



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



NBC Holdings Ltd. v. Aarts Nursery Ltd.,









2021 BCCA 7




Date: 20210112

Docket: CA46585

Between:

NBC Holdings Ltd.

Appellant

(Petitioner)

And

Aarts Nursery
Ltd., Garry Edward Cassidy and Darlene Aunita Cassidy

Respondents

(Respondents)

Corrected
Judgment: The cover page of the judgment
was corrected on January 13, 2021.




Before:



The Honourable Chief Justice Bauman

The Honourable Madam Justice Dickson

The Honourable Mr. Justice Hunter




On appeal from:  An
order of the Supreme Court of British Columbia, dated November 25, 2019 (
NBC
Holdings Ltd. v. Aarts Nursery Ltd.
, 2019 BCSC 2016, Vancouver Docket
S192487).




Counsel for the Appellant

(via videoconference):



D.J. Taylor
G. Paulson, Articled Student





Counsel for the Respondents

(via videoconference):



S. Payne





Place and Date of Hearing:



Vancouver, British
  Columbia

December 8, 2020





Place and Date of Judgment:



Vancouver, British
  Columbia

January 12, 2021









Written Reasons by:





The Honourable Chief Justice Bauman





Concurred in by:





The Honourable Madam Justice Dickson

The Honourable Mr. Justice Hunter




Summary:

The appellant petitioned the
court for cancellation of an easement on the grounds that the easement was
obsolete, or alternatively, that the parties agreed to cancel the easement. The
chambers judge declined to cancel the easement, instead ordering that, pursuant
to certain terms of the easement agreement, the easement be relocated at the
appellants expense. She awarded special costs against the appellant for its
breach of the easement agreement and for bringing the petition. Held: Appeal
allowed; the special costs award is set aside. The parties are at liberty to
pursue a traditional civil claim in the Supreme Court. While purporting to exercise
her jurisdiction under s. 35 of the Property Law Act, the judge
effectively ordered specific performance of a clause in the easement agreement.
In doing so, she erred in interpreting her jurisdiction under s. 35. Specific
performance, or enforcement generally, of the clauses in an easement agreement
cannot be pursued by a petition under s. 35. With respect to costs, the
judge erred in finding that the appellants pre-litigation conduct warranted a
special costs award against it.

Reasons for Judgment of the Honourable
Chief Justice Bauman:

I. Overview

[1]

This case considers the proper scope and application of s. 35 of
the
Property Law Act
, R.S.B.C. 1996, c. 377 [
PLA
]. It does
so in the context of an easement agreement (the Easement) benefitting lands
of the respondent Aarts Nursery Ltd. (Aarts) and burdening those of the
respondents Cassidy and the appellant, NBC Holdings Ltd. (NBC).

[2]

For simplicity, I will refer to the properties as Aarts Lot, Cassidys
Lot and NBCs Lot.

[3]

Aarts operates a commercial nursery on its lot. The nursery is currently
dependent on a private water supply from a well on NBCs Lot, which runs
through buried pipe across the Cassidys Lot to Aarts Lot. The Easement covers
the maintenance, repair and replacement of the well and pipe making up the
water supply system.

[4]

By its terms, the Easement prohibits the construction of buildings and
structures over its defined area. With admitted knowledge that it was doing so
in breach of this term, NBC constructed a substantial wall over the Easement in
order to enclose its principals new home.

[5]

NBC sought to cancel the Easement by way of petition in the Supreme
Court under s. 35 of the
PLA
. Notwithstanding its conduct in
constructing the wall, NBC takes the position that it has the right to cancel
the Easement in accordance with certain of its provisions.

[6]

In the result, the chambers judge fashioned something of a judicial
compromise by ordering that the Easement be relocated across NBCs Lot in a
way and to a location agreed upon in advance and in writing by Aarts and at
NBCs expense.

[7]

NBC takes the position that its alleged breach of the Easement is
irrelevant because circumstances exist obliging Aarts to cancel it after
connecting to the municipal water supply in the area. Given that position, NBC
questions the even-handedness of the compromise and it brings this appeal.

[8]

In my view, the parties have misunderstood the scope of s. 35 of
the
PLA
and have misguidedly invoked its jurisdiction. For reasons that
follow, I would allow the appeal but I would dismiss the petition and leave the
parties at liberty to pursue a traditional civil claim in Supreme Court if they
are so inclined. However, as I note below, there is much to be said for a
compromise here utilizing clause 13 of the Easement and fairly allocating the
costs of its relocation.

II. The Easement

[9]

The Easement was entered into in 1984 between the owners of the affected
lots.

[10]

A municipal water supply (from the township of Langley) was not then
available to Aarts Lot.

[11]

The owners of NBCs Lot and the Cassidys Lot agreed under clause 8 of
the Easement not to construct on the Easement areas across their lots, including
any building, structure, concrete driveway or patio, without Aarts consent.
They also agreed that they will not on any part of the easement areas do any
act or thing that will interfere with or injure the . . . pipe or the right or
ability of [Aarts] to have access to and draw water from the well system, and
maintain the . . . pipe . . .

[12]

Clause 13 of the Easement qualifies this prohibition in these terms:

If the location of the easement
areas on [NBCs Lot] and [Cassidys Lot] at any time interfere with the use or
enjoyment or the planned or desired use or enjoyment by [NBC and Cassidys],
[NBC and Cassidys] shall respectively have the right, at their sole expense,
from time to time, to alter the location of the easement areas and [Aarts]
Pipe on [NBCs Lot and Cassidys Lot] so long as the rights and benefits of
[Aarts] hereunder are not otherwise affected and so long as the location where
the easement areas and [Aarts] Pipe meet the boundary between [NBCs Lot] and
[Cassidys Lot] and the [Aarts Lot] is not altered without the written consent
of [Aarts], and where such alteration is permitted or authorized by [Aarts]
pursuant to this clause, [Aarts] will immediately on request execute all
documents and plans necessary for such purpose.

[13]

Clause 14 of the Easement is the other critical provision in this piece:

If Municipal water becomes
available to [NBCs Lot] and [Cassidys Lot] and [Aarts Lot] and is sufficient
for the commercial purposes of [Aarts], then all of the parties covenant that
within 120 days of receiving notice from the Municipality of Langley of the
availability of the Municipal water, that they will connect to the Municipal
water and all parties will immediately after connection to the Municipal water
supply release, discharge and cancel the easement hereby granted.

[14]

Access to municipal water has been available in the area of the Lots for
some time. Whether that water supply is sufficient for the commercial
purposes of Aarts was an issue of mixed fact and law below and was the subject
of expert evidence led by Aarts and NBC.

[15]

In this regard, NBCs witness opined that Langleys water supply system
can supply water in excess of the commercial needs of Aarts Lot.

[16]

Aarts tendered expert, on the contrary, said he conservatively estimated
the cost of that municipal supply at $32,000 per year, at minimum.

[17]

Aarts evidence was to the effect that this cost would be prohibitively
expensive to it. It is a live issue whether the cost of water and the cost of
connecting to Langleys municipal water system properly figure into the
sufficient for the commercial purposes of Aarts inquiry under clause 14 of
the Easement.

[18]

Aarts witness concluded:

In any event, in my experience, the Township of Langley is
not guaranteed to agree to provide municipal water in the volumes required by
the Nursery to operate its business. Section 21 of the Township of Langleys
Waterworks Regulation Bylaw 2008 No. 4697. This section confirms that
proposed water usage for other than Normal or fire protection use (which
includes irrigation and commercial agricultural use) requires the written
authorization of the Engineer. Use of municipally-supplied water for these uses
requires written application to the Engineer, and such usage will only be
permitted upon receipt of written authorization of the Engineer, and may
include terms and conditions imposed by the Engineer.

In consequence, the provision of
municipal water for such purpose as irrigation and commercial agriculture is
discretionary. Based on my experience and dealings with the Township of
Langley, I am skeptical that the Township of Langley would approve of water
connections permitting the 172,800 gallons per day the Nursery reasonably
requires to operate its business.

III. The Petition

[19]

The petition was brought under s. 35 of the
PLA
and Rule
2-1(2)(b) of the
Supreme Court Civil Rules
.

[20]

The latter rule allows a party to bring a petition proceeding where an
enactment so authorizes. Section 35 does so in the circumstances described
therein, which I will canvass below.

[21]

A petition proceeding is, of course, quite summary and usually
expeditious. The petition is heard by a judge in chambers and is based on
affidavit evidence only. It has a number of obvious advantages over the formal
trial process where there are no serious and disputed questions of fact.

[22]

NBC sought these orders by way of its petition:

1.         A Declaration that a municipal water supply
is available to the Respondents;

2.         A Declaration that the municipal water supply
is sufficient for the commercial purposes of the Respondent, Aarts Nursery
Ltd.;

3.         An Order that the Respondents connect to the
municipal water supply, if they have not already done so;

4.         An Order that once the Respondents are
connected to the municipal water supply, the parties will immediately release,
discharge and cancel the easement registered in the New Westminster Land Title
Office with Registration Number X2935;

5.         Further, or alternatively, a Declaration that
the easement registered in the New Westminster Land Title Office with
Registration Number X2935 is obsolete;

6.         costs; and

7.         such further and
other relief as this Honourable Court may deem just.

[23]

NBC recited clause 14 of the Easement and alleged the availability of a
water supply from the Municipality of Langley, sufficient for the commercial
purposes of Aarts. NBC pleaded that Aarts (and the Cassidys, who have allied
themselves with Aarts in these proceedings) had breached clause 14 of the
Easement. NBC, of course, invoked s. 35 of the
PLA
. It provides:

35(1)    A person interested in land may apply to the
Supreme Court for an order to modify or cancel any of the following charges or
interests against the land, whether registered before or after this section
comes into force:

(a)        an easement;



(2)        The court may make an order under subsection
(1) on being satisfied that the application is not premature in the
circumstances, and that

(a)        because of changes
in the character of the land, the neighbourhood or other circumstances the
court considers material, the registered charge or interest is obsolete,

(b)        the reasonable use
of the land will be impeded, without practical benefit to others, if the
registered charge or interest is not modified or cancelled,

(c)        the persons who are
or have been entitled to the benefit of the registered charge or interest have
expressly or impliedly agreed to it being modified or cancelled,

(d)        modification or
cancellation will not injure the person entitled to the benefit of the
registered charge or interest, or

(e)        the registered
instrument is invalid, unenforceable or has expired, and its registration
should be cancelled.

(3)        The court may
make the order subject to payment by the applicant of compensation to a person
suffering damage in consequence of it but compensation is not payable solely
for an advantage accruing by the order to the owner of the land burdened by the
registered instrument.

[24]

It was NBCs essential position that, by reason of the available
municipal water supply, the Easement was obsolete (s. 35(2)(a)).

[25]

Alternatively, by virtue of clause 14 of the Easement, the parties
expressly or impliedly had consented to its cancellation within the meaning of
s. 35(2)(c).

IV. The Chambers Proceeding and Judgment

[26]

In order to understand the genesis of the compromise ordered by the
chambers judge, it is necessary to refer at some length to the submissions
below of NBCs counsel, Mr. Taylor, and his colloquy with the chambers
judge.

[27]

Mr. Taylor advanced the essential submission under s. 35 of
the
PLA
that I have outlined. During the course of his submissions, the
chambers judge interjected:

THE COURT:  Can there be no good neighborliness in this?
Because this is a fight that, although one person my win, it's going to -- it's
going to end up with bad feelings because we have three lots, two of whom, from
what I hear, are in favour of the easement continuing. Your client wants to move
in, I imagine wants their family to live in a happy environment, which means
that everybody should get along. Is there no way that this can be resolved so
that that happens?



THE COURT:  Can this not be solved with some  and this
is really speaking off the top of my head -- but some agreement between your
client and the other easement holders that if there's a problem, they can get
under that wall or part of the wall might have to be taken down? There might
never, ever have to be a problem.

MR. TAYLOR: Without -- if the easement were to be cancelled
and those rights were given in a way that doesn't involve an easement, I expect
that would probably resolve my client's concerns, because then he could get an
occupancy permit and he could move in.

THE COURT:  No, the easement -- I don't see the easement
-- and again, really, this is just -- I'm just throwing this out, but I don't see
the easement being cancelled, but I can see it being amended to allow for the
wall and access, if need be. I don't know. You're squirming, so that might not
even be --

MR. PAYNE:   My client
would certainly be open to some sort of agreement that would reserve the easement.
Just speaking frankly, they're a bit baffled why their neighbour built a wall
directly overtop before even beginning proceedings.

[28]

Chambers then broke, with the encouragement of the chambers judge that
the parties use the break to work together.

[29]

Mr. Taylor returned from the break and advised the court that while
the parties had some useful discussions regrettably, we have to carry on.
Later, Mr. Taylor submitted:

In paragraph 96
we're relying on subsections 35(2)(a) and 35(2)(c). Alternatively, and I can
say this: To the extent that you are mind to consider the modification of the
easement as compared to a cancellation, there is something that I can suggest
which may be of assistance to you in that context.

The easement in
question runs directly beneath the building wall that's constructed at the
front of the house. Further to the front of the house there is approximately 4
feet of property owned by my client. So there's the house, the wall and another
4 feet. At present the front wall is right on top of the pipe. A modification
of the easement that allowed for a bypass pipe just across the frontage, so in
other words, the pipe from the well up to the start of the wall stays. At least
a bypass pipe that goes to the front of the wall and across the length of that
wall in front of the property and connects again on the other side of it. That
bypass pipe would effectively, as Your Ladyship suggested this morning, leave
everybody with what they want.

In that instance
the easement would be modified to cover that area as compared to where the wall
is, and the result of that is my client gets his occupancy permit and the city
is satisfied, and Aarts Nursery gets its continued easement, gets its access to
water, basically has everything that it has now, and it will be able to access
that water pipe and there's no issue.

So to the extent
that the court is more minded to try to fashion something that will be of
assistance to both parties rather than making a decision on cancellation, in my
submission, of course you have to be under the same section of the act, the
authority to modify the easement, and a modification in that respect certainly
will need the court to address cost, so there will be a cost of moving that
pipe.



THE COURT:  So you're saying that if I'm so inclined, then
the only matter I'd have to consider is costs.

MR. TAYLOR: I believe that to be the case, because
--

THE COURT: And your submission on costs?

MR. TAYLOR: Well, my
submission is, in the circumstances, the cost of that should be either borne
entirely by Aarts or significantly by Aarts because 

[30]

At the end of his submissions, Mr. Taylor provided the chambers
judge with further argument on the courts statutory authority to modify the
Easement under s. 35 of the
PLA
:

THE COURT:  But how do I get to the mid ground?

MR. TAYLOR: Well, either modification.

THE COURT:  Right.

MR. TAYLOR: Well, I think section -- the authority
for it, My Lady. I can take you to this. Tab 3 of my book of authorities, which
is the statute.

THE COURT:  That would allow me to modify?

MR. TAYLOR: Yes.

THE COURT:  Okay.

MR. TAYLOR: Yes. That's the statutory authority,
and that's in 35(1):

A person interested in land may
apply to the court for an order to modify or cancel.

And sub (a) is an easement.

THE COURT:  Okay.

MR. TAYLOR: So that's the statutory authority that
allows you to go there, and then the other things that I think would come into
your consideration is, of course, what kind of a modification may do justice
between the parties, and I can't think of anything that could really get to a
higher platform than a modification that would leave both parties with the
gravamen of what they really want.

My client wants to
be able to get the occupancy permit and live there.

THE COURT:  Right.

MR. TAYLOR: And Aarts wants to have access to my
client's well and the water supply and be able to access the pipeline in the
event there's a problem, and a modification that allows for that one bypass
appears to give everybody what they want so that the issue just remains, what
would the cost of that be, and I think the court can, if it's so minded, deal
with that in a number of different ways.

THE COURT:  Okay.

MR. TAYLOR: Including the possibility of saying,
the first X many dollars will be -- you know, required for the bypass will be
funded by one or the other of the parties, and in my submission it would be
Aarts. Pay for the first $10,000 and parties have liberty to come back if the
costs become something nobody is anticipating. But I'm telling you that my
understanding today from inquiring about this is that the cost of that bypass
for that specific finite area is anticipated to be less than $10,000.

THE COURT:  Okay. Good.
Thank you.

[31]

Counsel for Aarts, Mr. Payne, and Mr. Taylor made the
following submissions on the prospect of reaching a negotiated settlement:

THE COURT:  I don't want to short circuit. If you want
to go ahead on your long submissions, that's fine because I'm willing to hear
them. But if we can walk away and everybody is happy, that would be a good thing.

MR. PAYNE:
My Lady, if it's a matter of
negotiated settlement at this point, I do not have instructions to enter into
it.

THE COURT:  Okay.

MR. PAYNE:   But just speaking as counsel, I'm
aware that you have that discretion, and I agree that could be a practical
solution. I just submit that the petitioner should bear the costs and there
should be a costs consideration on top of that for these proceedings, given
that they are unnecessary in light of section 13 of the agreement.

MR. TAYLOR: Well,
to be clear, My Lady, I'm not
abandoning my principal position
, because I believe strongly it's an
appropriate case for cancellation.

THE COURT:  Okay. Well, let's go ahead with your
argument.

MR. TAYLOR: I'm not
saying I'm not prepared for the modification, but I'm not prepared to say I'm
giving up on my argument about cancellation at all.

[Emphasis added.]

[32]

This brings me to the reasons of the chambers judge. They are brief.

[33]

After setting out the background and the positions of the parties, the
judge seized on the so-called middle ground mooted in argument:

[17]      There is a solution that both parties agree is
feasible.

[18]      As set out in paragraph 13 of the Easement
Agreement, the owners of Lots 1 and 2 may alter the location of the easement
and the pipe if it interferes with the use or enjoyment of their lots:

If the location of the easement
areas on Lot 3 and Lot 2 at any time interferes with the use or enjoyment or
the planned or desired use or enjoyment by the First Grantor of Lot 3, and the
Second Grantor of Lot 2, the First and Second Grantor shall respectively have
the right, at their sole expense, from time to time, to alter the location of
the easement areas and the Grantee's Pipe on the First Grantors Lot and Second
Grantors Lot so long as the rights and benefits of the Grantee hereunder are
not otherwise affected and so long as the location where the easement areas and
the Grantees Pipe meet the boundary between the First Grantors Lot and the
Second Grantors Lot and the Grantees Lot is not altered without the written
consent of the Grantee, and where such alteration is permitted or authorized by
the Grantee pursuant to this clause, the Grantee will immediately on request
execute all documents and plans necessary for such purpose.

[19]      That clause should dispose of this issue. But it
does not as the parties cannot agree on who should bear the cost of moving the
pipe. NBC takes the position that Aarts should. Aarts says NBC should.

[20]      Not only is it clearly stipulated in the Easement
Agreement that NBC is responsible for the cost of moving the pipe, it is in my
view, just and equitable that they bear the expense.

[21]      Given this mid-ground
remedy that both parties agree is workable, I see no reason to go further. It
is a happy resolution. It allows Aarts to continue their long established
business and the Sidhus to move into and enjoy their home.

[34]

The chambers judge concluded by making these orders:

1)

Pursuant
to paragraph 13 of the Easement Agreement, NBC shall relocate the portion of
the pipe over which they have erected a concrete and brick wall in a way and to
a location agreed upon in advance and in writing by Aarts; and

2)

Pursuant to paragraph 13 of the Easement Agreement, NBC is solely
responsible for the cost of the relocation of the pipe and any associated
expense.

V. Analysis

[35]

I generally observe that, in my view, the parties and the chambers judge
have misunderstood the scope of the s. 35
PLA
jurisdiction in
analyzing and disposing of the essential issues before the court on the
application.

[36]

It is telling that in making the noted orders, the chambers judge did so
expressly Pursuant to paragraph 13 of the Easement Agreement.

[37]

The chambers judge was essentially ordering specific performance of the
obligations on the parties created by clause 13. However, on the face of that
clause, those obligations could only be invoked by the Grantor and Second
Grantor that is, at this time, NBC and/or the Cassidys. In particular, given
the Cassidys passive interest in the litigation, the right to call for the
relocation of the Easement area, pipe and waterworks, could only be invoked by
NBC. NBC clearly did not do so; it did not petition the court for enforcement
of this clause in the Easement, nor did it have any intention, as Mr. Taylors
submission to the judge made clear, to be responsible for the costs of
relocating the works.

[38]

Specific performance, or enforcement generally, of the clauses in an
easement agreement cannot be pursued by a petition under s. 35 of the
PLA
.

[39]

Again, s. 35(2) contemplates the modification or cancellation of an
easement present the alternative conditions in ss. (a) to (e) and if not
premature in the circumstances. Enforcement of the terms of the Easement,
whether they are those contained in clause 13, clause 14 (the requirement to
connect to a municipal water supply), or clause 8 (the prohibition on building on
the area of the Easement), are matters that must be pursued through the
traditional trial process, not the summary petition process under s. 35 of
the
PLA
.

[40]

Section 35 of the
PLA
provides a comprehensive code for the
modification or cancellation of the interests in land identified in subsection
(1). A comprehensive code displaces the common law, such that the authority of
the court to cancel [or modify] an easement is constrained by the specific
grounds set out in s. 35(2):
Lafontaine v. UBC
, 2018 BCCA 307 at para. 51;
Vandenberg v. Olson
, 2010 BCCA 204 at para. 23.

[41]

What is critical, is the fact that the jurisdiction to cancel or modify
the easement is constrained by subsection (2). This point was succinctly
summarized by Justice Punnett in
Langlois v. Tessaro
, 2018 BCSC 1463 [
Langlois
]
(affd with minor variance in 2019 BCCA 95) at para. 27:

For the petitioners to succeed on their application under
s. 35 of the
Property Law Act
, (whether for cancellation or
modification of the easement), they must:

a)         Demonstrate that
the application is not premature;

b)         Demonstrate that
the application fulfills one of the five criteria in subsection 35(2); and

c)         Persuade the court that, in all the
circumstances, the court should exercise its discretion in favour of granting
the application.

[42]

The five criteria in s. 35(2) provide the necessary context for the
cancellation/modification jurisdiction set out in s. 35(1). That
jurisdiction is not at large and, in particular, it is not triggered by
allegations of non-performance of obligations under the instrument.

[43]

This is all to say again that specific performance or enforcement
generally of the clauses in an easement must be pursued by a traditional civil
action as indeed was done in
Langlois
.

[44]

In this regard, it is instructive to look again at the relief claimed in
the petition. NBC sought these orders:

1.         A Declaration that a municipal water supply
is available to the Respondents;

2.         A Declaration that the municipal water supply
is sufficient for the commercial purposes of the Respondent, Aarts Nursery
Ltd.;

3.         An Order that the Respondents connect to the
municipal water supply, if they have not already done so;

4.         An Order that once the Respondents are
connected to the municipal water supply, the parties will immediately release,
discharge and cancel the easement registered in the New Westminster Land Title
Office with Registration Number X2935;

5.         Further, or
alternatively, a Declaration that the easement registered in the New
Westminster Land Title Office with Registration Number X2935 is obsolete;

[45]

In my view, the only claimed relief available under s. 35 of the
PLA
is that sought in para. 5. The declarations sought in paras. 1 and 2
are necessary findings in enforcing the obligations under clause 14, which are
in turn the subject of the enforcement orders sought in paras. 3 and 4. The
enforcement of these obligations may only be sought in a traditional civil
claim. They do not come within the modification/cancellation jurisdiction
vested in the court by s. 35. A judge has the jurisdiction under s. 35 to
cancel an easement if the parties have agreed to the cancellation. She does
not, however, have the jurisdiction to order specific performance of conditions
precedent in order to perfect an agreement so that she may order cancellation.

[46]

It might be said that to the extent the judge invoked clause 13 in the
manner she did, she was modifying the Easement under s. 35(1). But that
is not what the chambers judge said she was doing. What was done was 
Pursuant to paragraph 13. In any event, neither party made
an application to modify the Easement and the judge made none of the findings
of fact necessary before a modification order can be made under s. 35(2)
of the
PLA
. Those findings of fact, again, are set out in s. 35(2)
and are summarized by Justice Punnett in the above quotation from
Langlois
.

[47]

Finally, it is doubtful, even in these
circumstances, that modification is available against the interests of the
servient party (NBC) on the application of the dominant party (Aarts):
Banville
v. White
, 2002 BCCA 239.

[48]

On this appeal, Aarts argues that NBC knew and
agreed that a modification of the Easement was a possibility and that it was
on the table. However, an appellate court is not bound by concessions of law
made in the court below (
Orphan Well Association v. Grant Thornton Ltd.
,
2019 SCC 5 at para. 125) and counsel cannot accord jurisdiction by consent
where it is otherwise lacking.

[49]

Similarly, if the order of the chambers judge were in some way to be
squeezed into the s. 35 modification jurisdiction, NBC would rightly
submit that the judges discretion to assign the costs of the relocation to it
was exercised with a view to its breach of the no construction covenant, and without
regard to the obligation under clause 14 on Aarts to connect to the municipal
water supply and without making the findings of fact to determine if indeed clause
14 had been triggered.

[50]

Finally, in light of Mr. Taylors last submission that I am not
prepared to say I am giving up on my argument about cancellation at all, one
cannot characterize what the judge ordered as giving effect to some sort of
settlement reached during oral argument.

[51]

On this analysis, the disposition of the chambers judge cannot stand. It
was a well-intentioned judicial compromise that exceeded the judges
jurisdiction under s. 35 of the
PLA
and, in any event, is not based
on a consideration all of the equities relevant in the matter; that is to say,
in ordering that NBC bear the costs of relocation, the judge considered NBCs
alleged breach of the agreement but did not put the possibility of Aarts
failure to connect to the municipal water supply into the balance.

[52]

What then of NBCs petition? It too was misguided. In respect of the
relief sought in para. 5 (the only viable relief sought), recall that
there are two branches to NBCs s. 35 case: the Easement is obsolete in
light of the availability of a municipal water supply (s. 35(2)(a)) or,
alternatively, the parties expressly or impliedly consented to the Easements
cancellation (s. 35(2)(c)).

[53]

The obsolescence argument fails at the threshold. The well and pipeline
continue to supply water to Aarts Lot. The Easement clearly is not obsolete.
If
Aarts is in breach of clause 14, that is a matter for civil enforcement of the
contract.

[54]

Whether an easement is obsolete depends on the nature of the easement
itself and the circumstances of the use of the relevant property; it is not to
be decided on a basis of balancing the rights of the parties:
Chivas v.
Mysek
, [1986] B.C.J. No. 2547 (C.A.). As this Court held in
Vandenberg
at para. 33, on the plain language of s. 35(2)(a), an easement cannot
be obsolete in circumstances in which it has been in regular use.

[55]

In order for the court to cancel the Easement on the basis of
obsolescence, evidence would need to be before it that Aarts no longer uses the
private water system covered by the Easement.

[56]

Indeed, before we get to s. 35(2)(a) and the other considerations
set out in sections (2)(b) to (e), NBC must have demonstrated that the
application is not premature in the circumstances. It fails here as well. In
Newco
Invt. Corp. v. B.C. Transit
(1987), 14 B.C.L.R. (2d) 212 (at 223), this Court
provided the following guidance on the issue of prematurity:

. . . Thus
where it appears that considerations, material to a determination whether
grounds exist under paras. (a) to (e), have not yet materialized or where,
for other reasons, it would be better to defer to a later date consideration of
whether the covenant should be struck out, the application should be dismissed.

[57]

Here, the considerations material to whether grounds exist under
s. 35(2)(a) and (c) had not yet materialized. These considerations
included the formal notice from the Municipality of Langley of the availability
of municipal water, the passage of 120 days from receiving the notice, and the
connection by Aarts to the municipal water supply. Accordingly, the application
by NBC was premature in the circumstances.

[58]

Then NBC pursues the agreed to cancel submission. That finds its
genesis in clause 14 of the Easement. Again, that provides:

If Municipal water becomes available
to [NBCs Lot] and [Cassidys Lot] and [Aarts Lot] and is sufficient for the
commercial purposes of [Aarts], then all of the parties covenant that within
120 days of receiving notice from the Municipality of Langley of the
availability of the Municipal water, that they will connect to the Municipal
water and all parties will immediately after connection to the Municipal water
supply release, discharge and cancel the easement hereby granted.

[59]

However, NBCs submission ignores the clear conditions precedent that
must be satisfied before the parties agree to release, discharge and cancel
the easement hereby granted.

[60]

The conditions are: (i) the parties receiving 
notice from the Municipality
of Langley
of the availability of Municipal water sufficient for the
commercial purposes of [Aarts] (emphasis mine) and (ii) the connection of the
Lots to the water supply within 120 days of receipt of that notice.

[61]

There is no evidence in the record that
Langley
has given such
notice. Indeed, if one accepts Aarts evidence through its expert, there is
some doubt Langley would approve of the needed water connections, and the
chambers judge certainly did not make any finding in this regard.

[62]

When asked about proof of service of the required notice by Langley,
counsel for NBC submitted that it was effectively given to all the world by virtue
of the fact that municipal water regulated by Langleys bylaw was available in
the area.

[63]

In my view, that is not the notice contemplated by the Easement. The
Easement contemplates a formal notice stating the availability of municipal
water, which in turn would trigger a 120 day period within which the parties
had to connect to the water system. That has not happenedat least there is no
evidence that it has. It is then said by NBC that this aspect of the matter
hinged on an application by Aarts to Langley; that this was beyond the control
of NBC. There is nothing in the record indicating that Langley would not
cooperate with NBC by giving the required notice or, further, that NBC could
not compel Langleys cooperation through an appropriate proceeding. NBC wants
to rely on a very significant obligation in the Easement that leads to its very
cancellation. It is incumbent on NBC to ensure that the conditions precedent to
that cancellation have been performed.

[64]

Finally, of course, Aarts has
not
connected to the municipal
water supply system. Neither condition has been fulfilled. The agreed to
cancel argument under s. 35 cannot be sustained.

[65]

The petition must be dismissed.

[66]

If Aarts and NBC wish to enforce the obligations under the Easement that
benefit them, they must pursue a civil claim in the Supreme Court. However, as
I indicated above, a reasoned compromise must be considered. NBC built on the
Easement in apparent contravention of clause 8. Aarts arguably has failed to
connect to an available municipal water supply thus obviating the need for a
private supply. Clause 13 of the Easement does provide a scheme for compromise with
the parties modifying that scheme by fairly sharing the costs of relocation of
the private works. NBC could do so because whether Aarts is in breach of clause
14 is problematic. Without deciding the question, the phrase sufficient for
the commercial purposes of [Aarts] must in my view, and contrary to NBCs
submission, involve some consideration of the economics of the matter from the
perspective of Aarts business operation, perhaps on the basis of a
subjective/objective assessment of the impact of those costs on Aarts. And
Aarts of course would consider a compromise for the very reason that its
position under clause 14 is not at all clear.

The Special Costs Award

[67]

NBC also appeals the award of special costs against it. I note that the
decision to award special costs is discretionary and that discretion should not
be interfered with on appeal unless the judge made an error in principle or the
costs award is plainly wrong:
Hamilton v. Open Window Bakery Ltd.
, 2004
SCC 9 at para. 27.

[68]

Special costs are typically awarded when there has been reprehensible
conduct on the part of one of the parties:
Young v. Young
, [1993] 4
S.C.R. 3 at 134. Reprehensible conduct means scandalous or outrageous conduct
but also encompasses milder forms of misconduct deserving of reproof or rebuke:
Garcia v. Crestbrook Forest Industries Ltd.
(1994), 9 B.C.L.R. (3d) 242
(C.A.) at para. 17.

[69]

This Court established a bright line rule regarding special costs and
pre-litigation conduct in
Smithies Holdings Inc. v. RCV Holdings Ltd.
,
2017 BCCA 177 at para. 134:

Special costs should be reserved
to punish and deter reprehensible conduct in the course of litigation.
Pre-litigation conduct should not be considered in determining whether such an
award is appropriate. There are other suitable mechanisms to censure
pre-litigation conduct.

The
reasons of the chambers judge with regard to the special costs award do appear
to be focused on NBCs pre-litigation conduct (at para. 23):

NBC purchased the property fully
aware of the Easement Agreement. But it chose to build the wall right on top of
the easement, did not halt building when requested and chose instead to
complete the wall, then apply to court to cancel the easement. Not only is this
behaviour contrary to the Easement Agreement, it is relevant to the issue of
costs. I am satisfied that NBC created a problem that did not have to be
created, then made resolution of it far more difficult than it should have been.
As such an award of special costs against NBC is warranted.

[70]

The judge made no reference to the ongoing effect of the wall on the
terms of the Easement. Instead, she focused on the choices that NBC made prior
to the commencement of the litigation, its resistance to out-of-court
resolution, and its choice to make what she viewed as an unnecessary petition.
The problem that NBC created is properly the subject of a claim for relief in
a civil action, not a special costs award following a petition.

[71]

A failure to resolve an issue out of court also does not attract special
costs. Litigation is an inherently adversarial process and parties are
generally entitled to have their claims or petitions heard on their merits.

[72]

In my opinion, the judge erred in principle by awarding special costs
against NBC.

VI. Disposition

[73]

I would allow the appeal from the orders of the chambers judge but
dismiss the petition with liberty to proceed as I have indicated. I would set
aside the award of special costs.

[74]

In the odd circumstances of this litigation, I think it is appropriate
that the respondents have their costs of the chambers application and this
appeal.

The
Honourable Chief Justice Bauman

I agree:

The Honourable Madam
Justice Dickson

I agree:

The Honourable Mr. Justice Hunter


