The St. James' Preservation Society v. Toronto (City), 2007 ONCA 601
DATE: 2007-09-06
DOCKET: C45811
COURT OF APPEAL FOR ONTARIO
WEILER, BLAIR and MACFARLAND JJ.A.
BETWEEN:
THE ST. JAMES’ PRESERVATION SOCIETY
(Applicant)
And
CITY OF TORONTO AND RECTOR AND CHURCHWARDENS OF ST. JAMES CATHEDRAL, TORONTO
(Respondents/Respondent)
Counsel: Eric R. Murray, Q.C. and Ranjan Das for the appellants, Peter John Currie and Robert Morris McDougall Grange
Jason Murphy for the respondent, Rector and Churchwardens of St. James Cathedral
Heard: June 13, 2007
On appeal from the judgment of Justice Todd Ducharme of the Superior Court of Justice dated July 5, 2006.
WEILER J.A.:
[1] This is an appeal from a non-party costs award made against Dougall Grange and Peter Currie, the directors of the St. James’ Preservation Society (“the Society”). After a one and a half day application brought by the Society (also referred to in these reasons as the applicant), the application judge ordered costs in the amount of $105,852.14 to be paid personally by Grange and Currie. He concluded that the Society was almost wholly unsuccessful on the application, and that the litigation was not sufficiently in the public interest to justify a departure from the usual costs rules. The Society took no appeal from his decision on the application.
[2] The appellants’ principal submissions are that the application judge erred in his conclusion that the litigation was not sufficiently in the public interest and further submit that he deprived them of procedural fairness in making the personal costs award against them that he did.
[3] In my opinion, the application judge went too far in concluding that the Society had no success on the application. A declaration was necessary to restore actual notice to the public record that the residue of property, known as Parcel F, was trust property. As the respondent would not consent to the making of a declaration, bringing the application for a declaration was a precondition of actual notice being restored. That said, the application judge was clearly of the opinion that any success the Society achieved was outweighed by the time and expense of the litigation and by its lack of success on many other issues it raised. Overall, he was of the opinion the litigation was not in the public interest. While I may not have come to the same conclusion, I am not prepared to say that he committed an overriding error in this regard. However, in deciding whether to award costs personally against the appellants, the application judge is clear in his reasons that he accepted:
a) the Society and the appellants had a genuine interest in this case;
b) the Society and the appellants were not acting to vindicate a private interest;
c) the issue was novel insofar as no previous court had interpreted the precise scope of the provisions of this trust;
d) no other potential litigants were better suited to bring this litigation; and
e) the application involved issues that extended beyond the immediate parties involved.
These factors take the litigation out of the realm of an abuse of process, one of the bases on which courts have in the past awarded costs personally against individuals. It is equally clear that the appellants did not stand to gain personally from the litigation. The cumulative effect of these factors, when considered with the fact the R & C did not seek to make the appellants parties to the application, and the lack of a full hearing as to whether the appellants should be personally liable for costs in the face of affidavit evidence that other reputable persons supported the Society, leads me to conclude that the application judge erred in holding that the exceptional circumstances existed for awarding costs against the appellants personally. Accordingly, I would allow the appeal. My reasons are set out in detail below.
Background
[4] While the appellants appeal only the costs award and do not challenge the result of the underlying application, it is necessary to set out the background facts and the parties’ positions on the application to understand the context in which the costs award was made.
[5] The dispute at the centre of this application involved the use of the lands on which St. James’ Cathedral is located in the City of Toronto. The land that the cathedral occupies was granted in trust in 1817
for the sole use and benefit of the Parishioners and Inhabitants of the said Town of York forever, as a church yard and burying ground for the Inhabitants of the said Town of York and as appurtenant to the Church now built thereon.
[6] In 1820, the trustees surrendered that patent and a new patent was issued which divided the land into two separate parcels, each with a distinct trust. The 1820 patent provided that
It was intended that so much only of [the lands in the 1817 patent] as was necessary for the church yard and burial ground would be so appropriated and that such part of the said Tract as was not so required for the use of the parishioners should be held by such trustees to and for the sole use and benefit of the Clergyman of the church of England now residing in the said Town of York and having the cure of the souls therein.
Under the 1820 patent the residue and remainder of the property was to be held
To and for the sole use and benefit of the Parishioners and Inhabitants of the said Town of York forever, as a church yard and burying ground for the Inhabitants of the said Town of York and as appurtenant to the Church now built thereon.
[7] This residue, referred to in these proceedings as “Parcel F”, is the property that is the subject of this application. The two parcels of land in total consist of the city block bounded by King St. on the south, Adelaide St. on the north, Church St. on the west and Jarvis St. on the east. The property in question here is also subject to an Act Respecting St. James' Cathedral, 1903, 3 Edw. VII, c. 125, which gives powers to the trustees to convey lands associated with the cathedral but exempts the parcel in question here from that power.
[8] The St. James’ Preservation Society, is a corporation without share capital that was incorporated on August 7, 2003. Peter Currie and Dougall Grange are two of the three individuals listed as first directors of the corporation. Both are residents of Toronto but neither is a member of the St. James’ congregation. The objects of the Society are to
promote the preservation and protection of certain historical properties within the city of Toronto, more specifically… part of the Episcopal Block A, on the Town of York Plan, municipally referred to as 106 King West, and locally known as St. James’ Cathedral, and the associated burying ground and church yard.
[9] The respondent, the Rector and Churchwardens of St. James’ Cathedral (“R&C”), is a corporation that holds title to the land on which the cathedral sits as trustee. On January 17, 2000, the R&C conveyed Parcel F to itself without stipulating that it was a trustee or referring to the trust or its terms. On June 7, 2000, the R&C entered into a non-binding letter of intent with Context Real Estate Inc. (“Context”) to sell Parcel F for $7.5 million. Context sought to build a condominium tower on the land. The termination date of the non-binding letter of intent was extended to April 30, 2001, an extension that subsequently lapsed.
[10] For reasons that the parties dispute, the respondent began to consider options other than the development of the cathedral land. In 2002 R&C entered into an agreement with the City of Toronto and Context to transfer some of the zoning density from the church lands to Context’s nearby condominium property. R&C received $3.7 million from the developer for the density transfer and intended to use the funds to restore church buildings on the property. This transaction was approved at a meeting of the cathedral’s parishioners on May 26, 2002. On September 16, 2003, a further meeting of parishioners approved a re-zoning agreement which required R&C to enter into two separate agreements with the City: a Heritage Easement Agreement and a “Section 37 agreement” pursuant to section 37 of the Planning Act, R.S.O. 1990, c. P.13.
[11] The heritage easement agreement designated certain parts of the Parish House and Diocesan Centre on the land as having heritage value and prohibited changes to these buildings. The agreement also required that the church use the funds received from the re-zoning to refurbish the property within certain time limits. It stipulated certain aspects of the refurbishment and prohibited the church from otherwise altering the footprints of the existing buildings. The section 37 agreement required that at least $2.7 million of the funds received from the re-zoning be paid into a trust account, and required the church to provide a quarterly accounting to the city reporting on how funds had been used. It prohibited use of the funds except for “the purpose of financing the revitalization, conservation, restoration and/or improvement of the Parish House and Diocesan Centre of St. James’ Cathedral and associated landscape features on the St. James’ land.”
[12] In the lead up to these agreements, the Society and the appellants participated in several parishioner meetings in an attempt to thwart the rezoning and made further unsuccessful representations to City Council and the Ontario Municipal Board. On February 25, 2005, the OMB dismissed the Society’s appeal of its decision to pass the bylaws.
[13] The Society brought the application underlying the costs award against both the City of Toronto and the R&C. It sought orders quashing the zoning bylaws on the ground that the density transfer violated the terms of the trust. It also sought declaratory relief with respect to the terms of the trust, the proper use of the land, and the proper use of funds raised by the density transfer. After the Society commenced the application, the parties entered into a partial settlement agreement pursuant to which the Society retracted its attack on the bylaws, discontinued the application against the city, and limited the relief that it sought to specifically enumerated issues. The $3.7 million was paid into court.
The Application
[14] In its amended Notice of Application, the Society sought:
(1) a declaration that the money R&C received on the density transfer is impressed with a trust;
(2) a declaration that the funds cannot be used for the Diocesan Centre;
(3) a determination of the identity of the beneficiaries;
(4) an order that the funds remain in court until the Section 37 Agreement is amended to conform to the court's orders in respect of the foregoing questions; and
(5) an order that R&C report to the applicant on the use of the funds.
At the hearing, the Society advanced these grounds and a number of additional grounds that were not included in the relief that it had restricted itself to seeking in the partial settlement agreement. R&C’s position was that the appellant was precluded from raising these additional issues because they had been abandoned. The application judge agreed that the Society should be bound by the agreement and precluded it from raising these issues. Alternatively, the application judge gave reasons refusing to grant the relief sought.
[15] With respect to the issues that the Society had raised in the Amended Notice of Application, the application judge found that the monies R&C received from the density transfer were impressed with a trust. Importantly, at the hearing the respondent had admitted that the monies were impressed with a trust but had contested a declaration consistent with this admission. The application judge ruled that:
Given the agreement of the parties with respect to the fact of a trust, it is not clear why this aspect of the application has not been settled. It is equally unclear why the respondent resists a declaration consistent with their admission. However, in the absence of a settlement between the parties or a binding undertaking with respect to this issue, it is clear that the matter is not moot. Therefore, it is appropriate that the court address this issue and, in light of the agreement of the parties, it is appropriate to declare that the monies are impressed with a trust in the Crown patents as that trust has been revised from time to time by statute.
[16] With respect to the question of who are the beneficiaries of the trust, the Society argued that they must now be understood to be the parishioners of the cathedral and the “citizens” of the City of Toronto, as the City of Toronto is the successor to the Town of York. The respondent took the position that this issue was only relevant insofar as it related to the Society’s standing to bring the application. It did not contest standing and argued that the application judge should refuse to define the beneficiaries without knowing exactly why the question required a determination and without a concrete set of underlying facts.
[17] The application judge found the trust beneficiaries to be “the parishioners of St. James’ Cathedral and the inhabitants of the City of Toronto”, a class that is to be understood disjunctively. He rejected the Society’s arguments that the definition should be understood conjunctively, which would require that every use of the monies must benefit both parishioners and inhabitants. The application judge rejected the respondent’s argument that the issue of whether the monies were impressed with a trust was moot because the trust was admitted. He explained:
There is a live controversy between the parties that may affect the rights of both parties. That is, for whose benefit can these monies be expended when they are paid out of court?... I see no advantage in deferring this question until the applicant challenges some particular expenditure of R&C as they inevitably would.
[18] The application judge concluded that the monies could be spent on the Diocesan Centre without violating the trust and refused to grant the other relief sought by the appellants.
The Costs Award
The Successful Party
[19] In his reasons on the application, the application judge indicated that R&C was entitled to its costs in this matter and invited submissions on the appropriate scale, quantum, and on whether a costs award should be made personally against the individual directors of the Society. The Society requested an opportunity to make submissions as to who should be ordered to pay costs. Both parties provided written submissions.
[20] The Society argued that it should be awarded costs because the Society was successful in its principal claim of relief – the declaration that the proceeds of the density transfer were impressed with a trust. The Society’s alternative position was that each party should bear its own costs, given the fact that the application was brought in the public interest and in light of the respondent’s success as to whether trust funds could be used to refurbish the Diocesan Centre. With respect to a personal award of costs, the Society argued that this was not an appropriate case for such an exceptional order because the Society was acting in the public interest.
[21] Conversely, the respondent argued that it was entitled to its costs in virtue of its success on the application and that costs should be ordered payable by the directors personally because the Society has minimal assets and was designed solely to shield the real litigants from costs liability. The respondent disputed that the application was brought in the public interest.
[22] The application judge rejected the Society’s submission that it was the successful party in this litigation. He reasoned that “The Society's only success was that I agreed to rule on two issues that the respondent argued I need not decide: the existence of the trust and the propriety of using funds for the Diocesan Centre.” He noted that he had rejected the Society’s interpretation of the trust and its position that monies could not be spent on the Diocesan Centre. His view was that the Society was unsuccessful on every other issue that it raised on the application.
The Public Interest Element to the Litigation
[23] The application judge next considered whether the application had a public interest element that would justify a departure from a typical costs order. After a thorough and careful review of relevant case law and secondary sources, the application judge determined at para. 17 that the following factors should be considered in determining whether an unsuccessful litigant should be excused from paying costs because it was acting in the public interest:
(1) the nature of the unsuccessful litigant;
(2) the nature of the successful litigant;
(3) the nature of the lis -- was it in the public interest;
(4) whether the litigation had any adverse impact on the public interest; and
(5) the financial consequences to the parties.
[24] The application judge concluded at para. 34 that “this is clearly not a case where the applicant's actions were in the public interest” and that, as such, there is “no basis to make a no costs order”. The appellants do not allege error with respect to the factors that the application judge considered in making his determination but take issue with the application judge’s application of them.
[25] With respect to the first factor, the nature of the unsuccessful litigant, the application judge accepted that the Society was not acting to vindicate a private interest and did have a subjective belief in the issues raised. Further, he concluded that the Society had a genuine interest in this litigation and that there were no other potential litigants who were better suited to have brought this application.
[26] In regard to the second factor, the nature of the successful litigant, the application judge concluded that R&C was a private corporation whose work is in the public interest of the Toronto community and who was forced to participate in this litigation. He found these factors to militate against an order forcing the respondent to bear its own costs.
[27] In discussing the nature of the lis, the application judge acknowledged that this application involved issues that extended beyond the immediate parties to the litigation and also involved a new issue, insofar as no previous court decision had interpreted the precise scope of the provisions of this trust. That said, however, he concluded that the application was not in the public interest because many of the arguments advanced were totally devoid of merit and the Society had improperly tried to re-litigate matters that it had already settled by way of the partial settlement agreement.
[28] Further, he reasoned that the fact that the impugned density transfer had been agreed to by both the Church and the municipal government of Toronto in the context of “open, democratic and responsible decision-making processes” militated against the finding that the application was in the public interest, as the appellant “appears to represent no one but its three directors” and participated in these processes but refused to accept their outcomes. Finally, the application judge concluded that there was no practical need to bring this application because the respondent acknowledged that the funds were impressed with a trust.
[29] The application judge found that the application did have an adverse impact on the public interest because the respondent was forced to expend considerable funds in defending it that could have been used by the Church in various ways that would have benefited the public interest. With respect to the financial consequences of a cost order to the parties, he was satisfied that requiring the R&C to pay their own costs would have an adverse impact on the public interest. While requiring the Society to pay costs would bankrupt it, this was no reason to refuse a costs order, especially because it was incorporated with a view to this litigation and had no prior history of public interest activity.
[30] Having concluded that the Society was not the successful party and that the litigation was not public interest litigation that would justify a “no costs” award, the application judge fixed the costs against the Society. He then turned his attention to the respondent’s claim for costs personally against Messrs. Grange and Currie.
The Non-Party Costs Award
[31] The application judge explained how a court, as part of its common law jurisdiction to control its own process, may make a costs order against a non-party. He accepted that such an order should only be made in exceptional circumstances. In order to obtain such an order, he noted that the respondents must demonstrate: (a) that the directors had status to bring the application against the R & C themselves; (b) that the Society was not the “true applicant”; and (c) that the Society was a sham or a “man of straw” put forward to protect the true applicants from liability for costs.
[32] He found that the directors could have brought this application in their own names either in their capacity as beneficiaries of the trust or under the Charities Accounting Act, R.S.O. 1990, c. C-10. He also concluded that the directors were the “true applicant”, noting that there was no evidence that the Society had any other members or that it represents anyone beyond them. He was clear that Grange and Currie controlled the conduct of the litigation from its inception, attended all meetings in relation to the application, including settlement meetings, negotiated personally the partial settlement agreement, and retained and instructed counsel at the application.
[33] With regard to the last factor, he found that the Society was simply incorporated to protect the directors from personal liability. He concluded that this was “precisely the type of improper conduct that justifies the making of a costs order against a non-party.”
Issues on the Appeal
Standard of Review
[34] It is well-settled that costs awards, which are discretionary, are to be accorded a high degree of deference: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at para. 19. As set out by Arbour J. in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 at para. 27: “A court should set aside a costs award on appeal only if the application judge has made an error in principle or if the costs award is plainly wrong.”
The “Unsuccessful Society”
[35] In his reasons for judgment, the application judge noted that while the respondent admitted the monies were impressed with a trust, it resisted the making of a declaration by him.
[36] In the context of the litigation and the history between the parties, the declaration that the monies were impressed with a trust was itself significant.
[37] A declaration was necessary to restore actual notice of the trust to the public record respecting Parcel F which the R&C had conveyed to itself without making any reference to a trust. As the respondent would not consent to the making of a declaration, bringing the application for a declaration was a precondition of actual notice being restored. Securing the declaration itself constituted divided success. Thus the application judge was plainly wrong in ruling that the Society was without any success on the motion.
The “Public Interest Litigation” Issue
[38] The appellants argue that, irrespective of whether the Society was successful, the application was in the public interest and, as a result, no order as to costs, is justified as against them. The respondent submits that the application judge made no error in his appreciation or application of the various factors that inform the determination of what constitutes public interest litigation.
[39] The application judge gave careful reasons explaining why he did not accept that the Society’s efforts were in the public interest. Consequently, he declined to exercise his discretion not to order costs. As mentioned, the appellants do not take issue with the factors that the application judge considered in declining to order costs but contest his application of them.
[40] The application judge is clear in his reasons that he accepted:
a) the Society had a genuine interest in this case;
b) the Society was not acting to vindicate a private interest;
c) the issue was novel insofar as no previous court had interpreted the precise scope of the provisions of this trust;
d) no other potential litigants were better suited to bring this litigation; and
e) the application involved issues that extended beyond the immediate parties involved.
He concluded, however, that the application was not in the public interest because the Society’s arguments were devoid of merit, because it had attempted to re-litigate settled issues, and because the application did not positively supplement the democratic process because the impugned decisions had been approved by the parishioners and the City of Toronto.
[41] The fact that the Society and the appellants opposed an initiative that had been approved by a democratic municipal government and by the community of parishioners does not, in itself, militate against a finding that the litigation was in the public interest. Public interest litigation will often occur in the context of actions against a government or public authority that is acting responsibly in its capacity.
[42] In Incredible Electronics Inc. v. Canada (A.G.) (2006), 80 O.R. (3d) 723 (S.C.J.), Perell J. canvasses the jurisprudence on costs awards in different categories of public interest litigation. He cites a number of “public interest cases where the victorious government or public authority has not received costs from the unsuccessful public interest litigant notwithstanding that the victorious public authority achieved its victory in a way that was above reproach.” Clearly, the fact that the litigant was trying to thwart the product of a democratic process is not in itself determinative of whether its legal action was in the public interest.
[43] The Alberta Court of Appeal interfered with the costs award of a motions judge in a case with circumstances resembling these in Ratepayers of the City of Calgary v. Canada (2001), 2001 ABCA 162, 94 Alta. L.R. (3d) 23. Like the application judge, the motions judge in Ratepayers of the City of Calgary “held that the issues were serious, that the Appellants had a genuine interest in raising those issues and there was no other party in a position to apply to the court for the relief sought.”
[44] In reversing the costs award, the court explained at para. 8 how
When those findings are coupled with the underlying public interest in the utilization of health care resources, it was demonstrably wrong to conclude that there was no reason to deviate from the customary rule. Several reasons for deviation are apparent in the findings of the chambers judge.
[45] In the instant case, the application judge made exactly the same findings as did the motions judge in Ratepayers of the City of Calgary and, as I shall later indicate, these findings are an important consideration as to whether the appellants should pay costs personally.
[46] The application judge was, however, of the opinion that the Society’s lack of success on the matters that occupied the most time before him and the cost of spending funds on the litigation that could otherwise have been better used by the R &C in the interest of the community it served, outweighed any other factors he was required to consider. While I would not have come to the same conclusion as the application judge, I am not prepared to hold that his erroneous comment concerning the application having no success and his comment concerning the Society and the appellants thwarting the democratic process in themselves amounted to an overriding error that would justify setting aside his holding that, overall, the litigation did not come within the public interest exception.
[47] The trial judge’s conclusion that overall the litigation was not public interest litigation justified an award of costs against the Society as opposed to no costs being awarded. That conclusion was not, however, sufficient to justify an award of costs against the non parties personally. Indeed, the trial judge’s clear findings that the Society and the appellants had a genuine interest in this case, that they were not acting to vindicate a private interest or for personal gain, that the issues extended beyond the immediate parties and that no other persons were better suited to raise the novel issues they did, are incompatible with his decision to award costs personally against the non parties.
The Procedural Fairness Issue
[48] The application judge noted that the respondent’s factum requested costs against Grange and Currie personally and held that this constituted notice to them. He gave Grange and Currie the opportunity to make submissions in writing before making his award against them.
[49] Grange and Currie submit they were denied procedural fairness by this costs order. They submit that if costs were to be sought against them personally they should have been made parties to the litigation. See Ratepayers of Calgary (City) supra at para 10. Had R&C sought to make Grange and Currie parties they would have been afforded all of the protections of parties, including the ability to be awarded costs instead of just being subject to an order to pay them, and they further submit their litigation strategy may have been different.
[50] The R & C’s position is that Grange and Currie knew they were at risk to have costs awarded against them personally and there has been no denial of procedural fairness. Actual notice was given to the appellant that the R&C would seek personal costs against the directors in correspondence attached to a September 24, 2004 settlement offer, which mentioned that “if this settlement offer is not accepted, the Church will ask the court hearing this application to award costs in favour of the Church against Dougall Grange, Peter Currie and Melissa Moshenko personally.”
[51] This letter was sent less than two months before the hearing and until that point the issue of a personal costs order had not arisen in this litigation. Further, it is not uncommon for correspondence and offers to contain a threat that costs will be sought personally. Had the R & C brought a motion for security for costs in advance of the application being heard, the issue of Grange and Currie’s personal liability could have been raised at that time. No such motion was brought.
[52] The court clearly has authority, derived from its inherent jurisdiction to prevent an abuse of process, to award costs against a non-party who has proved to be the real person controlling the litigation but has put forward a “man of straw” to avoid liability for costs or other reasons: Alexanian v. Dolinski (1973), 2 O.R. (2d) 609 (C.A.); Re Sturmer and Town of Beaverton (1912), 25 O.L.R. 566 (C.A.). The making of such an order is, however, exceptional.
[53] There are important distinctions between the authorities on which the R & C relies in support of a personal costs award being made and the present case. For example, Sturmer v. Beaverton (Town), (1911) 20 O.W.R. 560, (H.C.J.), (1912), 21 O.W.R. 390 (C.A.), involved a situation where the court found there was an abuse of process. In Smith v. Canadian Tire Acceptance Ltd. (1995) 22 O.R. (3d) Gen Div. affirmed (1995), 40 C.P.C. (3d) 129, the litigant stood to gain personally. Neither situation exists here.
[54] Further, in making his order, the application judge found that there was “no evidence that the Society has any other members or that it represents anyone beyond the first three directors.” There was affidavit evidence that related to this issue on the record from William Cooke, a parishioner and former archivist of St. James’ Cathedral and from Jane Beecroft, a member of the Community History Project. While neither Cooke nor Beecroft mentioned being members of the Society, both explained how their research on St. James’ Cathedral had caused them to doubt whether the R&C had any legal rights to develop or re-develop the land in question. Cooke’s evidence also expressed his opinion for the need for a judicial determination of this issue. My only comment on this issue is that the application judge would have been in a better position to determine whether the Society was a sham after he had presided over a full hearing on the costs issue.
[55] Without subscribing to the submission that it is always necessary for an individual to be made a third party to an action if costs are going to be sought against the individual personally, I would hold that the individual members of the Society did not receive adequate warning in this case that costs would be sought against them personally and, further, that the exceptional circumstances do not exist for a costs award to be made personally against them.
Fresh Evidence
[56] Finally, the appellant seeks to admit fresh evidence on this appeal that it submits is probative of the fact that, the respondent’s admission of a trust when the application was heard, ran counter to its dealings with the property in the context of its potential development and in related litigation. It submits that this evidence would have caused the application judge to reconsider his finding that there was no practical need to bring this application. The proffered evidence does not satisfy the Palmer test for the admission of fresh evidence on appeal and I would not admit it.
Disposition
[57] In the result I would allow the appeal and set aside the order requiring the non parties to personally pay the costs of the application. The non parties are entitled to the costs of this appeal fixed in the amount of $15,000. all inclusive.
RELEASED: September 6, 2007 (“KMW”)
“Karen M. Weiler J.A.”
“I agree R. A. Blair J.A.”
“I agree J. MacFarland J.A.”