ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO: 11-CV-441567
DATE: 20121109

B E T W E E N:

1162185 Limited Partnership Applicant - and - The Corporation of the Town of Richmond Hill Respondent

Mark Noskiewicz & Nicholas Staubitz, for the Applicant
R. Leigh Youd , for the Respondent

HEARD : August 13, 2012

GOLDSTEIN J.:

[ 1 ] The Applicant is a land developer. It purchased 165 acres of land in the Leslie Industrial Area in the 1970’s. The Leslie Industrial Area is within the Respondent municipal corporation’s boundaries. The Applicant and has since developed all but 33 of the 165 acres (referred to as “ the undeveloped land ”). [1] In 1980 the Applicant and other developers entered into a development agreement with the Respondent with respect to the Leslie Industrial Area (“ the 1980 Agreement ”). The Applicant has paid development charges pursuant to the 1980 Agreement. In 2010 the Applicant applied, pursuant to Ontario Regulation 82/98 (“ the Regulation ”), to the Respondent for a credit for those development charges. The Respondent refused to give a credit. The Applicant appealed to the Ontario Municipal Board (“ OMB ”). The appeal was dismissed and the Applicant did not seek leave to appeal from the OMB to the Divisional Court. The Applicant now seeks a declaration that it is not required to pay any future development charges. In my view, the Applicant is not entitled to such a declaration. I also find that this Application is barred by issue estoppel. For the reasons that follow, the Application is dismissed.

BACKGROUND

[ 2 ] Municipalities require infrastructure services. Sewers, roads, parks, and water mains must be paid for. Prior to 1989 the arrangements to build and pay for these services were usually a matter of agreement between municipalities and developers pursuant to the provisions of the Planning Act , R.S.O. 1990, c. P.13 or predecessor legislation. These agreements were sometimes called lot levy agreements, or development agreements, or subdivision agreements but they all referred to an agreement between a municipality and a developer. The 1980 Agreement is an example. Such agreements were often a condition for subdivision approval. Sometimes developers paid municipalities directly for services. Sometimes the developers themselves installed these services and received a credit from the municipality.

[ 3 ] Pursuant to the 1980 Agreement each owner of land in the Leslie Industrial Area was required to pay a proportionate share for services such as storm sewers, sanitation, water mains, roads, and hydro facilities. The Respondent has developed most of its land in the Leslie Industrial Area. Only the undeveloped land remains. The Applicant has paid $1.8 million in development charges in respect of the land it developed in the Leslie Industrial Area, of which $375,000 was attributable to the undeveloped land.

[ 4 ] In 1989 the regulatory scheme for the development of land and the manner in which municipalities charge for infrastructure services changed, and became more uniform across the province. The Legislature passed the Development Charges Act , R.S.O. 1990, c. D.9 (“ the 1989 DCA ”), which empowered municipalities to impose development charges by way of by-laws. The 1989 DCA required municipalities to give a credit to developers who had already paid for or provided services, and included a provision that where there was a conflict between an older agreement and a new development charge by-law, the agreement would prevail to the extent of the conflict.

[ 5 ] Pursuant to the 1989 DCA, the Respondent passed development charge by-laws in 1991 and 1993. Although some portions of the Applicant’s land in the Leslie Industrial Area were developed between 1989 and 1997 no new development charges were collected by the Respondent.

[ 6 ] In 1997, the Legislature passed the Development Charges Act, 1997, S.O. 1997, c. 27 (“ the 1997 DCA ”). The 1997 DCA continued the regime set out in the 1989 Act, but put a time limit on it. Thus, the 1997 DCA did not include the credit provision found in the 1989 DCA. Instead, the Regulation promulgated under the 1997 DCA included the credit provision, and added a sunset clause. The Regulation continued the provision that developers were entitled to credit for development charges paid under development agreements. The Regulation also included a provision that where there was a conflict between an older agreement and a new development charge by-law the agreement would prevail to the extent of the conflict. The sunset clause required developers to apply for a credit from municipalities prior to October 31, 1999. The Regulation included an appeal to the OMB.

[ 7 ] The Applicant took no steps to apply for a credit from the Respondent prior to October 31, 1999 for any development charges it paid in respect of the Leslie Industrial Area.

[ 8 ] The Respondent enacted development charge by-laws pursuant to the 1997 DCA in 1999, 2004, and 2009. The 1999 and 2004 by-laws provided that where a developer had paid development charges under a previous agreement it was entitled to a credit. The 2009 by-law, the one currently in force, does not.

[ 9 ] The Applicant took no steps to appeal the 2009 by-law, although an appeal is available pursuant to s. 14 of the 1997 DCA.

[ 10 ] In 2010 the Applicant became aware that the Respondent was considering imposing new development charges in respect of the undeveloped land pursuant to the 2009 by-law. It wrote to the town solicitor seeking clarification, and eventually applied to the town clerk for a credit for all previous development charges pursuant to the 1980 Agreement. The Applicant’s position was (and remains in this Court) that it is not liable for further development charges paid pursuant to the 1980 Agreement, because the Agreement itself prohibits future charges. The Respondent’s Town Clerk refused the credit, on the basis that the sunset clause had long since passed. The Respondent’s position was that no separate process existed under paragraph 17.2 of the Regulation , and, therefore, the credit had to be applied for prior to October 31, 1999. The Applicant appealed to the OMB, as the Regulation contained a provision for appeals in respect of credit disputes. The OMB found that it did not have jurisdiction to hear the appeal, since the credit had been applied for after the October 31, 1999 deadline. The Applicant did not attempt to appeal the OMB’s decision to the Divisional Court. Instead, the Applicant now seeks a declaration that the 1980 Agreement precludes the Respondent from collecting development charges in relation to the undeveloped land.

ANALYSIS

[ 11 ] In my view, there are two issues that must be determined:

1. Is the Applicant still entitled to apply for a credit?
2. Does issue estoppel prevent re-litigation of the issue?

Is the Applicant still entitled to apply for a credit?

[ 12 ] This resolution of this question largely turns on the interpretation of the Regulation and the 1980 Agreement.

[ 13 ] Section 14 of the 1989 DCA stated:

14(1) If an owner or former owner has, before the coming into force of a development charge by-law, paid all or any portion of a charge related to development pursuant to an agreement under section 51 or 53 of the Planning Act or a predecessor thereof with respect to land within the area to which the by-law applies, the municipality shall give a credit for the amount of the charge paid.

(2) If an owner or a former owner has, before the coming into force of a development charge by-law, provided services in lieu of the payment of all or any portion of a charge related to development pursuant to an agreement under section 51 or 53 of the Planning Act or a predecessor thereof with respect to land within the area to which the by-law applies, the municipality shall give a credit for an amount equal to the reasonable cost to the owner or to the former owner of providing the services.

[ 14 ] The relevant parts of the Regulation are as follows:

17. The following rules apply with respect to credits given or required to be given under section 14 of the old Act:

18. The owner or former owner of land is entitled to the recognition of a credit towards a development charge imposed under a development charge by-law passed under the new Act by the council of the municipality that gave the credit.

19. If there is a conflict between a development charge by-law passed under the new Act and an agreement referred to in paragraph 3, the provisions of the agreement prevail over the by-law to the extent of the conflict.

20. Paragraph 2 applies with respect to an agreement made between a municipality and the owner or former owner of land if, before the coming into force of a development charge by-law under the old Act,

i. the owner or former owner of the land paid all or a portion of a charge related to development under the agreement with respect to the land and the land is within the area to which a development charge by-law passed under the new Act may apply, or

ii. the owner or former owner of the land provided services in lieu of the payment referred to in subparagraph i.

4. If a credit has been recognized under this section with respect to a service referred to in paragraphs 1 to 7 of subsection 2 (4) of the new Act, the value of the credit cannot be recovered from future development charges.

5. An application for the recognition of a credit under paragraph 1 must be made,

i. on or after March 1, 1998 and on or before March 1, 1999, or

ii. on or after September 27, 1999 and on or before October 31, 1999.

10. If the municipality refuses to recognize a credit in accordance with an application, the applicant may appeal the municipality’s decision to the Ontario Municipal Board by filing with the clerk of the municipality, within 30 days after the applicant receives the notice of the municipality’s refusal, a notice of appeal.

11. After the hearing, the Ontario Municipal Board shall determine whether the appellant is entitled to the recognition of a credit and, if so, shall determine the amount of the credit to be recognized and the services to which it relates.

[ 15 ] The Applicant’s argument is that there is a conflict between the 2009 by-law and the 1980 Agreement because 2009 by-law does not include a provision for crediting payment of prior development charges.

[ 16 ] The predecessor of the 2009 by-law, By-law No. 144-04 (July, 2004) included the following provision (I excerpt only the key portions):

9(3) Notwithstanding any other provision of this By-law, no development charge shall be payable for development of land where either

(i) all charges imposed pursuant to an agreement made with respect to development of the same land pursuant to section 51 of the Planning Act , R.S.O. 1990, c. P.13 or a predecessor thereof, and which agreement was made prior to the 23 rd day of November, 1991, have previously been paid to the Town, or

(ii) all charges imposed pursuant to a condition or conditions of a consent given under section 53 of the Planning Act , R.S.O. 1990, c. P.13 or a predecessor thereof, and which consent was given prior to the 23 rd day of November, 1991, have previously been paid to the Town

unless there has been a change in the proposed development…

[ 17 ] A version of this provision was included in previous versions of the Respondent’s development charge by-laws. As noted, the 2009 by-law was different from previous by-laws because it did not include a credit provision.

[ 18 ] The relevant portions of the 1980 Agreement states as follows:

8.2 Subject to section 8.1 hereof, each Owner shall be obliged to pay its Proportionate Share of the Cost of Common Facilities….

9.7 The Town agrees with each Owner that the Town will not impose any levies in respect of municipal services on the lands of an Owner in the Community, provided that such lands are used for a use permitted by By-law 150-80 as amended from time to time.

[ 19 ] The Applicant argues that there was no need to apply for a credit prior to the 1999 sunset clause because the conflict did not crystallize until the 2009 by-law was passed.

[ 20 ] The Applicant further argues that it is not applying for a credit under paragraph 17.1 of the Regulation . The Applicant concedes that if paragraph 17.1 of the Regulation applied, it would be stuck with the sunset clause. Rather, the Applicant argues that it can apply for a credit pursuant to paragraph 17.2 of the Regulation. The Applicant argues that paragraph 17.2 of the Regulation sets up a separate head under which a credit can be claimed, and the sunset clause does not apply in that case. The sunset clause refers to an application for credit under paragraph 17.1 of the Regulation. Since the Applicant is applying under paragraph 17.2, the sunset clause is inapplicable. Furthermore, the Applicant says that it accepts that the OMB was right that it had no jurisdiction to hear an application for credit under paragraph 17.2 and that is why there has been no attempt to appeal the OMB’s decision to the Divisional Court.

[ 21 ] The Respondent argues that it is irrelevant whether there is a conflict because the Applicant cannot avail itself of the Regulation . The Respondent says that the OMB was correct to dismiss the appeal from the Town Clerk’s refusal to recognize a credit, because there is no separate procedure under paragraph 17.2 of the Regulation. In any event, the Respondent does not agree that there is a conflict between the 1980 Agreement and the 2009 by-law, because it does not intend to bill for services that the Applicant has already paid for. The Respondent argues that the services contemplated in the 1980 Agreement are different from the services contemplated in the 2009 by-law.

[ 22 ] In my view, the Respondent is correct that the Regulation does not assist the Applicant. I do not need to resolve whether there is actually a conflict between the 2009 by-law and the 1980 Agreement because I agree that the Applicant cannot avail itself of the provisions of the Regulation.

[ 23 ] The oft-cited rule for statutory interpretation is that found in Driedger’s The Construction of Statutes :

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.

[ 24 ] On its face, paragraph 17.2 of the Regulation simply does not set out a free-standing separate procedure for the resolution of credit disputes. Rather, it is clearly a rule of interpretation for the assistance of those determining whether a credit should be granted. The preamble of s. 17 indicates that: “the rules apply with respect to credits given or required to be given…” Paragraph 17.2 is a rule of interpretation to by applied by decision makers. There is nothing to suggest that it is a separate process. Although the Applicant relies on the Ontario Court of Appeal’s decision in Mississauga (City) v. Erin Mills Corp., 2004 17223 (ON CA) , [2004] O.J. No. 2690 (C.A.), it does not assist. Goudge J.A. for the Court stated the following:

27 Mississauga argues that the s. 17 process is designed to deal with contested claims for credits under s. 14 of the old DCA. Section 14(1) describes the credit as the amount paid under a subdivision agreement. Mississauga says that the s. 17 process is limited to disputes over the amount of that credit, to be determined by reference to the payments which have already been made by the developers. The process is not intended to deal with the charges to be claimed in the future from developers pursuant to development charge by-laws.

28 I do not agree. The opening words of s. 17 of O. Reg. 82/98 make clear that the process described in that section applies "with respect to credits given or required to be given " (emphasis added). Such prospective language clearly suggests a process that encompasses future charges claimed of a developer by a development charge by-law, not a process that is confined to a dispute over how much the developer has paid pursuant to its subdivision agreement. To limit the s. 17 process as Mississauga suggests would render the conflict provision meaningless because in determining the amount that was properly paid under the subdivision agreement, no comparison of the agreement with the development charge by-law - which s. 17(2) which clearly contemplates - would be necessary. Only the subdivision agreement would have to be scrutinized.

29 Moreover, the reading of s. 17 advanced by Mississauga carries adverse policy consequences. Where a developer claims that its subdivision agreement gives it a credit not just for amounts paid, but also for future charges to be assessed against it pursuant to the development charge by-law, the developer would have to invoke two processes. For the former claim, it would have to appeal to the Board under s. 17 . For the latter, it would have to utilize the courts. Such an inefficiency cannot have been the intention when s. 17 was drafted.

30 In my view, s. 17 contemplates a single process which can, if required, resolve both questions. In both these proceedings before the Board it was the second question that was central. That is, was there a conflict between the subdivision agreements and the applicable development charge by-law that relieved the developers from paying any infrastructure charges beyond those already paid under their agreements.

[Emphasis added]

[ 25 ] Goudge J.A.’s interpretation was relied on by the OMB in its decision in this case:

In the Board’s simple reading of Section 17 in its entirety, it finds nothing to suggest that paragraph 2 takes on any meaning but to confirm the paramount nature of existing agreements over Development Charges by-laws in the context of credits being determined and, if disputed, resolved.

[ 26 ] According to the OMB decision, since paragraph 17.2 of the Regulation does not provide for a separate process to resolve disputes, the Applicant was required to make an application for a credit prior to the expiration of the sunset clause:

The Applicant failed to make an application for the recognition of a credit as it could have in 1999. There is no additional right to an appeal from paragraph 2. A 17.1 appeal only exists if the municipality refuses to recognize a credit in accordance with an application. An application has not been made pursuant to 17.5, the section that refers specifically to an application.

[ 27 ] The OMB applied the decision of the Court of Appeal at para. 30 of Erin Mills , and continued:

The Board reiterates that in the case of Mississauga v. Erin Mills the landowners had all appealed applications for recognition of credits pursuant to 17(10) before the statutory deadline. What is evident in the Mississauga case is that the conflict was known at the time of the application, a different circumstance to the case at hand.

The Board finds that regardless of whether or not a conflict is known it is the credit that must be applied for. Had the known credit been applied for and granted, any future conflict would clearly favour the agreement. Any clarification with respect to the all-inclusive nature of the credit could also have been resolved as part of the application process as confirmed by the Court in the Mississauga case. In the case at hand, if that had been done, there would be no need for this motion.

The Applicant’s reliance on exemption clauses in earlier Development Charges by-laws, in retrospect, was not prudent. A careful reading of Section 17 should have resulted in an application being made for recognition of any existing credit. That application process could have included the resolution of any clarifications necessary to avoid future conflicts.

[ 28 ] The OMB then went on to find that there was a clear intent in the 1997 DCA to end the regime of old subdivision agreements through the mechanism of a sunset clause. There was nothing in s. 17 of the Regulation to suggest an open-ended right to resolve conflicts. The Applicant should have applied for a credit before the 1999 sunset date.

[ 29 ] I respectfully agree with and adopt the OMB’s interpretation of paragraph 17.2 of the Regulation . The decision is consistent with the intent of the Legislature as interpreted by the Court of Appeal in Erin Mills . The Applicant was required to apply for a credit for development charges payable pursuant to the 1980 Agreement prior to October 31, 1999.

[ 30 ] The Applicant further argues that a municipality cannot abrogate contractual rights by using its by-law making authority to unless the Legislature has given the authority to do so in clear and unambiguous language. I do not accept this argument.

[ 31 ] In Wells v. Newfoundland , 1999 657 (SCC) , [1999] 3 S.C.R. 199, a case relied on by the Applicant, the provincial government of Newfoundland eliminated positions in the civil service, effectively breaching an employment contract. The Supreme Court of Canada held that while legislation may give the government the power to breach contracts without consequences, it must do so in clear and unambiguous language. See also: A.R.W. Development v. The Town of Beaumont , [2011] A.J. No. 1471 (C.A.) .

[ 32 ] Although the principle advanced by the Applicant is correct, I do not believe that it applies in this case. The Legislature did not abrogate the 1980 Agreement, and did not give the Respondent the right to abrogate the 1980 Agreement. What the Legislature did was change the development charges regime. As part of that regime, it created a system whereby the rights under previous development agreements could be carried forward through the credit system devised in the 1989 DCA and carried forward into the Regulation . The Legislature’s decision not to carry forward s. 14 of the 1989 DCA into the 1997 DCA was an unambiguously clear change in the system. If the Applicant, a sophisticated party with a great deal of experience in land development, lost rights under the 1980 Agreement, it was not because of anything the Legislature or the Respondent did, but rather because it failed (as the OMB pointed out) to apply for the credit in time. The interpretation suggested by the Applicant is also at odds with the Goudge J.A.’s comments in Erin Mills, supra , at paras. 9-10.

Does issue estoppel prevent re-litigation of the issue?

[ 33 ] Issue estoppel applies where the following elements are established:

1. The decision creating the estoppel is final;
2. The two proceedings have the same parties, or their privies;
3. The proceeding raises issues that have been decided in the earlier proceeding, or where a party had the opportunity to raise the issue and should have done so.

See: Penner v. Niagara (Regional Municipality) Police Services Board , [2010] O.J. No. 4046, 102 O.R. (3d) 688, 2010 ONCA 616 (C.A.) . The doctrine also applies to the decisions of administrative tribunals: Penner , supra, para. 22 .

[ 34 ] All three elements of issue estoppel are established here. The first element is easily dealt with: decision of the OMB is a final one. The Applicant did not attempt to appeal, although there is a route of appeal from the OMB to the Divisional Court, with leave: Ontario Municipal Board Act , R.S.O. 1990, c. O.28, s. 96.

[ 35 ] The second element of the test is also easily decided: the Applicant and the Respondent here are the same parties that were before the OMB.

[ 36 ] Does this proceeding raise issues that have been decided in the earlier proceeding? The Applicant accepts that OMB’s decision that it had no jurisdiction. The Applicant thus states that since it was seeking to avail itself of the separate procedure in paragraph 17.2, it was required to go to a court, rather than to the OMB, since that tribunal’s jurisdiction expired on October 31, 1999. The Applicant argues that the OMB’s comments regarding the applicability of Erin Mills , supra , and paragraph 17.2 were obiter dicta and, therefore, do not give rise to issue estoppel. The Applicant states that it does not accept the OMB’s decision to the extent that it states that the recognition of a conflict that arose after the 1999 deadline needed to be made as part of a credit claim application filed before the 1999 deadline.

[ 37 ] I disagree. The OMB’s decision did not turn on whether there was a conflict between the 1980 Agreement and the 2009 by-law, or whether the conflict only came into being in 2009. The decision turned on whether the Applicant was required to make an application prior to the 1999 deadline.

[ 38 ] The Applicant’s acceptance that the OMB does not have jurisdiction only makes sense if one assumes that paragraph 17.2 of the Regulation provides for a separate procedure for the resolution of conflicts. That exact issue was under consideration by the OMB and the OMB decided against the Applicant on that issue.

[ 39 ] It is correct that issue estoppel can not arise from comments that are obiter dicta : Almrei v. Canada (Attorney General) , [2011] O.J. No. 1764, 2011 ONSC 1719 (Sup.Ct.) I do not, however, accept that the comments were obiter dicta. The finding that paragraph 17.2 did not create a separate procedure for the resolution of conflicts was important, because it flowed from the OMB’s finding that there was only one procedure that was created by the Regulation . The application can therefore be dismissed on the basis of issue estoppel.

DISPOSITION

[ 40 ] The Application is dismissed. Under an agreement between the parties, costs are awarded to the Respondent and fixed at $10,000.00.

GOLDSTEIN, J.

DATE: November 9, 2012

The Corporation (Richmond Hill), 2012 ONSC 6360
COURT FILE NO: 11-CV-441567
DATE: 20121109

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:

1162185 Limited Partnership Applicant - and - The Corporation of the Town of Richmond Hill Respondent

JUDGMENT GOLDSTEIN J.

Released: November 9, 2012

[1] The undeveloped land has been held through various trusts, partnerships, and corporations since the 1970’s but the beneficial owner has, for the most part, remained the same. For convenience, I will refer simply to the Applicant. The Respondent does not contest that the Applicant, through one vehicle or another, entered into the 1980 Agreement and paid the development charges.