Huszti Holdings v. YQG, 2016 ONSC 8130

Huszti Holdings v. YQG, 2016 ONSC 8130

CITATION: Huszti Holdings v. YQG, 2016 ONSC 8130

COURT FILE NO.: CV-16-24432

DATE: 2016-12-28

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HUSZTI HOLDINGS INC.

Applicant

– and –

YOUR QUICK GATEWAY (WINDSOR) INC., THE CORPORATION OF THE CITY OF WINDSOR, and THE ATTORNEY GENERAL OF CANADA

Respondents

COUNSEL:

Shaun Laubman, for the Applicant

Mark Nazarewich, for the Respondents Your Quick Gateway (Windsor) Inc. and The Corporation of the City of Windsor

HEARD: December 22, 2016 at Windsor

REASONS FOR JUDGMENT

T. Heeney r.s.j.:

1This is a story about an easement that was granted in 1965 for $325, which may turn out to be a $442,000 cloud on title today for the grantor’s successor in title.

2Briefly stated, the Applicant was the owner of property across the road from the Windsor International Airport. On December 30, 2015, it sold the land to a third party. The property was subject to two easements: a “transformer easement” and an “approach lighting easement”, both of which had been granted to Her Majesty the Queen (hereinafter, “Canada”) in 1965. As a condition of closing, the Applicant undertook to obtain and register a release of the transformer easement. If it fails to do so by December 30, 2016, the principal amount of its vendor-take-back mortgage will be automatically reduced by $442,000.

3The Applicant has been unsuccessful in obtaining a voluntary release of the transformer easement from the current owner of the airport, the respondent Your Quick Gateway (Windsor) Inc. (“YQG”). It has therefore applied to this court for an order discharging the easement on the basis that the easement has either been abandoned, or has expired by its terms. A third ground for relief – that the easement is a nullity – was abandoned during oral argument.

4The background facts are not in dispute, and are compiled in a Statement of Agreed Facts. Since they are not lengthy, they are set out below in full:

1. The servient lands are legally described as Part Lot 17, Concession 7, Sandwich East, Pt 3, 4 & 6 on 12R3910 (the “Property”). The current registered owner is Airport Business Park Inc. (“ABP”). The PIN for the Property is 75235-0032. It is in the Land Titles system having been converted as “qualified”.

2. ABP and Huszti Holdings Inc. entered into an agreement of purchase and sale for the Property on November 26, 2015. The purchase price was $4,420,000.00.

3. The sale closed on December 30, 2015. The transfer is registered as instrument number CE695032.

4. As part of the sale transaction, Huszti Holdings took back a vendor mortgage from ABP in the amount of $2,920,000.00 registered on December 30, 2015 as instrument number CE695033 with the following provision:

“In the event that the Chargee fails to secure and register on title a good and valid Transfer Release and Abandonment relating to the Additional Grant of Easement registered on title as R334811 on July 13, 1965 in favour of Her Majesty the Queen in Right of Canada on or before December 30, 2016, the principal balance outstanding at that time shall be automatically reduced by the amount of Four Hundred and Forty Two Thousand Dollars ($442,000.00)”.

5. In 1965, there were two easements registered on the Property.

6. The first easement, registered as instrument number R334811, is an easement granted by Raymond St. Antoine and Loretta St. Antoine to Her Majesty the Queen in Right of Canada (“HMQ”) over the Property (the “Transformer Easement”). The grant of easement contains the following language:

In consideration of the sum of THREE HUNDRED AND TWENTY-FIVE ($325.00) Dollars paid by the Grantee to the Grantors, the receipt of which is hereby acknowledged, the Grantors doth hereby grants, convey and confirm, to the Grantee Her Heirs, and Successors, an easement In perpetuity, or for so long as shall be required for the purposes hereinafter set out…

in addition to the special purposes and privileges as set out in the Grant of Easement dated the 11th day of January 1965 and registered in the Registry Office for the Registry Division of the County of Essex on the 3rd day of February 1965 as instrument number 322598, an additional special purpose and privilege hereinafter set forth, that is to say, for the purpose of permitting the said Grantee, Her Heirs and Successors, to install a transformer within the easement area , including the rights to remove and replace fences or replace fences with gates and to cut and remove trees and brush in conjunction with the aforementioned airfield owned and operated by the Grantee, in upon or under the said lands, with the further and continuing right to the said Grantee, Her Heirs and Successors, and Her or Their Servants, agents and workmen, to enter upon the said land at any time to repair, correct , operate, replace, keep and maintain at all times in good condition and repair the said transformer.

TO HOLD the said rights, power, licence and permission to the Grantee forever with all the privileges and appurtenances thereto appertaining.

THE burdens and benefits of this additional grant of easement shall run with the lands and shall be binding on and enure to the benefit of the parties hereto and their respective Heirs, executors, administrators, successors and assigns.

7. The second easement, Registered as instrument number 322593 is an easement also granted by Raymond St. Antoine and Loretta St. Antoine to HMQ over the Property matching the description of the lands for the Transfer Easement (the “approach lighting system easement”). This grant of easement contains the following language:

“for the special purposes and privileges hereinafter set out, that is to say, for the purpose of permitting the said Grantee, Her Heirs and Successors, to maintain an Approach Lighting System for Windsor Airport by means of underground cable and light towers – 5 in number – including the right to remove and replace fences or replace fences with gates and to cut and remove trees and brush in conjunction with the aforementioned airfield owned and operated by the Grantee, in upon or under the said lands, with the further and continuing right to the said Grantee, Her Heirs and Successors, and Her or Their Servants, agents and workmen, to enter upon the said land at any time to repair, correct , operate, replace, keep and maintain at all times in good condition, the said Approach Lighting System.

TO HOLD the said rights, power, licence and permission to the Grantee forever with all the privileges and appurtenances thereto appertaining.

THE burdens and benefits of this grant of easement shall run with the lands and shall be binding on and enure to the benefit of the parties hereto and their respective Heirs, executors, administrators, successors and assigns.”

8. In 1965, the approach lighting system easement was registered under the Registry Act. It was not recorded when it was transferred to Land Titles in 2002. It does not appear on the parcel register for the Property.

9. Registered instrument 322598, referred to in the Transformer Easement, is not an easement. It is a discharge of mortgage between entirely different parties relating to lands that have nothing whatsoever to do with the airport.

10. William Huszti and his now deceased brother, Alex Huszti, purchased the Property from the St. Antoines on March 26, 1970.

11. The Huszti brothers owned the Property from 1970 until April 28, 1987, when the Property was transferred to Huszti Holdings. The Huszti brothers were directors and officers of Huszti Holdings.

12. In 1994, HMQ “gratuitously released” a portion of the Transformer Easement extending approximately 270 feet on the parcel of land immediately adjacent to the Property.

13. In or around 1998, HMQ transferred the Windsor Airport to the City of Windsor.

14. HMQ retained an option to purchase the airport land back that can be exercised anytime until 2056 for $1.

15. Subsequent to the transfer of the Windsor Airport, the City of Windsor incorporated, and is the sole shareholder of, a corporation called Your Quick Gateway (Windsor) Inc. (“YQG”).

16. YQG was created to be the operator and manager of the Windsor Airport.

17. In 2010, YQG commissioned a comprehensive planning document for the Windsor Airport. The “Master Plan” forecasted demand and infrastructure and planning needs at the airport until 2031.

18. Prior to the registration of the vendor take back mortgage, Brian Chillman, the lawyer for Huszti Holdings, contacted Carolyn Brown, the CEO of YQG, to inquire about the release of the Transformer Easement. Ms. Brown directed Mr. Chillman to speak with Steve Tuffin, YQG’s Director of Operations, about the request.

19. Mr. Chillman contacted Mr. Tuffin and they spoke about this issue in December 2015 and subsequently.

20. YQG and Mr. Chillman exchanged several letters. One of those letters is dated September 21, 2016, and is from William Willis, YQG’s lawyer, to Mr. Chillman wherein he advised Huszti Holdings that YQG would not agree to release the easement.

21. By letter dated December 12, 2016, HMQ confirmed that it was taking no position on this application.

22. There has never been a transformer on the Property.

23. Today, there are several buildings atop the easement area at different locations.

5Before dealing with the two specific issues to be determined, I confess to some confusion as to why a release of the transformer easement is so important to the purchaser of the Applicant’s property, whereas the approach lighting easement is apparently not. They both cover the same strip of land, which is 54 ft. in width, and was originally 924 ft. in length. The length of the easement was reduced by 270 ft. in 1994, after part of the original parcel of land was sold to a third party, who then obtained a gratuitous release of the transformer easement from Canada as it related to that part.

6It is common ground that the transformer easement is ancillary to the approach lighting easement, because it was intended to provide power for the lights. A transformer is a large electrical box, which is not particularly intrusive, and would occupy only a small fraction of the land covered by the easement. The approach lighting easement, on the other hand, contemplates a total of five light towers, which presumably would be spread out along the entire strip of land. One would expect this latter easement to be far more intrusive than the transformer easement, and hence it is that easement that one would expect the purchaser to be concerned about, yet there is no undertaking to register a discharge of that easement. If the approach lighting easement were to be declared invalid, the transformer easement would fall as well, since its only purpose is to provide power to the lights.

7I asked Mr. Laubman, counsel for the Applicant, if the purchaser was aware of the approach lighting easement, and he assured me that, from discussions he had had, there was an awareness of it. Both counsel agreed that the validity of the approach lighting easement is not at issue in this application, and argument was confined to the validity of the transformer easement only.

8I will deal first, then, with the issue as to whether the transformer easement was abandoned.

9The law relating to abandonment is well-settled, and is summarized in an often-cited decision of Osborne J., 455645 Ontario Ltd. v. Rousseau, [1981] O.J. No. 558 (H.C.J.) at para. 25:

My consideration of the cases counsel have referred to causes me to reach the following conclusions:

(1) abandonment is a question of fact;

(2) non-user is essential to abandonment, at least in these circumstances. Non-user, and nothing more, is not sufficient to permit a conclusion of abandonment;

(3) adverse possession for a period in excess of that provided for in The Limitations Act is not sufficient to bar a right to an easement. As well, such possession if found, does not change the onus on the issue of abandonment;

(4) in some circumstances evidence of non-user may lead to a finding of acquiescence on the part of the holder of title to a right of way or easement;

(5) all of the evidence bearing upon the issues of non-user, acquiescence and abandonment must be considered. It is an error in principle to fail to consider all the evidence by expedient resort to reference in earlier decisions, the effect of which is non-user, is in itself not sufficient to permit a conclusion that an easement right has been abandoned by the possessor of that right;

(6) the onus of establishing abandonment is on the defendant in this case. In more general terms, the onus is cast upon the party asserting abandonment. In this case, where there is no dispute as to the evidence, the matter of onus assumes very much less practical significance than is the case where there is a conflict in the evidence, and hence the facts are open to dispute on that account. On the issue of abandonment, if evidence of abandonment, when considered and compared with that opposed to it, has a more convincing force, and a greater probability of truth, then the onus has been discharged. On the other hand, if the trier of fact is unable to say that the evidence on either side of the issue of abandonment preponderates, then the finding on that issue must be against the defendant;

(7) if there is evidence of non-user and evidence, albeit circumstantial, of ac-quiescence, the trier of fact may infer abandonment.

10There is no direct evidence of abandonment, and therefore the Applicant relies on circumstantial evidence from which, it argues, abandonment can be inferred.

11The first fact that the Applicant relies upon in that regard is non-user. As has been made clear, non-user on its own is not sufficient to support an inference of abandonment, but it is clearly an important fact.

12There is no question that the easement has not been used in the 51 years since it was granted. That non-use will continue for the foreseeable future. In 2010, YQG commissioned a Master Plan for the airport, which considered forecasted traffic levels and infrastructure needs out to 2031. The runway which lines up with the easement is a secondary runway only, referred to as runway 30. The Master Plan concluded that the primary runway, runway 25, is capable of handling all current traffic, as well as aircraft types and frequencies as outlined in their forecasts. It then went on to conclude:

Based on forecasted aircraft movements, the expansion or modification of Runway 12-30 is not warranted. This runway is effective for current airport use and should be adequate for the duration of the planning period.

13Accordingly, there are no plans to install a runway approach lighting system for runway 30 until at least 2031. This projection arguably expands the period of non-use of the transformer easement to a total of 66 years.

14The second fact relied on to support the inference of abandonment is the gratuitous release by Canada of a 270 ft. portion of the easement in 1994. This amounts to just over 29% of the entire easement. The Applicant argues that the fact that Canada gave away part of the easement for nothing is consistent with the inference that it was of no use to it and had been abandoned.

15Mr. Nazarewich, for YQG and the City of Windsor, argues that one might draw the opposite inference by virtue of the fact that Canada did not release the entire easement at that time, but chose to retain a portion of it. However, it is clear that the release was sought by a third party purchaser of a portion of the original lands, who would have been interested only in obtaining a release as it affected its lands. There is no evidence that anyone requested a release of the entire easement in 1994.

16Furthermore, the intent of Canada to abandon the easement is reinforced by the position it takes on the current application. As noted in the Statement of Agreed Facts, Canada has the right to purchase the airport back anytime up until 2056 for $1. As such, the ongoing viability of the airport would be a matter of concern to Canada. Furthermore, pursuant to the Operating Agreement, Canada holds a veto over any dealings with the land, which would include granting a release of an easement. The position of Canada is set out in a letter dated December 12, 2016 from the Department of Justice, with the request that this position be put on the record. It is as follows:

In this case, pursuant to the Operating Agreement, an appendix to the Transfer Agreement, for the Windsor Airport, the City of Windsor must notify Transport Canada whenever a disposition of any portion of the Airport Land occurs. This would include easements that are incorporated in the legal description. The Minister then has 90 days to respond to the request. To date, Canada has not received a request from the City of Windsor and if such request was received by Canada, it would be inclined to grant it.

As such, given that Canada no longer owns the airport lands, that the easement was made in the benefit of, Canada will not take a position with respect to this matter.

17The next fact relied upon by the Applicant is the use that the Applicant and its predecessors in title have made of the land covered by the easement, which is inconsistent with use of the easement by the owner of the airport. Two large buildings straddle the easement, completely crossing it from side to side. One of those buildings has been in place since 1979, and there has never been an issue raised by the owner of the airport regarding such construction.

18Obstructing a right of way by constructing a building, which is acquiesced in by the owner of the dominant lands, is frequently a key fact to support a conclusion that the right of way has been abandoned. In Rousseau, (supra), a shed had been built that completely blocked the 10 ft. right of way in question, with no objection from the owner of the right of way for more than 50 years. In the course of concluding that the right of way had been abandoned, Osborne J. said this, at para. 26:

No use has been made of this right of way since 1923. That conclusion is based not upon the absence of evidence of use, but upon positive evidence of non-use. The obstruction to the right of way was not a subtle one. It was obvious to anyone concerned. The non-use of the right of way has not been explained as was the case in Baker v. Harris, supra.

19The buildings constructed across the easement in question here would have been at least as obvious as a shed, and no explanation has been forthcoming as to why the owners of the airport acquiesced in these obstructions.

20However, the obstructions must be considered in light of the easement rights that are being interfered with. Completely obstructing a right of way prevents passage along the right of way from one end to the other, rendering it unusable. However, obstructing certain portions of a transformer easement would not render it unusable, if sufficient unobstructed land remained for the installation of a transformer.

21These obstructions might arguably be more significant if the approach lighting easement were under consideration. However, as already noted, a transformer is not an overly intrusive structure, and would occupy only a tiny portion of the land covered by the easement. From looking at the aerial photograph of the property, it is easy to conclude that there are many places where a transformer might be placed notwithstanding the existence of the obstructing buildings.

22The final fact relied upon by the Applicant to support an inference of abandonment is that a search of the records of YQG show no discussion or contemplation of the easement for at least the past 15 years. This is consistent with the inference that it had long since been abandoned, and for that reason was no longer the topic of any discussion or planning.

23The second issue to be determined is whether the easement is no longer required, and has therefore expired by its own terms.

24This issue arises because of the wording of the transformer easement itself. The term of the easement is specified to be “in perpetuity, or for so long as shall be required for the purposes hereinafter set out…”. As already noted, it is common ground that the transformer easement was ancillary to the approach lighting easement, and its purpose was to provide power to the lights. The reference in the original easement to the “purposes and privileges as set out in the Grant of Easement dated the 11th day of January 1965 and registered in the Registry Office for the Registry Division of the County of Essex on the 3rd day of February 1965 as instrument number 322598” contains an obvious error, in that the actual registration number of the approach lighting easement is 322593. Instrument 322598 has nothing to do with this property. Allowing for this typographical error, the intended purpose of the transformer easement is clear.

25The question, then, is whether this transformer easement is still required for purposes of the approach lighting easement.

26All of the evidence discussed above regarding abandonment is equally relevant to this question. The fact that it has not been used for 51 years supports an inference that it is unnecessary, because if it were necessary one would expect that it would have been used by now. More importantly, the fact that the Master Plan indicates that it will not be used until at least 2031, which is as far into the future as their plans project, supports the inference that the transformer easement is no longer necessary.

27The fact that Canada gave away 270 ft. of the easement is consistent with the inference that it was no longer needed. Similarly, the fact that they see no need to preserve the easement in the event that they choose to exercise their right to repurchase the airport is consistent with the conclusion that they do not view the easement as being necessary to the long term viability of the airport.

28The obstructions that have been constructed across the easement arguably have more relevance to this question than to the question of abandonment, since the viability of the approach lighting system is now theoretically open for consideration. Since it is agreed that supplying power to the lighting system was the purpose for the transformer easement, the easement would be no longer necessary if the obstructions prevented a lighting system from being installed. The problem with this argument, though, is one of evidence. We have no evidence as to whether the existing buildings would obstruct an approach lighting system or not. It may well be, as suggested by counsel for YQG, that lights could be constructed on top of, or around, any existing buildings. It would, therefore, be speculation to conclude that the approach lighting system is no longer viable.

29However, the evidence already discussed is not the only evidence relevant to this question. There is additional evidence to support the inference that the transformer easement is no longer needed due to advances in technology.

30Steven Tuffin is the Director of Operations at YQG, and swore an affidavit for purposes of this application, on which he was cross-examined. In his cross-examination, he explained that when Transport Canada divested itself of ownership of airports, including Windsor, “Nav Canada was developed in order to take care of the navigation.” Accordingly, when the Applicant requested a voluntary release of the transformer lease, YQG had to check with Nav Canada to see whether it was still necessary for their navigational needs. This is reflected in a letter from Carolyn Brown, CEO of YQG dated March 10, 2016, where she said this:

Before the Airport can respond to your request we need to confirm with Nav Canada that the release of the easement on the subject property will not impact Nav Canada’s new approach aid requirements.

31After checking with Nav Canada, the response received was that it was not required. In an email from Paul Panes of Nav Canada dated August 12, 2016, he said this:

As indicated above, we plan to design new GPS approaches for Rwys 12 and 30. The new approaches (LPV and Baro VNAV) are high end GPS approaches that give both lateral and vertical (glideslope-like) guidance similar to an ILS, but without the need of any ground based navaids. However, we need obstacle data for these runways to support these new approaches.

32Mr. Tuffin confirmed in his cross-examination that the unneeded “ground-based navaids” referred to would include approach lighting. At q. 186 of his cross-examination, he made the following admission regarding the lighting system:

Q. And that Nav Canada did not require it?

A. Nav Canada did not require it for their approach design.

33If the approach lighting system is no longer required, it logically follows that the transformer which was intended to supply power to the lights is no longer required.

34The other technological innovation that renders the transformer easement unnecessary is that modern approach lighting systems no longer use them. Instead of having one large transformer to provide power to the lights, each light is equipped with its own small transformer, which is part and parcel of the light itself. When runway 25 was extended in the mid-2000’s, the new technology that they used had individual transformers integral to each light.

35At q. 275 Mr. Tuffin made the following admission:

So, to place a huge transformer in the middle of a – a system is probably obsolete.

36Since this case is determined on a balance of probabilities, an admission that a transformer-based system is “probably obsolete” leads to a finding of fact that it is obsolete.

37Counsel for YQG attempted to resile from these admissions on the basis that Mr. Tuffin is not an expert, and therefore his evidence cannot be considered as to whether or not a transformer is still needed to power an approach lighting system. However, the evidence he has given is well within his knowledge as Director of Operations at YQG, and essentially consists of facts, as opposed to opinion evidence where expertise is required. It is a fact that Nav Canada does not require approach lights, or the transformer that feeds them, for its GPS-based navigation system. It is a fact that the new generation of approach lights do not need a stand-alone transformer, but instead are each equipped with their own small one.

38Furthermore, if YQG wished to resile from these admissions, it seems to me that it would be incumbent on it to tender expert evidence to demonstrate that Mr. Tuffin was wrong, and that stand-alone transformers are still required. I draw an adverse inference against YQG for its failure to do so.

39Considering all of the above, I am not persuaded that the Applicant has proven that the transformer easement has been abandoned. Airports are long-term installations, and require long-term planning. The fact that the transformer easement has not been used for 51 years, and will not be required in the foreseeable future, does not necessarily mean that the right to install a transformer has been abandoned. It is equally consistent with a conclusion that the need has simply not yet arisen to install a transformer to service the approach to runway 30. As to the obstructions, I have already noted that they will not prevent the installation of a transformer on some other, unobstructed, portion of the easement.

40With respect to whether the transformer easement is still required, however, I conclude that it is not. Technology has passed it by in two respects: the advent of GPS-based navigation, making it unnecessary to install approach lights on runway 30, or the transformer that powers them; and advances in the design of the lights themselves, so that even if a decision were made in the future to install approach lights, a stand-alone transformer would no longer be necessary. Such a transformer is obsolete, as is the easement that would have facilitated its installation.

41For all of these reasons, I conclude that the transformer easement has expired by its own terms. A declaration will issue to that effect.

42An order will go that the transformer easement is released and discharged, and shall be deleted from the Parcel Register for both the dominant and servient lands. I have signed the draft Order to this effect, which was provided by counsel for the Applicants, except that the portion regarding costs has been struck out.

43With respect to costs, I encourage the parties to resolve this issue between themselves. I made the preliminary observation that responsibility for that the fact that the Respondents and this court have been forced into “crisis mode” to deal with this issue lies entirely with the Applicant, and is a relevant factor when considering the issue of costs. In that regard, I commend Mr. Nazarewich and his clients for their cooperation and willingness to do what was necessary to enable this application to be heard, before the passage of time made the whole thing moot.

44If agreement on costs cannot be reached, I will accept brief written submission from the Applicant within 15 days, with the Respondents’ responding submissions to follow within 10 days thereafter, and any reply to follow within 5 days thereafter. Failing that, the parties will be deemed to have resolved the issue of costs between themselves.