Court File and Parties

COURT FILE NO.: CV-18-610504 DATE: 20190221 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 819630 Ontario Limited, Applicant – AND – The City of Toronto, Respondent

BEFORE: E.M. Morgan J.

COUNSEL: Kevin Sherkin, for the Applicant Rodney Gill, for the Respondent

HEARD: February 11, 2019

Endorsement

[1] Can a sign be “altered” if it stays the same?

[2] The good thing about this Application is that it raises an interesting question about the way in which commercial speech is regulated by the Respondent (the “City”) as well as the Province. Although it arises from a relatively small incident – the City’s removal of a rooftop billboard in what it says was enforcement of its applicable By-law – it has buried within it a potentially profound contest between legislation aimed at signage and the Charter right to expression in the commercial context.

[3] The trouble with this Application is that it is in the form of an application. Although fashioned with a Notice of Application, affidavit evidence, and paper exhibits, it has buried within it a potentially complex and contentious policy and rights-oriented debate that cries out for in-depth exploration. This could, and should, take the form of an exchange of pleadings, full discovery, expert evidence on the policy and impact of the by-law and the relevant provincial legislation, not to mention evidence with respect to damages.

[4] The Applicant seeks an Order that the City illegally removed a rooftop sign from its property, and requests that the Court refer the matter to a Master for a trial to determine quantum of damages. The City concedes that it removed the sign from the Applicant’s property, but submits that it was done legally and without violating any rights of the Applicant.

[5] Counsel for the City also submits that this Application should be stayed as another application seeking identical relief (excluding the damages request) has been brought by the Applicant and is pending in Divisional Court (Court File No. CV-17-568065), with a hearing scheduled for May of this year. Counsel for the Applicant agrees that his client cannot pursue two such similar proceedings, and has advised that he will be staying the Divisional Court application.

[6] The subject property, 300 Bridgeland Avenue, Toronto (the “Property”), is located in the former City of North York within 400 feet of Highway 401. A permit for a sign on the roof of the Property was first issued in 1999 under North York By-law No 30788 (the “NY By-law), which governed the regulation of signage in North York prior to the coming into effect of a harmonized, Toronto-wide sign by-law, Chapter 694, on April 6, 2010. The original NY By-law continues to govern signs in North York which were lawfully in place when Chapter 694 came into force and which have not been substantially altered since that time.

[7] In addition, since the Property is situated within 400 feet of the Highway, the Public Transportation and Highway Improvement Act, RSO 1990, c. P.50 (“PTHIA”) was applicable to the Property and any signage erected thereon in 1999 as well as today. Sections 34 and 38 of PTHIA provide that no one may erect a sign within 400 metres of a King’s highway or controlled-access highway unless a permit is issued by the Ministry of Transportation of Ontario (“MTO”). The City issues sign permits under Chapter 694 and its predecessor did so under the North York By-law, but it has never been involved in the issuance of sign permits pursuant to PTHIA. The permit system under PTHIA is administered by the MTO and enforced by the MTO under s. 34 of PTHIA.

[8] Subsection 2.4.2 of the NY By-law covers the issuance of sign permits. It provides:

When the prescribed fee has been paid in accordance with Schedule “A” attached hereto, and the application, drawings, specifications and site plan or survey conforms to the requirements of this By-law, the Building Code and all other applicable governmental regulations, the Building Commissioner shall issue the permit together with one set of the approved drawings and specifications to the applicant, and retain the other set.

[9] The NY By-law provides that no sign may be erected or altered unless a permit is issued. Subsection 1.1.21 and 1.1.1 define those terms, respectively, as follows:

‘Erect, Erected and Erection’ include the alteration, placing or relocation of any sign or portion thereof, and the posting of notices.

‘Alter, Altered or Alteration’ means any change to the sign structure or the sign face wit the exception of:

(i) a change in the message displayed by a sign, (ii) the re-arrangement of numerals, letters or copy applied directly to the face of a sign and specifically designed and intended to be periodically re-arranged, (iii) repair ad maintenance, including replacement by identical components, as required by this By-law.

[10] In issuing permits, the NY By-law also distinguishes between an “Off Premise Sign” and all other signs. Subsection 1.1.35 defines this type of sign as:

‘Off Premises Sign’ means an advertisement related to a business or manufacturing enterprise or other activity not conducted within the building or upon the premises on which the sign is erected.

[11] As a matter of policy, the MTO also distinguishes between Off Premises Signs, or third party signs as the City now calls them, and first party signs referencing businesses or activity conducted within the premises on which the sign is situated. The MTO’s Corridor Signing Policy, which provides guidance to the MTO’s decision-making on the issuance of sign permits under PTHIA, indicates that the MTO generally does not allow the erection and display of third party signs within its area of authority, and will only issue permits for first party signs. This policy has apparently been in place since prior to 1999.

[12] On February 3, 1999, the Applicant submitted an application to the City for a permit to construct a roof-top, billboard-style sign. The application package included a permit from the MTO which approved the erection of a two-sided, 23.1 square metre sign advertising “Building Space for Lease”. The application complied in all respects with subsection 2.4.2 of the NY By-law, and the City issued a sign permit on April 21, 1999. The City inspected the sign once installed, determined it to be satisfactory an in accordance with the permit specifications, and closed its file.

[13] In 2000, the Applicant leased the Property to the Canadian distributor of Calvin Klein and Ralph Lauren brand clothing, and sought a new permit from the MTO. Nothing about the sign’s physical structure or location had changed with this application. The MTO issued a permit with an expiry date (or a renewal date pursuant to the Applicant’s right to apply for an annual renewal) of February 21, 2001. This was the last permit that the MTO has issued for the sign.

[14] No further permit was required under the NY By-law. Nothing had changed that would trigger the need for a new application, as no “alteration” as defined in subsection 1.1.1 had taken place. Counsel for the City explains that the only change was the message of the sign – from “Building Space for Lease” to “Calvin Klein and Ralph Lauren” – which is explicitly excluded from the definition of “alteration”.

[15] The City has produced affidavit evidence to the effect that sometime after 2001, the message on the sign changed from the designer brand clothing to various other commercial products and businesses. These include, inter alia, Telus in 2007, TD Bank in 2011, Geranium Homes in 2014, and Friday Harbour in 2015. The size, location, and structure of the sign never changed, but the message did.

[16] As indicated, in 2010 the City enacted Chapter 694 which harmonized all of the sign by-laws that had existed in the pre-amalgamation cities that now make up the City of Toronto. With that legislative initiative, the City also created a Sign By-law Unit (“SBU”) as an enforcement arm mandated to enforce regulations applying to signage across the City. Chapter 694, however, did not repeal the NY By-law or any of the other signage by-laws of the former municipalities. Rather, those pre-amalgamation provisions were considered legal non-conforming, and were grandfathered under s. 110(1) of the City of Toronto Act, 2006, SO 2006, c. 11:

A City by-law respecting advertising devices, including signs, does not apply to an advertising device that was lawfully erected or displayed on the day the by-law comes into force if the advertising device is not substantially altered, and the maintenance and repair of the advertising device or a change in the message or contents displayed is deemed not in itself to constitute a substantial alteration.

[17] In 2016, with the sign on the roof of the Property advertising Mitsubishi Electric, the SBU embarked on a signage enforcement blitz, and the sign on the Property became a subject of its inquiries and, ultimately, enforcement. As counsel for the City puts it in his factum:

[I]t is the City’s position that when the First Party Sign was converted to an Off Premise Sign, an alteration, as that term is defined in the NY Sign By-law, took place as the very nature of the sign changed. It was not just a change in the message. It was a change in who was providing the message. The relationship between the message and the Property changed. This means that a Third Party Sign was erected.

[18] In oral argument, counsel for the City confirmed that the crucial change, however, was not really “who was providing the message”. The City would have taken the same position had the Calvin Klein/Ralph Lauren sign remained unchanged throughout the years.

[19] I asked the City’s counsel if, in the City’s view, it would have been an “alteration” of the sign if it continued to advertise Calvin Klein and Ralph Lauren precisely as it had from the day the Applicant received its sign permit, but the tenant in the Property stopped selling Klein and Lauren jeans and started selling Levi’s. In that case, Calvin Klein and Ralph Lauren would still have been “providing the message” on the entirely unchanged sign, but it would have effectively changed to what the City calls an Off Premise or Third Party sign by virtue of the change in the brand of jeans on the store’s shelves below.

[20] City’s counsel acknowledged that in that case the sign would have been “altered”. In the City’s understanding of the term, it would have undergone an alteration into something other than what it was when the permit was issued, without actually changing at all. The sign would speak without speaking, uttering prohibited sounds of silence.

[21] It is the Applicant’s position that this policy not only makes no sense, but does not apply here. Applicant’s counsel argues that s. 110(1) of the City of Toronto Act exempts its sign from Chapter 694 since it was “lawfully erected” in 1999 and still in existence on the day in 2010 that the new by-law came into force. This, he contends, is as it should be, since the very purpose of the section is “to deal with the unfairness of subjecting existing signs to newly enacted regulatory standards”: Out of Home Marketing Association of Canada v Toronto (City), 2012 ONCA 212, at 16.

[22] Applicant’s counsel submits that since Chapter 694 is not applicable, it is the NY By-law that applies to the sign. He goes on to argue that although subsection 3.2.1 requires that a sign must at all times comply with “any applicable governmental regulations”, the power to revoke a permit is contained in subsection 2.3.1 which does not contain the word “governmental”. Rather, it states that a sign permit may be revoked “where the sign does not conform to this By-law, the Building Code, or any other applicable regulations…” It is Applicant’s counsel’s view that without the word “governmental”, the reference to “regulations” is to municipal by-laws rather than to enactments of a higher tier of government. Since the Applicant’s sign permit was onside the NY By-law and Building Code, and only arguably offside PTHIA, the Applicant’s position is that the City had no grounds to revoke the original sign permit.

[23] The City, of course, disagrees. It is the City’s position that under s. 694-5.A of Chapter 694, the sign was prohibited when the SBU commenced its enforcement campaign. That section provides that “no person shall erect, display, modify or restore…any sign within the City” without first obtaining a sign permit. The City’s counsel submits that since no permit has ever been issued by the City for a Third Party sign, the sign atop the Applicant’s property is erected in the absence of any permit at all.

[24] Counsel for the City states that s. 110(1) does not exempt the Applicant’s sign from Chapter 694 since the sign was not “lawfully erected” on the date the new by-law came into force. That is, it was erected in a way that was contrary to the MTO’s policy with respect to PTHIA and highway-side signs.

[25] The City’s counsel goes on to submit that in any case the NY By-law permits the revocation of any sign permit that is contrary to a “regulation”, which would naturally include PTHIA. Accordingly, the City issued Notices of Violation to the Applicant citing both By-laws for good measure. It is the City’s position that all formal notice and other provisions required of it for removal of the Applicant’s sign were fulfilled.

[26] The parties engaged in a long series of communications from 2016 through to 2018, which included various violation notices coming from the City and various letters coming from lawyers retained over the years by the Applicant explaining its position on the invalidity of the City’s notices. On November 27, 2018, the SBU put an end to the most practical aspect of the debate when it attended at the Property and forcibly removed the sign from the Property’s roof. Much to the Applicant’s surprise, the City’s self-help enforcement exercise took place while the court Application was pending.

[27] The first debate between the two counsel is over the use of the word “erected” in s. 110(1) of the City of Toronto Act. Applicant’s counsel uses it as a past tense verb – the sign was lawful when erected in 1999 and so is exempt under s. 110(1). The City’s counsel uses it as an adjective – the sign was not lawfully erected in 2010 and so is not exempt under s. 110(1). As a matter of syntax and logic, the interpretation could go either way.

[28] Some evidence of the source of the phrase, or the policy thinking behind either interpretation that may have driven the drafting of the section, is called for.

[29] The second debate between counsel is over the word “regulation” and the absence of the word “governmental” in subsection 2.5.1 of the NY By-law. Applicant’s counsel reads the word “regulation” in its general understanding, and would include any statutory provision enacted by any branch or tier of government. The City’s counsel reads the absence of the word “governmental” in its specific context, and would exclude any statutory provision enacted by a branch of government other than the municipality that created the NY By-law itself.

[30] Again, some evidence of the source of the phrase, or the policy thinking behind either interpretation that may have driven the drafting of the subsection, is called for.

[31] Whether or not Chapter 694 or the NY By-law applies, the entire matter inevitably turns on whether the Applicant’s sign stood in violation of PTHIA and, in particular, the MTO policy interpreting and applying PTHIA to exclude all Off Premises or Third Party signs. Was the sign “altered” when the advertised product changed but the retail tenant in the Property remained the same, or, the other side of the coin, was the sign “altered” when everything about the sign remained the same as it was but the retail tenant in the Property changed the brand of merchandise it sold?

[32] The matter further raises the question of whether the MTO policy and implementation of PTHIA, and the City’s enforcement of that policy through permit administration and sign removal, impinges on commercial expression. A billboard such as one for Calvin Klein and Ralph Lauren is in many ways a paradigmatic instance of protected commercial expression: Ford v. Quebec (Attorney General), [1988] 2 S.C.R. 712; Irwin Toy Ltd. v. Quebec (Attorney General), [1989] 1 S.C.R. 927. The question therefore arises as to whether this is a reasonable and justifiable way to regulate such expression in a free and democratic society.

[33] Once again, thorough documentary and oral discovery, and perhaps expert evidence, is needed to accompany the legal argument necessary to address this question.

[34] Rule 38.10(1)(b) of the Rules of Civil Procedure authorizes me to order that “the whole application or any issue proceed to trial and give such directions as are just”. While I do not have a sufficient record before me in this Application to decide all of the issues that arise from this dispute, I do have sufficient materials before me to make a determination about the appropriateness of converting it to an action. As Ground J. put it in Scott v Cockburn, 2005 ONSC 23097, at para 4 (SCJ), citing Keewatin v Minister of National Resources (2003), 2003 ONSCDC 43991, 66 O.R. (3rd) 370 at para 58 (Div Ct):

I am far from satisfied that allowing these applications to continue as applications and to leave to the applications judge the determination of which issues should be directed to trial would be more just and expeditious and less expensive than converting the applications to actions at this stage. In fact, the contrary may well be true.

[35] In my view, the cause of justice requires that this entire matter proceed by way of action rather than application. In that way, the validity of the policies and regulatory enforcement in play here, the liability issues, and the damages issues, can all be adjudicated with a proper evidentiary background.

[36] The Applicant shall have 30 days from today to issue a Statement of Claim in respect of this dispute, which will have the effect of converting the Application to an action. The usual timelines set out in the Rules will govern the action once the Statement of Claim is issued.

[37] Likewise, the Applicant shall have 30 days from today’s date to arrange to have Court File No. CV-17-568065, now pending a hearing at Divisional Court, stayed.

[38] If either of these two steps – issuance of a Statement of Claim and staying of the Divisional Court application – are not done within 30 days of today’s date, the City shall be at liberty to move for dismissal of this Application for failure to meet the required time limit ordered here.

[39] Costs of this Application shall be in the cause of the action once converted.

Morgan J. Date: February 21, 2019