Obico Rail Yard (GP) Inc. v. Toronto (City), 2022 CanLII 73952

Ontario Land Tribunal Tribunal ontarien de l’aménagement du territoire

ISSUE DATE: August 12, 2022 CASE NO(S).: OLT-22-002406 (Formerly LC200010)

PROCEEDING COMMENCED UNDER subsection 26(b) of the Expropriations Act, R.S.O. 1990, c. E.26, as amended

Claimant: Obico Rail Yard (GP) Inc. Respondent: City of Toronto Subject: Land Compensation Property Address/Description: Part of Lot 7, Concession 4 Municipality: City of Toronto OLT Case No.: OLT-22-002406 Legacy Case No.: LC200010 OLT Lead Case No.: OLT-22-002406 Legacy Lead Case No.: LC200010 OLT Case Name: Obico Rail Yard (GP) Inc. v. Toronto (City)

PROCEEDING COMMENCED UNDER subsection 9(1) of the Ontario Land Tribunal Act, 2021, S.O. 2021, c. 4, Sched. 6

Motion By: Obico Rail Yard (GP) Inc. Purpose of Motion: Request for Determination / Directions Subject: Land Compensation Municipality: City of Toronto OLT Case No.: OLT-22-002406 Legacy Case No.: LC200010 OLT Lead Case No.: OLT-22-002406 Legacy Lead Case No.: LC200010

Heard: July 11, 2022 by Video Hearing

APPEARANCES:

Parties	Counsel
Obico Railyard Inc. and Dream Asset Management Inc. (“Obico” / “Dream”)	Christopher Williams, Ajay Gajaria and David Neligan
City of Toronto (“City”)	Andrew Baker

DECISION DELIVERED BY WILLIAM R. MIDDLETON AND ORDER OF THE TRIBUNAL

INTRODUCTION

1This motion was subsequent to the motion heard by the Tribunal on June 1, 2022, which was the subject of the Tribunal’s ruling and Decision issued June 24, 2022 (“June 1 Motion Decision”). The background of the underlying proceeding was summarized in the June 1 Motion Decision and will not be repeated here.

2The Tribunal convened a hearing by video on Monday, July 11, 2022 (“VH”), in respect of a motion brought by Obico / Dream arising from the alleged failure by the City to disclose and deliver certain documents which had been improperly claimed to be subject to litigation privilege or solicitor-client privilege in its Affidavit of Documents Schedule “B” delivered on May 27, 2022. This further motion arises from the Examination for Discovery conducted of the representative for the City, Michael Stevenson on February 15, 2022.

3The materials before the Tribunal relevant to the VH consisted of the following:

(i) Motion Record of Obico dated May 17, 2022, comprising 600 pages;

(ii) Supplementary Motion Record of Obico dated June 30, 2022, comprising 39 pages;

(iii) Outline of Argument of Obico, dated June 27, 2022, comprising 29 pages;

(iv) Brief of Authorities of Obico, dated June 27, 2022, comprising 99 pages;

(v) Reply Motion Record of Obico, dated July 8, 2022, comprising 21 pages;

(vi) Responding Motion Record of the City, dated July 6, 2022, comprising 68 pages; and,

(vii) Responding Submissions of the City, comprising six pages;

4In their materials for this VH, summarized in paragraph [3], counsel for the City and Obico each provided an ‘annotated’ version of the Schedule B to the City’s Affidavit of Documents described in paragraph [2] above. Appended as Attachment 1 hereto is the version prepared by Obico’s counsel and appended as Attachment 2 is the responding version prepared by the City’s counsel.

Motion Dispute

5The only matter in dispute in this motion concerns whether the City has improperly claimed litigation privilege and/or settlement privilege and/or solicitor-client privilege pertaining to the Schedule B documents so described in Attachment 1. Attachment 2 lists the same claims of the City, with additional described rationale for such claims, and, in a few instances, a promise to produce a given document but in redacted form in order to remove the alleged privileged information.

6Thus, this motion depends upon whether the City’s privilege claims for the listed Schedule B documents described in paragraph [5] are proper in law.

LITIGATION PRIVILEGE

7The Parties agree that the principle of litigation privilege applicable in these circumstances is as set out in paragraph 8 of the Outline of Argument of Obico as follows:

The test for litigation privilege is both (a) that litigation was contemplated when the communication occurred or the document was created and (b) that the dominant purpose behind the communication was to respond to specific litigation.

8A good statement of the test expressed in paragraph [7] above was made by Associate Justice Todd Robinson in Metrolinx v. 1450638 Ontario Inc., 2021 ONSC 8045, at paras. 12 and 13 (“Metrolinx Decision”), who considered the issue of litigation privilege and documents related to an expropriation matter. In the Metrolinx Decision, the test for litigation privilege is summarized as follows:

Litigation privilege protects communications made or documents created for the dominant purpose of actual or contemplated litigation: Blank v. Canada (Minister of Justice), 2006 SCC 39 at paras 59-60. Third party communications, such as communications with experts, are only protected by litigation privilege where the dominant purpose of the communication is to prepare for litigation: Moore v. Getahun, 2015 ONCA 55 at para 68....Metrolinx must demonstrate both that litigation was contemplated when the communication occurred or document was created and that the communication or document was for the dominant purpose of litigation. Meeting that onus requires evidence of the dominant purpose behind the communication or document that Metrolinx seeks to protect: Whitell v. Whitell, 2020 ONSC 2310 (Master) at paras. 29 and 33.

9However, counsel for the City disagrees with the submission of Obico’s counsel that litigation was only contemplated at the date of service of the Statement of Claim, or in the alternative, after the date of service of the s. 25 offer (under the Expropriations Act, R.S.O. 1990, c. E.26) at earliest. He maintains that there is no bright-line rule establishing when it was reasonable for the Parties to have contemplated litigation. Such a determination that must be grounded on the unique facts of the case and “…not based on the arbitrariness of procedural timelines prescribed by civil procedure.”

10There are several relevant possible dates raised by counsel for the Parties during their written and oral argument as being the starting point for a legitimate claim of litigation privilege:

(i) Date of City Council’s authorization of expropriation proceedings on May 24, 2018;

(ii) Date of registration by the City of a plan of expropriation for the subject property on August 10, 2018 (“Plan”);

(iii) Date that Obico accepted (only as an advance payment) the City’s offer of compensation pursuant to s. 25 of the Expropriations Act, being November 13, 2018 (“Advance Offer”);

(iv) Date of service by Obico of its Notice of Arbitration and Statement of Claim (“Action”) on March 18, 2020;

(v) Date when a dispute over the acquisition of the Subject Property was contemplated, being when the City commenced without prejudice negotiations with both Obico / Dream and the then-owner of the subject property, Canadian Pacific Railway (“CPR”) on or about December 18, 2015 (those negotiations continued through and beyond March 4, 2016, when the City and Obico executed a mutual non-disclosure agreement (“NDA”) to facilitate the exchange of confidential information and documentation, but no deal was achieved and thereafter Obico purchased the subject lands in November, 2016); and,

(vi) March 4, 2016, being the date of the NDA.

11Although counsel for Obico did not formally concede the point, it seemed evident to the Tribunal that he has accepted the notion that litigation was reasonably contemplated by both Parties before March 18, 2020, the date of service of the Action. In any event, the Tribunal determines that this is not the relevant starting date for determining whether the City has made a legitimate claim for litigation privilege over its documents as listed in its Affidavit of Documents.

12In addition, it seems illogical to the Tribunal that the date of the Advance Offer would be the correct triggering date but not the date some three months earlier when the City registered its Plan, being August 10, 2018, or the still earlier date when the expropriation was authorized by the City’s Council on May 24, 2018. While it is true that there would have been no litigation had the Advance Offer been accepted as a full and final settlement, the Tribunal is of the view that both Parties certainly would have anticipated the prospect of litigation once the Plan was registered. While as contended by Obico’s counsel it is very often the case that many expropriation proceedings may result in a negotiated resolution before – or after – a claimant issues a Notice of Arbitration, in the Tribunal’s view this is not relevant to the determination of this issue.

13In the Tribunal’s view, the key question here in terms of defining a trigger date is whether prior to the Advance Offer would it have been reasonable to expect that the Parties would have anticipated the likelihood of litigation regarding compensation for the City’s expropriation.

14The evidence before the Tribunal, bearing upon the factual question described in paragraph [13] above, is as provided in the affidavit of Mr. Stevenson contained in the City’s Responding Motion Record (“Stevenson Affidavit”) and in the affidavit of Robert Hughes sworn July 8, 2022 (“Hughes Affidavit”) contained in the Reply Motion Record of Obico of the same date, just one business day before this VH.

15As preliminary evidentiary matter, the Tribunal notes that the Hughes Affidavit was not served and filed in accordance with the requirements of Rule 10 of Rules of Practice and Procedure of the Ontario Land Tribunal (“Rules”), a point raised by the City’s counsel. On those grounds, the City’s counsel could have moved to strike the Hughes Affidavit as he had no practical opportunity prior to this VH to cross-examine on it or to otherwise respond. However, counsel for the City in oral argument did not seek that remedy but instead argued that the Hughes Affidavit was not proper reply evidence on this motion since the evidence it contained could have easily been tendered as part of either the original or amended Obico Motion Records. Counsel for the City notes that the basic nature of the facts and relevant dates in 2015 and 2016, attested to in the Stevenson Affidavit were already well-known to Obico and therefore, Obico was obliged to deal with them in its own Motion Records rather than to late-serve the separate Hughes Affidavit in ‘reply’.

16The Tribunal agrees with the position of the City’s counsel as described in paragraph [15] above and although it has received and considered the Hughes Affidavit, it will accord it less weight in these circumstances.

17In the Stevenson Affidavit, it is attested that the City was contemplating potential litigation concerning the Subject Lands at the time it commenced serious negotiations with Obico concerning the Lands’ acquisition because it was clear that if no such transaction was consummated then the City’s only option was to commence expropriation proceedings instead. The Tribunal notes that Obico’s counsel did not seek to challenge these allegations by way of cross-examination.

18Counsel for the City argues that the Stevenson Affidavit sets out evidence that demonstrates that litigation was contemplated by December 18, 2015, or at the very latest, on March 4, 2016, when both the Toronto Transit Commission (“TTC”) and Obico / Dream agreed to the NDA governing the exchange of information between them as follows:

(i) On December 18, 2015, internal TTC correspondence notes that “We [TTC] will be having both Dream and CPR sign an NDA with us before we send them any material and all discussions will be without prejudice.”

(ii) On March 4, 2016, Dream and the City both agree to sign a broad NDA regarding the information exchanged in those discussions; and,

(iii) On April 30, 2016, a TTC Confidential Monthly Status Report reports that the TTC was: (1) exploring the potential for expropriation, and (2) noted the risk of negative impact to a CPR/Dream joint venture and the resultant claim for ‘lost development opportunity’.

19On the other hand, counsel for Obico / Dream argues that there is no basis for the City to assert litigation privilege prior to its Council’s authorization of the expropriation and even more so prior to a notice of intention to expropriate. Moreover, relying on the Hughes Affidavit, Obico’s counsel maintains that the purpose of the NDA was to shield the disclosure of sensitive documents exchanged between the TTC, Dream and CPR to third party commercial entities as part of negotiations for the TTC to acquire, through partial sale, a leasing arrangement, or a potential partnership, some or all of the Subject Lands and that:

…The context of the NDA had nothing to do with expropriation, which only occurred two years later.

20Mr. Hughes, the affiant of the Hughes Affidavit, is the General Counsel of Obico / Dream. Unlike Mr. Stevenson, he has not been examined for discovery nor was there any reasonable opportunity for him to be cross-examined on his affidavit prior to the VH as explained in paragraph [15] above.

21As noted in paragraph [16], the Tribunal is of the view that Mr. Hughes’ evidence ought to have been provided in Obico’s main Motion Record(s) and is not proper Reply evidence in the circumstances of this case. Clearly, Mr. Hughes direct contradiction of the points made by Mr. Stevenson puts this Tribunal in a difficult situation as it is unable to fully evaluate this competing evidence, and Obico’s counsel chose not to cross-examine Mr. Stevenson.

22From a common-sense perspective, and based on the totality of the evidence and the pleadings before the Tribunal, it seems to the Tribunal that it is highly unlikely that two sophisticated entities such as the City and Obico / Dream would have failed to ascertain the real prospect that:

(a) the City would pursue expropriation of the Subject Lands if negotiations between the City, the former owner CPR and/or Obico / Dream were unsuccessful;

(b) that the reason Obico was involved in these negotiations was because it intended to either embark on a joint venture with CPR regarding the Subject Lands or simply itself acquire them; and,

(c) litigation frequently arises after expropriation proceedings notwithstanding the fact that eventually such litigation is very often resolved well before a final arbitration. (On this point, the same could be said with respect to almost all civil disputes and litigation in Ontario).

23Therefore, the Tribunal determines that it is reasonable to consider that the theoretical starting date for the basis of a litigation privilege claim is December 18, 2015 (as described in paragraph [10] (v) above. On the other hand, this does not mean that counsel for the City has demonstrated that all documents dated after December 18, 2015, ought to be protected from discovery disclosure because they were prepared for the dominant purpose of impending litigation. In fact, the Stevenson Affidavit does not fully meet this onus.

24Perhaps this is why counsel for the City has wisely taken the position in written and oral argument that:

The City does not object to production of various documents in its Schedule B Index, even those prepared for the dominant purpose of litigation, so long as all material references to negotiations/potential settlement positions are appropriately redacted.

25The Tribunal notes as well that the City’s counsel has already conceded that the City must deliver a further and better Schedule A and Schedule B to its existing Affidavit of Documents to reflect additional documents that have been uncovered and to more accurately particularize and explain its Schedule B documents for which it claims privilege, including but not limited to litigation privilege.

26Therefore, the Tribunal agrees that all documents in the City’s existing and soon-to-be-provided revised Schedule B listings should be produced to counsel for Obico / Dream but that the City shall be entitled to redact from such documents any and all content relating to legal advice sought or received, negotiation and settlement positions. In addition, the City is not obliged to produce any documents prepared by third party appraisers or other valuation consultants at the behest of inside or outside City legal counsel.

SETTLEMENT PRIVILEGE

27The Tribunal agrees that from a policy perspective it is important to foster full and frank settlement negotiations between Parties to a dispute and that therefore documents and information stemming from the preparation for and conduct of resolution discussions ought to be protected from disclosure during the discovery process. This policy underpinning has long been recognized by both the Courts and this Tribunal.

28As pointed out by counsel for the City, in written and oral argument, the City’s claims of settlement privilege and litigation privilege in essence have ‘merged’

“…because the mischief that it seeks to avoid is disclosure of documents that were recorded for the purpose of trying to prepare for and resolve the dispute over the acquisition of the Subject Property in good faith…”

29In light of the Tribunal’s determinations made as described in paragraph [25] and [26] above, it is unnecessary to further consider the City’s claims of settlement privilege.

SOLICITOR AND CLIENT PRIVILEGE

30The City’s counsel has also asserted solicitor-client privilege in relation to a number of documents listed in the City’s existing Schedule B and will no doubt do so in relation to the updated Schedule B listing which it has agreed to provide to counsel for Obico / Dream.

31The Tribunal agrees with Obico’s lawyers that the City’s current Schedule B documents list in its Affidavit of Documents does not contain information that would support an assertion of communication directly relating to, seeking, or receiving of legal assistance. To the extent that those documents may contain communications seeking /containing legal advice from inside or outside counsel, proper redactions would shield such disclosure.

ORDER

32The Tribunal Orders as follows:

(i) the City shall provide a fresh Schedule B to its Affidavit of Documents, which shall provide adequate information to support any claims for litigation privilege, settlement privilege and/or solicitor-client privilege;

(ii) the City shall be entitled to redact from the Schedule B documents described in paragraph [32] (i) any content relating to legal advice sought or received, negotiation and settlement positions. In addition, the City is not obliged to produce any documents or opinions prepared by third party appraisers or other valuation consultants at the request of inside or outside City legal counsel or otherwise relating to the negotiation or settlement positions taken by the City;

(iii) the City shall produce for inspection by counsel for Obico / Dream all of the documents described in paragraph [32] (ii) that pre-date the date of service by Obico of its Notice of Arbitration and Statement of Claim on March 18, 2020 (“Action”);

(iv) for greater certainty, the Orders set out in paragraph [32] (i), (ii) and (iii) above shall not require the City to produce documents related to or arising out of communications subsequent to March 18, 2020 between the City’s representatives and the City’s current outside law firm or communications to and from any experts retained by the City’s current outside law firm in relation to the Action; and,

(v) the costs relating to this Motion shall be determined by the Tribunal Member presiding at the final hearing of the Action.

33The Tribunal Member will remain available to assist the Parties if matters arise concerning the implementation of the Orders made in paragraph [32]. In that event, the Parties may make written submissions to the Tribunal, following which the Tribunal will issue a further Decision or may, at its sole discretion, convene a further hearing event to resolve or determine such matters.

“William R. Middleton”

WILLIAM R. MIDDLETON MEMBER

Ontario Land Tribunal Website: olt.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248

The Conservation Review Board, the Environmental Review Tribunal, the Local Planning Appeal Tribunal and the Mining and Lands Tribunal are amalgamated and continued as the Ontario Land Tribunal (“Tribunal”). Any reference to the preceding tribunals or the former Ontario Municipal Board is deemed to be a reference to the Tribunal.

ATTACHMENT 1

list of agreed matters

At the outset of the undertakings motions, the City confirmed that certain questions included in the City’s Amended Motion Record have been resolved as follows:

Questions Resolved	Basis for Resolution
1. UA149(Q849-51) UA173(Q1102-04) & R3 (Q435)	These questions were resolved through supplemental answers provided by the Claimant.
2. UT77 (Q996-97) & UT79 (Q999)	These questions requested the production of finalized copies of the Claimant’s financial statements from 2016-2019. Copies of unaudited financial statements have been provided for the relevant time period. If audited financial statements exist, the City requests production, but if they do not exist, then the City considers the questions resolved.
3. UT83 (Q1084-85) UT91 (Q1138-39), UT92 (1140), UT94 (Q1142), UT95 (Q1143), & UT96 (Q1144-45)	These questions requested production of the particulars of out-of-pocket expenditures that the Claimant had paid to third party entities. However, the Claimant subsequently clarified no payments to third party entities were being claimed and that the claim to disturbance damages was limited to the time of its own staff. As a result, paragraph 40 of the Statement of Claim should read as follows: "40. Dream seeks $898,654.00 $662,025.00 for disturbance damages for costs thrown away in planning for development of the Subject Property. The costs thrown away relate to work undertaken by Dream staff~~, as well as expert consultant and advisory fees expended,~~ for the intended re-designation and development of the Subject Property." On the basis of this clarification to the claim, the City considers these questions resolved.

The following questions remained at issue in respect of the City’s Motion:

Questions in Issue	Subject of the Issue
1. UA172 (Q1092)	Question regarding the underlying evidence and accounting of the claim pleaded at para. 41 of the Statement of Claim for impacts to the Claimant’s existing leasing operations.
2. UT80 (Q 1024-26), UT 81 (Q1027-1029), UT82 (Q1037-1040), UA116(Q218-221), UA130 (Q278), UA131 (Q279), UA152 (Q927-28), UA161 (Q1030-36), UA163 (Q1045-1049, 1051), UA164 (Q1059), UA165 (Q1060), UA166 (Q1063-64), UA174 (Q1118-20), UA177 (Q1147-48), UA178 (Q1149), UA179 (Q1150), & UA180 (Q1151)	Questions regarding valuation work and the Claimant’s pleading at para. 37 of the Statement of Claim regarding “the conclusion on value as determined by CBRE, an independent appraisal expert firm with supporting expert evidence supplied to CBRE from a number of other firms, including Urban Strategies, an independent planning expert.”
3. UA176 (Q1131-34)	Question requesting the details of the “back of the envelope $80m value” calculation referred to in an email enclosed in the Claimant’s Schedule A Production at OBI033750.

ATTACHMENT 2