Genstar Development Company v. Plains Midstream Canada ULC, 2012 ABQB 457

Court of Queen ’ s Bench of Alberta Citation: Genstar Development Company v. Plains Midstream Canada ULC, 2012 ABQB 457 Date: 20120712 Docket: 1201 03017 Registry: Calgary Between: Genstar Development Company, Genstar Development Partnership #2, and Genstar Titleco Limited Applicants - and - Plains Midstream Canada ULC and Pembina Pipeline Corporation Respondents _______________________________________________________ Memorandum of Decision of J.T. Prowse, Q.C.

Master in Chambers _______________________________________________________ Is a trial required to rule on the validity of the subject right of way? [ 1 ] The applicants, referred to collectively as ‘Genstar’, own land in Calgary. A utility right of way is registered against the title to that land in favour of Plains Midstream. Genstar filed an originating application to remove the right of way from title. [ 2 ] Plains Midstream says that this action should have been commenced by way of a statement of claim.

It brings this application pursuant to Rule 3.2(6) for procedural directions to convert this action into an action by way of statement of claim.

Is there an enactment authorizing the removal of a utility right of way? [ 3 ] Rule 3.2(2) states that a statement of claim must be used to commence an action except in six listed exceptions. One of the exceptions is where: (

e) an enactment provides for a remedy ... or order to be obtained from the Court without providing the procedure to obtain it [ 4 ] The enactment which Genstar relies on to remove the right of way is the Land Titles Act , and specifically

section 141 (application to discharge caveat) and

section 146 (order re caveat). Both these sections deal with caveats, and not rights of way, and therefore are not applicable. Genstar’s originating application is not authorized by subsection (

e) quoted above. Is there no substantial factual dispute? [ 5 ] The other relevant exception to using a statement of claim, listed in Rule 3.2(2), allows an originating application to be used where “there is no substantial factual dispute”. [ 6 ] Genstar submits that there is no substantial factual dispute involved in its application to remove the right of way of Plains Midstream. Genstar says that the affidavits filed, and the transcripts which will flow from questioning on those affidavits, will provide all the relevant facts necessary to determine the validity of the right of way.

For the reasons which follow, I disagree with that submission. In my view, these proceedings should be carried on as if commenced by statement of claim. The series of events which led to the present dispute [ 7 ] Following is a quote from the written submission of Plains Midstream setting out the series of events which led to the present dispute. In its written reply, Genstar advises that it does not contest these background facts: (i). Plains is an Alberta corporation in the business of transporting, terminalling, and storing crude oil, liquified petroleum gas, and other petroleum products.

It owns and operates over 6,100 kilometers of pipelines in Alberta. (ii). Genstar is a real estate developer that develops master planned communities. Pembina is a Calgary company in the business of transporting and storing crude oil and natural gas, owning a pipeline network across Alberta and British Columbia. The Cremona Pipeline and the Right of Way (iii). Cremona Pipe Lines Ltd. ("Cremona") constructed the Cremona Pipeline in the 1950s. It consists of 444 kilometers of pipeline between Calgary and Sundre. (iv).

Cremona obtained rights of way under all the parcels of land along the Cremona Pipeline for the construction, installation, use, ownership, and operation of the Cremona Pipeline. This includes the Right of Way, which Cremona obtained in the form of an Easement Agreement in 1956 with the then owner of the Lands (the "Easement Agreement"). (v). The Easement Agreement grants to Cremona a "[p]ipe line right of way in the Northwest Quarter and the Southwest Quarter" of the Lands and a broad right-of-way:

for the laying down, construction, operation, maintenance, inspection, removal, replacement, reconstruction and repair of a pipeline or lines ... for the carriage, conveyance, transportation and handling of petroleum or petroleum products, water and/or gas through or by means of the same together with the right to construct, maintain, and operate, reconstruct, replace or remove on or from the said right-of-way a line of poles with telegraph and/or telephone wires thereon, and the right of ingress and egress, for all purposes incidental to the grant .... (vi).

The Easement Agreement further provides that it is assignable, that it is binding on all future owners of the Lands, and that it shall remain in force and effect "as and from the 19th day of May, A.D. 1956 and for so long thereafter as [Cremona] may desire to exercise the rights and privileges hereby given … ." (vii). The Right of way remains registered on the title to the Lands pursuant to Instrument Number 7903HD. The North Cremona Pipeline and the South Cremona Pipeline (viii).

The northernmost 314 kilometers of the Cremona Pipeline (the "North Cremona Pipeline") has remained in continuous operation since 1959. However, for reasons that are not known to Plains, in 1997 operations on the southernmost 130 kilometers of the Cremona Pipeline (the "South Cremona Pipeline") were suspended by Pembina. (ix). The Right of Way falls within the South Cremona Pipeline, and for reasons that are not known to Plains, the pipeline under the Lands was removed by Pembina in 2001.

A total of 1.3 kilometers of pipeline - or, approximately 0.3% of the Cremona Pipeline - were removed by Pembina in the South Cremona Pipeline. The Purchase and Sale Agreement (x). In December, 2009, Plains acquired the Cremona Pipeline, including the North and South Cremona Pipeline, from Pembina pursuant to a Purchase and Sale Agreement for approximately $8 million (the "PSA"). (xi). Plains also acquired the rights of way under all lands along the Cremona Pipeline. The Liquid Hydrocarbon Strategy (xii).

Plains acquired the Cremona Pipeline as part of its new business strategy for liquid hydrocarbons (the "Strategy"). Under that Strategy, Plains planned to expand its operations to include the pipelining, terminalling, and storage of refined petroleum products such as diesel, gasoline, jet and heating fuels. (xiii).

The acquisition of the Cremona Pipeline - in particular, the South Cremona Pipeline - was a key part of the Strategy because the South Cremona Pipeline reaches directly into Calgary, providing direct access to Alberta's largest metropolitan market for refined petroleum products such as gasoline, heating oil, and diesel. It also provides direct access to the Calgary International Airport for the transport of jet fuel. Plains acquired the Cremona Pipeline with the intention of resuming operations in the South Cremona Pipeline as part of the Strategy. Genstar's Requests that Plains Discharge the Right of Way (xiv).

In July, 2010, Genstar first approached Plains with respect to the Right of Way. Genstar asked Plains to allow one of Genstar's contractors, AMEC, to cross over the Right of Way in connection with AMEC's activities. Genstar also requested that Plains consent to

the discharge of the Right of Way. Plains consented to AMEC crossing over the Right of Way upon the execution of a Crossing Agreement. Plains did not, however, consent to the discharge of the Right of Way. Plains advised Genstar in clear terms that the Cremona Pipeline and Right of Way were "valuable and important assets" which Plains intended to protect and maintain. (xv). In October, 2010, Genstar again approached Plains to request the discharge of the Right of Way. Plains again advised that it was not prepared to do so. (xvi).

In February, 2011, Genstar met with Plains and again requested that the Right of Way be discharged. At that meeting, Genstar claimed - for the first time - that Pembina had represented to Genstar that it would discharge the Right of Way. Plains asked Genstar to provide documents or e-mails validating this assertion. Genstar failed to provide any. (xvii). In March, 2011, Genstar again asked Plains to discharge the Right of Way. Plains again replied that it was not prepared to do so. (xviii).

Plains did not hear anything further from Genstar until June, 2011, when it received a letter from Genstar's counsel demanding that the Right of Way be discharged. (xix). On August 17, 2011, Plains replied to Genstar's counsel by offering to re-route the Right of Way around the perimeter of the Lands on the condition that consent would be granted for Plains to construct and operate future pipelines within the re-routed pipeline right of way (the "Offer to Re-Route"). (xx). Genstar did not respond. Instead, in October of 2011, Genstar wrote to Plains to request a meeting to discuss the Right of Way.

Plains replied on the same date, asking Genstar to respond to its Offer to Re-Route. Again, Genstar did not respond. The Originating Application and Plains' Request for Discovery (xxi). Six months later, on February 16, 2012, Genstar's counsel wrote again to Plains to demand that Plains discharge the Right of Way. On March 14, 2012, Genstar filed the Originating Application. (xxii). On March 26, 2012, Plains requested that Genstar produce certain records to corroborate Genstar's claims. These records were requested to investigate the factual allegations Genstar made in support of its application. (xxiii).

On April 3, 2012, however, Genstar replied that Plains was not entitled to any additional documents because "Parts 4 and 5 of the Rules of Court , do not apply to actions commenced by way of Originating Notice." While Genstar did agree to produce a small handful of documents, it refused to produce the majority of documents requested. [ 8 ] While not disputing the facts recited above, Genstar says that the following facts are not subject to any ‘substantial factual dispute’, and establish that they are entitled to a discharge of the right of way on the basis that Pembina Pipelines abandoned the right of way: (

i) the registered right of way for other portions of the South Cremona pipeline have been discharged, including: - two residential properties that are part of the Coventry Hills Residential Development, and - 5 commercial properties that are part of a commercial development known as the WAM lands.

(ii) the City of Calgary will not approve any future private oil pipelines that run longitudinally within a public road. (iii) the ERCB licenses for the operation of the South Cremona Pipeline have been abandoned.

The law in Alberta concerning abandonment, or implied surrender, of rights of way [ 9 ] One cannot conclude that all the relevant facts are before the court, and not subject to ‘substantial factual dispute’, until one looks at the law concerning abandonment, or implied surrender, of rights of way. [ 10 ] Does the statutory law or common law in Alberta recognize the doctrine of abandonment, or implied surrender, of utility rights of way? If it does, what facts need to be established to trigger the abandonment?

Are those facts before the court by way of affidavit or transcripts, and not subject to a ‘substantial factual dispute’? [ 11 ] There is no statutory law in Alberta which recognizes the doctrine of abandonment of rights of way. Nor is there any case law in Alberta which recognizes the doctrine of abandonment of rights of way. If this case proceeds to trial, it will set a precedent. [ 12 ] There is common law doctrine of implied abandonment of easements (as opposed to utility rights of way).

It is described in Halsbury ’s Laws of England , Vol. 14 (4 th ed) para 21 as follows: The extinguishment of an easement by implied release must be based upon the intention of the dominant owner. To establish abandonment the conduct of the dominant owner must have been such as to make it clear that he had, at the relevant time, a fixed intention never at any time thereafter to assert the right himself or to attempt to transmit it to anyone else. It is a question of fact whether

an act amounts to an abandonment or was intended as such. [ 13 ] Does that case law on easements apply to rights of way? It might, and it might not. It is not obvious to me that it will apply.

Is the owner of a right of way, for example, entitled to say “I obtained this right of way in the context of a particular pipeline, but what I obtained is broad enough to allow me in the future to twin that pipeline, or abandon that pipeline (as opposed to abandoning the right of way) and in the future construct another pipeline in that right of way, or sell it to another entity which might choose to use all or part of the route for a different pipeline?”.

The right of way in question specifically contemplates the owner of the right of way removing and replacing pipelines. [ 14 ] I note that utility rights of way are dealt with by one

section of the Land Titles Act (section 69) which contains the following provision “The grantee may at any time, by an instrument to that effect registered under this Act, surrender the right ...” Is it arguable that the utility right of way, being a creature of statute, can only be surrendered as provided by the statute? [ 15 ] Easements are dealt with in a different

section of the Land Titles Act (section 67), with a separate

section dealing with discharge (section 73) as opposed to ‘surrender’. [ 16 ] Even if the principles of surrender by implied release apply to rights of way, the implied release is a question of fact, and we do not have any evidence of Pembina Pipelines as to their intentions at the relevant time. Case law under the previous rules noted that, in addition to ensuring that there are no material facts in dispute, the court should also ensure that there are no facts which are not known and which might affect the legal answer. Pembina’s testimony, in my view, falls into this category.

See Kingsway General Insurance Co. v. Alberta , 2004 ABQB 317 , 2004 CarswellAlta 543, 47 C.P.C. (5 th ) 384, 358 A.R. 94, 47 Alta.L.R. (4 th ) 251 at para 21 . [ 17 ] Even if Pembina Pipelines impliedly released the right of way, it remained on title and was purchased by Plains Midstream. Can Plains Midstream argue that it relied on the registration of the right of way at the land titles registry, and cannot be bound by matters (the conduct of Pembina) not reflected on the title? The Supreme Court of Canada has held that indefeasibility applies to interests

acquired which are less than a fee simple interest: see White Resource Management Ltd. v. Durish, (SCC), [1995] 1 S.C.R. 633, 178 N.R. 321, 165 A.R. 20, 1995 CasrswellAlta 4, 26 Alta.L.R. (3d) 153, 121 D.L.R. (4th) 577. [18] Given that five years elapsed since Genstar acquired the land, do any limitations issues arise? [19] As can be seen, there are many interesting legal issues which will need to be resolved in this action. In

summary judgmentapplications courts have declined to provide

summary relief where there are difficult or intricate legal issues: see 732311 Alberta Ltd. v. Paradise Bay Spa & Tub Warehouse Inc., 2003 ABQB 228, 2003 CarswellAlta 392, [2003] 8 W.W.R. 80, 15 Alta.L.R. (4th) 42, 332A.R. 315 at para 56. Likewise, in the context of

summary judgment, it has been stated that

summary disposition should be declinedwhere a legal issue is so unsettled or complex and nuanced that it should not be decided on a paper record: see Papaschase Indian Band No. 136 v.

Canada (Attorney General), 2004 ABQB 655, 2004 CarswellAlta 1170, 43 Alta.L.R. (4th) 41, [2005] 8 W.W.R. 442, 365A.R. 1 at para 53. [20] Given the complex and unsettled legal issues identified above, it is my view that any decision in this case should be foundedon complete and nuanced findings of fact resulting from a trial, rather than on a paper record resulting from an originating application.To use the language of Rule 3.2(6), even if it was permissible to start this action as an originating application, this action should continuein the form of a statement of claim.

The delays inherent in the trial process [21] Counsel for Genstar submitted that, even if the usual originating application process should not be continued in this action, thecourt should craft a procedural solution short of full document discovery, pre-trial questioning and trial.

The authority to give a“procedural order to correct and continue the proceeding and deal with any related matter” is contained in Rule 3.2(6). [22] In my view, the correct procedural order is to deem the originating application and supporting affidavit to be a statement of claim,and to give the respondents to the originating application 30 days to file a statement of defence. Thereafter the action can proceed as ifcommenced by statement of claim. [23] I am mindful of the desirability of the court bringing this matter on for trial as quickly as possible.

However, in that context Iwould note that Genstar, a land developer who presumably was always interested in developing the lands, purchased them subject to theregistered right of way in February of 2007, but only commenced proceedings to have the right of way discharged over five years later, inMay of 2012. Nevertheless, I would encourage the parties to agree to a litigation plan which would move the action along quickly.

Afterthe parties have reviewed each others’ affidavits of records, and are able to gauge the volume of documentary evidence, they couldconsider approaching the court to see if the court would fix a trial date, and allow the parties to work toward achieving that trial date. Costs [24] If the parties cannot agree as to the costs of this application, they may approach me for a ruling in that regard. Heard on the 4th day of July, 2012. Dated at the City of Calgary, Alberta this 12th day of July, 2012.

J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances: Joshua D. Sadovnick for the Applicants Michael P. Theroux for the Respondent, Plains Midstream Canada ULC Darren J. Reed for the Respondent, Pembina Pipeline Corporation