Canadian Alliance of Pipeline Landowners' Associations v. Enbridge Pipelines Inc., 2008 ONCA 227

CITATION: Canadian Alliance of Pipeline Landowners' Associations v. Enbridge Pipelines Inc., 2008 ONCA 227

DATE: 2008-04-03

DOCKET: C46460-C46582

COURT OF APPEAL FOR ONTARIO

O’CONNOR A.C.J.O., ROSENBERG and FELDMAN JJ.A.

BETWEEN:

CANADIAN ALLIANCE OF PIPELINE LANDOWNERS’ ASSOCIATIONS, 488796 ONTARIO LIMITED and RONALD KERR

Plaintiffs (Appellants)

and

ENBRIDGE PIPELINES INC. AND TRANSCANADA PIPELINES LIMITED

Defendants (Respondents)

COUNSEL:

Paul G. Vogel and John D. Goudy for the appellant

Harry Underwood and Darryl Ferguson for the respondent Enbridge Pipelines Inc.

J.L. McDougall, Q.C., John A. Fabello and Matthew Fleming for the respondent Transcanada Pipelines Limited

Heard: December 18, 2007

On appeal from the judgment of Justice E. Macdonald of the Superior Court of Justice, dated November 20, 2006, with reasons reported at [2006] O.J. No. 4999.

O’CONNOR A.C.J.O.:

[1] This appeal concerns the rights of farmers whose lands are subject to federally-regulated pipeline easements to be compensated by pipeline companies for the restrictions on the use of their lands imposed by government regulation.

[2] By way of summary judgment, the motion judge dismissed the appellants’ action claiming compensation from the respondent pipeline companies.

[3] The motion judge held that s. 75 of the National Energy Board Act, R.S.C. 1985, c. N-7 (“the Act”) did not create a civil cause of action for compensation. The motion judge also held that the appellant landowners were not entitled to compensation and/or damages pursuant to the provisions of their easement agreements.

[4] I agree with the motion judge and would dismiss the appeal.

FACTS

[5] The respondents, Enbridge Pipelines Inc. (“Enbridge”) and TransCanada Pipelines Limited (“TCPL”) own and operate inter-provincial pipelines for the transmission of petroleum products and natural gas. To construct these pipelines, the respondents acquired easements from landowners, either by way of agreement or pursuant to statutory expropriation powers.

[6] The appellants, 488796 Ontario Limited (“488”) and Ronald Kerr (“Kerr”) own and operate farms in Lambton County in southwestern Ontario.

[7] By agreement dated March 18, 1957, 488’s predecessor in title granted Interprovincial Pipe Line Company, now Enbridge, an easement over a sixty foot strip of land.

[8] By agreements dated July 3 and 11, 1967, the owners of the two 100 acre parcels of land now owned by Kerr granted TCPL 75 foot wide easements over their lands.

[9] The appellant, the Canadian Alliance of Pipeline Landowners’ Associations (“CAPLA”) is an umbrella organization of local and regional associations representing the interests of agricultural landowners with respect to energy pipelines. 488 and Kerr belong to member associations of CAPLA.

[10] In general terms, the easement agreements relating to 488 and Kerr’s lands grant the respondents rights to construct and operate pipelines within the lands described in the agreements (“the easement lands”). The respondents agree to bury and maintain the pipelines so as not to interfere with the drainage or ordinary cultivation of the easement lands. The landowners are required to obtain the respondents’ consent for excavations or installations on the easement lands.[^1]

[11] Since its original enactment in 1959, as National Energy Board Act, S.C. 1959, c. 46, the Act has contained restrictions on land use on, along and under pipelines for the purpose of promoting public safety. For example, s. 77(1) of the 1959 Act permitted a highway, private road, irrigation ditch or drain to be carried across a pipeline only with leave of the National Energy Board (the “Board”).

[12] At the present time, the regulatory regime governing activities on or adjacent to lands on which a pipeline is located is found in s. 112 of the Act and in the National Energy Board Pipeline Crossing Regulations, Parts I, S.O.R./88-528 and Part II, S.O.R./88-529 (“Pipeline Crossing Regulations”). Section 112 was enacted in its current form in 1990.

[13] Section 112(1) prohibits anyone from constructing a facility (i.e. installations such as a structure, road, drainage or fence) across, on, along or under a pipeline or from excavating using power-operated equipment or explosives within thirty metres of the pipeline (“the control zone”) without leave of the Board.

[14] Section 112(2) prohibits anyone from operating a vehicle or mobile equipment across a pipeline unless leave is first obtained from the pipeline company.

[15] In 1988, the Board passed the Pipeline Crossing Regulations, which provide that leave of the Board is not required for certain activities on pipeline rights of way, including activities for which permission is obtained from the pipeline company. Part II of the Regulations sets out the duties and responsibilities of pipeline companies when responding to requests for permission.

[16] It is not necessary in these reasons to go into detail about the interaction between s. 112 of the Act and the Pipeline Crossing Regulations. It is sufficient to point out that the appellants’ action is targeted at the imposition of increased restrictions on the use of their lands from the combined effect of both s. 112 and the Regulations, including the extension of land use restrictions to the control zone.

[17] On May 31, 2000, the appellants instituted the action giving rise to this appeal under the Class Proceedings Act, 1992, S.O. 1992, C.6 (“CPA”). In the action, they make claims on their own behalf and on behalf of other agricultural landowners in Canada who have lands subject to the respondents’ federally-regulated pipeline easements.

[18] The appellants claim compensation and/or damages for the restrictions on their ownership rights, the regulatory risks, and the loss of use and enjoyment of their lands, each resulting from the imposition of the control zone and the pipeline crossing restrictions found in s. 112 of the Act and the Pipeline Crossing Regulations.

[19] The appellants allege that pipeline landowners suffer loss of income, increased costs and diminished property values from having to modify or restrict existing agricultural operations to comply with the new land use restrictions and requirements. Likewise, they allege that future expansion or modification of agricultural or other operations and/or land use development will be impeded by the land use restrictions and the new notice and consent requirements. Landowners who proceed with their normal farm practices in contravention of regulatory requirements incur the regulatory risk of criminal and civil liability.

[20] It is notable that the appellants’ claims are directed at the imposition of the statutory and regulatory regime found in s. 112 of the Act and the Pipeline Crossing Regulations. The appellants do not complain that the pipeline companies have exercised the responsibilities assigned to them within the regime in a manner that diminishes the value of the landowners’ property or otherwise causes them loss.

[21] The appellants base their claims on three causes of action: (1) a statutory cause of action for compensation found in s. 75 of the Act;[^2] (2) contractual rights to compensation under their easement agreements; and (3) actions in contract for breaches of covenants in their easement agreements.

[22] Shortly after commencement of the action, CAPLA, acting on behalf of 157 individual landowners, including 488 and Kerr, served the Minister of Natural Resources with a notice of arbitration under s. 90(1) of the Act, seeking determination of their claims for compensation under s. 75 of the Act for the loss of interest in, and use and enjoyment of, the land sustained as a result of the provisions of s. 112 of the Act.

[23] On January 10, 2001, the Minister denied CAPLA’s request for the appointment of an arbitration committee on the basis that the claims were not arbitable under the Act. The Minister determined that the damages sought by CAPLA on behalf of its members were not a direct result of an activity of a pipeline company,[^3] nor were the damages claimed the result of the exercise by Enbridge or TCPL of powers conferred upon them by the Act. Thus, the Minister determined that the arbitration provisions under the Act did not apply to the claims for compensation asserted by CAPLA.

[24] The appellants did not challenge the Minister’s decision by applying for judicial review or otherwise. Instead, they proceeded with the action that underlies this appeal.

[25] The respondents moved for summary judgment to dismiss the appellants’ claims on the basis that the evidence did not disclose a cause of action. The appellants brought a motion seeking an order that their action satisfied the certification requirements of s. 5(1) of the CPA.

[26] The motions were heard together in January and February 2006. By judgment dated November 20, 2006, the motion judge granted the respondents’ motion for summary judgment and dismissed the appellants’ action.

[27] The motion judge held that the action did not raise any genuine issues for trial. She based her conclusion on four findings. First, s. 75 of the Act does not create a statutory cause of action for damages. It only entitles a landowner to seek compensation through the negotiation and arbitration scheme set out in the Act. Second, the Minister’s decision refusing to refer the appellants’ claims to arbitration operated as an estoppel to the appellants’ claims under s. 75 of the Act in the within action. Third, 488 and Kerr are not entitled to compensation under the compensation provisions in their easement agreements. Fourth, any breaches by the respondents of covenants in the easement agreements were mandated by a change in the law and, therefore, the doctrine of frustration relieved the respondents of liability.

[28] As a consequence of the motion judge’s decision to dismiss the appellants’ action, she also dismissed the motion for certification under the CPA.

ISSUES

[29] In order to dispose of this appeal, I find it necessary to address three of the issues raised by the appellants:

(1) does s. 75 of the Act create a statutory cause of action?

(2) do the easement agreements require the respondents to compensate the appellants for damages arising from the imposition of land use restrictions pursuant to s. 112 of the Act and the Pipeline Crossing Regulations?

(3) do the land use restrictions referred to above breach any of the covenants made by the respondents under the easement agreements?

[30] Given my conclusion that the answer to the first issue is that s. 75 of the Act does not create a statutory cause of action, I do not find it necessary to determine whether the Minister’s decision refusing the appellants’ claims to arbitration operates as an estoppel to their claims under s. 75 in the within action.

ANALYSIS

Section 75 of the Act

[31] There is no nominate tort of statutory breach in Canada. Thus it is necessary to determine whether s. 75 of the Act expressly creates a civil cause of action. I agree with the motion judge that s. 75 does not create a civil cause of action. The plain meaning of the language used in the Act, along with other indicators of Parliament’s intent, show that the Act provides a complete code with respect to the determination of s. 75 compensation claims.

[32] Since there is no nominate tort of statutory breach, a statutory obligation – in this case the obligation to pay compensation for damages resulting from the exercise of a pipeline company’s statutory powers – cannot itself give rise to a civil cause of action unless the statute which establishes the obligation expressly provides for a right of action: Canada v. Saskatchewan Wheat Pool, 1983 CanLII 21 (SCC), [1983] 1 S.C.R. 205 at 225.

[33] In this case, the question is whether s. 75 of the Act expressly creates a civil cause of action. Section 75 reads as follows:

A company shall, in the exercise of the powers granted by this Act or a Special Act, do as little damage as possible, and shall make full compensation in the manner provided in this Act and in a Special Act, to all persons interested, for all damage sustained by them by reason of the exercise of those powers. [Emphasis added.]

[34] To interpret s. 75, I rely on Driedger’s approach to statutory interpretation: “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”. For a recent endorsement of this approach, see A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency) (2007), 2007 SCC 42, 287 D.L.R. (4th) 4 (S.C.C.).

[35] The most obvious meaning of the language used in s. 75 of the Act is that the obligation of pipeline companies to compensate interested persons under the section is qualified by the phrase “in the manner provided in this Act”. The plain meaning of that phrase, as the motion judge held, refers to the dispute resolution provisions in ss. 88 to 103. Those sections set out a comprehensive scheme for the negotiation and arbitration of compensation claims made by landowners against pipeline companies pursuant to the Act.

[36] Had Parliament intended to create a cause of action, it could have done so expressly. Indeed, s. 75 can be contrasted with ss. 58.25(3) and 87(3) of the Act, where Parliament expressly created civil causes of action for landowners in respect of the conduct of companies engaged in the acquisition of lands. When Parliament uses specific language to confer a right in one section of the statute and uses different language in another provision of the same statute, it is an indication that Parliament did not intend to confer the same right in the second section.

[37] The appellants make five arguments in support of their submission that s.75 creates a civil cause of action. First, they argue that the “permissive language” of s. 90(1) of the Act – which provides that a landowner or company “may” serve a notice of arbitration – is indicative of Parliament’s intent in that a s. 75 claim may be pursued either by way of arbitration or by civil action.

[38] I do not accept this argument. Section 90(1) is one in a series of provisions that implement the Act’s negotiation and arbitration regime. The use of the word “may” in this context indicates only that, following a breakdown of negotiations, arbitration is available should the parties wish to pursue it. It would not make sense in this context to use the word “must” or “shall” because to do so would require parties who are unable to negotiate a settlement to arbitrate (as opposed to simply walking away from the dispute). I do not accept that s. 90(1) can be read as indicating an intention by Parliament to create an alternative remedy through the courts for a s. 75 compensation claim.

[39] Next, the appellants’ argue that because some claims which may fall within s. 75 are not arbitable under the Act, the void must be filled by a civil cause of action. As part of this argument, the appellants submit that there must be compensation because the restrictions on the use of their lands in effect amount to an expropriation.

[40] This argument fails for two reasons. The first is that Parliament created the right to compensation under s. 75; the right did not otherwise exist. That being the case, it was open to Parliament to limit by statute the circumstances in which compensation is payable and the manner in which compensation may be pursued. Parliament has specifically done so in s. 75.

[41] The second reason is that the appellants’ lands have not been expropriated. Their claims are for the alleged harm resulting from the imposition by Parliament of restrictions on the use of their lands. The enactment of s. 112 of the Act and the Pipeline Crossing Regulations do not constitute a “taking” and are not an expropriation of land or a legal interest in land. The restrictions are analogous to zoning regulations: they are regulatory rather than confiscatory and are directed at protecting the safety of the public, including the landowners on whose lands pipelines are located.

[42] The appellants third argument, which I also reject is based on the decision of Rothstein J.A. (as he then was) of the Federal Court of Appeal in Balisky v. Canada (Minister of Natural Resources), 2003 FCA 104, [2003] 4 F.C. 30. They contend that Balisky holds that if a potential compensation claim under s. 75 is excluded from the arbitration process in the Act, then the claim may be pursued by civil cause of action. I disagree. The court in Balisky did not hold that compensation claims made pursuant to s. 75 of the Act may be pursued by way of civil action. The court held only that the claim in that case came within s. 84 of the Act and was, therefore, subject to the arbitration process under the Act. While the court did observe that some claims which are otherwise actionable at common law may not be included in the arbitration process under the Act, it did not say, as the appellants contend, that when a claim under s. 75 does not fall within the dispute resolution process in the Act it may be asserted by way of civil action. Put another way, the court in Balisky did not hold that s. 75 creates a statutory cause of action for claims that do not fall within the dispute resolution process in the Act.

[43] Fourth, the appellants argue that they were entitled to arbitrate their claims under the Act, but that the process was “abortive” – referring to the Minister’s decision refusing arbitration. This argument assumes that the Minister’s decision was wrong. In that event, there was a means available to the appellants to pursue the arbitration process they contend was available to them; they could have pursued judicial review. Their failure to do so does not create a civil cause of action.

[44] Finally, the appellants appear to argue as an alternative that their claims are enforceable under the arbitration provisions in the statutes that applied to pipelines prior to the inclusion of the dispute resolution scheme referred to above in the Act in 1983.[^4] One of the processes available under the earlier statutes was an application to a Superior Court judge. The appellants argue that despite the fact that the provisions they seek to rely upon were replaced by Part V of the Act in 1983, they have a “vested right” to invoke those provisions.

[45] The short answer to this argument is that the appellants’ statement of claim does not seek relief under the predecessor provisions. Indeed, the predecessor provisions provide for an arbitration process not a civil cause of action. Even if the predecessor arbitration provisions continue to have some application, which I seriously doubt, the within proceeding is an action not an arbitration.

[46] In summary, I agree with the motion judge that s. 75 does not create a statutory cause of action, even in circumstances in which a potential s. 75 claim may not be subject to arbitration under the dispute resolution scheme in the Act.

Contractual Compensation

[47] The appellants submit that the motion judge erred in holding that the damages alleged in the statement of claim were not compensable under the easement agreements. I do not accept these arguments. The compensation provisions in the two easement agreements are different and I will address them separately.

[48] The compensation provision in favour of 488 requires Enbridge to pay compensation for the matters set out in clause Third. It reads:

THIRD: The Grantee [now Enbridge] will compensate the Grantor [now 488] for damage done to any buildings, crops, tile drains, fences, timber, culverts, bridges, lanes and livestock on the said land by reason of the exercise of the rights hereinbefore granted. [Emphasis added.]

[49] Clause Third is not an unlimited obligation on Enbridge to pay compensation for all losses resulting from Enbridge operating a pipeline on 488’s lands. Rather, the obligation is to pay for damage done to the enumerated list of physical items. I am satisfied that the plain and ordinary meaning of the words “damage done to” in the context of this clause is referring to physical damage to the listed items. In my view, the ordinary meaning of the language of clause Third does not extend to economic losses that may be incurred as a result of the presence of the pipeline on 488’s lands.

[50] Indeed, when clause Third is read in the context of the whole easement agreement, it is apparent that the parties intended that the landowner would be compensated for losses, if any, arising from the presence of the pipeline on the grantor’s land through the payment that was made when the easement was granted. Clause Third is a specific provision to cover instances of physical damage to the specifically enumerated items, nothing more.

[51] In its statement of claim, 488 does not allege any physical damages to the property items listed in clause Third. In its evidence filed on the summary judgment motion, 488 refers to “crop and related productivity loss[es]” (i.e. economic losses) caused by the imposition of the land use restrictions. I agree with the motion judge that these types of losses, if they occurred, do not fall within the compensation requirements in clause Third.

[52] The damages alleged by 488 flow directly from the imposition of the land use restrictions in s. 112 of the Act and the Pipeline Crossing Regulations. The easement agreement was negotiated and executed decades prior to the imposition of those restrictions. It seems most improbable that clause Third was intended to require the pipeline company to compensate the landowner for losses that may result at some unknown time in the future from a then unknown government public safety regulatory regime. Had that been the intention, the parties would have used much different language than that found in clause Third.

[53] In support of its argument that clause Third applies, 488 again relies on the Federal Court of Appeal’s decision in Balisky. That reliance is misplaced. Balisky did not involve a claim under an easement agreement. It dealt only with a claim for compensation under the Act. Balisky does not assist in interpreting the compensation provision in 488’s agreement.

[54] Finally, on this point, 488 relies on s. 86 of the Act which sets out the minimum requirements for land acquisition agreements relating to pipelines. Section 86 was first enacted in 1983. The language of s. 86 makes it clear that the minimum requirements for land acquisition agreements apply to future acquisitions of land. Section 86(2) prohibits a company from acquiring land for a pipeline unless the acquisition agreement contains the minimum requirements set out in the section. The minimum requirements are not made applicable to existing agreements. There is nothing in s. 86 that indicates an intention that the section operate retroactively or an intention to modify existing contractual arrangements. Section 86 does not help the appellant landowners.

[55] In summary, 488’s claim under clause Third of the easement agreement must fail.

[56] For similar reasons, Kerr’s claim for compensation under the compensation provision of the agreement with TCPL fails. In that agreement, the requirement to pay compensation is explicitly limited to “physical damages resulting from the exercise of any of the rights herein granted”. Kerr does not allege physical damage to his property. As with 488’s claim, the damages alleged flow from the government’s imposition of the land use restrictions. For the reasons given above, I do not think that the compensation provision in Kerr’s easement agreement applies.

[57] In the result, I agree with the motion judge that the claims based on the compensation provisions in the easement agreements must fail.

Damages for Breaches of Covenants

[58] The appellants also claim damages for breaches of covenants, other than the compensation provisions, in the easement agreements. They allege that the respondents breached covenants by:

(1) failing to confine their operations to the lands subject to the easements; and

(2) interfering with the appellants’ rights to conduct their agricultural operations on or outside the easements.

[59] The motion judge concluded that the easement agreements do not contain covenants relating to the matters about which the appellants complain. She went on to hold that even if such covenants were given, the appellants had not breached them.[^5]

[60] I agree with the motion judge. There are no express provisions in either agreement whereby the respondents agree to confine their activities to the easement lands. Nor are there express provisions that the respondents would not interfere with the appellants’ operations.

[61] Even if covenants of this nature could be implied, there is no basis to conclude that the pipeline companies would have given such covenants with the reach now urged by the appellants. There is nothing to suggest that the pipeline companies would have covenanted that the government would not impose public safety regulations with respect to pipelines at some time in the future. Indeed, it is hard to imagine that they would have done so.

[62] In addition, there is no evidence that the respondents have breached any such covenants. The respondents’ activities, except for access which is expressly provided for, take place entirely on easement lands. While it is true that s. 112 of the Act and the Pipeline Crossing Regulations impose a duty on the respondents to reply to requests for permission to carry out certain activities in the control zone, this function has nothing to do with the conduct of the respondents’ activities in these areas. Moreover, the appellants do not allege that the respondents have abused or misapplied the permission authority in any way.

[63] Given my conclusion that the respondents have not breached any covenants in the easement agreements, I do not need to address the applicability of the doctrine of frustration to the respondents’ alleged breaches.

DISPOSITION

[64] In the result, I would dismiss the appeal. I would award costs of the appeal to the respondents fixed in the amount of $15,000 each inclusive of disbursements and GST.

RELEASED: “APR 03 2008” “DOC”

“Dennis O’Connor A.C.J.O.”

“I agree M. Rosenberg J.A.”

“I agree K. Feldman J.A.”

[^1]: I discuss the terms of the easement agreements, including the compensation provisions, in more detail in my analysis of grounds two and three on this appeal.

[^2]: Section 75 of the Act reads as follows: A company shall, in the exercise of the powers granted by this Act or a special Act, do as little damage as possible, and shall make full compensation in the manner provided in this Act and in a special Act, to all persons interested, for all damage sustained by them by reason of the exercise of those powers.

[^3]: Section 84 of the Act limits the arbitration provisions of this Act to inter alia activities that are “directly related” to activities of a company.

[^4]: In this respect, the appellants refer to the Railway Act, R.S.C. 1952, c. 234 ss. 222-223, the 1952 Pipelines Act, R.S.C. 1952, c. 211, ss. 28-29 and the 1959 National Energy Board Act, S.C. 1959, c. 46, ss. 73-74.

[^5]: The motions judge dealt with the 488-Enbridge agreement. However, she made it clear that her reasoning applied to the Kerr-TCPL agreement as well.