CITATION: 1085372 Ontario Limited v. City of Toronto, 2020 ONSC 1136

DIVISIONAL COURT FILE NO.: 622/18

DATE: 20200225

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Backhouse, M.L. Edwards and Favreau JJ.

B E T W E E N:

1085372 ONTARIO LIMITED, 1235421 ONTARIO LIMITED, 2017253 ONTARIO INC., PAUL ROBERT OULAHEN, NORAH ANNE OULAHEN, JEFFERY JOHN OULAHEN AND MARK ADAM OULAHEN

Appellants

– and –

CITY OF TORONTO

Respondent

Stephen Waqué and Isaac Tang,

for the Appellants

Brendan O’Callaghan and Paul De Melo, for the Respondent

HEARD: June 12 and 13, 2019

REASONS FOR DECISION

M.L. EDWARDS J. and FAVREAU J.:

Overview

[1] This is an appeal from a decision of the Local Planning Appeal Tribunal, formerly the Ontario Municipal Board (the “Tribunal”), dated August 17, 2018.

[2] The City of Toronto (the “City”) expropriated a number of adjacent properties owned by the Appellants in 2014. In its decision, the Tribunal accepted some of the Appellants’ claims for compensation and rejected others, ultimately finding that the fair market value for the properties was $18,000,000, that the Appellants were entitled to an increased rate of interest on the value of the properties due to delay by the City, and that the Appellants were entitled to disturbance damages for lost real estate commissions and the costs associated with a loan.

[3] The Appellants and the City seek to overturn or vary aspects of the Tribunal’s decision.

[4] For the reasons that follow, the appeal is allowed in part and the cross-appeal is dismissed based on the following findings:

a. there was no error in the Tribunal’s valuation of the property;

b. there was no error in the Tribunal’s finding that the City caused delay and should pay 12% interest;

c. the Tribunal did not make any errors in fixing the start and end dates for the 12% interest;

d. there was no error in the Tribunal’s decision not to award disturbance damages for the Appellants’ lost business opportunities;

e. there was no error in the Tribunal’s decision to award disturbance damages for the Appellants’ lost commissions;

f. there was no error in the Tribunal’s decision not to award disturbance damages for the cost of purchasing alternative properties; and

g. the Tribunal’s calculation of the costs of the loan was in error and should have been $889,703.

Statutory Scheme

[5] Before reviewing the factual background to this appeal, it is helpful to review the statutory scheme under which the Tribunal made its decision.

[6] Section 13(1) of the Expropriations Act, R.S.O. 1990, c. E.26, requires an “expropriation authority”, such as the City, to “pay the owner such compensation as is determined in accordance with this Act”. Section 13(2) sets out the types of compensation the authority must pay to the owner, which include the “market value of the land” and “the damages attributable to disturbance”.

[7] Section 14 of the Expropriations Act addresses how the market value of the land is to be determined. Section 14(1) provides that the “market value of the land expropriated is the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer”. Section 14(4) explicitly provides that the intended expropriation of the land is to play no role in assessing the market value of the land.

[8] Section 18 of the Expropriations Act addresses disturbance damages, which are defined in section 18(1) as “such reasonable costs as are the natural and reasonable consequences of the expropriation”. The section also includes examples of disturbance damages, such as the costs of finding alternative premises and the costs of relocation.

[9] Section 25 of the Expropriations Act requires the expropriating authority to make an offer to compensate the owner for its estimate of the market value of the property, providing that “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”.

[10] Section 33(1) of the Expropriations Act provides that an owner is entitled to 6% interest on the difference between the amount offered by the authority for the market value of the land and the market value ultimately determined by the Tribunal. Section 33(4) allows the Tribunal to order interest at a rate of up to 12% where the Tribunal finds that the expropriating authority has caused a delay in determining the compensation.

Background

The Appellants and the Properties

[11] The properties at issue are located at 8, 12, 14, 16, 18, 20, 22 and 24 Bonnington Place, Toronto, which is close to the intersection of Yonge Street and Sheppard Avenue, immediately east of a subway stop (collectively referred to as the “Properties”).

[12] The corporate Appellants, 1085372 Ontario Limited, 1235421 Ontario Limited and 2017253 Ontario Inc., were the owners of the Properties. The individually named Appellants are the owners and principals of the corporate Appellants. They are involved in family run businesses that own, develop, build and sell, commercial real estate. Norah and Paul Oulahen are the parents of Mark and Jeffrey Oulahen.

The History of Dealings Between the Parties

[13] The City started considering expropriating the Properties to build a service road in the late 1990s.

[14] By 2009, the Appellants had acquired all of the Properties except for 8 and 12 Bonnington Place. The Appellants acquired 12 Bonnington Place on October 1, 2014. They entered into an Agreement of Purchase and Sale for 8 Bonnington Place in August 2014, but the deal did not close because of the expropriation. The Appellants intended to use the Properties for a mixed-use condominium development.

[15] Starting in 2010, there was a lengthy series of interactions between the Appellants and the City over the Appellants’ proposed development and the City’s intention to expropriate the Properties.

[16] Some of the key events leading to the hearing before the Tribunal are as follows:

a. In April 2010, the Appellants met with the City staff to discuss their plan to develop a 14-story mixed-use condominium building on the Properties. The City indicated that it wanted to acquire the Properties to build a service road.

b. In October 2011, City Council refused the City staff’s recommendation to acquire the Properties to build a service road.

c. In January 2013, the Appellants filed an Official Plan Amendment and a Zoning By-Law Amendment for a 14-story mixed-use building on the Properties.

d. On March 5, 2013, the City deemed the Appellants’ applications for an Official Plan Amendment and a Zoning By-Law Amendment complete. However, City staff did not support the proposed 14-story development, but instead supported a 10-story building.

e. In September 2013, the Appellants filed appeals to the Ontario Municipal Board under the Planning Act, R.S.O. 1990, c. P.1.

f. The appeals were originally scheduled to be heard in May 2014, but were adjourned on consent to October 2014. The purpose of the adjournment was to give the City an opportunity to pursue authorization for expropriation of the Properties. The Appellants agreed to the adjournment on the condition that the City was to make “an advance payment equal to 100% of its estimate of the market value for the Subject Property, on or before October 15, 2014 or such date later as the Appellants in their sole discretion direct, but in any case, no later than December 31, 2014”.

g. The City adopted a resolution to expropriate the Properties in August 2014, and filed the Plans of Expropriation for the Properties on October 29, 2014.

h. On January 28, 2015, the City offered the Appellants $9,000,000 as the market value of the Properties. The City paid that amount to the Appellants on April 30, 2015.

The Tribunal’s Decision

[17] The hearing before the Tribunal took place in October 2017.

[18] The Tribunal issued its decision on August 17, 2018.

[19] In its decision, the Tribunal made the following awards to the Appellants:

a. $18,000,000 for the fair market value of the lands;

b. 12% interest on the difference between $18,000,000 and the $9,000,000 the City paid to the Appellants for the period from April 30, 2015 to the date of the decision;

c. $2,100,000 for lost real estate commissions as disturbance damages;

d. $100,000 for wasted costs as disturbance damages; and

e. $724,710 for costs associated with a loan as disturbance damages.

[20] The Tribunal rejected the following claims for compensation by the Appellants:

a. Disturbance damages for loss of business opportunity; and

b. Disturbance damages for the cost of purchasing replacement properties.

The Court’s Jurisdiction

[21] Section 31 of the Expropriations Act sets out this court’s jurisdiction over the appeal:

31 (1) An appeal lies to the Divisional Court from any decision or order of the Tribunal in accordance with the rules of court, except that the appeal may be taken at any time within six weeks from the day the decision or order was served on the parties, and the period of any vacation of the court shall not be reckoned in computing such six weeks.

(2) An appeal under subsection (1) may be made on questions of law or fact or both and the Divisional Court,

(a) may refer any matter back to the Tribunal; or

(b) may make any decision or order that the Tribunal has power to make.

Standard of Review

[22] At the time the appeal was argued, the standard of review applicable to decisions of the Tribunal was reasonableness.

[23] However, following the date of the hearing and before the issuance of this decision, the Supreme Court of Canada released its decisions in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 and the companion case in Bell Canada v. Canada (Attorney General), 2019 SCC 66, which revise the standard of review applicable to statutory appeals from administrative tribunals.

[24] Following the release of Vavilov, the panel requested and received submissions from the parties on the revised standard of review and its application to the issues on this appeal.

[25] The parties agree that, in accordance with para. 37 of Vavilov, given that the Expropriations Act provides for a right of appeal to this Court, the applicable standard is the appellate standard set out in Housen v. Nikolaisen, 2002 SCC 33, at para. 8.

[26] Accordingly, the standard of review is as follows:

a. Questions of law are to be reviewed on a standard of correctness;

b. Findings of mixed fact and law where the legal principle is readily extricable are to be reviewed on a standard of correctness;

c. Findings of mixed fact and law where the legal principle is not readily extricable are to be reviewed on the palpable and overriding standard; and

d. Findings of fact are to be reviewed on the palpable and overriding standard.

[27] In their additional submissions addressing Vavilov, the parties addressed the standard of review that they say applies to each issue. Given the number of issues on the appeal, we address the standard of review as necessary in dealing with each issue below.

Issues

[28] As indicated above, both the Appellants and the City challenge different aspects of the decision.

[29] The Appellants’ position is that the Tribunal made the following errors:

a. The Tribunal should have found that the fair market value of the land is $22,300,000 rather than $18,000,000. The Tribunal made the following errors in determining fair market value of the land:

i. The Tribunal failed to apply section 14(4)(b) of the Expropriations Act, which required it to disregard the impact of the proposed expropriation on the value of the land; and

ii. The Tribunal should have applied the “residual approach” to the valuation of the land.

b. The Tribunal should have found that the 12% interest starts to run on May 9, 2014, when the appeals were adjourned to allow the City to pursue expropriation. The end date for the 12% interest should be the date on which the City made the final payment for the value of the lands.

c. The Tribunal should have awarded disturbance damages to the Appellants for their loss of business opportunity.

d. The Tribunal should have awarded disturbance damages related to the transaction costs associated with purchasing a replacement property.

e. The Tribunal erred in its calculation of the disturbance damages for the costs associated with the loan.

[30] The City’s position is that the Tribunal made the following errors:

a. The Tribunal should not have awarded 12% interest because there was no delay caused by the City.

b. The Tribunal should not have awarded disturbance damages to the Appellants for lost real estate commissions.

[31] Based on the issues raised by the parties on the appeal and cross-appeal, the court’s analysis of the issues is organized as follows:

a. Whether the Tribunal erred in its valuation of the property;

b. Whether the Tribunal erred in finding that the City caused delay and should pay 12% interest;

c. Whether the Tribunal erred in determining the start and end dates for the 12% interest;

d. Whether the Tribunal erred in not awarding disturbance damages for the Appellants’ lost business opportunities;

e. Whether the Tribunal erred in awarding disturbance damages for the Appellants’ lost commissions;

f. Whether the Tribunal erred in not awarding disturbance damages for the cost of purchasing alternative properties; and

g. Whether the Tribunal erred in its calculation of the costs of the loan.

Issue 1 - Whether the Tribunal erred in its valuation of the property

[32] This is an issue raised by the Appellants.

[33] As reviewed above, the Appellants challenge the Tribunal’s valuation of the Properties at $18,000,000 on the basis that 1) the Tribunal failed to disregard the impact of expropriation on the value of the property as required by section 14(4)(b) of the Expropriations Act, and 2) the Tribunal should have accepted the “residual” approach as the appropriate method of valuation.

Section 14(4)(b) of the Expropriations Act

[34] The dispute between the parties as it relates to this issue, turns on whether the proposed development plan should have been considered “shovel ready” or “only approved in principle” as of the expropriation date.

[35] In its decision, the Tribunal determined that “shovel ready” meant that all approvals and permits had been obtained and, as such, construction could start immediately. Conversely the Tribunal determined that “approved in principle” meant that additional steps were still required to proceed with the development. In layman’s terminology, a development plan that is “shovel ready” is more valuable than a development plan that is only “approved in principle”. All three appraisers who testified before the Tribunal, agreed that a development plan that was only approved in principle would attract a lesser valuation than a development plan that was shovel ready.

The Appellants’ Position Re Valuation

[36] The Appellants frame their position as it relates to this issue by reference to section 14 (4)(b) of the Expropriations Act, as whether “but for” the expropriation or the imminent prospect of expropriation, the Properties would have been shovel ready for the proposed development as of the expropriation date.

The City’s Position Re Valuation

[37] Contrary to the position asserted by the Appellants, the City argues that the Tribunal’s decision properly recognizes that the timing of when the development applications were made was a result of the Appellants’ own business decisions. Those business decisions, it is argued by the City, had nothing to do with the expropriation.

The Tribunal’s Decision on Valuation

[38] In coming to its decision, the Tribunal accepted the definition of “shovel ready” offered by the Appellants’ expert appraiser as follows:

I accept Mr. Penney’s characterization of a shovel ready site as having ‘imminent development timing’. The subject property was not at this stage. The term ‘imminent’ suggests ‘immediate’ or ‘without any delay’. As discussed earlier in this decision, the subject property was not entirely ready for construction as further steps were still required’ (para. 66).

The Tribunal accepted the evidence of the City’s Planner who in the view of the Tribunal ‘provided a more pragmatic view of the timing of the development proposal’ (para. 68).

Analysis

[39] The Appellants argue that this issue raises a question of law in relation to the application of section 14(4)(b) of the Expropriations Act. However, what underlies the position asserted by the Appellants, is a factual argument that the only reason for the delay in advancing the planning application and bringing the project to “shovel ready” status was the result of the expropriation, and/or the imminence of the expropriation itself. In essence, the Appellants argue that the various delays that are reflected in para. 16 above were caused by the City, and that but for those delays the proposed development would have been shovel ready. Therefore, in order to overturn this aspect of the decision, we must find a palpable and overriding error.

[40] It is noteworthy that the only development plan that was ever submitted to the City by the Appellants was in January 2013; which plan was deemed complete by City planning staff in March 2013. The plan as submitted by the Appellants was for a 14-story building. City staff did not approve a 14-story building, but did support a 10-story building. The Appellants then filed an appeal of this decision to the Ontario Municipal Board in September 2013.

[41] It was open to the Appellants to have submitted a development plan to the City at any time well before they did in January 2013. The Appellants sought to justify their delay in submitting any plan for approval at the feet of City officials. Throughout this time period, however, the Appellants, as noted by the Tribunal in its reasons at paras. 14 and 15, had available to them a team of professionals to assist in the development of the project. The timing of the decisions made by the Appellants in relation to submitting an application for planning approval was, as the Tribunal found at para. 14, a “business” decision made by the Appellants.

[42] Had the Appellants submitted a site plan for approval at a much earlier date than actually occurred, there may have been some merit to the argument that the project was shovel ready on the valuation date. But the facts as found by the Tribunal establish that not only was site approval not sought until the beginning of 2013, but that any delay in submitting such plan was within the control of the Appellants. Having made a conscious decision, with the advice of a professional team of advisors, not to take the necessary steps to advance the approval process and thus increase the value of the Properties, it was not then open to the Appellants to pin the blame on the pending expropriation for the delays and reduced value of the Properties.

[43] The Tribunal correctly identified that the determination of compensation to which the Appellants were entitled under the Expropriations Act, is guided by the Supreme Court of Canada decision in Toronto Area Transit Authority v. Dell Holdings Limited, 1997 400 (SCC), [1997] 1 S.C.R. 32 (“Dell Holdings”). As noted by the Tribunal at paras. 38-41 of its reasons, the Supreme Court provided guidance in how the Expropriations Act should be interpreted to ensure that an owner of land facing expropriation should be “fully compensated” for such loss. We agree with the Tribunal’s further reference to Dell Holdings at para. 41 of its reasons, when it is suggested that full compensation means a claim supported by credible evidence should be fully paid. Fundamentally, the evidence advanced by the Appellants to support their argument that the development project was shovel ready on the valuation date did not reach the level of “credible evidence”.

[44] The Tribunal was very much alive to what is often referred to as “screening out the scheme” pursuant to section 14 (4) (b) of the Expropriations Act, whereby the Tribunal was required to assess the market value of the Properties assuming that there was no expropriation or imminent prospect of expropriation. The Tribunal made factual findings that were supported by the evidence. We can see no basis to interfere with those findings of fact, specifically those findings as they relate to the timing of the Appellant’s application to the City for planning approval, and any suggestion that the delay in seeking such approval was the fault of the City. As such, we see no palpable and overriding error in the Tribunal’s finding that the Properties were not shovel ready but rather only approved in principle.

Market Value of the Properties

[45] There are two methods of valuing property that is subject to expropriation. The first is the direct comparison approach, while the second is the residual approach.

[46] The direct comparison approach compares the subject properties to other properties with similar attributes. As noted by the Tribunal at para. 70, the direct comparison approach is more commonplace in expropriation matters.

[47] The residual valuation approach is one that is applied by valuing the proposed development as if it were complete, and subtracting the costs of constructing the improvements. The Appellants unsuccessfully argued before the Tribunal that the residual approach was one that was particularly appropriate where development was imminent, and which but for the expropriation would have been the case for the Properties as of the expropriation date.

Appellants’ Position Re Market Valuation

[48] While the Appellants concede that the direct comparison approach is the one which is most often used in expropriation matters, in this case it was argued that the residual approach was the most reliable. In support of that position, the Appellants called the evidence of two expert appraisers who used the residual approach as it was the most accurate assessment of market value. The Appellants also referred to the cross-examination of the City’s appraiser, Mr. Robson, where it is suggested Mr. Robson admitted that the residual approach had wide acceptance in the development industry, and that the residual approach would potentially account for the unknowns in employing the direct comparison approach.

The City’s Position Re Market Valuation

[49] Not surprisingly, the City argues that the Tribunal correctly adopted the direct comparison approach, given that the residual approach had many frailties and should only be used when there are no comparable properties available. In that regard, the City argues that all three experts, i.e. the two expert appraisers who testified on behalf of the Appellants and the expert appraiser who testified for the City provided an opinion with respect to the fair market value of the Properties based on the direct comparison approach.

[50] As for the argument of the Appellants that the City’s appraiser, Mr. Robson, admitted that the residual approach had wide acceptance in the development industry, the City notes that Mr. Robson did acknowledge in cross-examination that the residual approach was “one way” of conducting the valuation, but that the valuation exercise required “a sober second look at what was going on in the local market as well as development residual”. (Appeal Book p. 224)

The Tribunal’s Decision Re Market Valuation

[51] Fundamentally, what the Tribunal did in accepting the direct comparison approach, was to accept the direction of the Ontario Court of Appeal in 747926 Ontario Ltd. v. Upper Grand District School Board (2001), 2001 24126 (ON CA), 56 O.R. (3d) 108 (“Upper Grand”). In that regard, at paras. 22-24 the Court, in part, stated:

In my view, the cost of development approach is an unsatisfactory means to determine market value. However, it is not prohibited by the Act. Further, I do not think that my opinion as to the proper approach to determining market value justifies putting the parties to the expense of sending the matter back to the OMB for a new hearing. The expertise of the OMB merits deference in the market valuation process. The OMB accepted the cost of development approach by considering and preferring the market valuation of the claimant’s appraiser. I can only take from this that the OMB was not satisfied with the testimony of the School Board’s appraiser who relied on a combination of the cost of development approach and the direct comparison approach…

[52] The Tribunal rejected the Appellants’ argument that there was a lack of good quality comparable sales, and in so doing noted that at least one of the Appellants’ appraisers – Mr. Atlin – did use a direct comparison approach. The Tribunal also rejected arguments advanced on behalf of the Appellants that the residual valuation approach would capture benefits such as a commercial parking component and the value of a second-floor office as part of the value of the overall development proposal.

Analysis Re Market Valuation

[53] In coming to its decision, the Tribunal acknowledged that it is difficult to find properties that exactly mirror each other and that this often necessitates adjustments. The Tribunal went on to note that while the Properties may have had some “special attributes”, this did not mean that they were “one of a kind”. Fundamental to the determination of whether the residual approach was an appropriate alternative method of valuation was the Tribunal’s finding at para. 72 of the reasons that there were comparable properties in the City.

[54] Both sides called expert evidence on the proper method of valuation. The Appellants called two experts, one of whom, Mr. Atlin, conducted a direct comparison valuation but as noted by the Tribunal also supplemented his opinion with data that he derived from the residual approach.

[55] While the residual approach may very well be an accepted method of valuation by the Appraisal Institute of Canada, the Tribunal was entirely correct to follow the guidance provided by the Court of Appeal in Upper Grand. The Tribunal had the benefit of hearing the evidence of the 3 experts called by the parties, including evidence of comparable properties as well as evidence that lent itself to the residual approach to valuation.

[56] The Tribunal correctly concluded on the facts and opinions provided that there were other comparable properties and as such the direct comparison approach was the proper method of valuation. There was no need for the Tribunal to accept the residual valuation approach proposed by the Appellants – a valuation approach that may have been appropriate if factually there were no other comparable properties. We see no error in the Tribunal’s method of valuation.

Issue 2 - Whether the Tribunal Erred in Finding that the City Caused Delay and Should Pay 12% Interest

[57] This is an issue raised by the City.

[58] As reviewed above, section 33(1) of the Expropriations Act provides that, in the normal course, the owner of an expropriated property is entitled to 6% interest on the “portion of the market value of the owner’s interest in the land…from time to time…calculated from the date the owner ceases to reside on or make productive use of the lands”. Section 33(4) of the Expropriations Act permits the Tribunal to award up to 12% interest if “the Tribunal is of the opinion that any delay in determining compensation is attributable in whole or in part to the expropriating authority”.

[59] In this case, the Tribunal awarded 12% interest on the difference between the $18,000,000 it found was the value of the land and the $9,000,000 the City paid the Appellants on April 30, 2015. The Tribunal found that 12% interest was warranted on the basis of the following considerations:

a. The City originally paid the Appellants $9,000,000, which is far less than its revised estimate of $14,000,000 before the hearing and its further revised of $17,000,000 at the hearing. The Tribunal held that the City should have paid these revised amounts in a timely fashion, which the City refused to do despite the terms of the agreement to adjourn the appeals scheduled for May 2014; and

b. The City delayed the proceedings “through requiring a Board Negotiation process and earlier section 43 reviews which was not successful”.

[60] The City argues that the Tribunal erred in finding that the City caused delay because the Tribunal considered irrelevant factors and because its findings were not supported by the facts. We disagree.

[61] Relying on the wording of section 33(4) of the Expropriations Act and the Court of Appeal’s decision in Barsenas v. Ontario (Minister of Transportation & Communications) (1984), 6 O.A.C. 102 (.C.A.), the City argues that an increased interest rate is only available where there is “delay in determining compensation”. The City argues that the Tribunal should not have considered the amount the City voluntarily paid to the Appellants and when it made the payment, because these are irrelevant to the issue of “delay in determining compensation”.

[62] In our view, the Tribunal’s interpretation and application of section 33(4) of the Expropriations Act was correct. In Dell Holdings, at paras. 20-21, the Supreme Court of Canada confirmed that “the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected”, and that the Expropriations Act is a “remedial statute” that “must be given a broad and liberal interpretation consistent with its purpose”. The wording of section 33(4) refers to “any delay in determining compensation…attributable in whole or in part to the expropriating authority” (emphasis added), suggesting that the provision is to be interpreted broadly. In addition, the Court of Appeal in Bersenas did not focus on the types of activities that might constitute delay, but rather on the time frame within which delay will be considered, finding, at para. 84, that delay only counts if it occurs after the expropriating authority files its plan of expropriation. In this case, in our view, it was appropriate for the Tribunal to consider the fact that the City initially made a low offer and then did not pay the Appellants in accordance with its increased valuation as a form of delay.

[63] The City also argues that the Tribunal improperly considered its conduct in the Board Negotiation and its request for a document review leading up to the hearing as delay. The City argues that it should not be penalized for participating in legitimate processes provided for in the Expropriations Act. We reject this argument.

[64] As mentioned above, the Tribunal found that the City caused delay by insisting on an unsuccessful Board Negotiation and on a review pursuant to section 43 of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28. The underlying facts leading to the Tribunal’s finding are as follows:

a. Section 26 of the Expropriations Act requires parties to attend a Board of Negotiation to discuss settlement prior to a hearing. In this case, the Appellants proposed that the parties agree to waive this requirement, but the City did not agree to this proposal. However, on the eve of the meeting, the City sought to cancel the negotiation.

b. The hearing before the Tribunal was initially scheduled for April 2017. Two weeks before this date, the City requested an adjournment to seek a section 43 review on a document disclosure issue. In a decision dated June 22, 2017, the Tribunal held that the request did not meet the threshold for review.

[65] In Vandenbelt v. Ottawa-Carleton (Regional Municipality), [1980] O.J. No. 730 (Div. Ct.), at para. 23, this Court held that section 34(4) of the Expropriations Act does not require that delay be a “flagrant violation”:

In our opinion s. 34(4) is not to be as narrowly construed as was done in the Schweitzer case. Any delay whether “a flagrant violation” or not in determining compensation is sufficient to attract the discretion of the Board to increase the rate of interest. It is the delay that causes the owner to lose the use of his compensation money that is the basis of the discretion to recompense him in this way as a matter of fairness and equity according to the individual circumstances of the case.

[66] Ultimately, the Tribunal’s finding that there was delay attributable to the City is a finding of fact. The Tribunal did not make any palpable and overriding errors in coming to this conclusion.

Issue 3 - Whether the Tribunal Erred in Setting the Start and End Dates for the Payment of 12% Interest

[67] This is an issue raised by the Appellants.

[68] At the hearing before the Tribunal, the Appellants argued that the start date for interest should be January 23, 2012, because the project would have been ready to proceed by that date. The Tribunal rejected that argument and set the start date as April 30, 2015, which is the date on which the City paid the $9,000,000 to the Appellants.

[69] The Appellants argue the Tribunal failed to provide a rationale for choosing April 30, 2015. For the purpose of the appeal, the Appellants now argue that the start date should have been May 9, 2014, which is when they agreed to adjourn their appeals for the purpose of allowing the expropriation process to unfold. The Appellants argue that from that date forward, it was evident that the Properties were to be expropriated and they could not longer make use of the Properties. Alternatively, they argue that the start date for the 12% interest should be October 29, 2014, which is the date on which the City filed the Plan of Expropriation.

[70] Contrary to the Appellants’ submissions, the Tribunal did provide a rationale for the April 30, 2015 start date. In rejecting that interest should start running in 2012, the Tribunal rejected the Appellants’ argument that they could have received site plan approval by that date. The Tribunal went on to find that the Appellants were not scheduled to acquire the property at 8 Bonnington Place until late March 2015:

Further, the Claimants did not acquire all of the subject properties along Bonnington Place for the duration of this timeframe. Some were acquired in 2014 with 8 Bonnington Place targeted for finalizing the sale at the end of March 2015.

[71] This was a finding of fact. The implication of this finding is that the Appellants could not have made use of the Properties for their intended purpose until they acquired 8 Bonnington Place in late March 2015. The Tribunal relied on this finding to decide that the appropriate start date for the payment of interest was April 1, 2015. The Tribunal did not make any palpable and overriding error in reaching this conclusion.

[72] The Appellants also argue that the Tribunal should have found that 12% interest was to be paid until the date the payment was made, rather than until the date the decision was issued. They argue that the Tribunal’s determination that 12% interest is only to be paid up to he date of the decision is contrary to the approach generally taken in other cases, such as Geneen v. Toronto (City) (2001), 77 L.C.R. 24 (O.M.B.), and West Hill Redevelopment Co. v. Ontario (2001), 75 L.C.R. 232 (O.M.B.).

[73] In its decision, the Tribunal did not provide a rationale for the end date being the date of the decision.

[74] The City did not address this issue in its factum. During the argument, the City indicated that it had made the payment for the balance of the market value of the property, paying 12% interest up to the date of the decision and 6% interest from the date of the decision to the date of payment.

[75] In our view, in combination, the Tribunal’s end date for 12% interest and the City’s interpretation of its obligations are appropriate. The rationale for the payment of 12% interest was based on a finding of delay attributable to the City up to the time when the Tribunal issued its decision. The decisions relied on by the Appellants involved the payment of 6%, not 12% interest. In this case, there was no evidence before us of delay in paying after the Tribunal’s decision was issued. Under the circumstances, we see no basis for varying the end date for the payment of 12% interest.

Issue 4 - Whether the Tribunal Erred in Deciding not to Award Disturbance Damages for the Appellants’ Lost Business Opportunities

[76] This is an issue raised by the Appellants.

[77] At the hearing before the Tribunal, the Appellants sought between $5.5 million and $6.3 million as disturbance damages for loss of business opportunity. For the purpose of the appeal, the Appellants seek $5,500,000 for their claim for loss of business opportunity. This claim relates to the opportunity the Appellants say they lost to develop, construct, market and sell the units in the proposed condominium development.

[78] The Tribunal denied this request for compensation, finding that it would amount to double recovery. In making this determination, the Tribunal relied on the Court of Appeal’s decision in Upper Grand, quoting from para. 24 of that decision:

From the reasons I have developed above, it follows that the Divisional Court was in error in adding the lost developer’s profit back into the compensation award as disturbance damages. The Court below seemed to approach this case as if it was presented with a personal injury matter, where the injured party is entitled to be made as whole as a money judgment can achieve. The Divisional Court circumvented the statutory framework of compensation set out in the Act by extracting lost developer’s profit from a methodology directed to the market valuation of expropriated land and characterizing this lost developer’s profit as disturbance damages.

[79] The Tribunal went on to explain its conclusion, that the Appellants’ claim for loss of business opportunity in this case was akin to a claim for loss of profit, which is barred by the scheme of the Expropriations Act:

Also, just as the Court of Appeal illustrated, including the loss of developer’s profit back into the compensation for disturbance damages was erroneous. In this case, the loss of developer’s profit is termed loss of business opportunity, but they mean the same thing. The market value for the property takes into account the development status of the property on the valuation date…

[80] The Appellants argue that the Court of Appeal’s decision in Upper Grand is distinguishable from this case because that decision was based on a finding that there was a comparable property, and it was therefore possible to include the loss of business opportunity as part of the value of the property. As found above, we accept that there are comparable properties in this case, and that the valuation method used by the Tribunal was supported by the record.

[81] It was similarly not an error for the Tribunal to conclude that the value of the property includes the value of any claim for loss of business opportunity and to therefore dismiss the Appellants’ claim for disturbance damages for loss of business opportunity. With the compensation the Appellants have received, they should be in a position to pursue similar business opportunities at another location.

Issue 5 - Whether the Tribunal Erred in Awarding Disturbance Damages for the Appellants’ Lost Commissions

[82] This is an issue raised by the City.

[83] In its decision, the Tribunal awarded $2,100,000 in lost real estate commissions to the Appellants. These were the commissions that the Appellants claim Paul Oulahen would have received for his pre-construction sales if the Properties had not been expropriated. In making this determination, the Tribunal found that these losses were directly tied to the expropriation. The Tribunal reasoned as follows:

My primary reason for this determination is that Mr. Oulahen’s evidence on having marketed the proposed development to potential condominium purchasers was compelling and reliable. This was and is the focus of his real estate business. The losses he suffered to not be able to collect on these potential real estate commissions are directly connected to the expropriation. These losses have a causal connection to the development opportunity which was not realized due to the expropriation. Pursuant to s. 18 of the Act, I determine that these commissions are reasonable given the experience of the Claimants and the municipality where such transactions occur. They represent a natural and reasonable consequence of the expropriation.

The City’s assertions that these losses would have been replaced by other commissions which Mr. Oulahen could have received are not supportable. I accept Mr. Oulahen’s account that his work-day was not 9 a.m. to 5 p.m. With the use of technology, professionals are available around the clock to meet the needs of their clients. Mr. Oulahen appeared to me to be a hard-working individual and I accept his testimony that he routinely worked evenings and weekends to provide stellar service to his clientele. These commissions would have been in addition to the commissions his company would have collected from other real estate transactions.

[84] The City argues that it was an error of law for the Tribunal to award these damages to the Appellants because disturbance damages are meant to be limited to reasonable out of pocket expenses. However, the City did not provide any case law in support of this position. The language of section 18, which refers to “such reasonable costs as are the natural and reasonable consequences of the expropriation” does not impose such a limitation. As referred to above, in Dell Holdings, the Supreme Court of Canada, held that the Expropriations Act is remedial and is to be given broad and liberal interpretation.

[85] The City also argues that, in this case, the lost commissions were speculative because they were based on an unsigned letter and the project was not yet shovel ready. However, the issue of whether the lost commissions were “a reasonable consequence of the expropriation”, is a question of fact on which deference is owed to the Tribunal.

[86] Finally, the City argues that the lost commissions are akin to the loss of business opportunity, and that allowing the lost commissions is akin to allowing double recovery. However, as reviewed above, the Tribunal accepted that the commissions were distinct from the profit from the project. These were amounts that were to be paid out before the project was developed. Again, this is a finding of fact to which deference is owed.

[87] We see no error of law or fact in the Tribunal’s award of disturbance damages for lost commissions. It is supported by the language of he legislation and based on findings of fact made by the Tribunal.

Issue 6 - Whether the Tribunal Erred in not Awarding Disturbance Damages for the Cost of Purchasing Alternative Properties

[88] This is an issue raised by the Appellants.

[89] At the hearing, the Appellants argued that they should receive disturbance damages for the cost of buying a replacement property, which they claimed would include the land transfer tax and legal fees associated with the purchase. For the purposes of the appeal, based on the Appellants’ claim that a comparable property would have a market value of $22,300,000, they argue that the land transfer tax would be $1,087,950 and that the legal fees would be $100,000.

[90] Unfortunately, the Tribunal did not address this issue. Instead, the Tribunal erroneously treated this claim as though the Appellants were seeking damages for the costs of purchasing 8 Bonnington Place. The Tribunal found that these costs could not be claimed as disturbance damages, because the closing date for that property was not set to occur until after the expropriation.

[91] Based on section 31(2)(b) of the Expropriations Act, which gives the court the authority to exercise the powers of the Tribunal, the Appellants ask this court to make a determination on this issue. The City agrees that the court should decide the issue, but argues that the Appellants are not entitled to the amounts claimed for the cost of buying a replacement property.

[92] We agree with the City. The record does not support the Appellants’ claim for the costs of buying a replacement property.

[93] The Appellants have the onus of demonstrating that these amounts are the natural and reasonable consequence of the expropriation. However, at the time of the hearing, the Appellants had not purchased or made arrangements to purchase an alternative property. This means that there was no evidence that they were to incur the real estate tax or legal fees at issue.

[94] Accordingly, while the Tribunal did not address the Appellants’ claim for the costs of a replacement property as it was presented, we agree that this claim should be dismissed.

Issue 7 - Whether the Tribunal Erred in its Calculation of the Costs of the Loan

[95] This is an issue raised by the Appellants.

[96] As part of the disturbance damages, the Tribunal awarded costs associated with a loan taken out by the Appellants, referred to by the parties as the Hullmark Loan. The Appellants argue that the Tribunal miscalculated the amounts at issue. They argue that the Tribunal should have awarded $816,890 for the interest on the loan, rather than the $590,658 ordered by the Tribunal. They also argue that the legal and lender fees associated with the loan should have been $72,813, rather than the $39,500 ordered by the Tribunal.

[97] The City agrees that the Tribunal erred in its calculation of disturbance damages for the costs associated with the Hullmark Loan and that the full amount awarded should have been $816,890 plus $72,813, for a total of $889,703.

[98] Accordingly, we find that the total amount for the costs associated with the loan should have been $889,703.

Costs

[99] The parties agreed to $35,000 for the appeal and $20,000 for the cross-appeal. While both parties had some measure of success in the appeal and cross-appeal we are of the view that the City had the greater degree of success and as such we award the City $10,000 in costs.

Conclusion

[100] For the reasons above, we make the following order:

The appeal and cross appeal are dismissed with the exception of the Tribunal’s calculation of the costs of the loan which amount shall be varied to $889,703. Costs to the City fixed in the amount of $10,000.

M. EDWARDS J.

FAVREAU J.

I agree _______________________________

BACKHOUSE J.

Released:

CITATION: 1085372 Ontario Limited v. City of Toronto, 2020 ONSC 1136

DIVISIONAL COURT FILE NO.: 622/18

DATE: 20200225

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Backhouse, M. Edwards, Favreau JJ.

B E T W E E N:

1085372 ONTARIO LIMITED, 1235421 ONTARIO LIMITED, 2017253 ONTARIO INC., PAUL ROBERT OULAHEN, NORAH ANNE OULAHEN, JEFFERY JOHN OULAHEN AND MARK ADAM OULAHEN

Applicants

– and –

CITY OF TORONTO

Respondent

REASONS FOR DECISION

M.L. EDWARDS J. and FAVREAU J.

Released: