NOVA/TransCanada withdraws application to "decommission" 266 km line

In August, 2012, NOVA Gas Transmission Ltd. (part of TransCanada Pipelines) applied to the National Energy Board (NEB) for permission to "decommission" a 266-km stretch of pipeline.  Essentially, the application would see the abandonment of the line in place, but NOVA contended that it was "decommissioning" the line because service on its "pipeline" would continue.  The NEB disagreed and directed that it would consider the application as one to abandon a pipeline.

On February 8, 2013, NOVA wrote to the NEB to withdraw its application, saying that it was reviewing its proposal in light of the NEB's comments: February 8, 2013.  The NEB confirmed this development in its letter to NOVA dated February 25, 2013.

Landowners should keep an eye on these developments.  It appears that pipeline companies are taking the position that, as long as they continue to transport materials somewhere on their pipeline systems, none of their abandonments are actually "abandonments" within the meaning of the NEB Act.  Instead, the companies will suggest that they are "decommissioning" pipelines, depriving landowners and other interested parties from public hearings, participant funding, etc.

Natural severance granted to two landowners by Superior Court

Owners of two different properties in the Hamilton, ON area brought applications to "clarify or determine title" to the bed of a waterway that traverses each of the properties.  If the waterway was determined to be navigable, then the bed of the waterway would remain the property of the Crown and would effect a severance of the properties involved.  Section 1 of the Beds of Navigable Waters Act provides: 

"Where land that borders on a navigable body of water or stream, or on which the whole or a part of a navigable body of water or stream is situate, or through which a navigable body of water or stream flows, has been or is granted by the Crown, it shall be deemed, in the absence of an express grant of it, that the bed of such body of water was not intended to pass and did not pass to the grantee."

The Crown Patent for both properties was issued on January 11, 1816 to a single owner.  The original Patent did not contain any express grant of the bed of the watercourse.  Therefore, if the watercourse was found to be navigable as of the date of the grant, then title to the bed of it would remain vested in the Crown.

On the basis of evidence presented by the parties, the Court concluded that it was probable that the waterway was navigable for significant periods of the year in 1816.  Title of the bed of the waterway remains in the Crown (resulting in the natural severance of the Applicants' properties).

Read the decision at: O’Donnell v. Ontario (Attorney General) and Obratoski v. Ontario (Attorney General).

NEB to introduce Administrative Monetary Penalties

The National Energy Board (NEB) has developed draft Administrative Monetary Penalties Regulations (AMP Regulations) and published them in the Canada Gazette, starting a 30-day public comment period. 

Under the proposed regulations, the NEB can issue a Notice of Violation to landowners who construct a facility or excavate without leave under Section 112(1) of the NEB Act or who fail to obtain leave of a pipeline company to drive vehicles or mobile equipment over a pipeline right-of-way under Section 112(2) of the NEB Act.  These violations are designated as Type-B violations and will result in a monetary penalty of between $4,000 and $100,000 for a corporation and between $1,000 and $25,000 for an individual.

NEB Abandonment Cost Estimates: Will there be enough money?

The National Energy Board released its decision in the Pipeline Abandonment Cost Estimates proceeding yesterday (click here).  An oral public hearing was held in Calgary last October and November.  For pipeline landowners, the key ruling by the NEB was its finding that basing cost estimates on an assumption of zero removal of pipelines in agricultural lands was unreasonable.  The NEB has already decided that companies must begin collecting tolls now to cover the future costs of pipeline abandonment; the question is how much is to be collected.  Companies argued that the amounts should be based on the assumption that nearly all pipelines in agricultural lands should be abandoned in place.  Not surprisingly, this was oppposed by pipeline landowners.

In an earlier hearing, the NEB had rejected the landowner proposal for a 100% removal assumption for all medium and large diameter pipelines in agricultural lands.  Instead, the NEB created a "base case" assumption calling for 20% removal and 80% perpetual maintenance, though giving companies the opportunity to provide justifications for a departure from this base case.  In its most recent decision, the NEB found that the companies had failed to justify their proposed departures from the base case and ordered that abandonment funding amounts be set based on the 80/20 split:

The Applicants have not successfully justified their deviation from the Base Case assumption for medium and large diameter pipe in these two land-use sub-categories. During the course of the MH-001-2012 hearing, all Applicants made submissions to the Board as to why the Base Case assumptions of 80 per cent abandonment-in-place and 20 per cent removal should not be imposed. The Board considered these comments but does not find them convincing. In addition, the Board also considered Applicants’ responses to a Board request made during the course of the hearing. Applicants were asked to provide recalculated cost estimates for three theoretical scenarios – 10, 20 and 30 per cent removal on "Agricultural, Cultivated" and "Agricultural, Cultivated and Non-Cultivated" sub-categories, using their own methodologies. Finally, the Board considered the issues described above regarding easement agreements, landowner surveys, and the lack of provision for any site-specific issues that may necessitate removal. The Board has exercised its judgment in determining a reasonable assumption for medium and large diameter pipelines in the "Agricultural, Cultivated" and "Agricultural, Non-Cultivated" sub-categories. In the Board’s view, 20 per cent removal for medium and large diameter pipe in these land-use sub-categories is a reasonable, prudent and adequate starting point for estimating purposes.

For the landowners and landowner groups who participated in the hearing process (at their own cost, given that there is no mechanism for cost recovery in the NEB hearing process and no participant funding available), this decision is a victory.  However, it remains to be seen whether the 80/20 split and the companies' actual estimates of abandonment costs will be sufficient to protect landowners from the costs of pipeline abandonment in the future.  The positions taken by the pipeline companies in the proceeding demonstrate that they will likely do everything in their power to avoid having to remove their abandoned pipelines from the ground. 

Federal Court denies Monsanto default judgment over patent infringement

Monsanto Canada Inc. and Monsanto Company have been denied an order for default judgment by the Federal Court of Canada in a patent infringement case.  The farmer involved did not file a defence.  Monsanto alleged that the farmer signed a licence with and obtained patented seeds from Monsanto; that the licence permitted the farmer to grow one crop, not to save seeds, and not to replant a new crop from those seeds; and that, notwithstanding the terms of the licence, the farmer saved seeds and planted a crop containing the patented gene. 

The rules required that Monsanto file affidavit evidence in support of its claim.  In other words, although there was no defence filed, the Court would not simply accept the allegations in the claim without some proof.  Monsanto attempted to circumvent this requirement by serving a "Request to Admit", a series of allegations put to the opposing party.  Where the opposing party fails to answer (either by admitting or denying the allegations), as in this case, that party is deemed to have admitted the allegations.

The Federal Court declined to accept this "evidence" as a sufficient basis for a default judgment order:

I am sceptical of such an attempt to “bootstrap” the requirement to provide the necessary evidence to support a default judgment by procedural manoeuvring. While it is true that, particularly in contested proceedings, the Request to Admit process is useful in eliminating the need to prove certain facts, I am satisfied that such a Request cannot be a substitute for affidavit evidence required on a motion for default judgment. Rule 210(3) states that a motion for default judgment shall be supported by affidavit evidence which evidence, in the context of the Rules, I take to be directed to the substance of the claim and not just an affidavit of service. I agree that the Court might even have discretion in respect of certain of the practice and procedural provisions of the Rules. In this case, because there is no affidavit evidence, whatsoever, to support the allegations in the Statement of Claim, I will not exercise any discretion, even if I have it, to accept the unanswered Request to Admit in lieu of such affidavit evidence.

Read the decision at: Monsanto Canada Inc. v. Verdegem.

Landowners seek to rely on 60-year old drainage maintenance agreement with municipality

Landowners and a municipality disagreed over the continuing effectiveness of an agreement made in 1953 that required the municipality's predecessor to maintain a drainage system and to make good any and all damage caused to the landowner (property owner).  The agreement had been made at a time when the local Township wished to construct a drainage system along a road.  In exchange for a right of access to the neighbouring property belonging to the predecessor-in-title to the current landowners, the Township gave the undertakings respecting maintenance and repair of damages.  The agreement was not registered on title, but the current landowners were aware of it.

When the current landowners asked the current municipality (the successor of the original Township) to meet its obligations under the agreement, the municipality responded that it was no longer bound by the agreement.  The parties then agreed to have the Court decide the question in a "Special Case" under Rule 22 of the Rules of Civil Procedure.

The result was the following series of declarations by the Court in favour of the landowners:

1. A DECLARATION that the Agreement on April 27, 1953, properly interpreted, did impose a perpetual obligation of the Township of Thurlow to maintain the drainage system it had installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the system.

2. A DECLARATION that as a result of the amalgamation of the Township of Thurlow and the Defendant City in 1998, the Defendant City is bound by the contractual obligations of the former Township which are found to have been created by the Agreement.

3. A DECLARATION that the Agreement is valid and binding notwithstanding that it was not entered into or, the system was not constructed, under or in accordance with legislation such as the Drainage Act.

4. A DECLARATION that the Agreement can be enforced against the Defendant City although it was not registered on title under the Registry Act and/or the Land Titles Act.

5. A DECLARATION that the Plaintiffs are not barred from enforcing the Agreement by s. 449 of the Municipal Act, 2001.

6. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs’ claim on the basis that the conduct of the Defendant amounts to the exercise or non-exercise of a discretionary function resulting from a policy decision.

7. A DECLARATION that the Plaintiffs are successors of the Agreement and thus, are entitled to enforce the Agreement without an express assignment.

8. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs' claim on the basis that the Plaintiffs are trying to enforce a positive covenant in regard the land.

9. A DECLARATION that the Agreement, which imposes a perpetual obligation upon the City, is not invalid as contrary to public policy because it does impose a perpetual obligation.

10. A DECLARATION that there is sufficient description of the property and easements in the Agreement to create an enforceable agreement.

11. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs’claim on the basis that the Plaintiffs did not inquire about the Agreement and/or its status before they bought the land, and/or by reason of the defence that the Plaintiffs did not rely on the Agreement when they bought the land.

12. A DECLARATION that the Agreement is not void as against public policy as fettering the Defendant City’s discretion with respect to future uses of roads and road allowances.

13. A DECLARATION that there is no statutory limitation period that acts to bar an action by the Plaintiffs.

14. A DECLARATION that the Plaintiffs’ claim for damages for breach of the Agreement is not defeated by the doctrine of laches.

Read the decision at: Brown v. Belleville (City).

Divisional Court upholds land registry freeze in face of apparent "scheme"

The Ontario Divisional Court has upheld a decision of the Director of Land Titles to place a freeze on the land records for a piece of property in Bruce County.  Krystal Summer Williams had sought to register a "self-to-self" transfer of the property, which was still administered under the Registry Act system of land registration.  Under the registry system, a person dealing with the property only has to trace the chain of title back for forty years.  The property in this case had not been dealt with since 1936 and Ms. Williams applied to become the registered owner of the land.

Ms. Williams admitted that she did not own or have any interest in the property prior to registration, and the Director alleged that she was involved in a scheme to convey title to property that she does not own. 

The Divisional Court agreed and ruled that the Director had authority to impose the freeze in order to determine the propriety of the self-to-self transfer.  In the Court's view, this was "merely a scheme to create an interest in land where none exists." 

Read the decision at: Williams v. Ontario.

Can a right of first refusal bind non-parties?

That general question was at the heart of a recent Ontario Court of Appeal ruling on an estate matter.  Parents owned a property; they wanted to sell it to one of their three children, but the other two kids opposed the sale; in order to appease everyone, the parents proposed an agreement that would allow the property to go to the one child, but with a right of first refusal on the part of the other two kids in case the property-owner child ever decided to sell.  The other two kids wanted to keep the property in the family.

The agreement was executed by the three children, including the right of first refusal and a provision stating that notice of the agreement could be registered on title to the property.  Later, the property was transferred from the one child to her and her husband as joint tenants, with the husband having agreed to be bound by the previous agreement (including the right of first refusal).  The agreement was subsequently registered on title to the property, with the undertaking of the husband appended.

The whole situation ended up in Court because of disagreement between the siblings and their children over what could happen with the property on the death of the property-owner sibling (and her husband).  Was the agreement binding on the heirs of the property-owner?  Those heirs raised the issue of privity of contract, which was described by the Court of Appeal as follows:

The doctrine of privity of contract stands for the proposition that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it. This doctrine has two very distinct components or aspects. On the one hand, it precludes parties to a contract from imposing liabilities or obligations on third parties. On the other hand, it prevents third parties from obtaining rights or benefits under a contract. See London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 CanLII 41 (SCC), [1992] 3 S.C.R. 299, at para. 200.

 

There are established exceptions to the second aspect of the doctrine. In certain situations, the courts will permit strangers to enforce the contract and take the benefit of its provisions. The established exceptions are agency, trust, assignment or assumption, exceptions established by statute, and restrictive covenants. See Greenwood Shopping Plaza Ltd. v. Beattie et al.,1980 CanLII 202 (SCC), [1980] 2 S.C.R. 228, at para. 11.

The Court noted that, at first blush, it might seems as if privity of contract applies in this case and that the heirs of the property-owner sibling are not bound by the right of first refusal.  However, death does not terminate a contract unless the contract is "based on personal considerations, skill or confidence (a personal contract)."  The estate of the owner would be in the position of the owner, bound by the agreement.

What if the property is then conveyed by the estate to the heirs?  The Court found that the heirs, too, would be bound by the right of first refusal.  The estate would pass title to the property to the heirs subject to the requirements in the agreement.  Not only do those heirs have actual notice of the agreement (in this case), but they "are volunteers in the sense that they give no consideration for title to the Property".  The heirs cannot stand in a better position than did the estate.

The Court of Appeal also ruled that the Agreement containing the right of first refusal was properly registrable against title to the property under the Land Titles Act.  The Court says the following with respect to the nature of the interest held by a holder of a right of first refusal:

What did the holder have before crystallization? The holder had an interest in the unregistered equity that arose at the point of crystallization. To be sure, the holder is not entitled to the equity, as that entitlement arises on crystallization. But the holder has an interest in it, in the sense that the holder has something more than a mere spes or hope. The holder, prior to crystallization, has the recognised legal interest that will swell into an equitable right on crystallization. In the language of s. 71(1), the holder is a person “… interested in [an] unregistered … [equity] in registered land…”. Accordingly, rights of first refusal over land can be protected by registration under s. 71(1).

Read the decision at: Benzie v. Hania.