8310 Woodbine Developments Inc. v. 2261039 Ontario Limited

COURT FILE NO.: CV-15-124027 DATE: 20180801 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

8310 WOODBINE DEVELOPMENTS INC. Applicant – and – 2261039 ONTARIO LIMITED Respondent

Counsel: Jason Cherniak, for the Applicant Gregg Roberts and Shivan Micoo, for the Respondent

HEARD: March 19, 2018 and June 13, 14 and 15, 2018

REASONS FOR DECISION

MCKELVEY J.:

Introduction

[1] This matter initially came before me on August 5, 2016. The applicant, 8310 Woodbine Developments Inc. (“Woodbine”) brought an application seeking an order that an access easement over its land owned by 2261039 Ontario Limited (“226”) be moved from its current location. At the same time 226 brought an application to vary the description of a services easement so that it conforms with the location of service pipes which are buried underneath the access easement. It turns out that there is a minor variance where some of the underground pipes go outside the designated services easement for about 2 feet. As part of its application Woodbine was seeking damages from 226 for trespass.

[2] Early on in the application I became aware that CIBC held a mortgage on the property owned by 226. CIBC was not named as a party to the application, nor was it served with any of the material on the application. At my request, CIBC was served with copies of the application material. I was subsequently advised by counsel for 226 that their office had been retained by CIBC to represent its interest on this application. I was further advised that CIBC opposed the relief sought by Woodbine.

[3] As a result of discussions between the parties an agreement was reached dealing with the services easement. The parties agreed that an order would issue to adjust the description of the services easement to conform with the present location of the underground pipes. This still left the application by Woodbine to change the location of the access easement. 226 continued to oppose the relief sought by Woodbine. On this application, it was recognized that the issue of any prejudice to 226 could be an important consideration. I directed that there be a hearing on this issue. The hearing proceeded on March 19 as well as June 13, 14 and 15, 2018. At that time three witnesses were called to give evidence. The applicant Woodbine called Mr. Richard Pernicky who is a Senior Project Manager and Transportation Planner as well as the Principal of Nextrans Consulting Engineers. 226 called Mr. Gene Chartier who is Vice President of Paradigm Transportation Solutions Limited which specializes in transportation, traffic, transit and parking planning. 226 also called Mr. Kris Misevski who is the Property Manager for the building which is operated by 226.

[4] By the time of the hearing, the sole issue before me was whether Woodbine was entitled to an order changing the location of the access easement running over its property and which was owned by 226.

Relevant Background

[5] Woodbine and 226 own adjacent properties in the City of Markham. The property owned by 226 is located at 8300 Woodbine Avenue. The property owned by Woodbine is located at 8310 Woodbine Avenue. The Principal of 226 is Alex Karamitsos. The Principal of Woodbine is George Banyasz. The property owned by Woodbine is located on the north east corner of Lanark Road and Woodbine Avenue. The property owned by 226 is located directly south of the applicant’s property. 226 owns an office building on the property. The only street access for this property is from Woodbine Avenue. The access easement offers an alternate access to the 226 property from Lanark Road.

[6] The access easement in question was purchased in around 1987. It runs from Lanark Road along the western edge of the Woodbine property and allows vehicle access to the 226 property from Lanark Road. Just prior to entering onto the 226 property, the access easement angles slightly to the east so that the entrance to the 226 property does not interfere with parking spaces located on the western edge of the 226 property.

[7] At the time the access easement was granted, the Woodbine property was being used as a gas station which was operated by Suncor. Suncor subsequently put the property up for sale. 226 had an option to purchase the property but was outbid by Woodbine which apparently made an offer 25% higher than that offered by 226.

[8] Woodbine is proposing to build a one story commercial office building. The size of this building is limited, however, by the number of parking spots which can be provided for users of the building. Based on the current configuration, the applicant would be limited to a commercial office building of 12,000 square feet. It wishes to build an office building with 17,000 square feet. This would be possible if it could install additional parking spaces along the western edge of this property in exactly the same way as 226 has done on its property. However, these parking spaces would block the existing right of way owned by 226. For this reason, Woodbine wishes to relocate the existing right of way slightly to the east. It maintains that the respondent would not be disadvantaged and in fact, that this would be a benefit to the respondent because the surface and maintenance of the right of way would be improved. Woodbine has gone so far as to offer $40,000 in compensation to 226 to move the right of way slightly to the east, which would allow 226 to add parking along the western border of its property. 226 has consistently rejected any attempt to move the easement and has not responded to any offers made by Woodbine. Woodbine takes the position that 226 has failed to negotiate in good faith about any alteration to the easement. It is also apparent that Woodbine has attempted to persuade 226 to agree to the proposed change by telling 226 that it would be required to dig up the pipes under the service easement to conform with the services easement at a cost which is estimated to be more than $100,000. As noted above, however, the issue of the underground services agreement has been successfully resolved. The issue of the access easement has not been resolved and is left to be addressed on this application.

[9] Woodbine has suggested that Mr. Karamitsos has taken the opportunity of refusing consent to change the access easement because Mr. Banyasz out bid him for the property at 8310 Woodbine Road. While this is certainly a possibility, there is no clear evidence for the motivation of Mr. Karamitsos and to be fair, the available documentation dealing with the communications between the parties certainly suggests that both sides in this case are playing “hardball”. It is significant to note, however, that Mr. Banyasz, when he acquired the property and while doing his due diligence prior to closing was specifically advised by his lawyer that he would not be able to unilaterally change the access easement. In a cross examination on his affidavit, Mr. Banyasz gave the following evidence:

117. Question: Now, when did you start planning to build the 17,000 square foot building? Was it before or after closing? Answer: I planned it on a piece of paper to show after closing, but I understood that I will be able to build, on an acre land, 17,000 square feet building without interfering --
118. Question: After closing? Answer: After closing.
119. Question: And you realized that if you only had the information that you have now, you may not have closed on the property. Is that true? Answer: No.
120. Question: No? You still would have closed? Answer: Yes.
121. Question: Now, did your lawyer ever explain the significance of the easements to you before you closed? Answer: He always was very clear that I cannot move the easement, not -- I was under impression that the way every car running today, they will run tomorrow. His gate will be in the same space. The only thing I need from him is a strip of two or three feet.
122. Question: And just to be very clear, that’s your lawyer who is in the room right now who gave you that advice, Perry Gruenberger? That was your lawyer. Yes? Answer: Yes.
123. Question: And did he give you that advice before you closed? Answer: About what?
124. Question: About the easements. Answer: Yeah. Yes.

The Applicable Legal Principles

[10] Generally, a court cannot order the relocation of a registered easement because this would involve the confiscation of a legal interest in the same manner as a fee simple or a lease. This is reflected in para. 9-101 of J. Gaunt and P. Morgan, Gale on Easements, 19th ed. (U.K.: Sweet & Maxwell, 2012), which identifies the following principle:

(a) A servient owner may not unilaterally take away a right of way over an existing route by offering an alternative route, even if that route is equally suitable, and…

[11] There are, however, some statutory exceptions which provide a window for the court to intervene in some limited situations.

[12] Section 61(1) on the Conveyancing and Law of Property Act, RSO 1990, c C.34, provides as follows:

Where there is annexed to land a condition or covenant that the land or a specified part of it is not to be built on or is to be or not to be used in a particular manner, or any other condition or covenant running with or capable of being legally annexed to land, any such condition or covenant may be modified or discharged by order of the Superior Court of Justice.

[13] In addition, s. 119(5) of the Land Titles Act, RSO 1990, c L.5, provides as follows:

The first owner and every transferee, and every other person deriving title from the first owner, shall be deemed to be affected with notice of such condition or covenant, but any such condition or covenant may be modified or discharged by order of the court on proof to the satisfaction of the court that the modification will be beneficial to the persons principally interested in the enforcement of the condition or covenant.

[14] These statutory provisions do not give guidance about how a court’s discretion is to be exercised. Nevertheless, the case law has established that there is a very narrow window for a court to intervene in situations where an easement has not been abandoned. There is no evidence of abandonment in this case and 226 agreed in argument before me that it is not raising the issue of abandonment. Discretion of the court in the absence of abandonment is very limited. Recently the Ontario Court of Appeal reviewed the extent of a court’s discretion in its decision in Remicorp Industries Inc. v. Metrolinx, 2017 ONCA 443. In that case, the motions judge authorized the relocation of an easement. On appeal, the court held that the application judge did not apply the correct legal principles in concluding that the access easement should be relocated. At para. 92 of their decision the Court of Appeal stated,

The applications judge did not apply these principles. Moreover, he ignored the warning given by this court in Ontario Lime that the jurisdiction be exercised with caution and that an order be seldom granted if prejudicial to the adjacent landowner. It is also difficult to see how the applications judge could conclude that the modification was beneficial to the interested parties. The relocation deprived Metrolinx of its rights under the Easement Agreement and results in significant traffic flow at the site of the alternative easement on Part 1. With the exception of making certain adjustments such as the removal of structures erected without building permits, the benefits to Remicorp of relocating the Access Easement are not obvious. Indeed, they do not appear to have been considered or identified by the applications judge.

[15] In a subsequent decision in Silver Seven Corporate Centre Inc. v. 2871220 Canada Limited, 2017 ONSC 5091, Justice Monahan considered the court’s discretion and commented,

Following Re Lime, the operation of s. 61(1) should be limited to cases where a restriction is spent or no longer useful, or where its discharge or modification would have no negative or detrimental impact on the lands benefitting from the restriction, such that continued insistence on the restriction could be said to be vexatious.

[16] Justice Monahan goes on to comment that eliminating a restriction might be thought to be economically efficient in the narrow sense that the net benefit exceeds any resulting detriment. The court’s role, however, is not to reallocate rights between adjacent land owners, without consideration, in the name of broader economic or public purposes, such as an economic efficiency. I agree with that conclusion.

[17] The reallocation of rights between parties is a matter for the parties themselves to settle through negotiation. While the change requested by Woodbine in this case would certainly be to the benefit of its proposed development, the Remicorp decision clearly establishes that the court will rarely intervene and only in a situation where there is no prejudice to the responding parties. To hold otherwise would be unfair to the responding parties as there is no provision under the legislation for compensation to be awarded to them. The court would in effect be involved in unilaterally re-writing agreements without the consent of at least one of the parties. This not only creates considerable uncertainty with respect to the rights of contacting parties, but would potentially attract considerable litigation from parties seeking changes to their rights and obligations because of changed circumstances.

[18] It is therefore apparent that as a precondition to considering the proposed change that there be no prejudice to the respondent. This was the main subject matter for analysis on the hearing before me.

Is 226 prejudiced by the proposed amendment?

[19] I have concluded that there is at least some potential prejudice to 226 with the proposed change to the access easement.

[20] Under the terms of the revised easement, the easement would be moved slightly to the east to allow for parking spaces along the western boundary of the Woodbine property. Mr. Chartier, who was called as a witness by 226 gave evidence that the introduction of parking along the easement would cause some degree of congestion as cars would be entering into and backing out of parking spaces. In addition, there would now be pedestrian traffic along the easement as drivers went to and from their cars. I found Mr. Chartier to be quite fair in giving his evidence. He acknowledged in cross-examination that there were some positive aspects to the new proposed easement. It would be a more direct route to the 226 property and he did not suggest that the proposed easement created an unacceptable layout. Instead he acknowledged that the parking layout was similar to the parking on the western boundary on the 226 property. He stated the obvious, however,

What I’m saying is that, in this particular instance, I think there are, if there’s parking that’s allowed beside the easement, then it would cause, it would increase congestion within the easement driveway, which would impede traffic flow. That’s not, that’s statement of fact.

[21] The presence of parking along one side of the easement is not, in my view, a basis to conclude that the position of 226 has been prejudiced. The Woodbine property is currently a vacant lot. It would always have been possible for Woodbine to set up parking spaces on the eastern border of the easement. For this reason, I do not believe that the imposition of parking spaces on one side of the easement constitutes prejudice to 226. This has always been a possibility and within the right of Woodbine to effect that type of change. However, the proposed relocation of the easement now exposes 226 to parking or other development on both sides of the easement. If the easement is relocated to the east to accommodate parking on the western border of the 226 property, it is now possible for the applicant to impose additional parking or development on the other side of the easement as well. This potential is not speculative and is in fact contemplated by the proposed site plan, which is found one page 33 of Tab 2C of the Joint Compendium. This site plan shows proposed parking spaces on both sides of the new proposed easement. While the parking spaces on the east side of the easement run for a relatively short distance, one cannot say with certainty how the ultimate plan will look. The effect of the proposed relocation of the easement does therefore expose 226 to having parking or other development on both sides of the easement instead of just one side. I therefore conclude that there is the potential for some degree of additional congestion if the easement is relocated as proposed by Woodbine.

[22] 226 also argues that it may be difficult to get rid of snow if the easement is moved. Their argument is that they currently plow the snow so that it is deposited along the western edge of the easement. Woodbine argues that they are not allowed to store snow on the easement, but in my view there is a strong argument that this is ancillary to their use of the easement as evidenced by the fact that this practice has been going on routinely since the easement was created. Woodbine also argues that if the new easement is created, they will take full responsibility for clearing the snow, which would certainly serve to minimize and reduce any prejudice to a negligible level. Based on the undertaking from Woodbine I accept that the issue of snow clearing is not a relevant factor to consider in the context of prejudice.

[23] 226 also argues that relocating the access easement would hinder access to their service easement. Currently, the two easements are aligned. If access is needed to the service easements, 226 will have to deal with the fact that parked cars may impede access to the service easement if the access easement is moved. From a practical perspective it would appear that there might be some very limited delay in accessing the service easement while parked cars were moved or towed. This is not likely to create a great deal of prejudice given that it will be a rare occasion when emergency access would be needed to access the pipes in the service easement.

[24] The respondent also argues that the changing of the easement would represent an economic windfall to the applicant without a corresponding obligation to compensate the respondent. I agree this is true but do not view it as being a relevant factor given that the easement cannot be changed unilaterally if there is going to be any prejudice suffered by the respondent. If this argument were accepted it would mean that the court could never intervene to alter an easement or a restrictive covenant. The authorities clearly demonstrate that this is not always the case.

[25] 226 also argues that it may be prejudiced on its mortgage. The thrust of this argument is that the court will unilaterally change the security on the mortgage which could create a default situation for 226. Woodbine argues that there would be no such prejudice because the mortgage was registered before any change in the placement of the easement. However, in the respondent’s material there is a letter from CIBC dated February 27, 2018 addressed to the counsel for 226 in which the bank states,

CIBC’s decision to advance the mortgage to your client was based on the value of the Property, which included the value of access easement at issue in the above noted court action. We understand the Applicant in the above-noted matter is seeking to relocate the access easement. Although CIBC is not a party to the action, CIBC opposes relief sought as it directly impacts the basis of the mortgage advanced to your client.

[26] It seems surprising that the bank would take issue with the proposed relocation of the easement as long as there continues to be an easement providing access to the property of 226. While it is not entirely clear whether the bank’s prior registration of a mortgage would be affected, I cannot ignore the possibility that the proposed change might have some impact on renewal of the mortgage or if another mortgage were sought at a later time from CIBC or another lender.

Conclusion

[27] In my view, the main prejudice which will flow to 226 if the easement is relocated is that they will now be exposed to parking spaces or other development being constructed on both sides of the easement instead of just one side as is currently the case. There may also be some prejudice associated with the respondent’s bank financing. While the level of prejudice is not high, I have concluded that it is not insignificant and the refusal by 226 to consent cannot be considered vexatious in these circumstances. In the presence of some degree of prejudice, the Court of Appeal has made it clear that there is no room for this court to exercise its discretion in favour of the applicant.

[28] While Woodbine argued strenuously at the hearing that the position of 226 was untenable and that they bargained in bad faith, I do not see any basis to conclude that 226 was obliged to negotiate with the applicant. They were entitled to rest on their legal entitlement as owners of the easement. While a more cooperative approach by 226 would almost certainly have led to a resolution of all issues without a court application, there is no basis to find that they acted outside of their rights as owner of the access easement.

[29] For the above reasons this application is dismissed. If the parties are not able to agree on costs, then they may contact the Trial Coordinator within 30 days of the release of this decision to arrange for an attendance before me to address the issue of costs, failing which there will be no award as to costs on this application.

Justice M. McKelvey

Released: August 1, 2018