Superior Court of Justice - Ontario

COURT FILE NO.: CV-18-605637

DATE: 2019-01-09

B E T W E E N:

MUSLIM GREEN CEMETERIES CORPORATION, Applicant

• and -

TORONTO MUSLIM CEMETERY CORP., Respondent

BEFORE: Copeland J.

HEARD: December 19, 2018

COUNSEL: Mr. John Longo and Mr. Patrick Copeland appearing for the Applicant Mr. Garth Dingwall, appearing for the Respondent

ENDORSEMENT

[1] The applicant, Muslim Green Cemeteries Corporation, brings an application pursuant to rule 14 seeking a ruling and a series of declarations regarding the interpretation of a contract (“the agreement”). The agreement relates to the development and management of a non-profit cemetery to serve the Sunni Muslim community in the Greater Toronto Area.

[2] There are three issues in dispute: 1) the right of the applicant to set the price list for plots in the portion of the cemetery that the agreement provides for the applicant to operate (the “Phase VI” lands); 2) if the applicant can set its own price list for the Phase VI lands, whether the price list set by the applicant is the one that governs the calculation of the care and maintenance fund (“CMF”) contributions under the Funeral, Burial and Cremation Services Act 2002, S.O. 2002, c. 33, and related regulations; and 3) whether certificates of interment rights to be provided pursuant to the agreement are to be issued as cemetery plots are transferred by the applicant to its members, or all at one time.

[3] The applicant argues that the wording of the agreement, without recourse to external context, supports its positions on all three issues. The applicant further argues that its interpretation of the agreement is supported by the context of the circumstances when the contract was entered into, pursuant to the decision of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[4] By the time of oral argument of the application, the respondent’s primary concern was the second issue, whether the CMF contributions should be based on the applicant’s price list, or on some other price list set by the respondent. However, the submissions of the respondent were less clear than would be ideal. At times in oral argument, the respondent conceded that the applicant could set its own price list, but took the position that the CMF contributions should be based on the respondent’s price list for other phases of the cemetery. This would have the effect of higher CMF contributions, because the respondent’s prices list was higher. However, at other times, the respondent seems to argue that a cemetery could not have different price lists for different parts of the cemetery under the Funeral, Burial and Cremation Services Act. However, the respondent was unable to direct the court to any support for this position in either the Act or the regulations. The respondent claimed that its primary concern was that it not run afoul of its regulatory obligations under the Act.

[5] I note that there is a significant history of litigation in this matter, where the applicant has sought to enforce its rights under the agreement.

[6] For reasons I set out below, I find that the applicant’s interpretation of the agreement prevails. Further, I do not see anything in the applicant’s interpretation of the agreement which runs afoul of the Funeral, Burial and Cremation Services Act, or regulations under the Act.

1. Does the agreement provide for the applicant to set its own price list for the Phase VI lands?

[7] Although counsel for the respondent at times conceded in oral argument that the applicant could set the price list for Phase VI, at other points in argument, the respondent suggested that having different price lists for different parts of the cemetery might be contrary to the Funeral, Burial and Cremation Services Act and regulations. As I result of this lack of clarity on the respondent’s position, I will deal with this issue on the merits.

[8] Reading the agreement as a whole, it is clear that the purpose of the agreement was to allow the applicant, a non-profit corporation, to develop Phase VI of the cemetery and to transfer plots to its members (members of the Sunni Muslim community) at as low a price as possible. In these reasons, I use the words “transfer” and “sell” interchangeably to refer to the applicant’s ultimate intention to transfer the developed interment plots to its members. The regulatory scheme allows a holder of interment rights to re-sell or transfer those rights as long as the re-sale price is not more than the price on the cemetery operator’s price list at the time of the transfer or sale.

[9] Several provisions of the agreement support the applicant’s position that the applicant has the right to set its own price list, and that the applicant is to be delegated (by the respondent) full operational management over Phase VI (see in particular ss. 5, 7.1, 7.4 and 7.10 of the agreement).

[10] Of particular note in relation to the price list is s. 7.4 of the agreement, which provides as follows:

“TMCC shall not sell ‘group’ interment rights for less than, or equal to the sale price of MGCC. TMCC shall not sell interment rights directly to members of the MGCC. MGCC to provide TMCC with MGCC’s selling price and member list from time to time”. [emphasis added]

[11] I find that the references in s. 7.4 to “the sale price of MGCC” and “MGCC’s selling price” are very clear that MGCC has the right to set the price list for Phase VI.

[12] Although the language of the agreement is sufficient for me to find that the agreement allows the applicant to set the price list for Phase VI of the cemetery, I also agree with the applicant that considering the surrounding context at the time the agreement was entered into in accordance with Sattva leads to the same conclusion.

[13] The record is clear that the applicant always intended to develop Phase VI as a cemetery for the Sunni Muslim community, and to do so on a not-for-profit basis. The record is clear that the respondent was aware of this intention of the applicant at the time the agreement was entered into. It was important for the applicant to contract for the right to set the price list for the Phase VI lands because keeping prices low for the community was essential to its not-for-profit objective.

[14] Indeed, the record contains emails between the principals of the respondent and the applicant in which the principal of the respondent tries to convince the principal of the applicant to set higher prices for Phase VI. These emails are effectively an admission by the respondent that the applicant has the right to set prices for Phase VI – for why would the principal of the respondent try to convince the principal of the applicant to set higher prices for Phase VI, if the respondent had the right to set the prices for Phase VI itself?

[15] Both of these pieces of context support the language in the agreement which I find clearly gives the applicant the right to set the price list for the Phase VI lands.

[16] As I have indicated above, the respondent at various points conceded in argument that the applicant could set its own price list for Phase VI. However, the respondent also raised concerns that having price list for Phase VI of the cemetery that was different from other phases of the cemetery might run afoul the Funeral, Burial and Cremation Services Act and regulations.

[17] I do not accept this argument by the respondent.

[18] The highest the respondent put its position on this issue was that having a different price list for Phase VI “might” by contrary to the Act or regulations.

[19] The substance of the respondent’s argument on this point is that I should reject the applicant’s interpretation of the agreement because it “might” be contrary to the provincial regulatory regime for cemeteries. In my view, the respondent bears the burden to persuade me that the applicant’s proposed interpretation of the agreement is contrary to the statutory regime.

[20] But the respondent at no point directed me to any provision of the Act or regulations that stated, or even suggested, that a cemetery could not have different price lists for different parts of the cemetery.

[21] I do not want to go too far into the interpretation of the Funeral, Burial and Cremation Services Act and regulations, given the relatively limited argument before me about the Act, and the respondent’s failure to point to any specific provision that prevents different price lists for different portions of a cemetery. However, it appears to me that the Act and Regulations do not prohibit different price lists for different portions of a cemetery. Indeed, there is language in the Act and regulations that appears to permit it.

[22] The provisions of the Act and regulations dealing with price lists are ss. 33-34 of the Act, and ss. 54-75 of O. Reg. 30/11. Section 63 of the regulation deals specifically with price lists for interment rights. None of these provisions provides that different phases of a cemetery cannot have different price lists. Indeed, s. 63(2) of the regulation seems to foresee the possibility of different prices for a particular type of interment right. The concern of s. 63(2) is not that different prices are prohibited, but rather that where there are different prices for “a type of interment”, there must be transparency for the consumer about the lowest and highest prices, and a full list of prices available on request.

[23] Nor would the purposes of the provisions in the Act and regulation in requiring price lists be undermined by allowing for different price lists for different phases of a cemetery. Within the scheme of the Act and regulations, price lists serve two primary purposes. They provide transparency for consumers, in the nature of consumer protection legislation. In addition, with respect to the calculation of the CMF, price lists ensure accountability by allowing the regulator to ensure that the appropriate funds are retained for the CMF, which is fixed and verifiable because it is calculated using the formula in s. 168 of the regulation based on the prices in the price list.

[24] Finally, I find that the evidence filed by the applicant in its reply application record shows that the respondent’s concern about the regulator raising an issue about a different price list for Phase VI is speculative and unsupported by the record.

[25] The applicant’s reply application record contains information about different price lists for similar types of graves/plots in different sections of Mount Pleasant Cemetery in Toronto. Further, counsel for the applicant wrote to the regulator, to inquire about the propriety (in the regulator’s view) of having different price lists for different parts of a cemetery, and specifically referring to the example of Mount Pleasant cemetery (see reply affidavit of Yakub Patel, paras. 22-23, and exhibits G and H).

[26] I find that this email chain and the Mount Pleasant Cemetery example make clear that a different price list for Phase VI in the circumstances of this particular cemetery development is not likely to raise any regulatory concern. In particular, the email from the from the regulator in response to the inquiry from the applicant’s counsel is clear that the regulator takes the view that different price lists for different sections of a cemetery are permissible, provided the variance in prices is “justifiable and properly identifiable”, and that price lists are maintained by the cemetery operator. Notably, in the email making the inquiry about different price lists to the regulator, counsel for the applicant specifically gave the examples of “religious reasons” or “a more lucrative/attractive part of the grounds” as permissible differences in price lists. The agreement in this case is clear that Phase VI is to be designated exclusively for Sunni burials (see s. 7.6 of the agreement).

[27] To the extent that the correspondence from the regulator may constitute a legal opinion on domestic law, it is not admissible for that purpose. It is the court’s job to interpret domestic law. However, the fact that the regulator takes the view that different price lists for different sections of a cemetery are permissible supports my finding that the respondent’s concern that interpreting the agreement to give the applicant the right to set the price list for Phase VI may run afoul of provincial regulations governing cemeteries is entirely speculative.

[28] Finally, although the issue of the applicant’s right to set the price list for Phase VI was argued based on the wording of the agreement, and the surrounding context, it also arguably flows from the previous binding order of Justice Dow of November 22, 2016, which required the respondent to (inter alia) take all steps necessary “to delegate full operational management of Phase VI to the applicant” (a decision which was upheld by the Court of Appeal on September 20, 2017).

[29] Thus, I find that the applicant is entitled to set the price list for the Phase VI lands.

2. Are the CMF contributions to be calculated based on the applicant’s price list?

[30] The respondent argued that even if the applicant is entitled to set its own price list under the agreement, the contributions to the CMF under the Act should be based on the respondent’s price list. As noted above, the record before me shows that the respondent’s price list is higher than the applicant’s proposed price list. This has the effect that if the respondent’s price list is used to calculate the CMF, then the CMF contributions will be disproportionately high in relation to the actual prices charged by the applicant to individuals to whom plots are transferred.

[31] I reject the respondent’s argument. It is not consistent with the agreement. It is not commercially reasonable. Further, it is not consistent with the Funeral, Burial and Cremation Services Act or regulations.

[32] Before turning to the agreement, it is useful as context to explain the nature of the CMF under provincial legislation. The concept of CMF under the Funeral, Burial and Cremation Services Act and regulations is straight-forward. It provides that a specified amount of funds are to be held in trust that can be drawn upon to maintain a cemetery in the event that the operator fails to do so. Under the Act and regulations, CMF is payable at the time a plot is purchased or transferred, the final act of which is the issuance of a burial certificate (see Act, s. 53, and regulation, s. 168).

[33] Section 168 of the regulation provides that for an in ground grave (of the size relevant to this application), the CMF is “the greater of 40 percent of the price of the interment rights as set out on the price list and $250”. Thus, the CMF is 40 percent of the price of the plot on the price list, with a floor of $250.00.

[34] I turn back to the terms of the agreement at issue. As I have outlined above at paragraphs 7-29 above, I find that the agreement clearly gives the applicant the right to set the price list for Phase VI. In the context of a regulatory scheme known to both the applicant and the respondent at the time they entered into the agreement, which clearly bases the amount of CMF payable on the price from the price list, I find that the agreement must be interpreted as meaning that the CMF is to be calculated based on the price list set by the applicant.

[35] This conclusion is supported by the provisions of the agreement that give the applicant operational control over Phase VI (ss. 5, 7.1 and 7.4 of the agreement).

[36] The applicant’s interpretation of the agreement is also commercially reasonable, whereas the respondent’s is not. The record before the court on the application is clear that the applicant sought to develop Phase VI as a cemetery for the Sunni Muslim community on a not-for-profit basis. This is the reason that the applicant contracted for the right to set its own prices – in order to keep prices low.

[37] As I have outlined above, s. 168 of the regulation under the Funeral, Burial and Cremation Services Act provides that the CMF is to be calculated as 40 percent of the price for the plot on the price list established under the Act, or $250.00, whichever is greater.

[38] If the respondent’s higher price list was used to calculate the CMF for the plots in Phase VI, rather than the applicant’s lower price list (which is also the price list that actually applies to Phase VI), then the CMF contributions for the plots in Phase VI would be disproportionality high in relation to the prices the applicant was actually charging for the plots. This result is not commercially reasonable, given the applicant’s clear intention to develop Phase VI on a not-for-profit basis, which was known to both parties at the time the agreement was entered into.

[39] Lastly, I find that the respondent’s argument is inconsistent with the Funeral, Burial and Cremation Services Act and regulations.

[40] The scheme of the Act and regulations in relation to CMF contributions is clear that the CMF contributions are calculated in relation to the price paid for the plot, and not to fall below the minimum of $250.00 per plot.

[41] As I have outlined above, in my view, the agreement clearly provides that the applicant can set its own price list. In my view the only reasonable reading of the agreement is that the CMF contributions for the plots in Phase VI that the applicant has the authority to set prices for is that the CMF contributions be based on the price list set by the applicants. The applicant’s price list is the only price list for the Phase VI lands. There is no logical reason why the CMF would be calculated based on prices the respondent sets for different phases of the cemetery.

[42] Section 168 of the regulation is clear that CMF is to be calculated based on the price list for a particular plot or set of plots. In relation to the CMF, the purpose of the price list is to ensure that prices are fixed and verifiable so that the regulator can verify that appropriate CMF contributions have been made. This purpose requires that CMF contributions be made in accordance with the price list for the particular plot or plots in a given portion of a cemetery. It would be inconsistent with this purpose to use a different price list, applicable to a different portion of the cemetery, to calculate the CMF on plots in the Phase VI lands.

[43] Thus, I find that the agreement provides that the CMF for the plots in Phase VI is to be calculated based on the applicant’s price list.

3. Are certificates of interment rights to be issued as the applicant transfers the plots, or all at one time?

[44] This leaves the last issue of when the certificates of interment rights are to be issued. The practical reason that this matters is that the CMF (and HST) is payable when a certificate of interment rights is issued.

[45] The respondent takes the position that it will issue a single certificate of interment for 5,793 plots. This would make the CMF on all of those plots payable at one time. Assuming even the minimum CMF of $250.00 per plot, this would mean the applicant would be liable for approximately $1.5 million in CMF at one time. It is important to note that the CMF is not a payment to the respondent. Rather it is held in trust for possible future use to maintain the cemetery. The respondent has already been paid by the applicant for the plots.

[46] The applicant argues that the CMF on each plot (or plots) is payable as each plot is transferred to an individual or individual who will use the interment rights.

[47] The agreement does not contain express terms addressing when the CMF is payable, However, I find that two provisions of the agreement lead me to agree with the applicant’s interpretation.

[48] Section 2 of the agreement provides that the applicant is responsible for additional payments due on graves purchased by the applicant, including the CMF contribution, and the HST. It is notable that s. 2.1 refers to the CMF as being “currently a minimum of $250.00 per Interment Rights” (emphasis added). In my view, the reference to “currently” suggests that the agreement foresees that the CMF would be payable from time to time, at whatever rate applied to calculate CMF at the time under the provincial legislation and regulation. There would be no need to add the proviso of the “currently” applicable minimum for CMF, if the CMF was going to be payable all at one time.

[49] This interpretation is also supported by the reference in section 7.4 of the agreement (quoted above at para. 10), to the applicant providing the respondent with its selling price and member list “from time to time”. Again, this suggests that the price list, from which CMF is calculated under the regulation, will need to be provided at various times in the future, not just one time.

[50] Further, the applicant’s interpretation of the agreement as to when CMF is payable is commercially reasonable, while the respondent’s is not. The respondent’s interpretation would have the applicant pay it CMF at one time, based on the price list then in effect. This is not commercially reasonable for two reasons. First, it would result in the applicant being responsible to pay a very large amount of funds for CMF before it transfers the plots to the end users and is paid by the end users. This is not consistent with the applicant’s not-for-profit purpose.

[51] Second, the provincial regulatory scheme is clear that the CMF is to be paid based on the price list at the time the interment rights are conferred. The respondent’s argument would have the applicant pay the CMF all at one time based on the price list then in effect, rather than on the actual price list in effect when the interment right is likely to be used.

[52] Thus, I find that the agreement provides that the CMF is payable on each plot when it is transferred from the applicant to the individual who will use the interment rights.

[53] I find that it is appropriate to order that the applicant is entitled to issue the certificates of interment as the plots are transferred by the applicant, pursuant to its delegated operational authority granted by the respondent under the agreement. I make the order in this form because of the history of litigation in this matter, and in particular, Justice Dow’s previous order, still binding, that included an order for specific performance by the respondent to do all things reasonably necessary “to delegate full operational management of Phase VI to the applicant”.

[54] The agreement as a whole clearly provides that the respondent delegates operational control/management of Phase VI to the applicant (see ss. 5, 6, and 7 generally of the agreement). The agreement also requires that the applicant follow all applicable laws and regulatory requirements in exercising this delegated authority (ss. 4.1, 5, 6, and 7 generally of the agreement). This delegation is permitted under s. 5(5)(b) of the Funeral, Burial and Cremation Services Act.

Conclusion

[55] For the reasons set out above, the application is granted.

[56] I make the following declarations regarding the interpretation of the contract:

(i) Any interment rights associated with Phase VI (the “plots”) that are transferred by the applicant shall be in an amount that is prescribed by the applicant as is set out in a price list, as amended from time to time, that is to be provided to the respondent by the applicant (the “applicant’s price list”);

(ii) Any funds that are owing for the care and maintenance fund with respect to the plots, along with any associated taxes, shall be based on the prices set out in the applicant’s price list; and

(iii) The applicant shall be entitled to issue one or more certificate(s) of interment right(s), as the respondent’s delegate, in respect of the plots as such plots are transferred by the applicant.

Costs

[57] I did not hear costs submissions at the hearing of the application. If the parties are unable to come to an agreement regarding costs, I will receive costs submissions in writing on the following schedule. The applicant may file its cost outline and written submission within 30 days of this decision. The respondent may file its cost outline and submissions within 20 days after the applicant’s submission is filed. All costs submissions are limited to a costs outline, and three pages of submissions.

[58] Finally, for purposes of the public record, I note that Mr. Copeland, who is co-counsel for the applicant, is not related to me.

Justice J. Copeland

Released: January 9, 2019