CITATION: Potusek v. Township of Alnwick-Haldimand, 2019 ONSC 5677 DIVISIONAL COURT FILE NO.: DC-19-1169 DATE: 20191001
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
MYERS, RAIKES, and FAVREAU JJ.
BETWEEN:
RICHARD POTUSEK
Appellant
– and –
TOWNSHIP OF ALNWICK-HALDIMAND and FIRE MARQUE INC.
Respondents
David A. Zuber, for Mr. Potusek
Jennifer G. Savini, for the Township of Alnwick-Haldimand
John I. Barzo, for Fire Marque Inc.
HEARD at Oshawa: September 27. 2019
REASONS FOR DECISION
F.L. Myers J.
The Appeal
[1] Mr. Potusek appeals from the decision of Corkery J. for oral reasons given May 21, 2019. Corkery J. upheld the propriety of a fee levied against Mr. Potusek for fire department services provided by the municipality.
[2] For the reasons that follow, the appeal is allowed. In my respectful view, the municipal bylaw under which the fee was levied does not allow for a fee to be charged to Mr. Potusek on the facts of this case.
The Facts
[3] The facts are straightforward and undisputed. On April 18, 2016, the municipal fire department responded to a fire in Mr. Potusek’s garage. They put out the fire in the ordinary course.
[4] On June 14, 2016, Fire Marque Inc., as the authorized billing agent for the municipality, invoiced Mr. Potusek’s home insurance provider $9,472.24 for the fire department services that the municipality provided to Mr. Potusek. The insurer declined to pay the bill. Therefore, the municipality added the fee to Mr. Potusek’s tax bill. Mr. Potusek paid his tax bill as required by law. His insurer has reimbursed him and brought a subrogated action on his behalf.
[5] Fire Marque is a privately-owned business that helps municipalities improve their finances by recovering fire-related expenses from insurance companies that cover homeowners for such fees or charges. Fire Marque provides its services to 96 municipalities in Ontario. It markets a system to municipalities on the basis that most homeowners have fire insurance that will cover fees and charges for fire department services billed by the municipality. For a fee, Fire Marque provides the back-office services to manage the invoicing and collection of fees from insurers for the municipality. It is responsible to account to the municipality for funds recovered. Municipalities, it says, are attracted to the system because it helps them recover a major expense and because Fire Marque deals with insurance companies directly so that voting ratepayers/homeowners never feel the effect of the fees.
The Proceeding Below
[6] This application was brought as a subrogated claim by Mr. Potusek’s insurer to challenge a by-law under which Fire Marque operates in the Township of Alnwick-Haldimand. It has potentially broad implications for other home insurers and other municipalities.
[7] Mr. Potusek argues that the bylaw enacted by the municipality to implement the Fire Marque system is void because it conflicts with or improperly circumvents the Fire Protection and Prevention Act, 1997, SO 1997, c 4. He also argues that by deliberately flowing its fees through homeowners to their insurers, the fees amount to an indirect tax that is ultra vires the Province of Ontario. As an element of both arguments, Mr. Potusek submits that the bylaw, properly construed, does not allow the municipality to levy its fee against him on the facts of this case.
[8] Counsel acknowledge that the argument concerning whether the fee is an impermissible tax was made at the last minute below. Evidence was not adduced regarding whether the fee is properly characterized as a tax, and specifically on the issue of whether there is a nexus between the amount charged and the service provided. Moreover, while the issue of “indirect” taxes raises a constitutional argument, Mr. Zuber acknowledges that under s.17(1)(a) and other sections of the Municipal Act, 2001, SO 2001, c 25, municipalities have no general entitlement to tax even by way of direct taxes. So, the constitutional issue never arises in this case. If the fee is really a tax, then it is invalid regardless of whether it may be characterized as direct or indirect.
[9] I am concerned about the state of the evidentiary record as a result of the way in which the process evolved below. This is not a criticism of counsel. Cases evolve and new issues arise. On the view that I take of the bylaw, I do not reach the broader issues concerning the Fire Protection and Prevention Act, 1997 and whether the fee is a tax. I know that the parties would like those issues resolved because each has a broader agenda than just the resolution of this case. To that point, I note two things. First, the municipal bylaw was amended in a significant way after the fire in Mr. Potusek’s garage in 2016. An analysis under the unamended bylaw would therefore not reflect the current state of play. Second, without a proper factual basis being assembled and adduced, a decision might be interesting academically, but it would be of limited utility as different fact patterns emerge in later cases that could impact the applicability of an academic precedent. Courts require a proper foundation of facts to allow them to decide the cases before them for good reason. I would not stray into the hypothetical nor decide issues for which there are insufficient underlying facts in the record. This case does not present the broader issues in a way that makes them ripe for determination.
The Bylaw
[10] To set up the Fire Marque system, the municipality enacted two bylaws. It authorized entry into an agency agreement between itself and Fire Marque. It also enacted bylaw 125-2012 “to provide for the recovery of costs for services provided by the Alnwick/Haldimand Volunteer Fire Department”.
[11] The bylaw defines “Fire Protection Services” very broadly to include fire suppression services i.e. firefighting.
[12] The bylaw also defines something called “Indemnification Technology®”:
“Indemnification Technology®” means Fire Department reporting, data collection and property insurance policy wording interpretation to maximize billing opportunities on behalf of fire departments by invoicing insurance companies for costs of fire department attendance with respect to insured perils.
[13] Indemnification Technology® seems to be the intellectual property behind the services provided to the municipality by Fire Marque. That is, Fire Marque will collect data, look at insurance policies, and report on ways to maximize billing opportunities for fire departments by billing insurance companies for insured perils. This definition makes it clear that Fire Marque is looking at finding recovery from insurers for insured perils rather than from the insured homeowners. Indemnification Technology® does not say anything about billing uninsured or under-insured homeowners for fire department services. The service provided by Fire Marque is maximizing billing opportunities to insurers.
[14] Paragraph 2 of the bylaw sets out the charges levied by the municipality. It incorporates a Schedule of Fees that is appended to the bylaw and says that those fees will be charged for Fire Protection Services in relation to seven listed circumstances that I summarize as follows:
(a) Non-residents in motor vehicle accidents;
(b) False alarms;
(c) Arson or malicious acts;
(d) Inspections of properties for insurance purposes or if required by a failure to comply with the Ontario Fire Code and the Fire Protection and Prevention Act, 1997;
(e) Medical assistance;
(f) Extraordinary expenses (which relate to equipment used in addition to equipment already owned or leased by the Fire Department or employees necessitated beyond the normal compliment); and
(g) Taxes on fees and charges otherwise properly charged.
[15] Mr. Potusek is a resident of the municipality, so the fee for non-residents for auto mishaps does not apply to him. None of the other listed fees and charges apply to his car and garage fire either.
[16] The municipality and the Judge below found that para.7 of the Schedule of Fees authorized the fee charged in this case. The Schedule of Fees incorporated into the bylaw begins:
The following fees and charges shall be charged for Fire Protection Services provided…in accordance with the applicable sub-paragraphs of paragraph 2 of By-Law 125-2012…”.
[17] Paragraph 7 of the Schedule of Fees provides:
Fire Response Fees - Indemnification Technology®
Fire Department incident reporting, data collection and property insurance policy wording interpretation to maximize billing opportunities on behalf of fire departments by invoicing insurance companies for costs of fire department attendance with respect to insured perils. Current MTO Rate and Personnel/Hour plus any additional cost to the Fire Department or the Municipal Corporation, Township of Alnwick-Haldimand for each and every call.
[18] The judge below held that para. 7 is the source of a fee under the opening words in the “Schedule of Fees” that say “[t]he following fees and charges shall be charged…”
[19] The judge then discussed that para. 7 is “somewhat confusing”. He found that the first sentence of the paragraph “makes no sense”. He relied on legal principles that favour broad and purposive interpretation of bylaws and found:
In other words, Section 2 of the by-law, read broadly, provides that (2) gives details as to how some of the fees will be paid. The schedule provides for what fees and charges are to be charged for.
[20] He then found that the invoice submitted by Fire Marque charges for personnel and equipment in the way that is “precisely what is set out in paragraph 7 of the schedule” and as such was a valid fee under the bylaw read broadly and purposefully.
Standard of Review
[21] The interpretation of the bylaw is a question of law that is reviewed on the standard of correctness: Housen v. Nikolaisen, 2002 SCC 33 at para. 8. While application of the bylaw to the facts is a question of mixed fact and law, the issue of whether para. 7 of the Schedule of Fees allows the municipality to charge a homeowner for fire department services that are not listed in paragraph 2 of the bylaw is an extricable question of law in this case. The facts that surround the fire, the fire department services provided, and the manner of billing for those services are not in question at all. Extricable errors of law within a question of mixed fact and law are also reviewable for correctness. Housen, at paras. 28 to 36.
Analysis
[22] I agree with the judge below that the task of interpreting a municipal bylaw, like statutes, involves both a broad and a purposive approach. Section 64 of the Legislation Act, 2006, SO 2006 c 21, sch F provides that statutes are to be given a “fair, large and liberal interpretation as best ensures the attainment of its objects”. In Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), the Supreme Court of Canada endorsed the modern approach to statutory interpretation as follows:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
[23] In Croplife Canada v. Toronto (City), 2005 15709 (ON CA), the Court of Appeal stressed that the approach to interpreting municipal bylaws is one of large and purposive construction. Moreover, it said that courts ought to be constrained in finding a bylaw invalid so as not to impinge on municipal democracy.
[24] Ms. Savini argues that the purpose of bylaw 125-2012 is to recover the cost of fire department services through the Fire Marque system i.e. through insurers in accordance with its Indemnification Technology®.
[25] Assuming that this is so, I do not understand how the fees have been charged to Mr. Potusek personally. Nothing in the bylaw or the sections referring to the “Indemnification Technology®” provide for charges to be levied against homeowners if the insurers decline to pay. The beauty of the Fire Marque system, as explained to us, is that ratepayers/homeowners are not the targets of the fees. I understand why a municipality would want to proceed against a homeowner who is insured where the insurer declines to pay, but that is not what the bylaw provides in any term that I can discern. In fact, other principles of statutory interpretation would require clarity and specificity before a person can be made liable to pay money to the government. But even assuming that the clarity principle is subservient to the large and liberal purposive approach, nothing about the purpose of maximizing charges against insurers requires the court to strain to find homeowners personally liable where the insurer declines to make the payment; the wording simply does not say so.
[26] In addition, I respectfully disagree with the finding below that the Schedule of Fees is a source of fees as opposed to a detail of the fees set out in para. 2 of the bylaw. The judge recited the opening words of the Schedule of Fees that say, “[t]he following fees and charges shall be charged”. But he left out the limiting words that follow, “for Fire Protection Services provided…in accordance with the applicable sub-paragraphs of paragraph 2 of By-Law 125-2012”. The fees listed in the Schedule of Fees therefore are fees that shall be charged for the services listed in para. 2 of the bylaw. None of the fees provided in para. 2 of the bylaw cover basic firefighting at a ratepayer’s home.
[27] Finally, even if the Schedule of Fees is a source of fees and even if para. 7 called for fees to be levied against homeowners, like the judge below, I still cannot make heads or tails of para. 7. The first sentence is not a sentence at all. It has no verb. It just sets out the three types of services that Fire Marque applies to maximize billings of insurers: incident reporting, data collection, and insurance policy interpretation. The second sentence is also not a sentence. It just names the provincial fee lists where one looks to find charges “for each and every call”. Neither sentence says anything about personal liability to pay fees generally or for firefighting services specifically. There is no link between the three types of services provided by Fire Marque listed in the first “sentence” of para. 7 and the fee schedules referenced in the second “sentence”. Whatever that paragraph does, I cannot see any words in it that make Mr. Potusek liable to pay a fee for the fire department services provided to him.
[28] As I noted at the outset, the bylaw was amended in 2016. A provision was added to para. 2 to expressly allow the municipality to charge for basic fire services. Accordingly, it does not appear that this issue will likely arise again.
[29] I note as well that I am not ruling the bylaw invalid. There is no issue of subverting the municipal process or undermining municipal democracy. This is a case of statutory interpretation to determine the meaning and reach of the bylaw the municipality enacted to carry out its purposes.
Outcome
[30] For the foregoing reasons, the bylaw did not authorize the municipality to levy a fee against Mr. Potusek on the facts of this case. A declaration will issue as requested in para. 1(b) of Mr. Potusek’s notice of application dated November 5, 2018 that the municipality was not authorized to bill Mr. Potusek’s tax roll for $9,472.24 under bylaw 125-2012. Moreover, as requested at para. 1(c), an order will go requiring the municipality to reimburse Mr. Potusek for the $9,472.24 fee and all penalties that it charged to Mr. Potusek in respect of the fee.
[31] The parties agreed that costs of $5,000 will be payable to Mr. Potusek by the respondents consequent on this outcome. So ordered.
___________________________ F.L. Myers J.
I agree
Raikes J.
I agree
Favreau J.
Date of Reasons for Judgment: October 1, 2019
CITATION: Potusek v. Township of Alnwick-Haldimand, 2019 ONSC 5677 DIVISIONAL COURT FILE NO.: DC-19-1169 DATE: 20191001
ONTARIO
SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
RICHARD POTUSEK
Appellant
– and –
TOWNSHIP OF ALNWICK-HALDIMAND and FIRE MARQUE INC.
Respondents
REASONS FOR JUDGMENT
F.L. MYERS J.
Date of Reasons for Judgment: October 1, 2019