TRG-KFH (Lakeside) Inc. v. Muskoka Lakes (Township)

TRG-KFH (Lakeside) Inc. v. Muskoka Lakes (Township) Collection Decisions of the Court of Appeal Date 2019-05-28 Neutral citation 2019 ONCA 443 Docket numbers C65923, M50384 Judges Sharpe, Robert J.; Roberts, Lois B.; Nordheimer, Ian V.B. Subject Civil Decision Content 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 Township’s 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 appellant’s 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 Township’s 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 Township’s 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 Township’s 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 Township’s 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 Township’s 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 Township’s 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 appellant’s 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 ICBL’s 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 appellant’s 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 Township’s Council passed an extension to the ICBL for a further one year period. In doing so, however, the Township’s Council removed the appellant’s 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 Wood’s findings of fact and law in its defence of the within claim. [21] Consequently, the import of the application judge’s decision is still very much a live issue between the appellant and the Township regardless of the fact that the appellant’s 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 judge’s 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 appellant’s property was being put when the ICBL was passed on May 18, 2018, and therefore erred in finding that the appellant’s 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 appellant’s 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 appellant’s 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 appellant’s 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 appellant’s 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 respondent’s 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.