News

Unprecedented yet Contemplated: Awarding Costs in Expropriation

 Shergar Development Inc v Windsor (City), Ontario Court of Appeal, 2020

On August 4, 2020 the Ontario Court of Appeal upheld the Divisional Court’s decision that costs can be awarded to the expropriating statutory authority under section 32 of the Expropriations Act (the “Act”) for settlement offers that were unreasonably rejected. Generally, cost awards are based on the amount of the section 25 offer made by the expropriating authority and are at the Tribunal’s discretion. This decision expands the Tribunal’s ability to apply costs awards.

The Respondent, the City of Windsor (“Windsor”), expropriated the Appellant, Shergar Development Inc.’s (“Shergar”) lands along the Detroit River in Windsor creating two issues for the Ontario Court of Appeal:

1. Whether the Divisional Court erred in finding that the reasonableness standard applies; and
2. Whether the wording “the amount offered by the statutory authority” in section 32 of the Act refers to an offer made by Windsor that was not made under section 25 of the Act.

The Ontario Court of Appeal upheld the Divisional Court and the Ontario Municipal Board’s decision finding that Shergar’s interpretation is inconsistent with the text, scheme and public policy objectives of the Act. The Court found that the decision was reasonable, and section 32 of the Act does refer to a subsequent offer made by an expropriating authority as well as an offer made under section 25 of the Act.

Background

The case has a history that has spanned  22 years. Shergar acquired the Subject Lands from the Canadian Pacific Railway Company (CPR) in 1995. Windsor expropriated the Lands for completion of a waterfront project in 1998. Shergar caused months of delay by not granting Windsor access to the Lands. Windsor offered compensation to Shergar and CPR jointly, in accordance with section 25(1) of the Act, for $500,000. Even after Shergar’s counsel advised that they would accept the offer, Shergar refused to cooperate causing further delay. This resulted in this section 25 offer being withdrawn.

Shergar then participated in Federal litigation against Windsor and after receiving unfavourable outcomes, commenced an expropriation arbitration in 2013. In 2015, Windsor made another offer to Shergar equivalent in value to $1,208,155 (“the 2015 Offer”), which Shergar did not accept. A proceeding was started under the Ontario Municipal Board to determine the amount of compensation. The Board determined that Shergar’s interest in compensation was only $266,832. However, the Board still awarded Shergar the costs of the proceeding causing Windsor to seek a rehearing on interest and costs. The Board then concluded that the most recent offer constituted the amount offered by the statutory authority and granted costs in favour of Windsor following the date of the 2015 Offer. Shergar appealed this decision to the Divisional Court.  The Divisional Court found the Board’s interpretation reasonable. Shergar further appealed to the Ontario Court of Appeal.

The Court of Appeal awarded the Board’s decision significant deference. They dismissed the appeal finding that the Board interpreted the Act correctly. The Court (and the Board before it) focused on determining the legislative intent of section 32 of the Act by looking at the text, the scheme and the public policy objectives.

Text of the Act

First, the wording of section 32 refers to “the amount offered” by the statutory authority. It does not refer explicitly to section 25 as Shergar argued. This is contrasted with other sections of the Act that do refer explicitly to section 25. The Court concludes that if the legislature had intended this narrow application of section 32, they would have done so explicitly as is the case for sections 26 and 33(1).

Second, section 32 applies to both expropriation and injurious affection cases whereas section 25 only refers to “expropriating authority”, defined as a person empowered to expropriate land. This is contrasted with the wording “statutory authority” in section 32 which is defined as a person empowered by statute to expropriate land or cause injurious affection. Because section 32 refers to both expropriation and injurious affection and does not specify that they be treated differently, the Court states that it is illogical to interpret “the amount offered by a statutory authority” in section 32 as referring to section 25 offers only.

Scheme of the Act

Shergar’s interpretation is also inconsistent with the process contemplated by the Act. A section 25 offer must be made within 3 months of registration of a plan under section 9 of the Act and this is often too soon for an expropriating authority to fully understand the property’s market value. The expropriating authority should be afforded some measure of costs protection where it makes an increased, fair offer and the claimant refuses to accept it. The expropriating authority should also be able to be compensated for related damages when the claimant refuses to accept the offer and elects instead to proceed with unnecessary arbitration.

Public Policy Objectives of the Act

Lastly, Shergar uses Dell Holdings to make a public policy argument. The Court agrees that the Act is remedial and should be interpreted broadly and liberally, however, this is not the only policy objective of the Act. The remedial nature of the Act does not in itself rule out cost consequences for refusals of reasonable offers. Another objective of the Act is to encourage settlement of claims as early a stage as possible. These objectives are not incompatible.

Conclusion

The Court emphasizes that an innocent party whose property is taken must be fully compensated and the party will not generally have to bear costs for reasonably disagreeing with the amount offered for that taking, even where the offer exceeds the ultimate award by a considerable margin. However, at the very least, there must be a potential for adverse cost consequences where the claimant forces a wholly unnecessary proceeding or otherwise acts unreasonably.

The objective of full and fair compensation cannot be divorced from the objective of the efficient resolution of claims. Shergar’s interpretation would permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the Board’s resources, safe in the knowledge that unreasonable refusals of subsequent offers cannot adversely affect its entitlement to legal costs.

While Shergar submits that awarding costs against a claimant in an expropriation proceeding is a new and undesirable precedent, it has always been contemplated that a claimant who unreasonably refuses an offer of settlement may be ordered to pay costs to a statutory authority (This is seen 44 years ago, in Rotenberg).

The Court of Appeal found that Shergar inexplicably refused an offer equivalent to $1,208,155 when their interest was limited to $266,832. Shergar also frustrated and delayed the determination of the issue of the appropriate compensation to be awarded to the subject lands. The Court ruled that this conduct is worthy of censure. Shergar’s actions resulted in significant delay and frustration, wasting the Board’s valuable time.

Questions?  Contact Ava Kanner  or Mark Flowers

On July 21, 2020, and just prior to the legislature rising for its summer recess, the Provincial government passed the recently introduced COVID-19 Economic Recovery Act (“Bill 197”) which represents a step towards Ontario’s plan for growth, renewal and economic recovery made necessary due to the ongoing pandemic.  Bill 197 is an omnibus bill which proposes to amend 20 statutes and was introduced by Premier Ford who described it as necessary to “rebuild the Province and get people back to work”.

Several of the statutes to be amended will be of particular interest to those in the municipal and land development sector and include the Building Code Act, the Planning Act, the Development Charges Act, the Municipal Act, the Ministry of Municipal Affairs and Housing Act, the City of Toronto Act and the Environmental Assessment Act.

A brief summary of some of the Bill 197 highlights is provided below.

Building Code Act

• Provisions of the Building Code Act are amended granting regulation making authority to the Minister of Municipal Affairs and Housing (the “Minister”) and no longer the Lieutenant Governor in Council;
• The Minister may make regulations by adopting documents by reference;
• The intent of these amendments is to streamline parts of the building codes to harmonize them intraprovincially and to enable the Province to respond faster to construction sector needs.

Planning Act

In 2019, the Province, through the passage of the More Homes, More Choice Act (“Bill 108”) and the Plan to Build Ontario Together Act, proposed significant amendments to the Planning Act as it related to community benefits and development charges (“DC”) and its parkland dedication regime.  However, these changes were not brought into force.  Bill 197 now rolls back many of Bill 108’s would-be changes, for example:

Community Benefits Charges (CBC’s)

• Sections 37 and 37.1 of the Planning Act are repealed and replaced, including the current section 37 agreement process;
• A CBC can not be imposed, amongst others, on development or redevelopment applications that have fewer than five storeys, fewer than 10 residential units, redevelopment that proposes to add fewer than 10 residential units to an existing building or structure, and other developments as are prescribed;
• A CBC can be imposed for public recreational purposes, provided that the capital costs for same are not also being charged pursuant to a development charge by-law under the Development Charges Act e. no double dipping;
• A local municipality can impose a CBC by-law and only one such by-law may be in effect in a municipality at a time;
• A CBC by-law must be subject to public consultation and is appealable to the Local Planning Appeal Tribunal (the “Tribunal”);
• The maximum CBC payable cannot exceed a yet-to-be prescribed percentage of the value of land as of the valuation date, which may be paid under protest;

Parkland Dedication

• The current system by which municipalities obtain parkland (and not the system proposed by Bill 108) will be generally maintained particularly in relation to the alternative parkland rate that applies to higher density residential development;
• Public consultation is required prior to passing a by-law that sets an alternative parkland dedication rate which still cannot be set at a rate greater than one hectare for each 300 dwelling units proposed where land is to be conveyed or one hectare for each 500 dwelling units for payments in lieu;
• An alternative parkland dedication by-law can be appealed to the Tribunal. Limits have also been imposed on the Tribunal’s decision-making powers which make clear that the Tribunal cannot amend the by-law so as to increase the alternative parkland rate or payment in lieu required; and
• Existing parkland dedication by-laws will expire two years after these changes come into force.

Ministerial Powers

• Bill 197 expands Ministerial power as it relates to “specified land”, which is generally defined as land other than land in the Greenbelt Area (which includes areas covered by the Oak Ridges Moraine Conservation Plan, areas covered by the Niagara Escarpment Plan and areas described in the regulations made under the Greenbelt Act, 2005);
• The Minister will have enhanced order-making powers to:
  • Confirm that site plan control does not apply to all or part of the specified land;
  • Address inclusionary zoning and require the provision of affordable housing;
  • Require an owner of land to enter into agreements with a municipality related to, amongst other things, conditions required for the approval of a development project as well as the drawings and plans related to same.

Development Charges Act

Bill 197 expands the list of services for which a DC can be imposed from the list that had been furnished in Bill 108.  The expanded list now includes, amongst others:

• By-law enforcement and court services;
• Services related to public health and emergency preparedness;
• Child care and early years programs; and
• Housing services.

Bill 197 rolls back some amendments first proposed by Bill 108 and does not permit the charging of a DC for the acquisition of lands for parks.  Double dipping of charges for services as between the Development Charges Act and the Planning Act is not permitted.

The proposed amendments permit services to be included in classes, whereas they were previously grouped into categories. Existing DC by-laws that include certain services can remain in force for up to two years.

Ministry of Municipal Affairs and Housing Act

Bill 197 formally establishes a Provincial Land and Development Facilitator (the “Provincial Facilitator”). The functions of the Provincial Facilitator are to advise and make recommendations to the Minister in respect of land use and other matters, including, but not limited to, Provincial interests.

Municipal Act and the City of Toronto Act

Bill 197 amends the Municipal Act and the City of Toronto Act by repealing existing rules and enabling municipal Clerks and Councils to amend procedural by-laws as they relate to electronic participation. Bill 197 permits members of Council, committees and local boards to participate electronically in meetings which may be open or closed to the public and to be counted for the purpose of determining a quorum.  This dispenses with the need to be physically present at a particular venue.  In essence, Bill 197 makes the temporary measures implemented to respond to the COVID-19 emergency permanent.

Council members, in accordance with processes established by the municipal Clerk, will be able to appoint a proxy Councillor to act on their behalf during a meeting by voting, questioning or speaking.  Specific rules apply with respect to the appointment of a proxy Council member.

Bill 197 also sets out rules relating to the fulfillment of temporary council vacancies under section 267 and 268 of the Municipal Act and prohibits Councillors who have declared a pecuniary interest from appointing a proxy with respect to the item(s) in question.

Concluding Remarks

Many of the Bill 197 amendments referred to above came into force upon Royal Assent, which occurred on July 21, 2020.  Certain amendments to the Development Charges Act and Planning Act will not come into force until a date to be identified by proclamation.

The team at Davies Howe would be delighted to answer any questions you may have pertaining to the Bill 197 amendments and how they may affect your current and future development projects.

On July 2^nd, the Tribunal released a Video Hearing Guide that applies to all electronic hearing events. Though the Guide may be changed without notice, suggesting it is a work in progress, it sheds much needed light on how video hearings should be conducted.

While the guidelines contain a series of best practices and preparation tips for successfully using video conferencing technology, perhaps the most important thing to remember is that participants in a video hearing should treat the process with the same decorum and gravity they would an in-person hearing.

Video hearings may be independently directed from the LPAT, or requested by a Party or Parties in a proceeding. However, not every case is suitable for a video hearing, and Parties are able to object to a request for one.

Video hearings will be normally made accessible to the public, and individuals may obtain hearing details on request from the assigned Tribunal case coordinator.

Tribunal video hearings will be generally conducted using GoToMeeting. All participants in a video hearing should review the best practices contained in the Guide to prepare as best as possible for the conduct of an orderly hearing.

Due to the ongoing COVID-19 outbreak and associated Emergency Order, the Local Planning Appeal Board (“LPAT”) is continuing operations, though in a modified format.

The LPAT is not currently scheduling hearings of new appeals, though we understand it is working toward that objective. In contrast, the LPAT is scheduling video and hybrid hearings for certain ongoing matters.

Aside from the telephone conference calls, which have long been used by the LPAT to address procedural aspects of a case, the LPAT has now held some hearings via video conference. Video conferences are exclusively digital and take place through a video conference provider, such as GoToMeeting.

Hybrid hearings have both a physical and digital element. The Tribunal Member, witness giving evidence, witnesses’ counsel and cross-examining counsel are all in one room, up to a set maximum occupancy. Another room, or rooms, are used as overflow space for other counsel or witnesses expecting to give evidence that same day. All others, such as registered participants or members of the public, are able to attend via a livestream video conference.

Based on emergent practice, there are several factors the LPAT will consider in assessing the suitability of holding a virtual or hybrid hearing. For virtual hearings, the degree of public interest and number of participants is a key consideration. Additionally, the complexity of the issues and associated importance of in-person evidence, in assessing the credibility of a witness, is also a consideration for virtual hearings. Other typical factors include the convenience of the format, its probable efficiency, accessibility (e.g. to the internet) and the risk of prejudice arising from the hearing format. Similar factors apply to hybrid hearings, with the added need to have suitable hearing space available.

While we understand that the LPAT is looking at how in person hearings can be resumed, we do not anticipate the return of more regular in-person hearings until Ontario has moved further along in the reopening process and most likely not until sometime in 2021.

As for a return to “business as usual” at the LPAT, it’s too soon to tell whether the digital practices will be discarded altogether or whether we can look forward to a new, more digital, era.

To date, the Toronto Local Appeal Body (“TLAB”) has postponed all hearings and suspended all filing deadlines between March 16, 2020, through to and including August 14, 2020. As a result, the TLAB will reschedule those hearings that were postponed. It is expected that the rescheduled hearings will follow the typical timelines provided for in the TLAB’s Rules of Practice and Procedure.

As a general rule, the TLAB has suspended, and will not schedule any hearing events, including electronic hearings. The exceptions are settlement hearings, single party variance only appeals, and electronic hearings where the parties agree and the presiding Panel Member overseeing the matter consents.

When requesting an electronic hearing, Parties and Participants will be asked to complete a survey that assesses the technological capacity of attendees. Where attendees have the technological means to engage in an electronic hearing, in our experience, the electronic hearing will likely be scheduled.

Upon resumption of regular service, those with postponed hearings will be issued a new Notice of Hearing setting out the procedural steps that must be completed before the Hearing date.

It should be noted that the TLAB may make exceptions where compelling circumstances warrant; however, we anticipate such circumstances to be very rare.

On June 15, 2020, the Province amended O.Reg. 149/20, which provides for the suspension of various Planning Act timelines for the duration of the Declaration of Emergency, via amending O.Reg. 278/20. This amendment will come into force on June 22, 2020, and serves to terminate the suspension of timelines in O.Reg. 149/20 effective on that date. Any timelines that did not end prior to March 17 are only suspended until June 22, 2020; in other words, the clock stopped running on March 17, 2020 and will resume on June 22, 2020, resulting in a ‘pause’ of 97 days.

Notice

Decision notices for most Planning Act instruments, including Official Plans and Official Plan Amendments, Zoning By-laws and Zoning By-law Amendments, Plans of Subdivision, Consents, and Community Planning Permits, given on or after February 26, 2020 and before April 15, 2020 are deemed not to have been completed. Any such decision notices and decision notices not yet sent out for decisions made on or after March 2, 2020 and before April 15, 2020 must be given no later than 15 days after June 22, 2020.

Decision notices with respect to Minor Variance applications that were made on or after February 26, 2020 and before April 15, 2020 must be given no later than ten days after June 22, 2020 irrespective of whether notice has already been effected. The 20-day appeal period in s. 45(12) of the Planning Act is expanded to be 20 days after receiving (or re-receiving) the notice.

Interim Control By-laws (“ICBLs”)

The expiry date of ICBL’s that were in effect on March 17, 2020 and had not been repealed prior to April 15, 2020 has been extended by the number of days between March 17, 2020 and June 22, 2020, or 97 days. Similarly, if an ICBL was in effect on March 17, 2020 and does not expire before June 22, 2020, the by-law is deemed to remain in effect after the day it would otherwise expire for a period of 97 days.

On June 17, 2020, The Province announced the creation of a new cluster of tribunals – the “Ontario Land Tribunals”, effective July 1, 2020.

Marie Hubbard has been appointed Executive Chair of the “Ontario Land Tribunals”, which includes the following adjudicative tribunals:

1. Board of Negotiation
2. Conservation Review Board
3. Environmental Review Tribunal
4. Local Planning Appeal Tribunal
5. Mining and Lands Tribunal

This change essentially restores the prior cluster of tribunals known as the “Environment and Land Tribunals Ontario (“ELTO”) with the exception of the Assessment Review Board. The team at Davies Howe will continue to monitor legislative and regulatory changes as they relate to land use planning and development.

On June 16, 2020, the Province posted two proposals on the Environmental Registry of Ontario (the “ERO”) related to its proposed changes to the Growth Plan. The proposal for the proposed amendments to the Growth Plan is found here and the proposal for the proposed Land Needs Assessment Methodology (the “Methodology”) is found here.

The proposed changes, which are currently open for public comment until July 31, 2020, include updates and policy changes to the population and employment forecasts, a change to the Growth Plan horizon year, adjustments to the aggregates policy framework, new policies to address Major Transit Station Areas (“MTSAs”) within Provincially Significant Employment Zones (“PSEZs”), and other policy revisions to support an increase in housing supply, create more jobs, attract business investment, and better align infrastructure.

A link to the proposed amendments and background materials can be found here.

Proposed Amendments to the Growth Plan

The proposed amendments extend population and employment forecasts to 2051, from 2041 currently, to ensure municipalities have sufficient land to support the creation of complete communities. The amendments specify that that municipalities must use the forecasts in the Growth Plan, found in Schedule 3, or higher forecasts determined through a Municipal Comprehensive Review (“MCR”) process with a conformity deadline of July 2022.

Further, the proposed amendments address Provincial objectives related to intensification surrounding MTSAs and would allow conversions of employment areas to non-employment areas within a PSEZ outside of an MCR that is located within an MTSA in order to allow for mixed-use developments to be approved more quickly. The amendments also outline the next steps to be taken in evolving PSEZ policies and how these areas can be used to support the post-COVID economic recovery, attract investment, and support the retention and expansion of manufacturing activity.

With regard to transition, it is contemplated that any Local Planning Appeal Tribunal matter where a hearing has been completed but a decision has yet to be issued would remain subject to the Growth Plan as it read prior these amendments but that all other matters would be required to conform to the Growth Plan as proposed to be amended.

Proposed Land Needs Assessment Methodology

Every municipality in the Greater Golden Horseshoe, as part of an MCR, must utilize the Methodology to assess the quantity of land required to accommodate forecasted growth. The proposed Methodology offers a simplified approach that will be forward looking and account for demographics, employment trends, market demand, and housing affordability.  The Methodology emphasizes that municipalities must have enough land with servicing capacity to provide at least a three-year supply of residential units, and that they must plan to maintain the ability to accommodate residential growth for at least 15 years, consistent with the 2020 Provincial Policy Statement.

The Methodology contains a Community Land Area Land Needs Assessment used for housing, population-related jobs and office jobs and an Employment Area Land Need Assessment for all various types of employment.

When planning for community areas, municipalities must:

• Use the population and employment forecasts contained in Schedule 3 for planning and managing growth, as a minimum;
• Direct development to settlement areas, except where the policies permit otherwise;
• Plan to achieve minimum intensification and designated greenfield area density targets;
• Support the achievement of complete communities that offer and support opportunities for people of all ages and abilities to conveniently access most of the necessities for daily living, including an appropriate mix of jobs, local stores, and services, a full range of housing, transportation options and public service facilities;
• Consider the range and mix of housing options and densities of the existing housing stock and plan to diversify housing options in the future, including additional residential units and affordable housing, to serve all sizes, incomes and ages of households; and
• Plan for a more compact built form that reduces the rate at which land is consumed and supports the integration and sustained viability of transit services.

When planning for employment, municipalities must:

• Within settlement areas, make more efficient use of existing employment areas, vacant and underutilized employment lands, and increase employment densities;
• Direct major office and appropriate institutional development to urban growth centres, major transit station areas and other strategic growth areas with existing or planned frequent transit service;
• Direct retail and office uses to locations that support active transportation and have existing or planned transit;
• Prohibit or establish a size and scale threshold to prohibit any major retail exceeding this threshold in employment areas; and
• Provide for economic activity on rural lands that is appropriate in scale and type to the rural context.

The team at Davies Howe would be delighted to answer any questions you may have pertaining to the proposed amendments to the Growth Plan and how it may affect your current and future development projects.

The Minister of Municipal Affairs and Housing (the “Minister”) has announced that he intends to end the temporary suspension of Planning Act timelines implemented through O.Reg. 149/20 on June 22, 2020. Please click here for a copy of the communication from the Minister.

We will provide an update when the Minister issues more details on how the suspension will be lifted and how timelines will resume.

The Divisional Court, in a February 25, 2020 decision stemming from an appeal of a decision of the Local Planning Appeal Tribunal (the “LPAT”), largely upheld the LPAT’s decision to award disturbance damages for lost real estate commissions and costs associated with a loan in an expropriation matter.

The circumstances of the case are that the City of Toronto expropriated a number of adjacent properties owned by the appellants in 2014, the valuation of which was appealed to the LPAT. The appellants had previously submitted a development application seeking a 14 storey residential building that had not yet been approved. The City had initially offered the appellants $9,000,000, which was further revised to $14,000,000 before the hearing and $17,000,000 at the hearing, although only $9,000,000 was paid to the appellants prior to the expropriation proceedings.

The LPAT, in addition to valuing the property at $18,000,000 – double the amount the City initially offered – awarded damages to the landowner incurred as a result of delay by the City in the form of interest on the $9,000,000 that remained outstanding as the proceedings occurred. The LPAT’s decision was largely upheld in a positive development for those seeking damage awards in expropriation matters.

In summation, the Divisional Court found that:

• There was no error in the LPAT’s valuation of the property at $18,000,000;
  • The LPAT determined this value based upon the “direct comparison approach”, which utilizes comparable property sales in the vicinity of the expropriated lands to arrive at a valuation, as opposed to the more rarely used “residual approach”, which values the proposed development as if it were complete and subtracting the costs of construction.
  • The LPAT rejected the appellants argument that the residual approach should be used, stating that it was only appropriate where development was imminent, which was not the case as there were further steps in the planning process that had to be taken before being “shovel ready”.
• There was no error in the LPAT’s finding that the City of Toronto caused delay in expropriating the property and should pay 12% interest on the outstanding expropriation amount;
  • The main factor in this aspect of the decision was that the City had only paid $9,000,000 to the appellants despite revising their valuation to $14,000,000 prior to the hearing and $17,000,000 during the hearing.
  • The LPAT determined that the start date for interest accrual would be the date on which the City paid the $9,000,000 to the appellants.
• There was no error in the LPAT’s decision to award disturbance damages for the Appellant’s lost commissions but to not award disturbance damages for the Appellant’s lost business opportunities;
  • The LPAT awarded $2,100,000 in lost real estate commissions to the appellants, which they would have received for pre-construction sales if the properties had not been expropriated, because this loss was directly tied to the expropriation.
• There was no error in the LPAT’s decision not to award disturbance damages for the cost of purchasing alternative properties
  • The appellants argued that they should receive disturbance damages for the cost of buying a replacement property, which they claimed would include the land transfer tax and legal fees associated with the purchase.
  • The Divisional Court agreed that this claim should be dismissed because the appellants had not yet purchased or made arrangements to purchase an alternative property.

This decision furthers the ability for landowners to receive damage awards in expropriation cases and largely exalted the LPAT’s decision-making in a high stakes expropriation case.

Our team at Davies Howe is at the forefront of expropriation matters in Ontario and would be happy to assist you in receiving fair treatment during an expropriation proceeding.

If you have any expropriation related questions, please contact Ava Kanner (416) 263-4503.