Shergar Development Inc. v. The City of Windsor

[Indexed as: Shergar Development Inc. v. Windsor (City)]

Ontario Reports

Court of Appeal from Ontario

Rouleau, Hoy and Hourigan JJ.A.

August 4, 2020

151 O.R. (3d) 653 | 2020 ONCA 490

Case Summary

Real property law — Expropriation — Compensation — Compensation boards — Hearings — Appeal by claimant in expropriation from decision confirming decision by Municipal Board that phrase "the amount offered" in s. 32 of Expropriation Act did not refer exclusively to an offer under s. 25 but also encompassed subsequent offers, such as Rule 49 offers dismissed — Wording in s. 25 and s. 32 did not support appellant's interpretation that phrase referred exclusively to an offer made under s. 25 and was also contrary to the process prescribed by the Act — Board must retain discretion to award costs against a claimant.

Appeal by the claimant in an expropriation from a decision of the Divisional Court confirming a decision by the Municipal Board that the phrase "the amount offered" in s. 32 of the Expropriation Act did not refer exclusively to an offer made under s. 25 of the Act but also encompassed subsequent offers, such as those that meet the criteria of a Rule 49 offer under the Rules. The appellant argued the phrase in s. 32 referred exclusively to an offer made under s. 25 of the Act. The respondent had expropriated land from the appellant. The appellant frustrated and delayed the determination of the issue of the appropriate compensation to be awarded for the expropriation and inexplicably refused an offer that was equivalent in value to $1,208,155, when its interest was limited to $266,832. The Board awarded costs against the appellant.

Held, the appeal should be dismissed.

The interpretation advanced by the appellant was inconsistent with the text of the Act, its scheme, and its underlying public policy objectives. Such an interpretation would also represent an unwarranted and unwise intrusion into the discretion provided to the Board to award costs. Section 32 referred to "the amount offered" by the statutory authority. It did not refer explicitly to s. 25. In contrast, other sections of the Act did refer explicitly to s. 25. If the legislature intended to restrict the meaning of amount offered in s. 32 to s. 25 offers, it would have done so explicitly. Section 32 applied to both expropriation and injurious affection cases and referred to the amount offered by the statutory authority. But s. 25 refers only to the expropriating authority. These were two different defined terms in the Act. The appellant's interpretation was inconsistent with the process contemplated by the Act. The objective of full and fair compensation could not be divorced from the objective of the efficient resolution of claims. The appellant's interpretation would permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the Board's resources, all the while safe in the knowledge that unreasonable refusals of subsequent offers could not adversely affect its entitlement to legal costs. The Board must retain discretion to award costs against a claimant. The [page654] appellant's actions resulted in significant delay and obfuscation, wasting the Board's valuable time. Suggesting that the Board could not control its processes by awarding costs against a claimant in these circumstances would be contrary to the Act's policy objective of encouraging early settlement of claims on an equitable basis.

Cases referred to

Canada (Minister of Citizenship & Immigration) v. Vavilov, [2019] S.C.J. No. 65, 2019 SCC 65, 441 D.L.R. (4th) 1, 59 Admin. L.R. (6th) 1, 69 Imm. L.R. (4th) 1; Popack v. Lipszyc (2016), 129 O.R. (3d) 321, [2016] O.J. No. 857, 2016 ONCA 135, 396 D.L.R. (4th) 57, 348 O.A.C. 341 (C.A.); Rotenberg v. Borough of York (No. 2) (1976), 1976 735 (ON CA), 13 O.R. (2d) 101, [1976] O.J. No. 2182, 1 C.P.C. 85, 63 D.L.R. (3d) 719, 9 L.C.R. 256 (C.A.); Shergar Development Inc. v. Windsor (City), [2019] O.J. No. 2169, 2019 ONSC 2623, 12 L.C.R. (2d) 214 (Div. Ct.); Toronto Area Transit Operating Authority v. Dell Holdings Ltd., 1997 400 (SCC), [1997] 1 S.C.R. 32, [1997] S.C.J. No. 6, 142 D.L.R. (4th) 206, 206 N.R. 321, 31 O.R. (3d) 576, 36 M.P.L.R. (2d) 163, 45 Admin. L.R. (2d) 1, 60 L.C.R. 81, 7 R.P.R. (3d) 1, 97 O.A.C. 81

Statutes referred to

Expropriations Act, R.S.O. 1990, c. E.26, ss. 9 [as am.], 25 [as am.], (1) [as am.], 26 [as am.], 32 [as am.], (2), 33(1), 44(d)

Ontario Municipal Board Act, R.S.O. 1990, c. O.28 [rep.], s. 43

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 49, 49.10(2)

APPEAL from the order of the Divisional Court (Swinton, Wilton-Siegel and Sheard JJ.), [2019] O.J. No. 2169, 2019 ONSC 2623 affirming a decision of the Ontario Municipal Board dated January 24, 2018.

John Doherty, Anne Tardif, Roberto Aburto and Michelle Cicchino, for appellant.

Stephen Waqué, Gabrielle Kramer, Patrick Brode, Julie Lesage and Andrew Baker, for respondent.

The judgment of the court was delivered by

HOURIGAN J.A.: —

I. Introduction

[1] This appeal arises from a proceeding wherein the respondent expropriated certain property (the "Subject Lands") along the Detroit River in Windsor owned by the appellant.

[2] The narrow issues before the court relate to the awarding of costs pursuant to s. 32 of the Expropriations Act, R.S.O. 1990, c. E.26 (the "Act"). That section specifies certain costs outcomes based on an analysis of the amount offered to a claimant versus the amount ultimately awarded in an arbitration proceeding. The appellant submits that the phrase "the amount offered" in s. 32 refers exclusively [page655] to an offer made under s. 25 of the Act. The respondent's position is that the phrase encompasses subsequent offers, such as those that meet the criteria of a Rule 49 offer under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules").

[3] The Ontario Municipal Board (the "OMB")[^1] agreed with the respondent's interpretation of s. 32 and the Divisional Court upheld its interpretation. The appellant's further argument, that the OMB does not have the authority under s. 32 to award costs against it, was likewise rejected by both the OMB and the Divisional Court.

[4] As will be explained, I agree with the result reached by the Divisional Court in its thorough and compelling reasons for decision. In sum, the interpretation advanced by the appellant is inconsistent with the text of the Act, its scheme, and its underlying public policy objectives. Such an interpretation would also represent an unwarranted and unwise intrusion into the discretion provided to the OMB to award costs. Indeed, this case is a perfect example of why the OMB must be free to use a costs award to sanction inappropriate and wasteful conduct by a claimant during an expropriation proceeding. I would, therefore, dismiss the appeal.

II. Background

[5] This case has a long and tortuous history spanning 22 years. The following summary of the factual highlights will provide the necessary context to consider the issues on appeal.

[6] On December 8, 1995, the appellant acquired the Subject Lands and another parcel of land (the "Railcut Lands") from the Canadian Pacific Railway Company (the "CPR") for a total consideration of $750,000. The CPR took back a mortgage in the amount of $562,500.

[7] On April 29, 1998, the respondent expropriated the Subject Lands for completion of a waterfront park. The appellant retained ownership of the Railcut Lands.

[8] On December 21, 1998, after months of delay because the appellant would not grant access to the Subject Lands, the respondent served a joint offer of compensation on the appellant and the CPR in the amount of $500,000, in accordance with s. 25(1) of the Act (the "Section 25 offer"). The appellant's then counsel advised that his client would accept the offer. [page656]

[9] When the respondent inquired as to the amount of the CPR's security interest in order to allocate the compensation between the CPR and the appellant, the appellant refused to cooperate. It maintained that it was not required to provide an allocation of compensation between itself and the CPR. The failure of the appellant to provide this information frustrated the ability of the respondent to pay out the Section 25 offer and resulted in the acceptance of the Section 25 offer being effectively withdrawn.

[10] The appellant participated in proceedings at the Canada Transportation Agency (the "CTA") in 1998. The appellant was of the view that the validity of the expropriation depended on whether the Subject Lands were a federal undertaking, but the CTA determined that the Subject Lands were not a federal undertaking. The appellant then participated in an appeal of that order to the Federal Court of Appeal. The appellant rejected the respondent's efforts to resolve compensation before the Board of Negotiation, preferring instead to await the Federal Court of Appeal decision. In 2000, the Federal Court of Appeal upheld the CTA's decision that there was no federal undertaking.

[11] In 2001, the appellant commenced an application to challenge the expropriation in the Superior Court on the basis that it was ultra vires the respondent and done in bad faith. After a 20-day trial, that application was dismissed in 2005, and substantial indemnity costs were awarded against the appellant with respect to the unfounded allegations of bad faith. In 2007, the appellant unsuccessfully appealed the Superior Court order to this court, and the costs of the appeal were awarded against it.

[12] Rather than proceeding to determine its claim for compensation under the Act, in 2008 the appellant sued its former lawyers who advised on its purchase of the lands for professional negligence. Although that claim was resolved in 2011, the appellant took no steps to commence an expropriation arbitration until July 5, 2013, when it issued its claim for compensation, after the CPR had already issued its own claim earlier that year.

[13] The respondent later made individual offers of settlement to each of the CPR and the appellant. The CPR accepted the offer of $400,000 made to it. In exchange, the respondent obtained an assignment of all of the CPR's rights to compensation as determined by the OMB. The respondent's offer of settlement to the appellant, made on June 2, 2015, was equivalent in value to $1,208,155 in compensation for the appellant's interest in the Subject Lands (the "2015 offer"). The appellant did not accept the 2015 offer.

[14] The OMB hearing to determine compensation commenced in February 2016. The appellant called two appraisers to provide expert evidence of market value, Suzanne de Jong and Ben Lansink, who [page657] valued the Subject Lands at $3,937,000 and $5,150,000 respectively. In its May 25, 2016 decision, the OMB rejected the evidence of the appellant's appraisers, and stated it was concerned that neither appraiser had "fulfilled their duty to provide the Board with opinion evidence that [was] fair, objective and non-partisan", and that Mr. Lansink's opinion was "inadequate, inappropriate and unreasonable" and his conclusion "unreliable".

[15] The OMB found that the Subject Lands' value was $710,000, consistent with the respondent's appraisal evidence. The OMB concluded that the amount owed to the CPR for its mortgage interest in the Subject Lands was $443,167 and that the appellant's residual interest in the compensation was $266,832.

[16] The OMB awarded the appellant its costs of the proceeding. The respondent successfully sought a rehearing before the OMB pursuant to s. 43 of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28, solely on the issues of interest and costs.

[17] In its decision on the rehearing (the "Rehearing Decision"), the OMB concluded that the 2015 offer constituted "the amount offered by the statutory authority" and granted costs in favour of the respondent following the date of the 2015 offer.

[18] The appellant appealed the Rehearing Decision to the Divisional Court. Regarding costs, the Divisional Court considered the following two issues: (a) the determination that the 2015 offer constituted "the amount offered by the statutory authority" within the meaning of s. 32 of the Act; and (b) the Rehearing Board's power to order costs against the appellant as the expropriated party.

[19] The appeal was heard and determined before the release of the Supreme Court's decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, [2019] S.C.J. No. 65, 2019 SCC 65, 441 D.L.R. (4th) 1. On the first point, the court noted that the words "the amount offered by the statutory authority" are arguably susceptible of the two interpretations urged by the parties. It found the OMB's decision to be reasonable, relying on the fact that s. 32 also applies to "no land taken" (injurious affection) claims, for which the statutory authority is not required to serve an s. 25 offer. On the second point, the court concluded that the OMB acted reasonably in awarding costs against an expropriated party. The court held that the purpose of the discretion afforded to the OMB under s. 32 is to encourage an expeditious settlement of claims on an equitable basis.

[20] The appellant raises the following issues on appeal:

-- Did the Divisional Court err in deciding that the reasonableness standard of review applies?

-- Did the Divisional Court err in upholding the following decisions by the OMB: [page658]

i. The "amount offered by the statutory authority" in s. 32 of the Act refers to any offer made by the respondent, not just an offer made pursuant to s. 25; and

ii. The 2015 offer was not dealt with in the Act, and regard can, therefore, be had to rule 49 of the Rules in exercising the Board's discretion under s. 32(2), and costs can be awarded against the appellant.

III. Analysis

(1) Standard of review

[21] This issue may be dealt with summarily. The respondent concedes that, in light of the decision of the Supreme Court in Vavilov, the proper standard of review on the interpretation of the Act is correctness. However, the respondent submits that the OMB's exercise of discretion in awarding costs under s. 32 of the Act should be reviewed on a standard of palpable and overriding error.

[22] In my view, as I will explain, the OMB correctly interpreted s. 32. As to the exercise of the OMB's discretion in ordering costs, I agree with the respondent that this exercise of discretion is not reviewed on a correctness standard and is afforded significant deference: see Popack v. Lipszyc (2016), 129 O.R. (3d) 321, [2016] O.J. No. 857, 2016 ONCA 135 (C.A.), at para. 25.

(2) The decisions of the board

(i) Meaning of "amount offered" in [s. 32](https://www.canlii.org/en/on/laws/stat/rso-1990-c-e26/latest/rso-1990-c-e26.html) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-e26/latest/rso-1990-c-e26.html)

[23] As a starting point in this analysis, it is helpful to consider the full text of s. 32. It provides as follows:

Costs

32(1) Where the amount to which an owner is entitled upon an expropriation or claim for injurious affection is determined by the Tribunal and the amount awarded by the Tribunal is 85 per cent, or more, of the amount offered by the statutory authority, the Tribunal shall make an order directing the statutory authority to pay the reasonable legal, appraisal and other costs actually incurred by the owner for the purposes of determining the compensation payable, and may fix the costs in a lump sum [page659] or may order that the determination of the amount of such costs be referred to an assessment officer who shall assess and allow the costs in accordance with this subsection and the tariffs and rules prescribed under clause 44 (d).

Same

(2) Where the amount to which an owner is entitled upon an expropriation or claim for injurious affection is determined by the Tribunal and the amount awarded by the Tribunal is less than 85 per cent of the amount offered by the statutory authority, the Tribunal may make such order, if any, for the payment of costs as it considers appropriate, and may fix the costs in a lump sum or may order that the determination of the amount of such costs be referred to an assessment officer who shall assess and allow the costs in accordance with the order and the tariffs and rules prescribed under clause 44 (d) in like manner to the assessment of costs awarded on a party and party basis.

(Emphasis added)

[24] The argument advanced by the appellant is that the words "amount offered" refer only to an offer made pursuant to s. 25 of the Act. The type of offer contemplated by s. 25 is described in that section as follows:

25(1) Where no agreement as to compensation has been made with the owner, the expropriating authority shall, within three months after the registration of a plan under section 9 and before taking possession of the land,

(a) serve upon the registered owner,

(i) an offer of an amount in full compensation for the registered owner's interest, and

(ii) where the registered owner is not a tenant, a statement of the total compensation being offered for all interests in the land,

excepting compensation for business loss for which the determination is postponed under subsection 19 (1); and

(b) offer the registered owner immediate payment of 100 per cent of the amount of the market value of the owner's land as estimated by the expropriating authority, and the payment and receipt of that sum is without prejudice to the rights conferred by this Act in respect of the determination of compensation and is subject to adjustment in accordance with any compensation that may subsequently be determined in accordance with this Act or agreed upon.

[25] According to the appellant, the OMB could only consider the respondent's Section 25 offer when doing its s. 32 costs analysis, not the 2015 offer. It argues that the use of the definitive article "the" before "amount offered" in s. 32 means that the only offer that could be compared to the amount ultimately awarded was the Section 25 offer of $500,000, which was less than the $710,000 awarded by the OMB. In my view, this is an erroneous interpretation of s. 32. I say that for the following reasons.

[26] First, a review of the wording of s. 32 demonstrates that it is inconsistent with the interpretation urged on us by the appellant. Section 32 refers to "the amount offered" by the statutory authority. It does not refer explicitly to s. 25. In contrast, other sections of the Act do refer explicitly to s. 25, namely, ss. 26 and 33(1). Moreover, s. 32 contains a reference to clause 44(d), which relates to regulations regarding costs. Thus, if the legislature intended to restrict the meaning of "amount offered" in s. 32 to s. 25 offers, it would have done so explicitly. As the Divisional Court put it at para. 84 of its reasons, "There is no apparent reason why the legislature would not also have referred to s. 25 if the [page660] intention had been to limit 'the amount offered by the statutory authority' to the offer required to be made under that provision."

[27] Further, s. 32 applies to both expropriation and injurious affection cases and refers to "the amount offered by the statutory authority". But s. 25 refers only to the "expropriating authority". These are two different defined terms in the Act. The difference is that a "statutory authority" is a person empowered by statute to expropriate land or cause injurious affection, but an "expropriating authority" is a person empowered to expropriate land. Given that s. 32 explicitly refers to both expropriation and injurious affection, and does not specify that they are to be treated differently from one another (in contrast to, for example, s. 26), and given that s. 25 is applicable only to expropriation, it is illogical to interpret "the amount offered by a statutory authority" in s. 32 as referring to s. 25 offers only.

[28] Next, the appellant's interpretation is inconsistent with the process contemplated by the Act. Where no agreement as to compensation has been made with the owner, a s. 25 offer must be made within three months of the registration of a plan under s. 9 of the Act. This is generally before the parties have exchanged affidavits of documents, served expert reports, and conducted mediation. As an expropriation case proceeds, the expropriating authority may well gain a better understanding of the market value of the property in issue and determine that it should make an increased offer. A responsible expropriating authority should be afforded some measure of costs protection where it makes an increased fair offer, and the claimant refuses to accept same.

[29] This concern is not limited to situations where the expropriating authority makes an increased offer based on a higher estimate of the property's market value. Other forms of damages, such as for disturbance, may not have fully emerged or crystallized by the time the s. 25 offer must be made. Just like in the situation where a subsequent offer is made based on increased market value, an expropriating authority should be granted potential costs protection for cases where a fair offer is subsequently made to compensate for related damages, and the claimant refuses to accept the offer and elects instead to proceed with an unnecessary arbitration.

[30] I also note that s. 26 of the Act provides that the statutory authority or the owner may require the compensation to be negotiated where the statutory authority and the owner have not agreed on the compensation and s. 25 has been complied with. The purpose of the negotiation is to elicit a further and satisfactory offer. Thus, the Act itself contemplates that the s. 25 offer may not be the only offer.

[31] In summary, the wording used by the legislature in s. 25 and in s. 32 does not support the interpretation submitted by [page661] the appellant. It is also contrary to the process prescribed by the Act. However, the appellant advances a broad policy argument in support of its position. It relies on the Supreme Court's decision in Toronto Area Transit Operating Authority v. Dell Holdings Ltd. (1997), 1997 400 (SCC), 31 O.R. (3d) 576, [1997] 1 S.C.R. 32, [1997] S.C.J. No. 6, at paras. 19 and 21, where the court commented that the Act is "a remedial statute enacted for the specific purpose of adequately compensating those whose lands are taken to serve the public interest" and that "it must be given a broad and liberal interpretation consistent with its purpose. Substance, not form, is the governing factor".

[32] There is no question that the policy purpose identified in Dell must guide the interpretation of the Act by both the OMB and the courts. However, that is not the only policy objective of the Act. Even on the appellant's interpretation of s. 32, the Act clearly allows potential cost consequences if a landowner refuses a s. 25 offer that engages s. 32(2). The remedial and compensatory purpose of the Act does not in itself rule out cost consequences for refusals of reasonable offers. As this court stated in Rotenberg v. Borough of York (No. 2) (1976), 1976 735 (ON CA), 13 O.R. (2d) 101, [1976] O.J. No. 2182, 9 L.C.R. 289 (C.A.), at p. 295 L.C.R., another objective of the Act is to "encourage settlement of claims at as early a stage as possible".

[33] As noted by the Divisional Court, at para. 102, these policy imperatives are not incompatible:

More generally, I also think that the Act can reasonably [be] interpreted, as the Rehearing Board did, as reflecting a balance between the equally important objectives of full compensation to a claimant and the "just determination of compensation in an expeditious and cost effective manner" with a concomitant encouragement of negotiation to promote early settlement.

[34] It is an extraordinary thing for the state to seize an innocent party's property. The Act must be interpreted so that the party whose property is being expropriated is treated fairly and its claim dealt with expeditiously, either through an agreement between the parties or as the result of an arbitration proceeding. A claimant receives all of its reasonable costs even if awarded as little as 85 per cent of what the statutory authority offered. To potentially lose this entitlement, a claimant must reject an offer that significantly exceeded the ultimate award. Even in that scenario, costs lie at the discretion of the OMB.

[35] An innocent party whose property is taken must be fully compensated, and it will not generally have to bear its costs for reasonably disagreeing with the amount offered for that taking, even where the offer exceeds the ultimate award by a considerable margin. But the statutory protection provided by the Act [page662] is not a blank cheque that permits a claimant to act unreasonably. At the very least, there must be a potential for adverse cost consequences where the claimant forces a wholly unnecessary proceeding or otherwise acts unreasonably.

[36] In short, the objective of full and fair compensation cannot be divorced from the objective of the efficient resolution of claims. The appellant's interpretation would permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the OMB's resources, all the while safe in the knowledge that unreasonable refusals of subsequent offers cannot adversely affect its entitlement to legal costs.

(ii) Rule 49 and the award of costs against the appellant

[37] The appellant submits that the OMB erred in applying Rule 49 when it made its costs award. The underlying premise of that submission is incorrect. The OMB did not apply Rule 49; if it had, then the appellant would have only been entitled to costs on a partial indemnity scale to the date of the 2015 offer, and thereafter the respondent would receive its partial indemnity scale costs. However, as the respondent concedes, and the Divisional Court found at para. 106, that is not what the OMB ordered. It concluded that the appellant would receive its solicitor-client costs up to the date of the 2015 offer and that the respondent would receive its partial indemnity costs after that.

[38] What the OMB did, quite appropriately, in my view, was draw upon rule 49.10(2) to inform its analysis regarding the criteria for a proper offer, concluding that it must be certain, understandable, and open at the commencement of the hearing. It correctly found that the 2015 offer met these criteria. The OMB then made an order in keeping with the jurisprudence under the Act, awarding the applicant its solicitor-client costs up to the time of the 2015 offer.

[39] The appellant further submits that the awarding of costs against a claimant in an expropriation proceeding is a new and undesirable precedent. However, as this court stated some 44 years ago in Rotenberg, at p. 296 L.C.R., para. 27, in the context of a claim for injurious affection:

On the other hand, if the authority makes a minimal offer in order to retain the opportunity of having an award of costs made to it, and the Board allows no compensation to the claimant, then it is reasonable that the Board be able to award costs to the authority, because in such a case it would have been the claimant who was acting in an unreasonable manner. However, in making such award, the Board should also have regard to such factors as the timing of the offer by the Board and to all the equities of the situation. [page663]

Thus, it has long been contemplated that a claimant who unreasonably refuses an offer of settlement may be ordered to pay costs to a statutory authority.

[40] Further, this case serves as an example of why the OMB must retain discretion to award costs against a claimant. It is undeniable that the appellant frustrated and delayed the determination of the issue of the appropriate compensation to be awarded for the expropriation of the Subject Lands. In addition, the appellant inexplicably refused an offer that was equivalent in value to $1,208,155, when its interest was limited to $266,832.

[41] This conduct is worthy of censure. The appellant's actions resulted in significant delay and obfuscation, wasting the OMB's valuable time. Suggesting that the OMB cannot control its processes by awarding costs against a claimant in these circumstances would be contrary to the Act's policy objective of encouraging early settlement of claims on an equitable basis.

IV. Disposition

[42] The appeal is dismissed. The appellant shall pay the respondent its costs of the appeal, fixed in the agreed-upon, all-inclusive sum of $50,000.

Appeal dismissed.

Notes

[^1]: For clarity, this decision refers to the OMB throughout, despite the eventual creation of the Local Planning Appeal Tribunal, because these proceedings commenced in the OMB.

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