ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-442717-00
DATE: 20130306

BETWEEN:

THE WINDSOR ARMS HOTEL CORPORATION

Applicant

– and –

THE CORPORATION OF THE CITY OF TORONTO

Respondent

Peter Kolla and Ian Andres, for the Applicant

Diana Dimmer and Christopher Henderson, for the Respondent

HEARD: November 5 and 6, 2012

J. Macdonald J.

reasons for decision

[1] This application to quash a by-law enacted by the respondent, and for additional relief which is dependent upon the by-law being quashed, arises from the following circumstances.

[2] The applicant owns the property municipally known as 16 St. Thomas Street, Toronto. It is the successor in title to its related corporation, the Windsor Arms Development Corporation (“WADC”), which purchased the property in January 1995 for the purpose of redevelopment. At the time of the purchase, WADC knew that the respondent had by by-law designated the Windsor Arms Hotel on the property as a heritage property, pursuant to the Ontario Heritage Act, R.S.O. 1990 c. O-18, s. 29(1). The respondent’s designating by-law No. 605-92 was dated September 15, 1992.

[3] In August 1996, WADC entered into a site plan agreement with the respondent in respect of the demolition of the existing hotel, the construction of a new 31-unit hotel and the construction of a 35-unit condominium building. WADC applied for, and the respondent granted a demolition permit for the hotel by notice of decision dated August 26, 1996. The respondent granted the demolition permit subject to the requirement that WADC enter into a Heritage Easement Agreement (“HEA”) with the respondent, in order to ensure that various heritage features of the hotel building to be demolished would be preserved or rebuilt in the new hotel. In these dealings with the respondent, WADC was represented by counsel.

[4] As of the date when the respondent authorized the issuance of the demolition permit, s. 34(5)(a) of the Ontario Heritage Act stated that a municipal council consenting to a request for a demolition permit in respect of a designated heritage property shall repeal the by-law which designated the property as a heritage property.

[5] The respondent enacted a by-law repealing the designation by-law in issue. The applicant moves to quash the repealing by-law for illegality despite what s. 34(5)(a) of the Ontario Heritage Act provided, as of August 1996. At present, the requirement that a municipality repeal a designation by-law in these circumstances is found in s. 34.3(1) of the Act.

[6] Some unusual circumstances surround the respondent’s repeal of the designation by-law. It was in March 2012 that the respondent passed its by-law repealing the designation by-law in issue, almost 16 years after approving the demolition permit for the former hotel building.

[7] It is the applicant’s position that the respondent acted illegally (including in bad faith) not in repealing the by-law as the Act required, but in how the respondent went about repealing it. The applicant bases its position on the respondent’s failure to give notice of its intention to repeal the designation by-law, on the fact that the repealing by-law was made retroactive to August 26, 1996 (the date when the respondent approved issuance of the demolition permit), and on the respondent’s failure to redesignate the new hotel building, which remains subject to the HEA, as a heritage property.

[8] The years between 1996 and 2012 brought changes in respect of heritage properties in Toronto. One of these changes gives rise to the additional relief sought by the applicant. In fact, this relief was what the applicant sought initially, before the respondent repealed the designation by-law. The relief originally sought, which is now dependent upon the quashing of the by-law repealing the designation by-law, was in respect of the property tax rebate applicable to the property. The applicant’s property qualified for such rebate until the designation by-law was repealed. The retroactive effect of the repealing by-law prevents the applicant’s property from qualifying for this rebate in the years in issue, being 2008 through 2011.

[9] The applicant seeks an order in respect of taxation years 2010 and 2011 declaring that all of the present hotel property, and not just the heritage components thereof, is “eligible heritage property” such that the property tax rebate should be based on the total property tax. The applicant also seeks judgment in the amount of $145,088.14 in respect of taxation years 2008 and 2009, being the difference between the property tax rebate paid by the respondent before it repealed the designation by-law, and the amount claimed by the applicant in these years, on the aforesaid basis.

prior notice of the intent to repeal the designation by-law

[10] When the respondent repealed the designation by-law in 2012, it acted pursuant to s. 34.3(1) of the Act, the successor to s. 34(5)(a) which was in effect in 1996, when the respondent consented to the issuance of the demolition permit. S. 34.3(1) states:

The council of a municipality shall pass a by-law to repeal a by-law or the part thereof designating a property under section 29 if the owner of a property has applied in writing to the council for consent to the demolition or removal of a building or structure on the property and,

(a) the council consents to the application under subclause 34(2)(a)(i) or (i.1) or is deemed to have consented to the application under subsection 34(4); …

[11] S. 34.3(2) is also relevant. It states in part:

(2) When a council passes a repealing by-law under this section, the council shall cause,

(a) a copy of the repealing by-law to be served on the owner of property … ;

(b) notice of the repealing by-law to be published in a newspaper having general circulation in the municipality;

[12] The applicant’s argument that it should have been given prior notice of the respondent’s intention to repeal the designation by-law is premised upon s. 31 of the Act, which states:

31(1) Subject to subsection (2), where the council of a municipality intends to repeal a by-law or part thereof designating property, it shall cause notice of intention to repeal the by-law or part thereof to be given by the clerk of the municipality in accordance with subsection (3).

(2) …

(3) Notice of intention to repeal a by-law or part thereof under subsection (1) shall be,

(a) served on the owner of the property … ; and

(b) published in a newspaper having general circulation in the municipality.

[13] When examined superficially, s. 34.3(1) and s. 31(1) might appear to address the same subject matter, because a municipality which is required to repeal a designation by-law under s. 34.3(1) and which takes the steps necessary to do so obviously “intends to repeal” the by-law, which phrase is found in s. 31(1). However, if that were the correct view, one of these two sections would be redundant. That would contravene what Lamer C.J. said for the Court in R. v. Proulx, 2000 SCC 5, [2000] 1 S.C.R. 61 at para. 28 (S.C.C.):

“It is a well accepted principle of statutory interpretation that no legislative provision should be interpreted so as to render it mere surplusage.”

[14] What then is the meaning which the legislature intended each of these sections to have? The modern approach to statutory interpretation is found in Elmer Driedger’s “Construction of Statutes” (2nd ed.) (Toronto: Butterworths, 1983) at p. 87, where he said:

“… 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.”

This extract from Driedger was cited with approval in Bell ExpressVu Limited Partnership v. Rex, [2002] S.C.R. 559 at paras. 26 and 27.

[15] While the legislature intended each of the two sections in issue to have meaning, the language of these sections appears to put them in conflict. However, that apparent conflict disappears when it is recognized that s. 31(1) has more general application and s. 34.3(1) has a narrow and specific application to the facts in issue in this case. As Ruth Sullivan explains in “Sullivan on the Construction of Statutes”, (5th ed.) (Lexis Nexis: Ottawa, 2008) at p. 343:

“When two provisions are in conflict and one of them deals specifically with the matter in question while the other has a more general application, the conflict may be avoided by applying the specific provision to the exclusion of the more general one. The specific prevails over the general: it does not matter which was enacted first.”

See City of Ottawa v. Town of Eastview, 1941 9 (SCC), [1941] S.C.R. 448 at p. 462 (S.C.C.) and R. v. Greenwood (1992), 1992 7750 (ON CA), 7 O.R. (3d) 1 at p. 7 (Ont. C.A.).

[16] Looking at the whole of the Act as context and the grammatical and ordinary meaning of the language used in the two sections, and taking into account the scheme and objects of the Act, I am satisfied that the legislature enacted a scheme for the repeal of designation by-laws in which s. 31(1) requires a municipality to give prior notice if it should choose to repeal a designation by-law, but which does not require a municipality to give prior notice where it is required by s. 34.3(1) to repeal a designation by-law. This interpretation is supported by s. 34.3(2), which requires a municipality to give only subsequent notice where it is required by s. 34.3(1) to repeal a designation by-law.

[17] The legislature therefore regarded prior notice of an intended repeal as functional and purposive, and not as mere formality. Prior notice of the intention to repeal a designation by-law is not required by the Act where those affected by the repeal have no basis for opposing that outcome, as is the case where the legislature has already determined and directed that the designation by-law shall be repealed.

[18] While the respondent was not required to give prior notice to the applicant of its intention to repeal the designation by-law in issue, I find that the respondent did give some notice to the applicant by means of the affidavit evidence which was filed in this application. The respondent’s deponent stated that the respondent intended to repeal the designation by-law.

Retroactive repeal of the designation by-law

[19] The applicant’s position is that it sued the respondent over the proper amount of its heritage property tax rebates and the respondent then retroactively repealed its heritage property designation, destroying its claims. Mr. George Friedmann, President of the applicant, states in his affidavit sworn on May 15, 2012:

“ … I cannot see how the Repealing By-law contributes to the conservation of the Windsor Arms Hotel Property or advances the public interest. Instead, it appears to me that the (respondent) is singling out the (applicant) for punishment because it brought Court proceeding regarding the amount of its heritage tax rebate.” (Parentheses added)

[20] At the commencement of the hearing, I raised with counsel my concern that this application contains contested factual issues which could require the trial of an issue for their proper determination. Counsel for both parties were opposed to a trial of factual issues and requested the court to determine these issues in the application. They filed the following signed stipulation with the court:

“The parties have agreed that the Applicant’s challenge to the Respondent’s By-law No. 382-2012 should be conducted on the paper record that is before the court and the parties are not asserting that this determination shall be made by way of a trial of an issue or with any viva voce evidence.”

I will proceed accordingly.

[21] Mr. Friedmann’s statement of how matters appear to him is not stated to be his belief. Nor is any information recited to support his assertion. In my view, this assertion is properly described as suspicion. Even if I were to take this assertion as Mr. Friedmann’s sworn belief, the evidence presented by the respondent, whose actions are in issue, is much more compelling and persuasive. Mr. Scott Barrett deposes that he is Senior Coordinator in the respondent’s Heritage Preservation Section and is responsible for oversight and management of the Heritage Property Tax Rebate Program. He acknowledges that the applicant applied to the respondent for heritage property tax rebates for the taxation years of 2008, 2009 and 2010 prior to the respondent repealing the designation by-law in issue, and that the respondent paid such tax rebates to the applicant for the 2008 and 2009 taxation years totalling $31,319.86. The applicant then brought this application, seeking greater tax rebates. Mr. Barrett deposed on February 29, 2012 as follows:

“As a result of this court application and a review of the heritage file, I have noted that the City was, and still is, required by the legislation under the Ontario Heritage Act to repeal the by-law designating the Property at the time that City Council approved the demolition application in 1996. Accordingly, steps will be taken to repeal the by-law designating the Property retroactive to the date City Council approved the demolition application.”

It is this affidavit which gave the applicant notice of the respondent’s intention to repeal the designation by-law retroactively.

[22] In a further affidavit filed after Mr. Friedmann’s affidavit was delivered, Mr. Barrett denied Mr. Friedmann’s assertion that the applicant had been singled out for punishment by the respondent. Mr. Barrett was cross-examined on his affidavits. He did not withdraw from his sworn assertions. I prefer the evidence of Mr. Barrett, which is based on personal knowledge and involvement, to Mr. Friedmann’s suspicion about the respondent’s motives. I find that the respondent repealed the designation by-law because of the requirements of the Ontario Heritage Act, of which it was reminded during the course of reviewing this application, as it was originally constituted. I find that the respondent repealed the designation by-law retroactive to the date of approval of the demolition permit as part of its belated effort to do what the Act had required it to do since that date.

[23] The applicant’s materials also mention the steps taken by the respondent’s counsel in respect of scheduling this hearing. The applicant’s materials appear to suggest that the litigation process was manipulated so as to delay the hearing of this application until after the respondent could surreptitiously repeal the designation by-law. Consequently, when the hearing of this application began, it appeared that the applicant was impugning the conduct of the counsel for the respondent who were appearing on the application, who denied these allegations. As of the commencement of the hearing, my concerns about the proper conduct of the hearing included whether the respondent’s counsel could appear when they were personally involved in disputed factual issues, and whether these disputed factual issues would require a trial for their proper resolution. These issues were resolved at the hearing when counsel for the applicant withdrew any suggestion that the respondent’s counsel had acted improperly and apologized to respondent’s counsel for what the applicant’s materials appear to suggest. I therefore leave this issue aside in determining this application.

should the repealing by-law be quashed?

[24] The applicant submits that the repealing by-law should be quashed for illegality. It submits that the purpose of the Act is the conservation, protection and preservation of the heritage of Ontario, and that the steps taken by the respondent to repeal the designation by-law, coupled with its failure to redesignate the property as a heritage property, are contrary to the purposes of the Act. There can be no doubt that the Act was passed to provide for the conservation, protection and preservation of Ontario’s heritage: see St. Peter’s Evangelical Lutheran Church v. The City of Ottawa 1982 60 (SCC), [1982] 2 S.C.R. 616 at p. 623. These overarching objectives of the legislature do not, however, capture all of what the legislature enacted at the procedural or regulatory level, for the purpose of the Act’s application.

[25] As stated previously, the Act explicitly requires municipalities to repeal heritage designation by-laws when demolition permits are approved for designated heritage properties.

[26] In my opinion, the respondent did not act illegally in repealing the designation by-law, save perhaps[^1] in failing to repeal it for as long as it did, an omission which it sought to redress by its decision to give retroactive effect to the repealing by-law. The step which the respondent took in repealing the designation by-law retroactively conforms to the rationale of the Act, in my opinion, and was a reasonable means of achieving compliance with the Act’s requirement about the timing of the repeal of the designation by-law, in the circumstances.

[27] The applicant also submits that the respondent acted in bad faith. Its position is as follows. Bad faith is made out when a municipality acts unreasonably and arbitrarily, without the degree of fairness, openness and impartiality required of a municipal government. Bad faith encompasses municipal conduct that is unfair or where power is exercised to serve private purposes at the expense of the public interest. See Grosvenor v. East Luther Grand Valley (Township) (2007), 2007 ONCA 55, 84 O.R. (3d) 346 (C.A.); Equity Waste Management of Canada v. Halton Hills (Town) [1997] O.J. 321 (C.A.) and H. G. Winton Ltd. v. North York (Borough) (1979), 1978 1566 (ON SC), 20 O.R. (2nd) 737 (Div. Ct.). Evidence of bad faith also can be found where a by-law is passed with inordinate speed, the usual practices are set aside or one property is singled out to the clear detriment of its owner. Failure to provide notice of the passing of a by-law can also be evidence of bad faith. See 839891 Ontario Inc. v. St. Catharines (City) (1992), 1992 8601 (ON SCDC), 90 D.L.R. (4th) 354 (Ont. Gen. Div.) and Ottawa (City) v. Boyd Builders Ltd. 1965 1 (SCC), [1965] S.C.R. 408 (S.C.C.). As well, when a municipality has acted for an improper or collateral purpose when passing a by-law, bad faith is established. Bad faith can also encompass municipal acts so markedly inconsistent with the relevant legislative context that a court cannot reasonably conclude that they were performed in good faith. See Roman Catholic Episcopal Corp. v. Barrie (City) (1997), 39 M.P.L.R. (2nd) 257 (Ont. Gen. Div.) and Enterprises Sibeca Inc. v. Frelighsburg (Municipality) 2004 SCC 61, [2004] 3 S.C.R. 304 (S.C.C.).

[28] For the reasons previously given, neither the absence of prior notice of the intended passage of the repealing by-law nor its retroactivity is evidence of bad faith on the part of the respondent. The applicant also asserts that the respondent should have redesignated the property as a heritage property on its own motion, and the failure to do so is evidence of bad faith. Nothing has prevented the applicant from seeking redesignation. In my opinion, the respondent has not disadvantaged the applicant by not redesignating the property on its own motion. I note that the respondent’s affidavit evidence, which I accept as factual, is that it will consider any application made by the applicant for redesignation of the property on the basis of the criteria established by O.Reg. 9/06, entitled “Criteria for Determining Cultural Heritage Value or Interest”. If the applicant should contend that other, earlier criteria properly should be applied to any application for retroactive redesignation in the unusual circumstances of the much delayed, retroactive repeal of the original designation by-law, the respondent’s statement about the criteria to be applied is reviewable. This potential issue was not argued before me because the applicant has not applied for redesignation.

[29] In support of its bad faith argument, the applicant also submits that this was the only occasion on which the respondent has imposed a retroactive repeal of a designation by-law, even though there are other instances of it failing to repeal such a by-law for some years following either approval of a demolition permit or destruction of the property. This is said to demonstrate that the applicant has been singled out and dealt with unfairly. In the Laskey Hotel case, the respondent repealed the designation by-law approximately three years after approval of the demolition permit, but did not do so retroactively. In my view, the periods of delay in the two cases are quite different. The delay in the case at bar was extraordinary, a fact which in itself is reasonable justification for the respondent’s extraordinary decision to repeal the designation by-law retroactively. In the Empress Hotel case, the hotel was destroyed by fire. The respondent has not repealed the designation by-law. However, there never was an application for a demolition permit to which the respondent consented. That is the event which triggers the obligation to repeal the designation by-law, pursuant to the Act. In the Joy Oil Gas Station case, the respondent gave notice of its intent to repeal the designation by-law and also gave simultaneous notice of its intent to redesignate the property as a heritage property. However, the facts were quite different. There was no application for a demolition permit. The gas station was not demolished or destroyed, it was relocated. The very different issues in that case provide a reasonable basis for the very different treatment of those issues.

[30] Good faith remains a central foundation for the validity of a municipal by-law enacted in conformity with the municipality’s powers. See Grosvenor v. East Luther Grand Valley (Township) (supra) at para. 41. The onus of proving the absence of good faith in the passage of a by-law rests on the party which asserts it. In my opinion, the applicant has failed to establish that the respondent did not act in good faith in repealing the designation by-law in issue. The respondent did not exercise its powers unfairly or to serve private interests at the expense of the public interest. While there was unusual haste in passing the repealing by-law if that is measured from when the respondent became aware of its lengthy oversight, that haste is not an indicator of bad faith, in my opinion. The rapidity with which the respondent ultimately moved was, like the retroactive nature of the repealing by-law, its attempt to comply with what the Ontario Heritage Act required. Viewed in that light, the rapidity with which it ultimately moved is evidence of its good faith.

[31] Ultimately, the fact that the respondent did what the Ontario Heritage Act required it to do and, after lengthy oversight, took an additional, reasonable step to achieve compliance with the Act’s requirement about the timing of the repeal of the designation by-law, is strong evidence that it did not act in bad faith. In Ocean Port Hotel Ltd. v. British Columbia [2001] S.C.R. 781 (S.C.C.) McLachlan C.J. for the court held at paragraph 27 that, where the intention of the legislature is unequivocal, there is no room to import common law principles. In that case, the common law principle was the independence of an administrative tribunal exercising decisional responsibilities from the prosecuting authority. While that decision turned on different legal principles, the case at bar is analogous. The respondent’s repeal of the designation by-law was motivated by and in accordance with the legislature’s clear requirement, as stated in the Ontario Heritage Act. The repealing by-law was given retroactive effect because of what the Act required and because of the respondent’s extraordinary delay in complying with the Act. In these circumstances, there is little room for bad faith conduct, and the applicant has failed to establish its presence.

[32] I therefore conclude that the applicant has failed to establish any basis for quashing the by-law repealing the heritage designation by-law. The result is that the property in question cannot comply with the criteria for a heritage property tax rebate and thus, there is no basis upon which the applicant is entitled to the additional relief which it seeks. That is because the Toronto Municipal Code, C-103, Art. VII defines eligible heritage property as follows:

ELIGIBLE HERITAGE PROPERTY – Land or buildings or a portion thereof that is:

(a) designated under Part IV or Part V of the Ontario Heritage Act;

(b) Subject to a heritage easement agreement under section 22 or 37 of the Ontario Heritage Act;

(c) Complies with the additional eligibility criteria set out in this article.

[33] I find that the applicant has also failed to comply with additional eligibility criteria. Art. VII. ss. 32 B and 34 B of the Code require that the applicant’s HEA shall be in good standing, or there is no entitlement to a rebate. Art. 2.9 of the HEA in issue requires that the respondent be named as an additional named insured in the applicant’s insurance on the property, and that evidence of compliance shall be provided to the respondent.

[34] The evidence filed herein establishes that, prior to this application, the applicant did not provide to the respondent evidence of it being an additional named insured. The applicant provided certificates of insurance as part of its heritage tax rebate applications for the tax years of 2008 and 2009. These certificates did not list the respondent as an additional named insured. The respondent’s requests for confirmation that it was in fact an additional named insured have been denied by the applicant. I therefore infer and find that the applicant has breached both of these additional eligibility criteria by failing to make the respondent an additional named insured and by failing to provide to the respondent evidence of its compliance with this requirement.

[35] Much of the time in argument was taken up by the applicant’s submission that its property tax rebate should be based on the whole of the property in issue, and not just on the few heritage components thereof. In my opinion, given the valid retroactive repeal of the designation by-law and given the applicant’s failure to comply with the aforesaid additional eligibility criteria, it is not necessary for me to decide this issue. In addition, I conclude that it is inappropriate to decide whether any heritage tax rebate properly should be based upon all of the property, or just upon the heritage components thereof. Not having heard argument on the criteria properly applicable to any application for redesignation of the property as a heritage property, including any application for retroactive redesignation, I am concerned that deciding this unnecessary issue would intrude upon the respondent’s discretion to decide what criteria should be applied in the unusual circumstances of this case, and to decide what is, and what is not a heritage component of the property in issue, as part of any redesignation of the property as a heritage property.

[36] The application is dismissed in its entirety. If the parties cannot agree upon costs, the respondent’s costs submissions limited to seven pages in factum format plus all necessary docket and disbursement information shall be delivered within 21 days of the date of these reasons. The applicant’s costs submissions, similarly limited, shall be delivered within 35 days of the date of these reasons.

Mr. Justice John Macdonald

Released: March 6, 2013

COURT FILE NO.: CV-11-442717-00
DATE: 20130306

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE WINDSOR ARMS HOTEL CORPORATION

Applicant

– and –

THE CORPORATION OF THE CITY OF TORONTO

Respondent

REASONS FOR DECISION

J. Macdonald J.

Released: March 6, 2013

[^1]: This issue was not addressed in the application and I make no finding about it.