Court File and Parties

COBOURG COURT FILE NO.: 49/13 DATE: 20160614 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Ian Angus and Daphne Angus, Plaintiffs – and – The Corporation of the Municipality of Port Hope, Defendants

Counsel: M. John Ewart, for the Plaintiffs Kristin Musczynski, for the Defendants

HEARD: November 16, 2015 and in writing April 12, 2016

Woodley, S. J.

REASONS FOR DECISION

Overview

[1] The Plaintiffs bring a motion for partial summary judgment. The motion seeks to determine whether a municipal by-law prescribing permit fees for the importation of fill material, are in substance a tax and thus ultra vires as beyond the powers of the Municipality.

[2] The motion first came before me on November 16, 2015. By Endorsement dated December 11, 2015 (2015 ONSC 7788), I found that the evidence filed by the Defendant was insufficient to allow a determination of the issue. Invoking the new fact-finding powers under Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, I ordered the Defendant to file further supplementary materials to address the issue of whether there is a nexus between the fees charged by By-law 47/2012 and the actual or estimated cost of administering the scheme and otherwise whether the fees were part of a larger regulatory scheme. Costs were reserved to the final determination of the motion.

Issues

[3] The issues to be determined on this motion are as follows:

a. Is this a matter that can be determined by summary judgment?

b. If the matter may be determined by summary judgment, does the fee schedule contained in the Municipal Site Alteration and Fill By-law (29 May 2012), fail to comply with the provisions of the Municipal Act, 2001, S.O. 2001, c. 25, and is thus ultra vires?

c. If the fee schedule contained in the Municipal Site Alteration and Fill By-law (29 May 2012), fails to comply with the provisions of the Municipal Act, 2001, S.O. 2001, c. 25, and is thus ultra vires, is the schedule severable and if so, what is the effect of the severability?

Determination of Issues

[4] I have determined the issues as follows:

a. This matter may be determined by summary judgment.

b. The fee schedule contained in the Municipal Site Alteration and Fill By-law (29 May 2012) fails to comply with the provisions of the Municipal Act, 2001, S.O. 2001, c. 25, and is thus ultra vires.

c. The fee schedule contained at Section 5.1(b) of the Municipal Site Alteration and Fill By-law (29 May 2012) is severable and is hereby ordered severed from By-law 47/2012 effective June 20, 2016. All remaining provisions of By-law 47/2012 remain in full force and effect.

Facts

[5] The evidence submitted by the Defendant at the original hearing on November 16, 2015, was in the form of an affidavit of the Director of Works and Engineering for the Defendant sworn November 5, 2015. The affidavit attached one report and did not provide details of any particular study, cost benefit analysis, or calculations.

[6] By Endorsement dated December 15, 2015, I directed that the Defendant file further supplementary materials to address the issue of whether there is a nexus between the fees charged and the actual or estimated cost of administering the scheme and whether the fees are otherwise part of a larger regulatory scheme.

[7] Following delivery of the Endorsement the Defendant filed two supplementary affidavits of the Director of Works and Engineering sworn February 2, 2016 and April 12, 2016. Neither supplementary affidavit provided information as to what calculations or analysis was undertaken in support of the fee structure as set out in by-law 47/2012. No information was provided as to the anticipated costs of the implementation of By-law 47/2012 or how the fee structure provided would serve as revenue neutral. Further, no information was provided which would allow me to determine whether the fees form part of a regulatory scheme. Simply stated, the supplementary affidavits were of a similar nature to the original affidavit sworn November 5, 2015. No hard data, calculations or cost estimates and analysis were provided to the court for review. The supplementary affidavits provided no evidence to address the issue of whether there is a nexus between the fees charged by By-law 47/2012 and the actual estimated cost of administering the scheme or whether the fees were part of a regulatory scheme.

[8] In contrast to the vague generalizations provided by the Defendant’s supplementary affidavits, the Responding Affidavit of Ian Angus sworn March 9, 2016 succinctly evidenced that the Defendant took no reasonable steps to establish a nexus between the fees charged and the cost of the services provided prior to enacting the By-law.

[9] The Plaintiff obtained the Defendant’s entire by-law file and reported that the file does not contain any calculations, estimates made by municipal employees, notes of administration costs, or the basis on which revenue neutrality was established in enacting the fee schedule. Further, the file contained no information at all to explain the switch from the original proposed $1 per cubic metre (utilized by neighbouring municipalities) to $1 per tonne (as per the fee schedule in the by-law).

[10] Further and most compelling, the Plaintiff’s counsel contacted the employee engaged to prepare the draft by-law for council’s review to enquire whether any original work had been undertaken relating to any fee calculations. The employee advised that he “did not undertake any original research regarding fee calculations”.

[11] When asked to clarify his response, and in particular whether any calculations were done with respect to the cost of administering or enforcing the by-law and whether the fee of $1.00 per tonne was the subject of any calculations or cost analysis undertaken, the employee advised that he did not recall conducting any calculations with respect to the costs to administer and enforce the subject By-law or any specific calculations to arrive at the $1 per tonne suggestion.

[12] Despite the Director’s statement that he was the person responsible for making the calculations (not the employ preparing the by-law), the calculations (which were not contained in the file or provided to the Applicant) were based on his experience and “best educated estimate considering it was a new By-law”.

Analysis

The Test for Summary Judgment

[13] Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, outlines when a court may grant summary judgment. In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada stated that r. 20 was amended to improve access to justice. The reforms changed the test for summary judgment from whether a case presents “a genuine issue for trial” to whether there is a “genuine issue requiring a trial” (at para. 43).

[14] The new powers in Rule 20 allow motion judges to weigh evidence, evaluate credibility, draw reasonable inferences, and call oral evidence. These new powers expand the number of cases in which there will be no genuine issue requiring a trial, thereby establishing that a trial is not the default procedure and eliminating the presumption of substantial indemnity costs against a party that brings an unsuccessful motion for summary judgment.

[15] Karakatsanis J., writing for the court, laid out the test to apply when determining whether a summary judgment motion may be granted, at para. 66:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[16] In determining whether there is a genuine issue requiring a trial, the Court of Appeal for Ontario’s decision in Hryniak suggested that “summary judgment would most often be appropriate when cases were document driven, with few witnesses and limited contentious factual issues, or when the record could be supplemented by oral evidence on discrete points” (at para. 48).

[17] The SCC affirmed that the ONCA’s suggestions are helpful observations, but should not be taken as delineating firm categories of cases where summary judgment should and should not apply; summary judgment may be appropriate in a complex case, with a voluminous record if there is no genuine issue requiring a trial. At para. 49, the SCC further explained that a case where there is no genuine issue requiring a trial will be a case “when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.”

[18] When summary judgment allows the judge to find the necessary facts and resolve the dispute, proceeding to trial is generally not proportionate, timely, or cost effective. Alternatively, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute.

[19] The focus is not what kind of evidence could be adduced at trial, but rather whether a trial is required. The evidence simply must be such that I am confident that I can fairly resolve the dispute fairly and justly.

[20] In the present case I am confident that I can fairly and justly resolve the dispute.

[21] The onus is on the moving party to establish a prima facie case that there is no genuine issue requiring a trial. The onus then shifts to the responding party to show that there is a genuine issue requiring a trial. The responding party must put their best foot forward and cannot simply advise that further or better evidence may be available at trial.

[22] In the circumstances of this case I find that the evidence submitted is sufficient to allow me to make the necessary findings of fact or to allow me to apply the law to the facts. Based on the facts before me I find that summary judgment is a proportionate, more expeditious, and less expensive means to achieve a just result.

Relevant Provisions of the Municipal Act, 2001 S.O. 2001, c.25

[23] Section 142 of the Municipal Act permits a Municipality to pass a by-law to prohibit the placing or dumping of fill. Specifically, s. 142 of the Municipal Act states:

“…a local municipality may:

a. Prohibit or regulate the placing or dumping of fill;

b. Prohibit or regulate the removal of topsoil;

c. Prohibit or regulate the alteration of the grade of the land;

d. Require that a permit be obtained for the placing or dumping of fill, the removal of topsoil or the alteration of the grade of the land; and

e. Impose conditions to a permit, including requiring the preparation plans acceptable to the municipality relating to the grading, filling or dumping, the removal of topsoil and the rehabilitation of the site.”

[24] Section 391.(1) of the Municipal Act authorizes a municipality to impose fees or charges on persons, (a) for services or activities provided or done by or on behalf of it; and (b) for costs payable by it for services or activities provided or done by or on behalf of any other municipality or any local board.

[25] Section 17 of the Municipal Act provides that sections 9, 10, and 11 do not authorize a municipality to impose taxes.

[26] Section 19.(2) of the Municipal Act, titled “Exception, services”, provides that a municipality may exercise its powers, other than its power to impose taxes, to provide a municipal system to provide a service or thing in an area in another municipality or in unorganized territory if certain conditions apply.

[27] By virtue of the varying sections of the Municipal Act, it is clear that while a municipality has authority to charge a fee for services rendered relating to a by-law enacted pursuant to s. 142 of the Municipal Act, there is no authority to charge a tax relating to such services.

[28] The issue in the present case is whether the fees prescribed by By-law 47/2012 are in substance a tax and thus ultra vires as beyond the powers of the Municipality to impose.

The Test to Determine Whether a Charge is a Fee or a Tax

[29] There is a five part test used to determine whether a fee is a tax. Specifically, a fee will be found to be a tax where:

a. It is enforceable by law;

b. It is imposed under the authority of the legislature;

c. It is levied by a public body;

d. It is levied for a public purpose; and

e. There is no nexus between the charge and the cost of providing the service or program to those subject to the fee.

(See 1736095 Ontario Ltd. v. Waterloo (City), 2015 ONSC 6541 at para 45; Eurig Estate, (Re), [1998] 2 S.C.R. 565).

[30] In Greater Toronto Apartment Association v. Toronto (City), 2012 ONSC 4448, at para 41, the Divisional Court took the following factors into account in determining whether the impugned fee was a tax:

a. Whether the fee is designed to be revenue neutral;

b. Whether the calculations of fees are based on best estimates of the costs associated with the service – including staffing and non-staffing expenditures relating to processing applications and enforcement efforts;

c. Whether the fees are used to defray expenses or raise revenue; and

d. Whether the fees are intended for a public purpose.

[31] As previously noted, by Endorsement dated December 11, 2015 (2015 ONSC 7788), I found that the evidence filed by the Defendant was insufficient to allow a determination of whether the fee was in substance a tax and ordered the Defendant to file supplementary materials to address the issue of nexus between the fees charged by By-law 47/2012 and the actual or estimated cost of administering the scheme and otherwise whether the fees were part of a larger regulatory scheme.

Determining Nexus Between Fees Charged and Services Provided

[32] The Defendant relied on the decision of Justice Lederer in Greater Toronto Apartment Association v. Toronto (City), 2012 ONSC 4448, [2012] O.J. No. 3866, at para. 41, for the proposition that “in determining whether a nexus exists, it is not for the court to look behind the methodology used and question the assumptions made in respect of individual values adopted.” However, Justice Lederer considered at length the evidence that was submitted by the City of Toronto and reviewed the chart which, in part, demonstrated the basis upon which the actual fee was calculated.

[33] Justice Lederer was not suggesting that in determining the nexus the court should rely upon statements of intent and reports containing no values or monetary comparisons. His Honour’s comments applied to a situation where actual costs were determined and categorized, where assumptions were made with respect to future costs, and where the permit fee was determined on the best estimates available to the City.

[34] This is not the situation before me. Despite being afforded an additional opportunity to submit evidence of a nexus, no evidence was submitted to support the Defendant’s submissions that the by-law permit fee was prescribed “in a way that will both allow the Municipality to recoup administration costs in overseeing operations involving fill while also effectively addressing numerous health and safety issues relating to large levels of fill being imported into the municipality which directly affects the residents of Port Hope.”

[35] I am not able to “look behind the methodology used and question the assumptions made in respect of individual values adopted” since no methodology was presented in support of the fee.

[36] The Defendant further submitted that the fees prescribed by the By-law are ancillary to the purpose of the by-law and that perfection and exactitude are not required to uphold the impugned provision. In support of this position the Defendants relied upon the Supreme Court of Canada decision in Allard Contractors Ltd. v. Coquitlam, [1993] 4 S.C.R. 371, where a municipal by-law regulating gravel extraction that charges fees based on volume was valid.

[37] In Allard Construction Ltd., the Supreme Court of Canada in addressing the relationship between a fee and the costs of the underlying service, stated, at para. 83, that “a surplus itself is not a problem so long as the municipalities made reasonable attempts to match the fee revenues with the administrative costs of the regulatory scheme”.

[38] In Eurig Estate, (Re), [1998] 2 S.C.R. 565, the Supreme Court in determining whether a nexus between a fee and the cost of the service exists, stated, at para. 22, that “courts will not insist that fees correspond precisely to the cost of the relevant service. As long as a reasonable connection is shown between the cost of the service provided and the amount charged, that will suffice”.

[39] The Supreme Court has directed municipalities to make reasonable attempts to match the fee revenues with the administrative costs. However, where the evidence fails to disclose any correlation between the amount charged and the cost of providing the service, the result is the absence of a nexus. This was the result in Eurig Estate, (Re). The Supreme Court found that the evidence failed to disclose any correlation between the fee charged and the cost of the services provided. The fees (probate fees) were held to be in substance a direct tax which was not imposed in accordance with the requirements of the Constitution Act, 1867. Thus the regulation was held invalid and of no force or effect.

[40] In the present case, the Defendant Municipality provided no evidence of any reasonable attempt to match the fee revenue with the administrative costs, or to show a reasonable connection between the costs of the services provided and the amount charged.

[41] Best estimates based on work experience are simply insufficient to establish a nexus. To legitimize the fee structure the Defendant Municipality needs to review the costs of the services versus the fees generated in real numbers. A cost analysis is required to legitimize the fee structure. Reasonable attempts must be more than the musings of municipal employees.

[42] In the present case I find that the Municipality did not make reasonable attempts to match the fee revenues with the administrative costs nor did the municipality exercise due diligence to ensure that fees charged by the by-law would not result in the imposition of a tax.

[43] Having found no evidence of a nexus between the fees charged and the services provided I find that By-law 47-2012 is ultra vires as being beyond the powers of the Municipality as imposing a tax.

Availability of Severance and Appropriate Remedy

[44] Despite the fee structure being ultra vires it is not necessary to strike down By-law 47/2012 in its entirety. As confirmed by the Ontario Court of Appeal in Uxbridge (Township) v. Timber Brothers Sand & Gravel Ltd. (1975), 7 O.R. (2d) 484, invalid provisions of a by-law can be severed from the remainder of the by-law. This is especially true where the invalid provision can be severed without declaring the entire by-law void. (See Lawrence v. Muskoka Lakes (Township), at para. 68).

[45] The impugned provision of By-law 47/2012, being the fee structure found at Section 5.1(b) is distinguished from the remainder of the by-law. The fee structure provision is not essential and the remainder of the by-law represents a complete law. Furthermore, the provisions of the by-law itself contemplate severability of provisions. In particular, s. 10.6 of By-law 47/2012 specifically provides that if a section of the by-law is declared invalid, it shall not affect the validity of the by-law as a whole.

[46] Once it is determined that the impugned provision found at Section 5.1(b) should be severed, the court must find an appropriate remedy.

[47] In Eurig Estate, (Re) the Supreme Court recognized that any law that is inconsistent with the provisions of the Constitution is, to the extent of inconsistency, of no force or effect. However, the court also recognized that an immediate declaration of invalidity of the probate fee would deprive the province of substantial revenue that would likely have harmful consequences of the administration of justice in the province. As a remedy, the court’s declaration was suspended for a period of six months to enable the province to address the issue.

[48] In the present case, no evidence was submitted that would support the argument that an immediate declaration of invalidity of the fee would cause harm to the administrative of justice in the municipality. Further, although the Defendant raised the issue of severability, they did not allege that harm would follow if the fee schedule were severed.

[49] Unlike the situation in Eurig Estate, (Re), where probate fees had been collected for many years and were heavily relied upon as a source of revenue for the province, By-law 47/2012 is relatively new, as is the collection fees. The same considerations do not apply.

[50] Finally, I note that By-law 47/2012 contains provisions for payment of expenses related to the services provided which insulate the Municipality against harm. The expenses covered by the provisions of By-Law 47/2012 include: (i) submission of security payments to secure the proper dumping or placing of fill and all work described including erosion and sediment control, signage, mud cleanup, dust control and road damage (5.1(e)); (ii) submission of security to secure performance of the work for which the permit is being applied (5.1(k)); (iii) provision to authorize Director to control mud and dust and to invoice the applicant for associated costs (5.4); provision to authorize Director to draw on security posted to recover the costs incurred by the municipality to perform required work (5.5.); provision to require testing at applicant’s expense (6.3); and (iv) provision to complete required work with the cost and expense to be added to the tax roll and collected as property taxes (9.3).

Disposition of Motion

[51] In the circumstances, I hereby Order as follows:

a. The Plaintiffs’ motion for partial summary judgment is granted.

b. The fee schedule set out in the Municipal Site Alteration and Fill By-law (29 May 2012), fails to comply with the provisions of the Municipal Act, 2001, S.O. 2001, c. 25, and is thus ultra vires.

c. The fee schedule set out at Section 5.1(b) of the Municipal Site Alteration and Fill By-law (29 May 2012), is hereby severed from By-law 47/2012 effective June 20, 2016. All remaining provisions of By-law 47/2012 remain in full force and effect.

[42] If the parties are unable to agree upon costs, the Plaintiffs shall have until July 2, 2016, to file costs submissions. The Defendant shall have until July 20, 2016 to respond. The Plaintiffs’ reply, if any, shall be served and filed before August 1, 2016. The cost submissions, response, and reply shall not exceed three pages in length with bills of costs attached. If no submissions are filed by July 2, 2016, no costs shall be awarded.

S. Woodley, J. Date: June 14, 2016