Canada: Development Charge Credit Claims

Introduction

In P. Barnett Construction v. Burlington (City), (2008), 44 M.P.L.R. (4th) 122, the Ontario Superior Court of Justice dismissed an application by a landowner seeking an exemption from development charges ("DCs") by virtue of subdivision (lot levy) agreements that had been entered into.

The subdivision agreements in this case dated back to the 1980s and provided for lot levies to be collected by the City of Burlington ("Burlington"). The levies were applied to all non-residential development in Burlington and were adopted by Burlington as policy, in effect as of the time of the execution of the subdivision agreements.

In 1989, the Province of Ontario enacted the Development Charges Act, 1989 ("Old DCA") which replaced the lot levy regime with development charges ("DCs"). Municipalities were empowered to impose DCs pursuant to development charge by-laws enacted under the Old DCA. The Old DCA did not exempt from the payment of DCs those lands that were subject to pre-existing lot levy agreements or lands for which lot levies had been paid. Instead, these prior payments were treated as credits against DCs otherwise payable, pursuant to section 14 of the Old DCA.

The Old DCA was replaced by the Development Charges Act, 1997. O. Reg. 82/98, passed in 1998 pursuant to the new statute, set out a mechanism for recognizing credits for lot levies paid under old agreements. Section 17 of the regulation provided that owners who had paid lot levies prior to the implementation of DCs could apply to the municipality for recognition of a credit to be used against DCs that would be payable on development. The Province imposed a time limit (until October 31, 1999) for applications for credit recognition under the regulation. Appeals respecting decisions made by municipalities were to be dealt with by the Ontario Municipal Board ("OMB"). The scheme of section 17 was twofold: to impose a time limit for applications for credit recognition and to quantify levy payments as a credit against DCs that would otherwise be payable when these undeveloped parcels ultimately came forward for development.

Burlington, like numerous other municipalities, received a number of applications for credit recognition. A group of developers, including P. Barnett Construction ("Barnett"), also asserted that Burlington was precluded from collecting any DCs from their lands by virtue of the terms of their lot levy agreements. In particular, these developers asserted that the imposition of DCs was a "conflict" with terms of the lot levy agreement. Burlington did not agree and appeals were launched. It was this group of landowners that ultimately came forward for a hearing before the Ontario Municipal Board ("OMB") in 2000. Barnett withdrew from the hearing prior to the commencement and instead commenced an application seeking an interpretation from the court that it was exempt from DCs by virtue of the terms of its agreement with Burlington.

The OMB hearing resulted in a decision which was overturned (along with a related decision in Mississauga on the same issues) on appeal to the Divisional Court and the Court of Appeal [sub nom Mississauga (City) v. Erin Mills Corp. [2003] O.J. No. 638 (Ont. Div. Ct.) and Mississauga (City) v. Erin Mills Corp. [2004] O.J. No. 2690 (C.A.)]. The appeal court decisions considered the nature of a "conflict" between an old lot levy agreement and the imposition of DCs pursuant to a development charge by-law enacted under the Old DCA. The decisions established the following principles of law:

A conflict will be found only where the subdivision (or lot levy) agreement, properly interpreted, precludes the infrastructure charge which the development charge seeks to impose on the developer. When the agreement does so, the two cannot "stand together" and the agreement prevails to the extent of the conflict. If the agreement and the development charge by-law can stand together, there is no conflict. Mere payment of lot levies does not constitute a "conflict" with the imposition of DCs under a by-law under the foregoing articulation.

Despite the clear ruling from the Court of Appeal in 2004, Barnett resurrected its Court application seeking the same relief already determined by the Courts. Burlington brought a motion to dismiss the application without a hearing.

Decision Of Ontario Superior Court Of Justice

Burlington brought a motion to dismiss Barnett's application on the basis that the issues raised by Barnett had already been decided by the Court of Appeal's decision in Mississauga v. Erin Mills. In one instance, the payment clauses in issue were identical to those considered by the Court of Appeal in 2004. In the other instance, the language fell far short of constituting a clear conflict with the imposition of DCs. The court also agreed with Burlington that Barnett's claim was properly a matter for the OMB to decide.

Impact

For many municipalities, the time-limited credit recognition process was fundamental in establishing, the rules of the game as they would relate to pre-existing lot levy agreements and their role in the new DC regime. For most municipalities, lot levies paid prior to the introduction of DCs in the Province fall far short of covering the cost of services required to serve development today. The decision in P. Barnett not only reconfirms the Court of Appeal decision, but hopefully closes the door on any future claims for DC exemptions based on old lot levy payments.

Most recently, in A.P. Developments Inc. v. Lakeshore (Town), (August 20, 2008), No. CV-07-10317CM, Gates J. (Ont. S.C.J.), the Superior Court of Justice dismissed an application by a developer in which it sought a declaration that its lands were exempt from the payment of DCs over and above amounts paid some years before. In this case, the developer had paid charges at rates under the then in-effect DC by-law. The municipality's new DC by-law implemented for the first time a charge for roads, whereas none had been in effect before. The developer did not appeal the by-law to the OMB but instead commenced an application in the courts challenging the municipality's ability to collect DCs for roads given the foregoing circumstances. Justice Gates dismissed the application on the basis that, in accordance with the ruling of the Court of Appeal for Ontario in Country Pork Ltd. v. Ashfield (Township), the Court ought to be most careful before assuming jurisdiction over a matter which the statute directs ought to proceed by way of an appeal to the OMB. The Court found that the applicant had not presented any "exigent circumstances" to warrant the Court assuming jurisdiction, other than circumstances of its own making (such as the decision to bypass the OMB). The fact that the limitation period for appealing the by-law to the OMB had passed did not alter the Court's conclusion. This decision reaffirms the central role of the OMB in proceedings concerning DCs and echoes statements made by the Court in P. Barnett when dealing with the same issue.

Patricia Foran is a partner with Aird & Berlis LLP's Municipal and Land Use Planning Group. Patricia acts for private sector developers and for municipalities. She appears regularly before the Ontario Municipal Board regarding hearings and mediations; appears before municipal councils and committees; and liaises with provincial, municipal and school board staff. She has experience before various levels of provincial and federal courts in the Province of Ontario. Patricia is co-author, with Robert Doumani, of all editions of Ontario Planning Legislation & Commentary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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