COURT FILE NO.: 340/08

DATE: 20090811

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CHAPNIK, FERRIER, and MOLLOY JJ.

B E T W E E N:

CITY OF TORONTO

Appellant

• and -

R & G REALTY MANAGEMENT INC.

Respondent

Andrew Stikuts and Sharon Haniford, for the Appellant

Alan Dryer and Bryan Finlay, for the Respondent

HEARD: July 16, 2009

REASONS FOR DECISION

MOLLOY J.:

A. INTRODUCTION

[1] The City of Toronto (“the City”) appeals from the decision of the Ontario Municipal Board (“the Board”) dated June 17, 2008 permitting R & G Realty Management Inc. (“R&G”) to convert a 20 storey rental apartment building to a condominium. The Board decision reverses an earlier decision of the City denying R&G’s application for condominium conversion. The apartment building in question is located in Toronto at 1465 Lawrence Avenue West, near Keele St., and currently consists of 161 units with “affordable rents,” meaning those rents fall below the average market rate level.

[2] Leave to appeal the Board decision was granted by Karakatsanis J. on the following issues:

Did the Board err in failing to apply or properly interpret the Planning Act, ss 1-3 and 51(24) by failing to consider the city-wide housing policy in the Provincial Policy Statement 2005 and the City’s New Official Plan policy relating to condominium conversion?

[3] For the reasons set out below, I find that the Board’s decision is unreasonable in that the Board applied the wrong legal test in considering the Provincial Policy Statement 2005 and failed to properly consider the specific provisions of the City’s Official Plan dealing with condominium conversions.

B. STANDARD OF REVIEW

[4] The City argues that the Board applied the wrong legal test and failed to consider matters that it was required by law to consider, thereby committing an error of law. The City submits that the standard of review should therefore be correctness. R&G submits that the Board decision should be reviewed on a reasonableness standard.

[5] There is a statutory right of appeal to this Court from decisions of the Board. There is no privative clause. These are factors that support a lower level of deference. On the other hand, the right of appeal is only on questions of law and only with leave of the Divisional Court. Further, the Board is a highly specialized tribunal in a technical field not part of the normal expertise of the Court. Those factors support a higher degree of deference.

[6] To the extent that this appeal involves questions of law, those issues relate to the interpretation and application of the Planning Act and related planning documents, specifically the City’s Official Plan and Provincial Policy Statement 2005. The Supreme Court of Canada has noted that deference is owed to a decision maker with specialized expertise interpreting its home statute or a closely related statute: Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at para 54; Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12 at paras. 25 and 44. The Board has specialized expertise in planning matters, including the interpretation of its constitutive and related enactments.

[7] I am therefore of the view that the applicable standard of review for this appeal is that of reasonableness. (See also, London (City) v. Ayerswood Development Corp.(2002), 34 M.P.L.R. (3d) Ont.C.A. at para 7; Vincent v. DeGasperis, [2005] O.J. No. 2890 (Div.Ct.) at paras 30-31)

C. RELEVANT STATUTORY PROVISIONS

[8] The purposes underlying the Planning Act, R.S.O. 1990 c. P13 (the Act) are set out in s. 1.1 of the Act and include the following:

(b) to provide for a land use planning system led by provincial policy;

(c) to integrate matters of provincial interest in provincial and municipal

planning decisions;

(f) to recognize the decision-making authority and accountability of municipal

councils in planning;

[9] The Board is required under s. 2(j) of the Act to “have regard to” matters of provincial interest such as “the adequate provision of a full range of housing.”

[10] A stronger directive is contained in section 3(5)(a) of the Act which states that a decision of the Board “shall be consistent with the policy statements issued under subsection 1 that are in effect on the date of the decision.”

[11] Pursuant to s. 3(5)(a) of the Act, the Board decision in this case was required to be consistent with Provincial Policy Statement 2005 (“PPS 2005”), which requires planning authorities “to provide for an appropriate range of housing types and densities required to meet projected requirements of current and future residents of the regional market area”: PPS 2005 s. 1.4.1 and 1.4.3. It is common ground between the parties that “regional market area” is a defined term and in this case means the City of Toronto as a whole.

[12] Section 4.5 of PPS 2005 states that the official plan is the “most important vehicle for implementation” of the policy statement. It follows that official plans are required to be consistent with PPS 2005.

[13] Condominium conversions are required by s. 9(2) of the Condominium Act, 1988, S.O. 1998, c. 19 to comply with s. 51(24) of the Planning Act. This directs the Board “to have regard to” whether the planned conversion “conforms to” the City’s Official Plan.

[14] The applicable Official Plan is the “new Official Plan” adopted by Toronto City Council in 2002, the housing provisions of which came into force in November 2006. The relevant provisions of the Official Plan are:

3.2.1 Adequate and affordable housing is a basic requirement for everyone. Where we live and our housing security contribute to our well-being and connect us to our community. Current and future residents must be able to access and maintain adequate, affordable and appropriate housing. The City’s quality of life, economic competitiveness, social cohesion, as well as its balance and diversity depend on it.

3.2.8. The conversion to condominium, or the severance or subdivision, of any building or related group of building, containing six or more rental housing units will not be approved unless:

(a) all of the rental housing units have rents that exceed mid-range rents at the time of application, or

(b) in Council’s opinion, the supply and availability of rental housing in the City has returned to a healthy state and is able to meet the housing requirements of current and future residents. This decision will be based on a number of factors, including whether:

(i) rental housing in the city is showing positive, sustained improvement as demonstrated by significant net gains in the supply of rental housing including significant levels of production of rental housing, and continued projected net gains in the supply of rental housing;

(ii) the overall rental apartment vacancy rate for the city of Toronto, as reported by the Canada Mortgage and Housing Corporation, has been at or above 3.0 per cent for the preceding four consecutive annual surveys;

(iii) the proposal may negatively affect the supply or availability of rental housing or rental housing sub-sectors including affordable units, units suitable for families, or housing for vulnerable populations such as seniors, persons with special needs, or students, either in the City, or in a geographic sub-area or a neighbourhood of the City; and

(iv) all provisions of other applicable legislation and policies have been satisfied.

D. THE ISSUES

[15] Three issues are raised.

(i) Did the Board apply the wrong test under s. 3(5) of the Act when considering PPS 2005?

(ii) Did the Board err in its consideration of the Official Plan by failing to properly address the specific requirements under s. 8 before condominium conversions can be approved?

(iii) Did the Board misinterpret PPS 2005 as applying only to the neighbourhood rather than the City as a whole?

E. ANALYSIS

(i) Did the Board apply the wrong test?

[16] The appellant argues that the Board erred in its consideration of s. 3(5) of the Act by applying the wrong legal test in its consideration of PPS 2005. The Act requires that Board decisions “be consistent with” policy statements. The appellant argues that the Board applied the lesser standard of merely “having regard to” PPS 2005.

[17] The Board deals with the issues of matters of provincial interest and PPS 2005 together at paragraphs 16 to 22 of its decision. At paragraph 16, the Board sets out the test to be applied as follows:

16. In carrying out its responsibilities under the Act, the Board is required to have regard to matters of provincial interest such as the adequate provision of a full range of housing (ss. 2j of the Act and any policy statements issued by the Minister (ss. 3(5) of the Act). (emphasis added)

[18] Having set out the test, the Board proceeded (in paragraphs 17 to 21) to summarize the evidence presented by the parties. The Board referred to expert witnesses for the City who presented evidence that the proposed conversion was not consistent with PPS 2005. The Board next reviewed the competing expert evidence on the point and stated at para.19, “Mr. Goldberg [R & G’s expert] disagrees with [the City’s experts] and believes that the proposal does satisfy the policies of the PPS.” The Board then stated that it found the evidence of Mr. Goldberg to be “more persuasive.”

[19] The Board then stated its conclusion, in the final sentence of para. 22, as follows:

Therefore, in considering the evidence presented, the Board finds the conversion has regard to matters of public interest within the meaning of subsection 2j of the Act and the housing policy objectives set out in the PPS. (emphasis added)

[20] At both paragraphs 16 and 22 of its reasons, the Board correctly stated the test to be applied with respect to ss. 2(j) of the Act. However, the Board was clearly in error with respect to the test under s. 3(5) of the Act. The Board treated the two as having the same test, whereas the statute requires a higher standard for policy statements issued by the Minister, such as PPS 2005. The Board was required to decide this case in a manner “consistent with” PPS 2005, not merely to “have regard to” it.

[21] It is worth noting that this provision has undergone various revisions over the years. The current wording requiring consistency with the provincial policy statements came into force in March 2005. Prior to that, the section merely required decision makers to “have regard to” provincial policy statements. The use of the words “shall be consistent with” in s. 3(5), as contrasted to the “have regard to” language used in other sections of the Act and in prior versions of this very provision, is a strong indication that the Legislature intended a higher standard for adherence to provincial policy statements. OMB decisions are required to follow such policies, not merely take them into account.

[22] The respondent argues that there was no error by the Board because it correctly stated the test when summarizing the evidence of Mr. Goldberg and then found the evidence of Mr. Goldberg to be persuasive.

[23] I disagree. In dealing with this issue at paragraph 19, the Board was merely summarizing evidence, not directing its mind to the correct legal test to be applied. The two crucial paragraphs on this point are the initial paragraph (para. 16 - where the Board states the test to be applied) and the last paragraph (para. 22 - where the Board states its conclusion). At both these crucial points the Board incorrectly stated the test and equated the PPS standard to the lower standard to be applied when considering provincial interests under s. 2 (j) of the Act. It appears from the analysis that the Board was unaware that a different test was to be applied for the PPS. This is not a situation in which deference is owed to the Board or where it can be said that the interpretation adopted by the Board was a reasonable one. Such a fundamental error in approach cannot be said to be reasonable.

(ii) Did the Board err in its consideration of the Official Plan?

[24] The appellant argues that the Board erred by applying the Official Plan’s general policy concerning the need for a full range of housing, rather than the more specific provisions of the Plan dealing directly with the conversion of rental units to condominiums. In particular, the appellant argues that the Board failed to apply what it characterizes as “the mandatory test” under the Official Plan, which requires that the supply and availability of rental housing in the City must have returned to a healthy state to meet the needs of current and future residents, showing positive sustained improvement as demonstrated by significant net gains in the supply of rental housing, significant levels of productions of rental housing and continued projected net gain in the supply of rental housing, pursuant to s. 3.2.1.8 (b)(i) of the Plan.

[25] It must first of all be noted that an Official Plan does not have the force of a statute. It is a “recommendation, or statement of intention only, which may or may not be implemented by the municipality by the enactment of appropriate zoning by-laws”: Re Woodglen & Co. Ltd. and City of North York (1984), 47 O.R. (2d) 614 at 617 (Div.Ct.): Toronto (City) v. Goldlist Properties Inc., [2003 O.J. No. 3931, 67 O.R. (3d) 441 at para 49 (C.A.). In that sense, it cannot be said that any part of the Official Plan in this case set out a “mandatory test” that the Board was obliged to follow.

[26] That said, the Board was obliged to “have regard to” the Official Plan and to consider it carefully within the context of the overall policy objectives. This means more than merely referring to the provisions of the Plan in passing. The Board must seriously reflect upon the Plan, and take it into account in making its decision. (See: Concerned Citizens of King Township v. King (Township) (2000), 42 O.N.B.R. 3 at 9 (Div.Ct.); Material Handling Problem Solvers Inc. v. Ministry of Municipal Affairs and Housing (2002), 44 O.M.B.R. 364 at 399-403 (Board).

[27] Further, PPS 2005 and the Official Plan are inter-connected. One of the stated purposes of the Planning Act is to recognize the decision-making authority of municipal councils in planning: s. 1.1(f) of the Act. The Official Plan is the most important vehicle for implementation of PPS 2005 and the Board’s decision is required to be consistent with PPS 2005: s. 4.5 of PPS 2005 and s. 3(5) of the Act. Accordingly, the Board is required to treat the Official Plan with due deference and ought not to depart from the planning principles embodied in it without articulating good reasons for doing so.

[28] The Board concluded, at para 115 of its reasons:

Based on Mr. Goldberg [sic] evidence the Board finds that the proposed conversion conforms to the new City of Toronto Official Plan and as such an amendment to the Official Plan is not required to support the conversion proposal.

[29] In coming to that conclusion, the Board made extensive reference to the general provisions in the Official Plan calling for a full range of housing types in the City. That is an appropriate consideration. However, it is not the only consideration. The Board neglected to properly consider the more specific provisions of the Official Plan dealing with condominium conversions and the limited situations in which they will be approved, as set out in Housing Policy 3.2.1.8. In particular, the Official Plan directs a consideration of whether the supply and availability of rental housing has returned to a healthy state based on stipulated factors that include: significant net gains in the supply of rental housing, significant levels of production of rental housing, and continued projected net gains in the supply of rental housing (s. 3.2.1.8 (b)(i)) and an overall rental apartment vacancy rate for the City at or above 3% as reported by CMHC for the preceding four consecutive annual surveys (s. 3.2.1.8(b)(ii)). It is important to note the mandatory language of the condominium conversion policy. This is not a mere expression of an overall housing policy endorsing a mixture of housing types. It prohibits the conversion of affordable rental housing units into condominiums unless specific requirements are met, including the specific requirements of ss. 8(b)(i). Before approving such a conversion, it was incumbent upon the Board to at the very least consider these specific requirements, determine on the evidence whether they had been met, and, if not met, provide a rationale for why the conversion in question should nevertheless be approved.

[30] The Board’s decision on this issue focused primarily on vacancy rates, which exceeded 3% over the prior 6 years. Based on those statistics, and on the testimony of an expert called by R & G that a loss of 161 units would only be a reduction of 0.2 of 1% in the rental supply of the entire City, the Board concluded (at para 65) that the proposed conversion “would not have an adverse impact on the supply of rental accommodations” in the subject area and the City as a whole. The Board stated at paragraph 81 of its reasons that it accepted that “preserving conventional rental is a clear policy objective; however, there are also other housing policies and criteria that the Board must consider.” The Board then again cited the vacancy rates in the City and the neighbourhood in question and the need for a healthy mix of ownership and rental in the neighbourhood. The Board then concluded (at para. 83) that the conversion meets the criteria set out in s. 51 (24) of the Act (requiring the Board to “have regard to” whether the conversion complies with the Official Plan).

[31] At no point in this analysis does the Board consider the criteria set out in ss.8(b)(i). In particular, there is no reference to whether there has been a “significant net gain in the supply of rental housing” or “significant levels of production of rental housing” or “continued net gains in the supply of rental housing.” Indeed, the evidence of the City’s experts, as summarized by the Board, is entirely to the contrary, including that: (a) based on population growth projections and the trend towards smaller household sizes, more rental units will be needed in Toronto for the future; (b) most of the new housing built in Toronto in recent years has been for ownership; (c) the loss of rental units has been greater than the construction of private rental units; (d) rental completions since 1997 have comprised only 5% of all housing production in Toronto, in contrast to 37% for the prior 10 years; (e) there are fewer secondary rental market units available, with a decline of 4100 condominium rentals from 1996 to 2001; and (f) the low level of production of new rental units will not be able to keep up with losses to the rental housing stock in the future: Board Reasons at paras. 39, 41, and 46-52. The Board does not refer to any evidence that would refute the evidence of the City’s expert evidence. The Board simply fails to deal with it at all. Indeed, the Board does not even mention the specific criteria set out in ss. 8(b)(i).

[32] It is no answer to say, as the Board did, that statistically speaking the reduction of 161 units is not significant when taken as a percentage of all the rental units in the City of Toronto, or that there would be no “adverse impact” on the supply of housing as a result of the conversion. The Official Plan, which was current and up-to-date, called for a significant improvement in the availability of rental housing in the City before any more rental buildings could be converted to condominiums. The approach taken by the Board is illogical in that it would erode, bit by bit, the availability of rental housing, since no one building would be statistically significant in a city this size until the reduction of overall rental housing had plummeted substantially. Given the lack of rental housing production, this would create precisely the opposite result to the planning purposes underlying the City’s Housing Policy.

[33] The only reference at all to the specific requirements of s. 8 of the Housing Policy is in the final section of the reasons in which the Board dealt with whether the conversion would require an Official Plan Amendment. At paragraph 112, the Board referred to the City’s expert evidence that the conversion proposed would not comply with Policy 8. The Board then observed that Policy 8 (b) permits a conversion if the supply and availability of rental housing in the City has returned to a healthy state and stated: “In Mr. Goldberg’s opinion the supply and availability of rental housing in the local area is healthy, as well as that of the City.” Again, the Board failed to even mention the specific criteria set out in Policy 8(b)(i) for determining whether the rental housing market has returned to a healthy state. The Board also did not mention what evidence was provided by Mr. Goldberg to support such an opinion. The Board merely stated that it accepted Mr. Goldberg’s opinion and that an amendment of the Official Plan was therefore not required.

[34] In considering the responsibility of the Board to “have regard to” provincial policy (under the previous version of the Act) A. Campbell J. held in Concerned Citizens of King Township at p. 9:

To “have regard to” falls somewhere on the scale that stretches from “recite them then ignore them” to “adhere to them slavishly and rigidly.”

And further on that same page:

Taking the reasons as a whole it is open to serious question whether the Board “had regard” to the provincial policies in the sense of considering them carefully in relation to the circumstances at hand, their objectives and the statements as a whole, and what they seek to protect, and determining whether and how the matter before it is affected by, and complies with, such objectives and policies, with a sense of reasonable consistency in principle.

[35] It cannot be said that the Board in this case “had regard to” provisions of the Official Plan which it did not even mention. It particularly cannot be said that the Board seriously reflected upon those provisions and took them into account in reaching its decision. It would appear from the decision that the Board completely ignored the specific provisions dealing with condominium conversions set out in the Official Plan, those being the most relevant provisions requiring the Board’s consideration.

[36] As previously noted (at para. 27 above), the Official Plan and PPS 2005 are interconnected in a manner that reinforces the Board’s responsibility to give serious consideration to the Official Plan. In this regard, the Board’s error with respect to the legal requirement that its decision be consistent with PPS 2005 is compounded by its failure to give due weight to the City’s Official Plan.

[37] The Board is not entitled to simply accept the opinion of an expert before it and adopt it as the opinion of the Board without stating its reasons for doing so: Toronto (City) v. Romlek Enterprises, [2009] O.J. No. 2232 at para 34 (Div.Ct.). That is particularly so when there is no evidence cited by the Board to support the opinion, clear evidence cited by the Board contradicting that opinion, and no reasons given for preferring the testimony of one witness over the other.

[38] In Dunsmuir, at para. 47, the Supreme Court of Canada held, “A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to the outcomes.” The Board in this case completely departed from the policy set out in ss. 8(b)(i) of the Official Plan, without articulating any reasons for doing so. Such a decision cannot be said to be “reasonable.” Likewise, the Board provided no reasons for adopting the opinion of R & G’s expert and rejecting the evidence of the City’s expert. In the absence of such reasons, it cannot be determined whether the outcome is reasonable. Further, the failure to state reasons for a decision, rather than bald conclusions, is sufficient grounds to set aside the decision in and of itself: Gray v. Ontario (Disability Support Program Director) (2002), 59 O.R. (3d) 364 (C.A.); Kalin v. Ontario College of Teachers (2005), 75 O.R. (3d) 523 (Div.Ct.).

[39] In my view, given the extent to which the Board ignored and seriously departed from crucial provisions of the official Plan without stating any reasons for doing so, its decision is unreasonable and cannot stand.

(iii) Did the Board misinterpret the PPS as applying only to the neighbourhood?

[40] The appellant further argues that the Board misconstrued PPS 2005 by failing to appreciate that the relevant area for the application of the PPS was the City as a whole, not merely the smaller neighbourhood in which the subject apartment building was located.

[41] It is true that the Board does refer extensively to the availability of rental housing within the neighbourhood of this building. Indeed, the primary focus of the Board appears to have been the impact of this conversion on the neighbourhood itself, rather than the entire City. However, the Board’s consideration was not limited to the neighbourhood; it also considered the City as a whole. For example, the Board stated, at para. 63, “The Board has considered the evidence regarding the supply of rental housing in the subject area and the City of Toronto.” Later at para 65, the Board stated, “The Board finds the proposed conversion would not have an adverse impact on the supply of rental accommodation in the subject area and the City of Toronto as a whole.” There are other such examples.

[42] The difficulty with the Board’s reasons on this issue is that often its conclusions are baldly stated without specific findings as to the supporting evidence. Since the bulk of the evidence to which detailed reference is made relates to the neighbourhood, as opposed to the City, and the conclusions are simply stated as being “in the neighbourhood and in the City,” it is hard to know whether the Board in fact directed its mind to applying the PPS 2005 policy based on the City as a whole, as opposed to just one small portion of the City.

[43] However, the Board does repeatedly refer to being satisfied as to the requirements being met for the City, so it does appear that the Board was at least aware that the test was required to be applied in that manner, rather than just within the neighbourhood. The fact that the Board erred in stating the legal test to be applied with respect to PPS 2005 and the lack of fulsome reasons to support its conclusions about City-wide impact, give me some concerns as to the reasonableness of the Board’s decision in this regard. However, if this were the only problem with the Board’s decision, I might not have considered it a sufficient basis to intervene. However, when coupled with the complete disregard of the most relevant provisions of the official Plan, I am more concerned.

F. CONCLUSION

[44] The Board committed fundamental and unreasonable errors with respect to its interpretation of s. 3(5) of the Planning Act and failed to properly consider whether the proposed conversion conformed with the Official Plan. The nature of these errors is such that they undermine the foundation for the decision as a whole. The decision is unreasonable and cannot stand. Accordingly, the decision of the Board is set aside. This matter is remitted for a new hearing before a Board differently constituted. Costs to the City fixed at $10,000 for the leave application and $22,000 for the appeal, payable forthwith.

MOLLOY J.

CHAPNIK J.

FERRIER J.

Released: August 11, 2009

COURT FILE NO.: 340/08

DATE: 20090811

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CHAPNIK, FERRIER, and MOLLOY JJ.

B E T W E E N:

CITY OF TORONTO

Appellant

• and -

R & G REALTY MANAGEMENT INC.

Respondent

REASONS FOR JUDGMENT

Chapnik J.

Ferrier J.

Molloy J.

Released: August 11, 2009