|
Real Property - Rule Against Perpetuities (2). Essex (County) v. Enbridge Gas Inc.
In Essex (County) v. Enbridge Gas Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from a successful appeal to the Divisional Court from an OEB order that "granted an application initiated by Enbridge pursuant to s. 10(1) of the Municipal Franchises Act, R.S.O. 1990, c. M.55, and ordered “the renewal of the franchise agreement based on the terms and conditions of the Model Agreement” which it had developed for the distribution, storage, and transmission of gas in Ontario".
The court considered the 'rule against perpetuities', here in the context of whether the case involved an error of law or of mixed fact and law:A. Did the Divisional Court err by Permitting Essex to appeal a question of mixed fact and law?
[15] The parties agree that pursuant to s. 33 of the Ontario Energy Board Act, the right of appeal to the Divisional Court is limited to questions of law or jurisdiction, and that s. 33 does not permit appeals on questions of mixed fact and law. Questions of law “are questions about what the correct legal test is”, whereas questions of mixed fact and law involve “applying a legal standard to a set of facts”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 49.
[16] However, virtually all legal decisions involve the application of a legal standard to a set of facts. It is therefore too simplistic, and incorrect, to conclude that because an impugned decision involved the application of legal principles to factual findings that decision is impervious to appeal. If a tribunal fails to consider a required element of a legal test when purporting to apply the law to its factual findings it will be committing an extricable error of law: see ClubLink, at para. 30.
[17] In my view, this is the kind of error of law the Divisional Court correctly identified in the present case. As the Divisional Court found, the OEB erred in identifying the nature of the interests that are subject to the rule against perpetuities. As I will explain, by focusing on the duration of the right rather than the time of its vesting, the OEB misunderstood one of the elements of the legal test for a breach of the rule against perpetuities and therefore failed to consider the actual element of the test that applied, resulting in an extricable error of law.
[18] Roberts J.A. addressed the material element of the rule against perpetuities in ClubLink. She began by noting, at para. 2, that “the rule [against perpetuities] arises out of the public policy against the fettering of real property with future interests dependent upon unduly remote contingencies.” However, she made clear that the rule against perpetuities does not address all future contingencies that can affect the enjoyment of property. As she explained in ClubLink, at para. 61, “the public policy purpose of the rule against perpetuities [is] to prevent contingent property interests from vesting too remotely.” Therefore, “[t]he rule does not restrict the duration of property interests, but the length of time that may elapse between the creation of a contingent interest and the vesting of that interest”: Clarke, at para. 15. Put otherwise, so long as an interest in land vests within the perpetuity period, in this case 21 years, the rule against perpetuities will not be infringed even if the duration of enjoyment of that right is limited by the terms of the grant. A property interest will be vested when the taker is ascertained, the interest they are to take is determined, and their right to the property interest is “already acquired”, there being no contingencies or conditions precedent left to satisfy before that interest takes effect: see O’Dell v. Gregory (1895), 1895 CanLII 78 (SCC), 24 S.C.R. 661, at p. 663; Re Campeau Family Trust (1984), 1984 CanLII 1977 (ON CA), 44 O.R. (2d) 549 (H.C.), at p. 553, aff’d 1984 CanLII 3078 (ON CA), 50 O.R. (2d) 296 (C.A.); Re Ogilvy (1966), 1966 CanLII 506 (ON SC), 58 D.L.R. (2d) 385 (Ont. H.C.), at pp. 393-394. McLachlin C.J. put the same concept differently in Tsilhqot’in Nation v. British Columbia, 2014 SCC 44, [2014] 2 S.C.R. 257, at para. 111, explaining, “[i]n property law, an interest is vested when no condition or limitation stands in the way of enjoyment” of the interest. The vesting of an interest therefore has nothing to do with limitations on the duration of the enjoyment of that interest once it has been acquired.
[19] However, as I have stated, as the Divisional Court found, the OEB proceeded on the misunderstanding that a term affecting the duration of enjoyment triggered the rule against perpetuities. When the OEB explained its conclusion as to why Enbridge’s franchise rights violated the rule against perpetuities, it directed its explanation solely at clause 2 of the 1957 Agreement, finding that “[t]he franchise right is a contingent interest, contingent on the former Union Gas Limited’s (now Enbridge Gas Inc.’s) continued transportation of gas”. As the Divisional Court pointed out, although clause 2 describes a limitation on the continuation of the franchise right beyond the initial ten-year period, “[t]he rule against perpetuities does not restrict the duration of vested property rights”. Since the OEB relied upon a provision addressing the duration of Enbridge’s right, rather than the vesting of that right, “the OEB made an extricable legal error (reviewable on a correctness standard) relating to the nature of the interest that is subject to the rule against perpetuities.”
[20] In coming to this conclusion, the Divisional Court was not simply describing and responding to a mere error of mixed fact and law. It correctly decided that the OEB misapprehended the requirements of the legal rule it was meant to apply. In my view, the Divisional Court did not err by permitting Essex to appeal on this basis.
[21] Enbridge argued before us that even if the explanation the OEB provided was wrong, the Divisional Court nonetheless erred in finding that the rule against perpetuities did not apply in this case, and that the franchise rights were vested. In support of its position, Enbridge submits that clause 1 of the 1957 Agreement provides broad rights, including the right to “remove” and “replace” its existing lines, but that pursuant to clause 3, the right to do these things is contingent on Essex approving the locations. It also submits that these rights are contingent on leave to remove or replace the pipeline being obtained from the OEB pursuant to s. 90(1) of the Ontario Energy Board Act, which the Board can grant pursuant to s. 96(1) only if it is of the opinion that “the proposed work is in the public interest”. Enbridge argues that the Divisional Court erred by failing to address these contingencies before deciding that the rule against perpetuities was not violated, and that it erred in so deciding in the face of these contingencies.
[22] In my view, the Divisional Court did not fail to address these contingencies. It answered these arguments in discussing the Dawn-Euphemia decision. It noted: “The court [in Dawn-Euphemia] found that the rights conferred by the franchise agreement constituted a future contingent interest in land, noting that the gas utility’s rights to enter the land and build transmission lines were contingent on future needs and not automatic”. It then disagreed with that conclusion, finding that the court in Dawn-Euphemia, like the OEB, failed to appreciate the nature of the interests that are subject to the rule against perpetuities.
[23] I also reject Enbridge’s position that the need for approval before removing and replacing the pipeline renders its franchise rights contingent. I agree with the Divisional Court’s conclusion that Enbridge’s “franchise right vested with the use of the County Roads for the supply of natural gas actually occurring under the 1957 agreement”. Once the agreement was entered, there were no conditions that had to be satisfied before Enbridge’s franchise rights arose. That agreement conferred immediately on Enbridge, without condition precedent, “[f]ull right … to keep, use, operate, repair, maintain, remove, abandon, replace, reconstruct, alter and extend its existing lines, pipes and works in the highways under the jurisdiction of the Council of the Municipality”. Essex’s authority under the agreement to designate the locations where the pipes “shall be laid across the said highways” does nothing to detract from this, as it is not a condition on any of those rights arising. It is no more than a provision that imposes limits on the way Enbridge may enjoy the franchise rights it received once the agreement was completed.
[24] The statutory requirement that Enbridge obtain approval from the OEB before constructing a hydrocarbon line in the circumstances designated by s. 90(1) of the Ontario Energy Board Act is not a condition to the franchise rights arising, either. It too is a limitation on how Enbridge may exercise its franchise rights, not unlike any other regulatory restriction on the enjoyment of existing property rights, such as zoning bylaws that may prohibit planned construction. I see no error in the Divisional Court’s decision.
[25] I am not persuaded by the OEB that the Divisional Court erred by declaring that the rule against perpetuities does not apply, instead of remitting the matter to the OEB for this issue of mixed fact and law to be resolved. The application of the rule against perpetuities was raised in the appeal proceedings and required no additional factual findings to resolve. All that was left to be done was for the Divisional Court to determine the proper legal characterization of the terms in the 1957 Agreement that Enbridge was relying upon.
|
