COURT OF APPEAL FOR ONTARIO
WEILER, ROSENBERG and ARMSTRONG JJ.A.
B E T W E E N :
ROBERT PEDWELL, KEITH PEDWELL, MARY PEDWELL, LINDA McLEAN and LANDPARK HOMES INC.
Peter T.M. Haney and
Thomas Bielby
for the appellants
Thomas Richardson and
Plaintiffs
Katherine King for the
(Respondents)
respondents Robert Pedwell
- and -
Keith Pedwell, Mary Pedwell
and Linda McLean
THE CORPORATION OF THE TOWN OF PELHAM and ROBERT JUDGE
Evert Van Woudenberg
for the respondent Landpark
Defendants
(Appellants)
Homes Inc.
Heard: October 16, 2002
On appeal from the judgment of Justice Jean-Jacques Fleury of the Superior Court of Justice dated August 25, 1998, reported at [1998] O.J. No. 3461.
1This appeal from the judgment of Fleury J. concerns the legality of an attempt by the appellant municipality, The Corporation of the Town of Pelham, to prevent a land development in the Niagara Region. In 1989, through a mechanism known as a testamentary devise, Tim Pedwell, a St. Catharines solicitor, created 25 lots on the edge of a piece of agricultural land that had been used to grow grapes. By using a testamentary devise, Mr. Pedwell was able to avoid the provisions of the Planning Act, R.S.O. 1990, c. P.13 and the intent, at least, of the applicable zoning by-laws. When Landpark Homes, a local builder, applied for a building permit, the Town became aware of Mr. Pedwell’s plan, and hastily enacted an interim control by-law. For approximately two years, this effectively froze the Pedwell/Landpark development plans. At the end of the two-year period the Town enacted a further by-law setting the minimum lot size on agricultural land at 1.5 acres. Since the Pedwell lots are, for the most part, one-acre, this had a significant impact on the proposed development.
2The trial judge found that the Town acted in bad faith and he directed that the Chief Building Official issue a building permit for most of the lots and declared that the by-law was a nullity. He also awarded the respondents substantial amounts for damages and pre-judgment interest because the Town had illegally held up development on the lands.
3The trial judge made strong findings of fact against the Town. The Town submits that in doing so the trial judge made palpable and overriding errors and that he misdirected himself with respect to the applicable law. I have not been persuaded that the trial judge erred in any material way. Accordingly, subject to minor adjustments concerning the amount of loss on invested funds and the scale of costs, I would dismiss the appeal with costs.
THE FACTS
4On August 12, 1988, through a numbered company, Tim Pedwell purchased an 85-acre piece of land in the Town of Pelham from Mrs. Lulu Peacock. Mrs. Peacock’s late husband had used the land to grow grapes. Tim Pedwell was acquainted with the Peacock family and performed the legal work for the transaction. He agreed that one lot would be severed off for Mrs. Peacock’s grandson. The application for severance proceeded through the Niagara Land Division Committee and, also, because of an objection from a neighbour, to the Ontario Municipal Board. By February 1, 1989, the severance had been finally approved. Because of the nature of the application, Tim Pedwell had to return the property to Mrs. Peacock by way of deed. She would then reconvey all but one acre back to him. Around this time, Mr. Pedwell became aware that Mrs. Peacock was suffering from terminal cancer. He then explained to her the concept of testamentary devises. At the time, the testamentary devise, in effect, allowed a person to subdivide land in a will. Apparently, the intent was that, for example, farmers would be able to convey lots to their children upon death without having to comply with the ordinary procedures in the Planning Act that require an approved plan of subdivision or the consent of the Land Division Committee.
5The advantage for Mrs. Peacock was that she would be able to convey lots to her children without having to go through the Land Division Committee procedure. The advantage for Tim Pedwell was that he could substantially increase the value of the land since he could, in effect, create a subdivision on agricultural land. After speaking with her family, Mrs. Peacock chose to proceed with the testamentary devise. Tim Pedwell prepared a deed to transfer the property back to Mrs. Peacock. He testified that he delivered the deed to her. She then amended her will to effect the testamentary devise, dividing the land into 25 one-acre (.4 hectare) parcels and a remaining large parcel of approximately 60 acres. The 60-acre lot and 19 of the one-acre lots were left to Tim Pedwell’s nominees, the individual respondents (for convenience referred to as the “Pedwells”). The six remaining one-acre lots were left to Mrs. Peacock’s relatives. Mrs. Peacock unexpectedly died shortly after these arrangements were made on March 10, 1989.
6In October 1989, the Pedwells entered into a contract to sell 15 of the one-acre lots to the respondent Landpark Homes Inc., a company controlled by Allan Breitkreuz, for $1.08 million. The Pedwells warranted that building permits would be available. The transfers were to close on December 31, 1990 with an option to extend the closing on seven of the transfers to October 31, 1991. The Pedwells also sold the large parcel and an access lot. That transaction was also conditional upon obtaining a building permit.
7In November 1989, Mr. Breitkreuz met with the appellant Robert Judge, the Town’s Chief Building Official about obtaining building permits. He did not present a formal application at that time. Mr. Judge was surprised that the lots existed. Breitkreuz showed him the reference plan and Mr. Judge said he would look into it. Mr. Judge also told him that he would need septic approvals from the Regional Health Unit. Mr. Breitkreuz then, sometime in the same month, spoke to someone in that Unit.
8I will review the facts concerning the Health Unit separately after outlining the respondents’ and appellants’ evidence about the dealings in late 1989 and early 1990. I adopt the trial judge’s summary of that evidence:
In early December 1989, Mr. Pedwell contacted Mr. Judge, advising him of the creation of the lots by testamentary devise and seeking clarifications as to what would be required by way of pre-requisites for the granting of building permits. The next contact was with Mr. Brooks, Town solicitor. He called Mr. Pedwell and asked for details concerning the testamentary devises. On December 6, 1989, Mr. Pedwell wrote to Mr. Brooks, giving him all of the details and asking that he instruct the building officials to issue building permits. When he heard nothing for close to a month, Mr. Pedwell became concerned over the delays and instructed Mr. Breitkreuz to attend and formally apply for the building permits. On January 3, 1990, Mr. Breitkreuz presented formal applications to Mr. Judge for all of the lots in issue.
9A substantial element of the respondents’ case rests on the proposition that had the Town officials not improperly interfered, Mr. Judge would have issued building permits prior to that date. The trial judge made that finding subject to two caveats:
I have no hesitation in concluding that, had these applications been treated normally, approval would have been granted well prior to the end of January subject to the issue of the Hazard Zoning by-law and subject also to the availability of septic tank permits.
10The caveat concerning the Hazard Zoning by-law is of no consequence to the litigation. The trial judge held that certain of the lots were in a hazard zone and could not be built on and he gave no relief in relation to those lots. The question of septic tank permits is more problematic and is a central feature of the appeal.
11The next significant series of events concerns the interim control by-law. After Mr. Judge brought the Pedwell issue to the attention of other town officials, they began discussions about ways to halt the development. They were concerned that the development was not in the public interest. On January 24, 1990, in a letter to the respondent Tim Pedwell, drafted by the Town solicitor but signed by Mr. Judge, Mr. Pedwell was informed that a decision with respect to the building applications “had been deferred pending an evaluation of the impact on Local, Regional and Provincial Planning Policies and legislation by our Town Solicitors and Consulting Planners. Unless special circumstances arise of which we are presently not aware, you can expect a decision on or before February 9th next.” Unbeknownst to the respondents or Mr. Breitkreuz, the Town solicitor recommended that the Town enact an interim control by-law to halt any development on agricultural land.
12On the same day as the letter went out to Tim Pedwell, the Town Planner, Mr. Barker, provided a report to Town Council recommending there be a planning review to address the issue of non-farm development in agricultural areas. On January 29, 1990, Council adopted this recommendation. On February 5, 1990 Council passed the interim control by-law No. 1319 pursuant to s. 38(1) of the Planning Act, R.S.O. 1990, c. P.13. Subject to certain exceptions that are not germane to this appeal, the by-law provided that no one could use land or erect a building within land zoned as agricultural. The by-law was in force for one year. The Pedwells and Mr. Breitkreuz were not given notice of the Town’s intention to pass the by-law. On February 6, 1990, Mr. Judge wrote to the Pedwells and advised them that the by-law had been passed and provided them with a copy.
13The respondents began an application before the Ontario Municipal Board to set aside the by-law and brought an appeal under s. 15 of the Building Code Act, R.S.O. 1990, c. B. 13, to review the refusal to issue the building permits. The OMB hearing was adjourned and did not proceed prior to the expiration of the interim control by-law. The s. 15 appeal was one of the matters dealt with by the trial judge at the trial that began in 1997.
14At this point it would be helpful to look at the legal landscape of testamentary devises for creating building lots. The trial judge found that although the report and the by-law were drafted in broad terms to look generally at non-farm development of agricultural lands, the by-law was “targeting only testamentary devise lots and in particular, at the time in question, the municipality only knew of the Pedwell lands as having been subdivided by testamentary devise”. The trial judge found that when Mr. Breitkreuz applied for the building permits, “There simply was no obligation to comply with the Planning Act and the Town knew this.” The appellants challenge this finding. The Town solicitor was aware that creating lots by testamentary devise was legal. However, in his evidence, he attempted to cast doubt on the creation of a large number of lots by this method. He testified that he believed that such schemes were a fraud on the Planning Act.
15Later in 1990 and 1991 a developer used the mechanism of testamentary devise in the nearby town of Niagara-on-the-Lake. In 1991 and 1992 judges of the Ontario Court (General Division) held that the transactions were valid. In January 1993, a majority of this court upheld those decisions.1 Meanwhile, in December 1990, the provincial government introduced legislation ending the right to divide property by testamentary devise. This legislation received Royal Assent in June 1991 but did not apply to wills of persons who died on or before July 26, 1990. It therefore did not affect the Peacock will.
16Sometime after the by-law was enacted, Keith Pedwell, Tim Pedwell’s father, encountered the Town solicitor at an OMB hearing and they had a discussion about the legality of testamentary devises. According to Keith Pedwell, the solicitor, Mr. Brooks, acknowledged that the Town knew of the legality of severance by testamentary devise but the Town would hold the Pedwells up “until the lots were not worth anything”. Mr. Brooks denied saying this, testifying that he told Mr. Pedwell that he knew testamentary devises were possible but that the scheme that had been adopted could be controlled under the Planning Act because it was a device to circumvent the Act. He also told Keith Pedwell that he thought the Town would be successful in blocking his application or any similar one, and that his application was incomplete. The trial judge accepted Mr. Pedwell’s version of the conversation. In doing so the trial judge relied, in part, upon the finding that Keith Pedwell had taken notes of the conversation and because that version was indicative of the kind of attitude demonstrated throughout by the Town and its officials. It was common ground on the appeal that in fact Mr. Pedwell did not take notes of this conversation. I will return to this issue later.
17On February 4, 1991, Town council extended the interim control by-law for a further year. The respondents were not given prior notice of the Town’s intention to do so.
18On January 28, 1992, the Town held a public hearing in respect of a report that recommended an amendment to the Town’s zoning by-law that would increase the minimum lot size from one acre to 1.5 acres. Notice of this meeting was published in the local paper. Although the respondents were engaged in litigation with the Town over this very issue they were not given notice of the meeting, and since they do not live in the Town they did not receive the local newspaper. The respondents had retained counsel to proceed with their various actions but they had not made a formal written request to the Town to receive notice of any proposed by-law amendments that would affect their property.
19On February 3, 1992, Town Council passed a by-law amending the zoning by-law to increase the minimum lot size from one acre to 1.5 acre as recommended in the report. The recommendation was purportedly based upon the Health Unit requirement for larger lots to accommodate septic needs. The planner who prepared this report conceded that he never talked to the Health Unit during this time about this recommendation. He testified that from previous dealings with the Health Unit he believed this increase in acreage was required.
THE ISSUES
20The appellants raise many issues but they can be summarized as follows:
(1) The trial judge misapprehended the facts relating to the Health Unit approval of the septic system.
(2) The trial judge erred in allowing the Building Code Act appeal and directing that building permits issue in respect of the lots for which Mr. Breitkreuz submitted applications on January 3, 1990.
(3) The trial judge erred in failing to comply with s. 200 of the Municipal Act.
(4) The trial judge erred in finding that the interim control by-law and the zoning amendment by-law were passed in bad faith and in quashing the latter.
(5) The trial judge erred in finding that Tim Pedwell delivered the deed to Mrs. Peacock.
(6) The trial judge erred in setting the rate of pre-judgment interest at the Courts of Justice Act rate.
(7) The trial judge erred in awarding solicitor client costs.
ANALYSIS
Introduction
21While the appellants raise some issues of law, their main arguments concern findings of fact and the inferences to be drawn from those facts. An appellate court is required to give deference to both the findings of fact and the inferences drawn by the trial judge.
22In Housen v. Nikolaisen (2002), 2002 SCC 33, 211 D.L.R. (4th) 577, the Supreme Court of Canada discussed at some length the standard of appellate review where the appellate court is called upon to review inferences from facts. The court concluded that the standard is one of considerable deference. Iacobucci and Major JJ. describe the standard at para. 23 as follows:
We reiterate that it is not the role of appellate courts to second-guess the weight to be assigned to the various items of evidence. If there is no palpable and overriding error with respect to the underlying facts that the trial judge relies on to draw the inference, then it is only where the inference-drawing process itself is palpably in error that an appellate court can interfere with the factual conclusion. The appellate court is not free to interfere with a factual conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts [emphasis added].
23As will become apparent, while I might not have made all of the same findings as the trial judge, nor drawn the same inferences, I am not satisfied that the trial judge was palpably in error.
(1) The Health Unit Approval Issue
24The question of the Health Unit approval impacts on this appeal in several ways. The appellants contend that the building applications were never complete and therefore the trial judge should not have allowed the Building Code Act appeal. The question of Health Unit approval would also affect the question of damages, even if the by-laws were passed in bad faith. If the development could not have been built because the Health Unit would never have approved of the septic system proposed by the respondents, the respondents’ damages would be minimal.
25I will outline some of the chronology concerning Health Unit approval and then set out the trial judge’s reasons. I will then address some of the appellants’ submissions on this issue.
26Mr. Judge, who was called by the respondents, testified that when Mr. Breitkreuz brought in the building permit applications, he told him he would need Health Unit approval for the septic system. Until Mr. Breitkreuz obtained that approval, the applications were not complete and could not be processed. The applications were never completed prior to the interim control by-law coming into force.
27While Mr. Breitkreuz’s evidence on this issue is not entirely satisfactory, it appears that he met with the Health Unit on two occasions before the interim control by-law was passed. On the first occasion someone, who was never identified, told him that inquiries would have to be made with the Town because the Health Unit was unaware of the development. On the second occasion, shortly after he submitted the building applications, Mr. Breitkreuz spoke to the Health Unit and was told that there was no point in his applying for septic system approval because the Town “had some issues” and when the Town was satisfied, the septic approval would be given. No objection was taken to the admissibility of this evidence and, in fact, it was introduced as a result of questions during cross-examination of Mr. Breitkreuz by counsel for the Town.
28The only other evidence, if it could be characterized as such, of the relationship between the Town and the Health Unit comes from a letter from Mr. Christensen, a manager with the Health Unit. He was not with the Health Unit in early 1990 and had no dealings with the Town over this issue at the time. However, in response to a letter from the Town’s solicitor he wrote as follows in December 1996:
In 1990 the concept of Testamentary Devise lots was a new one for this Department and as a result we spent a considerable amount of time consulting with our solicitors, Ministry of Environment and Energy consultants and planners in an effort to determine the best approach to access these lots. You must remember that a number of these type of proposals also came forward in other municipalities within the Niagara Peninsula about the same time. It is my recollection that in 1990 there was a pending legal proceeding which was to determine the legal status of these types of lots. Until that particular issue could be resolved, this Department’s position was not to recognize plans of testamentary devise lots as being legal lots of record. Therefore, had this particular development come forward prior to a legal decision being finalized, we would not have recognized the boundaries as outlined in Reference Plan 59R-6462 and requested that a complete submission be provided with engineering documentation for us to assess this multiple lot development. This would include but not be limited to submitting a proposal to address such issues as drainage, grading, ground water protection, sewage system designs, etc. Once these particulars had been submitted and reviewed, we would have been in a better position to review lot sizes and comment through normal planning channels, i.e. Draft plan approval.
29In commenting on that letter, Mr. Christensen testified that this position “came from our own solicitors of the Region after reviewing it with them”. Mr. Christensen did not become involved in the Pedwell issues until sometime in 1991.
30The trial judge accepted Mr. Breitkreuz’s evidence:
It is unclear when Mr. Judge advised Mr. Breitkreuz as to the requirement of a septic tank approval from the Health Department. In any event, what is clear is that when he approached the Health Unit, Mr. Breitkreuz was told unequivocally that he would not be getting an approval since the lots were considered illegal by the Town and he was referred back to the Town. Mr. Breitkreuz therefore did not consider taking additional steps towards securing the septic tank permits in light of the attitude taken by the Health Unit officials.
31On September 4, 1991, Mr. Breitkreuz first made a formal application for septic approval. He did so only in respect of one lot. When the employee of the Health Unit realized that this was part of a larger development he told Mr. Breitkreuz that he might have trouble getting a permit. On October 17, 1991, Keith Pedwell and Mr. Breitkreuz met with the Health Unit managers. The managers told Mr. Pedwell and Mr. Breitkreuz that the Health Unit was concerned about the legality of the lots; that in the context of a normal subdivision agreement application the Health Unit would deal with such things as soil structure and drainage; and, that the Health Unit would require an approved drainage plan before septic approval. The Unit also suggested an environmental assessment.
32On May 14, 1992, the respondents retained an expert to provide an opinion of whether the lots met the Health Unit’s requirements for septic approval as of January 3, 1990. The respondents did not, however, make any further application to the Health Unit.
33There was conflicting evidence from the appellants’ expert, Allan. Gray and the respondents’ expert, Peter McGlone, about what kind of septic system could be used. Mr. Gray was particularly concerned about the concentration of nitrates from a development of the size proposed by the respondents. He did not agree that the Class VI system designed by Mr. McGlone could meet these concerns. He testified that at least the size of the individual lots would have to be substantially increased to 2.5 acres. Mr. McGlone testified that each of the lots should be treated separately and he explained how he could design a safe Class VI system without increasing the size of the building lots.
34The trial judge accepted the evidence of the plaintiff’s expert and he resolved that issue in this way:
I am aware of the fact that the Chief Official in the Health Unit has a lot of discretion in approving or not a particular septic tank proposal. I would hope that this official would consider these applications as any other application and that he would not insist on treating them as part of a larger development. Based on my finding that these lots are exempt from planning control under the Planning Act, I have no hesitation in declaring that each lot should be considered as a single application and not as part of a whole series of lots in a plan of subdivision.
In light of the established facts and the evidence given by Mr. McGlone, I am satisfied that the following findings of fact can be made:
a) The establishment of septic systems of Class VI on the lots will not create a nuisance.
b) The establishment of septic systems of Class VI will not be or likely to be contrary to the public interest.
c) The establishment of septic systems of Class VI on the lots will not create or be likely to create a hazard to the health or safety of any person or result in the impairment of the quality of the natural environment for any use that can be made of them.
35The Town submits that the trial judge erred because he failed to consider the evidence of Bjorn Christensen, the official from the Health Unit, who testified that even if these lots were so-called lots of record, for the purposes of the Environmental Protection Act, R.S.O. 1990, c. E. 19, the entire development had to be considered. Mr. Christensen seemed to rely upon the respondents’ expert’s evidence, especially concerning the concentration of nitrates.
36It would have been preferable had the trial judge dealt squarely with this evidence. I am not convinced, however, that his failure to do so constitutes reversible error. His findings quoted above deal with the concerns raised by Mr. Christensen in his evidence. It is implicit in those findings that the trial judge, having accepted the respondents’ expert’s evidence, found that the Health Unit would have no legitimate basis for refusing to issue the approvals.
37The trial judge also relied upon the fact that Sharon Delaney, one of Mrs. Peacock’s daughters who had obtained one of the lots under the will, had no difficulty in obtaining septic tank approval in December 1989, a month before Mr. Breitkreuz made his application for building permits. The same reference plan used by Mr. Breitkreuz was attached to Ms. Delaney’s application.
38The appellants have not shown that the trial judge made a palpable and overriding error with respect to the evidence concerning the septic system.
(2) The Building Permit Appeal
39The case proceeded before the trial judge on the basis that no building permit could be issued in respect of this unserviced agricultural land until the Regional Health Unit had given its approval for a septic system. As I have said, Mr. Judge and Mr. Breitkreuz testified that when Mr. Breitkreuz brought in the applications on January 3, 1990, Mr. Judge told him that the Health Unit approval would be required. It is common ground that Mr. Breitkreuz never obtained these approvals before the interim control by-law took effect. The appellants submit that as of the time when the interim control by-law was passed, the applications for building permits were not complete and accordingly, Mr. Judge could not have issued the permits. As a result, the respondents’ right to have the building permits issued never crystallized before the by-law came into force. Accordingly, the appellants submit, the trial judge erred in allowing the Building Code Act appeal.
40The trial judge dealt with the question of Health Unit approval in this way.
I take it that no building permit will be issued with respect to unserviced lands without a septic tank permit being first issued by the Niagara Regional Health Unit. It is, in effect, a condition precedent to the granting of a building permit. It was argued at trial that because the plaintiffs failed to secure a septic tank permit prior to February 5, 1990 that their action is doomed. Let us therefore examine the circumstances of this failure to comply with the condition precedent. The only evidence that we have concerning the failure to apply to the Health Unit for a permit is in Mr. Breitkreuz’ own testimony. He states that some time in January of 1990, he contacted the Health Unit to find out their requirements. He was told, right off the bat, that since his lots were considered illegal by the Town, that there would be no permits issued and that he had better talk to the Town to remedy the situation. We all know what good talking to the Town did.
The question to be answered by me is whether or not the failure on the part of Mr. Breitkreuz to secure a septic tank permit beforehand should be fatal to his application for judicial review of the Chief Building Official’s decision. It would be a travesty of justice if it proved to be fatal. Where, as here, the Town has taken steps to notify the Health Unit of their legal concerns with respect to the creation of the lots and where the Health Unit’s response is contingent on what the Town might have to say concerning the legality of the uses, the Town should be estopped from raising the absence of septic tank permits as an obstacle in the process of this appeal. After all, even though the Health Unit is technically completely separate from the Town administration, there comes a point when as a result of the collusion of employees between themselves any such distinctions tend to disappear.
In the case at bar, there seems to be no question that all planning forces joined to attempt to thwart what they saw as a flagrant attempt to circumvent the Planning Act. Unfortunately for every one, at that time the Legislature in its wisdom had chosen to exempt testamentary devises from Planning Act controls. So there was nothing wrong with an individual working around the Planning Act in this fashion. There simply was no obligation to comply with the Planning Act and the Town knew this. Yet, two of its officials instructed the Chief Building Official to delay the processing of the applications for building permits. There is no authority for such delaying tactics [emphasis added].
41Thus, the trial judge concluded that there was collusion between the Health Unit and the Town and thus the respondents’ failure to obtain the septic approval should not have prevented issuance of the building permits. He therefore directed that the building permits issue, except for those lots in the hazard zone and subject to the respondents obtaining Health Unit approval. I will assume in the appellants’ favour that the evidence does not support the finding that there was collusion between the Health Unit and the Town and that the evidence at its highest merely shows that the Town and the Health Unit had the same concern about the legality of these lots.
42However, I do not consider that to be fatal to the respondents’ case. As I read Mr. Judge’s evidence, he would have issued the building permits, since the application was otherwise complete, had Mr. Breitkreuz obtained the necessary approvals from the Health Unit. There is evidence that other Town officials told Mr. Judge to “hold off” in giving the permits. While Mr. Judge was entitled to seek advice from whomever he thought would assist him in making his decision, he could not refuse to issue the permits, if they otherwise complied with the law. I agree with the trial judge that if the Town officials ordered Mr. Judge to refuse the permits, this would be an improper interference in his duties.
43I agree with the trial judge that it would have been unfair to dismiss the appeal because of this technical deficiency when the Health Unit had said that it would not process the applications until the problems with the Town had been sorted out. This placed Mr. Breitkreuz in a “Catch 22” position. In the circumstances, the trial judge made the only order that he could. He could not direct that the Health Unit give its approval. He ordered that the Chief Building Official issue a permit to the plaintiffs “subject to the securing by the said Plaintiffs of a septic tank permit”.
44The appellants raised two further objections to the trial judge’s decision on the building permits. First, they submit that Mr. Judge had the legal obligation to refuse to issue the permits because the Regional Official Plan is “other applicable law” within the meaning of s. 6 of the Building Code and the proposed development violated the terms of the Regional Official Plan. Section 6 provides that the chief official shall issue a permit except where the proposed building “will contravene any other applicable law”. There is some support for the appellants’ position. See Campeau Corporation v. Township of Gloucester et al. and two other actions (1979), 22 O.R. (2d) 652 (C.A.) affirming (1978), 21 O.R. (2d) 4 (H.C.J.).
45The appellants, however, failed to establish that the development would violate the Regional Official Plan. The appellants rely upon Objective 6.A of the Plan concerning “Policies for Agriculture”. That policy directs the municipalities to preserve the predominant use of land in good general agricultural areas for agriculture of all types including livestock operations and compatible uses such as forestry and conservation of plants and wildlife. The policy then sets out the circumstances in which the municipality may consent to severances including severances for farm-related residential lots. Under this policy, the development contemplated in Mrs. Peacock’s will would not have been permitted had she been required to seek consent from the Land Division Committee. However, because they were created by testamentary devise, the severances in this case did not require such consent. After Mrs. Peacock’s death, the provincial government considered the problem created in this region by severances through testamentary devise and amended the Planning Act accordingly. However, that legislation was not made retroactive so as to apply to Mrs. Peacock’s will. Further, the size of the lots complied with the Town’s Official Plan as it stood when the applications for building permits were made. I would therefore not give effect to this ground of appeal.
46Finally, the appellants submit that the Environmental Protection Act is “other applicable law” and that the evidence shows that the septic system proposed by the respondents would release nitrates into the soil in such quantities as to violate the Act. Related to this ground of appeal is the submission that the trial judge erred in permitting the respondents to recall their expert in reply to respond to the appellants’ evidence on this issue.
47I accept that in the circumstances of this case, the Environmental Protection Act can be considered other applicable law within the meaning of s. 6(1) of the Building Code Act. See Welwood v. Huron-Kinloss (Township) Chief Building Official (2002), 29 M.P.L.R. (3d) 1 (Ont. S.C.J.). Although compare Burns v. Perth South (Township) Chief Building Official (2001), 54 O.R. (3d) 266 (Ont. S.C.J.).
48The trial judge had the discretion to permit the respondents to recall their expert to respond to the nitrate issue. The question of reply evidence principally arose because of unexpected evidence given by the appellants’ expert, Mr. Gray, as to the Ministry policies that he relied upon for his opinion that proposed development would violate the Environmental Protection Act. The trial judge ruled that the respondents should be entitled to recall their expert, Mr. McGlone, on that topic. I am not persuaded that the trial judge exercised his discretion improperly or that Mr. McGlone’s evidence exceeded the scope of the trial judge’s ruling. On the substantive issue, as I have indicated, the trial judge preferred the evidence of Mr. McGlone to Mr. Gray and was in fact quite critical of the latter’s evidence, which he found “not very impressive”. The trial judge found that the system designed by Mr. McGlone would not create a hazard to the health or safety of any person or result in the impairment of the quality of the natural environment. The trial judge was entitled to accept Mr. McGlone’s evidence and accordingly, this aspect of the appeal cannot succeed.
(3) Section 200 of the Municipal Act
49Before dealing with the trial judge’s reasons for quashing the by-law I will address an issue raised by the appellants for the first time on appeal. Section 200 of the Municipal Act, R.S.O. 1990, c. M. 45 (new Municipal Act, 2001, S.O. 2001, c. 25), provided that a proceeding shall not be brought for anything done under a by-law that is invalid “until one month after the by-law … has been quashed or repealed”. The interim control by-law has long expired by operation of s. 38(1) of the Planning Act. By-law No. 1455 was passed by the Town council on February 3, 1992 and increased the minimum lot size to 1.5 acres for residential lots in the agricultural zone. The respondents applied to quash that by-law on the basis that it was enacted in bad faith. The application to quash the by-law was heard with the respondents’ action for damages. The appellant Town consented to this procedure and never pleaded s. 200 of the Municipal Act in its statement of defence. The issue was raised for the first time on appeal.
50In my view, the holding in Shaver Hospital for Chest Diseases v. Slesar et al. (1979), 15 C.P.C. 97 (Ont. C.A.) applies. In Slesar, the defendant had pleaded that the contract upon which the plaintiff sued was illegal because it violated two provincial statutes. The issue, however, was virtually abandoned at trial and evidence that might have been relevant to that issue was not introduced for that purpose, although there was some evidence on the issue in the record. On appeal, the defendant appellant attempted to resurrect the issue. Lacourciere J.A. at p. 101 referred with approval to a statement by Lord Halsbury from Browne v. Dunn (1893), 6 R. 67 (H.L.) at 76:
… that you cannot take advantage afterwards of what was open to you on the pleadings, and what was open to you upon the evidence, if you have deliberately elected to fight another question, and have fought it, and have been beaten upon it.
51In my view, that is the case here. The Town consented to this procedure. It must have perceived some tactical advantages to having all of the matters dealt with at the same time by the same trial judge. By the time the trial judge heard this matter it was almost eight years since the building permit applications were made and over five years since the by-law was passed. It would be manifestly unfair to require the respondents to begin their damage action all over again because of an issue that could and should have been raised at the first instance. I would not give effect to this ground of appeal.
52Accordingly, the trial judge did not err in holding that the building permits should have been issued prior to the town passing the interim control by-law on February 5, 1990.
(4) Bad Faith
53The appellants’ principal submission on this appeal is that the trial judge erred in finding that the Zoning Amendment By-law 1455 and the interim control by-law were passed in bad faith and in quashing the former. In holding that the by-laws were passed in bad faith the trial judge made a number of findings of fact that can be summarized as follows:
Mr. Judge took direction from other town officials to delay the granting of the building permits, and, but for the intervention of these persons the building permits would have been granted in the normal course before the interim control by-law was passed on February 5, 1990, subject to health unit approval.
At the direction of town officials, Mr. Judge wrote a misleading letter to Tim Pedwell on January 24, 1990 giving the impression that the delay in issuing the building permits was for evaluation of the impact on planning policies and legislation by the town solicitors and planners. In fact, by that time the decision had been made to use the interim control by-law to block the development.
The interim control by-law itself was targeting only the Pedwell development even though on its face it appeared to have broad application.
Although the town officials were aware that the interim control by-law would directly affect the Pedwells and Mr. Breitkreuz, they were given no notice that the Town intended to pass that by-law.
Mr. Brooks told Mr. Keith Pedwell that he knew that severance by testamentary devise was legal but the Town would give them a “real hard time” and hold up the development until they were not worth anything.
The Town did not give notice to Mr. Breitkreuz or the Pedwells of the intent to renew the interim control by-law or the intent to pass Zoning Amendment By-law 1455 even though they knew of their direct interest in those by-laws.
The Town did not give notice to Mr. Breitkreuz or the Pedwells of the public hearing on January 28, 1992 to consider passage of the zoning amendment by-law.
Publication of notice in the Pelham Herald was a sure way to ensure that notice would not come to the attention of Mr. Breitkreuz or the Pedwells.
The Town deliberately avoided the prospect of a public hearing where the Pedwells would have had the opportunity to present their side of the issue.
The Zoning Amendment By-law that was eventually passed itself violates the Regional Official Plan, which states that the maximum lot size is one acre. The real purpose behind the by-law was to frustrate the Pedwell plan.
54The appellants attack many of these findings of fact and the legal effect of those findings. I will briefly deal with those submissions.
a. Mr. Judge took direction from the Town officials
55The appellants submit that Mr. Judge had the right to consult with Town officials before issuing the building permits. The trial judge stated the following:
Surely it is imperative that other Town officials not interfere with the Chief Official in the performance of the duties imposed upon him pursuant to section 6 of the Act. Once he has been appointed he should be left alone to perform the functions entrusted to him. If the Chief Building Official is to deal fairly with each application, it is imperative that any such decision making be done impartially. The true measure of impartiality is the ability of the judge or other official to take some distance from his own preconceived notions and prejudices to arrive at a fair decision, looking only at the issues in question. Mr. Judge therefore should have reached his decision without consulting all other planners and officials and the decision should have been made on the basis of the requirements outlined in section 6 of the Act and not on the basis of extraneous concepts and policies [emphasis added].
56I agree with the appellants that the trial judge erred if he held that Mr. Judge had no right to consult with other Town officials. However, in my view his finding on this aspect of the case did not turn on that holding. He found that Mr. Judge made his decision on the basis of “extraneous concepts and policies”. In any event, the trial judge went on to hold that these were not consultations but instructions from the Town officials that “smack of interference rather than advice”. This finding is supported by the evidence. A particularly troubling aspect of the evidence is that Mr. Judge conceded that at the direction of the lawyer retained by the Town he swore a misleading affidavit in these proceedings in April 1990. In the affidavit, Mr. Judge purports to explain the legitimate planning reasons for refusing to issue the permits. Mr. Judge testified, however, that the affidavit was drafted by the lawyer and did not reflect his belief at the time. There could hardly be stronger evidence that Mr. Judge was not simply taking advice but was acting solely on the direction of the Town officials.
57The appellants also submit that Mr. Breitkreuz did not make a proper application for building permits since he had no intention of building the type of home specified in the application. Mr. Breitkreuz submitted identical plans for relatively small houses. His admitted intent was to actually build larger custom homes. The trial judge did not deal with this issue. There was, however, evidence from Mr. Judge that it is possible to submit revised plans, updated septic approval and additional fees, in which case the permit can be transferred. In my view, Mr. Breitkreuz adequately explained why he submitted the plans that he did. He and the Pedwells suspected that something was not right, and so he submitted a plan that he knew should receive approval because he had previously used it. As it turned out, their suspicions were correct.
b. The delaying tactics
58The appellants submit that the purpose of the interim control by-law is to protect the public interest and that it was open to the Town to delay the building permit applications until the interim control by-law was in place. There is no question that the purpose and effect of an interim control by-law is to suspend the rights of owners and developers to undertake otherwise permitted uses. Further, as Laskin J.A. said in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 35 O.R. (3d) 321 (C.A.) at 338:
An important purpose of interim control by-laws is to permit a municipality to change its mind, to reconsider its land use policies. Whether an area is suitably zoned, whether development should be suspended in the public interest, and whether proposed projects are compatible with a municipality’s long range planning objectives are matters to be decided by municipal councils, not by courts. The role of the court is limited to ensuring that the municipality did not exceed its powers or exercise those powers in bad faith.
59However, I do not read the trial judge’s reasons as being at variance with any of these principles. He had to consider whether these broad powers were exercised in bad faith. He thought that one indication of bad faith was that Mr. Judge wrote a misleading letter to the respondents. Mr. Judge confirmed that the letter was misleading. It was open to the trial judge to consider that this was simply one indication to be considered with the other evidence of bad faith. I do not think the trial judge misused this evidence or placed unreasonable emphasis upon it.
c. The by-law was targeted at the Pedwell development
60There was conflicting evidence at the trial about whether the by-law was targeted only at the Pedwell development or whether there were a number of other developments in the Town that were using the testamentary devise as a severance vehicle. In my view, the better view of the evidence is that the Pedwell development was the only one about which there was any real concern. There were other developers using this device in the area, but they were not developing lands in the Town of Pelham.
d. Lack of notice
61The trial judge was very critical of the Town for failing to give notice to the respondents. The appellants point out that under the legislation no notice needs to be given before an interim control by-law is passed, and that by giving notice in the Pelham Herald of the public meeting and the intent to pass the amended zoning by-law, the Town complied with the applicable legislation. However, the trial judge did not misapprehend the legislation or the evidence in this respect. He acknowledged, “Council did not technically offend any requirements contained in the legislation with respect to the giving of notice”. He also expressly noted that under s. 38(3) of the Planning Act there is no need for notice to affected persons before the interim control by-law as passed. His point was a different one. The only purpose of the interim control by-law was to frustrate the Pedwell development. He considered that the Town’s failure to give notice was a further example of bad faith, even if the technical legal requirements were complied with. By their conduct the Town “deliberately avoided the prospect of a public hearing where the Pedwells might have called them to task on some of the more dubious aspects of the proposed remedies”. While I might not have drawn the same conclusion from the evidence, I cannot say that the trial judge’s view was unreasonable. As I have indicated, his findings of fact and the inferences he drew from those facts are entitled to deference.
e. The Brooks/Pedwell conversation
62I have already referred to this incident in outlining the facts. The parties agree that the trial judge misapprehended the evidence when he held that Keith Pedwell had taken notes of the conversation with Mr. Brooks. However, the trial judge gave two reasons for accepting the evidence of Mr.Pedwell over that of Mr. Brooks, and stated his principal reason in these terms:
I have no difficulty preferring the evidence of Mr. Pedwell over that of Mr. Brooks for the simple reason that the kind of attitude demonstrated throughout this application by the Town and its officials was quite illustrative of the mind set shown by Mr. Brooks at the time.
63The trial judge also noted that the action for damages was commenced shortly after this conversation. In the circumstances, the trial judge’s error about the note-taking was not material and does not undermine his finding of fact about the contents of the conversation.
f. The amendment to the zoning by-law to increase the lot size
64The trial judge found that the real purpose behind the amendment to the zoning by-law was to frustrate the Pedwell development plan. This was a critical finding by the trial judge. It is implicit in that finding that the increase in the lot size had no real planning purpose and was simply designed to prevent a development for which there was otherwise no legal impediment. Once the Court of Appeal dismissed the appeal in the Niagara-on-the-Lake case and since the provincial government failed to make the new legislation retroactive to cover the respondents’ case, there was no legal impediment to the Pedwell development. The trial judge noted that the amendment to the zoning by-law to increase the maximum lot size was inconsistent with the Regional Official Plan. Not surprisingly, the trial judge was suspicious of the Town’s real motives for the amendment. He wrote as follows:
It does not require much by way of scepticism to assume that the real purpose behind this by-law was to frustrate the Pedwell plan. This, in my opinion, also stands as a further indication of the bad faith of the Town in passing this by-law.
65It is not entirely accurate to say that the amendment violated the Regional Official Plan. Policy 6.A.10(f) provides as follows:
(f) The size of any new lot shall not exceed an area of 0.4 hectares (1 acre) except to the extent of any additional area deemed necessary to support a well and private sewage disposal system as determined by the Medical Officer of Health or such other person appointed for that purpose by the Ministry of the Environment [emphasis added].
66Mr. Barker did the planning work that led to the amendment to the zoning by-law. He prepared the report that recommended the increase in the maximum lot size. He testified that he did so because of recommendations from the regional health services department. However, Mr. Barker conceded that he did not talk to anyone in the Health Unit about this change and no one in the department advised him that the one-acre lot size was no longer acceptable. He based his recommendation on reports he had read and his “public and private sector work that was done throughout the Region”.
67In my view, there is a reasonable basis for the trial judge’s conclusion concerning the purpose of the by-law amendment and the trial judge properly considered this to be an important indication of bad faith.
68The appellants also submit that the trial judge misapprehended the effect of the amendment since it did not defeat the Pedwells’ development plan. The appellants point out that the Pedwells would be able to proceed with the development by combining two of the proposed lots. In my view, this is not a basis for interfering with the trial judge’s conclusion. The effect of the zoning by-law was to substantially reduce the number of lots available for development and therefore substantially interfere with the Pedwells’ proposals. The trial judge was entitled to rely on this factor as an indication of bad faith on the part of the Town.
69To conclude, I am not persuaded that, given the deference to which the trial judge’s findings of fact are entitled, that there is any basis for interfering with these findings. The appellants have not shown that the trial judge made any palpable and overriding errors of fact or drew unreasonable inferences from those facts.
g. The test for bad faith
70The appellants submit that the trial judge erred in his approach to finding bad faith on the part of the Town. They submit that the trial judge erred in failing to adopt the modern approach to review of the validity of by-laws. That approach is set out in Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231 at 244 and 247:
Recent commentary suggests an emerging consensus that courts must respect the responsibility of elected municipal bodies to serve the people who elected them and exercise caution to avoid substituting their views of what is best for the citizens for those of municipal councils.
These considerations lead me to conclude that courts should adopt a generous deferential standard of review toward the decisions of municipalities. To say this is not new. Lord Green said it in Wednesbury, and his words have been oft-quoted in Canada. Nevertheless, many courts have continued to take a narrow, interventionist approach to municipal decisions.
71Similarly, in Equity Waste Management of Canada, this court overturned a decision by the motion judge finding that an interim control by-law had been passed in bad faith. Laskin J.A. at page 339 characterized the motion judge’s approach as “too interventionist”. The appellants rely upon the decision in Equity Waste Management and similarly argue that the trial judge’s approach was too interventionist.
72Some parts of the trial judge’s reasons suggest a more interventionist approach than is permitted under authorities. For example, he said the following:
In these days of increasing accountability of governments to the citizens who have voted them into office, I have no doubt that it would be considered only normal to insist that a municipal corporation act in the public interest but as well that in doing so it demonstrate good faith to the parties affected by its decision.
73However, when the trial judge’s reasons are considered in their entirety I am not persuaded that he erred. He was alive to the role the court has in reviewing the validity of by-laws and that it could only intervene if there was a finding of bad faith. The trial judge, moreover, accepted that the Town officials believed that they were acting in the public interest. As he said, “their own subjective assessment of the righteous character of their conduct does not resolve the problems of whether they acted in good faith in so doing”. The findings by the trial judge did not rest on second-guessing planning decisions by the Town. He was concerned about the process adopted and the evidence that convinced him that the Town’s purpose was to target a development that its officials knew to be legal. There was evidence to support his findings in that respect. As in this court’s decision in Re Hall and City of Toronto et al. (1979), 23 O.R. (2d) 86 at 92 it was open to the trial judge to find that there was “a singular absence of frankness and impartiality, which are the usual indicia of good faith” and a “deplorable lack of frankness and a calculated disregard of the appellant’s right to make the best use of his property in accordance with the existing by-laws”. Again, while I would not necessarily have reached the same conclusion, I cannot say that the trial judge’s conclusion is unreasonable. He had the benefit of a lengthy trial in which the entire course of conduct was canvassed with many witnesses for the plaintiffs and the defendants. He made findings of fact that I have found are supported by the evidence and he drew inferences that are not unreasonable. In my view, this court is not entitled to interfere with his conclusion.
(5) Delivery of the Deed
74The appellants submit that the trial judge’s finding that Tim Pedwell delivered the deed to Mrs. Peacock was perverse. The appellants submit that if there was no delivery of the deed, Mrs. Peacock never regained title to the lands that she purported to deal with in her will. Tim Pedwell testified that he delivered the deed to Mrs. Peacock. The trial judge believed him and found no evidence to contradict him. He was not persuaded that the fact Mrs. Peacock returned the deed to Tim Pedwell for registration undermined his testimony. There is no basis for upsetting this finding of fact.
(6) Pre-judgment Interest and Claim for Loss of Use of the Funds
75The trial judge fixed the rate of pre-judgment interest at the rate provided for in the Courts of Justice Act, R.S.O. 1990, c. C. 43, which in the second quarter of 1990 was 13.5%. The appellants submit that it would have been more appropriate to fix a blended rate since over the several years leading up to the trial there was a fluctuation in the rates. The trial judge delivered reasons addressing this question and was not persuaded he should depart from what he considered was the respondents’ prima facie right to the interest rate in accordance with s. 128 of the Act. He did not consider that fluctuation in the rates alone was a sufficient reason to depart from the rate provided for in the Act. I see no error in principle in his reasons and would not interfere.
76In a related submission, the appellants submit that the trial judge erred in permitting an amendment to the statement of claim to permit the Pedwells to claim an additional amount by reason of the losses suffered as a result of their inability to invest the gross amount from the sale of the lands. The trial judge was satisfied that the appellants were not prejudiced by this amendment. They had been placed on notice of this potential claim in a letter from Tim Pedwell on January 29, 1990. This claim was not included in the statement of claim because, as found by the trial judge, the respondents had erred in their interpretation of s. 128. Further, the trial judge was not persuaded that the appellants would have conducted the case any differently.
77The appellants submit that even if the amendment was properly made the respondents failed to adduce sufficient reliable evidence as to how they would have invested the money to establish the amount of their loss. The trial judge permitted the respondents to reopen their case and lead evidence about how they would have invested the money. The respondents attempted to show that they would have invested at least some of the money in high return investments. While the trial judge seemed to find the respondents truthful, he found the evidence speculative and therefore used the Courts of Justice Act rate of 13.5%. In my view, this was an error in principle. The burden was on the respondents to establish this part of their case. They did not introduce satisfactory evidence about how they would have used the money or even how the purported investments would have fared over the period. In those circumstances, I can see no justification for using the 13.5% rate, which was almost the peak rate over the period. A more reasonable measure of the loss would be the blended rate of 6.5%. I would allow the appeal to that extent.
(7) Costs
78The trial judge awarded costs against the appellants on a solicitor-client basis. The trial judge made this order because the Town maintained its position that the building lots were illegal; used the interim control by-law to freeze development; and then passed the zoning amendment by-law that the trial judge found to have been passed in bad faith. The trial judge has a wide discretion in assessing the scale of costs. However, in my view, he erred in fixing costs on a solicitor-client scale on this basis. The Trial Judge found that the respondents had made out their case but he also acknowledged that the Town officials acted in what they thought was the public interest. This was therefore not a case for solicitor-client costs.
79However, the trial judge made a further finding that the respondents had made an offer to settle that was not quite as favourable to them as the judgment. Thus, he held that in the alternative the respondents were entitled to solicitor-client costs from the date of the offer. Accordingly, the respondents are entitled to their costs of the action on a party and party basis to the date of the offer and thereafter on a solicitor-client basis.
DISPOSITION
80Accordingly, I would dismiss the appeal except as indicated with respect to the loss on the use of funds and solicitor-client costs. The respondents having been almost completely successful are entitled to their costs of the appeal on a partial indemnity basis. The parties provided the court with bills of costs and brief submissions. At trial, the respondents were represented by one set of counsel. On appeal, the Pedwells retained new counsel. The respondents have submitted bills of cost that in total exceed $100,000. The interests of all of the respondents were identical and yet there seems to have been little collaboration between the respondents’ counsel in their preparation. In my view, this resulted in duplication of work and the incurring of unnecessary costs. Accordingly, I would award one set of counsel fees in the amount of $45,000 inclusive of disbursements and GST for the respondents to divide between themselves as they see fit.
Signed: “M. Rosenberg J.A.”
“I agree K.M. Weiler J.A.”
“I agree Robert P. Armstrong J.A.”
RELEASED: “KMW” MAY 9, 2003
Footnotes
- Niagara-on-the-Lake (Town) v. Gross Estate (1993), 12 O.R. (3d) 1 (C.A.).
