April 21, 1997, E.C.B. No. 55/95/138 (61 L.C.R. 68)

Between:Captain's Square Holdings Ltd.
Claimant
And:Her Majesty The Queen in Right of the Province of
British Columbia as represented by the Minister of
Transportation and Highways
Respondent
Before:Fiona M. St. Clair, Vice Chair
Julian K. Greenwood, Board Member
Sharon I. Walls, Board Member
Appearances:J. Bruce Melville, for the Claimant
Robert J. Musto, for the Respondent

 

1. INTRODUCTION

The claimant in this proceeding is Captain's Square Holdings Ltd. ("Captain's Square"), a limited company owned 50% by its president, Eric Rastad, and 50% by another limited company, Rastad Construction Ltd. ("Rastad Construction"). Rastad Construction, in turn, is owned 99% by Mr. Rastad and 1% by his mother.

This compensation claim arose from Captain's Square's ownership of a multi-tenanted commercial warehouse building located at 3001/3005 Murray Street in Port Moody. The building measures about 16,500 square feet in area, and contains the businesses of 11 tenants. For the purposes of this decision, we will refer to Captain's Square's property as Lot 81. Next door to Lot 81, at 2933 Murray Street, is a commercial building owned by Rastad Construction. This property will be referred to here as Parcel A.

On October 4, 1995, Her Majesty The Queen in Right of the Province of British Columbia, as represented by the Minister of Transportation and Highways ("MoTH"), expropriated Parcel A from Rastad Construction. As a result, Captain's Square filed a claim with the Expropriation Compensation Board ("the board") for compensation under the Expropriation Act, S.B.C. 1987, c. 23, ("the Act") for an interest as owner of "a right of access and for parking purposes" in Parcel A. (The Form A Application for Determination of Compensation originally claimed compensation based on ownership of "an easement for access and parking purposes", but Captain's Square was granted the right to amend its Form A in the course of this application.)

Captain's Square says that the expropriation of Parcel A has caused a serious access problem to the west side of its warehouse adjacent to the expropriated property. There are four large (10 ft x 12 ft) vehicle access doors along the west side of the warehouse building that allow vehicles direct access into those units on that side of the building for loading and unloading goods and materials. Ever since the warehouse was constructed in 1980, vehicles regularly used part of Parcel A in order to have enough room to make the 90 degree turn into these large doors. The 12 foot driveway on Lot 81 is not sufficiently wide to permit most vehicles to execute the turn for entry into the warehouse through these doors.

Captain's Square seeks compensation for the market value of its interest in Parcel A pursuant to s. 30 of the Act, in the amount of $100,000. It also seeks compensation under s. 39 (1) (a) of the Act for a reduction in the market value of Lot 81, in the amount of a further $200,000. In addition, it seeks disturbance damages under s. 33 of the Act in the amount of $4,000, for a total net claim of $304,000. It also seeks costs and interest.

On November 20, 1996, the board heard oral testimony from Mr. Rastad (who had also filed an affidavit), along with legal argument from Bruce Melville, counsel for Captain's Square, and from Robert Musto, counsel for MoTH, regarding the issue of MoTH's liability to pay compensation to Captain's Square under the Act. By agreement of the parties, we did not hear any evidence with regard to quantum, and will not do so unless we find liability as a result of the first part of the hearing.

 

2. BACKGROUND

In addition to Lot 81, Captain's Square once owned the part of Parcel A that is used for access to the westerly units of its warehouse. This parcel, which was once called Remainder of Lot A, was adjacent to the west side of Lot 81 and was approximately 10 metres wide by 40 metres deep (33 feet by 132 feet). For ease of reference, we will refer to this portion of Parcel A as "the disputed area." Rastad Construction Ltd. acquired three other lots adjacent to this parcel, and purchased the parcel from Captain's Square in order to consolidate all four lots into Parcel A. Although the evidence as to the dates on which these different parcels were purchased by the two companies was vague, there was a reference plan showing this consolidation that was deposited in the Land Title Office in 1989. Rastad Construction had initially built a commercial building on what was to become the westerly part of Parcel A in 1986 and expanded this building for its tenant with the consolidation of the four parcels into Parcel A in 1989. None of this building was situated on the disputed area. The evidence was that Captain's Square used the disputed area for access to the west side of the warehouse both before and after Rastad Construction built and leased the commercial building on what was to become Parcel A.

The highway overpass for which Parcel A was expropriated has not yet been constructed, but Mr. Rastad testified that MoTH has rented the building on Parcel A to a private boat sales business which routinely blocks the disputed area with numbers of large parked boats and boat trailers. Once the construction has been completed, Captain's Square will have no access at all to the disputed area.

Mr. Rastad described himself as the controlling mind of both Captain's Square and Rastad Construction. He testified that, while he effectively controlled both Lot 81 and Parcel A, he did not believe that there was a need for a formal agreement to record Captain's Square's interest in the disputed area. However, when he learned in March of 1995 that MoTH intended to expropriate Parcel A, he sought legal advice about obtaining compensation for the impact of the proposed taking on Captain's Square. Acting on that legal advice, he instructed Captain's Square's lawyer to file a caveat against Parcel A in the New Westminster Land Title Office and to draw up an agreement to document Captain's Square's interest in the disputed area.

The caveat, which was filed on March 31, 1995, sets out the following allegations of fact in its paragraph 3, which details the grounds on which the claim for an interest in Parcel A are founded:

3.1 Lot 81 is immediately adjacent to Parcel A.

3.2 A commercial building is constructed on Lot 81.

3.3 Reasonable access to portions of the building on Lot 81 can only be obtained via Parcel A.

3.4 At all times since the present building on Lot 81 was constructed, the owners of Parcel A have permitted the owners of Lot 81 to access their property by way of Parcel A.

3.5 The owners of Parcel A have orally agreed to provide a registrable easement for the benefit of Lot 81 in the event they should decide to sell Parcel A.

3.6 The owners of Parcel A have just determined that an expropriation of Parcel A is imminent.

3.7 There is insufficient time to prepare a registrable easement instrument before the expropriation is expected to take place.

On April 3, 1995, Captain's Square and Rastad Construction entered into a letter agreement that provides as follows:

This letter will confirm an existing agreement whereby Rastad Construction Ltd., the owner of Parcel A, District Lot 201, Group 1, New Westminster District, Reference Plan 83794 ("Parcel A"), has given an easement for access purposes across Parcel A in favour of the adjacent lot, Lot 81, District Lots 190 and 201, Group 1, New Westminster District, Plan 50472 ("Lot 81"), owned by Captain's Square Holdings Ltd. The easement covers the area lying within 30 feet of the easterly boundary of Parcel A and is for the purpose of providing access and parking for vehicles, pedestrians and equipment to the building constructed on Lot 81. The right of access is not exclusive. Rastad Construction Ltd. agrees to provide a registrable document upon request and in any event if it should sell or otherwise dispose of its interest in Parcel A.

The expropriation notice was subsequently filed at the New Westminster Land Title Office on May 12, 1995. Captain's Square did not obtain a registrable easement from Rastad Construction for filing against Parcel A between the time it registered its caveat and that date. Parcel A did not ultimately vest in MoTH until October 4, 1995.

 

3. THE ISSUES

The primary issue to be determined here is whether Captain's Square is an "owner" under the definition set out in s. 1 of the Act, and thus entitled to compensation under the scheme of the Act. In order to determine Captain's Square's status as owner, it will be necessary to decide whether Captain's Square has an "estate, interest, right or title in or to the land" described here as the disputed area, as required in subsection (a) of the definition of owner, or whether it was in "legal possession or occupation of [the] land," as required in subsection (c) of that definition. Qualification under either category constitutes qualification as an owner under the Act.

A number of sub-issues arise in connection with the first issue regarding having an interest in the land. It needs to be determined whether Captain's Square held a right in the nature of an easement to the area in question, and if so, whether the fact that the easement was neither reduced to writing nor registered against the property precludes Captain's Square from qualifying as an owner under the Act. If we conclude that the legal requirements for an easement are not satisfied, then it will be necessary to determine whether Captain's Square had some other interest amounting to an "estate, interest, right or title in or to the land" so as to qualify as an owner.

 

4. CAPTAIN'S SQUARE'S POSITION

Mr. Melville argued, on behalf of Captain's Square, that it had a right to and did use and occupy the disputed area at the date of expropriation for the purposes of access and parking. He said that it was this right that is recognized in writing in the April 3, 1995, letter agreement, and that it amounts in law to an easement. In the alternative, it constitutes an irrevocable licence coupled with an agreement to grant an easement, which he argued amounts to an equitable interest in the disputed area.

Mr. Melville was not troubled by the fact that Captain's Square had not registered an easement against Parcel A. Whether Captain's Square's right consisted of an easement or an agreement to grant an easement, he argued that it constituted an equitable interest in Parcel A and therefore could not be defeated by the lack of registration. He pointed out that there is no provision in the Act that specifically denies compensation to an unregistered interest per se, and cited a number of court and board decisions in support of his position that Captain's Square has a compensable right or interest in Parcel A.

With regard to the issue of legal possession or occupation, the third branch of the ownership definition in the Act, Mr. Melville maintained that Captain's Square clearly had a right to possess or occupy the disputed area and that this right was not in the nature of a residential lease. He maintained that this right to possess or occupy the disputed area is sufficient to qualify Captain's Square as an owner under clause (c) of the definition of owner.

 

5. MOTH'S POSITION

Mr. Musto, on behalf of MoTH, argued that Captain's Square did not hold an easement over Parcel A, and said that at the very most it held a bare licence to cross a part of Parcel A and to park vehicles on the disputed area.

He maintained that Rastad did not grant an easement to Captain's Square, nor did it ever form the intention to do so. The evidence was, he pointed out, that Mr. Rastad intended to hold both Lot 81 and Parcel A indefinitely, and that it was only in the unlikely event of a sale of Lot 81 that he would have had to obtain and register a formal easement over Parcel A in favour of Lot 81. Thus, no implied easement should be found in this situation.

Mr. Musto spent some time reviewing the law defining easements and licences. Citing Cheshire and Burns, Modern Law of Real Property, 15th ed., (London: Butterworths, 1994) he stated that an easement is an incorporeal interest in land. It is

... a right attached to one particular piece of land which allows the owner of that land either to use the land of another person in a particular manner, ... or to restrict its user by that other person to a particular extent. (p. 518)

A legal easement is a jus in rem, not a mere jus in personam; it permanently binds the land over which it is exerciseable and permanently avails the land for the advantage of which it exists. (p. 519)

A licence, on the other hand, is not an interest in land.

A licence is created in favour of B if, without being given any legal estate or interest, he is permitted by A to enter A's land for an agreed purpose. It is an authority that justifies what would otherwise be a trespass. (p. 529)

Again citing Cheshire and Burns, Mr. Musto set out the four necessary conditions of an easement. They are:

1. There must be a dominant and a servient tenement.

2. The easement must accommodate the dominant tenement.

3. The dominant and servient owners must be different persons.

4. The right must be capable of forming the subject matter of a grant.

In addition, Mr. Musto argued, there must be more than a superficial appearance of the essentials of an easement. The parties must intend to create an easement: Gypsum Carrier Inc. v. The Queen (1978), 78 D.L.R. (3d) 175 (Fed.Ct., Trial Div.).

In this case, Mr. Musto maintained, the facts indicate a clear lack of intention. Furthermore, the interest which was purportedly granted is incapable of being the subject matter of a grant owing to the vagueness of its description. He argued that there was no evidence of the width of the alleged easement area, and that there was conflicting evidence about its length.

Finally with regard to the easement issue, Mr. Musto set out a number of facts which he said support a finding of a grant of permission to use rather than of an easement:

1. Both parcels of land were originally owned by the Claimant ... The claimant did not take the simple step of reserving an easement in favour of the remaining land.

2. Captain's did not pay Rastad for the use of the Land, nor did Rastad expect payment.

3. Mr. Rastad was the directing mind of Captain's and Rastad. He claims that Rastad "agreed to provide" Captain's with an easement. These are not words of grant.

4. The transfer occurred in 1989, at least five years and three months before the caveat was filed, yet no easement was ever drafted.

5. The caveat, which was sworn by Captain's solicitor, says that Rastad "permitted the owners of Lot 81 to access their property by way of Parcel A." These are words of permission, not words of grant.

6. The affidavit only says the Claimant "was permitted to use the Rastad Property for both access and parking." These are words of permission, not words of grant.

7. Mr. Rastad "did not believe there was a need for a formal agreement to record the interest of the Claimant in the Rastad Property". Informality is not an indicia of an intent to grant an interest in land.

8. The caveat also says "The owners of Parcel A have orally agreed to provide a registerable easement for the benefit of Lot 81 in the event they should decide to sell Parcel A. " It is not an indicia of an actual grant. An agreement to grant an easement is not an easement or an interest in land.

9. Captain's did not commence an action to establish title to its alleged interest and thereby allowed the caveat to expire.

10. The letter of April 3, 1995, does not purport to be a grant of an easement, only confirmation of "an existing agreement". The letter was made more than five years after the transfer of the land to Rastad and only after the Claimant became aware of an impending expropriation.

11. Mr. Rastad's evidence was that there was no agreement.

12. Mr. Rastad's evidence was that there was no intention to grant an easement.

With regard to the question of whether Captain's Square might qualify as an owner under the Act by virtue of legal occupation or possession of the disputed area, Mr. Musto limited his argument to whether an easement confers a right of occupation, and maintained that it does not. An easement, he maintained, is merely a right attached to one parcel of land which allows the owner to use or restrict the use of another parcel of land. He cited the following passage from Cheshire & Burns in support of this position:

An easement confers upon its owner no proprietary or possessory right in the land affected. It merely imposes a particular restriction upon the proprietary rights of the owner of the servient land. A right which entitles one person to the unrestricted use of the land of another may be an effective right to ownership or possession, but it cannot be an easement. (p. 518)

Mr. Musto did not address the issue of whether Captain's Square might have a legal right of occupation or possession through some mechanism other than an easement.

 

6. DISCUSSION AND DETERMINATION

Mr. Musto's argument focused first on the lack of a written and registered easement agreement, and second on the alleged absence of an actual agreement to grant an easement. In our view, the determination of Captain's Square's status as an owner does not turn on the existence of a written agreement, and certainly not of a registered written agreement. Section 54 (3) of the Law and Equity Act, R.S.B.C. 1979, c. 224 is pertinent to this issue. It provides:

A contract respecting land or a disposition of land is not enforceable unless

(a) there is, in a writing signed by the party to be charged or by his agent, both an indication that it has been made and a reasonable indication of the subject matter,

(b) the party to be charged has done an act, or acquiesced in an act of the party alleging the contract or disposition, that indicates that a contract or disposition not inconsistent with that alleged has been made, or

(c) the person alleging the contract or disposition has, in reasonable reliance on it, so changed his position that an inequitable result, having regard to both parties' interests, can be avoided only by enforcing the contract or disposition.

Subsection (a) does require that an enforceable agreement about land be in writing. In the case of someone who has transferred property without expressly reserving an easement for the benefit of land retained, this subsection incorporates the legal principle that a grantor is not permitted to derogate from his own grant, and the rule in Wheeldon v. Burrows (1879), 12 Ch.D. 31 (C.A.) that if a grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. Subsections (b) and (c), however, set out exceptions to the requirement established in subsection (a). They incorporate the equitable principles of estoppel and acquiescence. Further to these provisions, and to the common law relating to easements, it is possible to establish an enforceable easement that will be implied from the circumstances of the way the two owners of the dominant and servient tenements have conducted themselves with regard to the disputed area.

We have found assistance in dealing with the area of implied easements, in two cases not referred to by either counsel. We have provided counsel with copies, however, and have obtained their written submissions regarding the possible applicability of these cases to the legal question before us. In McDonell v. Lambourn Holdings Ltd. and Williams (1977), 4 B.C.L.R. 58 (B.C.S.C.), the defendant Lambourn had transferred land and a marina to the plaintiff, while retaining surrounding land for a proposed subdivision. At the time of the agreement for sale Lambourn promised that access would be available by public road, but later difficulties led the plaintiff to agree to the road being private, use by easement, and the road to be maintained by Lambourn. Due to inadvertence, however, no easement was ever registered, and Lambourn later tried to restrict the plaintiff's use of the road. The defendant Williams had, in a letter to the provincial Department of Highways, indicated "We are quite willing to maintain this road ourselves as a private road and give the few lots affected by it easements." This Gould J., the judge deciding the case, held "dispose[d] of the defence of the Statute of Frauds" (which in British Columbia is now incorporated in s. 54 (3) (a) of the Law and Equity Act, R.S.B.C. 1979, c. 224). He went on to find that

[t]here is no question whatsoever, and this court holds, that McDonell is entitled by implied grant to a written registrable easement agreement appurtenant to Lot 1, over the access road shown in Ex.1, such agreement nunc pro tunc to when it should have been delivered ... As to easements by implied grant see Megarry on the Law of Real Property, 3rd ed. (1966), p. 828 et seq., and Torosian v. Robertson, [1945] O.W.N. 427, [1945] 3 D.L.R. 142.

The second case we have found useful is Barton v. Raine, (1980), 15 R.P.R. 287, a decision of the Ontario Court of Appeal upholding a finding of an implied easement in a residential situation. A father owned two adjoining properties and transferred one to a son and daughter-in-law in 1952. He and his wife continued to live on the other property until their deaths in 1968. At that time, a second son, the plaintiff, inherited the father's property and moved in. A few years later, in 1971, the first son sold his adjoining property to a third party, the defendant. A problem arose regarding a 12 foot strip separating the two residences, which the owners of both properties had used for over 40 years as a common driveway providing access to their respective garages at the rear of the two properties. However, the most recent purchaser, the defendant, discovered that eight feet or so of this driveway was on his land and only four feet was on the plaintiff's. After a dispute with the plaintiff, he built a fence along the property boundary that permitted him continued use of the driveway and access to his garage, but which prevented the plaintiff from using the driveway or getting his car to his garage. At no time had there ever been a written easement agreement regarding the driveway.

The trial judge found that the plaintiff was entitled to a registrable easement over the driveway on one of two alternative grounds. He described these as follows:

In my view, an implied reservation of an easement can be easily justified here using one of the acknowledged major exceptions fully articulated by Thesiger L.J. [in Wheeldon v. Burrows (1879), 12 Ch.D. 31 (C.A.)] -- the mutual or reciprocal easement exception -- as well as by reference to the broader, umbrella-like 'common intention' principle.

The mutual or reciprocal easement exception is described as applying to "continuous and apparent easements ... necessary to the reasonable enjoyment of the property conveyed". Thorson, J.A., at p. 293, cites Gale on Easements (14 ed., 1972), as referring, in addition, to implied reservations where:

... a grantee can be shown positively or, for instance, by necessary inference from the effect on the property granted or some physical characteristic of the property retained, to have recognised and acquiesced in an intention on the part of the grantor to use his retained property, or part of it, in some definite manner detracting from the natural rights incident to the ownership of the property granted." (Thorson, J.A.'s emphasis)

He also cites the decision in Jones v. Pritchard, [1908] 1 Ch. 630, in which Parker J. stated at p. 636:

... the law will, I think, imply the grant and reservation in favour of the grantor and grantee respectively of such easements as may be necessary to carry out what was the common intention of the parties with regard to the user of the wall, the nature of those easements varying with the particular circumstances of each case.

In addition, he refers to the later case of Re Webb's Lease; Sandom v. Webb, [1951] Ch. 808, [1951] 2 All E.R. 131 (C.A.), in which the following comment on the two established exceptions to the rule in Wheeldon v. Burrows was made:

It is, however, recognised in the authorities that these two specific exceptions do not exhaust the list, which is, indeed, incapable of exhaustive statement as the circumstances of any particular case may be such as to raise a necessary inference that the common intention of the parties must have been to reserve some easement to the grantor or such as to preclude the grantee from denying the right consistently with good faith, and there appears to be no doubt that where circumstances such as these are clearly established the court will imply the appropriate reservation. (Thorson, J.A.'s emphasis)

Ultimately, Thorson J.A. concludes that this set of facts qualifies as an exception to the general legal rule against finding an implied reservation of an easement by a grantor. He finds that,

although the 1952 conveyance made no mention of a right of way over the driveway between the two properties, there was, by necessary inference from the circumstances in which the conveyance was made, a common intention on the part of both the father on the one hand and the son and daughter-in-law on the other hand that, after the conveyance, each of them would continue to use the driveway in the same manner as, in fact, it had been used without interruption since the late 1920's.

He therefore holds that an easement in the nature of a right of way over the driveway was acquired by implied reservation from the 1952 grant in favour of the grantor of the property. The son and daughter-in-law were bound by the easement, and thus so was the defendant, who purchased from them.

In Captain's Square's situation there was also a transfer of property without the express reservation of an easement for its continued benefit. This was the transfer in 1989 of the bulk of the disputed area to Rastad Construction. The evidence is that, as in Barton v. Raine, the disputed area was used after the transfer as it had been before the transfer -- as an access route from Murray Street to their respective buildings by both Captain's Square and Rastad Construction. The evidence is also clear that Captain's Square's continued use of the disputed area took place with Rastad Construction's full knowledge and approval. We are of the view that Captain's Square held an implied easement over the disputed area both by virtue of the mutual or reciprocal easement exception to the rule in Wheeldon v. Burrows, and also by virtue of the common intention principle.

To rephrase the language of Thorson J.A. in Barton v. Raine, we find that although the 1989 conveyance made no mention of a right of way over the entrance from Murray Street between the two properties, there was, by necessary inference from the circumstances in which the conveyance was made, a common intention on the part of both Captain's Square on the one hand and Rastad Construction on the other hand that, after the conveyance, each of them would continue to use the entranceway in the same manner as, in fact, it had been used without interruption since 1980. Captain's Square therefore acquired an easement by implied reservation from the 1989 grant in its favour.

Mr. Musto attempted to make much of the fact that Captain's Square and Rastad Construction had not actually made an "agreement" about an easement, and that Mr. Rastad did not intend to register an easement over Parcel A unless and until he sold Lot 81 to a third party. This, to our minds, amounts to splitting legal hairs. Mr. Rastad was the controlling mind of both entities, and his intentions regarding the use by Captain's Square of the disputed area were clear and consistently evidenced by its actual use over a long period of years. (As Mr. Rastad said in a moment of exasperation under cross-examination, he didn't know who he would have to agree with.) In addition, we consider the letter agreement of April 3, 1995, to be written evidence of the common intention of Captain's Square and Rastad Construction. The two Federal Court cases that Mr. Musto relied upon (Attorney-General of Canada v. Walsh (1980), 19 L.C.R. 333 and Gypsum Carrier Inc. v. The Queen; Canadian National Railway Co. v. The Ship "Harry Lundeberg" (1977), 78 D.L.R. (3d) 175) both resulted in findings that there was no common intention of the parties to create an easement. In Gypsum Carrier, there were contractual agreements between the parties which the court examined in detail, finding that they did not create an easement and did not reflect an intention to create one.

We also reject Mr. Musto's contention that the right here is not capable of forming the subject matter of a grant, because of the imprecision with which Mr. Rastad described the easement area in the course of his examination for discovery and his testimony before us. The fact that there would be some degree of latitude possible in negotiations with a third party purchaser of Lot 81 as to the precise dimensions of an easement does not render the easement area incapable of description. Indeed, the letter agreement between Captain's Square and Rastad Construction does define a specific area, that is "the area lying within 30 feet of the easterly boundary of Parcel A." We consider this to be a sufficient description to satisfy the fourth requirement of defining an easement.

The bottom line here is that Captain's Square has suffered a clear and identifiable loss as a direct result of the taking, based upon its former interest in and use of the property taken. It appears clear to us that the Act and its hearing process is the appropriate forum in which to determine the amount of this loss. We have found Captain's Square to have held an implied easement over part of the land taken. We agree with the authorities cited by Mr. Musto that an easement is not a right that conveys a possessory interest, and thus do not find Captain's Square to be an owner by virtue of subsection (c) of the definition. We do find, however, that by virtue of its easement interest in the expropriated property, Captain's Square qualifies as an owner under subsection (a) of the definition in the Act -- that is, it held, at the time of the taking, an "estate, interest, right or title in or to the land."

 

 

Government of British Columbia