ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 90/10 (Guelph)
DATE: 20140723
B E T W E E N:
REID HERITAGE HOMES LTD. et al
S.W. Pettipiere and T.D. Johnson, for the Plaintiffs
Plaintiffs
- and -
THE CORPORATION OF THE CITY OF GUELPH
P. Harrington and S. Worsfold, for the Defendant
Defendant
HEARD: June 23, 2014
REASONS FOR JUDGMENT
Justice Thomas A. Bielby
INTRODUCTION
[1] The plaintiffs are residential subdivision developers who have carried on business in the Corporation of City of Guelph (the City), the defendant herein. The plaintiffs have brought this lawsuit alleging that for the period 2004 to 2008 the City has, with respect to development charges, overcharged them. As a result, they are claiming two million dollars in damages.
[2] The City has before the court a motion, pursuant to Rule 21 of the Civil Rules of Practice, and seeks an order determining a preliminary question of law. The defendant submits that the development charges levied were done so in accordance with the Development Charges Act, 1997, S.O. 1997, c. 27, the City of Guelph Development Charges By-law 2004-17361, and the defendant’s standard subdivision agreement executed by all the parties to this litigation.
[3] It is submitted by the defendant that this issue can be determined prior to any trial as it is a point of law. If the actions of the defendant are determined to be lawful, the issue of liability is, for the most part, resolved and the trial will be substantially shortened.
PRELIMINARY PROCEDURAL ISSUES
[4] The plaintiffs oppose the relief requested and have put before the court two preliminary procedural issues.
ISSUE ESTOPPEL AND ABUSE OF PROCESS
[5] The first procedural issues involve issue estoppel and abuse of process. In the summer of 2010, the defendant brought a motion seeking summary judgment. In the alternative, the defendant sought an order for a determination on a preliminary question of law.
[6] The defendant alleged in 2010 that the proper forum for this action was the Ontario Municipal Board. Alternatively, the defendant argued that the application of the Development Charges Act, 1997 is a question of law and the determination of which may dispose of all or part of this action. The defendant relied then on Rule 21 as it does in the current motion.
[7] The motion was argued and a ruling rendered on November 8, 2010. The ruling of Herold J. only dealt with one issue and that was in regards to the proper forum for this action. Herold J. ruled that the Superior Court of Justice had jurisdiction to decide the issues between the parties. He did not address any other point of law.
[8] Herold J. concluded his endorsement by stating, “For very brief oral reasons delivered today, the defendant’s motion under Rules 20 and 21 for summary judgment dismissing the action is dismissed.”
[9] The defendant sought leave to appeal the decision of Herold J. and, in part, argued that Herold J. failed to grasp the issues of the statutory scheme of the Development Charges Act. Gray J. declined to grant leave.
[10] Counsel for the plaintiffs submits that the test for estoppel is set out in Alvi v. Misir 2004 47790 (ON SC), [2004] O.J. No. 5088. Cameron J. stated, at paragraph 20,
Issue estoppel is a branch of res judicata (the other branch being cause of action estoppel), which precludes the relitigation of issues previously decided in court in another proceeding. To invoke issue estoppel successfully, three preconditions must be met:
The issue must be the same as the one decided in the prior decision or fundamental to the prior decision and not merely collateral or incidental to it;
The prior judicial decision must have been final; and
The parties to both proceedings must be the same or their privies.
[11] Cameron J. went on, at paragraph 22, to discuss the doctrine of abuse of process and describes it as, “A flexible doctrine which engages the inherent power of the court to prevent misuse of its procedures.”
[12] It is the argument of the plaintiffs that the argument before me in 2014 is the same argument as included in the 2010 motion. I cannot, however, agree with the plaintiff’s position. For whatever reason, the only issue addressed by Herold J. was with respect to the court’s jurisdiction. The learned judge made no ruling in regards to a point of law and the validity of the development charges imposed.
[13] There has been no prior decision as required in the issue estoppel test. Herold J.’s endorsement dismissing the Rule 21 issue does not constitute a prior decision on the issue in question.
[14] With respect to the issue of abuse of process, my decision is the same. There has been no decision which might lead to conflicting decisions and the credibility of the judicial process will not be undermined.
[15] I will say, however, that these facts do go to the issue of “promptness”, a precondition to a Rule 21 motion and the basis of the plaintiff’s second procedural issue.
QUESTION OF PROMPTNESS (RULE 21.02)
[16] Rule 21.01(1)(a) states:
A party may move before a judge, for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs.
[17] Rule 21.02 states:
A motion under rule 21.01 shall be made promptly and a failure to do so may be taken into account by the court in awarding costs.
[18] Counsel for the plaintiffs argue that the motion was, by no measure, brought promptly and should be dismissed.
[19] Counsel for the defendant offered no explanation why the issue was not argued in 2010 before Herold J. and, with respect to the current motion, why it was not filed until November 2013. The defendant could only argue that it was appropriate to argue the issue now as opposed to pushing it down the road to a costly trial.
[20] Counsel for the defendant referred to the recent Supreme Court of Canada decision in the Hryniak v. Mauldin, 2014 SCC 7 case which dealt with summary judgment motions (Rule 20). Counsel argues that the case stands for the principle that, to reduce the burden of cases before the courts and the associated legal costs, where appropriate, such motions are to be encouraged. It is submitted that the same principle ought to apply to Rule 21 motions.
[21] The statement of claim in this matter was issued February 5, 2010 and the statement of defence was filed March 10, 2010. Discoveries were held in January 2012. Pursuant to Rule 48, the trial record was passed on January 28, 2013. The rule dictates that sixty days after the filing of the trial record the matter goes on the trial list. Pursuant to Rule 48.07, when an action is placed on a trial list all parties shall be deemed to be ready for trial.
[22] The motion before this court was brought three years and nine months after the action was started and well after the trial record was passed. It seeks the same relief as, in part, sought in the motion brought by the defendant in 2010.
[23] In relation to the wording of Rule 21.02, in Fleet Street Financial Corp. v. Levinson (2003) 31 C.P.C. (5th) 145 (S.C.J.) it was determined that Rule 21 does not restrict the court to taking the delay into account only on the question of costs.
[24] In Colonna v. Bell Canada (1993) 15 C.P.C. (3d) 65 (Gen. Div.), a delay of 18 months from the time when the motion could have been filed resulted in a Rule 21 motion being dismissed. In Colonna, reference was made to Mackenzie v. Wood Gundy Inc. (1989) 35 C.P.C. (2d) 272, a case in which Montgomery J. found a delay of five to six months to be fatal on the argument of promptness.
[25] On the strength of the chronology set out above, the reading of the rules as noted and the authorities presented, the motion before me cannot, by any stretch, be said to have been brought promptly. No adequate explanation has been provided by the defendant to explain why the motion was not brought until late 2013.
RULING
[26] Accordingly, the motion of the defendant to determine a point of law in relation to the legality of the development charges imposed is dismissed.
DETERMINATION OF A POINT OF LAW (LIABILITY)
[27] However, in the event I am wrong in arriving at my ruling on the procedural issue, I will consider the motion on its merits.
[28] The City, pursuant to the Development Charges Act, 1997, (the Act), enacted a Development Charges By-Law (2004) 17361 (the By-law). Section 26 of the Act states that development charges are due when the building permit is issued unless the by-law enacted says otherwise.
[29] The By-law in issue said otherwise and required developers, like the plaintiffs, to pay development charges, in two installments. The first installment was collected by the City when the Subdivision Agreement (the Agreement) was executed. This charge was levied to compensate the City for the cost of the increased burden on the City’s hard services, such as sewer and water.
[30] The second installment was collected when an application was made for a building permit. This charge was levied, for the most part, in regards to the City’s soft services such as policing and ambulance. The City categorizes this payment as the payment of the “remainder” of the development charges. However, the City included, in the second installment, a “top up” charge which is the basis of this lawsuit.
[31] In regards to the legality of the ‘top up’ charge, the City relies on section 5(1)(10) of the Act which permits the annual indexing of development charges based on the construction price index. In accordance with the Act, the City included in the By-law section 5.1, which states,
Development charges, including the phased in industrial and residential development charges, imposed pursuant to this By-law shall be adjusted annually, without amendment to this By-law commencing on the first anniversary date of this by-law and each anniversary date thereafter, in accordance with the prescribed index in this Act.
[32] It is submitted by counsel for the City that the Act and the By-Law allowed for the annual indexing of all of its development charges and, at the payment of the second installment, the City was within its rights to charge to the developer an additional amount, the “top up”, which represented the difference between the amount charged on the original installment and what the indexed initial installment would have been at the time of the building permit application.
[33] It is noted that the standard Agreement, section 9, stated that development charges are levied in accordance with the By-Law. It is further noted that the charge for hard services is paid at the execution of the agreement and that the “remainder” of the charges are paid when application is made for a building permit.
[34] Section 3.12 of the By-law states, “Development Charges imposed under this By-law are “calculated, payable, and collected” upon issuance of a building permit for the development.” Section 3.13 states that the charges related to hard services are ‘payable’ when the agreement is executed.
[35] The City submits that, based on such wording of the By-law at the time the agreement was executed, the charges for the hard services were “payable”. However, at the time of a building permit application, the charges, in their totality, were determined, and the remainder of the charges, including the “top up”, were to be “calculated, payable and collected”.
[36] The City submits that often a significant amount of time passes between the execution of an agreement and the filing of an application for a building permit and that the likely increase in hard services costs resulting from the passage of time was to be borne by the developers by way of a “top up” payment and not the taxpayers. This additional cost is calculated and payable when application is made for a building permit.
[37] Counsel for the City submits that the “top up” charge is valid and collectible pursuant to the Act and the By-law.
[38] Counsel for the plaintiffs argues that it is open to the court to apply a different interpretation of the indexing provisions. It is submitted that the indexing provision allowed for the development charges to be increase annually. Any payment made, either at the time of the execution of the agreement or at the time of filing a building permit application, reflected the current and only charges as indexed over the amounts charged in the previous year(s).
[39] It is submitted that the indexing provision simply allowed the development charges to change annually and to keep up with the costs of services, without the need to pass an amending By-Law, as specifically noted in section 5.1 of the By-law.
[40] Counsel for the plaintiffs referenced section 2.1 of the By-law which sets out the services for which a development charge can be imposed. Section 3.4 stipulated that only one charge could be levied for each service. Counsel for the plaintiffs submits that the “top up” payment represented a second charge for the same services.
[41] In response to the City’s argument in relation to the wording of sections 3.12 and 3.13 of the By-law, counsel for the plaintiffs submits that, when a charge was “payable”, initially, at the time the subdivision agreement was executed, there must have been a calculation as to what is the proper amount payable and collectible. The fact that the word “calculable” is not repeated is immaterial.
[42] Counsel for the plaintiffs notes that section 7.1 of the Agreement stated that, if there is a conflict between the By-law and the Agreement, the Agreement prevails. Paragraph 9 of the Agreement stated, “Payment of development charges and education development charges shall be at the rate in effect at the time of payment as specified in the City of Guelph By-law…”
[43] It is submitted that an ordinary reading of this wording would allow for the payment of the charge in an amount as indexed over the previous year(s). Accordingly, the payment made when the agreement was executed was at an indexed rate. Any further indexing at the time of the payment of the last installment resulted in a duplication of charges.
ANALYSIS
[44] On the point of law as raised by this motion, I am not persuaded that the City’s interpretation of the relevant documents as it relates to a “top up’ charge is the correct and only interpretation. I believe there is merit to the interpretation suggested by counsel for the plaintiffs.. Given the wording of the Act, the By-law and the Agreement, it is arguable that the indexing provisions simply mean the charges can be adjusted annually without the need for a new by-law. A developer, when signing an Agreement, was required to only make one payment in relation to the hard services at the indexed rate as prescribed by the By-law. The second payment, due when application is made for a building permit, related only to the soft services.
[45] The trial judge will be in a better position to determine the issue after hearing all of the evidence and full argument. It is not plain and obvious that the City’s interpretation of the relevant sections is the correct one. On the material before me, plaintiffs’ fundamental right to a trial would be paramount and I would dismiss the City’s motion, on its merits.
COSTS
[46] The parties have agreed that a proper amount of costs in regards to this motion is $15,000.00. Accordingly, I award the plaintiffs cost in this amount.
Bielby J.
Released: July 23, 2014
COURT FILE NO.: 90/10 (Guelph)
DATE: 20140723
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
REID HERITAGE HOMES LTD. et al
Plaintiffs
- and –
THE CORPORATION OF THE CITY OF GUELPH
Defendant
REASONS FOR JUDGMENT
Bielby J.
Released: July 23, 2014