Houston v. 530675 Ontario, 2017 ONSC 6419

CITATION: Houston v. 530675 Ontario, 2017 ONSC 6419

DIVISIONAL COURT FILE NO.: DC-17-828

DATE: 20171207

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

N. Spies, M. G. J. Quigley, M. G. Ellies JJ.

B E T W E E N:

LESLIE HOUSTON and JULIA SEIRLIS

Joseph W. Richards II, for the Appellants

Appellants (Tenants)

• and -

530675 ONTARIO LIMITED O/A MAYFIELD ESTATES LP

Joseph J. Hoffer, for the Respondent

Respondent (Landlord)

Sabrina Fiacco, for the Landlord Tenant Board (Social Justice Tribunals Ontario)

HEARD: October 5, 2017

REASONS FOR DECISION

ellies j.

OVERVIEW

[1] The appellants are tenants of the respondent landlord. They appeal three related orders of the Landlord and Tenant Board (the “Board”) which authorized an above-guideline rent increase (an “AGI”) for municipal taxes and charges under s. 126(1) of the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (the “RTA”).

[2] The Board held that fees paid by the landlord to the municipality for a Rental Housing Licence (a “RHL”) and to the Electrical Safety Authority (the “ESA”) for a certificate, both of which were required by a by-law, were part of an extraordinary increase in municipal taxes and charges.

[3] The tenants challenge the Board’s ruling in four respects. First, they allege that the Board was wrong to find that ESA fees are charges levied by a municipality. Second, they contend that, although the RHL fees qualify as municipal charges, both the RHL fees and the ESA fees are exempted because they relate to an alleged breach by the landlord of health, safety, housing or maintenance standards and the Board was wrong to conclude otherwise. Third, they argue that the Board improperly fettered its discretion by not calculating the AGI in a way that spread the fees and charges more evenly over the period of time for which they were incurred. Lastly, they allege that they were not afforded procedural fairness in the manner in which they received notice of the landlord’s application, disclosure of the basis for the application, and the way in which the Board proceeded to deal with it.

[4] These reasons explain why I would dismiss the appeal. The Board’s conclusions that the ESA fees qualify as municipal charges and that the RHL fees and ESA fees are not exempt were reasonable. So, too, was the Board’s decision that it was required by the RTA to calculate the AGI over a 12 month period only. Finally, although the notice and the disclosure provided to the appellants were inadequate, the procedural unfairness that resulted was cured in this case by the Board’s subsequent review of its own decision.

BACKGROUND

[5] In May 2011, the City of Waterloo passed the Rental Housing Licensing By-law (By-law 2011-047). The by-law implemented a new, comprehensive Rental Housing Licensing Program (the “RHL Program”), which required landlords of most low-rise rental units to obtain an RHL annually. In order to obtain an RHL, the landlord was required to pay a fee to the municipality and to certify that the rental property complied with certain statutorily-imposed standards, including those imposed by the Electrical Safety Code, O. Reg. 164/99. In this regard, the by-law required that the landlord submit a certificate from the ESA every five years.

[6] By-law 2011-047 was the subject of an application for judicial review before this Court. The landlord in this case was one of a group of landlords that together challenged the by-law in 1736095 Ontario Ltd. v. Waterloo (City), 2015 ONSC 6541 (“173”). For reasons released on October 22, 2015, the court dismissed the application.

[7] In December 2014, the landlord filed an application for an AGI with the Board. The application related to the landlord’s residential townhouse rental complex located on Goldbeck Lane, in Waterloo. It was based solely on an alleged extraordinary increase in municipal taxes and charges. The landlord alleged that municipal taxes and charges had increased over the base year of 2014 in the amount of $52,853.60. Of this amount, the sum of $25,112.63 related to RHL licensing fees and the sum of $18,034.80 related to ESA fees.

[8] The Board issued a Notice of Written Hearing on July 9, 2015. The notice required the landlord to give the tenant a copy of the notice by July 29, 2015, and to file a Certificate of Service with the Board by August 3, 2015. The landlord failed to file the certificate.[^1]

[9] The appellants filed a joint submission with the Board on August 27, 2015.

[10] On November 18, 2015, Board Member Greg Joy issued an order, without reasons, authorizing an increase of 6.00% above the annual guideline, effective April 1, 2015. As a result, Julia Seirlis’ rent increased by 7.6 percent and Leslie Houston’s rent increased by 8 percent.

[11] On January 7, 2016, Waterloo Region Community Legal Services (“WRCLS”), acting on behalf of Leslie Houston (“the tenant”), requested reasons for Member Joy’s decision and a copy of all of the landlord’s submissions on file. The Board had difficulty fulfilling the latter request. To preserve the tenant’s rights, counsel from WRCLS requested a review of Member Joy’s decision and an extension of time under the Board’s Rules of Practice (the “rules”). Reasons for Member Joy’s decision were issued on March 10, 2016. The landlord’s evidence was received by WRCLS counsel on March 22, 2016, following which counsel amended both the request to review and the request to extend time.

[12] On July 25, 2016, Board Vice-Chair Charron issued an Interim Review Order on behalf of the Board. In the order, Vice-Chair Charron denied the tenant’s request for a review hearing relating to the RHL fees and the ESA fees, but allowed a review hearing on the sole question of the proper AGI calculation under s. 31 of the Ontario Regulation 516/06 (“the regulation”), made under the RTA.

[13] The review hearing took place on October 26, 2016, and consisted of oral argument only. Board Vice-Chair Usprich issued a Review Order on April 10, 2017, finding that the Board did not have jurisdiction to modify the AGI calculation under the RTA over any longer period than 12 months.

[14] The appeal to this Court was launched thereafter.

ISSUES

[15] This appeal raises the following issues:

(1) Does the appeal raise questions of law?

(2) If so, what is the proper standard of review?

(3) Does the Board’s decision that the ESA fee is a municipal charge meet the standard of review?

(4) Does the Board’s decision that the RHL and the ESA fees are not exempted municipal charges meet the standard of review?

(5) Does the Board’s decision that it has no discretion to amortize the rent increase over more than 12 months meet the standard of review?

(6) Was the tenant denied procedural fairness?

[16] Although the issues were addressed by the appellants more or less in the order set out above, I propose to deal with the last issue, procedural fairness, first. If the tenant was denied procedural fairness, some or all of the other issues may be moot.

ANALYSIS

Was the tenant denied procedural fairness?

[17] The appellants maintain that the tenant was denied procedural fairness in three ways. The first two relate to the nature of the notice they received of the landlord’s application and the pre-hearing disclosure.

[18] The appellants submit that the notice was inadequate because the application form did not particularize the nature of the municipal taxes and charges that formed the basis for the landlord’s request. Further, without disclosure of the landlord’s evidence or submissions to the Board, the appellants were unable to perform their own calculations concerning the amount or timing of the RHL and ESA fees. As a result, the appellants say that they were unable to properly participate in the written hearing held before Member Joy.

[19] I agree that the appellants received inadequate notice and inadequate disclosure in this case. However, in my view, the procedural unfairness that resulted was remedied by virtue of the reviews that subsequently took place by Vice-Chair Charron and before Vice-Chair Usprich.

[20] The landlord’s application for an AGI was brought in compliance with s. 22(1) of the regulation, which provides that, in an application under s.126 of the RTA, the application must be accompanied by the following material:

1. If the application is based on extraordinary increase in the cost for municipal taxes and charges or utilities or both,

i. evidence of the costs for the base year and the reference year and evidence of payment of those costs, and

ii. evidence of all grants, other forms of financial assistance, rebates and refunds received by the landlord that effectively reduce those costs for the base year or the reference year.

2. If the application is based on capital expenditures incurred,

i. evidence of all costs and payments for the amounts claimed for capital work, including any information regarding grants and assistance from any level of government and insurance, resale, salvage and trade-in proceeds,

ii. details about each invoice and payment for each capital expenditure item, in the form approved by the Board, and

iii. details about the rents for all rental units in the residential complex that are affected by any of the capital expenditures, in the form approved by the Board.

3. If the application is based on operating costs related to security services, evidence of the costs claimed in the application for the base year and the reference year and evidence of payment of those costs.

[21] Thus, pursuant to the regulation, unlike an application for an AGI based on capital expenditures, the landlord in this case was not required to, and did not, file details about the increased municipal taxes and charges.

[22] In considering the issue of procedural fairness, Vice-Chair Charron pointed out that the tenant never asked that the landlord provide a breakdown of the amounts set out in the application (Interim Order, para. 7). That is correct. However, I agree with the appellants’ submission that there was nothing in the notice of application that told them that they could make such a request. In my view, at a minimum, that information should have been provided. The Board regularly deals with tenants who have no legal training, nor any legal representation. As a result, the Board’s forms must be legally informative. The prescribed notice in this case was not.

[23] Vice-Chair Charron also held that there was no evidence before her that the tenant was not reasonably able to participate in the written proceeding before Member Joy. I do not agree with that conclusion. As the Vice-Chair herself pointed out, “(t)he arguments raised by the Tenant in this Request to Review were not raised at the initial hearing stage” (Interim Order, para. 8). That is at least some evidence that the tenant was not able to reasonably participate in the earlier written hearing. There is more.

[24] In their written submissions to Member Joy, the appellants wrote (para. 2):

The proposed increase seeks to unfairly place the burden of costs incurred under a new licence fee imposed by the City of Waterloo on tenants rather than on the landlord.

The licence fee, i.e. the RHL, was only one of the charges at issue. The ESA fees were also a significant component of the increase sought by the landlord. This is further evidence that the appellants did not fully understand the basis for the landlord’s request.

[25] However, notwithstanding the fact that the tenant had not satisfied Vice-Chair Charron that she had not been reasonably able to participate in the previous hearing, and notwithstanding the fact that the tenant was raising arguments not raised before, Vice-Chair Charron went on to carefully consider the arguments raised by the tenant “out of an abundance of caution” (Interim Order, para. 12). I will return to her analysis, below.

[26] The appellants also argue that the effect of the lack of proper notice and disclosure continued after the written hearing and impacted the review later conducted by Vice-Chair Charron because they were required to satisfy a higher standard, namely that a serious error had been made.

[27] Vice-Chair Charron’s review was conducted under rule 29.2 of the rules, which permits the Board to exercise its discretion to review a previous order where it is satisfied that the order “contains a serious error, a serious error occurred in the proceeding, or the person making the request was not reasonably able to participate in the proceeding.”

[28] Although Vice-Chair Charron began by outlining the test under rule 29.2, she went on to consider simply whether the Board had “erred” in allowing the landlord to claim the amount it did for municipal taxes and charges and whether the Board ought to have exercised a discretion to spread out the AGI over several years in order to minimize the impact (Interim Order, para. 12). Vice-Chair Charron did not apply the serious error test until the end of her analysis, by which point she had concluded that no error, let alone a serious error, had occurred.

[29] For these reasons, the effect of the lack of proper notice and disclosure was remedied by virtue of the review undertaken by Vice-Chair Charron.

[30] The appellants’ third complaint relating to procedural fairness concerns the nature of the hearing conducted before Member Joy. The appellants contend that this was not a straightforward AGI request because the request involved a “complex and contentious” municipal by-law and non-municipal charges (Appellants’ Factum, para. 49). The appellants submit that the landlord’s request should have been the subject of an oral hearing. They argue that if it had been, the tenants would have had disclosure of the landlord’s evidence on the hearing date, if not earlier.

[31] I do not agree with the appellants’ submissions in this regard.

[32] In Baker v. Canada, 1999 699 (SCC), [1999] 2 S.C.R. 817, at paras. 23 - 27, the Supreme Court of Canada held that the specific requirements necessary to provide procedural fairness in any given case depend upon a number of factors, including the following:

(1) the nature of the decision being made and of the process followed in making it;

(2) the nature of the statutory scheme and the terms of the statute pursuant to which the body operates;

(3) the importance of the decision to the individual or individuals affected;

(4) the legitimate expectations of the person challenging the decision; and

(5) the choices of procedure made by the agency itself.

[33] In my view, the Board’s decision to hold a written hearing in the first instance, and the legislative and regulatory framework within which that decision was made, respect the duty of procedural fairness and, in particular, the audi alteram partem rule of natural justice.

[34] Section 183 of the RTA requires the Board to adopt “the most expeditious method of determining the questions arising in a proceeding that affords to all persons directly affected by the proceeding an adequate opportunity to know the issues and be heard on the matter.”

[35] Pursuant to s. 184, the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 (the “SPPA”) applies with respect to all proceedings before the Board. Section 25.0.1 of the SPPA grants the Board the power to determine its own procedures and practices and to make rules for that purpose under s. 25.1 of the SPPA.

[36] Section 5.1 (1) of the SPPA provides that a tribunal may make a rule permitting written hearings. Section 184 (2) of the RTA specifically exempts the Board from s. 5.1(2) of the SPPA, pursuant to which a tribunal shall not hold a written hearing if a party satisfies the tribunal that there is a good reason for not doing so.

[37] Rule 22.1 of the rules governs when the Board will hold a written hearing. It provides:

In deciding whether to hold a written hearing, the [Board] may consider any relevant factors, including:

1. the suitability of a written hearing format considering the subject matter of the hearing;

2. whether the nature of the evidence is appropriate for a written hearing, including whether credibility is in issue and the extent to which facts are in dispute;

3. the extent to which the matters in dispute are questions of law;

4. the convenience of the parties;

5. the ability of the parties to participate in a written hearing; and

6. the cost, efficiency and timeliness of proceedings.

[38] Notwithstanding that the RTA specifically exempts the Board from the provisions of the SPPA that prohibit a tribunal from holding a written hearing in certain circumstances, the rule also provides a procedure pursuant to which a party can object to a written hearing within a certain time limit and by virtue of which the Board may continue a hearing as either an oral hearing or an electronic hearing.

[39] As Vice-Chair Charron pointed out, the Board routinely deals with AGI increases by way of written hearings (Interim Order, para. 10). As she also pointed out, as with most AGI’s dealing with municipal taxes and charges, the issues in this application revolved mainly around numbers, there were no issues of credibility and the facts were straightforward.

[40] If, as the appellants argue, the central issues in this case are questions of law and not questions of fact or mixed fact and law (an argument that I accept for reasons set out below), I cannot see why the duty of procedural fairness required an oral hearing in this case. The fact that the appellants may have received at least last minute disclosure as a by-product of an oral hearing is more properly a reason to question the disclosure process, as I have done, than it is to question the hearing process.

[41] For these reasons, I do not accept the appellants’ argument that this matter should not have proceeded as a written hearing.

Are there questions of law raised?

[42] This appeal is brought under s. 210 of the RTA, which permits an appeal from an order of the Board, “but only on a question of law.”

[43] The landlord and the Board argue that the issues raised by the appellants regarding the ESA fees and the RHL fees are both questions of fact or, at best, questions of mixed fact and law. As a result, they argue that the appeal on those issues should be dismissed: Solomon v. Levy, 2015 ONSC 2556 (Div. Ct.), at para. 33. I am unable to agree.

[44] The distinction between questions of law, questions of fact, and questions of mixed fact and law was articulated by Iacobucci J. in Canada (Director of Investigation & Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748 (at para. 35):

Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests.

[45] With respect to both the ESA fees and the RHL fees, the Board was called upon to determine questions of law. With respect to the ESA fees, the question was whether a fee paid by a landlord to a third party pursuant to a municipal by-law could qualify as a charge levied by a municipality. With respect to both the ESA fees and the RHL fees, the Board was required to consider whether, in order to be exempt as municipal charges under s. 2(1)(a) of the RTA, a specific allegation had to precede an inspection.

[46] These are both questions of law. As with all questions of law, the questions were set against a factual background. That does not make them questions of fact.

[47] I see no distinction between the nature of the questions raised in this case and the legal questions raised in the governing cases cited by the landlord and by the Board regarding the standard of review applicable in this matter, addressed below.

[48] In First Ontario Realty Corp. v. Deng, 2011 ONCA 54, 274 O.A.C. 338, the Board had decided that tenants were entitled to a rent reduction due to a reduction of facilities provided in a residential rental complex. An appeal to the Divisional Court by the landlord was allowed. A further appeal to the Court of Appeal was dismissed, but not on the basis that the appeal failed to raise a question of law.

[49] The issue before the Board and the courts in Deng was whether the landlord’s removal of fenced-in gardens, lawns and walkways was a “reduction in common recreational facilities” within the definition of “services and facilities” under ss. 1(1) and 142(1) (now ss. 2(1) and 130(1)) of the RTA. Notwithstanding the particular factual matrix giving rise to the question, the issue was still one of statutory interpretation, involving a question of law.

[50] In Onyskiw v. CJM Property Management Ltd., 2016 ONCA 477, the issue was whether tenants were entitled to an abatement of rent as a result of the fact that the elevator in their building was out of service for 96 days in one year. The Board held that they were not. The Divisional Court dismissed the tenants’ appeal, as did the Court of Appeal. Again, neither court dismissed the appeal on the basis that the issue was a question of fact or mixed fact and law. As Weiler J. A. acknowledged on behalf of the Court of Appeal, the appeal involved the interpretation of a section of the RTA (s. 20(1)) and whether it was an error of law on the part of the Board to refuse an abatement of rent on the basis that the landlord’s behaviour was reasonable (para. 25).

[51] Like Deng and Onyskiw, this case involves questions of law, namely, the interpretation of the meaning of “municipal taxes and charges” in s. 2(1) of the RTA and the exemption in paragraph (a) under that section.

[52] In my view, therefore, this appeal is properly brought under s. 210.

What is the proper standard of review?

[53] The appellants submit that the proper standard of review is correctness with respect to the proper legal characterization of the RHL fees and the ESA fees. They submit that correctness is the test because the Board was not interpreting a provision with which it had particular familiarity or expertise. With respect to the Board’s decision that it had no power to amortize the AGI beyond 12 months, the appellants say that correctness is the standard of review because the issue raises a question of true jurisdiction.

[54] I disagree. The proper standard of review with respect to all three issues is reasonableness.

[55] The governing authority on the standard of review is the decision in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190. When determining the applicable standard of review, Dunsmuir instructs us first to look to existing jurisprudence on the question. There is no need to proceed from first principles where the standard of review of a tribunal’s decisions on a particular issue has already been determined (paras. 57 and 62).

[56] A look at the jurisprudence relating to reviews of the Board’s decisions interpreting its home statute quickly reveals that the standard of review is reasonableness.

[57] In Deng, the Divisional Court had held that the standard of review was correctness. Writing on behalf of the Court of Appeal, Karakatsanis J. A. (as she then was) began by noting that the standards of review established in Dunsmuir apply not only to judicial review, but also to statutory appeals, as well (para. 16). After acknowledging that a tribunal’s decision may attract different standards of review depending on the issue involved, Karakatsanis J. A. proceeded to conduct the first principles analysis required under Dunsmuir. She concluded that the Divisional Court erred in applying a correctness standard and held that the appropriate standard was reasonableness, even where the issue before the Board involves a pure question of law in which the Board is required to apply general principles of statutory interpretation (paras. 15 and 21).

[58] A similar conclusion was reached by the Court of Appeal in Onyskiw, an appeal that involved the interpretation by the Board of s. 20(1) of the RTA. That section imposes a duty on a landlord to provide residential rental units in a good state of repair, fit for habitation, and in compliance with health, safety and maintenance standards.

[59] In Onyskiw, the Divisional Court had applied a standard of reasonableness on the appeal. The Court of Appeal upheld the Divisional Court decision to apply that standard. Writing on behalf of the court, Weiler J. A. held (paras. 28 and 29):

[28] Where an administrative tribunal interprets or applies its home statute, the standard of review is presumptively reasonableness: Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654, at para. 39. A correctness standard may apply if the question at issue is both of central importance to the legal system and outside the adjudicator’s specialized area of expertise: Alberta (information and Privacy Commissioner), at para. 46. However, this exceptional category must be interpreted conjunctively and not as separate and distinct factors: see Loewen v. Manitoba Teachers’ Society, 2015 MBCA 13, 315 Man. R. (2d) 123, at para. 48.

[29] Where, as here, the jurisprudence has already determined the standard of review and thus the degree of deference to be accorded to a particular category of question before a given administrative tribunal, this will end the inquiry: see Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 62; First Ontario Realty Corporation v. Deng, 2011 ONCA 54, 274 O.A.C. 338, at para. 20. Subject to the exception stated above, decisions of the Board are subject to review on a standard of reasonableness: Deng, at para. 21. In Deng, this Court held, at para. 21, that the Board administers a specialized adjudicative regime for resolving residential tenancy disputes, and where it is required to interpret its “home statute” (the RTA) and regulations, with which it has particular familiarity, in making determinations with respect to its core functions, deference is owed to its decisions.

[60] In my view, Deng and Onyskiw require that we apply a reasonableness standard to the decisions of the Board in this case regarding the RHL and the ESA fees. A similar conclusion was reached by this Court in Helberg Properties Ltd. v. Caldwell, 2015 ONSC 7863, which involved an appeal of an AGI allowed by the Board on the basis of a capital expenditure by the landlord.

[61] I reach the same conclusion with respect to the issue of the amortization of the AGI. The appellants submit that the Board’s decision raises a true question of jurisdiction, requiring a correctness standard. They rely on Dunsmuir, where the majority held that administrative bodies must be correct in their determination of “true questions of jurisdiction or vires” (para. 59). The appellants argue that the present case is like the decision in Bellaire v. Ontario Aboriginal Housing Services Corp., 2017 ONSC 2839, in which this court applied the correctness standard to a decision of the Board. In my view, however, Bellaire is readily distinguishable from the case at bar.

[62] In Bellaire, the Board was asked in the course of an eviction proceeding to determine whether it had jurisdiction under s. 203 of the RTA to review the amount of geared-to-income rent that was being paid by the tenant. Section 203 of the RTA reads:

203. The Board shall not make determinations or review decisions concerning,

(a) eligibility for rent-geared-to-income assistance as defined in section 38 of the Housing Services Act, 2011 or the amount of geared-to-income rent payable under that Act; or

(b) eligibility for, or the amount of, any prescribed form of housing assistance.

[63] The Board held that s. 203 precluded it from reviewing the amount of rent allegedly owed by the tenant. This court held that the Board had erred in reaching that conclusion because the Board incorrectly believed that the tenant’s income was being paid under the Housing Services Act, 2011, S.O., 2011 c. 6, when it was not.

[64] Bellaire involved a true question of jurisdiction. Quoting from Dunsmuir at para. 59, Heeney J. wrote on behalf of this court at para. 19) that:

“Jurisdiction” is intended in the narrow sense of whether or not the tribunal had the authority to make the inquiry. In other words, true jurisdiction questions arise where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter. [Emphasis added in Bellaire.]

[65] In the subsequent decision in Alberta (Information and Privacy Commissioner), a majority of the Supreme Court of Canada confirmed that the category of true questions of jurisdiction is a narrow one and highlighted the deference owed to a tribunal interpreting its home statute (para. 34):

The direction that the category of true questions of jurisdiction should be interpreted narrowly takes on particular importance when the tribunal is interpreting its home statute. In one sense, anything a tribunal does that involves the interpretation of its home statute involves the determination of whether it has the authority or jurisdiction to do what is being challenged on judicial review. However, since Dunsmuir, this Court has departed from that definition of jurisdiction … it is sufficient in these reasons to say that, unless the situation is exceptional, and we have not seen such a situation since Dunsmuir, the interpretation by the tribunal of “its own statute or statutes closely connected to its function, with which it will have particular familiarity” should be presumed to be a question of statutory interpretation subject to deference on judicial review.

[66] In the present case, the Board was not being asked if it had the power to make determinations regarding the proper calculation of an AGI. Instead, it was being asked whether the power it did have could be exercised in a particular manner. The question before the Board was much more like the question before the Board in Deng than the question before the Board in Bellaire. In Deng, one of the issues was whether the Board had discretion to adopt a method of calculating a rent reduction for the loss of services or facilities based on the value of the loss to the tenants, as opposed to the cost of the service or facility to the landlord or the rental value of the service or facility. The Court of Appeal held that the Board had no jurisdiction to adopt an alternative method of calculating the rent reduction other than to base it on the cost to the landlord or the rental value of the service or facility. The Court of Appeal held that, notwithstanding the mandatory language of the regulation in question, the standard of review was not converted from one of deference to one of correctness (para. 21).

[67] I see no significant distinction between the question regarding the proper method of calculating a rent reduction in Deng and the question of how to calculate a rent increase in this case. Neither question gives rise to a jurisdictional issue.

Is the Board’s decision that the ESA fee is a municipal charge reasonable?

[68] The landlord’s application for an AGI was brought under s. 126(1) of the RTA. That section permits the landlord to apply for an AGI where the landlord experiences:

1. An extraordinary increase in the cost for municipal taxes and charges or utilities or both for the residential complex or any building in which the rental units are located.

[69] “Municipal taxes and charges” are defined in s. 2(1) of the RTA:

“municipal taxes and charges” means taxes charged to a landlord by a municipality and charges levied on a landlord by a municipality and includes taxes levied on a landlord’s property under Division B of Part IX of the Education Act and taxes levied on a landlord’s property in unorganized territory, but “municipal taxes and charges” does not include,

(a) charges for inspections done by a municipality on a residential complex related to an alleged breach of a health, safety, housing or maintenance standard,

(b) charges for emergency repairs carried out by a municipality on a residential complex,

(c) charges for work in the nature of a capital expenditure carried out by a municipality,

(d) charges for work, services or non-emergency repairs performed by a municipality in relation to a landlord’s non-compliance with a by-law,

(e) penalties, interest, late payment fees or fines,

(f) any amount spent by a municipality under subsection 219 (1) or any administrative fee applied to that amount under subsection 219 (2), or

(g) any other prescribed charges.

[70] Vice-Chair Charron held that the ESA fees qualified as a charge levied by the municipality. At paras. 18 and 19 of her Interim Order, the Vice-Chair wrote:

18. In 1736095 Ontario Ltd. v. Waterloo (City) [2015 ONSC

6541], the court held:

“In summary, the RHL Program requires landlords of most low-rise rental units to obtain a rental housing license, renewable annually, and to pay the prescribed license or renewal fee to the City. The rental housing license application process requires landlords to certify that the rental property is in compliance with the Building Code Act, 1992, S.O. 1992, c.23 and the Fire Protection and Prevention Act, 1997, S.O. 1997, c. 4 and the Electrical Safety Code, O. Reg. 164/99 and to submit, inter alia, the following: (a) a general inspection certificate report from the Electrical Safety Authority (“ESA”) (required every five years; (b) an HVAC certificate (required every five years); (c) proof of insurance (required annually); (d) a criminal record check (required every five years); and, (e) a floor plan for the rental property.” [At para. 11 Emphasis Added]

19. The Divisional Court clearly contemplated that landlords were to obtain a general inspection report from the ESA as a component of the licensing program and there is no evidence before me that if the inspection is conducted by ESA, and not directly by the Landlord, that the fee charged for the inspection ceases to be a municipal charge.

[71] The appellants submit that Vice-Chair Charron erred in two important ways in reaching the conclusion she did. First, they submit that whether the ESA inspection is carried out by the landlord is immaterial to the question of whether the inspection fees are a municipal charge. Instead, the appellants submit that what matters is whether the fees are charges levied on a landlord by a municipality. They submit that the ESA is a completely separate entity than the municipality and that the inspection fee bears no similarity to taxes. They also submit that the term “levy” is not one that can properly be used to describe the fee paid by the landlord to the ESA. In summary, the appellants submit that, in order to be a municipal tax or charge, the expense must be paid directly to a municipality and not to a third party, even if required by municipal by-law to do so.

[72] I disagree. To understand why, it is important to bear in mind that we are not called upon to determine if the ESA fee is a municipal tax or charge. Rather, we are called upon to determine if the Board’s conclusion that it is was reasonable.

[73] As the Supreme Court of Canada explained in Dunsmuir, in judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. It is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and the law (para. 47). The same concerns apply to the reasonableness standard of review on a statutory appeal such as this one: Deng, at para. 16.

[74] Vice-Chair Charron’s comments in para. 19 of her Interim Order must be read in the context of her reference to the decision in 173. In 173, the landlord argued that by-law 2011-047 was, in fact, a taxing statute and, therefore, was ultra vires the municipality. This Court held that it was not. Instead, the court found that the RHL fee was a levy (para. 71). On a fair reading of Vice-Chair Charron’s Interim Order, it appears that she relied on the decision in 173, incorrectly in my view, as authority for the proposition that the ESA fees are a charge levied by the municipality within the meaning of s. 2(1) of the RTA. The court in 173 did not decide the nature of the residential housing by-law in that context. It decided the validity of the by-law in a jurisdictional context. The decision does not stand as authority that fees paid by a landlord to a third party as part of the RHL process are municipal charges. In this sense, Vice-Chair Charron’s decision on the issue cannot be said to meet the requirement of justification.

[75] Absent clear authority on the issue, in order to determine whether the ESA fees are charges levied by a municipality which qualify for an AGI under s. 126(1) of the RTA, Vice-Chair Charron ought to have engaged in a process of statutory interpretation. Presumably because she incorrectly believed that she was bound by this Court’s decision in 173, she did not do so. In these circumstances, this Court is entitled to conduct its own statutory analysis: see 2274659 Ontario Inc. v. Canada Chrome Corp., 2016 ONCA 145 at para. 47, citing British Columbia (Securities Commission) v. McLean, 2013 SCC 67, [2013] 3 S.C.R. 895 (S.C.C.) at paras. 37-70; and Canada (Attorney General) v. Mowat, 2011 SCC 53, [2011] 3 S.C.R. 471 (S.C.C.) at paras. 32-64. When one undertakes the necessary analysis, it is clear that Vice-Chair Charron’s decision fits within a range of reasonable, defensible outcomes.

[76] The modern principle of statutory interpretation requires that the words of an Act be read in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the Act, the object of the Act, and the intention of the Legislature: Rizzo & Rizzo Shoes Ltd. (RE), 1998 837 (SCC), [1998] 1 S.C.R. 27, at para. 21; Rooney v. ArcelorMittal S.A., 2016 ONCA 630, 133 O.R. (3d) 387, at paras. 10-21.

[77] The object of the RTA is set out in s. 1 of that Act, as follows:

1. (1) The purposes of this Act are to provide protection for residential tenants from unlawful rent increases and unlawful evictions, to establish a framework for the regulation of residential rents, to balance the rights and responsibilities of residential landlords and tenants and to provide for the adjudication of disputes and for other processes to informally resolve disputes.

[78] The appellants argue that, in keeping with the object of the RTA, the scheme of the Act is to require that landlords, and not tenants, bear the costs of routine maintenance. This may be true. However, contrary to the submissions of the appellants, the RHL and ESA fees are not part of routine maintenance. They form part of an inspection scheme designed to ensure that certain standards are met, for the benefit of the tenants. In keeping with the object and scheme of the RTA, where those inspections reveal deficiencies, the landlord, and not the tenant, bears the costs of bringing the premises into compliance.

[79] Section 126(1) of the RTA does not seek to pass on the costs of routine maintenance to tenants. Instead, in keeping with the object of the Act, it seeks to pass on extraordinary increases in municipal taxes and charges in the same way such increases are ordinarily passed on to the occupants of dwellings owned by those occupants.

[80] The intention of the Legislature to flow extraordinary municipal taxes and charges through to tenants becomes obvious when one considers the definition of municipal taxes and charges set out in s. 2(1) of the RTA and, in particular, the exemptions listed thereunder. The Legislature clearly wished to exempt tenants from taxes and charges imposed upon a landlord by a municipality for expenses for which the landlord was to blame, or at least with respect to expenses that could have been avoided by the landlord with due diligence. I will return to discuss these exemptions when I address the RHL fees.

[81] In my view, to interpret the definition of municipal taxes and charges as the appellants suggest would be at odds with the object and scheme of the RTA. To require that charges must be paid directly to the municipality would result in an absurdity by exempting from the flow-through scheme any fee that a municipality demanded a landlord to pay to a third party, regardless of the nature of the fee or charge.

[82] Such an interpretation would also be at odds with the ordinary and grammatical meaning of the words in s. 2(1). If the Legislature wished to add the words “when paid directly to” the municipality, it could have done so. It did not. Instead, it defined municipal taxes and charges by virtue of the authority under which they were imposed, namely the municipality, and not by virtue of the identity of the party to which they were paid.

[83] For these reasons, I believe that, although the reasons of Vice-Chair Charron fail to meet the requirement of justification, her decision nonetheless fits within a range of reasonable outcomes that are defensible in fact and in law.

[84] The second error alleged by the appellants to have been committed by Vice-Chair Charron relates to the evidentiary onus on the question of the ESA fees. The appellants submit that the landlord had the onus of demonstrating that the ESA fees were a municipal charge. I agree with this submission. However, the appellants also submit that Vice-Chair Charron’s comment that there was no evidence before her that an electrical inspection ceases to be a municipal charge if conducted by someone other than the landlord shows that she incorrectly reversed that onus. I am unable to agree with this submission.

[85] I do not read the Vice-Chair’s comments as suggesting that the tenant bore the evidentiary onus. Instead, I read her comment to mean that there was no reason to conclude from the record before her that the characterization of the ESA fees as a municipal charge changes as a result of who conducts the inspection. Nor do I read Vice-Chair Charron’s comment as suggesting that the evidentiary onus was not met. This was not a question that turned on the absence of evidence. It was a legal question. The Board had all of the evidence that it required from the landlord, who had submitted a copy of the by-law, the ESA fee schedule, and receipts for payment.

[86] For these reasons, I would not give effect to this ground of appeal.

Is the Board’s decision that the RHL and ESA fees are not exempt as municipal charges reasonable?

[87] The appellants concede that the RHL fee is a municipal charge. However, they submit that, if the ESA fee is also a municipal charge, both the ESA and the RHL fees fall within the exemption contained in paragraph (a) under the definition of “municipal taxes and charges” in s. 2(1) of the RTA. For the sake of convenience, I will set that clause out again here:

… but “municipal taxes and charges” does not include,

(a) charges for inspections done by a municipality on a residential complex related to an alleged breach of a health, safety, housing or maintenance standard…

[88] The appellants submit that if the ESA fees need not be paid directly to a municipality in order to qualify as municipal charges, then the inspections for which the fees are paid also need not be done directly by a municipality in order to be exempt under paragraph (a).

[89] With respect to both the RHL and ESA fees, the appellants argue that there is no authority to suggest that the words “related to an alleged breach” in paragraph (a) require that the allegation occurs before the inspection (factum, para. 26). The appellants submit that the effect of the RHL program is to create a presumption that the landlord of a low-rise residential rental unit is in breach of health, safety, housing and/or maintenance standards unless and until the requisite inspections are passed.

[90] I cannot agree. There is no authority for the proposition that an allegation must occur before an inspection in order for the exemption to apply under paragraph (a) because no authority is needed. The paragraph is incapable of bearing such a meaning.

[91] There is nothing in the grammatical and ordinary sense of the words used in paragraph (a) that would support the interpretation urged by the appellants. The ordinary and grammatical meaning of the words “related to” (an alleged breach) is that the inspection must have arisen from an alleged breach. In order for an inspection to arise from an alleged breach, the allegation must occur before the inspection.

[92] Moreover, the interpretation urged by the appellants does not accord with the context of the RTA, nor with its scheme and object. As I stated earlier, all of the exemptions set out in paragraph (a) through (f) have in common some element of fault on the part of the landlord for failing to properly maintain a property or some element of unjust enrichment of the landlord by virtue of the municipality having stepped in to do so. The interpretation suggested by the appellants would completely denude these paragraphs of any effect. In essence, it would remove the element of fault or unjust enrichment on the part of the landlord. This would be contrary to the clear intention of the Legislature in exempting the charges set out in paragraphs (a) through (f).

[93] The appellants argue that an allegation need not be proven under paragraph (a) in order to exempt the charges for inspections done as a result thereof. The appellants contend that, in such a case, even an exemplary landlord would still be deprived of the ability to flow the cost of such an inspection through to the tenants as a municipal charge. We have not been provided with any jurisprudence in support of this argument. Without intending to decide the issue, such an interpretation might not survive the modern principle of statutory interpretation relied upon by the appellants in support of their argument that the fees at issue in this case are exempt.

[94] For these reasons, I would dismiss this ground of appeal.

Is the Board’s decision that it has no discretion to amortize the AGI over more than 12 months reasonable?

[95] Vice-Chair Charron dismissed the tenant’s request for a review hearing regarding the RHL and ESA fees. However, she granted the tenant’s request for a review hearing with respect to the manner in which the AGI should be calculated under s. 31 of the regulation and stayed the order of Member Joy pending the hearing. Because the landlord had not had an opportunity to make submissions on the issue, she directed that an oral hearing be held with respect to whether “the Board has, and ought to exercise discretion to spread the AGI over several years” (Interim Order, para. 2).

[96] The relevant parts of s. 31 of the regulation read as follows:

31. The percentage rent increase above the guideline for each rental unit that is the subject of the application shall be calculated in the following manner:

32. Divide the amount of each allowance determined under subsection 29 (2), subsection 29 (3) and section 30 by the total rents for the rental units that are subject to the application and are affected by the operating cost.

33. If the Board is of the opinion that the amount determined under paragraph 1 for an allowance does not reasonably reflect how the rental units that are subject to the application are affected by the operating cost to which the allowance relates,

i. paragraph 1 does not apply in respect to the allowance, and

ii. the Board shall determine an amount by another method that, in the opinion of the Board, better reflects how the rental units that are subject to the application are affected by the operating cost to which the allowance relates.

[97] The oral hearing proceeded before Vice-Chair Usprich. The tenant argued before her that the Board had discretion under s. 31 of the regulation to spread the AGI over time and that it ought to do so as a result of the fact that (a) the ESA fee covered a period of five years and (b) the amount of the RHL fees decreased by almost 50% after the first year. The tenant argued that, by spreading the ESA fee over five years and by allocating half of the total RHL fees paid over two years for each of those years, the appropriate rental increase was 3.59 percent above the guideline. The tenant argued that this method of calculating the AGI “better reflected” how the rental units were affected by the operating cost.

[98] Vice-Chair Usprich rejected the tenant’s argument. Having found that the appropriate standard of review on this issue is reasonableness, the question now to be considered is whether her decision was reasonable. I have no doubt that it was.

[99] Vice-Chair Usprich held that the Board had no discretion to allocate rent under s. 31 of the regulation because s. 126(10) of the RTA imposed a mandatory obligation on the Board to allocate the AGI over a twelve month period. She referred to s. 126(10), which sets out the order the Board can make if satisfied that an AGI is justified. It reads:

(10) Subject to subsections (11) to (13), in an application under this section, the Board shall make findings in accordance with the prescribed rules with respect to all of the grounds of the application and, if it is satisfied that an order permitting the rent charged to be increased by more than the guideline is justified, shall make an order,

(a) specifying the percentage by which the rent charged may be increased in addition to the guideline; and

(b) subject to the prescribed rules, specifying a 12-month period during which an increase permitted by clause (a) may take effect.

[100] Vice-Chair Usprich compared the language of this section, in which a 12 month period is specified with respect to applications of the type made in this case, with the language of s. 126(11), which permits the Board to allocate a rental increase associated with capital expenditures over two 12 month periods. She concluded that the Board had no discretion in light of this specificity in the RTA to allocate the AGI in question over a period of more than 12 months.

[101] Vice-Chair Usprich held that the RTA took precedence over the regulation and, therefore, s. 31, clause 2. ii. of the regulation did not give the Board the discretion urged upon it by the tenant. Her decision was a reasonable one. Vice-Chair Usprich’s reasons meet the requirement of transparency, justification and intelligibility. Her conclusion falls within a range of reasonable outcomes that is defensible in terms of both the facts and the law.

[102] For these reasons, I would dismiss this ground of appeal.

CONCLUSION

[103] The appeal does raise questions of law, which questions are reviewable on a standard of reasonableness.

[104] The Board’s decisions that the ESA fee was a municipal charge and that neither the ESA nor RHL fees were exempt, were reasonable. So, too, was the Board’s decision that it had no discretion to allocate the AGI over more than 12 months.

[105] While the appellants were not given proper notice of the landlord’s application or disclosure of the basis upon which it was made, the denial of procedural fairness that resulted was cured by the reviews undertaken by the Board.

[106] For these reasons, the appeal must be dismissed.

COSTS

[107] At the hearing of the appeal, it was agreed that, if the appeal was dismissed, costs would be payable by the appellants to the landlord in the amount of $7,500, all-inclusive.

[108] I would so order.

Ellies J.

I agree

Spies J.

I agree

M. G. J. Quigley J.

Released: December 7, 2017

CITATION: Houston v. 530675 Ontario, 2017 ONSC 6419

DIVISIONAL COURT FILE NO.: DC-17-828

DATE: 20171207

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

ELLIES J.

LESLIE HOUSTON and JULIA SEIRLIS

Appellants (Tenants)

– and –

530675 ONTARIO LIMITED O/A MAYFIELD ESTATES LP

Respondent (Landlord)

REASONS FOR decision

Released: December 7, 2017

[^1]: The appellant, Leslie Houston, relied on this fact before the Board in arguing that the landlord had failed to prove sufficient service of the notice. This point was not pressed before us.