Between:

 Garry Douglas Robb  (Respondent- plaintiff)

and

Christopher Michael Walker  (Appellant- defendant)

 

 

Before:

The Honourable Mr. Justice Chiasson The Honourable Mr. Justice Tysoe The Honourable Mr. Justice Willcock

On appeal from:  An order of the Supreme Court of British Columbia,
dated March 12, 2014 (Robb v. Walker, 2014 BCSC 408,
Duncan Docket S14821).

Counsel for the Appellant:	J.A. Hall
Counsel for the Respondent:	P.C.M. Freeman, Q.C. and K.O. Hamilton
Place and Date of Hearing:	Vancouver, British Columbia January 16, 2015
Place and Date of Judgment:	Vancouver, British Columbia March 18, 2015

 

Written Reasons by:

The Honourable Mr. Justice Willcock

Concurred in by:

The Honourable Mr. Justice Tysoe

Dissenting Reasons by:

The Honourable Mr. Justice Chiasson  (page 14, para. 44)

 

 

Summary:

The appellant sought to construct a sewer line across land subject to an easement. The grant was executed in 1978 by predecessors in title. The grant affords the owner of the dominant tenement a free and uninterrupted right to use, enter, pass and repass over and upon the land. The respondent, owner of the servient tenement sought a declaration that the easement does not permit the construction of a sewer line and an injunction to restrain its construction. The judge determined that the registered easement did not include the right to lay a sewer line through the easement. The appellant says the judge erred in his interpretation of the grant and failed to take into account historic and continuing use of the easement.

Held: appeal dismissed (Willcock J.A., Tysoe J.A. concurring.) It was open to the judge to conclude the easement granted a right of access only and did not permit construction of a sewer. The judge made no error of law and was cognizant of the evidence of the intentions of the grantor and the surrounding circumstances. (Chiasson J.A. dissenting.) In Sattva Capital Corp. v. Creston Moly Corp., the Supreme Court of Canada adopted the approach to contract construction which began in this Province with Hayes Forest Services Limited v. Weyerhaeuser Company Limited as explained in 269893 Alberta Ltd. v. Otter Bay Developments Ltd. Hayes and Sattva made it clear that where an appeal is limited to questions of law, it is an error not to accept the findings of fact of an arbitrator or to consider them as errors of law. It is clear that there is no such constraint on an appellate court’s review of a trial court’s interpretation of a contract provision. As they always have been, findings of fact are reviewable on the standard of palpable and overriding error; findings of law are reviewed on the standard of correctness. Sattva did not change this long-standing law. It does not circumscribe appellate review of contractual interpretations. Those who chose arbitration are limited to appellate review on questions of law. Those who do not, and have recourse to the court, are entitled to the full panoply of appellate review. In the present case, the judge erred in his application of the legal principles of contract interpretation, by not considering the implications of the words “use”, “enter” and “pass and repass”. He also erred by not considering these words in light of the surrounding circumstances at the time the easement was executed.

Reasons for Judgment of the Honourable Mr. Justice Willcock:

Introduction

[1]             The appellant, Christopher Walker, is the owner of waterfront property on Cowichan Bay on Vancouver Island, which is the site of a marina and a proposed development. The property is served by an easement that has provided road access and a utility corridor to the property since the 1960s, when the lot was subdivided from a larger parcel of land. From the time of its creation by subdivision, the nature and extent of the access to the waterfront lot has been a contentious issue dividing the owners of the dominant and servient tenements.

[2]             Mr. Walker, the present owner of the dominant tenement, the waterfront lot on which the marina is situated, seeks to expand upon the use that is being made of the property. Before he can do so, he must make adequate provision for the sewage that may be generated by such development. He would prefer to do so by installing a sewer line along the length of the easement so as to connect the sources of sewage on his property to the Cowichan Valley Regional District’s Lambourn Sewer System sewage treatment plant, approximately 400 metres southeast of the waterfront lot.

[3]             The respondent, Garry Robb, the present owner of the servient tenement, says the easement may not be used for that purpose. In proceedings commenced by Notice of Civil Claim in April 2013, Mr. Robb sought a declaration that the easement does not permit Mr. Walker to place a sewer line across the easement and an injunction to restrain him from installing the line.

[4]             The matter was heard before Mr. Justice Crawford in September 2013, and on March 12, 2014, for reasons indexed at 2014 BCSC 408, he granted the declaration sought by Mr. Robb.

[5]             Mr. Walker seeks to have that declaration set aside and seeks a declaration that the easement agreement permits him to lay sewer lines under the road that is the subject of the easement.

History

[6]             This is not the first occasion upon which access to this waterfront property has been before the courts. The history of the subdivision of property in question and the dispute giving rise to the easement is canvassed in colorful detail in the judgment of Mr. Justice Gould in McDonell v. Lambourn Holdings Ltd. (1977), 4 B.C.L.R. 58. The parties to that litigation were predecessors in title to the parties to this appeal. The plaintiff was the owner of the waterfront lot; the defendants were the owners of the surrounding property. Gould J. found the owner of the waterfront lot had purchased it on the strength of a representation made by the owners of the surrounding property that access would be by dedicated public road maintained by the British Columbia Department of Highways. He found the parties were sincere in the belief a road would be dedicated when the property was subdivided. As it turned out, probably because of the steep, tight turn in the road, the Department of Highways did not agree to the access road being so designated. The owner of the waterfront lot thereupon accepted that access to his lot would be assured by an easement instead of a public road.

[7]             The subdivision plan was approved and deposited on February 7, 1966. Due to inadvertence, the plan was deposited without the simultaneous deposit of an easement agreement. In subsequent years no written agreement was executed. Disputes arose in the 1970s with respect to the nature and extent of the access permitted.

[8]             After reviewing this history, Gould J. found, at 62:

            There 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, with Ex. 2, 26th March 1966. 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.

[9]             The Court noted that the real dispute concerned the terms, rather than the existence of the easement, in particular, whether the business of the marina had overloaded the road. The Court found the road had not been used inappropriately and held, at 64:

            As McDonell was to have a public road, or its equivalent, so far as the access road easement could be, what he is entitled to is unrestricted use of the access road.

[10]         Noting that there had been some negotiations and a limited agreement between the parties, Gould J. held, at 65:

            In this case the following was agreed between McDonell and Lambourn: McDonell for his marina should have unrestricted use of the access road shown in Ex. 1, which should be maintained by Lambourn. That is all the parties agreed to, and an agreement to that effect is all that this court can properly order to be prepared and duly executed. The court cannot make an agreement for the parties: it can only order the preparation and execution of the agreement the parties have already made between themselves. An agreement incorporating no significant terms other than those will be, for reasons obvious, highly unsatisfactory to both parties. Thus, I follow the lead of Mignault J. in [J. D. Creaghan v. Davidson, [1929] 3 D.L.R. 146 (Can.)], and suggest the parties draw a consent order in sensible and adequate terms. With their record over the years, that may be beyond their apparently painfully limited abilities to act intelligently. If that be so, the court may attempt such an order.

[11]         With that judicial encouragement, the parties, apparently assisted by counsel, drafted and executed an easement in registerable form on March 22, 1978. The recitals to the agreement provided the agreement had been entered into because:

a)  the grantor was the registered owner of the servient property;

b)  the grantee was the registered owner of the dominant tenement; and

c)  the grantee “has applied to the Grantor to grant an easement for access over [the easement property]” (emphasis added).

[12]         The grant of easement was worded as follows:

            NOW THEREFORE THIS INDENTURE WITNESSETH that in consideration of the sum of ONE DOLLAR ($1.00) and other good and valuable consideration now paid by the Grantee to the Grantor (the receipt of which is hereby acknowledged) the Grantor does hereby grant unto the Grantee, his heirs, assigns and successors, the owner or owners for the time being of the dominant tenement, his agents and servants, invitees, or any other member of the public however described, a free and uninterrupted easement in common with the Grantor or persons, animals and vehicles of any kind whatsoever including trailers or other objects attached to a vehicle to use, enter, pass and repass over and uponthose portions of:

Parcel “B” (DD 21934F) and Parcel “P” (DD 718411) of Sections Four (4) and Five (5) in Range Six (6) COWICHAN DISTRICT, EXCEPT those parts of said Parcel “B” included within the boundaries of Plan 16068, 16649, 18556, 18564, 18937 and 21218 and EXCEPT that part of said Parcel “P” included within the boundaries of Plan 18556;

as outlined in red and marked on a copy of Subdivision Plan #18556 registered in the Victoria Land Registry Office attached hereto as Schedule “A”.

[Emphasis added.]

[13]         When the owner of the dominant tenement acquired an adjacent lot, a new dispute arose with respect to whether the easement could be used to access both lots. When that dispute could not be resolved by other means, Mr. Walker commenced proceedings by a petition served upon Mr. Robb, then the owner of the servient tenement, seeking a declaration that the easement:

… authorizes the owner … of the dominant tenement … to use, enter, pass, and re?pass over and upon the Easement area for any purpose in any way related to access to or from the dominant tenement, the foreshore immediately adjacent to such lands and the aquatic leases appurtenant to the said lands, or any premises or business located on such lands, either in whole or in part, and together with any lands consolidated with title to the dominant tenement ...

[14]         That litigation was resolved by a Consent Order entered into on December 22, 2011 granting a declaration in precisely the terms sought by the petitioner, Mr. Walker. During the course of negotiations leading to the Consent Order, counsel for the petitioner asked the respondent to consider amending the easement to expressly allow for the installation of subterranean sewer lines. That proposal was rejected.

[15]         In January 2013, Mr. Robb received notice that Mr. Walker had instructed contractors to connect his property to the Lambourn Sewer System by installing sewer lines under the surface of the easement. That notice resulted in the litigation from which this appeal arises.

Judgment Appealed From

[16]         The judge began his analysis of the competing arguments by noting that correspondence from the owner of the servient tenement to the Department of Highways in 1965 reflected the location of water and power lines in relation to the roadway that he intended to be a public road. He noted that, while the easement is for a right of way, it has always served as a conduit for services to the marina and the adjacent lots of the original subdivision.

[17]         He observed that Gould J. found that the original owners of both the dominant and servient tenements intended the dominant tenement to have the benefit of a public road, or its equivalent.

[18]         He noted, further, on the jurisprudence, including Selby v. Crystal Palace Gas Company, [1862] 45 E.R. 1178, which concerned the right to install an underground gas line, an easement that affords the owner of the dominant tenement the right to use the easement as public land includes the right to lay lines under the easement.

[19]         He noted the evidence that the road had, in fact, been used as a utility corridor long before Mr. Robb came to the servient tenement:

[104]    … [C]lear evidence demonstrates that the right of way has been used for more than access before Mr. Robb purchased Lot 5 from Mr. Williams in 2000.

[20]         However, he found the broad use contemplated by the grantor of the easement and reflected in its use over the years was not reflected in the executed document:

[117]    The original grant was not of a public road but of a right of way or access in all its myriad forms. …

[21]         The claim was dismissed, for reasons set out in the following passages from the judgment:

[118]    Mr. Walker submitted that I rule the right of access include (in the context of all the easement’s other uses) a right to lay sewer pipe within the easement. He relies on the additional wording found in the consent order “for all purposes”.

[119]    However, “purposes” in a right of way context refers to using the dominant tenement. And if the grant is in wide terms, it simply means that if the marina use changed to a residential use, the right of way easement would not be lost. It does not alter the nature of the easement that grants a right of way.

[120]    In my opinion the right to lay service lines is a different use and consequently a different easement; it is not subsumed in a right of way that provides access for all purposes.

[121]    Thus, I am obliged to conclude that the easement does not include the right to lay a sewer line to the treatment plant from the marina through the easement.

Grounds of Appeal

[22]         The appellant argues the judge made the following errors:

a)  interpreting the phrase “use for any purpose whatsoever” in the 2011 Consent Order refining the easement as pertaining to the use of the dominant tenement “for any purpose whatsoever” instead of the use of the easement area “for any purpose whatsoever”;

b)  interpreting the easement as a grant of access only;

c)  interpreting the easement in such a way as to negate its original purpose to serve as a public road; and

d)  interpreting the easement in such a way as to negate its use to date as a utilities corridor serving not only the dominant tenement.

Discussion

The Wording of the 2011 Consent Order

[23]         In my view, nothing should turn on the wording of the 2011 Consent Order. This is not an action to enforce that Order but, rather, a dispute with respect to the rights afforded to the owner of the dominant tenement by the registered instrument. We are here concerned with what Estey J. referred to in Dukart v. Surrey, [1978] 2 S.C.R. 1039, as the right or condition running with the land, and not merely a contractual right enuring the benefit only to persons who are parties thereto at its inception (or, I should add, parties to later agreements with respect to the scope or effect of the registered agreement). The argument founded upon the wording of the Consent Order was not pressed on appeal and the parties’ submissions focused upon the interpretation of the March 1978 instrument.

The 1977 Judgment

[24]         Nor, in my view, does anything turn upon the view expressed by Gould J. in McDonell to the effect that the parties to the sale at the time of the subdivision of the property, McDonell and Lambourn Holdings, intended to give the owner of the dominant tenement such rights as he would have had if a public road to his property had been designated. Having expressed those views, Gould J. left it to the parties to draft an easement. For reasons known only to the parties to the agreement, they did not draft an easement in terms as broad as those described by Gould J.

[25]         While the judgment that caused them to enter into negotiations and, ultimately, execute an agreement certainly forms the factual matrix within which the agreement was drafted, we cannot look to the context until and unless we are permitted to do so in accordance with the principles governing interpretation of documents; and then, only to the extent permitted by those principles.

Recitals and Surrounding Circumstances

[26]         Nor does much turn on the words that appear in the recitals. Clearly, recitals to an easement may be referred to for the purpose of interpreting the grant. In Dukart, Estey J. canvassed the authorities for placing reliance upon the recitals in an easement. He cited the observations of Denman C.J. in Aspdin v. Austin (1844), 5 Q.B. 671 at 683; Clute J. in Re Lorne Park (1913), 18 D.L.R. 595 at 603; and Odgers’ Construction of Deeds and Statutes, (1967, 5th ed.) at 159, as authority for the proposition that where words of a recital manifest a clear intention that parties should do certain acts, the recitals may operate as formal covenants.

[27]         In general, however, words in the recitals ought only to be referred to for the purposes of clarifying ambiguity. As Rothstein J. noted inSattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 57:

While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62).

[28]         If there is ambiguity, and if reference may be made to the recitals in this case, reference must be made to the circumstances surrounding the execution of the easement. In this case, the same ambiguity that would permit the court to look to the recitals as evidence the parties referred to the easement as a means of affording access to the premises would also permit consideration of the intentions of the parties to grant to the dominant tenement all the rights entailed by designation of a public road.

Interpretation of the Grant

[29]         The task of the judge was to interpret the extent of the right of way provided in the grant. Specifically, the meaning of an easement granted to “the Grantor or persons, animals and vehicles of any kind whatsoever” to “use, enter, pass and repass over and upon” the easement. As worded, the grant does not provide any right to the appellant to construct utilities underneath the land subject to the easement. Similarly, the words of the grant do not suggest that the intent and purposes of the use of the land is the same as if it were a public road.

[30]         Disputes over the validity and scope of easements give rise to questions of mixed fact and law. For example, in the leading caseRe Ellenborough Park; Re Davies; Powell v. Maddison, [1956] Ch. 131, [1955] 3 All E.R. 667, the Court considered whether an easement could,factually or lawfully be of benefit to the plaintiffs. While decisions turning upon extricable legal issues are amenable to review on appeal, those turning upon factual questions are not.

[31]         When interpreting an easement, the court must have regard to the plain and ordinary meaning of the words in the grant to determine what the intention of the parties was at the time the agreement was entered into. Surrounding circumstances, that is, objective evidence of the background facts at the time of the execution of the contract, are to be considered in interpreting the terms of a contract: Sattva at para. 58.

[32]         The wording of the instrument creating the right of way should govern interpretation unless (1) there is an ambiguity in the wording, or (2) the surrounding circumstances demonstrate that both parties could not have intended a particular use of the easement that is authorized by the wording of the document: Granfield v. Cowichan Valley (Regional District) (1996), 16 B.C.L.R. (3d) 382 (C.A.).

[33]         The first task, therefore, in construing the scope of the right of way is to give regard to the words used, and give them their ordinary meaning in the context of the instrument as a whole.

[34]         Reference to vehicles, animals and persons, collectively as users of the easement, suggest that the easement is to be used for transit.

[35]         The fact the easement is to be exercised “over and upon” the land suggests that the use of the easement is limited to the surface of the property, rather than below the surface.

[36]         The reference to the “use” of the land suggests some activity other than mere transit over it. Simple access would be permitted by an easement that allowed the dominant owner to pass and repass upon the easement. For that reason, the judge could have read the easement as granting rights other than mere transit over the property. Further, the instrument might have been found to be sufficiently ambiguous to permit consideration of the circumstances in which the grant was executed. The trial judge might have read the instrument so broadly as to permit use of the easement consistent with its designation as public land. That would include conveyance of sewage and water and transmission of power.

[37]         In my view, however, it cannot be said the judge erred by interpreting the grant as he did. The easement would only permit the installation of underground sewage lines if the word “use” in the instrument were read so broadly as to grant an easement to “use for any purpose” or “use in any manner consistent with the designation of the easement as public land”. But that reading of the grant is inconsistent with the reference tospecific uses (entry, passing and repassing) and deprives those words of meaning. Interpretation may be aided by use of the ejusdem generis, or the limited class rule. Employing that rule, the judge could reasonably have considered all four words in the phrase “use, enter, pass and repassover and upon the easement” (emphasis added) to have been intended to describe the same type of activity, and read the word “use” in the instrument to mean “use for a purpose such as entry, passing and repassing”.

[38]         The words used in the grant are clearly meant to be repetitive and to clarify each other. It is hard to see how a right to pass over the property can be distinguished from a right to enter upon the property. It is hard to see how a right to pass over the property can be distinguished from a right to repass over the property. The apparent repetition of similar words suggests that we should consider them to be variations on the same theme, rather than considering each word as describing a different use.

[39]         The appellant also argues the judge erred in interpreting the easement in such a way as to negate its use as a utilities corridor serving not only the dominant tenement. It is not suggested there was any misapprehension of the factual matrix. Nor is it suggested the judge erred in law in describing the incidents that might have flowed from designation of the easement as a public road. He was cognizant of the evidence of the intentions of the grantor and concluded that a sewer line might have been installed had a road been designated. He then concluded, however, that the easement executed and registered did not give effect to that intention.

[40]         The appellant, in my view, has not identified an extricable question of law upon which to found the appeal. In the words of Rothstein J. inSattva, at para. 53, citing from King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80 at para. 21, 270 Man. R. (2d) 63, the appellant cannot point to “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor”. Nor can he identify an issue in contract law engaging substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on. In Sattva, at para. 54, we are advised to be cautious in identifying extricable questions of law in disputes over contractual interpretation. I cannot see a principled basis upon which to distinguish cases involving interpretation of easements from those involving interpretation of contracts.

[41]         In light of the deference we must pay to the trial judge’s interpretation of the instrument, and in light of the fact there is no identified error in principle, I am of the view that it is not open to us to set aside the judgment below simply because we might read the easement differently.

[42]         It cannot be said that the trial judge was not cognizant of the factual matrix in which the March 1978 instrument was drafted and executed. The question is whether it can be said that he erred in law or was under a misapprehension of fact when he interpreted the document.

[43]         While the appellant’s real complaint, in my view, is that the easement does not reflect the implied grant described by Gould J., the relief sought by the plaintiff was a declaration describing the rights arising from the registered easement. Confining the scope of my review of the judgment, in the manner described in Sattva, to determining whether there was an error in law on the part of the judge called upon to interpret the easement, and seeing none, I would dismiss the appeal.

“The Honourable Mr. Justice Willcock”

I agree:

“The Honourable Mr. Justice Tysoe”

Reasons for Judgment of the Honourable Mr. Justice Chiasson:

[44]         I have had the opportunity to read a draft of the reasons for judgment of Mr. Justice Willcock.  Regrettably, I am unable to agree with his analysis and conclusion.

Standard of Review

[45]         In Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, the Supreme Court of Canada adopted the approach to contract construction which began in this Province with Hayes Forest Services Limited v. Weyerhaeuser Company Limited, 2008 BCCA 31, as explained in 269893 Alberta Ltd. v. Otter Bay Developments Ltd., 2009 BCCA 37 [Otter Bay].  In Hayes, this Court rejected the notion that the interpretation of a contract provision is always a question of law.  Sattva, like Hayes, involved an appeal from an arbitration award in circumstances where an appeal was available only on a question of law.  The standard of review for contractual interpretation generally was not at issue.  In my view, the general comments in Hayes and Sattva must be considered in that context.

[46]         In Otter Bay, the standard of review was in issue because, relying on Hayes, the appellant took the position that the standard of review of a decision interpreting a contract provision is a palpable and overriding error.  In rejecting this contention, this Court stated:

[10]      Relying on paras. 41 and 44 of this Court’s decision in Hayes Forest Services Ltd. v. Weyerhaeuser Co., 2008 BCCA 31, 289 D.L.R. (4th) 230, the respondents contend that this Court should not interfere with the judge’s interpretation of s. 10 of the Mortgage absent palpable and overriding error because the construction of contractual provisions is a question of mixed fact and law.

[11]      In my view, the respondents’ position takes too narrow a view of Hayes.

[12]      In Hayes, this Court referred to and quoted from a number of authorities. Several propositions emerged. They included the following: a trial judge must apply the proper principles of contract interpretation; failure to do so would be an error attracting review on a standard of correctness; determining the factual matrix of a contract is a question of fact; construction of a contractual provision becomes a question of law as soon as the true meaning of the words and the surrounding circumstances have been ascertained. This Court summarized the analysis in para. 44, stating:

[44]      In my view, taken broadly, the construction of a contract often is a question of mixed fact and law. Insofar as the task narrowly is to determine the meaning of the words in the contract the matter may be a question of law as was stated in Domtar, but where the factual matrix of the contract is questioned, determining that matrix and its significance is a question of fact. Interpreting the language of the contract in the context of the factual matrix is a question of mixed fact and law.

[13]      The analysis in Hayes was undertaken to examine the proposition that the construction of a contractual provision is always a question of law because under the Commercial Arbitration Act, R.S.B.C. 1996, c. 55, an appeal to the court is limited to questions of law. This Court concluded that often the construction of a contractual provision is not solely a question of law, but it can be. The determination of the factual matrix is a question of fact. This means that interpreting the meaning of a contractual provision in the context of the factual matrix is a question of mixed fact and law, but at the end of the day the court determines the legal relationship between the parties as expressed by the language of their contract.

[14]      In Hayes, this Court expressed the nub of the problem which it was addressing in para. 45:

[45]      The appeal judge also did not separate the question or questions of law that properly may have been before him from a consideration of the factual determinations of the arbitrator which were not properly before him.

[15]      In the context of an appeal under the Commercial Arbitration Act, in the absence of legal error in the arbitrator’s determination, the court must take the factual matrix as found by the arbitrator. On an appeal such as this, a trial judge’s determination of the factual matrix is entitled to deference, but whether by arbitrator or court, the final determination of the meaning of a contractual provision is a question of law. This is not altered by the fact the process leading to that determination may involve questions of fact or mixed questions of fact and law. As noted, the construction of a contractual provision becomes a question of law as soon as the true meaning of the words and the surrounding circumstances have been ascertained.

[47]         Hayes and Sattva made it clear that where an appeal is limited to questions of law, it is an error not to accept the findings of fact of an arbitrator or to consider them as errors of law.  It is clear that there is no such constraint on an appellate court’s review of a trial court’s interpretation of a contract provision.  As they always have been, findings of fact are reviewable on the standard of palpable and overriding error; findings of law are reviewed on the standard of correctness.

[48]         In my view, Sattva did not change this long-standing law.  It does not circumscribe appellate review of contractual interpretations.  Those who chose arbitration are limited to appellate review on questions of law.  Those who do not, and have recourse to the court, are entitled to the full panoply of appellate review.  The caution in both circumstances is to respect the difference between findings of fact or mixed fact and law and determinations of law.  It is an error to conflate the two.  In Sattva, the Supreme Court did not emasculate the appellate rights of parties who engage trial courts to resolve disputes over the interpretation of contractual provisions.

[49]         In Northwest Territories (Attorney General) v. Association des parents ayants droit de Yellowknife, 2015 NWTCA 2 at para. 20, referring toHousen v. Nikolaisen, 2002 SCC 33, the court stated, “Housen did recognize the role of the appellate courts, stating at para. 9: ‘… the primary role of appellate courts is to delineate and refine legal rules and ensure their universal application’”.  The court continued:

[21]      Appeal courts obviously play a legitimate role in the administration of justice. The constitutionally enshrined principle of the “rule of law” includes the principle that private disputes will be resolved by ordinary public courts of general jurisdiction … The existence of a publicly operated dispute resolution system, with courts of universal jurisdiction, displaces the need for “self-help” remedies, and ensures that powerful entities cannot simply ignore the law. Within the public court system mandated by the rule of law, the appellate courts play a legitimate and important role. As observed in R. v. Cambridge University, ex party Bentley (1723), 1 Str. 557 at p. 564?5, 93 ER 698:

It is to the glory and happiness of our excellent constitution, that to prevent injustice no man is concluded by the first judgment; but that if he apprehends himself to be aggrieved, he has another Court to which he can resort for relief; for this purpose the law furnishes him with appeals, with writs of error and false judgment . . .

[22]      … the standard of review analysis should not be seen as a competition between recognizing the legitimate role of trial courts, and recognizing the legitimate role of appeal courts. The two levels of court are equally important components of one system. It is equally important to recognize that appeal courts need deference in their role as much as first instance courts need deference in theirs. Tipping the balance too far either way effectively compresses the system into a single rank of court. Doing so undermines both the capacity of the system to give individual justice and also the capacity of the system to ensure equal justice under law to everyone.

[23]      The law is ultimately an honour system in the sense that its authority depends on the integrity and credibility of the justice system, and self-discipline by each level of court in staying within its mandate. A system that effectively transfers the fact finding role of the first instance court to an appeal court could essentially reduce the first instance court to an expensive decoration. A system that effectively puts findings of fact or mixed fact and law by the first instance court beyond review has the similar potential for analogous damage to the ability of the appeal court to play its role. Appeal courts are expected to operate at a higher level of legal generality and, crucially, are to review outcomes for legality and reasonableness. If the appeal court is ineluctably confined to a structure of findings by the first instance court, there would be little or no real “review for legality” at the level of generality of appeal courts. The confidence of the enlightened public in a justice system with only one real level of judicial authority within and for each province or territory would soon wither.

[24]      In addition to defining the legal rules, and ensuring their universal application, the intermediate appellate courts have an important error correcting role. It is that role that is primarily regulated by the standard of review analysis set out in Housen. But while the standard of review analysis regulates that error correcting role, it does not eliminate it. Intermediate appellate courts are created by statute. Litigants are given statutory rights of appeal to those appellate courts. The error correcting role is legally legitimate, and should not be artificially restrained. The suggestion in Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 at para. 51 that litigants who exercise their statutory right to appeal are using courts of appeal as “a new forum for parties to continue their private litigation” is unnecessarily derogatory…

[25]      As noted, appellate courts play a role in refining the legal rules and ensuring their universal application. Their error correcting role focusses, in part, on ensuring some consistency and universality in legal reasoning, analysis, and outcomes. Like cases should result in like outcomes. The result should not depend on “luck of the draw” justice, where the happenstance of the identity of the trial judge overwhelms the process. …

Deference to trial judges should not be confused with allowing the law or the outcome of particular cases to depend on the idiosyncrasies of the finder of fact. That is particularly so with appeals like this, which involve public law, constitutional interpretation, and the compulsory spending of public money. [Some citations omitted.]

I agree with these comments.

[50]         At para. 55 of Sattva, the Court suggested that it will be rare to find extricable errors of law in the context of contract interpretation.  As an expression of the need for caution in identifying errors of law, the comments underscore the concern that gave rise to and was addressed by this Court in Hayes.  As a prediction of the likely incidence of errors of law, I share the comments of the court in Association des parents:

[21]      There are valid reasons for extending deference to trial judges. The vast majority of trial decisions are never appealed. However, given the variety and complexity of issues that trial judges face, it is overly optimistic to assume that reviewable errors will be rare in those few decisions that are appealed.

The frequency with which potential errors of law are identified will be a function of the cases that come to court.  There may be few or there may be many in which potential errors of law occur.

[51]         In Sattva, the Court observed:

[47]      … a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[52]         Consistent with this Court’s comments in Otter Bay, the Court framed the important but circumscribed role played by surrounding circumstances:

[57]      While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30?32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62).

The Court further noted:

[58]      … Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

[53]         Depending on the factual context, the inquiry into surrounding circumstances may or may not yield essential information to the process of contract interpretation.  As noted by the Court in Sattva, the factual matrix within which a contract is struck engages a standard of review of palpable and overriding error.  Application of the correct legal principles remains a question of law.  While the factual matrix may be relevant to the determination of the meaning of contract language in some contexts, this does not supplant the requirement for trial judges to apply correct legal principles to the interpretation of contract language, such as the requirement to look to the ordinary meaning of words and to consider the specific words used as they relate more broadly to the contractual provisions.  Failure to do so results in legal error.

The Merits

[54]         I begin by examining the language used by the parties in the easement:

… the Grantor does hereby grant unto the Grantee … a free and uninterrupted easement in common with the Grantor or persons, animals and vehicles of any kind whatsoever … to use, enter, pass and repass over and upon [the servient tenement].

[55]         In my view, three rights are granted: the right to use, the right to enter and the right to pass and repass.  They are not the same.

[56]         The right to pass and repass clearly is a right of access, but it does not authorize using the servient land.  For example, it does not authorize stopping for a picnic or to pick berries.

[57]         The right to pass and repass clearly includes the right to enter, but that right also is expressed specifically.  As an independent right, the right to enter does not connote access: the ability to pass and repass from the dominant tenement to another destination.  It merely allows persons, animals or vehicles to be on the servient tenement.

[58]         The right to use the servient tenement clearly embraces the ability to enter and the ability to pass and repass, but those rights are expressed separately.  “Use” must mean something more.  It certainly adds to the right to enter, but it does nothing for the right to pass and repass.  That is, it does nothing for the right of access.

[59]         The easement contains the phrase “over and upon” the servient tenement land, but that phrase is part of language that is separated by commas from the words “use” and “enter” and is preceded by the words “pass and repass”; that is, “pass and repass over and upon”.  The phrase is necessary to give meaning to the words “pass and repass”.  It is not necessary to give meaning to the words “use” and “enter”.  Grammatically, the phrase is not applicable to those words.

[60]         As a matter of law, the language of easements is to be construed broadly:

… the authorised mode or capacity of user … is as general as the physical capacity of the locus in quo at the time of the grant will admit, unless in any particular case … some limitation of user can be gathered from the surrounding circumstances” (Gaunt & Morgan, eds., Gale on Easements, 17th ed. (London, UK: Sweet & Maxwell, 2002) at 329).

As will be seen, I do not consider that the surrounding circumstances in this case impose any limitations.

[61]         The fact that the easement refers to persons, animals and vehicles may connote transit, but there is no question that one of the grants in the easement is access.  In my view, the plain meaning of the language of the easement shows that it is more than a right of transit access.

[62]         It is appropriate to consider the surrounding circumstances at the time the easement was granted.

[63]         At that time, the servient land apparently contained services: power and underground water.  Can it reasonably be suggested that the parties to the easement did not intend that those services be serviced, repaired or replaced?

[64]         While the specific focus of the 1977 litigation was on access – increased traffic to the marina – the legal problem was the vendor’s failure to provide a public road.  Mr. Justice Gould held that the purchaser should have the equivalent of a public road by way of an easement.  The judge noted that the vendor was in the awkward position of having sold the dominant tenement to the purchaser “on the promise that access to it would be by public road maintained by the Department of Highways”.  The vendor asked the purchaser “to agree to access into [the dominant tenement] by an easement (road) instead of a public highway”.  The purchaser reluctantly agreed, provided that the vendor “would maintain the road”.  As Gould J. observed at p. 62:

This would give him at least the main advantage that he would have had from a public road, namely it would be maintained by someone other than himself. [The vendor] agreed to this. He could hardly do any less as his company had sold the property on the inducement of access by public road.

[65]         Mr. Justice Gould stated at p. 64:

As [the purchaser] was to have a public road, or its equivalent, so far as the access road easement could be, what he is entitled to is unrestricted use of the access road.

and at p. 65:

In this case the following was agreed between [the vendor and the purchaser]: [the purchaser] for his marina should have unrestricted use of the access road … which should be maintained by [the vendor].

He ordered the parties to prepare an agreement to that effect.  This resulted in the easement in question in this case.

[66]         In the 1970s, the issue was the same as gave rise to the present litigation: concern over the expansion of the marina’s business.  Gould J. observed at p. 60:

There is no duty, and there never has been any, on [the purchaser] to operate the present marina - and it is still a small one - on a restricted basis.

[67]         The answer in 1977 was that the purchaser was entitled to the rights he would have received had there been a public road.  In my view, that still is the answer.  The instrument that came into existence to reflect those rights should now be considered in light of these surrounding circumstances.  While the trial judge referred to the 1977 litigation, in my view, he did not consider the underlying dispute and its resolution in the context of the language used by the parties to the easement.

[68]         This also is consonant with Selby v. Crystal Palace Gas Co. (1862), 4 De G.F. & J. 246, (referenced by the trial judge) in which a covenant that the owners of conveyed lands should have full use and enjoyment of all roads “in as full, free, complete and absolute manner to all intents and purposes whatsoever, as if the same were public roads” enabled them to authorize a gas company to lay a gas main under the road.

[69]         In my view, there are two extricable errors of law in the trial judge’s analysis.  One, he erred in failing to consider the plain and ordinary meaning of the actual contractual language contained in the easement, which granted a right to use, a right to enter and a right to pass and repass.  Two, he did not pay sufficient heed to the surrounding circumstances.

[70]         As noted by Willcock J.A. in his judgment, when interpreting an easement, courts must consider the plain and ordinary meaning of the grant language, to ascertain the intention of the parties (para. 31).  In this case, the judge failed to do so.  He did not address the word “use” or the word “enter” or the relationship of those words to the grant of the right to pass and repass.  He merely concluded that the document was an easement of access.  He stated:

[117]    The original grant was not of a public road but of a right of way or access in all its myriad forms. No sewer existed at the time.

[71]         In my view, this was an error of law.  The Court in Sattva stated it would be an error of law if the arbitrator:

[64]      … did not construe the Agreement as a whole because he ignored a specific and relevant provision of the Agreement. This is a question of law that would be extricable from a finding of mixed fact and law.

That is, by not considering the actual language of the granting provision in the easement, the judge did not apply the correct principles of contract interpretation.

[72]         As noted previously, it is clear that the surrounding circumstances cannot be allowed to overwhelm the language of a contract.  In the present case, the surrounding circumstances do not do so.  They do not suggest any limitation on the grant.

[73]         As a matter of legal principle, the judge was required to construe the easement language as broadly as possible, in light of the language used and the surrounding circumstances.  Despite the presence of expansive language and no restrictive surrounding circumstances, he nonetheless narrowed the contents of the grant.

Conclusion

[74]         In my view, the judge erred in his application of the legal principles of contract interpretation, by not considering the implications of the words “use”, “enter” and “pass and repass”.  He also erred by not considering these words in light of the surrounding circumstances at the time the easement was executed.

[75]         I conclude that the easement grants not merely a right of access, but also rights to enter and use the servient land.  This use included services that existed at the time of the grant and the ability to maintain them.  There is nothing in the easement to suggest that this use is limited to existing services.  In my view, it extends to other required services, including a sewer line.

[76]         I would allow this appeal and so declare.