Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West
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
Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL:
Coleman Municipal Drain 2013 [Costs Decision] Municipality of North Perth
Coleman Municipal Drain 2013 (RE) 2015ONAFRAAT09
STATUTE:
Drainage Act
HEARING:
June 17, 2015
2015-09
NEUTRAL CITATION:
2015 ONAFRAAT 09
COLEMAN MUNICIPAL DRAIN 2013 [Costs Decision]
MUNICIPALITY OF NORTH PERTH
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 Finlay and Edith McCormick, in North Perth, Ontario, under Section 64 of the Drainage Act about dissatisfaction with the quality of construction of the drainage works completed under the Engineer’s Report on the Coleman Municipal Drain 2013 in the Municipality of North Perth.
Before: John O’Kane, Vice-Chair; Andy McBride, Member; Jane Sadler Richards, Member
COSTS DECISION
In its decision of April 23rd, 2015, the Tribunal directed the parties to exchange and file written cost submissions. Those submissions have now been reviewed by the Tribunal panel and our decision with respect to costs is as follows.
Overview
This Drainage Act appeal was unusual. Firstly, the quality of construction of the drainage works was challenged in circumstances where the drain was performing exactly as designed. Secondly, the Appellants’ case lacked any reliable evidence to support their challenge. Thirdly, the Appellants pursued issues that were outside the Tribunal’s jurisdiction, and did so contrary to the Tribunal’s directions. Fourthly, the appeal was devoid of merit, and in effect frivolous. Fifthly, shortcomings and the mounting costs were called to the Appellants’ attention before and during the hearing on more than one occasion. Sixthly, these same Appellants had previously pursued a quality of construction appeal on the same drain that another Tribunal Panel determined was unwarranted and, subsequently ordered these same Appellants to pay costs. Despite all that the Appellants pursued a costly and unsuccessful appeal hearing and want their neighbours or the taxpayers of the Municipality to pay for it.
In the circumstances of this case and for the reasons explained, the Tribunal awards the Municipality the costs of the appeal fixed at $49,536.80.
It is relevant for this costs decision to understand that the Coleman Municipal Drain 2013 was a drainage works that impacted seven properties.
The Municipality of North Perth and the County of Perth were owners of two of the seven properties. Finlay and Edith McCormick (Appellants) were owners of one of the seven. Tom Gibson and Willem Bakker were owners of two of the seven. Maplevue Farms and Doug Johnston were the final two owners of the seven, but in actuality the latter two were both controlled by Doug Johnston’s family.
The Appellants appealed about the design and the quality of construction of the drainage works completed November 20th, 2013. In a preliminary ruling, the Tribunal constrained the Appellants from pursuing any design related appeal issues as those were clearly brought outside the time provided in the Drainage Act. The Municipality was the Respondent. Messrs. Gibson, Johnston and Bakker were parties to the appeal, but were aligned with the Municipality in a common position that there was no merit in the appeal and that the drain was performing as designed.
The Tribunal’s Cost Jurisdiction
The Drainage Act grants a right to landowners to appeal to this Tribunal about their dissatisfaction with the quality of construction of a drain.
- Any owner of land dissatisfied with the quality of the construction of a drainage works constructed under this Act may, at any time during construction or up to one year from the date of completion of the drainage works as certified by the engineer or a drainage superintendent of the drainage works, appeal to the Tribunal on grounds to be stated.
However, that statutory right of appeal does not exist in a complete vacuum. For example, 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.
Therefore, the statutory right of appeal comes with the responsibility for paying the costs of the proceedings, as determined by the Tribunal.
As seen from section 98 of the Drainage Act, the legislature granted the Tribunal wide discretionary jurisdiction to award costs of proceedings before it.
The Tribunal has developed its own Rules of Practice and Procedure and in those developed specific provisions applicable to drainage appeals that very closely mirror the statutory language. 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.
Neither the Drainage Act nor Tribunal Rule 31 suggests that costs will only be awarded rarely or only in exceptional circumstances. Therefore, no party in a Drainage Act proceeding has reason to complain that the Act and the Rules do not make clear the potential responsibility for costs of the proceeding.
The Tribunal does have an alternate source of jurisdiction to make cost awards under the Statutory Powers Procedure Act. However, given that this proceeding arose under the Drainage Act, the Tribunal does not need to resort to its cost jurisdiction under the Statutory Powers Procedure Act.
Entitlement
Typically in the civil justice system, the costs of a proceeding follow the outcome so that typically an unsuccessful party is responsible to pay the costs of the successful party, as determined by the judge or tribunal.
The Appellants were completely unsuccessful in their quality of construction appeal and, therefore, the Tribunal exercises its discretion to deny the Appellants any costs.
The Municipality was completely successful in its defence of this quality of construction appeal and, therefore, the Tribunal exercises its discretion to award costs to the Municipality.
As the Tribunal’s April 23rd, 2015 reasons for decision indicate, the Appellants appeal was devoid of any merit.
The Appellants had concerns, beliefs and theories about the quality of construction of the drainage works that they wished to air before the Tribunal, but what they lacked was evidence. They had no evidence of any tree root intrusion into the drain pipes. They had no evidence of any pipe joint gasket failure. They had no evidence that the drain was not working exactly as designed. The appeal hearing consumed four full days over nearly three months. The Municipality expended significant money responding to the Appellants appeal and defending the position that the municipal drain was constructed to the construction standards called for in the Engineer’s Report.
The essence of the issue before the Tribunal now is, who should be responsible for the Municipality’s costs? The Municipality asserts that the Appellants should pay the Municipality’s costs. The Appellants assert that it is appropriate that each party bear its own costs.
The other landowners on the drain, Mr. Tom Gibson, Mr. Doug Johnston and Mr. Willem Bakker, filed written costs submissions. Common to all those submissions is that the Appellant’s appeal was unwarranted and that those other landowners should not bear any part of the costs.
The Appellant’s position that each party bear their own costs is neither fair nor reasonable in the circumstances of this case.
It is not fair because a Municipality’s source of revenues to pay costs is its tax base. In other words, an order that the Municipality bear its own costs would mean that the taxpayers of the Municipality would all share in that expense. That would mean that all taxpayers, even those who have no connection with these drainage works, will bear a share of the appeal costs. It would also mean that successful parties on the appeal, such as Mr. Gibson, Mr. Johnston and Mr. Bakker, would not only bear their own costs of participating in the appeal, but they would all share in funding the Municipality’s costs. That would not be a fair result in these circumstances.
It is not reasonable in these circumstances because the Appellants were fully aware that they could be liable for costs if unsuccessful. That awareness arose from a previous unsuccessful quality of construction appeal where they were liable for the Municipality’s costs in that case.
It is not reasonable in these circumstances because the Appellants had clear and fair advance notice from the Municipality, through its Counsel, that it would seek significant costs if the appeal was unsuccessful. On January 15th, 2015, Counsel wrote to the Appellants alerting them that the Municipality would seek such costs.
“Please be advised that if you are unsuccessful at the hearing, I will press the Tribunal for a very large award of costs so that your neighbours are not burdened yet again.”
As the hearing extended, but after the Appellants had completed their evidence, Counsel for the Municipality again communicated with the Appellants about the mounting costs, the lack of evidence supporting the appeal and an overture of a possible settlement by way of a withdrawal in exchange for reduced or no costs. On March 22nd, 2015, Counsel e-mailed Rod McCormick as follows:
“I continue to be concerned, perhaps alarmed, over the cost of all this.” . . .
“To date, North Perth has incurred legal and engineering costs of approximately $30,000.00. That will increase by approximately $5,000.00 per day of hearing time.” . . .
“With respect, in my view, you have not made out a case that the installation work was of substandard quality.” . . .
“If you are willing to withdraw your appeal to shorten the hearing, I will try to get instructions to reduce or avoid the claim for costs.” . . .
Before the last hearing day, Counsel again communicated with the Appellants about the Municipality’s costs. Counsel supplied the Appellants with a draft summary of the Municipality’s costs, which at that time approached $50,000.00. On March 31st, 2015, Counsel e-mailed Rod McCormick as follows:
“Attached is a draft summary of the municipality’s costs to date, including an allowance for tomorrow. This is becoming almost unimaginably expensive, relative to the work complained of.”
It is appropriate to acknowledge the proportionality issue alluded to in that latter e-mailed passage from Counsel to Rod McCormick. The evidence before the Tribunal was clear that the cost to construct the entire portion of the drainage works that was the focus of the appeal hearing was less than $10,000.00. The reality is that if that portion of the drain completely failed, it could be re-built five times over for the amount expended by the Municipality alone to answer this unmeritorious appeal. That analysis does not include the costs, including actual costs and opportunity costs of the Appellants, Tom Gibson, Doug Johnston and Willem Bakker, in preparing for and attending the four days of the appeal hearing.
The Appellants’ position is not reasonable in these circumstances because despite being constrained by the Tribunal’s preliminary ruling that the appeal was restricted to the quality of construction of the drain, the Appellants continued throughout the hearing to attempt to improperly delve into issues related to design or to issues related to a private drain that was not part of the municipal drain in issue and therefore outside the Tribunal’s jurisdiction. By improperly pursuing those issues throughout the hearing, the Appellants were adding needlessly to the time and expense for all concerned.
It is not reasonable in these circumstances because despite filing voluminous documents in the appeal and despite four days of oral evidence, there was no reliable evidence tendered to support any of the Appellants’ alleged quality of construction defects.
There is no question that the Appellants have a statutory right to appeal the quality of construction of the drainage works. There is also no question that at each stage where Counsel raised the issue of mounting costs with the Appellants, they had a right to continue to pursue their appeal. However, all rights are accompanied with balancing responsibilities. The balancing responsibility in these circumstances is that, at each stage where Counsel raised the mounting costs with the Appellants, they knowingly accepted the responsibility of the potential price they would pay to exercise their statutory appeal right.
The Tribunal does not consider it necessary in the circumstances of this appeal to have regard to the general cost rule (Rule 28) since this appeal is under the Drainage Act and the Tribunal has cost rules specific for Drainage Act appeals (Rules 31.08-31.10). Despite that, in the event the Tribunal did consider Rule 28, there are several bases for making a cost award against the Appellants.
One definition of “frivolous” is having no sound basis in fact. The Tribunal would characterize the Appellants’ concerns, theories and evidence on this appeal as frivolous, that is, without any sound basis in fact.
Despite the Tribunal’s preliminary ruling that the scope of the appeal was constrained to the quality of construction, the Appellants filed voluminous materials, much of which related to design rather than quality of construction. In addition, during the hearing, despite several rulings to restrict the scope to quality of construction, the Appellants continued to attempt to deal with design issues.
While much of the McCormicks’ submissions on costs focused on reiterating their appeal arguments, they did rely on the suggestion that a cost award would, in effect, have a chilling effect on their statutory right of appeal. In light of all the circumstances of this case and based on the factors reviewed in these reasons, that argument does not dissuade the Tribunal from its conclusion that the Municipality is entitled to costs in this appeal.
Before proceeding with a quality of construction hearing in respect of a drain that is working exactly as designed and where there has been no failure of the drain within the statutory warranty period of one year, the Appellants would have been well served to obtain professional advice from a lawyer or drainage engineer about the quality of construction standard in the Engineer’s Report and about the quality of the evidence they had assembled regarding the construction. Properly advised about the quality of evidence required in such circumstances, any reasonable appellant would have withdrawn the appeal.
Quantum
The quantum sought by the Municipality is significant.
The McCormick’s cost submission generally “disputes and objects” to everything sought by the Municipality and, more specifically, asserts the Municipality’s Submissions contained a “gross $10,000 error”, and “consequently, their entire filing for costs is suspect”.
However, the consequence of an adding error, which the Municipality acknowledged, is to check their math, rather than to necessarily treat the Municipality’s filing as “suspect”.
After checking the math, the Municipality’s claim for costs amounts to $49,536.80, rather than $46,736.66. That is comprised of legal fees, disbursements and HST of $27,306.68 plus the engineering witness fees, disbursements and HST of $22,230.12.
Beyond the assertion that the Municipality’s costs filing is suspect and disputing everything, the Appellants did not focus on the issue of appropriate quantum, in the event the Tribunal was inclined to make a cost award. We have no contrary evidence from the Appellants that the amounts sought are inappropriate for a four day appeal hearing.
In these circumstances, the Tribunal finds as a fact that the Municipality’s costs incurred in responding to the Appellant’s appeal are $49,536.80.
The Municipality relied on a previous Tribunal decision in the Rosene Spillway Drainage Act proceeding in support of its claimed costs. The Rosene Spillway decision does not stand as any binding precedent but it is instructive to note, from that case, that a two day hearing before the Tribunal resulted in a cost award of almost $30,000.
The Tribunal did not find the Drainage Referee’s decision in the South-West Oxford matter, relied on by the Municipality or the Tribunal’s Dean Drain decision, relied on by the Appellants, to be particularly helpful in this matter. The Referee’s decision contained no detailed reasons to assist understanding the cost award in that case. The Tribunal’s decision was based on substantially different facts.
However, the Tribunal is aware of a recently published national survey on legal costs that revealed the average legal fees for a two day lawsuit in Ontario is just over $31,0001. That figure contrasts favourably for the Municipality in this case as the legal fee component of their cost request is about $27,000 for a four day hearing.
In the context of the cost award in the Rosene Spillway case and informed of the average cost of lawsuits in Ontario, and in all the circumstances of this case, the $49,536.80 costs of the Municipality for a four day hearing are within the range of reasonable costs.
A cost award of $49,536.80 to the Municipality is also reasonable in consideration of the Tribunal’s earlier comments regarding fairness to the other landowners and taxpayers of North Perth. For every dollar by which the Tribunal reduces the Municipality’s cost award, that dollar of expense will be shared by the other landowners (Gibson, Johnston and Bakker) or will be shared by all North Perth taxpayers. Given the way this appeal was conducted by the Appellants and given the findings of fact that the appeal was devoid of merit and given the nature and quality of the evidence filed by the Appellants, it would be unfair to require any other landowner or taxpayer to share in any of the cost of this appeal.
The Costs of Mr. Gibson, Mr. Johnston and Mr. Bakker
Mr. Gibson, Mr. Johnston and Mr. Bakker have asked for costs from the Appellants related to their attendance at the appeal hearing, which necessitated their absence from work.
The Tribunal exercises its discretion to deny any costs to Mr. Gibson, Mr. Johnston and Mr. Bakker.
Tribunal Order
- The Tribunal orders that the Appellants shall pay to the Municipality of North Perth the sum of $49,536.90 as costs of this unsuccessful appeal.
Dated at Brampton, Ontario this 17th day of June, 2015