Court of Appeal Summaries (August 3 – 7, 2020)

Please find below our summaries of the civil decisions of the Court of Appeal for Ontario for the week of August 3 to 7, 2020.

Shergar Development Inc. v. Windsor (City) confirms the power of the then OMB to award costs against a party whose land is expropriated when that party fails to accept a reasonable settlement offer made by the expropriating authority and takes unreasonable positions.

In Walia v. 2155982 Ontario Inc., the Court upheld a motion judge’s determination that an interest clause in a mortgage was unenforceable pursuant to section 8 of the Interest Act because the interest rate increased subsequent to default under the mortgage.

Becker v. Walgate deals with the determination of a property line between waterfront properties.

Finally, in Grasshopper Solar Corporation v. Independent Electricity System Operator, a breach of contract case, the Court discusses the doctrines of estoppel by convention and promissory estoppel.

 

Shergar Development Inc. v. Windsor (City), 2020 ONCA 490

[Rouleau, Hoy and Hourigan JJ.A.]

Counsel:

John Doherty, Anne Tardif, Roberto Aburto and Michelle Cicchino, for the appellant

Stephen Waqué, Gabrielle Kramer, Patrick Brode, Julie Lesage and Andrew Baker, for the respondent

Keywords: Administrative Law, Municipal Law, Land Use Planning, Expropriations, Statutory Interpretation, Civil Procedure, Costs, Offers to Settle, Expropriations Act, R.S.O. 1990, c. E.26, ss. 25, 32, Ontario Municipal Board Act, R.S.O. 1990, c. O.28, s. 43, Rules of Civil Procedure, Rule 49, Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, Popack v. Lipszyc, 2016 ONCA 135, Toronto Area Transit Operating Authority v. Dell Holdings Ltd, [1997] 1 S.C.R. 32, Re Rotenberg et al. and Borough of York (No. 2), 1976 CanLII 735 (ON CA),

Facts:

This case has a long and tortuous history spanning 22 years, and involves the expropriation by respondent of the “Subject Lands” along the Detroit River in Windsor owned by the appellant.

On December 8, 1995, the appellant acquired the Subject Lands and another parcel of land (the “Railcut Lands”) from the Canadian Pacific Railway Company (the “CPR”) for a total consideration of $750,000. The CPR took back a mortgage in the amount of $562,500. On April 29, 1998, the respondent expropriated the Subject Lands for completion of a waterfront park. The appellant retained ownership of the Railcut Lands. On December 21, 1998, after months of delay because the appellant would not grant access to the Subject Lands, the respondent served a joint offer of compensation on the appellant and the CPR in the amount of $500,000, in accordance with s. 25(1) of the Ontario Municipal Board Act (the “Section 25 Offer”). The appellant’s then counsel advised that his client would accept the offer. When the respondent inquired as to the amount of the CPR’s security interest in order to allocate the compensation between the CPR and the appellant, the appellant refused to cooperate. It maintained that it was not required to provide an allocation of compensation between itself and the CPR. The failure of the appellant to provide this information frustrated the ability of the respondent to pay out the Section 25 Offer and resulted in the acceptance of the Section 25 Offer being effectively withdrawn.

After various intervening proceedings in both the Federal Court and the Superior Court, the appellant finally took steps to commence an expropriation arbitration on July 5, 2013, when it issued its claim for compensation, after the CPR had already issued its own claim earlier that year. The respondent later made individual offers of settlement to each of the CPR and the appellant. The CPR accepted the offer of $400,000 made to it. In exchange, the respondent obtained an assignment of all of the CPR’s rights to compensation as determined by the OMB. The respondent’s offer of settlement to the appellant, made on June 2, 2015, was equivalent in value to $1,208,155 in compensation for the appellant’s interest in the Subject Lands (the “2015 Offer”). The appellant did not accept the 2015 Offer.

The OMB hearing to determine compensation commenced in February 2016. The appellant called two appraisers to provide expert evidence of market value who valued the Subject Lands at $3,937,000 and $5,150,000 respectively. In its May 25, 2016 decision, the OMB rejected the evidence of the appellant's appraisers, and stated it was concerned that neither appraiser had “fulfilled their duty to provide the Board with opinion evidence that [was] fair, objective and non-partisan,” and that one of the opinions was “inadequate, inappropriate and unreasonable” and his conclusion “unreliable”.

The OMB found that the Subject Lands’ value was $710,000, consistent with the respondent's appraisal evidence. The OMB concluded that the amount owed to the CPR for its mortgage interest in the Subject Lands was $443,167 and that the appellant's residual interest in the compensation was $266,832.

The OMB awarded the appellant its costs of the proceeding. The respondent successfully sought a rehearing before the OMB pursuant to s. 43 of the Ontario Municipal Board Act, solely on the issues of interest and costs. In its decision on the rehearing (the “Rehearing Decision”), the OMB concluded that the 2015 Offer constituted “the amount offered by the statutory authority” and granted costs in favour of the respondent following the date of the 2015 Offer.

The appellant appealed the Rehearing Decision to the Divisional Court. The Divisional Court found the OMB’s decision to be reasonable, relying on the fact that s. 32 also applies to “no land taken” (injurious affection) claims, for which the statutory authority is not required to serve an s. 25 offer. The Divisional Court also concluded that the OMB acted reasonably in awarding costs against an expropriated party. The court held that the purpose of the discretion afforded to the OMB under s. 32 is to encourage an expeditious settlement of claims on an equitable basis.

Issues:

1. Did the Divisional Court err in deciding that the reasonableness standard of review applies?
2. Did the Divisional Court err in upholding the following decisions by the OMB:
   1. The “amount offered by the statutory authority” in s. 32 of the Ontario Municipal Board Act refers to any offer made by the respondent, not just an offer made pursuant to s. 25; and
   2. The 2015 Offer was not dealt with in the Ontario Municipal Board Act, and regard can, therefore, be had to Rule 49 of the Rules of Civil Procedure in exercising the Board's discretion under s. 32(2), and costs can be awarded against the appellant.

Holding:

Appeal dismissed.

Reasoning:

1. No. The proper standard of review with respect to the interpretation of the Ontario Municipal Board Act was correctness. However, the exercise of discretion to award costs is afforded considerable deference, and is not subject to a standard of review of correctness.
2.  
   1. No. The Court disagreed with the appellant’s interpretation that s. 32 of the Ontario Municipal Board Act only applies to offers made by a statutory authority under s. 25 of that Act. The OMB therefore was not restricted to only considering the Section 25 Offer, and not the 2015 Offer in deciding costs. The wording used by the legislature in s. 25 and in s. 32 does not support the interpretation submitted by the appellant. That interpretation was also contrary to the process prescribed by the Act.

It is an extraordinary thing for the state to seize an innocent party’s property. The Act must be interpreted so that the party whose property is being expropriated is treated fairly and its claim dealt with expeditiously, either through an agreement between the parties or as the result of an arbitration proceeding. A claimant receives all of its reasonable costs even if awarded as little as 85% of what the statutory authority offered. To potentially lose this entitlement, a claimant must reject an offer that significantly exceeded the ultimate award. Even in that scenario, costs lie at the discretion of the OMB.

An innocent party whose property is taken must be fully compensated, and it will not generally have to bear its costs for reasonably disagreeing with the amount offered for that taking, even where the offer exceeds the ultimate award by a considerable margin. But the statutory protection provided by the Act is not a blank cheque that permits a claimant to act unreasonably. 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.

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

2. No. The OMB did not apply Rule 49. If it had, then the appellant would have only been entitled to costs on a partial indemnity scale to the date of the 2015 Offer, and thereafter the respondent would receive its partial indemnity scale costs. Instead, the OMB concluded that the appellant would receive its solicitor-client costs up to the date of the 2015 Offer and that the respondent would receive its partial indemnity costs after that. What the OMB did, quite appropriately, was draw upon Rule 49.10(2) to inform its analysis regarding the criteria for a proper offer, concluding that it must be certain, understandable, and open at the commencement of the hearing. It correctly found that the 2015 Offer met these criteria. The OMB then made an order in keeping with the jurisprudence under the Act, awarding the applicant its solicitor-client costs up to the time of the 2015 Offer. The awarding of costs against a claimant in an expropriation proceeding was not a new and undesirable precedent. Costs orders in favour of statutory authorities have been contemplated for decades.

This case served as an example of why the OMB must retain discretion to award costs against a claimant. It was undeniable that the appellant frustrated and delayed the determination of the issue of the appropriate compensation to be awarded for the expropriation of the Subject Lands. In addition, the appellant inexplicably refused an offer that was equivalent in value to $1,208,155, when its interest was limited to $266,832. This conduct was worthy of censure. The appellant’s actions resulted in significant delay and obfuscation, wasting the OMB's valuable time. Suggesting that the OMB cannot control its processes by awarding costs against a claimant in these circumstances would be contrary to the Act's policy objective of encouraging early settlement of claims on an equitable basis.