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Does a Property or Business Owner Subject to an Expropriation have to pay legal fees?

The short answer is on. What follows is a more in depth overview:

Costs in Expropriation A Primer On Expropriation Law

Expropriation is one of the ultimate exercises of government authority and the Expropriations Act, RSO 1990, c. E-26 (the “Expropriations Act”) is designed to make landowners whole when their property is taken without their consent.  The Supreme Court of Canada held that the “whole purpose” of the Act is to provide the private land owner, who has been subject to the expropriation of property, with “full and fair compensation.”

Costs (s.32)

In expropriation proceedings the risk of counsel for the claimant not being paid is substantially lower than the risk would be when representing clients in normal litigation. In all but unusual circumstances, the expropriating authority is responsible for the payment of the claimants solicitor.  Section 32 of the Act generally provides for the recovery of full indemnity costs by an expropriated landowner.

s.32(1):

Where the amount to which an owner is entitled upon an expropriation or claim for 

injurious affection is determined by the Tribunal and the amount awarded by the Tribunal is 85 per cent, or more, of the amount offered by the statutory authority, the Tribunal shall make an order directing the statutory authority to pay the reasonable legal, appraisal and other costs actually incurred by the owner for the purposes of determining the compensation payable, and may fix the costs in a lump sum or may order that the determination of the amount of such costs be referred to an assessment officer.

The section is clear – the Board “shall” make an order. A successful owner is one who is awarded 85% or more of the amount offered by the authorities. For example, if an owner is provided $100.00 as an initial payment for the market value of the lands taken and ultimately recovers a total award of $86.00 for all damages including market value, the owner’s entitlement to costs is triggered. 

s.32(2):

Where the amount to which an owner is entitled upon an expropriation or claim for injurious affection is determined by the Board and the amount awarded by the Board is less than 85 per cent of the amount offered by the statutory authority, the Board may make such order, if any, for the payment of costs as it considers appropriate, and may fix the costs in a lump sum or may order that the determination of the amount of such costs be referred to an assessment officer who shall assess and allow the costs in accordance with the order and the tariffs and rules prescribed under clause 44 (d).

The language “the Board may make such order, if any, for the payment of costs as it considers appropriate” provides discretion for the Tribunal to make a costs award against the landowner in the event the owner does not achieve 85 per cent or more of the amount offered by the statutory authority.  When the authority is successful and a claim is dismissed entirely, the “below 85% threshold” in s. 32(2) of the Expropriations Act is engaged because the award is less than any offer presented by the authority. This section empowers the Board, where a claim has been dismissed, to deny costs to the claimant or order that the respondent (expropriating authority’s) costs be paid by the claimant. 

Which “Amounted Offered”? 

Some decisions held that an owner could recover full indemnity legal and appraisal costs in accordance with section 32(1) as long as it achieved 85 per cent or more of the expropriating authority’s offer made pursuant to section 25 of the Act (“Section 25 Offer”).  

Other decisions held that an owner was required to achieve 85 per cent of subsequent higher offers made by the expropriating authority, including those made pursuant to Rule 49 of the Rules of Civil Procedure, RRO 1990, Reg 194 (“Rule 49 Offer”).

Shergar v. Windsor (City) 2020 ONCA

Costs can be awarded to the statutory authority under s.32 of the Expropriations Act for settlement offers that were unreasonably rejected.  Previously, costs awards under s.32 were based on the amount of the s.25 offer made by the authority; however, this case expands the Tribunal’s scope to award adverse costs for any subsequent offer made by the authority.

What Costs are “Reasonable”?

The Board’s Rules of Practice and Procedure provide that where a matter is not covered in those rules, the Board may follow the Rules of Civil Procedure. The factors enumerated in rule 57.01 of the Rules, are instructive: 

Reasonable Costs under the Rules of Civil Procedure 

58.06 (1) In assessing costs the assessment officer may consider, 

  1. the amount involved in the proceeding; 
  2. the complexity of the proceeding;
  3. the importance of the issues; 
  4. the duration of the hearing;
  5. the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; 
  6. whether any step in the proceeding was, (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution; 
  7. a party’s denial of or refusal to admit anything that should have been admitted; and 
  8. any other matter relevant to the assessment of costs

“Reasonableness” does not prevent costs from being in excess of total amount awarded as compensation.  In Johnson v. MTO LCR 296 1975, the compensation awarded was $60,000 and the costs $84,000. 

DIS-ALLOWING CLAIMANTS COSTS


Under the LPAT Rules of Practice and Procedure, the Tribunal may only order costs against a party if the conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or if the party has acted in bad faith.

Costs – 23.09. Circumstances in Which Costs Order May be Made:


(a) failing to attend a hearing event or failing to send a representative when properly given notice, without contacting the Tribunal; 

(b) failing to give notice without adequate explanation, lack of co-operation with other parties during pre-hearing proceedings, changing a position without notice to the parties, or introducing an issue or evidence not previously mentioned or included in a procedural order; 

(c) failing to act in a timely manner or failing to comply with a procedural order or direction of the Tribunal where the result is undue prejudice or delay; 

(d) a course of conduct necessitating unnecessary adjournments or delays or failing to prepare adequately for hearing events; 

(e) failing to present evidence, continuing to deal with issues, asking questions or taking LPAT Rules of Practice and Procedure April 3, 2018 – 28 – steps that the Tribunal has determined to be improper; 

(f) failing to make reasonable efforts to combine submissions with parties of similar interest; 

(g) acting disrespectfully or maligning the character of another party; 

(h) knowingly presenting false or misleading evidence; or 

(i) breaching a confidentiality requirement of a mediation, settlement conference or of a decision of the Tribunal in the hearing of the merits. The Tribunal is not bound to order costs when any of these examples occur as the Tribunal will consider the seriousness of the misconduct. 

PERTINENT CASES

Given the more recent trend by the LPAT to awards costs to an expropriating authority, counsel for claimants are wise to inform their clients about the potential cost consequences of proceeding with an unmeritorious claim. 

Shergar Development Inc. v. Windsor (City) 2020 ONCA 490 – Offers subsequent to S.25 are relevant in fixing costs

Costs can be awarded to the statutory authority under s.32 of the Expropriations Act for settlement offers that were unreasonably rejected.  Previously, costs awards under s.32 were based on the amount of the s.25 offer made by the authority; however, this case expands the Tribunal’s scope to award adverse costs for any subsequent offer made by the authority. 

HELD: Shergar refused to accept an offer equivalent to $1,208,155 when their interest was limited to $266,832. Shergar also frustrated and delayed the determination of the issue of the appropriate compensation to be awarded to the subject lands. The Court ruled that this conduct is worthy of censure. Shergar’s actions resulted in significant delay and frustration, wasting the Board’s valuable time. Shergar’s interpretation would otherwise permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the Board’s resources, safe in the knowledge that unreasonable refusals of subsequent offers cannot adversely affect its entitlement to legal costs.

Pitblado v. Oakville 2006, 90 LCR 156, 2006 CarswellOnt 2574 (O.M.B.)

An otherwise narrow interpretation of the Act would require the authorities to guess the market value of the subject property at the outset. That said, the Board has rejected the authorities attempt to rely on a subsequent offer of compensation to determine the claimants entitlements to costs; as in this case where the authority attempted to rely on an offer made two years before the expropriation. 

Willies Car & Van Wash Ltd. v. Simcoe County – Failure to Avoid Unnecessary Costs

Claim was for injurious affection no land taken, and the claimant failed in its claim for the following reasons: 

  • The claim was statute-barred by the one-year limitation period set out in s. 22 of the Expropriations Act
  • The Appellant failed to meet the legal threshold for establishing injurious affection where no land is taken
  • The Appellant did not demonstrate that the Respondent’s construction caused any reduction in its business.
  • The Appellant did not present sufficient evidence to demonstrate that it suffered compensable damage.

The Board found that unnecessary costs could have been avoided if the Appellant had accepted the Respondent’s offer that was made early in the proceeding.  The Board also found that the offer was bona fide and intended to achieve a settlement of the claim before substantial costs were incurred. The Board concluded that the Appellant “at its own peril, ignored the offer as well as the challenges with respect to the facts of the case and the applicable law and must now face the consequences of its actions”. The Appellant’s conduct in refusing the offer was “unreasonable”. As a result, the Board stated that it should be responsible for some of the Respondent’s costs incurred in defending a claim that had no merit.

The Board substantially reduced the Respondent’s costs as follows:

  • Legal Costs: $60,009.20 (This was a 50% discount of $120,018.40).
  • Experts Costs: It discounted the expert costs by 40%. The starting point was $44,888.15, discounted to $26,934.00.
  • Total costs allowed: $86,943.20.

Disposal Services Ltd. v. Toronto 5 LCR 91, 1973 CarswellOnt 1358 – Where “Nil” Offer

Where there is solely a claim for injurious affection or whether the authority has failed to make an offer on expropriation and the Board dismisses the claim altogether, both sides will likely be ordered to bear their own costs up to the date of an offer, and if rejected, costs agent the claimant after that date. 

Whitnall v. Sarnia (City), 68 LCR 291, 1991 CarswellOnt 5346 (OMB)

  • Claimants failed in claim for injurious affection were no land had been taken 
  • Claimant refused two separate offers to settle and ultimately received no award of compensation at the hearing
  • Rule 49 of the Rules of Civil Procedure was applied and awarded costs to the respondent 

To incorporate the cost consequences of Rule 49 of the Rules (which was designed to dissuade frivolous claims by creating cost risks for Plaintiff’s), the Expropriations Act is a remedial statue…

Davoodian v. Dufferin Wind Power 2019 CanLII 101734 

Electrical transmission line installed that abutted the land owned by the claimants.  Business damages as a result of injurious affection from the construction of the transmission line was sought. The Respondent was totally successfully at the Hearing; the Claimant rejected two offers to settle; and the issues were not particularly novel. The Tribunal made an award of partial indemnity costs to be paid by the Claimant.

Disbursements

Hamilton v. Lax (1972) 47 LCR 84
https://www.canlii.org/en/on/onsc/doc/1992/1992canlii7656/1992canlii7656.html?autocompleteStr=hamilton%20(city)%20v.%20lax%20&autocompletePos=1#document

Interest charges on money borrowed to fund expropriation expenses will be disallowed where the owner had funds available from the advance payment paid by the authority to provide for those expenses.

Assessment Officer Decisions 

  • Where a hearing was unduly length and repetitive, the Board recommended a reduction in the counsel fee for 171/2 to 8 days; 
  • Where a claim for business loss was dismissed and the Board found no credible evidence to support the claim, it disallowed the counsel fee for the time involved presenting the claim; 
  • Separately registered owners failed to give evidence to support there were any separate or conflicting issues requiring each to be represented by separate counsel. The Board directed to Assessment Officer to disallow the separate legal costs of one of the two counse