Court of Appeal for Ontario

Date: 20210106 Docket: C68261

Trotter, Zarnett and Jamal JJ.A.

BETWEEN

The Corporation of the Town of Oakville and Oakville Hydro Electricity Distribution Inc. Applicants (Respondents)

and

Michael Arthur Sullivan and Margaret Di Pede Respondents (Appellants)

Counsel: Albert G. Formosa and Marie-Pier Nadeau, for the appellants Charles M.K. Loopstra and Scott E. Hamilton, for the respondents

Heard: November 24, 2020 by video conference

On appeal from the order of Justice Clayton Conlan of the Superior Court of Justice, dated March 6, 2020, with reasons reported at 2020 ONSC 1419.

Jamal J.A.:

Introduction

[1] This appeal involves a claim for actionable encroachment on an easement. The appellants, Michael Sullivan and Margaret Di Pede, built a swimming pool and surrounding deck, platform, and other elements (“Pool Amenities”) behind their house in Oakville. The Pool Amenities extend over a ten-foot strip of land which, although owned by the appellants, is subject to an easement held by the respondents, The Corporation of the Town of Oakville (“Town”) and Oakville Hydro Electricity Distribution Inc. (“Hydro”). The easement prohibits “the erection of any building or structure” within that strip of land. The appellants knew about the easement when they bought the property and proceeded to build the Pool Amenities without a municipal building permit.

[2] The application judge declared the Pool Amenities to be a “building or structure” erected on the land that was subject to the easement, and thus an actionable encroachment upon it. He ordered the appellants to remove the Pool Amenities and remediate any damage to the easement by June 1, 2020. The appellants now appeal.

[3] For the reasons that follow, I would dismiss the appeal.

Background

[4] In June 1972, the appellants’ predecessors in title granted an easement to the Town over “the most westerly ten feet (10’)” of their property. The easement indenture, which is registered on title, provides in relevant part:

WHEREAS the Owners are the owners of the lands described in Schedule “A” hereto and have agreed to grant the herein mentioned easements;

NOW THEREFORE the Owners in consideration of other good and valuable consideration and the sum of Two Dollars ($2.00) now paid to it by the Town, hereby grants to the Town the right, liberty and privilege appurtenant to its undertaking as a Municipal Corporation to construct, operate, maintain, replace and repair underground sewers, drains, pipes, conduits, wires and services generally with such above ground accesses, manholes, catch basins, hydrants, service boxes and other appurtenances as it desires, at its expense and for so long as it desires, upon, across, along and under the land described in Schedule “A” hereto and for every such purpose the Town and those claiming under it shall have access to the said land at all times but reserving to the Owners the right to use the surface of the said land for any purpose which does not conflict with the Town’s rights hereunder and specifically excluding the planting of any tree and the erection of any building or structure . [Emphasis added.]

[5] In February 2000, the Town sold the easement to Hydro but retained an interest in it under the municipal by-law authorizing the sale.

[6] In October 2012, the appellants bought the property. They knew about the easement before closing, but believed it was abandoned or never used. In fact, located within the easement is an underground conduit that houses a hydro cable providing electricity to a neighbouring property.

[7] In early 2014, the appellants built the Pool Amenities in their back yard within the easement.

[8] It is not disputed that the Pool Amenities are a “building” under the Ontario Building Code Act, 1992, S.O. 1992, c. 23, and thus legally required a municipal building permit. No such permit was obtained. In January 2018, the appellant Michael Sullivan pleaded guilty to building the Pool Amenities without a building permit and breaching an order to comply. Mr. Sullivan offered to pay to relocate the hydro service of the neighbouring property, but his affected neighbour was unwilling to agree to this proposal.

[9] It is also not disputed that, over the years, several other structures have been erected within the easement with the Town’s approval, including a carport and part of the house. Two large trees are also within the easement.

[10] In May 2018, the respondents applied to the Ontario Superior Court for a declaration that the Pool Amenities encroach upon the easement and for an order requiring their removal.

The application judge’s decision

[11] By order dated March 6, 2020, the application judge granted the application. In his reasons, he ruled that the Pool Amenities actionably encroach upon the easement because they contravene the express prohibition against erecting a building or structure within it. He also ruled that the equitable doctrine of proprietary estoppel does not prevent the Town and Hydro from enforcing their rights under the easement. He therefore ordered the appellants to remove the Pool Amenities and to remediate any damage to the easement at their own expense by June 1, 2020.

[12] In obiter dicta , however, the application judge added that had he not concluded that the Pool Amenities contravened the express terms of the easement, he would have ruled that the Town and Hydro had not established an actionable encroachment. He was “prepared to accept that the Pool Amenities could cause some unspecified or unknown, but probably quite minor, degree of inconvenience to the Town and/or Hydro in exercising their Easement rights, however, that is not the test for substantial interference.”

Issues

[13] This appeal raises three issues:

1. Is there an actionable encroachment on the easement?
2. Was the easement abandoned or partially extinguished?
3. Does the equitable doctrine of proprietary estoppel preclude enforcement of the easement?

Discussion

Issue #1: Is there an actionable encroachment on the easement?

(a) Applicable principles

[14] In evaluating whether there is an actionable encroachment on an easement created by express grant, the court first determines the nature and extent of the easement by interpreting “the wording of the instrument creating the easement, considered in the context of the circumstances that existed when the easement was created”: Fallowfield v. Bourgault (2003), 2003 ONCA 4266, 68 O.R. (3d) 417 (C.A.), at para. 10; see also Raimondi v. Ontario Heritage Trust, 2018 ONCA 750, 96 R.P.R. (5th) 175, at para. 11.

[15] Once the nature and extent of the easement have been determined, the court then considers whether there is an actionable encroachment upon it. The test for an actionable encroachment is whether there is a “substantial interference” with the use and enjoyment of the easement for the purpose identified in the grant: Weidelich v. de Koning, 2014 ONCA 736, 122 O.R. (3d) 545, at paras. 9-11; Fallowfield, at paras. 40-41; Hunsinger v. Carter, 2018 ONCA 656, 91 R.P.R. (5th) 175, at para. 11; Anne Warner La Forest, Anger & Honsberger, Law of Real Property , loose-leaf, 3rd ed. (Toronto: Thomson Reuters, 2019), at para. 17:20.50; and Halsbury’s Laws of Canada – Real Property (Toronto: LexisNexis Canada, 2016 Reissue), at HRP-325.

(b) Application to this case

[16] The appellants assert that the application judge erred in ruling that the Pool Amenities are an actionable encroachment, for two reasons:

1. The easement does not limit the appellants’ right to build the Pool Amenities on their property, because the easement was only ever intended to be used, and has only ever been used, for a hydro line, which can be serviced even with the Pool Amenities located within the easement; and
2. The application judge applied the wrong test for actionable encroachment by ruling that the appellants are “prohibited outright from erecting any building or structure within the Easement, regardless of whether that building or structure conflicted or substantially interfered with the rights of the Easement holder(s).” Had the application judge applied the correct “substantial interference” test, he would have concluded that no actionable encroachment was established.

[17] I do not accept these submissions.

[18] First, the application judge’s ruling as to the nature and extent of the easement involves a question of mixed fact and law that attracts appellate deference, and is reviewable (absent an extricable error of law) only for palpable and overriding error: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50; Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, 450 D.L.R. (4th) 105, at para. 101, per Rowe J. (dissenting, but not on this point); Tessaro v. Langlois, 2019 BCCA 95, 100 R.P.R. (5th) 51, at paras. 18-20; and Twogee Developments Ltd v. Felger Farming Co Ltd, 2017 ABCA 138, 52 Alta. L.R. (6th) 270, at para. 27.

[19] In my view, the application judge properly focused on the wording of the easement indenture. The indenture states that the appellants’ rights to use the surface of the lands within the easement “specifically exclud[es] the planting of any tree and the erection of any building or structure”. He was entitled to conclude that the easement “delivered a two-part message to the homeowner”: “(i) do not use the surface of the Easement land for any purpose that conflicts with the Town’s rights (described above), and (ii) so that there is no confusion, do not under any circumstances plant a tree or erect a building or structure within the Easement” (emphasis in original). The bottom line, the application judge stated, is that “the planting of a tree or the erection of a building or structure on the Easement land is not permitted, period.”

[20] The application judge was also entitled to conclude that interpreting the easement as an outright prohibition reflects its broad purpose of allowing the Town unfettered access within the easement to provide municipal services:

One must remember that the purpose of this particular Easement is very broad. The Town, from the outset of the Indenture’s creation, has the right to (i) go underground within the Easement for, effectively, any reason connected to municipal services and to (ii) access, above ground and within the Easement, any item related to such a service. An outright prohibition against the planting/erection of any tree, building or structure within the Easement is neatly consistent with such a broad purpose.

[21] The appellants say that the application judge’s interpretation focuses principally on the wording of the indenture and ignores contemporaneous extrinsic evidence that suggests that the easement was primarily if not exclusively intended to permit a hydro line under the appellants’ property. They say that modern technology now allows the hydro line to be repaired or replaced even if a building or structure is erected within the easement.

[22] I do not accept this submission. It is, in effect, an invitation for the court to read down the clear words of the easement indenture based on the surrounding circumstances and the use made of the easement to date. But, as Rothstein J. for the Supreme Court of Canada cautioned in Sattva, “[w]hile the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement”: at para. 57. The easement indenture here is not limited to placing a hydro line under the appellants’ property. It also allows the Town to install and maintain “underground sewers, drains, pipes, conduits, wires and services generally”. That these facilities have not been installed within the easement to date is of no moment. The easement is not time limited and is therefore perpetual: Remicorp Industries Inc. v. Metrolinx, 2017 ONCA 443, 138 O.R. (3d) 109, at para. 47, citing Gale on Easements , 20th ed. (London: Thomson Reuters (Professional) UK Limited, 2017), at para. 12-26. Indeed, the easement indenture expressly permits the Town access to provide the other listed municipal services, “as it desires” and “for so long as it desires”.

[23] Thus, in my view, the application judge’s determination of the nature and extent of the easement is not tainted by palpable or overriding error. I would therefore reject the appellants’ first argument that the easement does not prohibit the erection of a building or structure such as the Pool Amenities.

[24] Second, I disagree with the appellants’ claim that the application judge applied the wrong test for an actionable encroachment. Although I accept that the application judge’s reasons could have been clearer, I read those reasons as implicitly applying the substantial interference test. By contravening the outright prohibition against erecting a building or structure, the Pool Amenities necessarily encroach upon the easement. The easement indenture does not say that the appellants are prohibited from erecting a building or structure unless it creates a barrier or obstacle to the respondents’ exercise of their rights under the easement. Rather, as the application judge held, the appellants are “prohibited outright from erecting any business or structure within the Easement”. By agreeing to an outright prohibition, without qualification, the parties have effectively defined for themselves what will constitute a substantial interference with the easement.

[25] The application judge’s observation in the alternative and in obiter that the respondents did not discharge their onus of establishing substantial interference does not detract from this conclusion. His obiter observation considered only one aspect of the easement — the appellants’ obligation not to use the surface of the easement for any purpose that conflicts with the Town’s rights. Because it was in the alternative, it did not consider the outright prohibition against erecting any building or structure. But when the outright prohibition is considered, as it was under the first part of the application judge’s analysis, a substantial interference is established.

[26] I therefore see no basis to intervene with the application judge’s conclusion that the Pool Amenities are an actionable encroachment on the easement.

Issue #2: Was the easement abandoned or partially extinguished?

(a) Applicable principles

[27] In Remicorp, this court reviewed the general principles relating to abandonment of an easement by release (at paras. 47-51) and partial extinguishment of an easement (at paras. 63-73). In broad outline:

• “Unless an easement is granted for a term of years, the rights conferred by an easement are perpetual and, accordingly, are actually or potentially valuable rights. Therefore it is not lightly to be inferred that the owner of such a right should give it up for no consideration”: at para. 47, citing Gale on Easements , at para. 12-26.
• Other than by an express release, an easement can be abandoned by release impliedly by non-use coupled with evidence of an intention to abandon the easement: at para. 49.
• An easement can be extinguished either by statute or at common law: at paras. 70-71.

(b) Application to this case

[28] Here, in the alternative, the appellants assert that the easement has been abandoned for any purpose other than the hydro cable. They say this is the only purpose for which the easement has been used, and that modern technology allows the cable to be serviced effectively even with the Pool Amenities within the easement. They also suggest the easement has been partially extinguished at common law because the easement serves no purpose other than servicing the hydro cable.

[29] However, the application judge made no express findings on abandonment or partial extinguishment, and it is not clear whether these issues were even argued before him. This court will generally not entertain entirely new issues on appeal where doing so might unfairly deprive the other party of the opportunity to lead relevant evidence: Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at para. 18; Whitby (Town) v. G & G 878996 LM Ltd., 2020 ONCA 654, 5 M.P.L.R. (6th) 174, at para. 9.

[30] In any event, based on the evidence before the court and the findings that were made, I see no basis to conclude that the easement was abandoned or partially extinguished:

• No express abandonment is alleged, nor have the appellants established implied abandonment. In my view, the creation of the easement by express grant registered on title and its use continuously for a hydro cable is sufficient to find that the respondents did not intend to abandon it: see Remicorp, at paras. 50-51.
• Nor is there any basis to find that the easement was extinguished at common law. There is no evidence that the municipal purposes for creating the easement have come to an end: Remicorp, at para. 65, citing Anger & Honsberger , Law of Real Property , at para. 17:20.60(a). Nor does lack of use and lack of need suffice to extinguish an easement by operation of law: Remicorp, at para. 76.

[31] I therefore conclude that the appellants have not established that the easement was abandoned or partially extinguished.

Issue #3: Does the equitable doctrine of proprietary estoppel preclude enforcement of the easement?

(a) Applicable principles

[32] Proprietary estoppel is an equitable doctrine that can create or affect property rights when there is a want of consideration or of writing: Clarke v. Johnson, 2014 ONCA 237, 371 D.L.R. (4th) 618, at para. 41, citing Anger & Honsberger, Law of Real Property , at para. 28:10.20. As noted in Clarke, at para. 52, three elements must be established:

(i) the owner of the land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the property; (ii) in reliance upon his belief, the claimant acts to his detriment to the knowledge of the owner; and (iii) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive[.]

(b) Application to this case

[33] In the further alternative, before this court the appellants largely repeat the argument they made before the application judge to invoke proprietary estoppel: (i) the Town expressly permitted the construction of a portion of the appellants’ house and carport within the easement, and thus induced, encouraged, or allowed them to believe that the easement was abandoned or no longer in use; (ii) the appellants relied on this belief when building the Pool Amenities within the easement; and (iii) it would be unconscionable to allow the respondents to now assert that the Pool Amenities encroach on the easement.

[34] The application judge rejected this argument and concluded that the appellants had established none of the conditions for proprietary estoppel:

[T]here is no evidence to suggest that Hydro had any knowledge of the other structures located within the easement that existed before the Pool Amenities were installed, and thus, it cannot be said that Hydro induced, encouraged or allowed [the appellants] to do what they did in early 2014. Second, we know for certain that the [appellants] did not enquire with the Town and/or Hydro about the scope of the Easement or a building permit before installing the Pool Amenities, and thus, there is no evidence to suggest that the [appellants] acted to their detriment to the knowledge of either the Town or Hydro. Third, though perhaps unforgiving to some degree, there is nothing “unconscionable” about the Town and Hydro enforcing the clear wording of the said Indenture.

[35] The application judge correctly cited the elements for proprietary estoppel enunciated in Clarke, and asked whether those elements were met based on the facts. His conclusion that the appellants had not established the conditions for proprietary estoppel is a finding of mixed fact and law that attracts appellate deference, absent palpable and overriding error. In my view, the appellants have shown no such error.

[36] I therefore conclude that the equitable doctrine of proprietary estoppel does not preclude the enforcement of the respondents’ easement.

Disposition

[37] I would dismiss the appeal, order the appellants to comply with the order of the application judge by June 30, 2021 (the date agreed to by the parties), and award the respondents costs of the appeal in the agreed amount of $40,000, all inclusive, payable within 30 days.

Released: January 6, 2021 (“G.T.T.”)

“M. Jamal J.A.”

“I agree. G.T. Trotter J.A.”

“I agree. B. Zarnett J.A.”