



COURT OF APPEAL FOR ONTARIO

CITATION: Metrolinx v.
    Enbridge Gas Distribution Inc., 2015 ONCA 429

DATE: 20150615

DOCKET: C59191

MacPherson, Epstein and Roberts JJ.A.

BETWEEN

Metrolinx

Applicant (Respondent)

and

Enbridge Gas Distribution Inc.

Respondent (Appellant)

Cynthia R.C. Sefton and Meghan Cowan, for the appellant

Wendy J. Earle and Matthew Furrow, for the respondent

Heard: June 9, 2015

On appeal from the judgment of Justice Edward M. Morgan
    of the Superior Court of Justice, dated July 17, 2014.

Epstein J.A.:

OVERVIEW

[1]

The respondent, Metrolinx,
[1]
purchased from the Canadian National Railway Company (CN) a corridor on which
    Metrolinx operates a railway. The appellant, Enbridge Gas Distribution Inc.,
    owns six gas pipelines that run along municipal road allowances and cross under
    the Metrolinx railway.  Metrolinx asked that the six pipelines be relocated.  A
    dispute arose over which party, Metrolinx or Enbridge, should bear the relocation
    costs.

[2]

The application judge examined the relevant agreements and came to two
    main conclusions. First, the agreements between CN and Enbridges predecessor
    provided that Enbridge was responsible for the costs of relocating the six
    pipelines.  Second, in the sale from CN to Metrolinx, Metrolinx assumed all of
    CNs rights and obligations: these rights and obligations included the ability
    of Metrolinx to require Enbridge to pay the relocation costs in issue.

[3]

Enbridge appeals.

[4]

First, Enbridge argues that CN only had a contractual right to require
    that Enbridge pay to relocate pipelines on CN owned lands, not on municipal
    road allowances.  Second, even if CN had such a right, CN did not convey these
    rights to Metrolinx. Enbridge submits that the application judge erred in law
    in holding otherwise.

[5]

For the reasons that follow, I see no reason to interfere with the
    application judges analysis or conclusion.

ANALYSIS

[6]

The resolution of the divide between the parties rests on the
    interpretation of three complex agreements relating to the arrangements between
    CN, subsequently Metrolinx, and Enbridge.

(a)

The Master Utility Agreement  January 1, 1997

[7]

On January 1, 1997, CN and Enbridges predecessor entered into an
    agreement referred to as the Master Utility Agreement (the MUA).  The purpose
    of the MUA was to consolidate previous agreements relating to areas in which
    gas pipelines cross beneath CNs railways.

[8]

The first issue on appeal is whether, under the terms of the MUA, CN was
    entitled to require Enbridge to pay the costs associated with relocating the
    six pipelines.  This depends on the definition of Crossing in the MUA.
    Specifically, do the locations at which the six pipelines at issue cross
    underneath CNs railways, which are located on municipal road allowances,
    constitute Crossings under the terms of the MUA?

[9]

The MUA defines Crossing or Crossings in art. 1.1 as the pipeline
    or pipelines of [Enbridge] which cross, more or less, perpendicularly on, over
    or under the Right-of-Way of [CN].

[10]

Right-of-Way
    is in turn defined in art. 1.4 as the lands of [CN] now or formerly used as
    corridors for the movement of trains.

[11]

Enbridge
    submits that the definition of Crossing excludes the six crossings at issue
    in this litigation.  Enbridge points out that the definition of Crossing
    refers to pipelines that cross under CNs Right-of-Way, which in turn is
    defined as lands of CN.  Since the pipelines run under municipal road
    allowances, not lands of CN, the pipelines are not Crossings within the terms
    of the MUA.

[12]

I
    disagree.

[13]

Under
    the APPLICATION section of the MUA, art. 4.1 provides that, This Agreement
    shall apply to all Crossings already established as referred to in Schedule
    A. Schedule A contains a list of all railway crossings to which the MUA
    applies.  Enbridge has admitted that the six crossings in issue are included in
    Schedule A.

[14]

In
    my view, art. 4.1 indicates that the six crossings at issue in this appeal
    qualify as Crossings for the purposes of the MUA. They are Crossings already
    established under art. 4.1. Therefore, these Crossings are governed by the
    MUA.

[15]

As
    the application judge noted, art. 6.1 of the MUA provides that the removal and
    alteration of the Crossings is governed by a document called the Railway
    Guidelines, which is incorporated by reference. The Railway Guidelines are
    defined in art. 1.9 of the MUA as the Guide to Pipe and Wire Process which has
    been provided to [Enbridge]. Significantly, the relevant portion of this guide
    provides that Enbridge shall pay the cost of modifying any Crossings. Moreover,
    s. 4 of Appendix D of the guide further provides that Enbridge shall pay the
    cost of modifying any Crossings not simply for lands owned by the Railway but
    for the purposes of alterations in Railway Property, facilities or operations
    of the Railway. Railway Property is defined in the first paragraph of the
    MUAs preamble as the right-of-way, tracks or other property owned or
    controlled by the Railway.

[16]

The
    interpretation Enbridge urges is not supported by the wording of the MUA. Moreover,
    it would represent a change in the historical financial arrangements between
    the parties of such significance that the MUA would, one would think, contain
    express wording to this effect.

[17]

I
    agree with the application judge that, under the MUA, the six pipelines in
    issue are Crossings.  It follows that CN had the right to require Enbridge to
    pay the cost of relocating the pipelines.

(b)

The Agreement of Purchase and Sale  March 31, 2009

[18]

On
    March 31, 2009, CN and Metrolinx entered into an agreement of purchase and sale
    (the APS) whereby CN sold to Metrolinx the railway corridor where the six pipelines
    in issue are located.

[19]

The
    second issue on appeal is whether, as part of this transaction, CN also
    conveyed to Metrolinx the right to require Enbridge to pay to relocate the six
    pipelines.

[20]

To
    resolve this issue, the question that must be answered is whether CNs right to
    demand that Enbridge pay for the pipeline relocation in issue is a Crossing
    Agreement within the meaning of the APS.

[21]

Crossing
    Agreements are defined in art. 1.01 of the APS as:

the agreements and orders provided to [Metrolinx] by [CN]
permitting access in, over, along, under or with respect to
roads, highways and other public access routes connecting the parcels of land
    comprising the Land and attached hereto as Schedule H. [Emphasis added.]

Article 5.01(12) of the APS reads:

[CN]: (a) to the best of its knowledge, has the lawful right
    and authority to cross over, under and through all public highways and roads
    connecting all parcels of land (which parcels collectively comprise the Land)
    and to operate its trains[,] have railway tracks, ties and related rail
    equipment on such public roads and highways, (b)
has the
    lawful right and authority to assign and transfer the private crossing
    agreements forming part of the Crossing Agreements to [Enbridge] without notice
    to or approval of any third party or any Authority
[Emphasis added.]

[22]

While
    the definition of Crossing Agreements in art. 1.01 of the APS is not entirely
    clear, the term acquires greater clarity from Schedule H of the APS, which is
    incorporated into the APS by art. 1.04.

[23]

The
    use of Crossing Agreement in other parts of the APS, particularly Schedule H,
    makes it apparent that Crossing Agreement includes CNs agreement to require
    Enbridge to pay the costs of relocating the six pipelines.

[24]

In
    art. 1 of Schedule H, CN gives Metrolinx its right, title and interest in the
    Crossing Agreements and the full benefit of all covenants, agreements,
    obligations, terms, conditions, representations and warranties of any nature or
    kind whatsoever arising from or out of or in any way relating to the Crossing
    Agreements.  In my view, CNs right to require Enbridge to pay to relocate the
    pipelines in issue constitutes a covenant or obligation relating to the
    Crossing Agreements, the full benefit of which has been assigned to
    Metrolinx.

[25]

Accordingly,
    based on the terms of the APS, including Schedule H, CN gave Metrolinx the
    right to require Enbridge to remove the pipelines at Enbridges expense. This
    conclusion is confirmed with reference to a third agreement, to which I now
    turn.

(c)

The General Assignment and Assumption Agreement  March 30, 2011

[26]

On
    March 30, 2011, the parties entered into a General Assignment and Assumption
    Agreement (the GAAA), a document that appears to be a follow-up agreement to
    the APS. Although the GAAA was signed in 2011, it had an effective date of
    March 31, 2009. The GAAA reinforces the conclusion that Metrolinx is entitled
    to require Enbridge to pay the costs of relocating the pipelines in issue.  In
    the words of the application judge, the GAAA [made] it clear, in case anything
    was left out of the [APS] and the Schedule H Agreement, that everything CN had
    relating to the stretch of track at issue has been assigned to Metrolinx.

[27]

Article
    1 of the GAAA provides:

[CN] does hereby assign, set over and transfer to [Metrolinx]
    all of the right, title and interest of [CN] in and to the Assigned Agreements
    and Rights together with the full benefit of all covenants, agreements,
    obligations, terms, conditions, representations and warranties of any nature or
    kind whatsoever arising from or out of or in any way relating to the Assigned
    Agreements and Rights to the extent that same affect the Rail Lands, as of the
    31st day of March, 2009...

[28]

Assigned
    Agreements and Rights is defined in the recitals of the GAAA as various
    leases and license agreements,
crossing agreements
and development agreements
in relation to Rail Lands

    (emphasis added). The term crossing agreements is not further defined.

[29]

Since
    crossing agreements are not defined in the GAAA, it was open to the
    application judge to interpret them as including the agreements between CN and
    Enbridge relating to Enbridges pipelines crossing under CNs railways.

[30]

Accordingly,
    CN and Enbridges agreements regarding who bears the cost of moving the
    pipelines constitute Assigned Agreements and Rights under the GAAA. Article 1
    of the GAAA says that CN gave Metrolinx the full benefit of all covenants,
    agreements, obligations of any nature or kind whatsoever arising from or out
    of or in any way relating to the Assigned Agreements and Rights.

[31]

Thus,
    the GAAA confirms the conclusion that CN gave Metrolinx the right to require
    Enbridge to remove the pipelines, at Enbridges expense.

[32]

Finally,
    I agree with the application judge that the fact that the contracts at issue
    arose in a federally regulated context does not alter the interpretation of the
    agreements in issue. As the application judge wrote, It may well be the case
    that the Crossing Agreements were an outgrowth of federal regulations that
    prevailed at the time of their signing. Nevertheless, they are valid contracts,
    and remain so whether or not the relevant federal regulations continue to govern
    either of the parties.

CONCLUSION

[33]

The
    application judges decision was based on the interpretation of a number of
    contracts between the parties and their predecessors.  In
Sattva Capital
    Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, the Supreme
    Court clarified that contractual interpretation is a question of mixed fact and
    law as it requires an examination of the agreement in issue as well as the
    surrounding circumstances known to the parties at the time the contract was
    entered into.

[34]

In
    limited circumstances, it may be possible to extract a discrete question of law
    upon which the interpretation depends.  However, such circumstances will be
    rare.

[35]

This
    is not one of them. Here, the application judge examined the wording of the
    agreements in the light of the surrounding circumstances, including the
    objective intentions of the parties and the commercial arrangements between
    them. This was a question of mixed fact and law.

[36]

It
    follows that the application judges decision will only be overturned where
    there has been a palpable and overriding error.  And, in my view, the
    application judge committed no error in interpreting the various agreements as
    he did and in reaching the conclusions he reached.

[37]

The
    wording of the relevant agreements supports the application judges
    interpretation.  Furthermore, the application judges reasoning that the
    intention of CN and Metrolinx when they entered into the APS and especially the
    GAAA was that Metrolinx would fully step into the shoes of CN and assume all
    of CNs rights and obligations  and that CN would therefore have no further
    involvement with the railway property  makes commercial sense.

DISPOSITION

[38]

For
    these reasons, the appeal is dismissed.

[39]

In
    accordance with the agreement of counsel, Metrolinx is entitled to its costs of
    the appeal fixed at $12,000, inclusive of disbursements and HST.

Released: June 15, 2015 (JCM)

Gloria
    Epstein J.A.

I
    agree J.C. MacPherson J.A.

I
    agree L.B. Roberts J.A.





[1]
The Greater Toronto Transit Authority was the predecessor to Metrolinx. For the
    purposes of these reasons, both Metrolinx and the Greater Toronto Transit
    Authority will be referred to as Metrolinx.


