Ontario (Natural Resources) v. 555816 Ontario Inc., 2007 CanLII 20785 (ON SCDC)

Court File and Parties

Court File No.: 476/07; 482/06, and 50706 Released: 20070606

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Re: Ministry of Natural Resources v. 555816 Ontario Inc. (Campbellville Sand and Gravel Supply) et al. Regional Municipality of Halton v. 555816 Ontario Inc. (Campbellville Sand and Gravel Supply) et al.

Before: Swinton J.

Counsel: Ronald E. Carr for the Ministry of Natural Resources, Moving Party Roger T. Beaman for the Regional Municipality of Halton, Moving Party Claudio R. Aiello for 555816 Ontario Inc., Responding Party

Heard at Toronto: May 22, 2007

ENDORSEMENT

1The Ministry of Natural Resources (“MNR”) and the Regional Municipality of Halton (the “Region”) seek leave to appeal two decisions of the Ontario Municipal Board (“OMB”) issued September 25, 2006 and October 3, 2006. The first dealt with the merits of a proposed amendment to a site plan under s. 16 of the Aggregate Resources Act, R.S.O. 1990, c. A.8 (“ARA”) put forth by the MNR and the second with the costs of the proceeding.

2The MNR proposed an amendment to the site plan for a quarry operated by the responding party Campbellville Sand and Gravel Supply (“the Licensee”) near Campbellville. Sand and gravel have been excavated at the site to the point that the water table has been exposed. The existing site plan contemplated the deposit of inert fill in the quarry, while the proposed amendment would leave the pond exposed.

3The pit is in a hydrogeologically sensitive area, because it is above a sand and gravel aquifer that forms a major source of drinking water for residents of Milton and the surrounding area. The issue at the OMB hearing was the appropriate method of rehabilitation of the pit.

4The OMB rejected the MNR’s proposed amendment to leave the pit unfilled and ordered the pit be filled on terms set out in the decision. The Board member gave lengthy reasons for the merits decision, as well as a supplementary decision on the terms of the fill protocol and the wording of the order. Subsequently, the Board member determined that the Licensee should be awarded costs on a full indemnity basis in the amount of $664,956.46, plus a premium of $60,000. The MNR was ordered to pay 75% of the costs and the Region 25%.

5An appeal lies to the Divisional Court from a decision of the OMB on a question of law with leave of the Court (Ontario Municipal Board Act, R.S.O. 1990, c. O.28, s. 96(1)). The test for leave is well known: there must be good reason to doubt the correctness of the decision, and the issue of law must be of sufficient importance to merit the attention of the Divisional Court (Concerned Citizens of King Township v. The Township of King (2000), 42 O.M.B.R. 3 (Div. Ct.) at 7).

6The proper standard of review of a decision of the OMB is correctness or reasonableness, depending on the nature of the particular question of law. Questions of law that engage the specialized expertise of the OMB, such as the interpretation of its own statute, attract a standard of reasonableness (London (City) v. Ayerswood Development Corp., 2002 3225 (ON CA), [2002] O.J. No. 4859 (C.A.) at para. 7).

Reasonable Apprehension of Bias

7The MNR submitted that there was a reasonable apprehension of bias because the Board member closed her mind to the site plan amendment proposed after an evidentiary ruling that the MNR could not lead evidence relating to the past misconduct of the Licensee. As well, it is said that she formed a negative attitude to the MNR and its counsel that gave rise to a reasonable apprehension of bias.

8The test for a reasonable apprehension of bias is whether an informed person, viewing the matter realistically and practically, would conclude that the decision-maker, whether consciously or unconsciously, would not decide the matter fairly (R. v. R.D.S., 1997 324 (SCC), [1997] S.C.J. No. 84 (S.C.C.) at para. 31).

9The fact that the Board made an evidentiary ruling against the MNR does not mean the member had closed her mind to the evidence and submissions in the case. The Board member gave lengthy, detailed and careful reasons for the decision to permit fill of the pit, under certain conditions. She carefully examined the risks of leaving the pond intact and permitting filling and considered the submissions of all parties.

10The main basis for the MNR’s allegation of bias arises from the costs award, in which the Board member was very critical of the conduct of the MNR and its counsel. However, she made her comments following her decision on the merits, and she did so in the context of the OMB’s rules on costs. In general, costs are awarded only if there has been some misconduct by a party. The Board member found such misconduct on the basis of the material that was before her at the time of the costs hearing, which included material that she did not have during the hearing on the merits.

11In my view, the MNR has not shown that there is a good arguable case that there was a reasonable apprehension of bias on the part of the Board member when she made her decision on the merits. I would not grant leave on this issue.

Evidentiary Issues

12The MNR and the Region also raised a number of evidentiary issues. Neither has raised a legal issue that leads me to doubt the correctness of the Board’s decision.

Evidence of Past Misconduct

13Both the MNR and the Region submit that the Board erred in ruling that evidence relating to past misconduct by the Licensee was irrelevant and inadmissible. At the time of this ruling, the Board identified the issue in the hearing as “the risk posed by reason of the quarry operation and rehabilitation on the subject site, given the character of the ground water table and the aquifer, which is used by the municipality for drinking water” (Reasons, July 18, 2005, issued August 2, 2005, p. 6). The Board member held that the core issue was the “appropriate regulatory controls” to protect the aquifer, not the conduct of a particular licensee, as there were other parts of the ARA providing means to address compliance. She went on to say at p. 7:

In this case, the inquiry of the Board is to determine whether the proposal by the MNR makes sense in the context of current social, environmental, health and safety and other scientific knowledge and applicable social, environmental, health and safety and planning policies and regulations. Thus, the compliance record of this Licensee is not a relevant consideration for the matters in issue. Furthermore, the Board finds that such evidence could be unfairly inflammatory and prejudicial and divert the parties and the Board from the true nature of the issue the Board must decide.

14While the Board member refused to hear evidence indicating blame, she invited evidence gathered during investigative and enforcement activities showing the condition of the site as it was observed from time to time by witnesses, as well as evidence about the operational structure of the Licensee, insofar as it went to the Licensee’s capacity or ability to implement regulatory controls.

15The moving parties submitted that she erred, as the Licensee’s non-compliance with an existing site plan was a relevant consideration in determining whether the site plan should be amended. Both parties relied on the fact that s. 12 of the ARA, the provision allowing a party to apply for a licence to operate a quarry, included the party’s history of compliance with regulations as a relevant consideration for the grant of a licence. They submitted that misconduct should also be considered under s. 16 of the ARA when a proposal is made to amend a site plan.

16I see no good reason to doubt the correctness of the evidentiary ruling. The Board member reasonably characterized her function as regulatory, rather than enforcement. She did not err in determining that non-compliance or misconduct was not a mandatory consideration under s. 16, as there is no reference to particular criteria in that section dealing with the amendment to a site plan.

17The issue before her was the need for a change to the site plan to better protect the groundwater. She reasonably determined that this required her to consider the relative risks of filling and not filling the pond. As part of that determination of relative risks, she considered the history of the site and the capacity of the operator.

18I was not given transcripts of the hearing to show exactly what was before the Board in terms of the condition of the site. However, it appears that the parties were able to present relevant evidence about the condition of the site, as shown in the reasons on the merits on p. 21, where the Board described the MNR evidence as primarily related to observations of and investigations into the type of fill material that the MNR staff had observed being placed on the site and the results of tests of fill material samples at the site.

19There is not good reason to doubt the correctness of the Board member’s ruling excluding evidence about “blame” on the part of the Licensee, nor her application of s. 16 of the ARA.

Operating Capacity of the Licensee

20The MNR claims that the Board erred in finding that the operational capacity of the Licensee was irrelevant, when it had earlier ruled that such evidence was relevant.

21There is no error of law in the treatment of the operating capacity of the operator. In the passage cited by the MNR, the Board was addressing the probative value and weight of this evidence, not treating it as irrelevant.

Consideration of the Licensee’s Finances

22The Region submits that the Board erred in law by considering irrelevant evidence about the Licensee’s finances. These considerations arose in a discussion of conclusions and directions about groundwater monitoring during the fill operation. This evidence was relevant to the Board’s conclusion about the least risky alternatives, and the Board made no error of law in admitting this evidence.

The Test of Harm to the Environment

23The MNR submits that the Board erred in considering “actual adverse impact” on the environment instead of “potential harm”. In fact, the sentence referred to comes from the costs decision, not the decision on the merits. In the latter, it is clear that the Board was considering the risk of potential harm, as well as evidence of actual harm.

Application of the Precautionary Principle

24The Region submits that the Board erred in its application of the Precautionary Principle. The Region interprets this principle as requiring the halting of all activity with respect to the pit that may pose some risk to the environment. However, the Board member found, as she was entitled to do on the evidence before her, that there were risks associated with both filling and not filling. She chose the alternative that she concluded would provide the least risk to the water quality. In her reasons, she applies the Precautionary Principle – for example, at pp. 50 and 55 of her reasons. There is no error of law identified in her application of that principle.

The Role of the Ministry of the Environment

25The MNR submits the Board erred in criticizing it, in the costs decision, for failing to disclose the position of the Minister of the Environment. I fail to see any error of law raised in this submission.

Hydrogeological Evidence

26With respect to the costs decision, the MNR and Region submit that the Board should not have criticized the hydrogeological evidence. I see no error of law here. Having heard all the evidence and having reached her conclusions, the Board member was critical of the MNR’s failure to obtain the opinion of its own independent expert, and of the problems she saw with the Region’s experts.

The Costs Decision

27The OMB has broad discretionary powers with respect to costs, as set out in s. 97 of the OMB Act. Pursuant to s. 91, the Board has the power to make general rules regulating its practice and procedure. Rule 99 provides that a party may request an order for costs where the party believes that another party has “acted clearly unreasonably, frivolously, vexatious or in bad faith considering all the circumstances” [sic].

Evidence of Settlement Discussions

28The MNR submits that the Board erred in considering evidence of settlement discussions in the course of determining whether to award costs. There is no error of law here. Settlement discussions are privileged until a dispute has been resolved. The material considered by the Board with respect to offers and efforts to settle were relevant to her determination whether to award costs because of the conduct of the parties.

The Procedure Adopted

29The Region submits that the Board failed to follow Rule 100.1(iii) because it did not have before it invoices for expenses or an affidavit from a representative of the corporate Licensee verifying that the costs claimed were incurred directly and necessarily for the time period in question.

30The Board appears to have been of the view that it was proceeding under Rule 100.1(i), holding an oral hearing on costs. There are no requirements for particular materials to be filed under that section. In any event, the Board has discretion pursuant to Rule 6 to grant all necessary exceptions to the rules as it considers appropriate to ensure that the issues are determined in a just manner. The Board member was satisfied with the material before her, and there is no apparent injustice to the moving parties because of the way in which the costs hearing proceeded. Therefore, I would not grant leave on this issue.

The Method of Determining Quantum

31The Region submits that the Board erred in failing to apply the principles in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.) and in failing to explain adequately why the Region was held responsible for 25% of the costs.

32The Board member gave detailed reasons for her findings of misconduct by the Region and MNR, and she adequately explained why she chose to hold the Region responsible for 25% of the costs.

33While Boucher is not mentioned, she examined the dockets before her and heard lengthy submissions before concluding that the costs sought were reasonably incurred in the proceeding. Her decision on costs is entitled to significant deference. There is no good reason to doubt the correctness of her decision on these grounds. Even if there were such reason, this issue is not of sufficient importance to grant leave to appeal.

The Conduct of the Licensee

34The Region submits the Board erred in failing to consider the conduct of the Licensee. However, at pp. 22-23 and 24 of the costs decision, the Board considered the Licensee’s conduct.

The Premium

35The final issue is the premium of $60,000. This is the first time the Board has awarded a premium. While the Board member observed that the rules were silent on this issue, she exercised the discretion to award costs found in s. 97(1) of the OMB Act and ordered a premium. In doing so, she relied on the Court of Appeal decision in Walker v. Ritchie (2005), 2005 13776 (ON CA), 197 O.A.C. 81, which was subsequently overturned by the Supreme Court of Canada (2006 SCC 45, [2006] S.C.J. No. 45). She stated that such an award is to be made only in rare circumstances, and she then considered the outstanding contribution to the proceeding by counsel for the Licensee, a sole practitioner, and the substantial risk that he might not recover his fees, both because of the death of Mr. Guerrieri, the principal of the Licensee, and the uncertainty about operations at the quarry sites.

36The OMB does not generally awards costs. In fact, the comments on its rules state that an order for costs is very rare. The rules provide that costs may be awarded where the conduct of a party has caused prejudice to other parties (see Rules 99 and 106).

37There is good reason to conclude that the Board erred in law in awarding a premium for a number of reasons. First, costs are in the nature of an indemnity to the client for costs spent in the prosecution or defence of an action. In Walker v. Ritchie, the Supreme Court described a risk premium as a financial arrangement between the plaintiffs and their counsel (at para. 27). In this case, there is a letter in the Motion Record from the Licensee’s counsel to opposing counsel prior to the costs hearing in which he states that he has no arrangement with the Licensee for the payment of a premium. The unsuccessful party cannot be expected to pay more that the client would be expected to pay. Given the lack of an agreement by the Licensee to pay a premium, the Board has awarded more than full indemnity by ordering a premium.

38Second, the Board’s award of the premium is inconsistent with the rules of the Board respecting the award of costs. The rules focus on the misconduct of a party against whom an award of costs is sought, not the result achieved by the party seeking costs and the risks assumed by its counsel.

39Third, even if the Board can award a premium, one of the major considerations in awarding a premium is the risk to counsel that there will be no payment. There is further reason to doubt the correctness of the decision, given the lack of evidence before the Board about the Licensee’s inability to pay and about payments to its counsel in 2005.

40The power of the Board to award a premium and the considerations that should enter into such an award are issues of law of general importance that should be considered by the Divisional Court.

41Therefore, leave is granted only on the issue whether the OMB erred in law in awarding the premium in the costs order. Otherwise, the leave to appeal motions are dismissed.

42When leave to appeal is granted, costs are normally reserved to the panel hearing the appeal. However, given that the Licensee was generally successful on these motions, I invite submissions on costs, if the parties cannot agree. The responding party may make written submissions on costs within 21 days of the release of this decision. The moving parties shall respond within 14 days thereafter.

Swinton J.