COURT OF APPEAL FOR ONTARIO

CITATION: Poplar Point First Nation Development Corporation v. Thunder Bay (City), 2016 ONCA 934

DATE: 20161214

DOCKET: C61761

Rouleau, van Rensburg and Benotto JJ.A.

BETWEEN

Poplar Point First Nation Development Corporation

Applicant (Respondent by Counter-Application) (Appellant)

and

The Corporation of the City of Thunder Bay

Respondent (Applicant by Counter-Application) (Respondent)

Rene Larson and Thomas Demetzer, for the appellant

Allan D. McKitrick, for the respondent

Heard: June 22, 2016

On appeal from the order of Justice W. Danial Newton of the Superior Court of Justice, dated January 19, 2016, with reasons reported at 2016 ONSC 457.

van Rensburg J.A.:

A. Overview

[1] The central question in this appeal is whether the court has jurisdiction to grant relief from a deemed forfeiture occurring under s. 380(6) of the Municipal Act, 2001, S.O. 2001, c. 25 (the “Act”).

[2] The appellant, a not-for-profit corporation supporting Poplar Point First Nation Band and its members, was the registered owner of a property that was sold by the City of Thunder Bay (the “Municipality”) in a municipal tax sale. After recovering $5,843.11 in tax arrears and additional associated costs, the Municipality paid into court the surplus (an amount exceeding $76,000).

[3] Pursuant to s. 380(4) of the Act, the appellant had one year from the date of payment of the surplus into court to bring an application for payment out of court. Pursuant to s. 380(6), one year after payment in, the monies were deemed to be forfeited to the Municipality. The appellant applied to the court three weeks after the one year deadline. In response to the appellant’s application, the Municipality brought a counter-application, seeking payment out of court of the monies pursuant to s. 380(7) of the Act.

[4] The application judge, after setting out the chronology of what had occurred, and the steps the Municipality had taken, all in accordance with the Act, considered whether to grant the appellant relief from forfeiture under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43 or under s. 5(1) of the Fines and Forfeitures Act, R.S.O. 1990, c. F.13.[^1] After considering the contradictory case authority, the application judge dismissed the appellant’s application on the basis that he was not empowered to grant relief from forfeiture under either statute. He said he would have granted relief from forfeiture, if he had the jurisdiction to do so. He granted the Municipality’s application for payment out of court. Neither party sought costs, and none were awarded.

[5] The appellant appeals, arguing that the application judge erred in concluding that he did not have jurisdiction to grant relief from forfeiture. The respondent says that the application judge was correct on this point, and in any event that relief from forfeiture is not warranted on the evidence in this case.

[6] For the reasons that follow, I would allow the appeal.

[7] Briefly, I conclude that there is jurisdiction in the Superior Court under s. 98 of the Courts of Justice Act in proceedings under s. 380 of the Act to grant relief from the deemed forfeiture arising under s. 380(6). Since the Act does not expressly, or by necessary implication, exclude the court’s general power to grant relief from forfeiture in civil proceedings, and the forfeiture is not imposed as a penalty for breach of any requirement of the statute, such relief may be available. In this case, to grant relief would not undermine the purpose of the Act, or interfere with the finality and certainty of the municipal tax sale scheme. Resort to s. 5(1) of the Fines and Forfeitures Act is unnecessary and it is doubtful that this statute would apply. Finally, consistent with the application judge’s assessment of the facts and the equities, I conclude that relief from forfeiture is warranted in this case.

B. Relevant Facts and Statutory Provisions

[8] The appellant was the registered owner of a property located on County Blvd. in Thunder Bay. This was one of three properties in respect of which the appellant had failed to pay municipal taxes. As of December 31, 2011, $5,843.11 was owing on the County Blvd. property.

[9] The Municipality took the necessary steps under Part XI of the Act. This part provides for the rights of a municipality to sell a taxpayer’s land for the recovery of property tax arrears and specifies the procedures to be followed.

[10] On November 28, 2012, the Municipality registered a tax arrears certificate against title to the property. The certificate stated that the land would be sold if the cancellation price (tax arrears, interest, reasonable costs, etc.) was not paid within one year following registration of the certificate. Notice of registration of the tax arrears certificate was sent to the appellant on January 23, 2013. The notice was sent to the appellant at two addresses – the County Blvd. address and an address on Simpson St. (a property that was also the subject of a municipal tax sale).

[11] On September 19, 2013, a final notice was sent to the appellant, warning that the land would be advertised for public sale failing payment of the cancellation price within the prescribed time, in accordance with s. 379 of the Act.

[12] The appellant did not challenge or respond in any way to the tax sale proceedings. The property was offered by the Municipality for sale by public tender and sold on June 26, 2014. The sale proceeds exceeded the cancellation price by $76,264.60.

[13] Pursuant to s. 380(1) of the Act, after payment of the cancellation price, the remaining proceeds belonged to the appellant, as there was no other person or party having an interest in the land.

[14] The treasurer of the Municipality was required to pay into court the proceeds of sale minus the cancellation price, “together with a statement in the prescribed form outlining the facts under which the payment into court [was] made”: s. 380(2). This occurred on September 18, 2014. Within 60 days after making a payment into court, the treasurer was required to send a copy of the statement to the Public Guardian and Trustee and to the appellant.[^2] The Municipality’s representative deposed that this had occurred.

[15] Pursuant to s. 380(4), the appellant (and any other person with an interest in the land claiming entitlement to the proceeds) had one year from the date of payment into court to apply for payment out. In this case there was no one other than the appellant with an interest in the land.

[16] The balance of s. 380 provides for the court to determine the entitlements to receive payment out of the proceeds of sale, including deemed forfeiture to the municipality where no one applies for payment out (s. 380(6)), where there is a surplus after the determination of the entitlements of any applicants (s. 380(6.1)) or where the surplus is $250 or less (s. 380.0.1).

[17] For ease of reference I set out here section 380 in its entirety:

(1) The proceeds of a sale under section 379 shall,

(a) firstly, be applied to pay the cancellation price;

(b) secondly, be paid to all persons, other than the owner, having an interest in the land according to their priority at law; and

(c) thirdly, be paid to the person who immediately before the registration of the tax deed was the owner of the land.[^3]

(2) The treasurer shall pay the proceeds of sale, minus the cancellation price, into the Superior Court of Justice together with a statement in the prescribed form outlining the facts under which the payment into court is made.

(3) Within 60 days after making a payment into court under subsection (2), the treasurer shall send a copy of the statement to the Public Guardian and Trustee and to the persons to whom the treasurer sent notice under subsection 379(1).

(4) Any person claiming entitlement under clause (1) (b) or (c) may apply to the Superior Court of Justice within one year of the payment into court under subsection (2) for payment out of court of the amount to which the person is entitled.

(5) The court shall, after one year has passed from the day the payment was made into court, determine all of the entitlements to receive payments out of the proceeds of sale.

(6) If no person makes an application under subsection (4) within the one-year period referred to in that subsection, the amount paid into court under subsection (2) shall be deemed to be forfeited,

(a) to the Public Guardian and Trustee if, at the time of the registration of the tax arrears certificate, the land was vested in the Crown because of an escheat or forfeiture under the Business Corporations Act or the Corporations Act; or

(b) in any other case, to the municipality.

(6.1) If, after the entitlements of all applicants under subsection (4) to receive payment out of court have been determined, there remains any amount paid into court from the proceeds of sale, the remaining amount is deemed to be forfeited,

(a) to the Public Guardian and Trustee in the circumstances described in clause (6) (a);

(b) to the municipality in any other case.

(7) The Public Guardian and Trustee or the municipality, as the case may be, may apply to the Superior Court of Justice for payment out of court of the amount that was paid in.

(8) In the absence of evidence to the contrary, the Superior Court of Justice may rely on the statement of the Treasurer under subsection (2) in determining whether the amount paid into court under that subsection is forfeited to the Public Guardian and Trustee or the municipality under subsection (6).

(9) Money received by a municipality under subsection (6) shall be paid into the general funds of the municipality.

[18] After the Municipality paid the surplus monies into court, the appellant did not respond or take any steps in relation to the arrears during the prescribed one year period to apply to obtain the funds in court.

[19] The appellant’s explanation for its delay was that, while it was aware that there was a one year deadline, it did not receive the notice of payment into court which had been sent to the assessed (and sold) property, and that, because there were other properties subject to municipal tax sale proceedings, it misjudged the point at which the clock began running for the one year period. The appellant thought the Municipality would be making decisions about the three properties at the same time, and it believed the deadline to apply to the court was in October 2015. After a board member questioned when the deadline was, and began to look into the issue, the appellant discovered the one year deadline had passed. The appellant retained counsel and brought an application promptly on notice to the Municipality.[^4]

[20] The appellant’s application was dated October 7, 2015, at a time when the Municipality had not yet applied for payment out of court of the surplus funds. The application claimed payment out of court. The Municipality’s counter-application for payment out was made on November 12, 2015.

[21] In its application the appellant asserted that it was entitled to relief from forfeiture under s. 98 of the Courts of Justice Act or under s. 5(1) of the Fines and Forfeitures Act. Section 98 of the Courts of Justice Act provides:

A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

[22] Section 5(1) of the Fines and Forfeitures Act provides:

Where a fine is imposed by or under the authority of an Act of the Legislature, the court or judge having cognizance of the proceedings for the recovery thereof may at any time after the commencement thereof remit in whole or in part such fine, whether the money is in whole or in part payable to the Crown or to some person other than the Crown and whether it is recoverable by indictment, information, summary process, action or otherwise.

[23] Section 5(2) provides that a provincial judge or justice of the peace does not have the authority mentioned in subsection (1). “Fine”, for the purpose of the statute, is defined in s. 1 to include “all pecuniary fines, penalties and forfeitures”.

C. Decision of the Application Judge

[24] The application judge set out the relevant statutory scheme and facts. The central issue he had to decide was whether he had jurisdiction to grant relief from forfeiture.

[25] The application judge identified a number of cases in which relief from forfeiture under municipal statutes was granted or was considered available under the Courts of Justice Act: Niagara Falls (City) v. Diodati, 2011 ONSC 2180, 106 O.R. (3d) 154 (Ont. S.C.J.); Halton Hills (Town) v. Row Estate, [1993] O.J. No. 1222 (Gen. Div.); and Northern Bruce Peninsula (Municipality) v. Kerry, 2015 ONSC 7361, 45 M.P.L.R. (5th) 316 (Sup. Ct.).

[26] The application judge also noted decisions to the contrary that refused to recognize the court’s authority to relieve from a forfeiture arising in the municipal context: St. Louis v. Thunder Bay (City) (2005), 16 M.P.L.R. (4th) 233 (Ont. Sup. Ct.); and Household Realty Corp. v. Chatham (City) (1988), 42 M.P.L.R. 215 (Ont. Dist. Ct.).

[27] The application judge accepted the authority of a line of cases (that will be discussed later in these reasons) that the equitable relief provided for under s. 98 of the Courts of Justice Act could not apply to relieve against statutory penalties and forfeitures. With respect to the Fines and Forfeitures Act, the application judge stated that he did not read that statute as applying to municipal tax sales.

[28] Referring to authorities dealing with challenges to tax sale proceedings (Zeitel v. Ellscheid, 1994 CanLII 82 (SCC), [1994] 2 S.C.R. 142 and Elliott v. Toronto (City) (1999), 1999 CanLII 1073 (ON CA), 43 O.R. (3d) 392 (C.A.)), the application judge concluded that the tax sale regime is a carefully crafted legislative scheme, and that, while denying a remedy deprives the former owner of the surplus proceeds and results in a “windfall” for the municipality, it creates certainty and places the obligation to act diligently on the delinquent owner.

[29] The application judge held that, if he had authority to grant relief from forfeiture, he would have done so in this case. He noted that the appellant’s conduct was inadvertent, although negligent, that a three-week delay would not unduly prejudice the Municipality and the disparity between the lateness of the application and the value of the property forfeited.

D. Positions of the Parties

[30] The appellant says that the application judge erred in law in concluding that he did not have jurisdiction to grant relief from forfeiture. The appellant argues that relief from the forfeiture occasioned by s. 380 of the Act is available under either or both of the Courts of Justice Act and the Fines and Forfeitures Act. Further, since the application judge would have granted relief from forfeiture in the circumstances, the appellant submits that the appeal should be allowed and an order substituted granting relief from forfeiture and payment out of court to the appellant.

[31] The respondent says that there was no error in the decision of the application judge in finding that there was no jurisdiction to grant relief from a forfeiture arising under a statute. Further, the respondent contends that to permit relief from forfeiture would be inconsistent with the municipal tax scheme which is a “complete code”, and would undermine its policies and purpose. Finally, the respondent contends that, if the court has the power to grant relief from the forfeiture provided by s. 380 of the Act, relief should not be ordered in this case, considering the conduct of the appellant in relation to the sale and its weak explanation for failing to meet the one year deadline to claim payment out of court.

E. Analysis

[32] As I have indicated, I would allow the appeal. In my view, there is nothing in the scheme outlined in s. 380 of the Act that would preclude this court from granting relief from forfeiture under s. 98 of the Courts of Justice Act where the circumstances warrant.

[33] I will begin by considering the broad and general language of s. 98 and its placement in the Courts of Justice Act. I will then address in turn the two impediments to the exercise of this jurisdiction identified by the application judge. The first is what he accepted as a general proposition that the court does not have the authority under s. 98 to grant relief against statutory penalties and forfeitures. I will explain why I conclude that the prohibition against such relief is properly limited to circumstances where the forfeiture is in the nature of a penalty for breach of the statute; or where the statute expressly or by necessary implication precludes equitable relief from forfeiture. This will take me to the second impediment identified by the application judge: that relief from forfeiture would be contrary to the statutory scheme. As I will explain, although s. 380 is part of a statutory scheme for municipal tax sales, recognizing the court’s ability to relieve from forfeiture in an application for payment out of the surplus funds would not undermine the certainty or finality of that scheme.

[34] I will briefly discuss the Fines and Forfeitures Act and why in my view relief under that statute from the forfeiture that occurred here is both not contemplated thereunder and unnecessary.

[35] Finally, I will consider the merits respecting relief from forfeiture in this case and explain why I would accept the application judge’s assessment that relief from forfeiture, on the facts of this case, is warranted.

(1) Relief from Forfeiture under the Courts of Justice Act

[36] The Courts of Justice Act provides for what appears to be broad and unlimited authority to the court to grant relief from forfeiture. Section 98 is a general provision that states:

A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

[37] Section 98 is found in Part VII of the Courts of Justice Act. Section 95(1) provides that Part VII applies to “civil proceedings” in courts in Ontario.[^5] “Civil proceedings” are not only proceedings commenced by statement of claim, but include proceedings commenced by application. In this case, s. 380 of the Act requires an application to the court before money paid into court will be released, whether by the party entitled to the surplus under s. 380(4), or by the municipality after a deemed forfeiture under s. 380(7). The context of the appellant’s claim for relief from forfeiture is within a civil proceeding commenced by way of application under s. 380 of the Act.

[38] The origin of the court’s ability to grant relief from forfeitures and penalties was in the equitable jurisdiction of the Chancery Courts. Its scope was limited, available only for penalty clauses. It was also restricted to contracts concerning the transfer of proprietary or possessory rights: J. McGee, Snell’s Equity 3rd ed. (London: Sweet & Maxwell 2010), at para. 13-015.

[39] With the fusion of the courts of equity and common law (commencing in 1873 with the Administration of Justice Act, S.O. 1873, c. 8 and completed in 1881 with the Ontario Judicature Act, 1881, S.O. 1881, c. 5) the ability to grant relief from forfeiture was no longer restricted to the Chancery Courts. Section 16 of the Ontario Judicature Act, 1881 provided that “in every civil cause or matter commenced in the High Court of Justice” where equitable relief was claimed, the court was empowered to grant “such and the same relief as ought to have been given by the Court of Chancery… before the passing of this Act."

[40] Specific statutory authority for granting relief from penalties and forfeitures appeared first in the Ontario Judicature Act, following an amendment to that Act in 1886: S.O. 1886, c. 16, s. 38(b). Relief from penalties and forfeitures was included as “a rule of law” for “every civil cause or matter commenced in the High Court of Justice.” This new statutory power was quickly interpreted as having expanded the circumstances in which relief from forfeiture could be granted. See, for example, Townsend v. Toronto, Hamilton and Buffalo Railway Company (1898), 28 O.R. 195, where Meredith C.J. noted that it was “unnecessary to consider what, if any, limit was to be placed upon” the “wide general language of [the] provision” (at p. 199).

[41] The statutory provision was re-enacted in the various Judicature Acts, until the last was repealed and replaced by the Courts of Justice Act, 1984, S.O. 1984, c. 11, where it was placed under Part VII (originally as s. 111, and now s. 98).

[42] The broad wording of s. 98 and its application to civil proceedings, suggest, without more, that it should be available in this case, in the context of an application to obtain payment out of court of monies deemed to be forfeited to the Municipality.

[43] I turn to consider the two impediments that the application judge considered insurmountable in applying s. 98 in this case: first that, as a general principle, s. 98 would not be available to relieve from a statutory penalty or forfeiture, and second that relief from forfeiture is precluded in the absence of a specific discretion provided by the legislature as part of the “carefully crafted legislative scheme” for municipal tax sales.

(a) Penalty or Forfeiture Imposed by Statute

[44] The application judge referred to two lines of cases as authority that relief from forfeiture is not available to relieve from a penalty or forfeiture imposed by statute. The first is what I refer to as the McBride line of cases, which would preclude such relief as improperly interfering with the legislative function. However, this line of cases has been overtaken by a modern approach that rejects a categorical exclusion of s. 98 in the case of any forfeiture arising under a statutory scheme, and instead considers whether as a matter of statutory interpretation, s. 98 may apply.

[45] The second line of cases involves true penalties for breach of a statute, where it is clear that civil relief from forfeiture should not in any event be available.

(i) The McBride line of cases

[46] At issue in McBride v. Comfort Living Housing Co-operative Inc. (1992), 1992 CanLII 7474 (ON CA), 7 O.R. (3d) 394 (C.A.) was the termination of rights of occupancy in a co-operative housing building. The Court of Appeal, resolving a dispute that had waged in the lower courts, decided that the residential tenancy provisions of the Landlord and Tenant Act, R.S.O. 1990, c. L.7 did not apply. These included specific authority to grant relief against forfeiture. Finlayson J.A. referred to s. 98 of the Courts of Justice Act as a “general provision giving the courts power to relieve against all penalties and forfeitures”. He commented that he “[did] not rule out the equitable jurisdiction of the court to grant relief against forfeiture apart from the provisions of the [residential tenancy legislation]” (at p. 402), but noted that equitable relief from forfeiture had not been relied on. He went on to comment that s. 98 “apparently does not empower a court to relieve against penalties and forfeitures imposed by statute” (at p. 402), citing Webb v. Box (1909), 14 O.W.R. 802 (Div. Ct.), leave to appeal ref’d (1910), 15 O.W.R. 205 (C.A.).

[47] Both comments by the court are obiter. Relief from forfeiture under the Courts of Justice Act was not requested by the moving party, and the forfeiture in question arose under an occupancy agreement, not as the result of the failure to comply with a statutory requirement. Perhaps Finlayson J.A. was attempting to define the outer limits for such relief – that it would not “apparently” apply to a penalty or forfeiture “imposed by statute”. What he meant by a forfeiture imposed by statute was however not entirely clear.

[48] In fact, the case referred to by Finlayson J.A., Webb v. Box, involved a true breach of a statutory provision (illegal distress by a landlord), and its prescribed consequence (payment to the tenant of double the value of goods). The landlord claimed relief from forfeiture under the Judicature Act to reduce the payment to the tenant to the actual value of the goods seized. In refusing such relief at first instance, Chancellor Boyd commented that to do so “would be to repeal by adjudication what the legislature has distinctly provided for, not so much in the way of penalty as to afford protection to tenants against unwarrantable seizure and sales of property to the great detriment of the tenants’ rights” (at p. 804). Leave to appeal to this court was refused, with Meredith J.A. observing that to take away the double value damages would “repeal the statute” (at p. 208). Citing Keating v. Sparrow (1810), 1 Ball & B. 367, he went on to query, “…apart from these considerations, what power has the Court to relieve from even a penalty imposed by statute, except under R.S.O. 1897, ch. 108 [a predecessor of s. 5(1) of the Fines and Forfeitures Act]?”

[49] The main reason for the court’s refusal of relief in Webb v. Box was that the statutory scheme specifically provided for the payment of double value of the goods as the consequence of unlawful distress. Even if the requirement to pay double value of the goods seized were characterized as a penalty then the only power to relieve from such a penalty would be under the equivalent to the Fines and Forfeitures Act. Again, the comment about the limitations on equitable relief from forfeiture was obiter to the court’s decision.

[50] The origin of the statement that the court has no power to relieve against statutory penalties and forfeitures is the 1810 decision of the Irish High Court of Chancery in Keating v. Sparrow.

[51] Keating v. Sparrow however was decided when civil relief from forfeiture was limited to circumstances where the forfeiture was designed to secure the payment of money. More importantly, at the time of the decision there was no statutory provision for relief from forfeiture. The court was unwilling to apply equitable jurisdiction to override the legislative will expressed in a statute. The equitable jurisdiction to relieve against penalties and forfeitures has since been both expanded and legislated.

[52] Many cases took the approach referred to in obiter in McBride. An example is Johnson v. Dominion of Canada Guarantee and Accident Insurance Co. (1908), 12 O.W.R. 980 (C.A.), where this court held that relief from forfeiture under the Judicature Act was not available to relieve from the requirement of providing timely proof of loss under an insurance contract. The court was confronted with the sympathetic case of a claim made out of time for a survivor’s benefit through no real fault of the claimant. In overturning the decision of Chancellor Boyd advocating a liberal interpretation of the court’s power under the Judicature Act and granting relief from forfeiture, this court noted that the legislature had “gone to great pains to regulate contracts of insurance” (at p. 982). Meredith J.A. stated that it would be “legislation, not adjudication” to grant relief from forfeiture other than as provided under the insurance statute itself. By 1994 however, the Supreme Court of Canada rejected an argument based on Johnson and stated that the case was no longer good law, as the court wrongly treated the insurance legislation at issue as a statutory code: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490, at 505-506.

[53] The evolution in the court’s approach is reflected in State Farm Mutual Automobile Insurance Co. v. Ontario (Minister of Finance) (2001), 2001 CanLII 28051 (ON SC), 53 O.R. (3d) 436. In that case an insured failed to provide a proof of loss within the 90 days prescribed by a regulation under the Insurance Act, R.S.O. 1990, c. I.8. The application judge denied relief from forfeiture under s. 98 of the Courts of Justice Act,stating that it was questionable “whether the court has any jurisdiction to relieve against a penalty or forfeiture that is decreed by statute” (at para. 38), referring to authorities including McBride. He concluded that “even assuming there is some residual jurisdiction in the court to relieve against penalties and forfeitures imposed by statute” (at para. 40), he could not see how the jurisdiction could arise in a situation where the legislature has “occupied the field” and stipulated for relief to be given in certain defined conditions; conditions the party seeking relief had failed to meet (at paras. 37 and 32)

[54] On appeal to this court (reported as Kingsway General Insurance Co. v. West Wawanosh Insurance Co. (2002), 2002 CanLII 14202 (ON CA), 58 O.R. (3d) 251 (C.A.)), Sharpe J.A. concluded that the court should not exercise “any general discretion it might have” under s. 98 to grant relief from forfeiture, because the regulation in question “provides a scheme that contemplates extensions of the 90-day notice period in certain circumstances, and that, by implication, any general discretion a court might have to grant extensions in other circumstances is excluded” (at para. 13). Sharpe J.A. approached the issue not through a blanket prohibition against the use of s. 98 relief from forfeiture in instances of statutory forfeitures, but by considering the statutory scheme itself. The focus of the analysis was on whether “by implication any general discretion a court might have…is excluded”. In that case, the provision for relief from forfeiture contained in the regulation was considered to be exhaustive, and therefore no further relief was available under s. 98.

[55] The question is not whether there is a statutory scheme, but whether the language and scheme of the statute would exclude relief from forfeiture under s. 98. This is now firmly the approach taken in the case of forfeitures arising under insurance contracts governed by the Insurance Act. Relief from forfeiture under s. 98 is available where the insured’s breach constitutes imperfect compliance with a policy term and the specific relief from forfeiture provisions under the Insurance Act do not apply: Kozel v. Personal Insurance Co., 2014 ONCA 130, 119 O.R. (3d) 55. As LaForme J.A. noted in Kozel at para. 58:

…in the absence of clear legislative intent indicating that s. 129 of the Insurance Act applies to the exclusion of s. 98 of the CJA, I would hold that the latter provision is available as an avenue of relief for contracts governed by the Insurance Act.

[56] See also Lavoie v. T.A. McGill Mortgage Services Inc., 2014 ONCA 257, 119 O.R. (3d) 651, where this court upheld the ruling in Kozelthat relief against forfeiture under s. 98 may be available, however the facts in Lavoie were not amenable to such relief.

[57] In my view, this is the approach that should govern in the present case. Section 98 is a statutory provision expressed in broad and general terms to be available in civil proceedings. Where a forfeiture occurs under a statutory scheme, the scheme should be examined in order to determine whether by necessary implication relief from forfeiture under s. 98 would be precluded.

(ii) Cases involving Penalties for Breach of a Statute

[58] The application judge also referred to a second line of cases in concluding that the court does not have the power to grant relief against statutory penalties and forfeitures. These cases involved, what I would refer to as “true statutory penalties” imposed for breach of a statutory provision. While, this is an appropriate limit on s. 98 relief from forfeiture, in my view, none of these cases would preclude reliance on s. 98 in the present case.

[59] In R. v. Canadian Northern Railway Co. (1922), 1922 CanLII 31 (SCC), 64 S.C.R. 264; on appeal to the Privy Council, 1923 CanLII 444 (UK JCPC), [1923] 3 W.W.R. 547, the court held relief from forfeiture under the Alberta Judicature Act was not available to relieve from penalties for failure to pay taxes under federal taxation statutes (although the court concluded that the railway was not subject to taxation). In Canada (Attorney General) v. Wheeler, 1941 CanLII 84 (ON SC), [1944] O.R. 138 (H.C.J.), the court concluded that relief from forfeiture under the Judicature Act would not be available to relieve against a forfeiture of share warrants imported into Canada in contravention of orders and regulations under the War Measures Act.

[60] The application judge also referred to Mullen v. Flin Flon (City), 2000 MBCA 104, 193 D.L.R. (4th) 300, leave to appeal ref’d, 269 W.A.C. 160 (note). In that case, a taxpayer claimed relief from forfeiture of its property after a completed municipal tax sale, where the taxpayer had not received actual notice of the sale and the property was sold to municipal councillors at what was described as a “bargain basement” price. The court purported to follow the authority of the Canadian Northern and Wheeler cases to refuse relief.[^6]

[61] None of these cases are determinative of whether relief from forfeiture should be available in the present case. First, both the Canadian Northern and Wheelercases involved a forfeiture imposed as a consequence of the breach of a statute. As a matter of statutory interpretation, granting relief from forfeiture would amount to rewriting or repealing the statute, revoking the very consequence for breach of the statute that the legislature prescribed. Further, relief from forfeiture under the Judicature Act (and now the Courts of Justice Act) would not be available because the ability to grant such relief from forfeitures and penalties is in the context of civil proceedings, and not criminal or statutory offences.

[62] As for Flin Flon, it is only by regarding the sale of a taxpayer’s property in a tax sale as a forfeiture occurring as a penalty for failure to pay taxes that the analysis under the Canadian Northern and Wheelercases would apply. Respectfully, the relief from forfeiture issue in that case could have been decided, not by referring to cases involving true statutory penalties, but by finding that relief from forfeiture would be contrary to the “carefully crafted legislative scheme” for tax sales, as the Supreme Court did in Zeitel v. Ellscheid, (discussed below at para. 66). The result would have been the same – it would be inconsistent with the finality and certainty of the scheme to permit an attack on a tax deed after a tax sale had taken place.

[63] I do not see this line of cases therefore as an impediment to the relief sought in the present case. The forfeiture of the surplus to the municipality under s. 380 is not a penalty for the taxpayer’s failure to pay taxes or breach of any other obligation, nor does it occur as the release of security for an obligation owed to the municipality. The municipality has already been made whole, having received the cancellation price consisting of the tax arrears, interest and its costs. The forfeiture does not occur in order to punish the property owner, but to ensure that the money, which belongs to the owner or other claimants at the time it is paid into court, does not sit in court unclaimed, in perpetuity. The forfeiture brings finality to the process where funds might otherwise remain in court and unclaimed. The forfeiture arises from the failure to meet a time limit, and not as the consequence of any breach of a statutory obligation.

[64] As such, I would find that there is no absolute bar to granting relief from forfeiture in relation to the forfeiture in this case simply because it occurs in the context of a statutory scheme. The issue is one of statutory interpretation. The question is whether relief from forfeiture is expressly or implicitly precluded. I turn to this question now.

(b) Would s. 380, in the Context of the Municipal Act, 2001, Preclude Relief from Forfeiture under s. 98 of the Courts of Justice Act?

[65] The application judge accepted the argument that relief from forfeiture would not be available under s. 98 because the municipal tax sale statutory scheme is a “carefully crafted legislative scheme”. He referred to certain cases where the courts rejected challenges to the tax sale process and efforts to redeem the subject property by owners and mortgagees.

[66] In Zeitel v. Ellscheid, the Supreme Court of Canada held that a tax sale under the Municipal Tax Sales Act, 1984 (the predecessor to Part XI of the Municipal Act, 2001) was immune from attack by a party claiming an interest in the property. The court held, at p. 152, that the statute exists “to allow property which is the subject of tax arrears to be sold by a municipality” and that “purchasers must be assured of the integrity of title so with some exceptions when a tax deed is issued it is final”. The court held that as a matter of statutory interpretation any attack on the tax deed after the tax sale had taken place was not permitted, as the statute provided for a “carefully crafted legislative scheme” (at p. 152). This characterization of the statutory provisions respecting municipal tax sales has been adopted in numerous subsequent cases, including Elliott v. Toronto (City).

[67] In Elliott, the owners and mortgagee of a property subject to a municipal tax sale challenged a sale before the registration of a tax deed, in part on the basis of lack of actual notice. This court held that there was no right to redeem the property by paying the outstanding taxes after the prescribed one year period had expired unless the tax sale proceedings were voidable under the Act. The court refused to read in additional notice requirements as interfering with the carefully crafted legislative scheme and expressed concern about impairing the integrity of the tax sale process (at p. 407-408).

[68] The policy reasons for restricting the circumstances in which municipal tax sales might be challenged (certainty, finality and the integrity of the sale process, including interests of third parties) are not engaged when dealing with the surplus under s. 380.[^7] The taxpayer is not challenging the sale process, but asserting a claim to the surplus. Section 380 operates after the municipality has recovered its tax arrears and its costs, at a time when its claim against the property is spent, and without affecting the rights or interests of third party purchasers. At issue under s. 380 is entitlement to the surplus, not the property itself. As such, there is no prospect of interfering with or undermining the municipal tax sale process.

[69] I read the Act’s provisions as consistent with, and not precluding, the ability of the court to relieve from forfeiture in an appropriate case. First, the statute states specifically to whom the sale proceeds “shall be paid.” After payment of the cancellation price, payment is to persons with a prior interest in the land, and then to the owner: s. 380(1). Second, the statute requires the municipality to pay the surplus into court: s. 380(2). Arguably, if the intent were to provide for an absolute forfeiture to a municipality on default of a claim to the funds, there would be no reason to require the involvement of the court, until there is a dispute about priorities.

[70] Third, the statute does not provide that the unclaimed surplus belongs to the municipality, but “deems” a forfeiture in three circumstances: (1) if the surplus is $250 or less; (2) if those entitled to the money have not applied for payment out within a year; or (3) if there is any surplus left after the payment out to a claimant (presumably because the owner has not made a claim). At the time the surplus was paid into court in this case, it belonged to the appellant, since there was no other party with an interest in the land, and it was only at the one year period without an application by the claimant, that it was “deemed forfeited” to the municipality. The municipality has no right to the funds absent a forfeiture, and in every case where the surplus is forfeited to the municipality, the municipality receives a windfall.

[71] Fourth, and most importantly, the statute requires an application to the court for payment out, whether it is by the taxpayer or by the municipality. In this way, the court retains jurisdiction over the process, and the parties of necessity are engaged in a “civil proceeding”. The requirements for payment into the Superior Court of Justice, and for an application in all cases for payment out anticipate that the court will have at its disposal all authority available to it under the Courts of Justice Act, including under s. 98.

[72] For these reasons, I conclude that the court’s general authority to relieve against forfeitures under s. 98 would be available in the context of a deemed forfeiture under s. 380, in circumstances such as are present in this case. There is no clear legislative intent to exclude relief from forfeiture, nor is the recognition of such authority inconsistent with the statutory scheme.

(2) Relief under the Fines and Forfeitures Act

[73] As a result of my conclusion that a court considering an application in respect of a surplus under s. 380 would have jurisdiction to grant relief from forfeiture under s. 98 of the Courts of Justice Act, it is unnecessary to consider in any detail the alternative claim that relief should be granted under s. 5 of the Fines and Forfeitures Act, which provides the Superior Court the authority to “remit in whole or in part” a “fine” (defined to include a forfeiture).

[74] In my view, however, a fair reading of that statute suggests that it applies in the context of fines, penalties and forfeitures that are imposed for violations of Ontario statutes. And as such, it has no application to the facts of this case.

[75] Recall that s. 5(1) deals with the remission of fines (defined to include “all pecuniary fines, penalties and forfeitures”):

5. (1) Where a fine is imposed by or under the authority of an Act of the Legislature, the court or judge having cognizance of the proceedings for the recovery thereof may at any time after the commencement thereof remit in whole or in part such fine, whether the money is in whole or in part payable to the Crown or to some person other than the Crown and whether it is recoverable by indictment, information, summary process, action or otherwise.

[76] Section 2 of the Fines and Forfeitures Act provides that “where a fine has been imposed for a contravention of an Act of the Legislature or a regulation made thereunder and no other provision is made for its recovery, it is recoverable with costs by a civil action at the suit of the Crown” (emphasis added). Section 3 provides that, where no other mode of recovery is prescribed, a fine may be recovered upon indictment in the Superior Court of Justice. Section 4 also refers to fines “imposed for a contravention of any statute” and directs their payment, except so far as other provision is made in respect thereto, to the Treasurer of Ontario (emphasis added).

[77] Reading these provisions together suggests that the ability of the court to remit a fine, penalty or forfeiture is in the context of proceedings for their recovery where they have been imposed for contraventions of a statute (and where no other provision is made in respect thereof). In this case, the deemed forfeiture arises from the expiry of a time limit under s. 380 of the Act, and is not a penalty “imposed” for a “contravention” of the Act. In any event, as I have found that relief from forfeiture here would be available under s. 98 of the Courts of Justice Act, it is unnecessary to offer any definitive views about the scope and availability of relief under s. 5 of the Fines and Forfeitures Act.

(3) Should Relief from Forfeiture be Granted in this Case?

[78] Before exercising discretion to grant relief from forfeiture in a particular case, a court must first consider: (1) the conduct of the applicant; (2) the gravity of the breach; and (3) the disparity between the value of the property forfeited and the damage caused by the breach: Dube v. RBC Life Insurance Co., 2015 ONCA 641, 127 O.R. (3d) 161, at para. 6; Kozel, at paras. 31 and 59; Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., at p. 504.

[79] Had the trial judge concluded that s. 98 was available, he would have exercised his discretion to grant relief from forfeiture and to allow the appellant’s late application for payment out of court of the surplus funds. He found that the appellant’s conduct was inadvertent, although negligent, and that the Municipality did not suffer undue prejudice from the three-week delay. He noted the disparity between the short delay in applying and the value of the property forfeited (at para. 64).

[80] I see no reason to depart from the application judge’s assessment of the relevant factors in this case. The appellant would have been entitled to the monies in court, without any claim by the Municipality, had its application been initiated three weeks earlier. The appellant’s delay was explained by its erroneous belief about timing because of its two other properties also subject to tax sales. When it realized its error, the appellant moved promptly. The Municipality had not received the funds, and had not even commenced an application for payment out. And the windfall to the Municipality would have been enormous, amounting to the receipt of $76,264.60 in surplus funds when the initial tax arrears, which had been fully satisfied, were $5,843.11.

[81] Therefore, I would grant the appellant relief against forfeiture under s. 98 of the Courts of Justice Act.

F. Disposition

[82] For these reasons I would allow the appeal and set aside the order of the application judge. I would grant relief from forfeiture and order payment out of court of the sum of $76,264.60 paid to the credit of Court File No. CV-14-0344-00 at the Superior Court of Justice in Thunder Bay, plus accrued interest. Such payment shall be made to Rene Larson Law Office Professional Corporation on behalf of the appellant. As agreed between the parties, I would make no order as to costs.

Released: “P.R.” December 14, 2016

“K. van Rensburg J.A.”

“I agree Paul Rouleau J.A.”

“I agree M.L. Benotto J.A.”

[^1]: The application judge also considered and rejected, an argument by the appellant that the doctrine of “special circumstances” was available to extend the time for its application for the surplus funds. That argument is not renewed on appeal.

[^2]: All of the references to the Public Guardian and Trustee in this subsection as well as others in s. 380 will be replaced by “the minister responsible for the administration of the Forfeited Corporate Property Act, 2015” when that statute (S.O. 2015, c. 38, Sched. 7) comes into force December 10, 2016, and alters the scheme for dealing with the property of a dissolved corporation.

[^3]: On December 10, 2016, S.O. 2015, c. 38, Sched. 7 comes into force, and the following subsection will be added: (1.1) If the land was vested in the Crown in right of Ontario because of an escheat or forfeiture as a result of the dissolution of a corporation is sold under section 379, the Crown shall not be excluded under clause (1)(b) in respect of interests that the Crown has in the land other than its ownership.

[^4]: The application, and the Municipality’s counter-application were both brought within Court File No. CV-14-0344-00 in the Superior Court of Justice in Thunder Bay, in the proceeding in which the Municipality had paid the surplus funds into court under s. 380(2).

[^5]: Pursuant to s. 95(2) certain sections under Part VII also apply to proceedings under the Criminal Code and pursuant to s. 95(3) certain sections also apply to proceedings under the Provincial Offences Act.

[^6]: The motion court judge determined that notice had not been given to the taxpayer where it was sent in accordance with the statutory requirements at the time but not received. (As the Court of Appeal noted, the statute was later amended to require personal service of the notice.) Relief from forfeiture was raised only on appeal. A dissenting opinion in the Court of Appeal would have dismissed the appeal on the notice issue, and did not address relief from forfeiture.

[^7]: While the Municipality in its factum raises concerns about certainty, in particular as to how the treasurer should proceed in the face of a late application and whether and to whom additional notice would be required, these concerns are misplaced. Section 380 requires payment into court of the surplus and from that point on, any determinations of entitlement, forfeiture and relief from forfeiture, are for the court.