Court File and Parties

COURT FILE NO.: 22/649

DATE: 2022/20/07

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: The Corporation of the Municipality of Strathroy-Caradoc, Applicant

AND: The Corporation of the Township of Adelaide-Metcalfe, Respondent

BEFORE: Justice A. K. Mitchell

COUNSEL: C. Brandow, for the Applicant

M. Polvere and P. Lombardi, for the Respondent

HEARD: July 13, 2022 via videoconference.

ENDORSEMENT

OVERVIEW

[1] The applicant, The Corporation of the Municipality of Strathroy-Caradoc (the “applicant” or “Strathroy-Caradoc”) provides water and sewerage services to buildings located along County Road 81 in the geographic boundaries of the respondent (the “service area”), The Corporation of the Township of Adelaide-Metcalfe (the “respondent” or “Adelaide-Metcalfe”).

[2] These services were first provided pursuant to an agreement between the parties dated October 1, 2003 (the “original agreement”). Through the exercise of an option to renew contained in the original agreement, the original agreement was renewed for a five-year term by agreement dated October 1, 2013 (the “renewal agreement”) and thereafter extended a further 6 months. At the end of the renewal term as extended, the parties engaged in negotiations which ultimately proved unsuccessful. Despite the failed negotiations, Strathroy-Caradoc has continued to provide (without interruption) water and sewage treatment services to the service area.

[3] The original agreement contained a clause which permitted the parties to arbitrate the negotiation of an agreement through the Ontario Land Tribunal (“OLT”). The clause required notice of request for arbitration to be served within 12 months of the expiry of the renewal period.

[4] On April 29, 2022, Adelaide-Metcalfe requested that Strathroy-Caradoc proceed to arbitration with respect to establishing the terms of a new agreement between them. Strathroy-Caradoc refused to arbitrate a new agreement and objected to the OLT’s jurisdiction claiming their jurisdiction expired 12 months following the expiry of the renewal period. Shortly thereafter, Strathroy-Caradoc commenced this application.

[5] On this application, Strathroy-Caradoc seeks declaratory relief as follows:

(a) a declaration that the original agreement and the renewal agreement have expired and are of no force and effect since April 1, 2019; and

(b) a declaration that Adelaide-Metcalfe is not entitled to approve, allow, permit, or make any new connections to the applicant’s water mains and sanitary sewer systems located within the service area.

[6] Strathroy-Caradoc also seeks the following interim relief:

(a) an interim, interlocutory order enjoining Adelaide-Metcalfe from approving, allowing, permitting, or making any new connections to the applicant’s water mains and sanitary sewer systems located within the service area;

(b) an interim, interlocutory order requiring Adelaide-Metcalfe to continue paying to Strathroy-Caradoc a sewage treatment charge at the rate provided for in the renewal agreement for so long as the existing connections to Strathroy-Caradoc’s sewer system remain in place and Strathroy-Caradoc continues to provide sewage treatment services to properties within the geographic boundaries of Adelaide- Metcalfe; and

(c) an interim interlocutory order that Strathroy-Caradoc continues and shall continue to have rights of inspection, examination, and maintenance of the existing shared water service system and sewer systems including connections to those systems while those services continue to be shared.

[7] This application was precipitated by Adelaide-Metcalfe’s stated intention to connect three new developments to Strathroy-Caradoc’s systems. These developments relate to:

(a) a 90-room “Holiday Inn Express” hotel (the “hotel connection”);

(b) an A-Z Storage Inc. facility (the “A-Z connection”); and

(c) raw land owned by 2789234 Ontario Inc. (Doug Cuddy) slated for future development (the “Cuddy connection”).

[8] This application was first returnable before the court on May 27, 2022. On that date, Garson J. made an interim interim without prejudice order until July 8, 2022 (the “Garson J. Order”):

(a) prohibiting Adelaide-Metcalfe from making the connections relating to the three proposed developments; and

(b) requiring Adelaide-Metcalfe to secure an expedited jurisdiction hearing date before the OLT.

[9] In compliance with the Garson J. Order, the jurisdiction hearing before the OLT was expedited and conducted on June 28, 2022. The OLT released their decision on July 4, 2022 (the “OLT ruling”) granting Adelaide-Metcalfe’s motion and:

(a) finding that the OLT has jurisdiction under the provisions of the Municipal Act, 2001, based upon the terms of the original agreement and the subject matter of the parties’ dispute, to hear and resolve the issues raised in the Request for Arbitration dated April 19, 2022[^1]; and

(b) subject to any order of the court made in connection with this application, ordering Strathroy-Caradoc to facilitate and issue all permits necessary to provide connections to the water and sewerage services in the service area relating to the Cuddy connection, the hotel connection and the A-Z connection.

[10] By further order of the court made July 8, 2022, the interim, interim relief granted pursuant to the Garson J. Order was extended and the application was adjourned to July 15, 2022.

[11] This application came before me on July 15, 2022. On that date, only the applicant’s claim for continued interim injunctive relief was before the court. The issues raised in the relief requested in subparagraphs 1(a) and 1(b) of the Notice of Application together with the threshold issue of the court’s jurisdiction to determine these issues in light of the OLT ruling, were adjourned to a hearing on September 12, 2022.

ANALYSIS

[12] The applicant’s request for interim relief, both injunctive and mandatory, is found in subparagraphs 1(c)-(e) of the Notice of Application. Adelaide-Metcalfe consents to the interim relief requested by Strathroy-Caradoc in subparagraphs 1(d)[^2] and (e). With respect to subparagraph 1(c), Adelaide-Metcalfe consents to the interim relief requested provided the Cuddy connection, the hotel connection and the A-Z connection are exceptions to the general prohibition against making new connections to the applicant’s water supply and sanitary sewer systems.

[13] Pursuant to s. 101 of the Courts of Justice Act, the court may grant an interlocutory injunction where it appears it would be just or convenient to do so. The test for granting injunctive relief is well-established. The applicant must satisfy the following three criteria: (i) there is a serious issue to be tried; (ii) the applicant would suffer irreparable harm if the injunction were refused; and (iii) the balance of convenience favours the granting of the injunction.[^3]

Serious Issue to be Tried

[14] The threshold is low in order to satisfy the first prong of the R.J.R.-MacDonald test where the injunctive relief will not amount to a final determination of the merits as is the case here. Both the jurisdictional issue raised by the OLT ruling and the issues raised with respect to the existence and enforcement of the original agreement appear, at this preliminary stage, to be serious issues requiring the court’s determination.

[15] Specifically, both the original agreement and the renewal agreement have specific terms which appear to have expired. Both agreements contain an arbitration clause permitting arbitration if requested within a specified period of time. The notice of request for arbitration appears to have been issued beyond the specified period of time provided for in the agreements.

[16] I find that the relief sought on this application raises serious issues to be tried. Consequently the applicant has satisfied the first prong of the R.J.R.-MacDonald test.

Irreparable Harm

[17] The applicant raises a number of areas of potential liability which it submits that, without an agreement governing their continued provision of services to Adelaide-Metcalfe, will expose the applicant and its members of Council and municipal staff to damage claims.

[18] The respondent raises a single objection to the requested interim relief. Specifically, Adelaide-Metcalfe objects to an order prohibiting the new connections relating to the already approved development proposals i.e., the Cuddy connection, the A-Z connection and the hotel connection. The respondent does not object to a general prohibition on new connections to the applicant’s water and sewage systems provided these three new connections are excepted from that general prohibition.

[19] Given the very narrow scope of the respondent’s objection to the requested interim relief, the applicant must establish irreparable harm flowing from the connection of these three new connections to its systems.

[20] The applicant acknowledges that its water and sewage treatment systems have the capacity to safely and adequately provide water and sewage treatment services to these three new developments. Furthermore, the consent interim relief[^4] ensures that the applicant will be compensated for the services it provides to Adelaide-Metcalfe, including the services it provides to the three new developments. This consent relief also grants the applicant a right to inspect, examine and maintain its systems located in the service area and all connections, including the connections relating to the three new developments.

[21] The applicant further acknowledges that if successful on this application, a protocol or plan must be developed to ensure the orderly transition of the provision of water and sewage treatment services by Strathroy-Caradoc to Adelaide-Metcalfe or another service provider. Strathroy-Caradoc acknowledges it cannot simply disconnect the existing connections to the buildings located in the service area and immediately stop providing water and sewage treatment services to residents of Adelaide-Metcalfe located within the service area. The applicant argues that increasing the number of connections by three will ultimately increase the time and potential cost to the applicant with respect to the orderly transition of services because once connected these connections cannot be easily disconnected. No evidence of such harm is before the court. Furthermore, there is no evidence before the court that any harm is “irreparable” and incapable of being compensated through a monetary award of damages.

[22] I find the applicant has failed to establish on a balance of probabilities that it will suffer irreparable harm should these three new connections be permitted.

Balance of Convenience

[23] Having found that the applicant has failed to satisfy the second prong of the R.J.R.-MacDonald test, it is unnecessary to consider the third and final prong. However a complete analysis of the issue, including the third prong of the test, is required in the circumstances. Consequently, I will consider whether the balance of convenience favours the granting or the refusal of the requested interlocutory order.

[24] The parties are public bodies having statutory duties to ensure the protection of the public. If granted, the interim injunction requested by the applicant would not only impact on the interests of the respondent but would also directly negatively impact the interests of the private citizens involved in the proposed developments requiring the three new connections. Those affected parties are not before the court and their interests are not directly represented at this hearing. This court has an obligation to ensure all parties with an interest in the outcome of a proceeding, have their interests considered.

[25] Therefore, I find that, in the circumstances, the balance of convenience favours permitting the three new connections and denying the injunctive relief to the extent such relief is opposed by Adelaide-Metcalfe.

DISPOSITION

[26] An interim interlocutory order shall issue on the following terms:

1. The respondent, the Corporation of the Township of Adelaide-Metcalfe is hereby enjoined from approving, allowing, permitting, or making any new connections to the applicant’s water supply (water mains) and sanitary sewer systems in the service area set out in Schedule “A” to the Notice of Application, including not to approve site plans which contemplate such connections, until and unless there is a new agreement for the sharing of the sewage and water public utility services entered into between the applicant and the respondent or until further order of the court save and except that the hotel connection, A-Z connection and the Cuddy connection (collectively, the “Permitted Connections” ) are hereby expressly exempt from the application of this provision.

2. The respondent, The Corporation of the Township of Adelaide-Metcalfe, shall continue to pay to the applicant a sewage treatment charge of $0.74 per cubic meter for sewage treated (2013 rate), subject to increase annually based on the principles established and the calculation set out in Schedule “C” of an agreement between the applicant and respondent regarding sharing of sewer and sewage treatment services approved by the Council of the applicant on December 3, 2013 for so long as the existing connections, including the permitted connections, to the sewer system of the applicant, The Corporation of the Municipality of Strathroy-Caradoc remain in place and the applicant, The Corporation of the Municipality of Strathroy-Caradoc continues to provide sewage treatment services to properties within the service area set out in Schedule “A” to the notice of application.

3. The Corporation of the Municipality of Strathroy-Caradoc shall continue to have rights of inspection, examination, and maintenance of the existing shared water service system and sewer systems, including all existing connections and the Permitted Connections, while those services continue to be shared.

[27] If the parties unable are unable to reach an agreement on the issue of costs, I will receive written submissions as follows:

(a) Adelaide-Metcalfe shall serve and file its submissions not to exceed five pages in length (exclusive of any Costs Outline, time dockets and case law) within 14 days;

(b) Strathroy-Caradoc shall serve and file its responding submissions not to exceed five pages in length (exclusive of any Costs Outline, time dockets and case law) within 14 days thereafter; and

(c) Reply submissions, not exceeding two pages in length, if any, shall be served and filed within 7 days thereafter.

“Justice A. K. Mitchell”

Justice A. K. Mitchell

Date: July 20, 2022

[^1]: These are the same issues raised in this application. [^2]: Subject to the relief being restricted to the service area rather than the geographic boundaries of Adelaide-Metcalfe, generally. [^3]: R.J.R.-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 SCR 311 (“R.J.R.-MacDonald”) at pp. 334 – 335, 338; and R. v. Canadian Broadcasting Corp. 2018 SCC 5 at para. 12. [^4]: Subparagraphs 1(d) and (e) of the Notice of Application dated April 28, 2022.