CITATION: City of Toronto v. Sherway Gate Development Corp., 2013 ONSC 6298

DIVISIONAL COURT FILE NO.: 300/13

DATE: 20131009

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: City of Toronto, Moving Party/Appellant

AND:

Sherway Gate Development Corp., Respondent

BEFORE: Himel J.

COUNSEL: Robert A. Robinson and Kirsten Franz, for the Moving Party/Appellant

Alan J. Lenczner, Q.C. and Lynda Townsend, for Sherway Gate Development Corp., Respondent

HEARD: October 7, 2013

ENDORSEMENT

Overview

[1] Sherway Gate Development Corp. appealed a development charge imposed by the City of Toronto regarding a structural building permit issued for construction of a residential tower located at 215 Sherway Garden Road, Toronto. The tower which contains 323 condominium units is interconnected with an above grade podium with below grade parking for two residential condominium towers. The Ontario Municipal Board ("OMB") agreed with the developer's position and granted the appeal. The City now seeks leave to appeal the decision of the Board to this court.

Background

[2] A development charge is imposed on land development projects to help pay for the capital cost of infrastructure to service growth. Revenue is made available as a capital funding source for the municipality. Bylaw No. 275-2009 passed under the Development Charges Act, 1997 S.O. 1997, c. 27, s. 26(1) requires development charges to be calculated and paid on the date of issuance of the first building permit in respect of a building to which the charge applies. The Bylaw provides for phasing in of increases to charge rates over the five year term of the Bylaw.

[3] The history of the relationship and communications between the parties is set out in the Agreed Statement of Facts that was filed before the OMB. The development project involves Tower C and Tower D which are the final two towers of a four tower development adjacent to the Sherway Gardens Mall. Tower C is known municipally as 215 Sherway Gardens Road and Tower D is known as 205 Sherway Gardens Road. The two towers share a common foundation, three levels of underground parking and a common above grade podium (to contain a lobby, amenities and service connections for both buildings and access to the two towers) which were all approved as a single site plan. Sherway Gate applied for a building permit on July 14, 2010 for construction of a common foundation, common underground parking, common above-grade podium and one tower (Tower D). On December 16, 2010, Sherway applied for a building permit to construct Tower C.

[4] On January 25, 2011, the City wrote to Sherway concerning the building permit for Tower D advising that the development charges of $1,577,098 were due and payable prior to the issuance of the permit. On January 25, 2011, the City sent a second and separate letter to Sherway concerning the permit for Tower C advising that development charges in the amount of $1,917,183 were due and payable prior to the issuance of the permit.

[5] Sherway paid $3,494,281 to the City for the development charges for both permits on January 31, 2011. On January 31, 2011, the City issued a receipt for the development charges in the amount of $1,577,098 for Tower D and $1,917,183 for Tower C. The City issued a conditional Building permit on January 31, 2011 to allow construction of the structural components for Tower D. The full structural building permit for Tower D was issued on May 9, 2011. Notes on the City website indicate that the permit was for the construction of a new 23 storey residential condominium building containing 270 units, retail area on the ground floor and three levels of underground parking.

[6] In the fall of 2011, the City advised Sherway that a development charge in the amount of $397,941 was required to be paid in addition to the amount of $1,917,183 which was paid on January 31, 2011 to obtain the structural permit for Tower C. Sherway wrote back on November 14, 2011 disputing the amount and arguing that the development charges had been paid in full on January 31, 2011. The City responded on November 28, 2011 taking the position that since no previous permits were issued under the application for Tower C, payment of all applicable development charges must be paid in full prior to the issuance of the structural permit including increases that came into effect on February 1, 2011. The developer filed a complaint under the Development Charges Act, 1997 concerning the additional charge. Sherway paid the additional charge under protest in order to obtain the structural building permit. On January 20, 2012, the structural building permit was issued by the City for Tower C. Notes on the City's website indicate that the permit issued is for Phase 2—Tower C consisting of 323 unit condo building sitting on foundation and underground garage of Tower D.

[7] The developer filed a Notice of Appeal to the Ontario Municipal Board under s. 22(2) of the Development Charges Act, 1997. The Board heard the appeal and issued a decision on June 20, 2013. The evidence before the Board consisted of the Agreed Statement and one witness who was a planning expert.

[8] The Board found that Sherway's appeal was valid and agreed that it was reasonable to conclude that the amount requested and paid for the two towers as set out in letters by the City on January 25, 2011 was the full amount outstanding and that the correspondence did not support that an additional amount of $397,941 would be owing. The OMB held that the City had a responsibility to clearly communicate the development charge process to the developer and the Board was of the view that it failed to do so.

[9] The OMB ordered that the disputed amount paid by Sherway be returned by the City. The City now moves for leave to appeal the decision dated June 20, 2013.

Positions of the Parties

[10] The City argues that the Board committed errors in failing to consider the wording of the Bylaw regarding the calculation of development charges and, in fact, did not consider the Bylaw at all, relying on letters written by the City on January 25, 2011 rather than the Bylaw. It submits that the matter is of significant importance and, therefore, should be heard by this court. Sherway opposes the motion for leave, argues that the Board has expertise in the interpretation of the Development Charges Act, 1997 and municipal by-laws and that its decision is entitled to deference and should be upheld if it is reasonable. It submits that the Board gave a reasonable interpretation to the Bylaw, and, furthermore, there is no reason to doubt the correctness of the Board's decision. Moreover, it takes the position that the matter is not of significant importance to warrant review by this court. It submits that the City could amend its Bylaw if it is dissatisfied with the result in this case. Sherway asks that the motion for leave be dismissed.

Decision

[11] An appeal from a decision of the OMB lies to the Divisional Court on a question of law. On a motion for leave to appeal, the court must be satisfied that the correctness of the decision is open to "substantial doubt" and the issue of law is of sufficient legal importance to warrant the attention of the Divisional Court: see Mod-Aire Homes Ltd. v. Bradford (Town) (1990), 1990 6990 (ON SC), 72 O.R. (2d) 683 (Div. Ct.). The proper interpretation of the Development Charges Act has been held to be a question of law within s. 96 of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28: see Eastpine Kennedy-Steeles Ltd. v. Markham (Town), [2002] O.J. No. 3045 (Div. Ct.) at para. 9. The City argues that the proper interpretation of the Bylaw is a question of general importance to the City and other developers. The City also argues that the ordinary meaning of the passage "development charges applicable to development shall be calculated payable and collected as of the date a building permit is issued" is that the amount due is that which is calculated on the date that the building permit is issued.

[12] In this case, before the building permit was issued, the City calculated the development charge, notified the developer and collected the monies on January 31, 2011. Sherway was issued a building permit on January 31, 2011 which permitted the construction of a building or structure. Development charges were calculated by the City based upon the number of residential units in the project. The City notified the developer and collected the monies. The building permit was for Tower D as well as the common foundation, the common underground parking and the common above grade podium shared by both Towers C and D. Almost one year later, the City advised that additional development charges were owing with reference to Tower C. The City submits that the development is a phased development over a ten year period involving two separate towers constructed under separate development permit applications and requiring two separate building permits. Therefore, since the structural permit for Tower C was issued after February 1, 2011, the City argues that it is the date the building permit is issued that the development charges are calculated and that it was subject to increases due to the indexing provisions of the City's Bylaw. This is notwithstanding the fact that Sherway had paid a development charge of $1,577,098 for Tower C which was accepted by the City on January 31, 2011 before the permit was issued.

[13] In assessing "the merits of the decision and determining whether leave to appeal should be granted, it is appropriate to bear in mind the standard of review that would be applied on an appeal": see Orangeville District Home Builders Association v. Orangeville (Town), [2011] O.J. No. 1393 (Div. Ct.) at para. 6. The Ontario Municipal Board has expertise in interpreting the Development Charges Act, 1997. There are issues of mixed fact and law involved in this case and deference must be accorded to the OMB. As Lax J. said in Toronto (City) v. 2059946 Ontario Ltd., [2007] O.J. No. 3021, (2007) 38 M.P.:L.R. (4th) 176 (Div. Ct.) at para. 3: "…when considering leave to appeal, some measure of deference commensurate with the degree of independence and expertise of the Board is required".

[14] Upon review of the Board's decision, while specific mention is not made of the words "section 415-8 of Bylaw 275-2009", the Board made references to the Development Charges Bylaw in the decision and I am satisfied that the Board interpreted the essence of the Bylaw. It considered the evidence including the Agreed Statement of Facts and the oral evidence before it, and reached a conclusion that was reasonable in determining that the developer was led to believe by the City that the amount of $3,494,281 was the full amount of development charges to permit the construction of Towers C and D which were part of one plan involving a common foundation, common underground parking and common above-grade podium to support both towers. Its conclusions were based on the wording and purpose of the Act and the evidence before it. I find that the correctness of the Board's decision is not open to substantial doubt.

[15] Further, I do not deem this a case of general significance. The City has the opportunity to amend and clarify its Bylaw or its practices including not accepting the payment of charges until the time that the building permit is to be issued or clarifying its communication processes as to when development charges are due and the circumstances of when they are to be paid. The case does not raise a point of law which is of sufficient importance to merit the attention of the Divisional Court.

[16] Therefore, the motion for leave to appeal is dismissed. Costs are to be paid by the City to Sherway in the amount of $7,500 inclusive of disbursements and HST, an amount agreed upon by the parties and which I consider fair and reasonable in the circumstances.

Himel J.

Date: October 9, 2013