Executive Summary: Key Legal and Evidentiary Issues

• Buffalo Spirit Ventures Ltd sought summary judgment against multiple defendants for $955,272.60 in remediation costs incurred after tenants allegedly altered the grade of leased land by adding fill.
   
• Dominion Pipe and Piling Ltd's summary dismissal application was granted, as uncontroverted evidence established it never conducted any business in relation to the land.
   
• The claim against OCTG Protectors Ltd (now amalgamated with 242855 Alberta Ltd) was dismissed on limitations grounds, as OCTG vacated the land in 2006 and the action was not commenced until more than 14 years later.
   
• Central to the Varsteel analysis was whether the oral, year-to-year tenancy included an implied covenant requiring the tenant to restore the land to its original grade upon termination.
   
• Evidentiary gaps — particularly the inability to establish who added the fill between 2000 and 2006 — were fatal to Buffalo's claim against OCTG and complicated its case against Varsteel.
   
• Neither Buffalo's application for summary judgment against Varsteel nor Varsteel's cross-application for summary dismissal succeeded, leaving those claims to proceed to trial.

Facts of the case

Buffalo Spirit Ventures Ltd (formerly 92386 Canada Ltd), referred to as Buffalo, owns a parcel of land in Alberta, a 2.2 to 2.5 acre portion of which (the Land) was leased beginning in July 1985 to M&D Pipe Sales (1980) Ltd (M&D) for use as a pipe storage yard. The lease was arranged orally between the principals of the two companies — Ronald Williamson of Buffalo and Raymond Flanagan of M&D — and was never reduced to writing. At the time, the Land was described as "grassed, uneven, hilly." M&D was invoiced annually for rent, which it paid while it occupied the Land. A significant amount of fill was placed on the Land at some point during the occupation, changing the grade substantially.

M&D sold its assets to Varsteel Ltd (Varsteel) on September 1, 2006. Buffalo says it was not aware of this sale until 2008, after which it began invoicing Varsteel instead of M&D. Varsteel continued to use the Land for pipe storage and paid the rent. On August 30, 2006, Raymond Flanagan and OCTG Protectors Ltd each sold a parcel of land adjacent to the Land to Varzani Trading Ltd, a company owned by Gerald Varzani, who is also the sole director of Varsteel.

Buffalo's witness Ronald Douglas attended the property on March 25, 2015 to change locks and observed that the grade of the leased area had been dramatically changed by the addition of a minimum of 5 feet of fill. Douglas noted that when the adjacent office building was vacated around 2000, the lands were level with the building and surrounding concrete pad, consistent with a photograph he had taken in July 1987. It was clear that sometime between 2000 and 2006, approximately 5 feet of fill had been added. No party produced any documentation identifying who added the fill.

On July 31, 2018, Buffalo sent Varsteel a letter providing notice of termination of the lease, requiring vacant possession by January 31, 2019, and specifying that Varsteel was to restore the Land to its original grade and remove all non-native material by the date of termination. Varsteel vacated the Land on or about January 31, 2019 without taking any steps to restore it. Buffalo subsequently removed the fill and remediated the Land at a cost of $955,272.60, and sought full recovery of that amount from the defendants.

Contractual and statutory provisions at issue

The lease between the parties was entirely oral and unwritten, having been established by handshake between the principals in July 1985. No formal covenants were ever documented. The court characterized the arrangement as a tenancy at will under Section 1 of the Statute of Frauds, 1677 (U.K.), 29 Car. 2, c.3, as raised by Varsteel, given that the value of the land in relation to the rent had not been established and the agreement was from year to year. The asset purchase agreement of September 1, 2006, between M&D and Varsteel contained a provision under heading 6.5 Certain Relationships, which acknowledged there was no formal contract in place with respect to the approximately 2.2-acre lease and covenanted that the vendor would use its best efforts to ensure the purchaser enjoyed the benefits of the arrangement. The court found this provision was of no assistance to Buffalo, as there was no evidence OCTG did anything to satisfy it.

Buffalo asserted two implied duties: (i) a duty not to make significant alterations to the Land without consent, and (ii) a separate duty to restore the Land to its original grade at the tenant's cost. The court found that Buffalo had failed to establish that even the first of these implied covenants would require restoration to a pre-1985 condition, and that it had not established negligence or waste by Varsteel on the summary judgment record.

Reasoning and analysis

The court applied the summary judgment test from Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49, asking whether a fair and just determination could be made on the record before it.

With respect to Dominion Pipe and Piling Ltd, the court found that Dominion was a registered trade name under which Varsteel had operated, not a separate corporate entity, and that the uncontroverted evidence was that the Dominion "Corporation" had never conducted any business in relation to the Land. Summary dismissal in its favour was accordingly granted.

Regarding OCTG Protectors Ltd (amalgamated with 242855 Alberta Ltd in February 2011), the court found that OCTG vacated the Land in September 2006. The action was amended to include 242855 Alberta Ltd on July 31, 2020, and OCTG was added by further amendment on April 6, 2021 — more than 14 years after OCTG had ceased any involvement with the Land. Buffalo argued the limitation period was suspended by fraudulent concealment, citing OCTG's failure to advise Buffalo of the grade change. The court rejected this, finding that once someone from Buffalo attended the Land in 2015, the grade change was plain and obvious, and no concealment extended to acts of active or reckless wrongdoing. The court found no basis to suspend the limitation period, and dismissed the claim against OCTG under both the 10-year ultimate limitation period and the two-year rule.

As for Varsteel, the court found that a tacit tenancy agreement had been established when Varsteel continued to store pipe on the Land after 2006 and Buffalo accepted its rent payments beginning in 2008. The court acknowledged that Varsteel had added a layer of fill material — possibly crushed concrete — on top of the pre-existing fill, graded and covered with gravel around 2010, characterized by Varsteel as routine maintenance to prevent pipe and machinery from sinking and creating a safety hazard. However, the court found it difficult to conclude that restoring the grade to pre-1985 conditions had ever been contemplated under an arrangement where no one discovered the dramatic grade change until 2015, some 30 years after the original handshake agreement. There was no evidence Buffalo raised concerns about grade restoration during the tenancy, and its conduct upon discovering Varsteel was the tenant in 2008 was simply to change the name on invoices. The evidentiary record was insufficient to support summary judgment for Buffalo, but equally insufficient to support summary dismissal for Varsteel, and both applications were dismissed.

Ruling and overall outcome

Applications Judge L.A. Smart dismissed Buffalo's application for summary judgment against Dominion Pipe and Piling Ltd and granted Dominion's cross-application for summary dismissal, with costs to Dominion on the appropriate Column of Schedule C. The application for summary judgment against OCTG was dismissed, and OCTG's cross-application for summary dismissal was granted, with costs to OCTG on the appropriate Column of Schedule C; OCTG was also awarded costs against Varsteel on the same basis in respect of Varsteel's third party claim, which was also dismissed. Buffalo's application for summary judgment against Varsteel and Varsteel's cross-application for summary dismissal were both dismissed, with each party bearing its own costs on those applications. No monetary award was made; costs were awarded on Schedule C but no specific dollar amounts were quantified in the decision.