



COURT OF APPEAL FOR ONTARIO

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

DATE:
    20200804

DOCKET:
    C67508

Rouleau, Hoy and Hourigan JJ.A.

BETWEEN

Shergar
    Development Inc.

Claimant
    by OMB Proceeding/Appellant

(Appellant)

and

The City of Windsor

Respondent
    by OMB Proceeding/Respondent

(Respondent)

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

Heard:
    June 29, 2020, by videoconference

On appeal from the order
    of the Divisional Court (Justices Swinton, Wilton-Siegel, and Sheard JJ.),
    dated April 29, 2019, with reasons reported at 2019 ONSC 2623, 12 L.C.R. (2d)
    214, affirming a decision of the Ontario Municipal Board, dated January 24,
    2018.

Hourigan J.A.:


I.

INtroduction

[1]

This appeal arises from a proceeding wherein the
    respondent expropriated certain property (the Subject Lands) along the
    Detroit River in Windsor owned by the appellant.

[2]

The narrow issues before the court relate to the
    awarding of costs pursuant to s. 32 of the
Expropriations Act
,
    R.S.O. 1990, c. E.26 (the Act). That section specifies certain costs outcomes
    based on an analysis of the amount offered to a claimant versus the amount
    ultimately awarded in an arbitration proceeding. The appellant submits that the
    phrase the amount offered in s. 32 refers exclusively to an offer made under s.
    25 of the Act. The respondents position is that the phrase encompasses subsequent
    offers, such as those that meet the criteria of a r. 49 offer under the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 (the Rules).

[3]

The Ontario Municipal Board (the OMB)
[1]
agreed with the respondents interpretation of s. 32 and the
    Divisional Court upheld its interpretation. The appellants further argument,
    that the OMB does not have the authority under s. 32 to award costs against it,
    was likewise rejected by both the OMB and the Divisional Court.

[4]

As will be explained, I agree with the result
    reached by the Divisional Court in its thorough and compelling reasons for
    decision. In sum, the interpretation advanced by the appellant is inconsistent
    with the text of the Act, its scheme, and its underlying public policy objectives.
    Such an interpretation would also represent an unwarranted and unwise intrusion
    into the discretion provided to the OMB to award costs. Indeed, this case is a
    perfect example of why the OMB must be free to use a costs award to sanction
    inappropriate and wasteful conduct by a claimant during an expropriation
    proceeding. I would, therefore, dismiss the appeal.


II.

Background

[5]

This case has a long and tortuous history spanning
    22 years. The following summary of the factual highlights will provide the
    necessary context to consider the issues on appeal.

[6]

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.

[7]

On April 29, 1998, the respondent expropriated
    the Subject Lands for completion of a waterfront park. The appellant retained
    ownership of the Railcut Lands.

[8]

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 Act (the Section 25 Offer). The
    appellants then counsel advised that his client would accept the offer.

[9]

When the respondent inquired as to the amount of
    the CPRs 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.

[10]

The appellant participated in proceedings at the
    Canada Transportation Agency (the CTA) in 1998. The appellant was of the view
    that the validity of the expropriation depended on whether the Subject Lands
    were a federal undertaking, but the CTA determined that the Subject Lands were
    not a federal undertaking. The appellant then participated in an appeal of that
    order to the Federal Court of Appeal. The appellant rejected the respondents
    efforts to resolve compensation before the Board of Negotiation, preferring
    instead to await the Federal Court of Appeal decision. In 2000, the Federal
    Court of Appeal upheld the CTAs decision that there was no federal undertaking.

[11]

In 2001, the appellant commenced an application
    to challenge the expropriation in the Superior Court on the basis that it was
ultra
    vires
the respondent and done in bad faith. After a 20-day trial, that
    application was dismissed in 2005, and substantial indemnity costs were awarded
    against the appellant with respect to the unfounded allegations of bad faith.
    In 2007, the appellant unsuccessfully appealed the Superior Court order to this
    court, and the costs of the appeal were awarded against it.

[12]

Rather than proceeding to determine its claim
    for compensation under the Act, in 2008 the appellant sued its former lawyers
    who advised on its purchase of the lands for professional negligence. Although that
    claim was resolved in 2011, the appellant took no steps to commence an
    expropriation arbitration until July 5, 2013, when it issued its claim for
    compensation, after the CPR had already issued its own claim earlier that year.

[13]

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 CPRs rights to compensation as determined by the OMB. The respondents offer
    of settlement to the appellant, made on June 2, 2015, was equivalent in value
    to $1,208,155 in compensation for the appellants interest in the Subject Lands
    (the 2015 Offer). The appellant did not accept the 2015 Offer.

[14]

The OMB hearing to determine compensation
    commenced in February 2016. The appellant called two appraisers to provide
    expert evidence of market value, Suzanne de Jong and Ben Lansink, 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 Mr. Lansink's opinion was inadequate, inappropriate
    and unreasonable and his conclusion unreliable.

[15]

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.

[16]

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
, R.S.O. 1990, c. O.28, solely
    on the issues of interest and costs.

[17]

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.

[18]

The appellant appealed the Rehearing Decision to
    the Divisional Court. Regarding costs, the Divisional Court considered the following
    two issues: (a) the determination that the 2015 Offer constituted the amount
    offered by the statutory authority within the meaning of s. 32 of the Act; and
    (b) the Rehearing Boards power to order costs against the appellant as the
    expropriated party.

[19]

The appeal was heard and determined before the
    release of the Supreme Courts decision in
Canada (Minister of Citizenship and Immigration) v.
    Vavilov
, 2019 SCC 65, 441 D.L.R. (4th) 1. On the
    first point, the court noted that the words the amount offered by the
    statutory authority are arguably susceptible of the two interpretations urged
    by the parties. It found the OMBs 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. On
    the second point, the court 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.

[20]

The appellant raises the following issues on
    appeal:

·

Did
    the Divisional Court err in deciding that the reasonableness standard of review
    applies?

·

Did
    the Divisional Court err in upholding the following decisions by the OMB:


i.

The amount offered by the statutory authority
    in s. 32 of the Act refers to any offer made by the respondent, not just an
    offer made pursuant to s. 25; and


ii.

The 2015 Offer was not dealt with in the Act,
    and regard can, therefore, be had to r. 49 of the Rules in exercising the
    Board's discretion under s. 32(2), and costs can be awarded against the
    appellant.

III.

Analysis

(1)

Standard of Review

[21]

This issue may be dealt with summarily. The
    respondent concedes that, in light of the decision of the Supreme Court in
Vavilov
,
    the proper standard of review on the interpretation of the Act is correctness.
    However, the respondent submits that the OMBs exercise of discretion in awarding
    costs under s. 32 of the Act should be reviewed on a standard of palpable and
    overriding error.

[22]

In my view, as I will explain, the OMB correctly
    interpreted s. 32. As to the exercise of the OMBs discretion in ordering
    costs, I agree with the respondent that this exercise of discretion is not
    reviewed on a correctness standard and is afforded significant deference: see
Popack
    v. Lipszyc
, 2016 ONCA 135, 129 O.R. (3d) 321, at para. 25.

(2)

The Decisions of the Board

(i)

Meaning of amount
    offered in s. 32 of the Act

[23]

As a starting point in this analysis, it is
    helpful to consider the full text of s. 32. It provides as follows:

Costs

32
(1) Where the amount to which an owner is
    entitled upon an expropriation or claim for injurious affection is determined
    by the Tribunal and the amount awarded by the Tribunal is 85 per cent, or more,
    of
the amount offered by the statutory authority,
the Tribunal shall
    make an order directing the statutory authority to pay the reasonable legal,
    appraisal and other costs actually incurred by the owner for the purposes of
    determining the compensation payable, and may fix the costs in a lump sum or
    may order that the determination of the amount of such costs be referred to an
    assessment officer who shall assess and allow the costs in accordance with this
    subsection and the tariffs and rules prescribed under clause 44 (d). 2017, c.
    23, Sched. 5, s. 35.

Same

(2) Where the amount to which an owner is entitled upon an
    expropriation or claim for injurious affection is determined by the Tribunal
    and the amount awarded by the Tribunal is less than 85 per cent of
the
    amount offered by the statutory authority
, the Tribunal may make such
    order, if any, for the payment of costs as it considers appropriate, and may
    fix the costs in a lump sum or may order that the determination of the amount
    of such costs be referred to an assessment officer who shall assess and allow the
    costs in accordance with the order and the tariffs and rules prescribed under
    clause 44 (d) in like manner to the assessment of costs awarded on a party and
    party basis. 2017, c. 23, Sched. 5, s. 35. [ Emphasis added]

[24]

The argument advanced by the appellant is that
    the words amount offered refer only to an offer made pursuant to s. 25 of the
    Act. The type of offer contemplated by s. 25 is described in that section as
    follows:

25 (1) Where no agreement as to compensation has been made
    with the owner, the expropriating authority shall, within three months after
    the registration of a plan under section 9 and before taking possession of the
    land,

(a) serve upon the registered owner,

(i) an offer of an
    amount in full compensation for the registered owners interest, and

(ii) where the
    registered owner is not a tenant, a statement of the total compensation being
    offered for all interests in the land,

excepting compensation for business loss for
    which the determination is postponed under subsection 19 (1); and

(b) offer the registered owner immediate
    payment of 100 per cent of the amount of the market value of the owners land
    as estimated by the expropriating authority, and the payment and receipt of
    that sum is without prejudice to the rights conferred by this Act in respect of
    the determination of compensation and is subject to adjustment in accordance
    with any compensation that may subsequently be determined in accordance with
    this Act or agreed upon.  R.S.O. 1990, c. E.26, s. 25 (1); 1993, c. 27, Sched.

[25]

According to the appellant, the OMB could only
    consider the respondents Section 25 Offer when doing its s. 32 costs analysis,
    not the 2015 Offer. It argues that the use of the definitive article the before
    amount offered in s. 32 means that the only offer that could be compared to
    the amount ultimately awarded was the Section 25 Offer of $500,000, which was
    less than the $710,000 awarded by the OMB. In my view, this is an erroneous
    interpretation of s. 32. I say that for the following reasons.

[26]

First, a review of the wording of s. 32 demonstrates
    that it is inconsistent with the interpretation urged on us by the appellant. Section
    32 refers to the amount offered by the statutory authority. It does not refer
    explicitly to s. 25. In contrast, other sections of the Act do refer explicitly
    to s. 25, namely, s. 26 and s. 33(1). Moreover, s. 32 contains a reference to clause
    44(d), which relates to regulations regarding costs. Thus, if the legislature
    intended to restrict the meaning of amount offered in s. 32 to s. 25 offers,
    it would have done so explicitly. As the Divisional Court put it at para. 84 of
    its reasons, 
There is no apparent
    reason why the legislature would not also have referred to s. 25 if the
    intention had been to limit the amount offered by the statutory authority to
    the offer required to be made under that provision.

[27]

Further, s. 32 applies to both expropriation and
    injurious affection cases and refers to the amount offered by the statutory
    authority. But s. 25 refers only to the expropriating authority. These are
    two different defined terms in the Act. The difference is that a statutory
    authority is a person empowered by statute to expropriate land or cause
    injurious affection, but an expropriating authority is a person empowered to
    expropriate land. Given that s. 32 explicitly refers to both expropriation and
    injurious affection, and does not specify that they are to be treated
    differently from one another (in contrast to, for example, s. 26), and given
    that s. 25 is applicable only to expropriation, it is illogical to interpret the
    amount offered by a statutory authority in s. 32 as referring to s. 25 offers
    only.

[28]

Next, the appellants interpretation is
    inconsistent with the process contemplated by the Act. Where no agreement as to
    compensation has been made with the owner, a s. 25 offer must be made within
    three months of the registration of a plan under s. 9 of the Act. This is generally
    before the parties have exchanged affidavits of documents, served expert
    reports, and conducted mediation. As an expropriation case proceeds, the
    expropriating authority may well gain a better understanding of the market
    value of the property in issue and determine that it should make an increased
    offer. A responsible expropriating authority should be afforded some measure of
    costs protection where it makes an increased fair offer, and the claimant
    refuses to accept same.

[29]

This concern is not limited to situations where
    the expropriating authority makes an increased offer based on a higher estimate
    of the propertys market value. Other forms of damages, such as for
    disturbance, may not have fully emerged or crystallized by the time the s. 25
    offer must be made. Just like in the situation where a subsequent offer is made
    based on increased market value, an expropriating authority should be granted
    potential costs protection for cases where a fair offer is subsequently made to
    compensate for related damages, and the claimant refuses to accept the offer
    and elects instead to proceed with an unnecessary arbitration.

[30]

I also note that s. 26 of the Act provides that
    the statutory authority or the owner may require the compensation to be
    negotiated where the statutory authority and the owner have not agreed on the
    compensation and s. 25 has been complied with. The purpose of the negotiation
    is to elicit a further and satisfactory offer. Thus, the Act itself
    contemplates that the s. 25 offer may not be the only offer.

[31]

In summary, the wording used by the legislature
    in s. 25 and in s. 32 does not support the interpretation submitted by the
    appellant. It is also contrary to the process prescribed by the Act. However,
    the appellant advances a broad policy argument in support of its position. It
    relies on the Supreme Courts decision in
Toronto Area Transit Operating Authority v. Dell
    Holdings Ltd
, 1997 CanLII 400 (SCC), [1997] 1
    S.C.R. 32, at paras. 19 and 21, where the court commented that the Act is a
    remedial statute enacted for the specific purpose of adequately compensating
    those whose lands are taken to serve the public interest and that it must be
    given a broad and liberal interpretation consistent with its purpose.
    Substance, not form, is the governing factor.

[32]

There is no question that the policy purpose
    identified in
Dell
must guide the interpretation of the Act by both
    the OMB and the courts. However, that is not the only policy objective of the
    Act. Even on the appellants interpretation of s. 32, the Act clearly allows
    potential cost consequences if a landowner refuses a s. 25 offer that engages
    s. 32(2). The remedial and compensatory purpose of the Act does not in itself
    rule out cost consequences for refusals of reasonable offers. As this court
    stated in
Re Rotenberg et al. and Borough of York (No. 2)
, 1976 CanLII
    735 (ON CA), 9 L.C.R. 289, at p. 295, another objective of the Act is to encourage
    settlement of claims at as early a stage as possible.

[33]

As noted by the Divisional Court, at para. 102,
    these policy imperatives are not incompatible:

More generally, I also think that the
Act
can reasonably [be] interpreted, as the Rehearing Board did, as reflecting a
    balance between the equally important objectives of full compensation to a
    claimant and the just determination of compensation in an expeditious and cost
    effective manner with a concomitant encouragement of negotiation to promote
    early settlement.

[34]

It is an extraordinary thing for the state to
    seize an innocent partys 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.

[35]

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.

[36]

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

(ii)

Rule 49 and the
award
of
costs against
the
appellant

[37]

The appellant submits that the OMB erred in
    applying r. 49 when it made its costs award. The underlying premise of that
    submission is incorrect. The OMB did not apply r. 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. However, as the respondent concedes, and the
    Divisional Court found at para. 106, that is not what the OMB ordered. It 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.

[38]

What the OMB did, quite appropriately, in my
    view, was draw upon r. 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.

[39]

The appellant further submits that the awarding
    of costs against a claimant in an expropriation proceeding is a new and
    undesirable precedent. However, as this court stated some 44 years ago in
Rotenberg
,
    at p. 296,

in the context of a claim for injurious affection:

On the other hand, if the authority makes a
    minimal offer in order to retain the opportunity
of
having
    an award
of
costs made to it, and the Board allows
no
compensation to the claimant, then it is reasonable
    that the Board be able to award costs to the authority, because in such a case
    it would have been the claimant who was acting in an unreasonable manner.
    However, in making such award, the Board should also have regard to such
    factors as the timing
of
the offer by the Board and
    to all the equities
of
the situation.

Thus, it has long been contemplated
    that a claimant who unreasonably refuses an offer of settlement may be ordered
    to pay costs to a statutory authority.

[40]

Further, this case serves as an example of why
    the OMB must retain discretion to award costs against a claimant. It is
    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.

[41]

This conduct is worthy of censure. The appellants
    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.

IV.

Disposition

[42]

The appeal is dismissed. The appellant shall pay
    the respondent its costs of the appeal, fixed in the agreed-upon, all-inclusive
    sum of $50,000.

Released: P.R. August 4, 2020

C.W. Hourigan J.A.

I agree.
Paul Rouleau J.A.

I agree. Alexandra Hoy J.A.





[1]
For clarity, this decision refers to
    the OMB throughout, despite the eventual creation of the Local Planning Appeal
    Tribunal, because these proceedings commenced in the OMB.


