Court of Appeal for Ontario
Date: 2021-08-24 Docket: C68393 & C68467
Before: Fairburn A.C.J.O., Miller and Zarnett JJ.A.
Between:
Docket: C68393 The Estate of William Albin Herold, deceased Applicant (Respondent)
And: Attorney General of Canada, Curve Lake First Nation, Hiawatha First Nation and Mississaugas of Scugog Island First Nation Respondents (Respondent / Appellants)
And Between:
Docket: C68467 The Estate of William Albin Herold, deceased Applicant (Respondent)
And: Attorney General of Canada, Curve Lake First Nation, Hiawatha First Nation and Mississaugas of Scugog Island First Nation Respondent (Appellant / Respondents)
Counsel: Robert Janes, Candice S. Metallic, and Aubrey Charette, for the appellants (C68393)/respondents (C68467) Curve Lake First Nation, Hiawatha First Nation and Mississaugas of Scugog Island First Nation Daniel E. Luxat, for the appellant (C68467)/respondent (C68393) Attorney General of Canada D. Jared Brown, for the respondent (C68393/C68467) Estate of William Albin Herold
Heard: March 2, 2021 by videoconference
On appeal from the order of Justice C.M. Smith of the Superior Court of Justice, dated February 28, 2020 with reasons reported at 2020 ONSC 1202.
Zarnett J.A.:
I. Introduction
[1] This litigation concerns the ownership of three islands (the “Islands”) located in Lake Katchewanooka [1], which is part of the Trent-Severn Waterway. The Islands are in close proximity to each other. The largest is referred to as Island 27; the two smaller islands were at one time part of Island 27 but are now separated from it as a consequence of flooding and erosion. [2]
[2] In the decision under appeal, the application judge held that the respondent, the Estate of William Albin Herold (the “Estate”), owns the Islands by virtue of its ownership of Lot 35, Concession 11, in the Township of Smith, County of Peterborough (“Lot 35”).
[3] The application judge found that when Lot 35 was first surveyed in 1818, the land that became the Islands was a headland or peninsula connected to Lot 35’s mainland. In 1868, the Province of Ontario, by Letters Patent, granted Lot 35 to Alexander Rose, the Estate’s predecessor in title. Although he was not satisfied that in 1868 the Islands were still physically part of the mainland of Lot 35, and the Letters Patent made no reference to any islands, the application judge declined to determine the intention of the parties to the Letters Patent. Instead, he concluded that since Island 27 had, by 1855, separated from the mainland as a result of changes in water levels brought about by dams erected in the 1830s, it was included as a matter of law in the Letters Patent’s conveyance of Lot 35. He further held that ownership of the Islands was not affected by treaties between the appellant First Nations [3] (the “First Nations”) and the Crown made in 1818 and 1856. He interpreted the treaties, by which the First Nations had surrendered their title to a vast tract of land in what is now Central Ontario, to include a surrender of the property in issue in this litigation, giving the Crown the right to sell. Accordingly, as the Islands had been sold as part of Lot 35, when the Estate became the owner of Lot 35, it also became the owner of the Islands.
[4] The First Nations and the Attorney General of Canada (“AG Canada”) both appeal. For the reasons that follow, I would allow the appeals.
[5] In my view, the application judge’s determination that the Letters Patent conveyed the Islands as part of the conveyance of Lot 35 is not subject to deference, since he made extricable errors of law. The application judge failed to follow the fundamental principle of interpretation—to determine the meaning of the Letters Patent in accordance with the intentions of the parties, objectively ascertained from the language they used in light of the relevant factual matrix. He also erred in treating a legal principle about the effect of sudden changes in water levels on boundaries between different owners as applicable and determinative. Finally, he failed to properly consider the Crown’s obligations to the First Nations in determining what the Crown intended to convey by the Letters Patent.
[6] Properly interpreted, the Letters Patent did not include any conveyance of the Islands. As Mr. Rose did not obtain ownership of the Islands when he received a conveyance of Lot 35 under the Letters Patent, the Estate did not obtain ownership of them when it obtained ownership of Lot 35.
II. Background
A. Treaty 20
[7] In 1818, the Crown and the First Nations entered into the [Treaty of Newcastle (“Treaty 20”)]. It provided for the surrender to the Crown of a vast tract of land in what is now Central Ontario. Although the description in Treaty 20 was general, the application judge found that it included the property in issue in this litigation.
[8] Although there was no express exclusion in Treaty 20 of any islands, the evidence before the application judge, which he accepted, was that the First Nations had requested that any islands in the waterways within the surrendered lands be excluded, and the Crown’s representative had assured them that the request would be communicated to the King who would no doubt accede to it.
B. The Wilmot Survey
[9] At about the same time as Treaty 20 came into effect, the southern part of the Township of Smith was surveyed by Samuel Wilmot. The 1818 survey he prepared (the “Wilmot Survey”) showed bodies of water, concessions, and lots; of particular relevance is its depiction of Lot 35.
[10] The Wilmot Survey depicts Lot 35 as a mainland lot roughly triangular in shape. Its northern boundary is the concession line separating Concessions 11 and 12; its western boundary is the division between Lots 34 and 35; and its southeastern boundary is the water’s edge of Lake Katchewanooka. The Wilmot Survey does not show any distances between the fixed boundaries on the north and west, and the southeastern water’s edge boundary.
[11] The application judge noted that there was some concern about the precision of the Wilmot Survey’s depiction of the southeastern area of Lot 35, as the surveyor had noted that the “waters are not traversed only sketched”. However, according to evidence that the application judge accepted, at the time of the Wilmot Survey, what came to be the Islands was a headland or peninsula on part of the mainland of Lot 35.
C. Dams in the Waterway
[12] Dams were constructed in the Trent Severn waterway in the 1830s, downstream and upstream from Lot 35. The application judge did not make a finding of the distance between the dams and Lot 35. Some of the evidence suggests that one of the dams was about 7.5 kilometres away. The application judge found that these dams caused a rise in water levels, resulting in a change to the configuration of Lot 35. His precise findings concerning the timing and nature of the rise in water levels are discussed in more detail in the Analysis section below.
D. The Haslett Survey
[13] In 1854, a survey of islands in the “Rivers Trent and Otonabee and their lakes” was authorized by the Privy Council and commissioned by the Commissioner of Crown Lands. The application judge found that the resulting survey (the “Haslett survey”), completed in 1855, identified an island in Lake Katchewanooka in the location of what had been the headland or peninsula depicted on the Wilmot Survey of Lot 35. The Haslett survey named it Island 27.
[14] The Estate contended before the application judge that the Haslett survey was unreliable to the extent it identified Island 27 as separated from the mainland of Lot 35 in 1855. The Estate maintained that the Islands continued to be physically connected to the mainland of Lot 35 at the time of the Letters Patent in 1868, and only became separated due to flooding in the 1870’s. Ultimately, the application judge found against the Estate, which bore the onus of proof, on these factual points. He noted that, based on the evidence of the expert witnesses, “it is reasonable to conclude that Island 27 existed as surveyed [by Haslett] in 1856”. The application judge concluded that “I cannot be satisfied on a balance of probabilities that Island 27 was still attached to the main land in 1868” – a reference to the date of the Letters Patent.
E. Treaty 78
[15] In 1856, the Crown and the First Nations entered into the [Islands of the Trent Treaty (“Treaty 78”)]. The application judge found that “Treaty 78 addressed any uncertainty there may have been regarding the status of the islands in the waters in question flowing from the wording of Treaty 20 in 1818”. Under Treaty 78, the First Nations conditionally surrendered to the Crown, “in trust, to [be] sold or otherwise disposed of to the best advantage for ourselves and our descendants forever … all islands and mainland … in the Newcastle and Colborne Districts, including the islands in Rice Lake which have not heretofore been ceded to the Crown” with the “principal arising from such sales to be safely funded and the interest accruing therefrom to be paid annually to us and our said descendants for all time to come.”
[16] The application judge found that the description of land covered by Treaty 78 “would include the Township of Smith where the subject property is located”.
F. The Letters Patent
[17] In 1868, by Letters Patent, the Province of Ontario granted Lot 35 to Mr. Rose, from whom the Estate ultimately derived its title. The Letters Patent describe what was conveyed “as being composed of Lot Number Thirty five in the Eleventh Concession of the … Township of Smith”. An approximate acreage is provided but it is unclear if it is 21 or 71 acres. There is no express mention of any islands. The Letters Patent provided for the consideration to be paid by Mr. Rose – $17.00 – and did not allocate it between the mainland and any islands.
G. The 1893 Resolution
[18] In 1893, the federal Crown issued a Resolution (the “1893 Resolution”) approving a request by the First Nations that certain islands, including Island 27, not be sold under Treaty 78, but instead be reserved for their use.
H. Conduct After the Letters Patent
[19] The parties led evidence of conduct and views expressed after the Letters Patent relating to whether the Islands were part of Lot 35, and whether they were sold as part of the 1868 Crown grant.
[20] The after-the-fact evidence included: that between 1894 and 1896, the federal, Ontario, and Quebec governments participated in arbitration proceedings regarding amounts owing to the First Nations from the sale of islands, which did not include anything about Island 27; compensation having been paid to Jane Rose for flooding damage to Lot 35 that occurred because of the reconstruction of a dam in 1879; the registration of the 1893 Resolution and related resolutions on title in 1973; the Islands having been assigned their own Property Identification Numbers as separate parcels with no owners specified; correspondence between various government agencies articulating different positions; and the Estate having used the Islands, made improvements, paid property taxes, and posted “Private Property” and “No Trespassing” signs on them.
[21] The application judge summarized the effect of the after-the-fact evidence as follows: “The title to [Lot 35] has been plagued since 1868 by uncertainty about whether three islands in the lake, the largest of which is referred to as Island 27, are properly a part of [Lot 35]”.
III. The Application Judge’s Decision
[22] The Estate applied for various orders to confirm its ownership of the Islands.
[23] The application judge identified three issues for determination:
a) Did the 1868 Letters Patent convey the Islands to the Estate’s predecessor in title, Mr. Rose? b) What is the effect of Treaty 20 and Treaty 78 on the ownership of Island 27? c) What is the effect of the Resolution of 1893 on the ownership of Island 27?
[24] On the first issue, the application judge declined to consider the intention of the parties to the Letters Patent on the basis that to do so would be “sheer speculation”. He also observed that the Beds of Navigable Waters Act, R.S.O. 1990, C. B-4 (the “Act”), which deemed a Crown grant not to include the bed of a navigable body of water unless a contrary intention is expressly stated, could not have been on the minds of either party at the time of the Letters Patent as it was not yet proclaimed into force.
[25] The application judge reasoned that the southeastern boundary of Lot 35 was “riparian and ambulatory” at the time of the Wilmot Survey, but the “water boundary lost its ambulatory status sometime during the 1830s”, when the dams were first constructed. He relied on a legal principle that when “water levels are quickly raised through a process that is not gradual, then the boundary of the property in question is fixed in location at the time of encroachment”. Although he was not satisfied that the Islands were physically connected to Lot 35 in 1868, the Letters Patent conveyed them because they were within the boundary of Lot 35 that had been so fixed.
[26] On the second issue, the application judge found that Treaty 20 provided for the surrender to the Crown of a vast tract of land which included Lot 35 and, based on his findings, the land that later became the Islands. He found that Treaty 20 contained no exceptions relating to the property in issue and imposed “no restrictions of any kind regarding subsequent dealings with the lands” by the Crown. He held that Treaty 78 did not detract from the Crown’s full ownership rights, which included a right to sell. He noted that while Treaty 78 imposed a condition that the Crown use the proceeds of any sale for the benefit of the First Nations, this did not estop the Crown from selling any of the surrendered lands. The honour of the Crown was not at risk as long as it used the proceeds in that way.
[27] On the third issue, the application judge found that Island 27 was included in the 1893 Resolution by mistake, and that the 1893 Resolution should not affect title to the islands.
IV. The Parties’ Positions
[28] The First Nations argue that the application judge erred in giving Treaty 20 and Treaty 78 the effect of extinguishing the title of the First Nations to the Islands. Treaty 20 was subject to an orally agreed to reservation concerning islands. Treaty 78 was a conditional surrender in trust, which imposed obligations if the Crown were to effect a sale of any islands. There was no evidence of compliance with those obligations in the transaction contemplated by the Letters Patent. The application judge should have, but failed to, interpret the Letters Patent with reference to the Crown’s intention as grantor and in a manner that reconciled their meaning with the obligations of the Crown under Treaty 78. The only way to do so would be to conclude that the Letters Patent did not include the Islands.
[29] The First Nations further submit that the application judge erred in applying legal principles respecting water boundaries and misapprehended the evidence concerning the nature and timing of any change in water levels. Finally, they submit that the application judge erred in finding that after the Letters Patent, the federal Crown had no authority to deal with the Islands and thus had included them in the 1893 Resolution by mistake.
[30] The appellant AG Canada argues that the application judge erred by: failing to properly interpret the Letters Patent in accordance with the intentions of the parties, objectively ascertained; and, applying a legal principle respecting water boundaries between different owners to conclude that Island 27 remained part of Lot 35 at the time of the Letters Patent, when the principle was factually and legally inapplicable.
[31] The Estate argues that the application judge properly found as a fact that, prior to the Letters Patent, flooding had occurred causing the separation of the Islands from the mainland of Lot 35. They submit that he correctly concluded, as a matter of law, that the flooding fixed the boundary of Lot 35 such that what became the Islands were included as part of the Lot 35 Letters Patent conveyance. The Estate also argues that the application judge properly interpreted the treaties as giving the Crown the right to sell the Islands and properly found that the honour of the Crown was not engaged in any way that detracted from the Estate’s ownership.
V. Analysis
[32] If the application judge erred in finding that the Letters Patent included a conveyance of the Islands by the Province of Ontario to Mr. Rose, that is determinative of the appeals. Accordingly, my analysis commences with identifying the interpretive issue under the Letters Patent, the principles of interpretation, and the standard of review. I then discuss the errors which, in my view, the application judge committed in his approach. Finally, I set out the proper resolution of the interpretive question. The effect of the treaties and the legal principles concerning water boundaries all play a part in this analysis.
A. The Interpretive Issue and The Standard of Review
[33] The Letters Patent did not include a metes and bounds description of the property conveyed or any express mention of islands. The property was described by what the parties agree was a reference to Lot 35 on the 1818 Wilmot Survey. [4] The Wilmot Survey depicted Lot 35 as a mainland lot with a southeastern boundary formed by the water’s edge of Lake Katchewanooka. In this court, all parties accept the application judge’s finding that Island 27 was beyond the water’s edge and was not connected to the mainland of Lot 35 at the time of the Letters Patent in 1868.
[34] The interpretive question thus raised was whether the Letters Patent conveyed the land up to the water’s edge in 1868, and therefore did not include the Islands, or whether the Letters Patent also conveyed the Islands, as land that had previously been connected to the mainland of Lot 35, including at the time of the Wilmot Survey.
[35] The parties advance different formulations of the issues and thus the applicable standard of review. The Estate characterizes the application, to the facts, of legal principles about the effect of flooding on boundaries and the resulting determination of what was conveyed as a question of mixed fact and law, subject to deference on appeal. The First Nations characterize the failure of the application judge to determine the intentions of the parties to the Letters Patent as an error of mixed fact and law, with a commensurate standard of appellate review. The AG Canada submits that the interpretation of the Letters Patent should be reviewed on a standard of correctness because it deals with title and the factual matrix is not required to resolve any ambiguity in the Letters Patent.
[36] As I discuss in more detail below, the interpretation of the Letters Patent involves discerning what the parties to them objectively intended. That is a fact specific exercise; it is a function of the language used, read in light of the relevant factual matrix or surrounding circumstances, and the legal principles that arise from those circumstances. It follows that the interpretation of the Letters Patent is a question of mixed fact and law. Absent an extricable error of law, or a palpable and overriding error of fact, a determination of a question of mixed fact and law is subject to deference on appeal: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 234, at paras. 26, 36-37; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50, 53; Corner Brook (City) v. Bailey, 2021 SCC 29, at para. 44.
[37] In my view, the application judge made three extricable legal errors in his approach to the question of whether the Islands were included in the conveyance by the Letters Patent. First, he failed to follow the fundamental principle of interpretation, which is to determine the meaning of the Letters Patent based on the parties’ intentions, objectively derived from the words they used in light of the factual matrix. Second, he erroneously relied on a legal principle about a sudden change in water levels fixing boundaries between different owners; in the circumstances, that principle was neither applicable nor determinative. Third, he failed to consider how the apparent disconnect between the obligations of the Crown concerning a sale of an island covered by Treaty 78, and the terms of the Letters Patent, bore on the question of whether the Province of Ontario intended to include the Islands in the Letters Patent.
[38] As a result of these extricable legal errors, the application judge’s conclusion about the meaning of the Letters Patent is not entitled to deference: Sattva, at para. 53.
[39] Below, I will expand on the application judge’s three errors. I will then turn to what I consider to be the proper interpretation of the Letters Patent.
B. The Application Judge’s Errors
(1) Failure to Consider the Meaning of the Letters Patent from the Standpoint of the Intention of the Parties Objectively Derived
[40] Although the meaning of the Letters Patent was a core issue identified by the application judge, he declined to determine the intentions of the parties to it. This was an error, as objectively ascertaining the intention of the parties is the very goal of interpreting a written instrument.
[41] As the Supreme Court of Canada said in Sattva, the “overriding concern” in the interpretation of contracts is to:
… determine “the intent of the parties and the scope of their understanding”. To do so, a decision-maker must read the contract as a whole … consistent with the surrounding circumstances known [or that reasonably ought to have been known] to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning [Emphasis added.] [Citations omitted.]: Sattva, at para. 47.
[42] In other words, when interpreting a contract, the question is not the abstract meaning of its words, but what the parties to the contract are objectively taken to have intended by the words they chose in light of the circumstances – the factual matrix – in which they used them. A court objectively derives the parties’ intentions by examining the words to determine what the parties intended, and examining the surrounding circumstances “to deepen [its] understanding of the mutual and objective intentions of the parties as expressed in the words of the contract” (emphasis added): Sattva, at para. 48, 57-58, 60; McLean v. McLean, 2013 ONCA 788, 118 O.R. (3d) 216, at para. 54, leave to appeal refused, [2014] S.C.C.A. No. 76.
[43] This approach is consistent with the goals of finality and certainty in contractual dealings – the interpretation that is reached is grounded in the text of the agreement read as a whole, and the factual matrix is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to overwhelm or deviate from them, or change or overrule their meaning: Sattva, at paras. 57, 59-60.
[44] These general principles apply equally to the interpretation of an instrument that creates or conveys an interest in land. I draw that conclusion for three reasons.
[45] First, the Supreme Court of Canada has noted that the construction of an easement – clearly an interest in land – is a question of mixed fact and law as it must be interpreted in light of the entire factual matrix: Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, 450 D.L.R. (4th) 105, at para. 101. In support of that proposition, the Supreme Court cited both Robb v. Walker, 2015 BCCA 117, 383 D.L.R. (4th) 554, at paras. 30-31 (which held the principles in Sattva to be applicable to the interpretation of an easement) and Sattva itself. There is no apparent reason to distinguish the principles applicable to the interpretation of an instrument granting or conveying an easement from those applicable to a different type of interest in land. Determining the objective intentions of the parties is thus equally the goal of interpreting a conveyance, as that is the overriding concern of interpretation as identified in Sattva.
[46] Second, the need for certainty and finality in conveyancing is respected by determining the objective intentions of the parties to the instrument through examining its words in light of the factual matrix that illuminates their meaning, in accordance with the principles in Sattva.
[47] Third, this approach is in line with this court’s holding in the leading case concerning the interpretation of conveyances by deed or Crown grant: Gibbs v. Grand Bend (Village) (1995), 129 D.L.R. (4th) 449 (Ont. C.A.). Although expressed in pre-Sattva language, the basic principles articulated in Gibbs do not vary, in any respect that is material to this case, from those articulated in Sattva. Those principles equally focus on determining the intention of the parties to the deed or grant.
[48] Under Gibbs, the primary determinant of the meaning of a conveyance, whether by deed between private parties or by Crown grant, is its language: Gibbs, at p. 461. This is consistent with the role played by the text of a written agreement under Sattva: at para 57. Extrinsic evidence cannot be used to contradict the unambiguous terms of a conveyance made by deed or Crown grant (Gibbs, at p. 461), just as it cannot be used to contradict the meaning of the language of any contract (Sattva, at paras. 59-60). But just as evidence of factual matrix or surrounding circumstances can be used to ascertain contractual intention when it is difficult to do so by looking at the words alone (Sattva, at para. 47), in the case of a deed or Crown grant, extrinsic evidence can be used “to explain the sense in which words, open to more meanings than one, have been used by the contracting parties", and thus to give effect to the grantor’s intention: Gibbs, at p. 461 (citations omitted). [5] The purpose of reviewing such evidence is “to permit the court to carry out the intentions of the parties”: Gibbs, at p. 463.
[49] Gibbs refers to the requirement that a latent ambiguity must exist in a deed or Crown grant before extrinsic evidence will be considered: at p. 461. Sattva permits the consideration of factual matrix or surrounding circumstances in any contractual interpretation, recognizing that it may be difficult to determine intention by the words alone. In this case, this is a distinction without a difference. The test for a latent ambiguity, and thus for the admission of extrinsic evidence under Gibbs, is met in cases where the description of the land in the deed or grant, when applied to the land itself, raises an issue about the location of a boundary. Clearly, that test is met in this case.
[50] An example referred to with approval in Gibbs was a case in which a deed described “the old shore road” as the westerly boundary of a lot expropriated by the provincial government. However, the “old shore road” no longer existed at the time of expropriation, causing difficulty in determining the dimensions of the land. Extrinsic evidence was admitted to assist in determining the previous location of the road: at p. 462.
[51] Similarly, the interpretive issue in this case arises since the description in the Letters Patent, referring to property depicted on a survey in 1818 as a mainland lot with a water’s edge boundary, when applied to the land in 1868 after Island 27 was no longer part of the mainland, raises an issue about the boundary of what was conveyed. Extrinsic evidence of the factual matrix or surrounding circumstances was thus admissible under both Gibbs and Sattva.
[52] The parties introduced, and the application judge admitted, extrinsic evidence of the circumstances existing up to the time of the Letters Patent. Yet the application judge did not use this evidence to determine the intentions of Ontario and Mr. Rose, as revealed by the words of the Letters Patent, in light of the surrounding circumstances. He held that “[a]ny consideration of the intention of the parties to the 1868 Letters Patent is … sheer speculation”.
[53] If all the application judge meant by this was that he was jettisoning from the analysis any consideration of the subjective thoughts of the parties, as opposed to what they objectively intended, he would have been correct. Evidence of subjective intentions plays no role in contractual interpretation: Sattva, at para. 59. But the application judge did not make that distinction.
[54] He made numerous findings based on extrinsic evidence, including about the Wilmot Survey, the historical and then current location of the Islands, the Haslett survey, and Treaties 20 and 78. He did not hold that any of those matters fell outside of the category of background facts known or that reasonably ought to have been known to the parties at the time of the Letters Patent (the description of factual matrix used in Sattva) or as evidence of writings prior to and leading up to the issue of the Letters Patent that explains the sense in which the parties used language open to more than one meaning (the description of extrinsic evidence used in Gibbs). [6] Despite his acceptance of this evidence, he did not use it to assist in determining the objective intentions of the parties by examining the words used in the Letters Patent in light of those circumstances.
[55] By failing to determine the objective intentions derived from the language of the Letters Patent in light of the surrounding circumstances, the application judge failed to consider and apply the correct principle of interpretation. This was an extricable legal error: Sattva, at para. 53.
(2) Error in the Consideration of Boundaries Principles
[56] The application judge identified three legal principles relating to water boundaries of property. He rejected the application of one of them, held that a second applied only up to a point in time, and treated one as applicable and determinative.
[57] The appellants argue that the application judge erred in rejecting the applicability of the Act on the basis that it could not have been within the parties’ contemplation at the time of the 1868 Letters Patent, as it was not enacted until 1911. I agree that his basis for rejection was erroneous, but I do not agree that the error was material.
[58] Section 1 of the Act provides that where land that borders a navigable body of water 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 that body of water was not intended to and did not pass to the grantee. Given the language of s. 1 (“has been … granted”), and the nature of the exceptions in s. 2 (for example, rights determined by a court before March 24, 1911), it is clear that s. 1 has retrospective effect, governing grants made before the first version of the Act came into force in 1911: Middlesex Centre (Municipality) v. MacMillan, 2016 ONCA 475, 132 O.R. (3d) 497, at para. 16.
[59] The Act specifically and retrospectively regulates the meaning of a grant from the Crown. If the applicability of the Act were contingent on it being in force at the time of the grant, its provisions that give it retrospective operation would be meaningless.
[60] Although the basis on which he rejected the applicability of the Act was erroneous, in my view the error was not material; as the Estate argues, interpreting the Letters Patent to exclude the water bed between Lot 35 and the Islands does not necessarily exclude the Islands themselves, as Island 27 was above the water.
[61] A second principle the application judge referred to is that a riparian or water’s edge boundary may be ambulatory, in the sense that it may change to reflect gradual [7] movement of the water’s edge (the “Ambulatory Principle”). A parcel of land with this type of boundary is subject to accretion – the addition of land when the water’s edge gradually moves out – and erosion – the decrease of land when the water’s edge gradually moves in. Put differently, when this principle applies, the water’s edge, wherever it may gradually move to from time to time, is the boundary: Natural Resources Canada, Surveyor General Branch, Water Boundaries on Canada Lands: That Fuzzy Shadowland, (Edmonton: Her Majesty the Queen in Right of Canada, 2016) (the “Surveyor General Publication”), at p. 31.
[62] The application judge concluded that in 1818, the southeastern boundary of Lot 35 as depicted on the Wilmot Survey – the water’s edge of Lake Katchewanooka – was ambulatory.
[63] The application judge also referred to a principle (the “Flooding Principle”) that when “water levels are quickly raised through a process that is not gradual, then the boundary of the property in question is fixed in location at the time of encroachment”. In other words, where a sudden [8] change in water levels occurs, the boundary of the owner’s property will be fixed at the point where the land met the water’s edge at the time of the sudden rise of water levels: Surveyor General Publication, at p. 39; Neilson v. British Columbia (Attorney General), [1956] S.C.R. 819, at p. 840. The application judge applied this principle to conclude that the boundary of Lot 35 had ceased to be ambulatory in the 1830s.
[64] The appellants argue that there are two problems with the application judge’s use of the Flooding Principle.
[65] First, they say that the evidence was insufficient to support a finding that a non-gradual change in water levels separated the Islands. Indeed, the First Nations say that the application judge made findings that were contradictory, in that he referred to the rise in water levels as “a lengthy and gradual process which commenced in the 1830s”, but then applied the Flooding Principle as though the rise was sudden enough to engage it.
[66] Second, the AG Canada argues that the Flooding Principle applies to prevent a person from losing land to another due to a sudden rise in water levels, not to determine where one parcel of unpatented land belonging to the Crown ends and another begins. Here, on the application judge’s findings, at the time that the water levels changed, the Crown owned Lot 35, the adjacent water bed, and the Islands that were separated from the mainland of Lot 35.
[67] I address each point below.
a) The Application Judge’s Factual Findings Do Not Support the Application of the Flooding Principle
[68] The application judge found that the Islands separated from Lot 35 in a lengthy and gradual manner:
I am also satisfied that the configuration of the subject property was radically altered by the installation of man-made dams on the river. This was a lengthy and gradual process which commenced in the 1830s with the Herriot dam, continued through the construction of the Trent Severn Waterway in the middle years of the 19th century, culminating in the more significant damage caused by the flooding in the 1870s which led to the damages paid by the Crown to Jane Rose, as evidenced by the release registered on title of the subject property in 1885 as Instrument Smith 3160. The Baird drawings and the Haslett survey are the only evidence available regarding flood conditions at the subject property in the mid-19th century. Those documents, particularly the Haslett survey, support the notion that water levels on the river at the point in question had risen by as much as 2.5 feet by the mid-1850s. [Emphasis added.]
[69] After making these findings, he set out the Flooding Principle by reference to p. 44 of the Surveyor General Publication, which states that it applies where water levels rise quickly through a process that is not gradual:
Watercourses regulated for navigation or reservoir (millpond) purposes have higher levels, which remain somewhat constant throughout the year (e.g. many lakes in Ontario). Such levels are upstream of dams and remove impediments to navigation such as rocks and reeds. This means that discharge varies greatly throughout the year. If water levels are quickly raised (through a process that is not gradual), then erosion has not occurred and the boundary is fixed in location at the time of encroachment. The upland parcel is partially (or completely) submerged. [Emphasis added.]
[70] The application judge’s factual finding of a gradual and lengthy process by which water levels changed over approximately 25 years was not a finding of a quick rise in water levels through a process that was not gradual, as necessary for the application of the Flooding Principle he described. Nonetheless, without explanation of this discrepancy, the application judge concluded:
What does persuade me that Island 27 and the two smaller islands were [what] was conveyed to Alexander Rose in 1868 is the [principle] set out in the [Surveyor General Publication] to the effect that when, as here, water levels are quickly raised through a process that is not gradual, then the boundary of the property in question is fixed in location at the time of encroachment. That principle is set out in an article produced and published by no less an authority than the Surveyor General Branch of Natural Resources Canada. That same principle was also applied by this Court in the Gall v. Rogers case, also referred to above. In my view, that is the governing law. That being the case, I find that the applicant has met its onus and has established on the balance of probabilities that Island 27, as well as the two smaller islands which formed immediately adjacent to Island 27, were conveyed by the Crown to Alexander Rose by the Letters Patent of 1868. [Emphasis added.]
[71] Although the application judge used the words “as here”, he did not make any factual findings that the change in water levels was non-gradual. He found the opposite – that the property was altered through a “lengthy and gradual process”. This characterization is also in line with what he described as the only evidence of the change in water levels and alteration of Lot 35, namely, that approximately 25 years after the dams were erected, Island 27 existed as depicted by the Haslett Survey, and that the water level had increased by 2.5 feet over the course of those years. There was no evidence of water levels in 1818 or the effect on them in the 1830s when the dams were erected.
[72] The flooding principle requires a sudden alteration or displacement of land or water: Neilson, at p. 826; McLeay et al v. City of Kelowna et al., 2004 BCSC 325, 27 B.C.L.R. (4th) 344, at para. 20.
[73] The Estate seeks to support the application judge’s conclusion by relying on the cause of the rise in water levels having been artificial – the result of dams. However, the fact that the cause of a rise in water levels was artificial does not on its own make the Flooding Principle applicable if the rise was not sudden. Nor is the Ambulatory Principle inapplicable if accretion or erosion is the result but not the intended effect of a lawful artificial structure: Surveyor General Publication, at p. 29; Clarke v. Canada (Attorney-General), [1930] S.C.R. 137, at p. 144. A change in water levels somewhere may be the natural result of a dam. But the inference that the dams erected in the 1830s were intended to cause erosion at, and to take land away from, Lot 35 was not one that the application judge drew. Nor is such an inference properly available from the fact that water levels were different, and Island 27 had separated from the mainland, some 25 years after the dams were erected.
[74] Where the facts found by a trial judge are insufficient to engage a correctly articulated legal standard, the application of that standard is an error of law, since it is tantamount to the judge having altered the legal standard: Housen, at para. 27. On the factual findings of the application judge, the Flooding Principle was not applicable. It was thus an error of law for him to apply it.
b) Applying The Flooding Principle to a Time Before the Crown Grant
[75] The AG Canada submits that it was an error to apply the Flooding Principle to unpatented land, that is, to fix the boundary at a location other than the 1868 water’s edge because of changes in water levels before the Letters Patent.
[76] Although in light of my finding above it is unnecessary to finally conclude on this issue, I note that the authority that the application judge relied on, The Surveyor General Publication, does not seem to support applying the Flooding Principle in this circumstance. The authors make the following observation about the relevance of the movement of the water’s edge between the time a lot has been surveyed, and the time of the Crown grant:
What if the watercourse shifts between time of survey and time of parcel creation (e.g. creating a Reserve, granting a Crown patent, registering a subdivision plan, or raising a new title)?
The significant date is when the parcel is created. The location of the watercourse and thus the location of the water boundary pertains when the parcel is created and not when the parcel/watercourse is surveyed: “The test is whether the land in fact comes to the water’s edge under the grant and not upon the manner of land description within the grant.” The time of survey pales into insignificance because “riparian rights exist ... at the time of the original Crown grants.” at p. 5 (emphasis added).
[77] Contrary to the submission of counsel for the Estate, the reference in Becker v. Walgate, 2020 ONCA 491, at footnote 4, that the water’s edge at the time of the Crown grant does not necessarily mean the water’s edge on the day of the grant but rather the water’s edge in its natural and calm condition cannot be read in this case to refer to the water’s edge some 30 years prior to the Crown grant.
(3) Failure to Consider the Implications of the Treaties on the Interpretation of the Letters Patent
[78] After finding that, because of the Flooding Principle, the Letters Patent conveyed the Islands to Mr. Rose, the application judge considered the effect of Treaties 20 and 78 on ownership of the Islands. As described above, he found that Treaty 20 effected an absolute surrender of lands that included Lot 35, and that Treaty 78 resolved any uncertainty about the Islands and did not detract from the Crown’s full ownership rights which included a right to sell. The condition Treaty 78 imposed that the Crown use the proceeds of any sale for the benefit of the First Nations, this did not estop the Crown from selling any of the surrendered lands, and the honour of the Crown was not at risk as long as the Crown used the proceeds in that way.
[79] In other words, the application judge, having found without reference to the Treaties, that the Letters Patent meant that the Islands had been sold, then concluded that the Treaties did not affect the title that was conveyed.
[80] The appellants argue that in approaching the matter this way the application judge made a number of errors. It is not necessary, in my view, to address each of those arguments. I accept the argument that in considering what the Letters Patent conveyed, the application judge erred by failing to consider the obligations in Treaty 78, and whether they were consistent with reading the Letters Patent to include Island 27. In other words, he failed to take them into account as something that shed light on the sense in which the words in the Letters Patent were used: Sattva, at para. 58; Gibbs, at p. 463.
[81] Treaty 20 recorded an absolute surrender of title by the First Nations, but the application judge accepted that assurances were given that the King would accede to the First Nations’ request to exclude any islands. The application judge found that those assurances were not given effect until Treaty 78. However, Treaty 78 resolved those issues by effecting a surrender that was in trust and on conditions. It imposed limitations on the type of sale that could be made – “to the best advantage for ourselves and our descendants forever” – and obligations about any proceeds – the “principal arising from such sales to be safely funded and the interest accruing therefrom to be paid annually to us and our said descendants for all time to come.”
[82] The Crown was under an obligation to ensure the conditions of surrender, which are construed liberally and through the lens of the honour of the Crown, were faithfully carried out: R. v. Badger, [1996] 1 S.C.R. 771, at para. 41; Guerin v. The Queen, [1984] 2 S.C.R. 335, at pp. 376, 382. And the Province was bound by those obligations if it carried out the Crown power to sell: Grassy Narrows First Nation v. Ontario (Natural Resources), 2014 SCC 48, [2014] 2 S.C.R. 447, at para. 50.
[83] The fact that the Crown had undertaken separate obligations in connection with islands, and the nature of the obligations, should have shed light on whether a sale of Island 27 was objectively intended by the Province by Letters Patent that referred only to Lot 35. The Crown is not presumed to act in a manner that ignores its duties: Badger, at para. 41. The fact that the Letters Patent neither identified Island 27 separately, although surrendered to the Crown in trust and on conditions, nor allocated any of the sale price to Island 27 (a seemingly necessary first step toward investing those proceeds for the benefit of the First Nations as the terms of Treaty 78 required) were facts that were objectively inconsistent with the inference that the reference to Lot 35 was intended to include Island 27.
C. The Interpretation of the Letters Patent
[84] In light of these errors, the application judge’s interpretation of the Letters Patent is not entitled to deference. I turn, therefore, to whether, applying the proper principles, his interpretation is nevertheless supportable. In my view, and as presaged by the discussion above, it is not.
[85] I repeat the interpretive question: whether it was the intention of the parties, objectively ascertained, that the Letters Patent conveyed the land up to the water’s edge in 1868, which did not physically include the islands, or whether they conveyed land that in 1868 was beyond the water’s edge but which had been, at a prior point in time, connected to the mainland.
[86] In my view, the former interpretation is the only one which reflects the objectively ascertained intentions of the parties, as determined by the language of the Letters Patent read in light of the factual matrix and the legal principles that apply:
a) the language of the Letters Patent refer to Lot 35, which the Wilmot Survey depicted as a mainland lot having a southeastern boundary constituted by the water’s edge of Lake Katchewanooka, and that did not include any land beyond the water’s edge or any islands;
b) the water’s edge boundary shown on the Wilmot Survey was ambulatory. Nothing in the language of the Letters Patent incorporating the Wilmot Survey, or in correctly applied legal principles concerning boundaries, would reasonably be taken to mean that the reference to Lot 35 was intended to include any land beyond the water’s edge at the time of the Letters Patent even if the water’s edge had moved after the date of the Wilmot Survey;
c) by the time of the Letters Patent, Island 27 had not only separated from the mainland of Lot 35, but had also been separately identified on the Haslett Survey – this makes the absence of any reference to Island 27 in the Letters Patent all the more important; and
d) by the time of the Letters Patent, the Crown, under Treaty 78, had undertaken obligations in connection with Island 27 in favour of the First Nations. Yet the Letters Patent did not reference Island 27 or set out a value for Island 27, nor is anything else in them consistent with a sale of Island 27 in accordance with those obligations.
[87] Interpreting the Letters Patent to not include the Islands makes sense of their language – both the reference to Lot 35, a property that as depicted was a mainland lot that did not extend beyond the water’s edge, and the lack of reference to any islands being included in the conveyance. This interpretation is consistent with the relevant factual matrix at the time of the Letters Patent, namely that Island 27 was physically separate from Lot 35, located beyond the water’s edge, had been separately identified, and was the subject of a separate and fundamental set of Crown obligations in favour of the First Nations.
[88] The effect of the application judge’s interpretation is that the Letters Patent were meant to convey land with a boundary defined not by the water’s edge at the time of the Letters Patent, but by a point defined by a historical event. In my view, this would not be a reasonable assessment of the parties’ intentions in these circumstances, as it would not be consistent with water boundary principles and would exclude from consideration all other factors noted above. Given that Island 27 was physically separate at the time and known by a designation, it seems highly likely, given the objectives of certainty in a conveyance, that if the parties had intended to include Island 27 in the conveyance, they would have simply said so.
VI. Conclusion
[89] For these reasons, I would allow the appeals, set aside the orders of the application judge, and substitute an order dismissing the Estate’s application.
[90] The Estate sought costs of $43,754 if successful. The appellants indicated they were content with the quantum referred to by the Estate. I would award costs of the appeals to the First Nations in the sum of $21,500, and to AG Canada in the sum of $21,500–both inclusive of disbursements and applicable taxes.
Released: August 24, 2021 “J.M.F.” “B. Zarnett J.A.” “I agree. Fairburn A.C.J.O.” “I agree. B.W. Miller J.A.”
Footnotes:
[1] Also known as the Otonabee River.
[2] The ownership of Island 27 determines the ownership of the other Islands – no party argued otherwise. I refer in these reasons to the Islands or to Island 27 as the context requires.
[3] The appellants Curve Lake First Nation (formerly known as the Mud Lake Indian Band or Mud Lake Reserve), Hiawatha First Nation (formerly known as Rice Lake Indian Band or Rice lake Reserve) and Mississaugas of Scugog Island First Nation (formerly known as The Scugog Band of Indians).
[4] The application judge did not resolve the acreage reference in the Letters Patent or use it to assist in determining what was conveyed.
[5] In this case, it could not be seriously contended that the interpretive issue could be resolved by the words of the Letters Patent alone. Extrinsic evidence was led and relied on by all parties.
[6] Nor was any party’s position comprehensible without reference to these matters. For example, the Estate’s position turned on the location of the Islands in relation to the mainland of Lot 35 in 1818, and if separated, when and why that occurred. The appellants’ positions required consideration of the location and identification of the Islands at various points prior to and at the time of the Letters Patent, as well as the obligations of the Crown to the First Nations.
[7] Gradual is usually accompanied by additional modifiers that reinforce its meaning – imperceptible (in the moment, though perceptible over time), and incremental. The applicability of the principle is also a function of the cause of the change of water levels – either natural forces or the unintentional effects of an artificial structure.
[8] The principle is sometimes described as involving a change in water levels that is sudden and artificial.
