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.

Interest on expropriation damages awarded for time before land actually expropriated

The Ontario Divisional Court has dismissed an appeal from an Ontario Municipal Board ("OMB") decision that awarded interest to a landowner under the Expropriations Act for a period prior to the actual expropriation.  In this case, a local school board expropriated land for a school site.  The landowner had registered a subdivision plan on the lands in question and, in February, 2005, wrote to the school board to advise that, failing an agreement to sell the property to the school board, the landowner would be proceeding with the development of residential lots on the land.

Rather than attempting to negotiate an agreement (reportedly because of a change of control over the landowner company and uncertainty as to the identity of the controlling interest), the school board registered an expropriation plan on June 1, 2006.

The market value of the land taken was determined by the OMB to be a little over $2 million.  On the issue of interest payable on that amount under the Act, the OMB ruled that interest could accrue from a date preceding the date of expropriation.  The OMB determined that the productive use of the land actually ceased in December, 1999 when a "district plan" that governed land use in the area received draft approval.  That plan stated that the land in question was to be used as a school site.  The interest payable by the school board for the period between 1999 and 2006 amounted to between $600,000 and $700,000.

The Divisional Court upheld the OMB's ruling that interest was payable from the date of loss of the use of the expropriated asset and that, in this case, that date was December, 1999.  As the Divisional Court notes:

In my view, the board member applied the correct test by seeking to determine the earliest date at which the potential for expropriation prevented the use of the lands, either because the Municipality would not permit further development or because it would not have been prudent for Erbsville to spend money for that purpose.  In the present case, the distinction between these two potential triggering events is inconsequential.  The board member found that both events occurred on the date that Plan 30T-97017 received draft approval.  As I will explain, I believe that finding was reasonable.

Read the decision at: Erbsville Road Development Inc. v. Waterloo Region District School Board.

Divisional Court upholds OMB on question of reduction in market value for contamination

The City of Toronto appealed an OMB decision awarding more than $3.3 million for market value on the expropriation of a contaminated property.  The property in question was the former site of a soft drink manufacturing plant; the expropriation was required in order to install an underpass at Dufferin Street in Toronto beneath a rail corridor.  Through testing, a City consultant had identified various contaminants on the property, including vinyl chloride (VC) and tetracholorethylene (TCE).

Although there was no requirement to remediate the property, the City's expert witness at the OMB hearing suggested that remediation might be warranted based on a risk assessment and that the cost of remediation of the TCE would be $355,000.  To deal with the VC, a $40,000 upgrade to basement ventilation would be required.  As a consequence of these findings, the City's appraiser estimated that market value of the property should be subject to a reduction of $580,000.

The OMB accepted the evidence of the landowners that there was no risk to human health or to the environment from the presence of the contaminants and that no remediation was needed.  However, the OMB did deduct $20,000 from the market value for air sampling and $10,000 for the drilling of additional bore holes. 

The City appealed the market value award (as well as an award of business losses) arguing that the OMB should have deducted something for the contamination because the land was not "pristine" and that the OMB erred in relying on 2009 environmental standards when the valuation date for the expropriation was in 2005.  The Divisional Court ruled that it was reasonable for the OMB to reject the City's expert's evidence about a "potential 'ball park' worst case scenario" concerning the contamination.  There was no basis on which to find that the market value should be reduced on account of the contamination present.  Also, the Divisional Court found that the landowners' expert witness testified on the basis of standards that were available in 2005, even if he made reference to the 2009 standards as well.

The Divisional Court dismissed the City's appeal and awarded the landowners' costs of $25,000.

Read the decision at: City of Toronto v. Simone Group Properties Limited.

Depth of Cover Monitoring Requirements Absurd? So says the Ontario Divisional Court

Enbridge Gas Distribution Inc. has won an appeal from the dismissal of its small claims court action against a contractor over damage caused to a gas main in Holland Landing, Ontario.  Enbridge claimed that the contractor damaged the pipe when using a mechanical digging device to uncover a leaking septic tank.  Enbridge had asserted at trial that the entire incident could have been avoided if the contractor had called for a locate; the contractor was negligent.  On appeal, the Divisional Court agreed and awarded damages to Enbridge.

At trial and in the appeal, the issue of depth of cover over the pipe came into play.  The trial judge had found that the pipe was not buried at the minimum required depth (2 feet) and that Enbridge should have ensured proper depth.  However, the Divisional Court noted that there is no requirement in the applicable legislation or regulations (or the TSSA Guideline or the CSA Standard) that a gas main must remain installed at the minimum depth.

The Court reasoned:

There is no requirement that Enbridge must continually measure the depths of all of its buried pipelines. Such a finding would lead to the absurd result that utility companies would be required to constantly recheck their lines in the ground. It is a well-established principle of statutory interpretation that the Legislature does not intend to produce absurd consequences. If the Legislature intended this result, the Act, the Regulation, the TSSA Guideline or CSA Standard would have stated that utility companies must ensure that the pipes “remain” buried at a minimum depth.

Unlike the case of Sun-Canadian Pipeline v. Lockwood, where the Court found that the company had actual knowledge that the pipeline had insufficient cover on the property, there is no evidence that Enbridge had knowledge that its Gas Main was at less than the required depth at the property until after the incident occurred.

Although these comments must be read in light of the facts of this particular case, it will no doubt be of concern to pipeline landowners to find an appellate court in Canada suggesting that pipeline companies have no obligation to monitor the depth of cover over their pipelines.  In fact, the Divisional Court suggested that such a requirement would be absurd.

Read the decision at: Enbridge Gas Distribution Inc. v. Froese. 

Farm Property Class for legal owners, not beneficial owners

The Ontario Divisional Court heard a "stated case" from the Agriculture, Food and Rural Affairs Appeal Tribunal (the "Tribunal") concerning the appeal of property tax assessments of various properties.  The applicants had appealed on the basis that they should have been assessed in the farm property class under Section 8(2) of Regulation 282/98.  The questions on the stated case to the Divisional Court boiled down to whether lands that are beneficially, but not legally, owned by Canadians, qualify for farm property class.  In general, a property is legally owned by the named registered owners of the property; other individuals or entities may hold unregistered equitable ownership interests in the property.  The Divisional Court concluded that the favourable tax treatment applies only to lands legally owned by Canadians.

The properties at issue in this case were purchased for commercial investment purposes by Walton International Group Inc.  They are currently being used for farming, but the long-term plan is to develop them for non-farming purposes. 

Read the decision at: Walton International v. Farm Property Class Tax Rate Program.

When innocent parties are held liable for environmental contamination

The Ontario Divisional Court has recently released a decision affirming the authority of the Ministry of the Environment to hold a party liable for clean up of contamination even though that party was not at fault.  As the Court explained: "The appeal centres on the question of what are the appropriate considerations in making a clean-up order under the Act, against an owner of contaminated land who had no responsibility whatsoever for the contamination."

Several hundred litres of furnace oil had leaked from the basement of a privately owned property located in the City of Kawartha Lakes.  The oil seeped onto property that the City owned and from there had the potential to adversely affect Sturgeon Lake. The Ministry of the Environment (MOE) ordered the private property owners to remediate the damage. The owners, who had limited financial resources, made an insurance claim, but their insurance funds ran out before remediation could be completed on the City property. The MOE then ordered the City to clean up the contamination on its property and to prevent discharge of the contaminant from its property.

The City appealed the order to the Environmental Review Tribunal (ERT), which refused to allow the City to call evidence directed at proving the City's innocence and determining who was actually at fault for the contamination.  The Divisional Court upheld this decision of the ERT, finding that earlier decisions of the ERT related to fairness (e.g. it would not be fair to hold an innocent party responsible for the costs of clean up) had been supplanted in large part by the MOE Compliance Policy. 

The Compliance Policy states that the "fact that an owner of a contaminated site may have purchased it without notice of the presence of contamination is irrelevant to the purpose of the Ministry legislation [the Environmental Protection Act] and generally will not be considered by the statutory decision-maker to be grounds for relieving that owner from liability under a control document."  According to Section 2 of the Policy, an innocent or "victimized" owner will not be relieved of liability.  If an exceptional or unusual circumstance existed, the timing and content of such an order could be varied - but not whether the order should be issued in the first place. 

The Divisional Court also rejected the argument of the City that the ERT's decision violated the "polluter pays" principle and, therefore, that the decision could not stand.  The Court instead pointed to Section 157.1 of the Environmental Protection Act, which it says "can be accurately described as an 'owner pays' mechanism".  The section makes no reference to fault.  It gives the provincial officer the discretion to make an order against an owner if the officer reasonably believes that the order is necessary or advisable to protect the environment.  The ERT had found that the MOE had acted reasonably in making the order against the City, and the Divisional Court agreed.

Read the decision at: The Corporation of the City of Kawartha Lakes v. Director, Ministry of the Environment.

Ontario Court of Appeal overturns Antrim Truck Stop expropriation compensation decision

In February, 2010, I wrote about a much anticipated decision of the Ontario Divisional Court on appeal from the Ontario Municipal Board: Antrim Truck Centre Ltd. v. Ontario (Ministry of Transportation).  The facts of the original OMB case were as follows:

• Antrim owned a truck stop in the Hamlet of Antrim on Highway 17, formerly part of the Trans-Canada Highway;
• In September, 2004, a new section of Highway 417 was finished and re-routed the former Trans-Canada Highway (away from the truck stop);
• The Antrim property comprised 13.66 acres and included 947 feet fronting on Highway 17;
• Antrim alleged that the closure of Highway 17 substantially interfered with its use and enjoyment of its property and made a claim for injurious affection - the change in the Highway basically put Antrim out of business (Antrim took steps to mitigate its loss and relocated);
• The business had been generating gross annual revenues of more than $15 million and had employed about 100 people;
• The claim for injurious affection was for over $8.2 million, including the cost of relocation and construction of new business premises;
• The OMB awarded Antrim $393,000 - the MTO appealed the decision - Antrim cross-appealed seeking the additional $7.6 million or so it had originally claimed.

No lands were taken from Antrim.  The Divisional Court agreed with the decision of the OMB and upheld the award of compensation on the basis that the diversion of the highway constituted an actionable nuisance in the form of interference with access. 

 

The Ontario Court of Appeal disagreed with both the OMB and the Divisional Court.  In its June, 2011 decision, the Court found errors in the Divisional Court's analysis of the tort of nuisance.  The Court of Appeal said that the OMB was required to consider two elements of the test for nuisance: was the interference with Antrim's property (access) substantial and, if so, was the interference unreasonable?  The Court of Appeal agreed with the OMB's finding (upheld by the Divisional Court) that the interference was substantial.  However, it found that the interference was also reasonable.  In its view, the Divisional Court had failed to analyze this issue.  The Court of Appeal concluded:

When the board’s factual findings are properly applied to the various elements of the reasonableness analysis, I would conclude, based on the observations made above, that the interference caused by the MTO’s conduct was not unreasonable. As the board reasonably concluded, the interference amounted to a “serious impairment in nuisance”. However, the interference was such that it fell within the boundaries of what the reasonable property owner in the area should be expected to tolerate and was the result of a project that served the public interest – more, was actually essential to public safety. Simply put, the highway was built to save lives. In the light of the substantial weight to be given to this factor in the circumstances, it is difficult to see how this change in the access to the Antrim property, particularly given the fact that it actually brought the Antrim truck stop in line with the access typical of Ontario truck stops, can be viewed as unreasonable.

In failing to properly carry out the reasonableness analysis, the board failed to give effect to the fundamental purpose of the law of nuisance: balancing the competing rights of property owners to use their land as they wish.

On this basis, the Court of Appeal found there was no nuisance and, therefore, no basis for an award of compensation.  Based on agreement between the parties, the Court awarded the MTO its costs of the appeal in the amount of $20,000 and its costs of the unsuccessful cross-appeal by Antrim (seeking higher compensation) in the amount of $20,000.

Read the decision at: Antrim Truck Centre Ltd. v. Ontario (Transportation).

Hanna challenge to Ontario setbacks for wind turbines dismissed by Divisional Court

In a decision released late last week, the Ontario Divisional Court has rejected a challenge by Ian Hanna of the Ministry of the Environment's minimum setbacks for wind energy projects.  The application for judicial review challenged the promulgation of sections 35, 53, 54 and 55 of O. Reg. 359/09 made under Part V.0.1 of the Environmental Protection Act (“the EPA”). The title of the regulation is the “Renewable Energy Approvals Regulation.” The affected sections in the regulation prescribe minimum setback requirements for wind energy facilities and require that they conform to the Ministry of the Environment’s published “Noise Guidelines for Wind Farms.” The regulation came into effect on October 1, 2009, following a period of public consultation ending July 24, 2009.

Section 11 of the Environmental Bill of Rights, S.O 1993, c. 28 (the “EBR”) requires the Minister of the Environment to “take every reasonable step to ensure that the ministry statement of environmental values (the “SEV”) is considered whenever decisions that might significantly affect the environment are made in the ministry.”  Hanna submitted that s. 11 of the EBR establishes a condition precedent for the decision by the minister to recommend promulgation of the regulation, and a breach of that condition renders his decision, and the regulation, ultra vires (or outside the authority of the minister).  In particular, the ministry’s statement of environmental values sets out principles the ministry will apply in developing Acts, regulations and policies. One of those principles is that “the ministry uses a precautionary science-based approach in its decision making to protect human health and the environment.”  Hanna contended that the minister failed to consider that “precautionary principle.”

In the end, the three-member panel of the Divisional Court found that the minister did comply with the process mandated by the EBR when he prescribed a setback requirement of 550 metres:

There was a full public consultation and a consideration of the views of interested parties. The ministerial review included science-based evidence, such as reports of the World Health Organization and the opinions of acoustical engineering experts. Cognizant of the possible health concerns the minister decided the minimum 550 metre setback was adequate. He made that decision knowing the adequacy of the minimum setback could be challenged in any particular case before a specialized tribunal.  In the context of the broad policy issues at play, the alternative protections provided by the Environmental Review Tribunal and the absence of clear evidence the 550 metre setback requirement is necessarily insufficient we find that the minister did comply with the requirement in s. 11 of the EBR, notwithstanding the “precautionary principle” in the statement of environmental values. The precautionary principle does not preclude the decision that was taken by the minister.

Read the decision at: Hanna v. AGO.

Ontario Farms Taxed at Industrial Rates?

Last week, I reported on a Court decision denying a farm operation leave to appeal a property tax assessment decision.  Read the Better Farming story on the case at the following link: Ontario Farms Taxed at Industrial Rates?

Decision on wind turbine judicial review "coming soon"

Ian Hanna's application for judicial review of wind turbine setbacks in Ontario was heard by a three-judge panel of the Ontario Divisional Court last Monday in Toronto.  The Prince Edward County resident has challenged the 550 metre setback under the Green Energy Act regulations.  The responding party, the Province of Ontario, believes that the case should be heard by the Environmental Review Tribunal rather than the Court.  The Divisional Court panel raised the question with counsel for Hanna, but eventually agreed to hear the case. 

The hearing had been scheduled for two days, but was completed in one.  The panel indicated that a decision could be expected "soon".

Read the Countylive.ca story at: Decision on Ian Hanna case "soon".