Court of Appeal overturns Gilmor v. NVCA decision - confirms discretionary powers of Conservation Authorities

The Ontario Court of Appeal has now released its decision in the Gilmor v. Nottawasaga Valley Conservation Authority case, which was on appeal from the Divisional Court.  This decision is an important one in defining the power of Conservation Authorities in Ontario to decide when landowners may or may not develop properties that fall within the geographic jurisdictions of the Authorities.  In this particular case, a husband and wife wanted to build a house on a property at the edge of a floodplain and were denied permission by the NVSA (and, on appeal, by the Commissioner), even though there was already a garage on the property and houses built on neighbouring properties.

The main reason stated by the Commissioner for denying permission was that the driveway that would have led to the house might not be safe (in certain possible severe flood conditions, although there was already a existing driveway on the property).  The Commissioner's view was that safety was part of the regulatory authority to control flooding under the Conservation Authorities Act, and that her discretion to approve the development proposal in this case should not be exercised because of safety concerns.

The Divisional Court had disagreed with the Commissioner on both fronts.  The Divisional Court was of the opinion that safety could not be an overriding factor in the decision to approve or deny permission to develop where there were no concerns about flood control (and the landowners' proposal in this case would not have an effect on flooding).  Furthermore, the Divisional Court disagreed with the Commissioner that there was any sufficient reason for concern about safety in connection with the proposed development.  I reported on the Divisional Court's decision in an earlier blog post: Divisional Court Decision.

In its rejection of the Commissioner's decision, the Divisional Court also put forward its own interpretation of the development permission provisions in the Conservation Authorities Act legislation and regulations.  Importantly for landowners, the Divisional Court confirmed that there is not necessarily an absolute prohibition on development within areas regulated by Conservation Authorities.  The prohibitions in the legislation and regulation are generally subject to the possibility of obtaining permission from the Conservation Authorities.  For instance, the regulation in this case provided:

2. (1) Subject to section 3, no person shall undertake development or permit another person to undertake development in or on the areas within the jurisdiction of the Authority …

3. (1) The Authority may grant permission for development in or on the areas described in subsection 2 (1) if, in its opinion, the control of flooding, erosion, dynamic beaches, pollution or the conservation of land will not be affected by the development.

In the opinion of the Divisional Court, it was in fact a prerequisite of the prohibition on development stated in Subsection 2(1) that the Conservation Authority be of the opinion that the development would affect the control of flooding, erosion, dynamic beaches, pollution or the conservation of land.  In this particular case, since those potential effects were not present, the Conservation Authority (and, on appeal, the Commissioner) had no authority to prohibit development.  Again, safety concerns alone could not justify the prohibition.

The Court of Appeal has now overturned the decision of the Divisional Court and restored the Commissioner's original decision.  Writing for the Court, Justice Huscroft makes the following points:

• the Divisional Court's reading of Subsection 3(1) of the Regulation as being a prerequisite to the prohibition on development in Subsection 2(1) is wrong; the starting point is that development within certain regulated areas is prohibited; but a person wishing to develop may apply to the Conservation Authority for permission to develop and the Conservation Authority must exercise its DISCRETION to approve or deny a development REASONABLY;
• the listing of specific relevant factors (effect on control of flooding, etc.) in Subsection 3(1) does not mean that related factors such as safety for persons and property (which is related to and is a reason for flood control measures) cannot be the basis for the exercise of the discretion;
• the standard of review on appeal from the Commissioner is a standard of "reasonableness", not "correctness" as was applied by the Divisional Court, and the Commissioner's findings on safety in relation to the property and the development were entitled to deference;
• The Divisional Court's task in conducting the reasonableness review was "not to weigh the evidence, reach its own judgment, and then use that judgment as a benchmark for assessing the reasonableness of the Commissioner's decision";
• "It may be that, as the Divisional Court noted, a Timmins storm is unlikely to occur, but it cannot be said that the Commissioner's concerns about access to and egress from the site in the event of such a storm were unreasonable."

Where does that leave landowners?  Conservation Authorities will no doubt be emboldened by this reaffirmation by the Court of Appeal of the discretionary authority to approve or deny development permits.  The exercise of discretion must be reasonable, but the Court of Appeal has likely signaled that the range of possible reasons for denying a development permit is broader rather than narrower.  The reasons cited for denying permission may go beyond the factors named specifically in the regulations (i.e. control of flooding, erosion, dynamic beaches, pollution or the conservation of land); the question will be what level of relatedness there will have to be between those enumerated factors and the factors considered by a Conservation Authority for a decision to be "reasonable".

The Court of Appeal's decision also signals that it may be very difficult in the future to bring a successful appeal against a decision of the Commissioner.  In most situations, the standard of review that can be applied by the Divisional Court on such an appeal will be the "reasonableness" standard.  It won't be a question of whether the Commissioner got the decision right; it will simply be a question of whether it was a decision that could have reasonably been made in the circumstances.  Not necessarily the right decision; just a reasonable decision.

Read the Court of Appeal's decision at: Gilmor v. Nottawasaga Valley Conservation Authority.

What will NEB Modernization mean for landowners?

The Expert Panel appointed by the Minister of Natural Resources to provide recommendations on the future of the National Energy Board ("NEB") has now released its report: "Forward, Together - Enabling Canada's Clean, Safe, and Secure Energy Future".  Comments on the report will be accepted by the federal government until June 14, 2017.  You can submit your comments at the following link:  COMMENTS.

What the Expert Panel's recommendations will mean for pipeline and energy transmission line landowners is difficult to glean from the report; obviously, it's not possible to know at this point whether the recommendations of the panel will be adopted and/or implemented.  However, it doesn't appear that there will be much of benefit for landowners in any shift to a new Canadian Energy Transmission Commission ("CETC") framework.  The NEB may be getting a change in name, but the CETC seems likely to be more of the same for landowners.

The Report includes recommendations on changes to the way in which various project proposals are reviewed.  Without knowing how these changes will be implemented in legislation to replace the NEB Act, we can only speculate on the effect on landowners at this time.  Landowners should be concerned, though, about the potential for the erosion of the procedural rights that they do have under the current legislation.  The NEB Act is far from landowner-friendly, but it guarantees certain rights for landowners when faced with new project applications or the operation of existing facilities.  Will the Expert Panel's clear focus on the engagement of Indigenous peoples and the general public result in the further watering down of landowner involvement in the regulatory process?  

The addition of a Landowner Ombudsman is not likely to change anything for landowners in terms of navigating the regulatory processes; the NEB already has personnel assigned to assist those affected by energy infrastructure and projects in dealing with various processes.  There's mention of the possibility of funding for landowners to access relevant legal advice, but there is still no sign of any system of cost recovery for landowners who must participate in the regulatory process to protect their property interests.  Government should not be (under)funding landowner legal advice and participation in regulatory processes - energy transmission companies should be paying the costs actually incurred by landowners as a result of the companies' projects and operations.  

That "Respect for Landowners" is the last section in the Expert Panel's report, and consists of only 4 pages out of 100 in total, is telling.  The impression left is that the role of landowners in the review process is an afterthought or an add-on, and that is exactly where landowners have been in the NEB process all along.  Landowners should just hope that the current review process doesn't erode what few protections they have under the existing regulatory system.

NEB Modernization Report recommends creation of Canadian Energy Transmission Commission ("CETC") - Comment on the Expert Panel Report until June 14, 2017

The Expert Panel established by Canada's Minister of Natural Resources has now released its report of recommendations and advice on the modernization of the National Energy Board ("NEB"): "Forward, Together - Enabling Canada's Clean, Safe and Secure Energy Future".  The public is invited to comment on the report for 30 days until June 14, 2017.  Comments can be submitted through the following link:  COMMENTS.

Recommendations put forward by the Expert Panel include:

• The creation of a "formal Canadian energy strategy which plots the course for the future of energy in Canada, balancing environmental, social and economic objectives";
• High level inter-governmental coordination on all energy-related matters in order to realize the federal government's vision of the future of energy in Canada;
• Establishment of an "independent Canadian Energy Information Agency" with a mandate to collect and disseminate energy data;
• Transformation of the NEB into the Canadian Energy Transmission Commission ("CETC");
• Shifting of responsibility to make public recommendations to the federal cabinet on whether a preliminary major project proposal (for federally-regulated energy transmission) is in the public interest to the Minister of Natural Resources;
• Enshrinement in regulation of the definition of the "national interest", to be updated on a "reasonable schedule" to keep pace with societal change;
• The new CETC to continue to review project applications for transboundary pipeline and electricity transmission line projects, but major projects must first pass through the "national interest" review by the Minister of Natural Resources and cabinet;
• Joint Hearing Panel process for review of "major" and "significant" projects, the panel to consist of two CETC commissioners, two representatives of the Canadian Environmental Assessment (CEA) Agency, and one independent Commissioner.  One of the five commissioners must be Indigenous;
• Once major projects have passed through the "national interest" approval stage, the CETC to have full authority to approve or deny projects, restoring the authority that was taken away from the NEB and given to cabinet several years ago;
• The elimination of Section 58(1) of the NEB Act (exemption from the Certificate of Public Convenience and Necessity requirement for certain projects) and designation of three classes of projects - 1. Projects of National Consequence, requiring review by the federal cabinet; 2) projects of significance that require a Joint Review Panel review but not review by cabinet; and, 3) "smaller" activities that require review and approval but not a full Joint Panel review;;
• Enshrinement in legislation of two core principles: 1) no regulated activity shall proceed without proper approval; and, 2) all regulated activities must undergo environmental assessment commensurate with the scale and risk of the proposed activity;
• Establishment of a Board of Directors of the CETC responsible for strategy and oversight of the CETC, separate from the Commissioners of the CETC who would sit on hearing panels and make regulatory decisions.  Currently, the NEB consists of members who perform both functions;
• Minister of Natural Resources to define how to meet the commitment to ensure Indigenous peoples have a nation-to-nation role in determining Canada's national energy strategy;
• Government funding for an Indigenous Major Projects Office, under the governance of Indigenous peoples, which will define clear processes, guidelines and accountabilities for formal consultation by government on projects;
• For project hearings, the repeal of tests for standing, allowing for a wider array of input into project reviews (from simple letters to the provision and testing of evidence).  Letters of comment to be accepted without qualification;
• Establishment of a Public Intervenor Office to represent the interests and views of parties who wish to use the service, and to coordinate scientific and technical studies to the extent possible;
• Establishment of Regional Multi-Stakeholder Committees, open to all interested parties, with a mandate to review all aspects of the regulatory cycle and operational system;
• Establishment of a Landowners Ombudsman to review and make recommendations on improving relationships with landowners, provide advice and best practices on how to navigate the processes, enable better mediation, and potentially administer a fund so that landowners can access relevant legal advice;
• CETC Hearing Commissioners to take on alternative dispute resolution, with support from ADR staff as appropriate;
• Review of compensation practices and outcomes, resulting in a public report on the matter, so as to better understand and deal with compensation issues large and small.

Read the Report at: NEB Modernization Expert Panel Report.

Saskatchewan landowners challenging RM by-law that would expropriate gravel pit property

Two sisters own a quarter section of land in Saskatchewan adjacent to a gravel pit owned by their Rural Municipality ("RM").  The RM's current gravel pit is nearly exhausted, and the RM has been interested in obtaining the sisters' property - the property is ideally located next to the existing pit, and demand for gravel in Saskatchewan is currently very high.  In November, 2015, the RM offered to purchase the land, which has been in the sisters' family for generations, for $1.5 million.  The sisters rejected the offer.

The sisters then entered into a gravel extraction lease agreement in February, 2016 with a private company.  Later that month, the RM upped its offer by $17,000, and served a notice of expropriation along with its purchase offer.  The sisters again rejected the RM's offer.  The RM moved ahead and passed a by-law authorizing the expropriation of the property in May, 2016.

The matter has ended up in the Court of Queen's Bench.  The RM applied to have the compensation determined on the expropriation.  The sisters applied to the Court for determination as to whether the RM was lawfully expropriating the land for a purpose authorized by the Municipal Expropriation Act.  The Court has deferred the RM's application and allowed the sisters' application to proceed as an application to quash the by-law.

The sisters do not challenge the RM's authority to expropriate land where necessary to ensure that the RM has an adequate source of gravel to fulfill its duty to build and maintain roads within the municipality.  They argue that the RM's true purpose in passing the expropriation by-law was not to ensure an adequate source of gravel; instead, according to the sisters, the RM wants their property to acquire a source of gravel that the RM can sell at a profit in the context of the current high demand for gravel in Saskatchewan.

This will be an interesting case to watch.

Read the decision at: Rural Municipality of Edenwold No. 158 v Murray.

Court finds farm lease not signed under duress - owner ordered to pay lost profits

In the fall of 2011, a couple of farmers ("D&S") asked an area landowner ("H") whether she would lease her farmland to them.  After a couple of meetings, H agreed to lease the land for three years at a set rental amount.  However, a few months later in April, 2012, on the day set by D&S to begin field operations on the rented land and a couple of days after D&S had provided H with a draft written lease, H blocked her driveway to prevent D&S from entering the land.  The OPP was called; the parties discussed the situation and made several changes to the draft lease at H's request, and the lease was signed.

In December, 2012, according to D&S, H then unlawfully terminated the lease.  D&S sued her for loss of profits that they would have earned had they been able to farm H's land during the two years remaining on the lease.  In her defence, H pleaded that she had signed the lease (on the day in April, 2012 when the OPP attended at her property) under duress.  In addition, H pleaded that D&S had breached the terms of the lease, which entitled her to terminate it.  At trial, Justice Bale rejected both defences and awarded D&S damages of just over $64,000 for lost profits.

Justice Bale did not accept the plea of duress because the presence of the OPP at the property (although the officers were called by D&S) was for H's benefit as well; H had already agreed to the material terms of the lease even before the written agreement was made in April, 2012; the only changes made to the lease agreement that day were changes that were requested by H; H testified that she though she was only signing a one-year lease that day, which she could put up with, but that demonstrates that she was signing the lease voluntarily (and, in any event, the judge did not accept H's claim that she didn't know the lease was for three years); and, after signing the lease, H allowed D&S to go into possession of the farmland and carry out their farming operations.

H also argued that she was entitled to terminate the lease because D&S had failed to "Supply Application Rates of Fertilizer & chemicals by 3rd party."  While D provided H with a handwritten note advising her of the fertilizer and chemicals applied, H claimed that she was entitled to some sort of formal document from the third party chemical suppliers.  D&S said they couldn't provide that document since they received only a single invoice from their supplier for the several properties they farmed.

Justice Bale ruled that it didn't matter whether the information provided by D&S satisfied the contract or not, at least not in the determination of whether H had a right to terminate the contract.  H would only be able to treat the contract as terminated if there was a fundamental breach of the contract.  Failure to provide the fertilizer and chemical information in the form demanded by H would not constitute a fundamental breach of the contract (as would a failure to pay rent).

Read the decision at: Drew v Huskinson.