Ministry of Natural Resources v. Municipality of West Nipissing, 2014 ONAFRAAT 35

Agriculture, Food and Rural Affairs Appeal Tribunal

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales

1 Stone Road West Guelph, Ontario N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

1 Stone Road West Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Courriel: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: Rosene Spillway/Deer Lake Project (RE) [Cost Decision] Municipality of West Nipissing

Rosene Spillway/Deer Lake Project (RE) [Cost Decision] Municipality of West Nipissing 2014ONAFRAAT35

STATUTE: Drainage Act

HEARING: By way of written submissions

DATE OF DECISION: May 9, 2014

016Rosene13

NEUTRAL CITATION: 2014ONAFRAAT35

ROSENE SPILLWAY/DEER LAKE PROJECT MUNICIPALITY OF WEST NIPISSING

IN THE MATTER OF THE DRAINAGE ACT, R.S.O. 1990, CHAPTER D.17, AS AMENDED.

AND IN THE MATTER OF: An appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by the Ministry of Natural Resources under Section 48(1)(d) of the Drainage Act from the Engineer’s Section 40 Report with respect to the Rosene Spillway/Deer Lake Project in the Municipality of West Nipissing.

Before: John O’Kane, Vice-Chair; Ed Dries, Member; John Rudics, Member

COSTS DECISION

In our decision of April 24th, 2014, the Tribunal directed the parties to exchange and file written cost submissions that we have now received and reviewed.

The Tribunal’s Cost Jurisdiction

Sections 98(10) and (11) of the Drainage Act provide:

(10) The costs of any proceedings before the Tribunal shall be paid by or apportioned between the parties in such manner as the Tribunal considers proper, and where costs are ordered to be paid, the order for payment thereof may be filed in the Small Claims Court and is enforceable as a judgment or order of that court.

(11) The costs chargeable or to be awarded in any proceedings may include the costs of witnesses and of procuring their attendance, the costs of secretarial staff and such other costs as the Tribunal may direct.

The Drainage Act therefore grants the Tribunal wide discretionary jurisdiction to award costs of proceedings before it.

In the civil justice system, courts have broad cost discretion and generally exercise that discretion to make a cost award in favour of the successful party.

For most of the administrative justice system in Ontario, that general rule from the court system does not necessarily apply because section 17.1 of the Statutory Powers Procedure Act provides:

17.1(1) Subject to subsection (2), a tribunal may, in the circumstances set out in a rule made under section 25.1, order a party to pay all or part of another party’s costs in a proceeding.

(2) A tribunal shall not make an order to pay costs under this section, unless,

(a) The conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or a party has acted in bad faith; and

(b) The tribunal has made rules under section 25.1 with respect to the ordering of costs which include the circumstances in which costs may be ordered and the amount of the costs or the manner in which the costs is to be determined.

Therefore, depending on which legislation governs a proceeding before the Tribunal, there are at least two different sources of cost awarding jurisdiction as in this case. The Drainage Act grants wide cost discretion while the Statutory Powers Procedure Act grants a more restricted cost discretion.

However, the general rule, when interpreting statutes with an apparent conflict, is the general legislation yields to the more specific legislation. That interpretive rule is known as the “implied exception” rule. Applying the “implied exception” rule in this case resolves that apparent conflict with the more general Statutory Powers Procedure Act yielding to the more specific Drainage Act as the controlling source of the Tribunal’s cost jurisdiction in these circumstances.

The Tribunal’s Cost Rules

The Ministry’s costs submissions relied heavily on the wording associated with Rule 28 of the Tribunal’s Rules of Procedure.

The provisions of Rule 28 borrow extensively from the more restrictive costs powers from the Statutory Powers Procedure Act and suggest that the Tribunal will only rarely award costs and only then in exceptional circumstances.

However, the Tribunal Rules also contain a specific subset of rules under Rule 31 related to Drainage Act appeals. Rules 31.08, 31.09 and 31.10 provide:

31.08 The costs of any proceeding before the Tribunal shall be apportioned between the parties in such a manner as the Tribunal considers proper.

31.09 When the Tribunal orders a party or parties to any proceeding to pay costs, the order for payment thereof may be filed with the Small Claims Court and is enforceable as an order of that court.

31.10 The costs chargeable to or to be awarded in any proceeding may include the costs of witnesses and of procuring their attendance, the costs of secretarial staff and such other costs as the Tribunal may direct.

It is evident that the Rule 31 specific rules, which the Tribunal developed to inform and guide its exercising its Drainage Act power to award costs, stand in contrast to Rule 28 which the Tribunal developed to inform and guide exercising its Statutory Powers Procedure Act power to award costs. Each of those two rules borrow extensively from the statutory source for that jurisdiction.

However, it is apparent that Rule 31 does not suggest that costs in Drainage Act matters will only be awarded rarely nor does that rule suggest that some exceptional circumstances are necessary for the Tribunal to award costs.

The Jurisprudence

The Ministry relied on several previous Tribunal decisions in support of its argument that there should be no costs awarded.

The Short and No. 2A Drain, 2006 and the Hambly Sabourin & Beach Beaulac Municipal Drain decisions were both Drainage Act proceedings before the Tribunal. Both decisions traced the source of the Tribunal’s cost jurisdiction through both the Statutory Powers Procedure Act and the Drainage Act. While in both of those cases the Tribunal determined that there were exceptional circumstances that warranted a costs award, neither decision suggested that such exceptionality was required for a cost award under the Drainage Act.

The cases of La Gantoise Inc. v. Dairy Farmers of Ontario and Ontario Quota Rights Organization v. Dairy Farmers of Ontario both arose under the Ministry of Agriculture, Food and Rural Affairs Act. That Act does not contain any specific language that grants the Tribunal any power to award costs. Therefore, the proceedings before the Tribunal under that Act would be governed by the Tribunal’s costs jurisdiction in section 17.1 of the Statutory Powers Procedure Act. Therefore, those cases are clearly distinguishable from the present case and those decisions therefore provide the Tribunal with little guidance in the present circumstances.

The Ministry did not provide any authority that convinced the Tribunal that no costs should be awarded.

Costs of the Appeal

In considering an award of costs of a proceeding, the two issues are entitlement and quantum.

1. Entitlement

The Ministry started the appeal to the Tribunal from the Engineer’s determination about the costs of the section 40 Report.

The Ministry was completely unsuccessful in its appeal to the Tribunal.

At the start of the hearing, the Ministry argued that the Engineer did not have the jurisdiction under section 40 of the Drainage Act. The Ministry was unsuccessful on the jurisdictional issue.

The Ministry then developed its case that the Engineer inappropriately exercised his authority by including in his Report that the Ministry should bear one-third of the Report costs. The Ministry was unsuccessful on that appeal issue.

The Ministry did not lead evidence at the appeal to contradict or challenge the one-third quantum determined by the Engineer.

Therefore, the Municipality was completely successful on the appeal.

In the Tribunal’s view, given this outcome, there is no reason in these circumstances to depart from the general rule that the costs follow the outcome. Therefore, on the threshold issue of entitlement, the Municipality is entitled to a costs award from the Ministry.

2. Quantum

The Municipality seeks costs of the appeal of $31,108.34 comprised of disbursements of $15,526.20 (including HST) and fees of $15,582.14 (including HST).

The claimed disbursements are for the most part modest and reasonable and include items such as printing and photocopying, postage and courier charges, meals and accommodations associated with the two day hearing in Northern Ontario.

The most significant disbursement comprising over $12,000.00 is the amount associated with the Engineer’s involvement on the appeal.

While that disbursement amount is high, it cannot be a complete surprise to the Ministry. Going into the appeal, the Ministry had to have known that since it was appealing the Engineer’s Report determination on costs, the Engineer would be a necessary participant. The Engineer is entitled to be paid for his involvement in the appeal and he was the only expert qualified by the Tribunal with the Ministry’s consent.

When considered in the context of the issues on appeal, the time associated with preparing for a two day hearing, the travel involved in a hearing in Northern Ontario and the actual hearing days, coupled with the essential nature of the expert Engineer’s involvement, the Engineer’s time and charges were reasonable in the circumstances.

Therefore, we find the disbursements of $15,526.20 ($13,746.10 plus HST of $1,780.10) to be reasonable in the circumstances.

The Municipality claimed for recovery of 90% of the legal fees set out on its Bill of Costs.

Under the court system a court will award costs based on either “partial indemnity” or “substantial indemnity”. Recovery of fees at the 90% level would be akin to “substantial indemnity” recovery.

The general rule in the courts is costs are awarded on a “partial indemnity” basis. There are several factors a court might consider to increase a cost award to the “substantial indemnity” level. Those factors include unfounded allegations of fraud, extremely bad conduct by a party in the proceeding or offers to settle made under the court rules.

In our view, there were no factors in this case that would cause the Tribunal to increase the fee portion of the cost award above the “partial indemnity” level.

In the present circumstances, recovery of 75% of the claimed fees would be reasonable and reflect a “partial indemnity” recovery. Therefore, the Municipality will recover 75% x $13,789.50 or $10,342.13 for legal fees and HST of $1,344.48 for a total fee recovery of $11,686.61.

The total cost award to the Municipality is fees of $11,686.61 (including HST) plus disbursements of $15,526.20 (including HST) for a grand total of $27,212.81.

Tribunal Order

1. The Tribunal orders that the Ministry of Natural Resources shall pay the Municipality of West Nipissing costs of the appeal in the amount of $27,212.81.

Dated at Brampton, Ontario this 9th day of May, 2014.