Canadian National Railway Company Appellant (Respondent) v. Star Processing Ltd., 2021 SKCA 167

Court of Appeal for Saskatchewan Docket: CACV3746 Citation: Canadian National Railway Company v Star Processing Ltd. , 2021 SKCA 167 Date: 2021-12-22 Between: Canadian National Railway Company Appellant (Respondent) And Star Processing Ltd. Respondent (Applicant) And Infra Pipe Solutions Ltd. Respondent (Respondent) Before: Ottenbreit, Caldwell and Leurer JJ.A. Disposition: Appeal allowed Written reasons by: The Honourable Mr. Justice Ottenbreit In concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr.

Justice Leurer On appeal from: QBG 368 of 2019, Saskatoon Appeal heard: November 15, 2021 Counsel: Kelly Hannan and Alixandra Stoicheff for Canadian National Railway Company Faith Baron for Star Processing Ltd. Peter Bergbusch, Q.C. for Infra Pipe Solutions Ltd. Ottenbreit J.A. I.

INTRODUCTION [ 1 ] Canadian National Railway Company [CN] appeals the decision of a Court of Queen’s Bench Chambers judge dated November 18, 2020, granting a declaration that CN holds no legal or equitable interest in or charge on certain lands owned by Star Processing Ltd. [Star] and ordering that the Registrar of Titles for Saskatchewan discharge certain interests registered by CN against those lands: Star Processing Ltd. v Canadian National Railway Company (18 November 2020) Saskatoon, QBG 638 of 2019 [ Decision ]. [ 2 ] Infra Pipe Solutions Ltd. [Infra] appears as a respondent but supports the position of CN.

Infra has filed its own appeal of the Decision as CACV3753. That appeal not been perfected. The parties have agreed that the core issues in that appeal are identical to those in this appeal and that the determinations made in this appeal will bind the parties insofar as CACV3753 is concerned, and that upon this Court rendering its decision in this matter, that appeal will be abandoned and the respondents in that appeal have undertaken they will not seek costs therein. [ 3 ] For the reasons hereinafter set forth, I would allow the appeal.

II. FACTS AND BACKGROUND [ 4 ] CN owns and conducts a railway operation and owns tracks next to Melville Street in the City of Saskatoon. A portion of its track branches off its mainline, crosses Melville Street and, after several splits of the track, siding trackage crosses Surface Parcel #135691803 and Surface Parcel #135691814, both owned by Star [Star lands]. The siding trackage continues toward and crosses into land owned by CN’s customer, Infra. [ 5 ] Infra owns land located immediately west of the Star lands.

Since 1987, Infra has manufactured and continues to manufacture large diameter high density polyethylene pipe at its facility on its land and relies on CN and the siding line to service its business. [ 6 ] A substantial part of the land in the area, part of which comprised the Star lands, was originally owned by CN and sold to third parties. Normandale Holdings Ltd. [Normandale] acquired the Star lands from CN in 1979 as part of a larger purchase of land. [ 7 ] As part of that acquisition, Normandale entered into three agreements with CN.

The first was a siding agreement [Siding Agreement] under which, among other things, CN agreed to provide railway service to Normandale and permit Normandale to use the siding trackage and related track infrastructure located on the purchased lands for an annual rental fee. [ 8 ] The second agreement restricted development of the land acquired by Normandale to development that would require railway services [Building Restriction].

The Building Restriction was related to the Siding Agreement. [ 9 ] The third agreement was Normandale’s grant of an easement dated October 23, 1979 [Easement], to CN to protect a right of way on the land for its railway tracks. CN eventually constructed its tracks over the Star lands in 1984 and extended them to the land owned by Infra in 1985. [ 10 ] The Building Restriction was protected by a caveat registered against the land Normandale had purchased. The Easement was registered against the land as well.

It did not identify a dominant tenement and was registered only against the title of the servient tenement, Normandale. [ 11 ] In January of 1980, Normandale subdivided the land it had purchased from CN into northern and southern parcels. The Easement and the Building Restriction were continued on the new certificates of title for both parcels. In January of 1993, Normandale sold the northern parcel, i.e., the Star lands, to Star subject to the registered Easement and the Building Restriction caveat. After the sale, the majority of the land covered by the Easement was located on the Star lands.

Normandale retained the southern parcel but the Easement area only extended into that parcel by approximately six inches. Normandale assigned the Siding Agreement to Star concurrently with the sale of the northern parcel to it. [ 12 ] In March of 1998, Star asked CN to cancel the Siding Agreement. After some delay, CN confirmed in July of 2000 that the Siding Agreement would be cancelled effective March 1998 and that it would remove all track materials.

CN never did remove the track and continued to use it to service Infra. [ 13 ] In 2004, Normandale requested a discharge of the Easement and Building Restriction caveat as against the southern parcel. The reason for that request is not clear on the evidence, although the request appears to roughly coincide with the construction of a telecommunications tower located thereon near the area protected by the Easement. On July 7, 2004, a “ full interest register ” discharge was submitted to the Saskatchewan Land Registry on behalf of CN.

This led to the discharge of the Easement and the Building Restriction caveat from not only Normandale’s land but the Star lands as well. [ 14 ] There is no evidence that Star and CN ever discussed a discharge or termination of the Easement and Building Restriction caveat.

It appears that neither Star nor CN became alive to the fact that the two interests had been discharged from title to the Star lands until September of 2018, during the exchange of some correspondence between CN and Star. [ 15 ] When CN was made aware of the discharge of its interests, it re-registered the Building Restriction and Easement against the Star lands in March of 2019.

CN acknowledges that the re-registration is subject, as to priority, to an intervening registration by Bank of Nova Scotia. [ 16 ] CN continued to use the siding trackage after the Easement and Building Restriction caveat were discharged from title to the Star lands, including by delivering products by railcar to Infra’s manufacturing plant.

CN maintains the Easement continues to be necessary to allow it to service Infra. [ 17 ] In its affidavit material filed before the Chambers judge, CN indicated that it was in the process of discharging its caveat protecting the Building Restriction because Star no longer needed the services of CN. [ 18 ] Star applied to the court for a declaration that neither CN nor Infra had a legal or equitable interest in or charge against the Star lands and an order directing the Registrar of Titles to discharge the interests registered on its land by CN. III.

CHAMBERS JUDGE’S DECISION [ 19 ] Before the Chambers judge, Star contended that the Easement was granted pursuant to The Public Utilities Easements Act, RSS 1978, c P-45 [ PUEA ] . It submitted that when the Easement was discharged by CN from the Star lands, pursuant to the PUEA , the rights and privileges arising under the easement agreement ceased. Therefore, it was not open to CN to re- register the Easement against title to the Star lands.

Star also submitted that the Easement was not valid because it did not specify a dominant tenement. [ 20 ] CN and Infra submitted that the Easement was not governed by the PUEA and that it was a common law easement granted by Normandale at the time it acquired the Star lands as part of its larger land purchase from CN. CN argued that the Easement was

mistakenly discharged and that its rights under the Easement continued and it could, therefore, re-register it. [ 21 ] The Chambers judge first reviewed the evidence as he understood it and the position of the parties. He then reviewed ss. 2 to 13.1 of the PUEA . The Chambers judge concluded that s. 13.1(3) of the PUEA , in its grammatical and ordinary sense, caused the rights and privileges of an easement registered pursuant to the PUEA to cease on discharge of the easement from the title. [ 22 ] The Chambers judge concluded that when CN cancelled the Siding Agreement, it also cancelled the easement agreement.

He stated: [30] In 1998, neither Star Processing nor any of its tenants required the rail service on the spur line. CN was asked to cancel the spur siding agreement and that track materials be removed from the property. It took two years for CN to confirm cancellation but did so and the private siding agreement was cancelled effective May 1998. CN also stated at the time of cancellation that it would remove the track materials at its own cost.

There was no further need to retain the easement as there were no other customers using the track at the time nor was CN asking to retain the line as its intention was to use the main rail line on Edson Street to service neighbouring properties. [31] CN not only cancelled the private siding agreement, it also cancelled the easement – which certainly would make sense as they no longer had a private siding agreement and were removing the track material. [ 23 ] He found the discharge of the Easement in July of 2004 was a matter of common sense and not an inadvertent mistake. [ 24 ] The Chambers judge concluded that, in order for CN to re-register its easement, Star would have to consent to a new easement.

He noted that even if the Easement was discharged by mistake, that was irrelevant under s. 13.1 of the PUEA . [ 25 ] He determined that Star relied on the indefeasibility of title after the discharges had occurred and to allow the easement to be re-registered would offend that principle. [ 26 ] In the result, he ordered the re-registered interests of CN discharged. [ 27 ] It is from this decision that CN appeals. IV. ISSUES [ 28 ] CN raises four issues, as follows: (

a) Did the Chambers judge err by failing to decide whether the Easement was a common law easement or granted under the PUEA ? (

b) Did the Chambers judge err by failing to consider, ignoring or otherwise misapprehending substantive, relevant evidence? (

c) Did the Chambers judge err by failing to identify and apply the law governing contractual

interpretation to the Easement in general, including failing to consider the surrounding circumstances that were or ought to have been known to the parties at the time of the Easement’s formation? (

d) Did the Chambers judge err by misidentifying the law applicable to indefeasibility of title? [ 29 ] I need only address the first two issues to determine this appeal. V. ANALYSIS A.

Did the Chambers judge err by failing to decide whether the Easement was a common law easement or granted under the PUEA ? [ 30 ] CN argues the Chambers judge failed to decide the main issue before him, i.e., whether the easement granted by Normandale was made pursuant to the PUEA or whether it was a common law easement. [ 31 ] It submits the Chambers judge understood that to be the question before him based on his references at paragraphs 3, 4, 12 and 22 of the Decision .

CN argues that, rather than determining the question before him, the Chambers judge did no analysis and proceeded as if it was common ground that the Easement was made pursuant to the PUEA and, in doing so, erred. [ 32 ] Star argues that, despite the fact that the Chambers judge did not explicitly determine the Easement was made pursuant to the PUEA , he nevertheless implicitly determined that question. It submits further that the form of the Easement and the way it was registered proves that it was made pursuant to the PUEA and that it is not a common law easement.

It argues that there is no dominant tenement express or implied in the Easement. Star submits these are characteristics of a PUEA easement. On this basis, it submits the rights under the Easement are extinguished by its discharge. [ 33 ] I am satisfied that the Chambers judge erred by failing to properly address the issue of whether the Easement was made pursuant to the PUEA . [ 34 ] The Chambers judge made a cursory mention of possible relevant provisions of the PUEA .

He noted that s. 3 set out a process for determining consent of parties that might have an interest in the creation of the easement, that s. 4 set out notice provisions regarding the obtaining of that consent and that ss. 6–9 set out further processes governing the creation of the easement, including provisions for

arbitration.

However, he failed to determine if any of these provisions had been complied with based on the facts surrounding the creation of the Easement between CN and Normandale or if it was necessary to comply with them. [ 35 ] Whether the process for the creation of an easement under the PUEA was undertaken, and the prerequisites thereunder met, would have been a good start in the analysis of what kind of easement had been created, but that matter was not canvassed by the Chambers judge. [ 36 ] The Chambers judge also failed to appropriately engage with the parties’ competing positions on the nature of the Easement.

He had before him law that indicated easements are agreements that are interpreted in light of the applicable factual matrix. He failed to do any analysis of several relevant factors that would assist in determining the question before him; the terms of the Easement, the basis on which it was registered, and the form and characteristics of an easement under the PUEA . He had evidence before him touching these factors. [ 37 ] The Chambers judge also had before him reference to cases that were relevant to Star’s argument that because the Easement failed to state a dominant tenement, it was a PUEA easement.

He did not address that issue either.

Without deciding that issue, I note parenthetically that there is a substantial body of law that indicates that the dominant tenement need not be expressed in a common law easement and that it can be inferred from the circumstances. [ 38 ] The Chambers judge’s failure to address the factual matrix or the law that might inform him as to the nature of the Easement satisfies me that he failed to actually grapple with the issue before him. [ 39 ] The Chambers judge instead focused a good portion of his decision on whether a mistake had been made by CN in discharging the Easement, eventually concluding that even if it was a mistake, that fact did not assist CN because s. 13.1(3) of the PUEA extinguished CN’s rights upon registration of the discharge.

That conclusion assumed that the Easement was made pursuant to the PUEA without having determined the issue explicitly and without any of the analysis referred to earlier. [ 40 ] Even if it can be said, as argued by Star, that the Decision can be read as implicitly concluding the Easement was made pursuant to the PUEA , how the Chambers judge reached that conclusion is unknown. [ 41 ] Based on all the foregoing, I determine that the Chambers judge erred in law in failing to decide the central issue before him. On that basis, the appeal is allowed. B.

Did the Chambers judge err by failing to consider, ignoring or otherwise misapprehending substantive, relevant evidence? [ 42 ] My comments regarding this issue will be brief given that the matter is remitted to the Court of Queen’s Bench for disposition and that factual findings to determine the matter will undoubtedly be required. However, this issue merits some comment. [ 43 ] The Chambers judge made several factual findings for which there was no evidence or which constitute palpable and overriding errors.

Many of these findings concern his conclusion that the discharge of the Easement by CN was not a mistake. As I noted above, he eventually found that mistake was irrelevant to the operation of s. 13.1(3) of the PUEA . For example, he determined that CN intended to serve Infra’s land with its mainline and not the siding line. There was no evidence of that. He also found that, at the time of the discharge of the Easement, there was no further need to retain it as there were no other customers using the track.

There was uncontroverted evidence that CN continuously used the track before and after the discharge of the Easement to service its customer, Infra. [ 44 ] He concluded that CN had cancelled and discharged its Easement because it had agreed to cancel the Siding Agreement and to remove its track, and that it made common sense to do so.

It seems to have eluded the Chambers judge that the discharge of the Easement in July of 2004 was more than six years after the effective date of the Siding Agreement cancellation and there was no evidence that the discharge had anything to do with it. [ 45 ] The Chambers judge also appears to have ignored the uncontroverted fact that the discharge of the Easement was not discussed by Star and CN until 2018. [ 46 ] There are other aspects of the factual matrix that the Chambers judge failed to address that were relevant to his final conclusion that I need not deal with. [ 47 ] The foregoing factual determinations resulted in a skewed analysis with regard to whether the rights of CN under the Easement were extinguished by the discharge.

I find that the Chambers judge erred by failing to consider, ignoring or otherwise misapprehending substantive, relevant evidence. VI. CONCLUSION [ 48 ] The appeal is allowed. The matter of whether the Easement is governed by the PUEA or is a common law easement remains to be determined. That is best done by the Court of Queen’s Bench.

Depending on the outcome of that question, the issue of the effect of the discharge of the Easement can then be addressed. [ 49 ] The decision of the Chambers judge is set aside and the matter is remitted to the Court of Queen’s Bench to make the proper determinations as to facts and law. [ 50 ] CN and Infra shall have their costs of this appeal in the usual way in any event of the cause. “Ottenbreit J.A.”

Ottenbreit J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Leurer J.A.” Leurer J.A. Court of Appeal for Saskatchewan Neutral Citation: 2021 SKCA 167 Corrigendum Date: 2022-01-28 Canadian National Railway Company Appellant (Respondent) And Star Processing Ltd. Respondent (Applicant) And Infra Pipe Solutions Ltd.

Respondent (Respondent) Corrigendum The text of the judgment has been corrected from its original 22 December 2021 release date to reflect the following: the appellant’s name has been changed from the erroneous “Canadian National Railway Corporation” to “Canadian National Railway Company” on the cover page; and, in paragraph 1, the citation has been modified to read Star Processing Ltd. v Canadian National Railway Company (18 November 2020) Saskatoon, QBG 638 of 2019 [ Decision ].

The original incorrectly identified the appellant as “Canadian National Railway Corporation” instead of “Canadian National Railway Company”.