Court File and Parties

COURT FILE NO.: CV-20-644834 and CV-20-643847

DATE: 20210119

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: METROLINX Applicant

- and -

1450638 ONTARIO INC., 1714820 ONTARIO INC., KING CITY AUTO SALES & SERVICE AND ROHAN DATT Respondents

BEFORE: Pollak J.

COUNSEL: Christel Higgs & Jessica Karban, for the Applicant/Respondents Metrolinx Shane Rayman & Brynn Leger, for the Respondent/Applicant 1450628 Ontario Inc. Matthew Kersten, for the Respondents/Applicants 1714820 Ontario Inc., King City Auto Sales & Service and Rohan Datt

HEARD: November 19-20, 2020

ENDORSEMENT

[1] There are two applications before the court which have, by consent of the parties, been consolidated and are being heard together:

• an Application by Metrolinx against 1450638 Ontario Inc. (the “Landlord”), 1714820 Ontario Inc., King City Auto Sales & Service, and Rohan Datt (collectively referred to as the “Tenant”) pursuant to s. 40 of the Expropriations Act, R.S.O 1990 c. E.26 (the “Act”), for a warrant to put down resistance to possession.

• an Application by the Landlord pursuant to s. 39(3) of the Act to postpone possession until Metrolinx’s obligations are complied with.

[2] The Respondent’s submit that the requested warrant should not be ordered as Metrolinx has failed to fulfill its statutory obligations under the Act. They apply for an order delaying possession until Metrolinx complies with s. 25 of the Act as the Landlord will be deprived of its property and rental income with no compensation or any rational basis on which to deny compensation. This, it is submitted, is contrary to the remedial purpose of the Act, which seeks to ensure that Landlords are fairly compensated for the expropriation.

[3] The Respondents do not dispute that Metrolinx is entitled to possession of the expropriated land, provided it complies with the conditions precedent as set out by the Act, including the requirement to provide a valid offer for compensation as set out in s. 25 of the Act.

[4] The Respondents submit that the issues on these two Applications are:

a. Has Metrolinx complied with s. 25 of the Act?

b. Has Metrolinx made its offer in good faith and with a reasonable basis for its position? This good faith requirement is disputed by Metrolinx.

[5] The Respondent’s position on these Applications is that Metrolinx has not acted in good faith with respect to its offer pursuant to s. 25 of the Act and has therefore not complied with the pre-requisite requirements for the relief sought. They submit that because Metrolinx has not served a valid offer that is “based on” the Appraisal Report with which it was served, the Landlord has no reasonable basis upon which to assess the compensation offered.

[6] Further, the basis for opposition to Metrolinx’s Application for possession is that it has failed to act in good faith. Metrolinx has not provided any rational basis for its $1.00 s. 25 offer and refused to answer questions related to fair and consistent treatment of other contaminated or potentially contaminated expropriated lands. It has refused to answer questions related to its policies of consistent treatment of landLandlords or related to its treatment of potentially contaminated lands. It is alleged that such refusals results in the Landlord being unable to determine whether the offer was made with the required fairness. Metrolinx has prevented the Landlord from obtaining necessary and relevant evidence – and precluded this Court from being provided with a full and appropriate factual record.

[7] Metrolinx’s position on these Applications is that all documents required to be served under the Expropriations Act by Metrolinx were served as follows:

(a) Notice of Application for Approval to Expropriate Land dated March 23, 2018;

(b) Notice of Expropriation, dated April 23, 2019;

(c) Notice of Election, served under cover of letter dated April 24, 2019;

(d) Notice of Possession, dated April 23, 2019;

(e) Expropriation Plan YR2942445, dated March 26, 2019, served under cover of letter dated April 24, 2019;

(f) Certificate of Approval YR2941704, dated March 12, 2019, served under cover of letter dated April 24, 2019;

(g) A s. 25 Offer dated March 20, 2020, and s. 25 Appraisal Report, prepared by Antec Appraisal Group, was served under cover of letter dated March 23, 2020. The s. 25 Offer offered compensation to the municipality for unpaid property taxes, in the amount of $49,697.81. All other “registered Landlords” – as that term is defined in the Act - were offered $1.00, given the environmental contamination on the Property.

[8] The Respondents have requested an adjournment of the hearing of these two applications in order to permit a motion before a Master in order to determine whether the refusals by Metrolinx are justified. The refusals are lengthy and set out in a chart provided by Metrolinx.

[9] In cases where an adjournment is merely delaying an inevitable result – such as an unsuccessful refusals motion – Canadian courts have held that an adjournment will likely be unwarranted.

[10] Metrolinx submits that it has rightly refused to produce draft expert reports and correspondence between the expert, Metrolinx and its legal counsel. Metrolinx’s position is well settled in law given Rule 53 of the Rules of Civil Procedure, R.S.O. 1990, Reg. 194 and the decisions of the Court of Appeal in Moore v. Getahun, 2015 ONCA 55, 124 O.R. (3d) 321, and the Superior Court in Edwards v. McCarthy, 209 ONSC 3925.

[11] The opposing parties emphasize that Metrolinx has expropriated legal title to the property, seeking to take possession without providing any compensation to the expropriated Landlord. The Act provides a safeguard against such an injustice in s. 25 and s. 39(3). Section 25 requires the expropriating authority to pay 100 per cent of the market value based on an accompanying appraisal report before taking possession.

[12] Metrolinx submits that regardless of this Honourable Court’s decision on the Landlord’s motion, Metrolinx’s Application as against the Tenants should proceed.

[13] Metrolinx’s main submission opposing an adjournment is that on the basis of the leading case of Toronto (City) v. Bernardo, 2004 CanLII 5760 (Ont. S.C.), the “good faith of Metrolinx and the reasonableness of its offer or not relevant to the issues on these Applications. In that case, a $1.00 offer was made because environmental testing revealed on-site and off-site contamination, the Court granted the City’s Application for a warrant to put down resistance pursuant to the Act. The court held that there was no legal basis by which the respondents could resist possession until the City paid the respondent the amount of compensation it sought. The Court held that:

50 …. The City has complied with the requirement to base its offer under paragraph 25(1)(b) on an appraisal of the market value of the Property and to serve a copy of the appraisal with its offer. There is nothing in that paragraph, however, that prevents the City from reducing the amount of its offer from the appraised value provided it is acting in good faith.

55 Second, as also set out above, the City has satisfied the Court that it has complied with its obligations under the Act in respect of the expropriation process. In particular, there is no suggestion that it did not act in good faith in making the City Offer jointly to Bernardo and the Corporate Respondent under s. 25(1) of the Act.

56 Third, the City has demonstrated that the Respondents' conduct amounts to resisting or opposing possession by the City. In this connection, I agree with the conclusion of McLelland D.C.J. in Saskatchewan Telecommunications that it is not necessary to demonstrate a physical threat to resist or oppose possession for the purposes of s.40

57 Fourth, I see no legal basis by which the Respondents can resist possession until the City agrees to pay the Corporate Respondent the amount of compensation that it seeks.

[14] In the Bernardo case, on which both parties rely, the expropriating authority served its s. 25 offer along with an appraisal report for $242,500. Its offer was for $1.00 because it deducted the costs of remediation for soil contamination. The City based this offer on two environmental reports, in addition to the appraisal report. The evidence was that it was advised by environmental consultants that remediation costs were estimated to exceed $250,000. The Court found that the offer made under s. 25 of the Act need not necessarily match the amount set out in the accompanying appraisal report, but the expropriating authority is required to make its offer “in good faith and with a reasonable basis for its position”. In the circumstances of that case, the Court awarded the authority’s request for a warrant to put down resistance to possession.

[15] On the basis of the reasoning in the Bernardo case, Metrolinx submits that the appropriate forum for determining compensation is the Local Planning Appeal Tribunal (“LPAT”). However, Metrolinx does not address the finding of the court that good faith in the submission of their offer may be relevant.

[16] The Respondent’s submit that Metrolinx did not meet these requirements for a valid s. 25 offer. The Offer was made without any reports or other basis to support a valuation of $1.00. It has provided no reasonable basis for its position on market value and the compensation payable at this stage of the process. Further, unlike the Bernardo case, Metrolinx has not provided the Landlord with any environmental reports setting out what the remediation requirements are estimated at to support its $1.00 valuation. The Supplementary Offer and Memorandum, served six months following the initial Offer, provided no valuation of the Property to support the offer of $1.00. Metrolinx’s appraiser testified that he is not qualified to comment or opine on issues of environmental contamination.

[17] The Respondent’s emphasize that Metrolinx did not provide any valuation to support its offer of $1.00. The only evidence is that of Metrolinx’s appraiser, who testified that he would not likely be able to identify any income-producing properties in the Greater Toronto Area that could be purchased for $1.00 and that he was not able to provide a value for the Property.

[18] There is no evidence on the cost of required remediation to offset the $2,100,000 market value set out in Metrolinx’s appraisal. Such is in contrast to the facts in the Bernardo case upon which Metrolinx relies. There has been no attempt by Metrolinx to value the land as contaminated.

[19] Upon a review of the leading case of Bernardo, it is clear that the issue of Metrolinx’s good faith and the reasonableness of its position is potentially relevant.

[20] For this reason, the court finds that the Respondents have a reasonable basis for their adjournment request.

[21] The court must, however, balance the competing interests of both parties with respect to whether or not to grant the adjournment. In particular, the potential prejudice arising to both sides must be evaluated and balanced. Although Metrolinx has from the very beginning of its request for an urgent Application, during the COVID pandemic, submitted that the issue of whether or not it should be granted possession is urgent, a review of the chronology agreed to by both parties with respect to the events and the delays that have taken place, reveals that any urgency is largely due to Metrolinx’s failure to proceed with its expropriation in a timely manner. There were significant periods of inaction by Metrolinx, with no reasonable explanations other than changes in personnel.

[22] Further, with the assistance of the court through case conferences on an urgent basis during the COVID pandemic, the parties reached an access agreement for Metrolinx, which is in place pending the hearing of these Applications, resulting in a court Order directing the Landlord and Tenant to provide Metrolinx and its agents access to the Property for the purposes of complying with the Ministry of the Environment, Conservation and Parks (“MECP”) Order (the “Access Order”).

[23] Metrolinx has arranged for and conducted environmental testing on the Property pursuant to this Access Order.

[24] The court does note that the Respondents did not proceed with the filing of the appropriate Masters’ motion as a result of Metrolinx’s objection to this adjournment request.

[25] In order to determine the validity and the appropriateness of granting the adjournment request and to ensure that these Applications proceeded as efficiently and expeditiously as possible, it was necessary for this court to hear two days of submissions on the merits of the Applications and to reserve its decision on the adjournment request. The court is now in a position having heard argument with respect to the potential relevancy of the evidence, to find that an adjournment should be granted to permit the parties to bring their refusals motion before a Master.

[26] Although it certainly is in the public interest that the property, which all parties agree is contaminated, be remediated as soon as possible, the Respondents must have the opportunity to lead evidence that the Metrolinx offer was not made in good faith and on a reasonable basis.

[27] The Landlord is therefore directed by 12 p.m. on January 22, 2021, to request a hearing for the earliest available date for a refusals motion before a Master.

[28] When the refusals motion has been adjudicated on, the parties must report to this court, via my assistant, with respect to the amount of time that is required for the continuation of the hearing of these Applications. I reserve costs of this adjournment to the hearing of the Applications.

Pollak J.

Date: January 19, 2021