2015 ONSC 7286

COURT FILE NO.: 254/15

DATE: 20151203

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: HAMILTON HALTON HOME BUILDERS’ ASSOCIATION, Appellant/Responding Party

AND:

THE REGIONAL MUNICIPALITY OF HALTON, Respondent/Moving Party

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL: Robert G. Doumani and Jody E. Johnson, for the Applicant

Patrick Duffy and Maggie Bassani, for the Respondent

HEARD: November 10, 2015

ENDORSEMENT

Introduction

[1] The applicant on this motion for leave to appeal, the Regional Municipality of Halton (the “Applicant” or the “Region”), seeks leave to appeal from a decision of the Ontario Municipal Board (the “Board”) issued May 5, 2015 (the “Decision”). Pursuant to the Decision, the Board allowed an appeal by the respondent, the Hamilton Halton Home Builders’ Association (the “Respondent”), in respect of two matters provided for in the Development Charges By-law 48-12 (the “By-law”) of the Region. The By-law was enacted by the Region on April 18, 2012, pursuant to the Development Charges Act, 1997, S.O. 1997, c. 27 (the “DCA”).

Test for Leave to Appeal

[2] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.

[3] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: see Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 CanLII 7405 (ON SC), 7 O.R. (3d) 542 (Div. Ct.).

[4] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: see Nazari v. OTIP/RAEO Insurance Company Inc., 2003 CanLII 40868 (ON SC), [2003] O.J. No. 3442 (S.C., per Then J.); Ash v. Lloyd’s Corp. (1992), 1992 CanLII 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: see Rankin v. McLeod, Young, Weir Ltd. et al. (1986), 1986 CanLII 2749 (ON SC), 57 O.R. (2d) 569 (H.C.J., per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 1988 CanLII 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.).

Analysis and Conclusions

[5] In the Decision, the Board overturned two provisions of the By-law dealing with the following matters:

(1) the inclusion of capital costs incurred by Conservation Halton (“CH”), which the Board found were not incurred on behalf of, and were not approved by, the Region; and

(2) the policy decision of the Region to impose development charges on four categories of development, including one category for each of apartments and multiple dwelling units, instead of six as was the case under the predecessor development charges by-law and which the Board reinstated.

[6] I will address the Applicant’s motion for leave to appeal both of these determinations in the Decision in turn after first addressing the application of the test for leave to appeal in the particular circumstances of this proceeding.

Application of the Test for Leave to Appeal in the Present Circumstances

[7] In this case, leave to appeal is sought under the provisions of Rule 62.02(4)(b). For this purpose, it is relevant that section 96(1) of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28 (the “Act”), provides that an appeal lies from a decision of the Board to the Divisional Court, with leave, on a question of law. Accordingly, the Applicant alleges that the Board erred in law in reaching the two determinations for which leave to appeal is sought.

[8] The parties agree that the standard of review of the Decision on an appeal would be reasonableness. On a leave motion under Rule 62.02(4)(b) where the standard on appeal is reasonableness, the applicant must therefore demonstrate that the reasonableness of the decision of the tribunal, in this case the Decision, is open to very serious debate: see Richmond Hill Naturalists v. Corsica Development Inc., 2013 ONSC 7894, 316 O.A.C. 248 (Div. Ct.), at paras. 21-22. In this case, therefore, the Applicant must demonstrate that there is reason to doubt the reasonableness of the statutory interpretation of the Board in respect of the two matters at issue on the proposed appeal.

Inclusion of the Halton Conservation Charges

[9] The parties agree that the Region’s appeal of the Decision in respect of the CH capital costs raises an issue of law, being the interpretation of the introductory language of section 5(3) of the DCA, which reads as follows:

The following are capital costs for the purposes of paragraph 7 of subsection (1) if they are incurred or proposed to be incurred by a municipality or a local board directly or by others on behalf of, and as authorized by, a municipality or local board…

[10] The Board interpreted the introductory language of subsection 5(3) of the DCA to exclude capital costs incurred by CH from the computation of the development charge of the Region contemplated by the By-law. The Board found that such costs are not incurred on behalf of the Region for the purposes of section 5(3). Its conclusion is set out in paragraph 29 of the Decision:

The case noted above clearly indicates the conclusion that conservation authorities are independent entities with clear roles and responsibilities and that this would clearly preclude the interpretation of the Region that it (Conservation Halton) is acting on behalf of the Region. It is not the creation of the Region and its administrative policies cannot override the fact that it is legally constituted as an independent entity.

[11] The Region says that the Board isolated its reading of the Conservation Authorities Act, R.S.O. 1990, c. C.27 (the “CAA”) to a few sections and failed to interpret the DCA as a whole. On this basis, the Region says there is good reason to doubt the correctness of the Order, that is, that there is good reason to doubt that the Board decision was reasonable.

[12] The Region argues that capital expenditures of CH are incurred by it on behalf of the Region for the provision of recreational and educational services and facilities in the Region. Further, such expenditures implement the Natural Heritage policies in the Official Plan of the Region (the “ROP”). The Region reads the Board’s statements in paragraph 29 of the Decision to exclude capital costs of any entities that are independent of the Region. It says this is unreasonable as a matter of law.

[13] While I agree with the Region that it would be incorrect to find that independent entities cannot act on behalf of a municipality for the purposes of section 5(3) of the DCA, the Board did not make that determination. The Board based its decision on the specific attributes of the relationship between the Region and CH. In this regard, the Board reviewed the particular statutory powers and authority of a conservation authority and the nature of the operational relationship between the Region and CH, including the provisions of the CAA respecting apportionment and payment of capital costs of a conservation authority. Based on that review, the Board held that the capital costs of a conservation authority are not incurred on behalf of, and are not authorized by, a municipality.

[14] I accept that it can be argued that capital costs of a conservation authority are incurred in the interest of a municipality in the sense that capital projects of such an authority must be consistent with, and further the objects of, the official plan of the municipality. However, the determination of the Board implies that a municipality must have greater control over, as well as more direct authorization of, capital projects of a third party for the costs incurred by such third party to qualify as capital costs for the purposes of section 5(3).

[15] The issue for the Court is not whether it would interpret section 5(3) of the DCA in the same manner as the Board, but rather whether the reasonableness of the Board’s interpretation, as set out in the Decision, is open to very serious debate. I conclude it is not for the following reasons.

[16] First, the following aspects of the authority of CH, and its relationship with the Region, argue strongly for the conclusion that CH incurs capital costs on its own behalf and in furtherance of its own independent objects rather than on behalf of the Region. As a conservation authority, CH is created as an independent corporate body established under the CAA which is not controlled by the Region. In addition, in undertaking capital projects, CH exercises its own statutory authority rather than any authority or power of the Region that is delegated to it. Further, the Region has no legal authority or power over lands owned or controlled by CH. Also, when undertaking capital projects, to the extent there is any divergence in interest between CH and the Region, CH is required by law to act with a view to furthering its own statutory objects, rather than those of the Region. Lastly, the recognition of CH’s capital projects in the ROP is not, by itself, sufficient to establish that such projects are incurred by or on behalf of the Region.

[17] Second, capital projects of CH are not authorized by the Region. The evidence before the Court does not establish that the Region “authorizes” the CH capital costs by giving official permission for, or approval to, the CH capital budget. The authority to approve capital expenditures lies with CH pursuant to section 26(1) of the CCA. Significantly, it is CH, rather than the Region, that has the right to determine the amount of the CH capital budget to be paid by the Region, and to enforce payment against the Region: see sections 26(3) and (4) of the CCA. The involvement of the Region is limited to a review of the CH budget without any formal approval right.

[18] Based on the foregoing, I conclude there is no basis for finding that the reasonableness of the Decision on this issue is open to very serious debate.

The Categories of the By-law

[19] The former development charges by-law of Halton imposed development charges on six categories of residential development. It included two categories in respect of multiple dwelling units (for which the threshold was 3 bedrooms) and two categories in respect of apartment dwelling units (for which the threshold was 2 bedroom units). The By-law collapsed the two categories of multiple dwelling units into one category and similarly collapsed the two categories of apartment dwelling units into one category.

[20] The Decision of the Board is set out in the following paragraphs:

The Board concludes that the conflation of the apartment category from two divisions will result in an increase in the charge for small apartments from $10,902.07 to $13,685.79 - an increase of $2,743.66, while larger apartments (more than 2 bedrooms) would be reduced by 1,448.77.

In the case of multiples, those units containing less than three bedrooms would face an increase of $4,312.17 and those with three or more bedrooms would see a decrease of $1,590.44. The percentage increase would be higher in terms of its impact because the cost of a smaller unit would be less than the impact of the decrease.

The Region asserts that the conflation was the result of administrative problems and that it was a policy decision. The Region could only present two appeals to council of Development Charges difficulties and this in insufficient to make a case for administrative problems. The case Guelph (City) Development Charges By-law (1999)-15992 (Re); Whiteley v. Guelph (City) [1999] O.M.B.D. paras. 100-101, is presented as support for this position.

What the Board looks for on appeals, in such cases, is whether the municipality has acted fairly and reasonable, within its powers, in accordance with the process set out in the legislation.

When dealing with appeals, the Board should not substitute its policy choices for City Council’s policy choices where the Board finds based upon the evidence that the City Council has acted fairly, reasonably, within its powers and in accordance with the process set out in the Act. If Council has done so, then the Board should dismiss any appeal and leave City Council’s policy choices in place even if they are not the policy choices the Board itself would have made.

Firstly, the Board is not substituting its policy decision but reinstating Halton’s existing position with respect to the residential categories which more fairly represent the demand for services and the supply of same.

Secondly, the Board cannot countenance a cost recovery scheme that would punish one sector smaller residential units at the expense of larger units. The Board cannot give the council of any municipality a free pass – carte blanche – on setting categories for the recovery of capital costs. It could not realistically consider a charge that collected more money from houses painted blue from those painted white. The original classification was fair and reasonable and should not have been altered.

[21] It is not contested that the Board’s function was to determine whether the By-law complied with the statutory restriction in paragraph 5(6)2 of the DCA which reads:

(6) The rules developed under paragraph 9 of subsection (1) to determine if a development charge is payable in any particular case and to determine the amount of the charge are subject to the following restrictions:…

2. If the rules expressly identify a type of development they must not provide for the type of development to pay development charges that exceed the exceed capital costs, determined under paragraphs 2 to 8 of subsection (1), that arise from the increase in the need for services attributable to the type of development. However, it is not necessary that the amount of the development charge for a particular development be limited to the increase in capital costs, if any, that are attributable to that particular development.

[22] The Respondent argues that the Decision on this issue is a question of mixed fact and law that cannot be appealed. I do not agree. In this case, even as a question of mixed fact and law, there is an extricable question of law, being the interpretation of paragraph 5(6)2 of the DCA.

[23] Alternatively, the Respondent argues that the reasonableness of the Decision is not open to very serious debate. The Decision reinstated the previous four categories in the prior development charges by-law on the basis that such categories “more fairly represent the demand for services and the supply of same.” The Respondent says the evidence supports this conclusion of the Board. It also says the Board reasonably rejected the Region’s argument that the collapsing of the categories was justified on the grounds that it provided for easier administration of the By-law, of which there was limited evidence.

[24] The Region argues that the Board could not set aside the By-law unless it determined that, in the By-law, the Region had unfairly or unreasonably provided that a type of development, in this case apartment buildings or multiple dwelling buildings, would pay development charges that exceeded the need for services attributable to the type of development. The Region argues that the collapse of the four categories into two was a policy decision of the council of the Region that should have been accepted by the Board in the absence of such a finding by the Board. It says, instead, the Board substituted its own policy choice for that of the council. The Region argues that since the Board failed to find that the categories chosen by the Region offended the DCA, it should not have proceeded further. On this basis, the Region argues that the Decision is not reasonable.

[25] The Decision does not proceed from a finding that the By-law fails to comply with the DCA. In particular, it does not proceed from a finding that compliance with the DCA requires maintenance of the six categories of development provided for in the previous development charges by-law. Instead, it appears that the Board reached its conclusion on the basis that, in its opinion, the Region had failed to demonstrate a reasonable justification for the change from the approach in the former development charges by-law. In the absence of such evidence, the Board concluded that the Region did not act fairly and reasonably, a finding that entitled the Board, in its opinion, to require reinstatement of the prior scheme.

[26] There is no basis in the language of paragraph 5(6)2 of the DCA for the application of the standard of fairness and reasonableness in the manner applied by the Board in this case. In addition, in effect, the Board appears to have implied into that provision an onus upon a municipality to justify the fairness and reasonableness of any change in any provision from a previous development charges by-law, rather than limiting the scope of its review to the compliance provisions of a current developments charges bylaw with the test in paragraph 5(6)2. While the Board referred to the provisions of paragraph 5(6)1 as importing a fairness standard into deliberations regarding compliance with paragraph 5(6)2, it is far from clear that such provisions operate in the circumstances presented in this proceeding.

[27] This raises a clear question of statutory interpretation. Given the absence of any express language in paragraph 5(6)2 of the DCA that would support the Board’s approach, I conclude that the reasonableness of the Decision, in particular the statutory interpretation of paragraph 5(6)2 upon which it is based, is open to very serious debate.

[28] I am also satisfied that the issues involved in this appeal are matters of sufficient importance that leave to appeal ought to be granted. The proposed appeal raises the question of whether the Board has the authority to impose its view of the fairness and reasonableness of a change in a development charges by-law in circumstances where there is no finding of non-compliance with the DCA. More generally, it engages the issue of the extent to which the Board’s view of policy can override that of a municipal council. These are novel issues in the context of an appeal under section 16(1) of the DCA that are of importance to municipalities generally.

Conclusion

[29] Based on the foregoing, the Region is granted leave to appeal the Decision insofar as it set aside the provisions of the By-law that provided for four categories of development, rather than the six types of development in the previous development charges by-law. By agreement of the parties, as neither party was fully successful on this leave motion, each party shall bear its own costs and the costs of the transcripts shall be borne equally.

Wilton-Siegel, J.

Date: December , 2015