Schwark v. Cutting, 2010 ONCA 61

CITATION: Schwark v. Cutting, 2010 ONCA 61

DATE: 20100127

DOCKET: C49746

COURT OF APPEAL FOR ONTARIO

Gillese, Blair and MacFarland JJ.A.

BETWEEN:

Reinhard Schwark and Siegfried Schwark, Estate Trustees of the Estate of Louise Gertrude Schwark, Derek Clayton Bell and Jennifer Margaret Bell

Plaintiffs (Respondents)

and

William Leonard Cutting and Brenda Jean Cutting

Defendants (Appellants)

Paul Amey, for the appellant

Bryan G. Embree, for the respondent

Heard: November 20, 2009

On appeal from the judgment of Justice P.B. Hambly of the Superior Court of Justice dated November 13, 2008.

MacFarland J.A.:

[1] This is an appeal from the judgment of Hambly J. dated November 13, 2008 wherein he declared that the respondents Reinhard Schwark and Siegfried Schwark, Estate Trustees of the Estate of Louise Gertrude Schwark, Derek Clayton Bell and Jennifer Margaret Bell (Bell/Schwark) had the right to enter upon the property owned by the appellants, William Leonard Cutting and Brenda Jean Cutting (Cuttings), erect staircases thereupon at their own expense to facilitate that entry, and granted to the Bell/Schwark, as well as their immediate family and friends the right to use the entire beach front area of the Cutting property.

[2] While the trial judge dismissed the Bell/Schwark claims for prescriptive easement, the relief he did grant was based on proprietary estoppel.

[3] For the reasons that follow, I am of the view that while the trial judge properly dismissed the Bell/Schwark claims to prescriptive easement – and no appeal is taken from that finding – he erred in law in granting them any relief on the ground of propriety estoppel.

THE FACTS

[4] As Lord Denning observed in Crabb v. Arun District Council, [1976] 1 Ch. 183 “This case cannot be properly understood without a map”. So, too, in this case. I have annexed as Schedule A to these reasons a sketch which outlines the properties relevant to the issues raised.

[5] A history of the property ownership is succinctly set out in the appellants’ factum. In the 1920’s William Rosseau Cutting, great-grandfather of the appellant Bill Cutting, registered a plan of subdivision, Plan 139 at Port Ryerse, a small community located on the shores of Lake Erie. That plan of subdivision included:

(a) cottage lots 19 and 20, which together totalled 100 feet in width, acquired by Andy Bell, grandfather of the respondents Bell, in 1958;

(b) cottage lots 16 and 17, which together totalled 100 feet in width, acquired by Louise and Kurt Schwark, parents of the respondents, Schwark, in 1976;

(c) building lots 1, 2, 3, 8, 9, 10 acquired by the appellants Cutting from the appellant Bill Cutting’s grandfather, William O. Cutting, in 1982 and upon which they built a year-round home;

(d) water lots 26 to 36, which total 550 feet in width acquired by the appellants Cutting from William O. Cutting in 1988 with the exception of Lot 31, acquired from the Municipality in 1998;

(e) a 10-foot strip owned by the Municipality giving access from the street to the lake between lots 17 and 18 and lots 28 and 29;

(f) cottage lot 15 acquired by the Cuttings in 2001;

(g) cottage lots 13 and 14 acquired by the Cuttings in 2003.

[6] The cottage lots were “lakeview”, not lakefront lots, and the deeds to those properties do not include access of any kind to the beach/lake. The cottages on those lots were built at the top of the bank. The water lots were not buildable but separated the cottage lots from Lake Erie. The Cuttings’ building lots were across the street from the cottage lots.

[7] Water lots 26 and 27 separated the Bell cottage lots from Lake Erie and water lots 29 and 30 separated the Schwark cottage lots from Lake Erie. As indicated above, those water lots had been acquired by the Cuttings from Bill Cutting’s grandfather in 1988.

[8] The Schwark cottage property is located to the east of the Bell cottage property and separated from it by the 10 foot municipal pathway and cottage lot 18 owned by Hughes.

[9] In 1978 the bank on which the cottages are built began to erode as the result of wave action placing in jeopardy the continued existence of the Bell/Schwark cottages at the top of the bank.

[10] The evidence disclosed that in 1978 and 1979, Andy Bell and others constructed a berm of rocks and broken concrete from the demolition of the nearby Norfolk Fruit Growers building hauled to the site and placed at the base of the hill to prevent further erosion.

[11] The trial judge noted the evidence of Bill Cutting’s father who testified that he witnessed Andy Bell constructing the berm in front of his cottage and witnessed his father, William O. Cutting, threatening to sue him if he continued. He also noted that there was no evidence of any of the Cuttings taking legal action against the hill top cottage owners over their use of the Cutting waterfront lots with the exception of the appellants’ counterclaim in the action before him.

[12] There was conflicting evidence over the hilltop cottager’s use of the water lots. The Bell witnesses testified to their use of the waterfront lots from the early ‘70’s without objection. The Schwark witnesses testified to the same effect. They both testified that it was not until the fall of 1998, when the appellant Bill Cutting placed blue barrels and brush on the path at about a line between the south limit of their respective cottage lots and the appellants’ water lots, that this right to use the beach was challenged.

[13] The trial judge accepted the evidence of the appellants that in 1988 they gave permission to the Bells to use the water lots in exchange for the Bells granting them permission to use the stairs they had constructed behind their cottage, to access the beach. Similar permission was given to Louise Schwark at her request in 1989. The trial judge also concluded that the Bells and Schwarks would have been aware that the appellants had acquired the water lots in 1988, seen the “no trespassing” signs placed on the berm in front of their cottages and been aware that they could only use the beach with the permission of the Cuttings.

[14] The trial judge’s conclusion in this regard defeated any claim based on prescriptive easement and there is no appeal taken from those findings.

[15] The trial judge then considered the alternate claim based on proprietary estoppel. In his consideration of the law, he relied heavily on a decision of the British Columbia Court of Appeal in Zelmer v. Victor Projects Ltd., 1997 CanLII 4068 (BC CA), [1997] B.C.J. No. 1044 (B.C.C.A.). However, the trial judge failed to apply the law to the facts as he found them and failed to consider whether the requirements for promissory estoppel were met on the evidence before him.

[16] The law with respect to proprietary estoppel is well-settled. This court has accepted that Snell’s Equity properly discloses the elements necessary to establish proprietary estoppel as:

1. encouragement of the plaintiffs by the defendant owner,

2. detrimental reliance by the plaintiffs to the knowledge of the defendant owner, and

3. the defendant owner now seeks to take unconscionable advantage of the plaintiff by reneging on an earlier promise.

[17] The seminal case on proprietary estoppel is the decision of the English Court of Appeal in Crabb v. Arun District Council, supra. The plaintiff, Crabb, and the defendant, District Council (DC) were adjoining landowners. The two properties had previously been owned by the same party. Under the conveyance by which he acquired title to his two-acre parcel, Crabb was also granted a right of access at a point described as “A” to a proposed new road and a right along it to the public road. When DC acquired the adjoining three and one-half acre parcel, the grantors expressly reserved the right (which they had already granted to Mr. Crabb) for the owner of the two-acre parcel to have access at point A to the proposed new road and a right of way along it to the public road. DC agreed to erect a fence along the boundary line between the two properties save for the access gap at point A.

[18] Sometime later Mr. Crabb decided to divide his property in two portions and sell them separately for separate use. The access point he already enjoyed at A would serve the front half of his property. He required a second point of access at point B to serve the back half of his property, together with a right of way along the proposed new road to the public road.

[19] On July 26, 1967 Mr. Crabb and his architect met with a representative of DC. At that meeting it was agreed that Mr. Crabb should have an additional access at point B so as to give access from the back portion of his land over the new proposed road. During the winter of 1967 DC erected the fence along the agreed boundary leaving gaps at points A and B. In February/March 1968, DC had gates constructed at points A and B, the posts for the gates were set in concrete and were clearly intended to be permanent.

[20] Later in 1968 Mr. Grabb sold the front portion of his land to a purchaser and assigned to him the right of access at point A. In so doing, Mr. Crabb did not reserve any right for himself (as owner of the back portion) to go over the front portion so as to get out at Point A. He thought he already had a right to exit at point B (where gates had already been erected) and so had no need to reserve for himself any right to get to point A.

[21] In January 1969, Mr. Crabb put a padlock on the inside of the gate at point B. This action on his part evidently incensed the DC who went upon Mr. Crabb’s land, took down the gates at point B, pulled the posts out of the concrete and filled the gap with fence to match the rest of the fence along the boundary and effectively shut the access at point B, leaving Crabb’s remaining property landlocked.

[22] The DC then agreed that Crabb could have access at point B but only at an exorbitant cost. Crabb brought an action claiming a right of access at point B together with a right of way along the new proposed road to the public road.

[23] By strict letter of the law Mr. Crabb had no right by deed, conveyance or written agreement. The DC was entitled to its land subject only to an easement at point A, but none at point B. The plaintiff advanced his case on the basis of proprietary estoppel.

[24] In his reasons for judgment at p. 187 Lord Denning explained the basis for the claim as follows:

The basis of this proprietary estoppel – as indeed of promissory estoppels – is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as “estoppels”. They spoke of it as “raising an equity”. If I may expand what Lord Cairns L.C. said in Hughes v. Metropolitan Railway Co. (1877) 2 App. Cas. 439, 448:

‘it is the first principle upon which all courts of equity proceed,’

that it will prevent a person from insisting on his strict legal rights – whether arising under a contract, or on his title deeds, or by statute – when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties.

What then are the dealings which will preclude him from insisting on his strict legal rights? If he makes a binding contract that he will not insist on the strict legal position, a court of equity will hold him to his promise. Short of a binding contract, if he makes a promise that he will not insist on his strict legal rights – then, even though that promise may be unenforceable in point of law for want of consideration or want of writing – then if he makes the promise knowing or intending that the other will act upon it, and he does act upon it, then again a court of equity will not allow him to go back on that promise (citations omitted). Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights – knowing or intending that the other will act on that belief – and he does so act – that again will raise an equity in favour of the other.

[25] The trial judge dismissed the action essentially having found there was only an “agreement in principle” following the July 16, 1967 meeting and no “definite assurance”. The Court of Appeal saw it differently. The fact that DC had put up a gate at point B at “considerable expense” led the plaintiff to believe that there was an agreement giving him the right to access at point B. As Lord Denning M.R. explains at page 189:

The defendants knew that the plaintiff intended to sell the two portions separately and that he would need an access at point B as well as point A. Seeing that they knew of his intention – and they did nothing to disabuse him but rather confirmed it by erecting gates at point B – it was their conduct which led him to act as he did: and this raises an equity in his favour against him [emphasis in original].

[26] The appeal was allowed and Mr. Crabb granted the right of access at point B as well as a right of way over the new road to the public road.

[27] In his separate reasons Scarman L.J. considered the judgment of Fry J. in Wilmott v. Barber (1880), 15 Ch.D. 96 which he considered “a valuable guide as to the matters of fact which have to be established in order that a plaintiff may establish this particular equity”. It is worthwhile to repeat what Fry J. said at pages 105-6 of his judgment:

It has been said that the acquiescence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expanded some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, … the defendant, the possessor of the legal rights, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right.

[28] After quoting from Wilmott v. Barber, supra Scarman L.J. went on to observe:

But it is clear that whether one uses the word “fraud” or not, the plaintiff has to establish as a fact that the defendant, by setting up his right, is taking advantage of him in a way which is unconscionable, inequitable or unjust …

This court therefore cannot find an equity established unless it is prepared to go as far as to say that it would be unconscionable and unjust to allow the defendants to set up their undoubted rights against the claim being made by the plaintiff. In order to reach a conclusion upon that matter the court does have to consider the history of the negotiations under the five headings to which Fry J. referred.

[29] I take from this that in order to establish unconscionability one must meet the five-part test laid out by Fry J. in Wilmott.

[30] In the British Columbia Court of Appeal’s decision in Zalmer v. Victor Projects Ltd., upon which the trial judge relied, the facts are set out in the headnote as follows:

The plaintiff developers contacted the defendant owner of the adjoining parcel of land and requested permission to build a reservoir on the defendant’s property to serve their subdivisions. After an initial meeting, the plaintiff’s engineer met with the defendant’s principal and engineer at the site and pointed out the desired location for construction of the reservoir. The plaintiffs understood from that meeting that the defendant could grant, gratuitously, the easement for the area occupied by the reservoir and its ancillary works. The plaintiffs had the site surveyed and provided the defendant with the plan, asking if there were any concerns with the site. Without speaking to his principal, the defendant’s engineer acknowledged receipt of the plan and said he had no concerns with the proposed location but that formal approval from the principal would be necessary. The defendant did not review the plan and was unaware that the reservoir was built in its actual location until after its completion. He refused to provide an easement alleging that he told the plaintiffs’ engineer that the reservoir would only be acceptable in a gully north of the spot he had indicated. The plaintiff commenced proceedings and applied for a declaration as to the existence of an equitable easement. The application was granted at trial. The plaintiff was entitled to the declaration sought even though the defendant clearly had a different location in mind for the reservoir than where it was actually built. The defendant had led all those present at the site meeting to believe that he was agreeable to the reservoir being constructed at its present location. When the defendants’ engineer was asked if he had any concerns about the location of the reservoir, the plaintiff’s engineer was established to assume that he was speaking on behalf of the defendant and the plaintiff’s engineer was entitled to proceed in the manner he did.

[31] In his reasons, Hinds J.A. noted:

50 I now turn to consider whether, on the facts of this case, the plaintiffs established their claim against the defendant on the basis of proprietary estoppel.

51 I shall consider the question on the basis of the third alternative expressed by Lord Denning in Crabb: i.e.

… if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights – knowing or intending that the other will act upon that belief – and he does so act …

52 At the meeting on site on 6 August 1992 Mr. Bennett agreed that the plaintiffs could construct the water reservoir on his land at a location which the plaintiffs’ witnesses testified was the location at which it was in fact installed. On 11 August 1992 Mr. Pilling faxed to Mr. Bennett the particulars of the easement to which Mr. Bennett did not respond. The fax of his agent, Mr. Tomlinson, to Mr. Pilling on 13 August confirmed the location. The statement by Mr. Bennett to Mr. Gossett to the effect that he would be a good neighbor and would not require compensation for the land which would be subject to the easement, confirmed that the easement would be given on a gratuitous basis. In my view the words or conduct of Mr. Bennett, including those of his agent, Mr. Tomlinson, taken as a whole, led the plaintiffs to believe that they had the approval of Mr. Bennett to construct the reservoir and would be granted an easement. I find that the equitable doctrine of proprietary estoppel has been established.

[32] Here, in considering the respondents’ claim based on proprietary estoppel the trial judge in his analysis of the evidence merely reiterated the use the respondents and their families had historically made of the water lots owned by the appellants. At paragraph 103 of his reasons he concluded:

Bill Cutting and Brenda Cutting and Bill Cutting’s grandfather, William Owen Cutting, who preceded Bill and Brenda in owning the waterfront lots, have acquiesced in the Bell and Schwark extended families using the beach and gaining access to the beach over the berm, at least since 1971 for the Bells, which is 37 years, and at least since 1976 for the Schwarks, which is 32 years. The Bell and Schwark extended families have developed a lifestyle and have established family traditions rooted in the use of the beach. In doing so, they have relied upon the facet or explicit consent of the owners of the waterfront lots to their use of the beach and their being able to access the beach across the berm. In my view, it would be unconscionable for the Court now to permit Bill Cutting and Brenda Cutting to enforce their legal property rights by excluding the Bell and Schwark extended families from the beach.

[33] The statement is conclusory. Nowhere in the trial judge’s reasons is there any analysis of the evidence which led him to conclude that the appellants’ conduct was “unconscionable” within the meaning of Crabb and Willmott. Mere acquiescence or being a good neighbor is not enough to establish a claim in proprietary estoppel.

[34] The test for proprietary estoppel is set out in this court’s decision in Eberts v. Carleton Condominium No. 396 et al., 2000 CanLII 16889 (ON CA), [2000] O.J. No. 3773 (Ont. C.A.) at para. 23:

Proprietary estoppel is a form of promissory estoppel. It is commonly supposed that estoppel cannot give rise to a cause of action, but proprietary estoppel appears to be an exception to that rule: see Lord Denning in Crabb v. Arun District Council (1975), 1 Ch. 179 (Eng. C.A.) at 187-188. But there must be an estoppel. The basic tenets of proprietary estoppel are described in McGee, Snell’s Equity, 13 ed (2000) at pp. 727-28:

Without attempting to provide a precise or comprehensive definition, it is possible to summarize the essential elements of proprietary estoppel as follows:

(i) An equity arises where:

(a) the owner of land (o) induces, encourages or allows the claimant (c) to believe that he has or will enjoy some right or benefit over O’s property;

(b) in reliance upon this belief, C acts to his detriment to the knowledge of O; and

(c) O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.

[35] The facts established in this case fall far short of what is required to establish proprietary estoppel.

[36] In the first place the respondents knew they had no legal right to use the water lots. The trial judge explicitly found in paragraph 94 of his reasons, that the respondents knew they could only cross the berm and use the beach with the permission of the Cuttings.

[37] There was no evidence of any holding out or inducement on the part of the Cuttings which could be said to have caused the respondents to believe they had some right or benefit over the Cuttings’ water lots. They were merely granted permission to use it for a time. There is no evidence that they acted to their detriment in any way by relying on a belief that they had such a right. The construction of the berm in the 70’s was objected to by the appellants’ predecessor in title at the time. There was no evidence that any money was expended in the construction of the berm. The only evidence is that it was constructed from the rubble left after the demolition of a building(s) close by.

[38] Lastly, there is nothing unconscionable about a property owner, who, having permitted his neighbor to use his property for a time, withdraws that permission.

[39] In short, in my view, none of the elements necessary to establish a proprietary estoppel are made out in this case.

DISPOSITION

[40] I would allow the appeal, set aside the judgment below and in its place issue a judgment dismissing the action with costs.

[41] Costs of the appeal to the appellants on a partial indemnity scale fixed in the sum of $32,885.19 inclusive of disbursements and G.S.T.

[42] As discussed with counsel at the conclusion of argument, trial costs of the appellants are to be fixed by this court after the release of this court’s decision. Counsel will file their submissions made to the trial court within 10 days of the release of these reasons.

RELEASED: January 27, 2010 “EEG”

“J. MacFarland J.A.”

“I agree E.E. Gillese J.A.”

“I agree R.A. Blair J.A.”