Terasen Gas Inc. v. Utzig Holdings (B.C.) Ltd., (2012) 329 B.C.A.C. 164 (CA)

• Judge: Newbury, Frankel and Garson, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: September 10, 2012
• Jurisdiction: British Columbia
• Citations: (2012), 329 B.C.A.C. 164 (CA);2012 BCCA 444

Terasen Gas Inc. v. Utzig Holdings (2012), 329 B.C.A.C. 164 (CA);

    560 W.A.C. 164

MLB headnote and full text

Temp. Cite: [2012] B.C.A.C. TBEd. NO.012

Terasen Gas Inc. (respondent/plaintiff) v. Utzig Holdings (B.C.) Ltd. (appellant/defendant) and Alpha Manufacturing Inc., Burns Development Ltd., Burns Developments (1993) Ltd. (defendants)

(CA037878, CA038453; 2012 BCCA 444)

Indexed As: Terasen Gas Inc. v. Utzig Holdings (B.C.) Ltd.

British Columbia Court of Appeal

Newbury, Frankel and Garson, JJ.A.

November 7, 2012.

Summary:

Utzig Holdings (B.C.) Ltd. owned a portion of a large peat bog (Burns Bog). Terasen (formerly BC Gas), a supplier and distributor of natural gas had statutory rights of way (Land Title Act) over the bog for a natural gas pipeline, pursuant to 1961 and 1981 rights of way agreements granted by Utzig's predecessor. In 1988, Utzig agreed to permit a neighbouring landowner, Alpha Manufacturing Inc. (AMI), to conduct a landfill operation on its property. In October 10, 1993, Utzig agreed to sell the property to AMI et al. (purchasers) under an agreement for sale (AFS) and the purchasers took possession. The AFS made no reference to the rights of way agreements. The AFS was in registrable form, but never registered. Further, the AFS was never completed because the purchaser failed to pay the entire purchase price when due. Accordingly, the property remained registered in the name of Utzig at all material times. In 1995, Terasen commenced an action against Utzig, claiming that the pipeline was damaged or put at risk by the landfill operations and that Utzig breached covenants in the pipeline rights of way agreements or permitted the creation of an actionable nuisance.

The British Columbia Supreme Court, in a decision reported [2012] B.C.T.C. Uned. 90, ruled that Utzig had breached the covenants in the statutory right of way agreements both before and after entering into the AFS in October 1993. In the alternative, the court held that Utzig had committed the tort of nuisance, but only in the period prior to the execution of the AFS. Utzig appealed, arguing that the trial judge erred: (a) in finding that Utzig was bound by the covenants in the statutory rights of way after October 10, 1993 when the AFS was entered into; (b) in finding that Utzig, if bound by the covenants, breached the covenants both in the pre- and post-AFS periods; and (c) in holding that Utzig was liable for a nuisance created on the lands prior to October 10, 1993.

The British Columbia Court of Appeal court held that Utzig was bound by the covenants in the statutory rights of way agreements even after the AFS was entered into. However, the court allowed the appeal to the extent of restricting Utzig's breach of the covenants to the period prior to October 10, 1993. The court also allowed the appeal respecting the alternate claim in nuisance and dismissed that claim in its entirety. Garson, J.A., dissenting in part, agreed that Utzig was bound by the covenants, but differed with the majority on whether Utzig breached the covenants.

Real Property - Topic 65

General principles - Definitions - Owner defined - Utzig owned property subject to statutory rights of way agreements (Land Title Act (LTA)) respecting natural gas pipelines owned by Terasen - Utzig allowed a neighbouring property owner (AMI) to use its property as a landfill - Thereafter, Utzig executed an agreement for sale (AFS) in favour of AMI et al. (purchasers), which made no reference to the rights of way agreements (October 10, 1993) - The purchasers took possession - The AFS was never registered or completed - Utzig remained the registered owner - In 1995, Terasen sued Utzig, alleging breaches of the covenants in the rights of way agreements - At issue was whether Utzig was bound by the covenants after executing the AFS - The British Columbia Court of Appeal held that because of the wording of the rights of way, the only way in which Utzig might cease to be bound was to show that it "ceased to be the owner of the land" (LTA, s. 218) - Under the LTA "owner" meant registered owner - Regardless of whether AMI acquired an equitable or proprietary interest, or even "ownership", Utzig would remain the legal, and registered, owner in the eyes of equity until title passed - Thus, Utzig never ceased to be a registered owner and remained bound by the statutory rights of way even after entering the AFS - See paragraphs 22 to 38.

Real Property - Topic 132

General principles - Covenants that run with land - What constitute - [See Real Property - Topic 65 ].

Real Property - Topic 7220

Easements, licences and prescriptive rights - Interference or obstruction - Interference with right of way - Utzig owned property subject to statutory rights of way agreements (Land Title Act (LTA)) respecting natural gas pipelines owned by Terasen - Utzig allowed a neighbouring property owner (AMI) to use its property as a landfill - On October 10, 1993, Utzig executed an agreement for sale (AFS) in favour of AMI et al. (purchasers), without reference to the right of way agreements - The purchasers took possession; however, Utzig remained the registered owner - In 1995, Terasen sued Utzig, alleging breaches of the covenants in the rights of way agreements by permitting AMI to do acts that might interfere with Terasen's pipelines - The British Columbia Court of Appeal held that Utzig remained bound by and was in breach of those covenants prior to October 10, 1993 - Up until then, Utzig retained sufficient authority over the subject property that it should be regarded as having "permitted" AMI to do acts that might have interfered with the pipeline - After October 13, 1993, having sold the property under the AFS, Utzig was no longer in a position to "permit", or withhold permission for AMI's activities - Once land was sold, the new owner was responsible for new breaches of the terms of instruments (such as rights of way or restrictive covenants) that were registered against the land - See paragraphs 39 to 56.

Real Property - Topic 8014.3

Title, registration of instruments, etc. - Land titles system - Registration - Effect of failure to register - [See Real Property - Topic 65 ].

Sale of Land - Topic 4504

Restrictive or positive covenants - General principles - Covenant which binds or runs with the land - What constitutes - [See Real Property - Topic 65 ].

Sale of Land - Topic 4504.1

Restrictive or positive covenants - General principles - Covenant that runs with the land - When vendor liable for breach of covenant by purchaser - [See Real Property - Topic 7220 ].

Sale of Land - Topic 4517

Restrictive or positive covenants - General principles - Breach of covenant - What constitutes - [See Real Property - Topic 7220 ].

Torts - Topic 1414

Nuisance - Injury to property - Neighbouring owners - Interference with right of way - Utzig owned property subject to statutory rights of way agreements (Land Title Act (LTA)) respecting natural gas pipelines owned by Terasen - Utzig allowed a neighbouring property owner (AMI) to use its property as a landfill - On October 10, 1993, Utzig executed an agreement for sale (AFS) in favour of AMI et al. (purchasers), without reference to the right of way agreements - The purchasers took possession; however, Utzig remained the registered owner - In 1995, Terasen sued Utzig, alleging nuisance (i.e., up until October 10, 1993, Utzig was responsible for the landfill activities conducted on the land with its consent which substantially interfered with Terasen's use of its rights of way) - The British Columbia Court of Appeal rejected the nuisance claim - There was a lack of clear evidence that Terasen's enjoyment of the pipelines was substantially interfered with prior to October 1993 - See paragraphs 57 to 63.

Cases Noticed:

Hounsome v. Vancouver Power Co. (1914), 49 S.C.R. 430, refd to. [para. 17].

Banfai et al. v. Formula Fun Centre Inc. et al. (1984), 51 O.R.(2d) 361 (H.C.), refd to. [para. 17].

Martin Commercial Fueling Inc. v. Virtanen et al., [1994] 2 W.W.R. 348 (S.C.), affd. [1997] 5 W.W.R. 330; 90 B.C.A.C. 161; 147 W.A.C. 161; 144 D.L.R.(4th) 290 (C.A.), refd to. [para. 27].

Rayner v. Preston (1881), 18 Ch. D. 1 (C.A.), refd to. [paras. 28, 67].

Jellett v. Wilkie (1896), 26 S.C.R. 282, refd to. [para. 30].

Gregg v. Palmer, [1932] 3 D.L.R. 640 (B.C.C.A.), refd to. [para. 30].

Davidson v. Davidson, [1946] S.C.R. 115, refd to. [para. 30].

Leisitkow v. Ritchot (Municipality), [1923] 3 D.L.R. 153 (Man. C.A.), refd to. [para. 32].

Rempel and Junghanns, Re, [1957] B.C.J. No. 8 (S.C.), refd to. [para. 33].

Progressive Services Ltd. v. Burnaby (District) (1970), 14 D.L.R.(3d) 552 (B.C.C.A.), refd to. [para. 33].

Jackson v. North Vancouver (Corporation of) (1914), 16 D.L.R. 400 (B.C.C.A.), refd to. [para. 33].

Berton v. Alliance Economic Investment Co., [1922] 1 K.B. 742 (C.A.), refd to. [paras. 43, 70].

Lewis (A.) & Co. (Westminster) Ltd. v. Bell Property Trust Ltd., [1940] Ch. 345, refd to. [para. 44].

Wilson v. Twamley, [1904] 2 K.B. 99 (C.A.), refd to. [para. 45].

Sefton v. Tophams Ltd., [1965] 3 W.W.R. 523 (C.A.), affd. [1966] 2 W.L.R. 814; [1967] 1 A.C. 50 (H.L.), refd to. [paras. 47, 48].

Royal Anne Hotel Co. v. Ashcroft (Village), [1979] B.C.J. No. 2068 (C.A.), refd to. [para. 58].

St. Pierre v. Ontario (Minister of Transportation and Communications), [1987] 1 S.C.R. 906; 75 N.R. 291; 22 O.A.C. 63, refd to. [para. 58].

T.H. Critelli Ltd. v. Lincoln Trust and Savings Co. et al. (1978), 86 D.L.R.(3d) 724 (Ont. H.C.), refd to. [para. 60].

Pugliese et al. v. National Capital Commission et al. (1977), 17 O.R.(2d) 129 (C.A.), refd to. [para. 60].

Lysaght v. Edwards (1875-76), L.R. 2 Ch. D. 499, refd to. [para. 67].

R. v. Caledonian Insurance Co., [1924] S.C.R. 207; [1924] 2 D.L.R. 649, refd to. [para. 67].

Statutes Noticed:

Land Title Act, R.S.B.C. 1996, c. 250, sect. 1, sect. 218 [para. 23].

Authors and Works Noticed:

Canadian Encyclopaedic Digest (3rd Ed. 2009), generally [para. 17].

Di Castri, Victor, The Law of Vendor and Purchaser (3rd Ed. 1988), § 696 [para. 23].

Harpum, Charles, Megarry & Wade: The Law of Real Property (6th Ed. 2000), generally [para. 67]; p. 1078 [para. 23].

Keeton, G.W., and Sheridan, L.A., The Law of Trusts (10th Ed. 1974), generally [para. 29].

Linden, Allen M., and Feldthusen, Bruce, Canadian Tort Law, generally [para. 17].

Street, Law of Torts (5th Ed. 1972), p. 215 [para. 58].

Counsel:

M.A. Clemens, Q.C., and P. Senkpiel, for the appellant;

D.R. Urquhart and S. Hamilton, for the respondent Terasen Gas Inc.;

No one appeared on behalf of Alpha Manufacturing Inc., Burns Development Inc., or Burns Developments (1993) Ltd.

This appeal was heard in Vancouver, B.C., on September 10, 2012, before Newbury, Frankel and Garson, JJ.A., of the British Columbia Court of Appeal. The decision of the court was delivered on November 7, 2012, and the following opinions were filed:

Newbury, J.A. (Frankel, J.A., concurring) - see paragraphs 1 to 64;

Garson, J.A., dissenting in part - see paragraphs 65 to 79.