710357 Ontario Limited v. Penetanguishene (Town)

710357 Ontario Limited v. Penetanguishene (Town) Collection Decisions of the Court of Appeal Date 1998-09-08 Docket numbers C23131 Judges Krever, Horace; Carthy, James Joseph; Osborne, Coulter Arthur Anthony Subject Civil Decision Content DATE: 19980908 DOCKET: C23131 COURT OF APPEAL FOR ONTARIO KREVER, CARTHY and OSBORNE JJ.A. BETWEEN: ) ) 710357 ONTARIO LIMITED and ) 840703 ONTARIO LIMITED ) Peter J. Harte ) for the appellants Appellants ) ) - and - ) ) THE CORPORATION OF THE TOWN ) OF PENETANGUISHENE ) Frank N. Grisé ) for the respondent Respondent ) ) ) ) ) Heard: June 24, 1998 OSBORNE J.A.: [1] This is an appeal from the order of the Honourable Mr. Justice Logan dismissing the application of two landlords (710357 Ontario Limited and 840703 Ontario Limited) for an order quashing By-law 33/95 and s. 13 of By-law 37/92 of the Corporation of the Town of Penetanguishene (the "Town") on the basis that the impugned provisions were passed without legislative authority. [2] Logan J., after considering what was meant by the term "ultra vires", concluded that s. 13 of By-law 33/95, which provided that owners were responsible for the payment of water rates, "discriminates against certain owners of property and consumers of water." However, he concluded that By-law 33/95 was "... not essential to the valid operation of the water system within the Town of Penetanguishene. It is trifling in character and administrative in nature. The doctrine of ultra vires would not apply to an administrative matter of this kind." He therefore dismissed the appellants' application, but without costs because of his finding that, since the by-law discriminated against certain owners of property, it was unlawful. The landlords appeal. They contend that the motions judge erred in failing to find that there is no statutory authority that would permit the Town to recover water rates from them and that the by-law provisions in issue are, therefore, unlawful and should be quashed. THE FACTS [3] In 1992, the Town assumed control of the operation and management of the municipal waterworks system. The operation and management of the system before that time has been the responsibility of Penetanguishene Water and Light Commission. On July 27, 1992, the Town passed By-law 37, s. 13 of which provided: Where a house or building is tenant occupied, the owner will be billed. An owner may make written application to the Treasurer to have the tenant billed provided the owner agrees to be responsible for any unpaid bills. This does not relieve the owner from any liability for payment. [4] In response to By-law 37/92, the appellants, who own and manage 27 residential apartment units at 155, 157 and 159 Church Street North in the Town, signed applications with the Town to have accounts for water rates sent directly to their tenants. Consistent with s. 13 of By-law 37/92, the appellants acknowledged that any arrears were payable by them as property owners. [5] By 1995, the Town concluded that the existing method of billing for water rates was resulting in an unacceptable level of bad debt. It thus passed By-law 33/95. That By-law repealed and replaced s. 13 of By-law 37/92. The purpose of the new s. 13 was to eliminate the option for the owner of premises to have tenants billed directly for water rates. [6] By-law 33/95, passed by Council on May 24, 1995, provides: 1. That section 13 of by-law 1992-37 be hereby repealed in its entirety and be hereby substituted with the following: 13. Notwithstanding any arrangements between property owners and tenants or users of the property, the property owner shall be billed for and shall pay all rates and charges for water service. 2. That this by-law shall take effect and shall be effective on the 1st day of July, 1995. [7] The effect of By-law 33/95 was that as of July 1, 1995, property owners, not tenants, would be billed for and be responsible to pay water and sewer charges. [8] Under the 1995 scheme (the new s. 13 introduced by By-law 33/95) the Town billed the owners of rented premises directly for water and sewage. The appellants received 27 separate, flat- rated, bills (one bill for each rented unit). Under the 1992 scheme these bills had been sent directly to individual tenants. The appellants' premises are serviced by the Town's water and sewage system and the individual units are not metered individually. THE APPELLANT'S POSITION [9] The appellants took issue with By-law 33/95 and moved to quash it. They emphasize practical problems they face if primary responsibility for water and sewage bills falls upon them in circumstances where all of the leases for 155 to 159 Church Street North provides that the tenants pay "... all water and sewer rates with respect to the premises." They emphasize that there is no provision in any of the leases which would permit them to recover water and sewer charges from a tenant in the event that they had to pay those charges. They contend that to recover water and sewer charges, they would have to resort to what they submit is a time-consuming and cumbersome rent review process. They also contend that even if they were successful on a rent review application, the prescribed limitations on rent increases would not permit them to recover all of the water and sewer charges from their tenants. [10] The appellants submit that once the motions judge had found that s. 13 of By-law 33/95 was "unlawful", he erred in not quashing s. 13 of the By-law. I agree with that submission. Nonetheless, the question remains -- does the Public Utilities Act, R.S.O. 1990, c. P.52 (the "Act") provide authority to permit the Town to require landlords to pay for water and sewer services provided to tenants? ANALYSIS [11] There is no doubt that if the impugned provisions are intra vires of the Town, that is if they are permitted to collect water and sewer charges directly from owners, the appellants, and other similarly situated landlords, will face practical problems in recovering water and sewer charges from tenants. However, these difficulties notwithstanding, the central issue is whether the Act gives the Town authority to require owners to pay for water and sewer services provided to tenants. The resolution of that issue requires an examination of certain provisions of the Act to determine whether the owner of an apartment building in which individual apartments are not separately metered is a "consumer", as that term is used in the Act. [12] Section 55 of the Act gives the Town authority to operate its waterworks. The supply of water to buildings is required by the Act if any of the "owner", "the occupant" or "other person in charge of any such building" requests it. Thus, tenants, as occupants, can compel the Town to supply water to their premises. [13] The only authority in the Act that would permit the imposition of a condition before supplying a public utility, including water, is found in s. 50(4) which provides: 50. (4) Any corporation before supplying any public utility to any person or to any building or premises, or as a condition of continuing to supply the utility, may require any consumer to give reasonable security for the payment of the proper charges therefor or for carrying the public utility into the building or premises. [Emphasis added.] [14] A municipal corporation's authority to regulate the distribution and use of water and to fix the price for the use of water is found in s. 8 of the Act: 8. The corporation may regulate the distribution and use of the water in all places where and for all purposes for which it may be required, and fix the prices for the use thereof, and the times of payment, and may erect such number of public hydrants and in such places as it may see fit, and may direct in what manner and for what purposes the same shall be used, and may fix the rate or rent to be paid for the use of the water by hydrants, fireplugs and public buildings. [Emphasis added.] [15] Section 12 of the Act also gives the municipality the power to pass by-laws that regulate, among other things, the price to be paid for water. 12. The corporation may pass by-laws for regulating the time, manner, extent and nature of the supply by the works, the building or persons to which and to whom the water shall be furnished, the price to be paid therefor, and every other matter or thing related to or connected therewith that it may be necessary or proper to regulate, in order to secure to the inhabitants of the municipality a continued and abundant supply of pure and wholesome water, and to prevent the practising of frauds upon the corporation with regard to the water so supplied, and for providing that for a contravention of any such by-law the offender is guilty of an offence. [Emphasis added.] [16] Section 28(2) of the Act specifically refers to consumers and provides a municipal corporation with a discretion as to the rents, rates or prices charged to various classes of consumer. 28. (2) In fixing the rents, rates or prices to be paid for the supply of a public utility the corporation may use its discretion as to the rents, rates or prices to be charged to the various classes of consumers and also as to the rents, rates or prices at which a public utility shall be supplied for the different purposes for which it may be supplied or required. [Emphasis added.] [17] As can be seen, s. 28(2) identifies "consumers" as the persons required to pay for water charges. It does not contain any reference to owners. [18] Section 28(3) gives the municipal corporation authority to shut off supply in default of payment. Thus, if a municipal corporation or public utilities commission can require an owner- landlord to pay water charges, the owner's failure to pay could result in service to all leased units being shut off. [19] By the provisions of s. 31(1) the municipal corporation acquires a lien for a public utility supplied to the owner or occupant for use on the land of the owner or occupant. The lien is on the debtor's interest in the land and is triggered by the supply of a public utility (water) for use on the lands. Section 31(3) gives the municipal corporation authority to distrain upon the goods and chattels of "the person liable to pay for the amount due for any public utility supplied to the person." [20] It is common ground that the Public Utilities Act provides authority to the Town to collect hydro rates from landlords such as the appellants, as owners, only if the appellants can be taken to be "consumers", as that term is used in the Public Utilities Act. That premise was accepted by this court in Bracebridge Hydro Electric Commission v. 796479 Ontario Ltd. (1991), 2 O.R. (3d) 761 (Ont. Gen. Div.); appeal dismissed February 9, 1995, unreported. [21] In Bracebridge, the issue was whether Bracebridge's policy that required landlords to guarantee payment of tenants' hydro rates was valid as it applied to the subject rented premises, all of which were separately metered. The motions judge held that the landlord was not a "consumer" within the meaning of what is now s. 50(4) of the Act. Bracebridge appealed. In its brief endorsement dismissing the appeal, the court said: In the present circumstances where there is individual metering and the tenants are billed individually, we agree with the motions court judge that the owner cannot be considered a "consumer" so as to be required to guarantee the accounts of individual tenants. [22] The Town takes comfort from the reference in Bracebridge to individual metering and separate billing. Since the appellants' premises are not separately metered, the Town contends that Bracebridge does not directly apply to this case. The Town submits that when the apartments are not separately metered, Bracebridge suggests that the owner (landlord) would be a consumer. [23] In my opinion, if "consumer" is given its plain ordinary meaning, as I think it should be, a landlord-owner is not a consumer. Consumer as referred to in the Act is that person who uses, that is consumes, water supplied by a municipal corporation or a public utilities commission. That interpretation of consumer seems to me to accommodate the ordinary meaning of the word "consumer" and it accords with the statutory provisions set out in the Act that deal with the obligation to pay for utilities. [24] Sections 8 and 28 of the Act plainly link charges for water to the use of water. As I have noted, s. 50(4) of the Act permits the municipal corporation, as a pre-condition to supplying any public utility, to require "any consumer" to give a reasonable security for the payment of public utility charges. This confirms that only consumers are liable to pay water rates. [25] There is, however, no reference to owners in those sections of the Act that provide a municipal corporation with the authority to charge for a public utility, or impose an obligation to pay for the use of the utility.1 In addition, it seems to me that if a tenant is entitled to the supply of water, it would be incompatible with that entitlement to permit an entire residential apartment building to be deprived of water because of a payment default by the owner. [26] In my view, if a person other than the user of water, that is a consumer of that utility, was obligated to pay for it, the Act would have plainly said so. When the legislature dealt with the obligation to pay public utility (water) rates, it imposed the obligation on the utility's user, that is the consumer of the utility, without reference to the relationship of the payer to the property to which the utility is supplied. In my view, landlords, as owners, are only liable to pay for water charges if the landlord uses the water, as would occur in a superintendent's apartment occupied by the landlord, or its employee. In that case, the landlord's obligation to pay for water would accrue because the landlord is a consumer, not because the landlord is an owner. [27] I do not think anything turns on the presence or absence of individual meters. Meters simply quantify use. They do not determine who the user of a public utility is. I cannot accept the submission that a landlord is a consumer where there are no individual meters, but is not a consumer where there is individual metering. The same persons, that is the tenants, are using the water in both cases. In the unmetered premises the tenants pay a flat rate. In the metered premises, the tenants pay according to the amount of water they use. Thus, where there is no individual metering, low water users will inevitably subsidize high water users. In both circumstances the consumer is the tenant. I do not take this court's judgment in Bracebridge to stand for the proposition that the owner of rented premises that are not separately metered is a consumer. CONCLUSION [28] In my opinion, there is no statutory authority that would permit the Town to charge the appellant owners directly, as consumers, for water supplied to their tenants. The billing scheme contemplated by By-law 33/95 is, in my view, not authorized by the Act. I would, therefore, allow the appeal and quash By-law 33/95. Since By-law 33/95 repealed s. 13 of By-law 37/92, quashing of By-law 33/95 will resurrect s. 13 of By-law 37/92. Section 13 of the old by-law also provided for the billing of owners for water rates. I would, in the circumstances, also quash s. 13 of that by-law. [29] In my view, the appellants are entitled to costs here and below. Released: September 8, 1998 _______________________________ 1 See, for example, ss. 11, 15, 16 and 31(1).