



COURT OF APPEAL
    FOR ONTARIO

CITATION: TRG-KFH (Lakeside) Inc. v. Muskoka Lakes
    (Township), 2019 ONCA 443

DATE: 20190528

DOCKET: C65923 (M50384)

Sharpe, Roberts and Nordheimer JJ.A.

BETWEEN

TRG-KFH (Lakeside) Inc.

Applicant (Appellant)

and

The Corporation of the
    Township of Muskoka Lakes and Neil Donald, Chief Building Official for the
    Corporation of the Township of Muskoka Lakes

Respondents (Respondents)

Scott Hutchison and Mark Strychar-Bodnar, for the
    appellant

Harold Elston and William Thomson, for the respondents

Heard: May 15, 2019

On appeal from the judgment of Justice Thomas Wood of the
    Superior Court of Justice, dated September 6, 2018, with reasons reported at 2018
    ONSC 5193.

Nordheimer J.A.:

[1]

TRG-KFH (Lakeside) Inc. appeals from the order of the application judge dismissing
    its application for an order declaring that its property is not affected by the
    Townships Interim Control By-Law (ICBL). The sole exception is that the
    application judge did, effectively on consent, declare that a portion of the ICBL
    that stipulated that said existing use shall only be permitted if it is
    conducted entirely within a building in existence on the date of the enactment
    of this by-law was of no force or effect.

Background

[2]

The facts surrounding the issues raised in this appeal are largely not
    in dispute. The Village of Minett (Minett), lies within the Township of
    Muskoka Lakes (the Township). Minett has historically been a resort destination
    but it has recently experienced increased pressure to develop. This pressure
    arises from the fact that major economic and tourism changes have occurred in
    the past decades. While once dozens of historic inns and resorts existed in
    Minett, and on the three main Muskoka Lakes (Joseph, Rosseau, and Muskoka),
    barely a handful exist today. In their place, properties that once housed
    large, tourist-oriented resorts have been re-purposed into large private
    residences.

[3]

As these resorts become harder to sustain, many former proprietors have
    sought to re-develop their property for the more lucrative cottage market, or
    sold their properties to developers.

[4]

The appellant owns one such property in Minett on Lake Rosseau. Prior to
    the appellant acquiring this property, it was used for many years as a summer
    tourist lodge. The lodge began operation in 1937, as Leefholms Resort. It was
    renamed Lakeside Lodge in 1945, and ceased operation in 2008 when it was sold
    to the appellants predecessor in title, 2116249 Ontario Inc. (2116249). The
    lodge operation consisted of a main building, a number of sleeping cabins, and
    some recreational facilities including tennis courts and docks. The property
    has been zoned resort commercial since the Township was first incorporated.

[5]

Sometime after the property's purchase by 2116249, it was used as a
    dormitory to house staff working at other nearby resorts. This use went on for
    a number of years while 2116249 negotiated redevelopment plans with the
    Township. It was proposed to develop the property as a condominium with 43
    stand-alone residential units to be rented to tourists on a short term basis,
    together with some recreational features as common elements. The condominium aspect
    of the development has not as yet been approved. That application is the
    subject of a proceeding ongoing before the Local Planning Appeal Tribunal
    (formerly the Ontario Municipal Board).

[6]

Between 2014 and 2017, three site plan agreements for this development
    were submitted to, and tentatively approved by, the Township. However, each of
    those agreements lapsed, as 2116249 was unable to fulfil the conditions
    required for their final approval and registration.

[7]

A fourth site plan was negotiated and thereafter approved by the
    Townships Council on March 16, 2017 (the site plan agreement). The appellant
    acquired title to the property after the site plan agreement was approved, but
    before it was registered on title on September 28, 2017.

[8]

The site plan agreement governs the proposed construction of 43
    residential units, an office, and a number of recreational amenities including
    a dock, a boathouse with second storey clubhouse, a beach area, a swimming
    pool, a fire pit area, pavilions, amenity areas and trails (the development).

[9]

Contemporaneously with this approval, the Township issued a demolition
    permit for the removal of all buildings on the property. The appellant
    completed this work to the Townships satisfaction. It also commenced
    servicing work for the property, which included significant earthworks, the
    installation of sanitary storm sewers, installation of water mains, the
    installation of roads and other related works. The appellant then applied for,
    and was granted, building permits for the first 11 condominium units.
    Construction on these units has progressed to the extent that concrete footings
    have been poured. The servicing work for the property is now substantially
    complete.

[10]

Independent
    of these events, the Township discovered, in early 2018, that some of the
    polices contained in an earlier Official Plan Amendment had not been carried
    forward into a comprehensive amendment to the Townships Official Plan, adopted
    by Council on March 17, 2009, and approved with modifications by the District
    of Muskoka on November 16, 2009.

[11]

As a
    consequence of this discovery, on April 13, 2018, the Townships Council
    requested that the District of Muskoka and the Township initiate a joint and
    in-depth review of the site-specific Official Plan polices for Minett in both
    the Township and District of Muskoka Official Plans.

[12]

About
    a month later, on May 18, 2018, at a meeting of the Townships Council, one
    councillor introduced a motion to pass the ICBL. The introduction of the ICBL
    was initiated at the behest of members of two local associations  the Friends
    of Muskoka and the Muskoka Lakes Association.
The appellant
    was the only developer with a project in the midst of construction in the area
    captured by the ICBL at the time of its enactment.
No notice was given
    to the appellant that an ICBL was going to be proposed, nor to any other
    property owner potentially affected by the ICBL. Indeed, the record shows that
    the planning staff for the Township had only heard about the ICBL after
    business hours the day before the Council meeting. No planning input was sought
    from the planning staff respecting the ICBL, nor was the Director of Planning asked
    for his input prior to passage of the ICBL.

[13]

The
    ICBL purports to restrict the permitted use of land within the designated
    area to the use lawfully existing on the date of its enactment. As noted
    above, the ICBL went on to further qualify any lawfully existing use, stating
    [s]aid existing use shall only be permitted if it is conducted entirely within
    a building in existence on the date of its enactment.

[14]

Prior
    to the passing of the ICBL, the appellant had filed applications for 15
    additional building permits. When the appellant requested the issuance of one
    of those additional building permits after the ICBL had been passed, the Chief
    Building Official refused to issue it, or any of the other building permits, because
    of the existence of the ICBL.

[15]

The
    appellant took the position that its development was protected as a legal
    non-conforming use under ss. 38 and 34 of the
Planning Act
, R.S.O.
    1990, c. P.13. After initial entreaties to Township Council failed, the appellant
    commenced an application to quash the ICBL and to appeal the decision of the Townships
    Chief Building Official not to issue any additional building permits after the
    passing of the ICBL.

The decision below

[16]

As I
    noted at the outset, the application judge dismissed the appellants
    application with one small exception  namely, his order that the portion of
    the ICBL stipulating that stating any lawful existing use shall only be
    permitted if it is conducted entirely within a building in existence on the
    date of the ICBLs enactment was of no force or effect.

[17]

In
    dismissing the application, the application judge rejected the contention that
    the ICBL had been passed in bad faith: see paras. 26-28. The application judge
    also found that the use of the property on May 18, 2018 was akin to that of
    vacant land being developed for the first time and thus was not exempted from
    the ICBL by virtue of s. 34(9)(a) of the
Planning Act
: at para. 32. The
    application judge added that, if he was incorrect in his conclusion regarding
    use, the use of the property on May 18, 2018 was so remote from the original
    protected activity that it would not be protected under s. 34(9)(a): at para.
    33. The application judge did not address whether the appellants property was
    exempt from the ICBL by virtue of s. 34(9)(b).

Preliminary issue  motion to quash

[18]

Before
    I begin my analysis on the main issue, I need to address a preliminary matter. By
    virtue of s. 38(1) of the
Planning Act
, an interim control by-law has
    a maximum term of one year. On April 12, 2019, the Townships Council passed an
    extension to the ICBL for a further one year period. In doing so, however, the
    Townships Council removed the appellants property from the scope of the ICBL.

[19]

As a
    result, the respondents brought a motion to quash this appeal on the basis that
    the appeal was moot.
[1]
We heard the motion at the outset of the appeal, reserved our decision, and
    then proceeded to hear the appeal.

[20]

I
    would dismiss the motion to quash for two reasons. First and foremost, in
    addition to bringing its application to quash the ICBL, the appellant has
    commenced an action for damages against the Township for breach of contract and
    for conspiracy to harm the appellant. In defence of that claim, the Township
    relies on the decision of the application judge. Indeed, in paragraph 13 of its
    statement of defence, the Township pleads:

In reply, the Township pleads and relies upon Justice Woods
    findings of fact and law in its defence of the within claim.

[21]

Consequently,
    the import of the application judges decision is still very much a live issue
    between the appellant and the Township regardless of the fact that the
    appellants property has now been removed from the scope of the extended ICBL.

[22]

On
    the hearing of the motion, counsel for the respondents was asked if the
    Township would undertake to amend its statement of defence to remove any and
    all reliance on the decision of the application judge in its defence of the
    claim. Counsel said it would. While that, at first blush, might appear to address
    the issue, counsel for the appellant submitted, and I agree, that removal of
    the references to the decision does not remove the impact of the decision
    itself. Even if the Township does not raise the issue of the application
    judges decision, the trial judge might properly raise it of his or her own
    motion.

[23]

On
    that basis alone, this appeal ought not to be dismissed as moot.

[24]

The
    second reason is the same one that led this court to hear the appeal in
Equity
    Waste Management of Canada v. Halton Hills (Town)
(1997), 35 O.R. (3d) 321
    (C.A.), where Laskin J.A. said, at p. 325:

Because of their limited duration, interim control by-laws will
    rarely come before this court for consideration. For this reason, and because
    our decision may affect the rights of the parties in the civil proceedings, we
    concluded that we should hear the appeal: see
Borowski v. Canada (Attorney
    General),
[1989] 1 S.C.R. 342 at p. 360, 57 D.L.R. (4th) 231.

Analysis

[25]

At
    the hearing, the appellant submitted that the application judge made three
    errors in reaching his decision:

1.

He erred in his determination of the use to which the appellants
    property was being put when the ICBL was passed on May 18, 2018, and therefore
    erred in finding that the appellants property was not exempt under s. 34(9)(a)
    of the
Planning Act
;

2.

He failed to consider the effect of the fact that the Chief Building
    Official had issued building permits for 11 units of the development and that
    those units were already being built, and therefore erred in not finding that
    the appellants property was exempt under s. 34(9)(b) of the
Planning Act
;

3.

He failed to apply his equitable jurisdiction under the
Building
    Code Act
,
1992
, S.O. 1992, c. 23.

[26]

In
    my view, this appeal can be resolved on the basis of the second asserted error,
    such that the other two asserted errors do not need to be addressed. I earlier
    noted that the application judge failed to address this issue in his decision. His
    failure to do so constitutes an error.

[27]

In
    considering this issue, it will be helpful to first set out two sections of the
Planning Act
. Section 38 of the
Planning Act
deals generally
    with interim control by-laws. More specifically, s. 38(8) reads:

Subsection 34(9) applies with necessary modifications
    to a by-law passed under subsection (1) or (2).

[28]

Section
    34 of the
Planning Act
deals generally with zoning by-laws. In that
    regard, s. 34(9) reads:

No by-law passed under this section applies,

(a) to prevent the use of any land, building or
    structure for any purpose prohibited by the by-law if such land, building or
    structure was lawfully used for such purpose on the day of the passing of the
    by-law, so long as it continues to be used for that purpose; or

(b) to prevent the erection or use for a purpose
    prohibited by the by-law of any building or structure for which a permit has
    been issued under subsection 8(1) of the
Building Code Act, 1992
,
    prior to the day of the passing of the by-law, so long as the building or
    structure when erected is used and continues to be used for the purpose for
    which it was erected and provided the permit has not been revoked under
    subsection 8(10) of that Act.

[29]

The
    appellant had received 11 building permits for the construction of 11 of the
    proposed 43 units that form the core of the development. The appellant had applied
    only for 11 building permits because it intended to build the 43 units in
    phases and because there is a cost in applying for the permits. In furtherance
    of this plan, and as I earlier noted, the appellant had subsequently filed
    applications for an additional 15 building permits. There is no dispute that the
    appellant commenced construction of the 11 units prior to the passage of the
    ICBL. There is also no dispute that these 11 building permits remain valid.

[30]

The
    appellant takes the position that the development has to be viewed as a whole
    and that, for the purposes of s. 34(9), the issuing of 11 building permits is
    equivalent to the issuance of a building permit for the entire development. It
    should be noted, on this point, that each of the building permits, both those issued
    and those applied for, refer to the same legal description for the property.
    Further, there is no suggestion that there is any reason why further building
    permits would not have been issued in the same fashion as the first 11 permits,
    but for the existence of the ICBL.

[31]

I
    repeat, on this point, that the development  and the site plan agreement
    entered into by the Township and the appellant  envisages the construction not
    of 11 units or even 43 units, but also a building for the management of the development,
    along with all of the amenities related to the development, including a
    swimming pool and a dock, to which I referred above.

[32]

In
    response, the respondents submit that there was nothing that prevented the
    appellant from proceeding to complete the 11 units and operate its development with
    just those units. More specifically, the respondent says that s. 34(9)(b) only
    protects buildings or structures for which a person actually has in hand a building
    permit at the time that an interim control by-law is passed, and not for any other
    buildings or structures for which they do not have building permits.

[33]

In
    my view, the respondents position places an overly narrow and legalistic interpretation
    on s. 34(9)(b),  one that ignores the practical realities of the situation
    surrounding the appellants development.

[34]

In
    interpreting s. 34(9)(b), the words are to be read in their entire context and
    in their grammatical and ordinary sense harmoniously with the scheme of the
Planning
    Act
, the object of the
Planning Act
, and the intention of the Legislature:
Rizzo & Rizzo Shoes Ltd. (Re),
[1998] 1 S.C.R. 27, at para. 21.
    Further, the words of the statute should be given a broad and purposive
    interpretation. As noted in
United Taxi Drivers' Fellowship of Southern
    Alberta v. Calgary (City)
, 2004 SCC 19, [2004] 1 S.C.R. 485, at para. 8:

A broad and purposive approach to the interpretation of
    municipal legislation is also consistent with this Court's approach to
    statutory interpretation generally.

[35]

As
    already mentioned, the appellants development has various different elements.
    Those elements are all integrally related to the development as a whole. They
    cannot reasonably be treated in isolation, one from the other. Further, all of
    these elements are part of the site plan agreement that the Township entered
    into with the appellant. For example, the site plan agreement requires the
    appellant to have management facilities on site. Drawings showing the location
    of the units and the other amenities are schedules to the site plan agreement.

[36]

Put
    simply, the 11 buildings for which the appellant has building permits are properly
    regarded as constituent elements of an integrated whole. The site plan
    agreement specifies the design and location of each of those constituent
    elements including the 43 units. The respondent had given the appellant
    permission to proceed with the construction of that integrated whole. Before
    the 11 permits were issued, the appellant obtained a demolition permit and had
    embarked upon extensive work to install the services that were required for the
    development as a whole. The respondent would not have issued permits to build
    11 buildings on a stand-alone basis. The permits were only issued because the
    11 buildings were constituent parts of an integrated whole. The appellant could
    not have altered its plan and build only 11 buildings without placing itself in
    breach of the site plan agreement. In light of that reality, it is somewhat
    disingenuous for the Township to argue that the appellant could proceed with
    just the 11 units for which it obtained building permits when, if it did so, it
    would breach the very obligations that the Township required from the appellant
    under the site plan agreement.

[37]

This
    case is similar to the situation that was presented by
Kim v. Mississauga
    (City)
(1996)
,
33 M.P.L.R. (2d) 135 (Ont. Gen. Div.). Mr. Kim wanted
    to build a coin operated car wash. He applied for a building permit for the car
    wash and a separate building permit for site servicing. The latter building
    permit was issued and Mr. Kim proceeded to undertake the site servicing. Due to
    objections by other property owners, the City of Mississauga issued an interim
    control by-law prior to Mr. Kim receiving the building permit for the car wash.
    Mr. Kim then brought an application for a declaration that the interim control
    by-law did not prevent him from building the car wash.

[38]

The
    application judge ordered the City to issue the building permit that Mr. Kim
    needed to build the car wash. In so deciding, the application judge found that because
    a building permit had been issued for part of the car wash, the entire project
    was captured by s. 34(9)(b). The application judge said, at para. 79:

In the result, the CBO was in error in refusing to issue the
    further building permit to complete the car wash which the applicant seeks to [build]
    at 1459 Lakeshore Road East, Mississauga, Ontario. That was the only building,
    using the ordinary natural grammatical meaning of a building, in respect of
    which "a" permit was issued. The declaration will therefore go that
    the ICB cannot be used to prevent the erection of that car wash building.

[39]

I appreciate
    that courts are generally loathe to interfere with the decisions of
    municipalities regarding the use to which lands should be put within their boundaries.
    However, in approaching issues such as are presented here, two factors must be
    kept in mind. One is that interim control by-laws are a special remedy given to
    municipalities for a particular purpose. That purpose was described in
Equity
    Waste Management
by Laskin J.A. at p. 338:

An important purpose of interim control by-laws is to permit a
    municipality to change its mind, to reconsider its land use policies. Whether
    an area is suitably zoned, whether development should be suspended in the
    public interest, and whether proposed projects are compatible with a
    municipality's long range planning objectives are matters to be decided by
    municipal councils, not by courts.

[40]

However,
    as Laskin J.A. also observed in
Equity Waste Management,
there must be
    a planning justification for the interim control by-law: at p. 339. In this
    case, no genuine planning justification was advanced by the Township. Indeed,
    the Director of Planning for the Township acknowledged, in cross-examination,
    that he was not asked by the Township Council for his advice or opinions on the
    ICBL before it was passed. Rather, this ICBL appears to fall within that
    category of interim control by-laws that was described by the Ontario Municipal
    Board in
Scarborough (City) Interim Control By-law 22169-81, Re
(1988), 22 O.M.B.R. 129:

Interim control by-laws are extraordinary remedies given to
    cities and their application must be done with extreme caution. In this case,
    there was no rationale behind the [
sic
] passing this by-law other than
    to appease angry ratepayers and delay development of the site. There are no
    planning principles involved here that would justify the City of Scarborough's
    action.

[41]

On
    that point, I would reiterate that the appellants development had been the
    subject of negotiations in four different site plan agreements over more than
    three years. It had also been the recipient of demolition permits and 11
    building permits, and was the subject of significant site servicing work, all
    undertaken with the express approval of the Township. There is nothing in the
    record before this court to suggest that there were any legitimate and existing
    planning concerns regarding this development proceeding on the property as agreed.

Conclusion

[42]

I
    would allow the appeal, set aside the order below, and in its place grant an
    order declaring that the Property, and the development thereon, is not affected
    by the ICBL by operation of ss. 38(8) and 34(9)(b) of the
Planning Act
.

[43]

The
    appellant is entitled to its costs of the appeal fixed in the agreed amount of
    $70,732.59, inclusive of disbursements and HST. These costs include costs thrown
    away from the respondents abandoned cross-appeal relating to the costs below
    and the costs of the motion to quash the appeal.

[44]

If
    the parties cannot agree on the appropriate disposition of the costs of the
    original application, they may make written submissions on that issue. The
    appellant shall file its submissions within 15 days of the date of this decision
    and the respondents shall file their submissions within 10 days thereafter. No
    reply submissions are to be filed. Each of the submissions shall not exceed
    five pages in length.

Released: RS May 28, 2019


I.V.B.
    Nordheimer J.A.


I agree. Robert J. Sharpe J.A.

I agree.
L.B. Roberts J.A.






[1]

I note that one does not quash an appeal for mootness. Rather,
    the appeal would be dismissed for mootness.


