Summary Judgment Dismisses Agricultural Landowners' Proposed Class Action

On November 20, 2006, Justice Ellen Macdonald of the Ontario Superior Court of Justice granted summary judgment dismissing proposed class-action proceedings commenced on behalf of all agricultural landowners in Canada whose lands are subject to federally regulated pipeline easement agreements in favour of Enbridge Pipelines Inc. (Enbridge) and TransCanada Pipelines Limited (TCPL): Canadian Alliance of Pipeline Landowners' Associations et al. v. Enbridge Pipelines Inc. et al., 2006 CanLII 42062 (ON S.C.).

The plaintiff landowners claimed both past and future damages or compensation (amounting to $500 million) for the loss of use and enjoyment of their lands arising from statutory and regulatory restrictions on use of the pipeline easement and the adjacent 60-metre-wide control zone. The control zone came into being in 1990 when Parliament enacted and proclaimed into force s. 112 of the National Energy Board Act, which, together with the related Pipeline Crossing Regulations, places restrictions on certain activities in the vicinity of pipelines.

The plaintiffs claimed damages for breach of the easement agreements entered into with the pipeline companies which, they alleged, assured them the unfettered use of the affected lands. They also claimed statutory compensation pursuant to the National Energy Board Act, which, in s. 75, requires pipeline companies including Enbridge and TCPL to compensate all those who suffer damage as a result of the pipeline companies' operations.

The landowners first demanded arbitration of their statutory claim but their demand was refused by the Federal Minister of Natural Resources, who acts as the gatekeeper under the statute, on the basis that any loss was not the result of the pipeline companies' operations but arose from the statutory scheme itself. The landowners did not seek judicial review.

Justice Macdonald held that the s. 75 claim had to be dismissed on two grounds. First, the material provisions of the National Energy Board Act constituted a complete code and gave rise to a right of arbitration only, and there was no implied civil cause of action. Second, the landowners were barred, under the principle of issue estoppel, from challenging the Minister's determination, made within his jurisdiction, that s. 75 did not ground a claim in the circumstances.

Justice Macdonald also held that, on a proper construction of the easement agreement, it did not give the landowners the right to compensation they claimed and, in the alternative, any covenants in the agreement that may have been breached so as to give rise to a claim for damages would have been held frustrated by the scheme of statutory regulation.

The plaintiffs were represented by Paul Vogel and John Goudy of Cohen Highley LLP.

Enbridge was represented by Harry Underwood and Darryl Ferguson of McCarthy Tétrault LLP.

TCPL was represented by J.L. McDougall, Q.C. and Matthew Fleming of Fraser Milner Casgrain LLP, and John Fabello of Torys LLP.