COURT FILE NO.: 430/07

DATE: February 25, 2008

SUPERIOR COURT OF JUSTICE – DIVISIONAL COURT – ONTARIO

RE: LAKE WASEOSA RATEPAYERS’ ASSOCIATION (Moving Party)

and

SYBILLE PIEPER and THE DISTRICT MUNICIPALITY OF MUSKOKA (Respondents)

COUNSEL: Chris Paliare, for the Moving Party

Al Burton, for the Respondent Sybille Pieper

David Royston for the Respondent the District Municipality of Muskoka

HEARD: January 15, 2008

E N D O R S E M E N T

MOLLOY J:

Introduction

[1] The applicant Lake Waseosa Ratepayers Association (“LWRA”) seeks leave to appeal from a decision of a Review Panel of the Ontario Municipal Board (“OMB”) dated August 27, 2007 (“the Review Decision”).

[2] Sybille Pieper owns a large parcel of property with 340 metres of water frontage on Lake Waseosa. In 2002, she applied to sever her property so that there would be four lots instead of one. The Town of Hunstville refused to approve her application and Ms Pieper appealed to the OMB. The LWRA had standing at the OMB proceeding and took the position that the severance should not be allowed because of the risk that further development could adversely affect water quality in the lake by increasing phosphorous levels. After a hearing, OMB Member Sniezek ruled in favour of the LWRA position and dismissed Ms Pieper’s application, by Order dated January 9, 2007 (“the Original Decision”).

[3] Ms Pieper sought a review of the Original Decision, pursuant to s. 43 of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28 (“the Act”). The Review Panel hearing that motion ordered a re-hearing of the issues related to water quality in Lake Waseosa. It is from that decision of the Review Panel that the LWRA now seeks leave to appeal.

Decision of the Review Panel

[4] The Review Panel found two errors which it held required a rehearing on the water quality issue. First, the Review Panel held that the original Board erred in fact and in law by applying the wrong standard. The Review Panel said that the original Board “relied on a policy to approve new lots ‘if there is no net increase in phosphorous levels in the lake’” whereas the proper policy to apply was that there be “no further impairment of [water quality in] the lake.” Second, the Review Panel held that the original Board “failed to provide sufficient reasons outlining the proper balancing of evidence related to the ultimate risk to the overall water quality of Lake Waseosa” in relation to the board’s application of the “precautionary principle”. The Review Panel stated, “If the Board is to rely on such a principle, it must set out a clear application and standard to be met.”

Issues

[5] Mr. Paliare, for the moving party, identifies four issues, which he submits are legal errors made by the Review Panel warranting leave to appeal:

(i) it erred in granting party status to the District Municipality of Muskoka on the rehearing motion;

(ii) it failed to apply the correct test for determining if a rehearing should be ordered; and,

(iii) it erred in holding that the original Board applied the wrong test for determining whether to permit the proposed development; and,

(iv) it erred in finding that the original Board wrongly applied the precautionary principle.

The Test for Granting Leave to Appeal

[6] An appeal lies to the Divisional Court from a decision of the OMB on a question of law with leave of the Court: s. 96 (1) of the Act. The parties agree as to the applicable test for leave to appeal. Before granting leave to appeal, I must be satisfied that: (a) there is reason to doubt the correctness of the Review Decision; and (b) the Board’s error involves a question of law of “sufficient importance to merit the attention of the Divisional Court”.

Party Status Before the Review Panel

[7] I see no legal error by the Review Panel with respect to the granting of party status to the District on the motion before it. That is a question of procedure and a matter within the discretion of the Review Panel. There is no basis for this Court to intervene. Further, that question does not involve issues of such importance to warrant the attention of this Court. Leave to appeal on that issue is refused. Further, to the extent that the decision of the OMB Chair to direct a full motion to consider the request for a rehearing is an issue on this leave application, leave is not granted. That decision is not one that is properly subject to review as there is no legal issue involved; it is an exercise of discretion.

Review Panel’s Reasons for Test Applied in Ordering a Rehearing

[8] The power of the OMB to rehear any application is found in s. 43 of the Act and is very broadly stated, without any restrictions on the circumstances in which such a rehearing may be ordered.

[9] The OMB also has the power under s. 91 of the Act to make rules regulating its practice and procedure. It has exercised that power by enacting Rules 112-118 dealing with s. 43 rehearing requests. Rule 115 provides:

Reasons for Review The Board will hear a motion to review a decision only if the reasons provided in the request raise an arguable case that the Board,

(a) acted outside its jurisdiction;

(b) violated the rules of natural justice and procedural fairness, including those against bias;

(c) made an error of law or fact, such that the Board would likely have reached a different decision;

(d) heard false or misleading evidence from a party or witness, which was discovered only after the hearing and could have affected the result; or

(e) should consider evdience which was not available at the time of the hearing, but that is credible and could have affected the result.

(Emphasis added)

[10] Rule 118 states that if the Board decides to proceed with a motion for review, “the parties will be expected to make submissions on whether the request meets the Board’s reasons for review in Rule 115”.

[11] In its reasons for ordering a new hearing in this case, the Review Panel does not identify the test that it applied to come to that determination, or indeed if it even applied a particular test. No mention is made of the Rules at all. If one of the grounds in Rule 115 was relied upon, it could only have been the error of fact and law ground in Rule 115(c), since there was no reference in the material filed to any other ground except for new evidence, and no reference in the Review Panel decision to any new evidence it considered. However, if the Review Panel was relying on Rule 115(c), it apparently failed to consider the second branch of that test, which is that the error would have likely resulted in a different decision being reached.

[12] The respondents argue that the Review Panel is not obliged to follow its own Rules, and that the Rules are merely guidelines that the OMB is free to disregard if it chooses. The respondents rely in this regard on Russell v. Shanahan, 2000 17036 (ON CA), [2002] 52 O.R. (3d) 9 (C.A.). However, what the Court of Appeal was referring to in that case was merely a Practice Direction of the OMB. The Rules applicable to rehearing requests enacted under s. 91 of the Act did not exist at the time the Review Panel made its decision in Russell v. Shanahan and were therefore not considered by the Court of Appeal.

[13] There is a considerable difference between formal Rules enacted under powers granted under the Act and internal guidelines or directives. It is at least arguable that the OMB is bound by its own Rules and that by those Rules has limited the circumstances in which its s. 43 power may be exercised.

[14] The failure to provide reasons for a decision can amount to a legal error. In this case, I am not able to determine the basis upon which the Review Panel decided that a rehearing was warranted under its own Rules. That is a legal error.

[15] The test that is applicable to requests to the OMB for a rehearing is a matter of some importance to the general public. In its own policy statements and through many of its own decisions the OMB has emphasized the importance of finality in OMB decision-making. The issue of the applicability of the Rules in this regard, and the failure of the Review Panel to clearly apply those Rules, is a legal issue of sufficient importance to warrant the attention of this Court. Therefore, leave to appeal is granted with respect to this issue.

Legal Error re Test Applied by Original Board

[16] The Review Panel held that the test applied by the original Board was that the development would be approved only “if there is no net increase in phosphorous levels” and that the correct policy framework to apply was whether water quality in the lake was impaired. The appropriate test to be applied is a question of law. There is good reason to doubt the correctness of the Review Panel’s decision in that regard. The review Panel lifted one sentence from the original Board’s decision out of context. It is apparent from looking at the Reasons of the original Board as a whole that water quality and the impact of the development on water quality was front and centre in the Board’s reasoning and formed the basis of its decision. On the evidence before the Board, the level of phosphorous in the water was the central issue of water quality and was therefore understandably the focus of much of the Board’s reasoning.

[17] The applicable test for dealing with development issues in the Muskokas and the impact of phosphorous on water quality in the Muskoka area are matters of considerable public importance that have a potential impact on any new lakefront development in the environmentally sensitive lakeshore areas of Muskoka. Accordingly, the second branch of the leave to appeal test is also met. Leave to appeal is granted on this issue.

Legal Error re the Precautionary Principle

[18] The application of the “precautionary principle” is an important and emerging principle for land-use planning in Ontario. It is not clear from the Review Panel’s reasons whether its objection to the Board’s application of the precautionary principle was solely a question of fact. The Review Panel seems to have connected its reasons on this point to its finding that the Board also applied the wrong test. Ironically, one of the difficulties cited by the Review Panel was the failure of the original Board to provide adequate reasons, particularly with respect to “a clear application and the standard to be met”. I am unsure what that means. There is no “standard” to be met with respect to the precautionary principle. It is a policy consideration that provides that where there is a risk of serious or irreversible environmental damage, one should err on the side of caution even when there is not full scientific certainty with respect to the risk: 114957 Canada Ltée (Spraytech Société d’arrosage) v. Hudson (Town), 2001 SCC 40, [2001] 2 S.C.R. 241 at para 31 (S.C.C.). Further, the original Board did consider the prospect of risk from numerous sources and did appear to engage in the balancing process that the Review Panel was of the view was missing.

[19] There is good reason to doubt the correctness of the Review Panel’s decision on this point. It is a matter of broad importance warranting the attention of this Court. Accordingly, leave to appeal is granted on this point.

Decision

[20] In the result, leave to appeal is granted on the following questions:

(i) Do the OMB’s Rules apply to the decision of a Review Panel under s. 43 of the Act? If so, what is the legal test and was it correctly applied by the Review Panel in this case?

(ii) Did the Review Panel err in finding that the original Board applied the wrong test for determining whether the proposed development should be approved?

(iii) Did the Review Panel err in finding that the original Board wrongly applied the precautionary principle?

[21] Costs are left to be determined by the Divisional Court Panel hearing the appeal.

MOLLOY J.

Date: February 25, 2008