2011 QCCA 675, 2011 QCCA 675

Unofficial English Translation Westmount (Ville de) c. Montréal (Ville de) 2011 QCCA 675 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-020333-100 / 500-09-020340-105 / 500-09-020341-103 (500-17-046118-082 / 500-17-045993-089 / 500-17-046728-088) DATE: April 8, 2011 CORAM: THE HONOURABLE MARC BEAUREGARD, J.A. YVES-MARIE MORISSETTE, J.A. JACQUES A. LÉGER, J.A. No.: 500-09-020333-100 (500-17-046118-082) CITY OF WESTMOUNT APPELLANT – plaintiff v.

VILLE DE MONTRÉAL RESPONDENT – defendant and TOWN OF BAIE D'URFÉE CITY OF BEACONSFIELD CITY OF CÔTE SAINT-LUC CITY OF DOLLARD-DES-ORMEAUX CITY OF DORVAL TOWN OF HAMPSTEAD TOWN OF KIRKLAND TOWN OF DORVAL ISLAND VILLE DE MONTRÉAL-EST TOWN OF MONTREAL WEST TOWN OF MOUNT-ROYAL CITY OF POINTE-CLAIRE CITY OF STE-ANNE-DE-BELLEVUE VILLAGE OF SENNEVILLE IMPLEADED PARTIES – impleaded parties No.: 500-09-020340-105 (500-17-045993-089) CITY OF WESTMOUNT APPELLANT – plaintiff v.

VILLE DE MONTRÉAL RESPONDENT – defendant No.: 500-09-020341-103 (500-17-046728-088) CITY OF WESTMOUNT APPELLANT – defendant v. VILLE DE MONTRÉAL RESPONDENT – Plaintiff JUDGMENT [ 1 ] The appellant appeals from a judgment rendered on December 15, 2009, by the Superior Court, District of Montreal [1] (the Honourable Madam Justice Jeannine M.

Rousseau) that granted the respondent's motion to dismiss and consequently dismissed the appellant's action on a monetary claim in the file bearing docket number 500-17-045993-089, and granted in part the appellant's motion to join the actions in dockets 500-17-046118-082 and 500-17-046728-088. [ 2 ] According to the conclusions of the appeal, the appellant seeks the dismissal of the respondent's motion to dismiss and the joining of docket 500-17-045993-089 with dockets 500-17-046118-082 and 500-17-046728-088.

It follows that, if the trial judgment dismissing the appellant's action in docket 500-17-045993-089 is affirmed, the second conclusion of the appeal becomes moot. [ 3 ] In docket 500-17-045993-089, the appellant sued the respondent claiming the amount of $21,901,012, which according to its allegations consists of a budgetary surplus in the amount of $16,240,000, pension plan contributions in the amount of $3,266,707, and disputed adjustments in the amount of $2,394,305.

This claim appeared in the wake of the municipal mergers and demergers governed by the Act respecting the consultation of citizens with respect to the territorial reorganization of certain municipalities [2] [the Consultation Act ] and the Act respecting the exercise of certain municipal powers in certain urban agglomerations [3] [the Municipal Powers Act ]. [ 4 ] At paragraphs [25], [33], and [37] of her reasons, the trial judge concluded that the Superior Court did not have jurisdiction to hear the monetary claims submitted by the appellant under the three previously stated headings. [ 5 ] The demerger process set up by the statutes in question provides for the creation by order in council of a transition committee that is a "mandatary of the State" [4] and whose mission it is to "participate, together with the administrators and employees of the city or any other existing municipality and with any persons elected in advance in the reconstituted municipality, in the establishment of the conditions most conducive to facilitating the transition between the successive municipal administrations in the sector concerned that is within the purview of the transition committee" [5] .

This committee must report to the Ministre des Affaires municipales et des Régions at the end of its mandate or when required by the Minister. [6] [ 6 ]

Chapter V of the Consultation Act , entitled "Effect of city reorganization on personnel, and sharing of assets and liabilities", has several provisions on which the appellant relies. It is useful here to quote this act at length: DIVISION I PURPOSE AND

INTERPRETATION 120. Divisions II and III state principles to be used as the basis for establishing the rules both for dealing with the effect of the reorganization of a city on personnel and for sharing the assets and liabilities of the city. Such rules may be prescribed by legislation on city reorganization or any statutory instrument under that legislation. A rule may depart from a principle, however, when it is impossible to respect the principle or when respecting the principle would result in an inappropriate rule.

A person who has to recommend the adoption of a rule referred to in the first paragraph or who is called upon to anticipate its effects, particularly a transition committee or the person responsible for a study on the consequences and estimated costs of reorganization, must take into account both the principle on which the rule should normally be based and the possibility of departing from the principle as provided for in the second paragraph. 121.

Even if Divisions II and III expressly refer only to cases in which a new local municipality resulting from the reorganization of the city is a reconstituted municipality whose territory is entirely situated within that of the city before reorganization, the principles put forward also apply, with the necessary modifications, to cases where (1) a new local municipality is a reconstituted municipality whose territory is formed of parts of the territory of the city and of another local municipality that existed before the reorganization ;

(2) a part of the territory of the city is transferred to the territory of another local municipality that existed before the reorganization. ... DIVISION III SHARING OF ASSETS AND LIABILITIES §1. —

Interpretation 138. For the purpose of this division, the words “debt” and “surplus” also mean whatever the city’s constituting act or charter equates with a debt, particularly in the expression “expenditures related to a debt”, or with a surplus. §2. — Debts 139. The debts of the city that existed immediately before the reorganization and that were contracted by a former municipality whose territory corresponds to that of a reconstituted municipality become the debts of the latter.

The expenditures related to those debts shall continue to be financed by revenues derived exclusively from that territory or a part of it, as the case may be. However, if the financing rules applicable to such a debt immediately before the reorganization state that the expenditures related to the debt are financed by revenues derived from the territory of several former municipalities, the debt remains or becomes a debt of the central municipality, as the case maybe.

The joint council of the central municipality shall establish the share of the expenditures payable by each related municipality concerned, so that the financing rules continue to apply until the debt expires. 140. The debts of the city that existed immediately before the reorganization, that were not contracted by a former municipality, and that are related to property, services or activities within an area of jurisdiction referred to in Division II of

Chapter IV remain or become the debts of the central municipality, as the case may be. The joint council of the central municipality shall establish the share of the expenditures related to those debts payable by each related municipality concerned, so that the financing rules applicable to each debt immediately before the reorganization continue to apply. The joint council may change the rules. 141. The debts of the city that existed immediately before the reorganization, that were not contracted by a former municipality, and that are related to property, services or activities within an area of jurisdiction referred to in Division II of

Chapter IV remain or become the debts of the central municipality, as the case may be. The expenditures related to such a debt are financed by a contribution from the related municipality that benefits from the property, service or activity from which the debt derives. That municipality may be determined on the basis of the territory on which the property is located or used, the service is provided or the activity is carried on. If a number of municipalities benefit, each one must contribute to the financing of the expenditures related to the debt, in proportion to the benefit it receives.

If it is not possible to determine which municipality benefits, the financing rules applicable to the debt immediately before the reorganization are used to establish the share payable by each related municipality. §3. — Assets 142. Any property the city owns immediately before the reorganizationthat is related to the exercise of a power over a matter referred to in subdivision 2 of Division II of

Chapter IV remains or becomes the property of the central municipality, as the case may be. If the central municipality alienates the property, the proceeds of the alienation or, where applicable, the part of the proceeds that exceeds the amount of the debt related to that property is shared among the related municipalities in proportion to the participation of each in the financing of the expenditures related to that debt. 143. Any property the city owns immediately before the reorganizationthat is related to the exercise of a power that is not referred to in Division II of

Chapter IV remains or becomes, as the case may be, the property of the related municipality (1) on whose territory the property is located, if the property is an immovable ; (2) whose territory, before the reorganization, received a service for which the property was used, if the property is a movable.

However, in determining to which municipality a property belongs after the reorganization, special situations that existed before the city was constituted must be taken into account, such as: (1) an immovable that was located on the territory of a former municipality other than the municipality to which it belonged; (2) a vehicle that belonged to a former municipality other than the one whose territory it served before the reorganization. 144.

A compensatory amount is calculated for a reconstituted municipality if all the following conditions are filled: (1) before the reorganization, the city alienated property that belonged to the former municipality whose territory has become the territory of the reconstituted municipality;

(2) the alienated property was related to the exercise of a power that is not referred to in Division II of

Chapter IV, or was the immovable that housed the office of the former municipality; (3) a debt related to the alienated property existed at the time the city was constituted and still exists at the time of the reorganization, and the expenditures related to it were financed, immediately before the reorganization, by revenues derived exclusively from the territory of the former municipality or a part of it; (4) the proceeds of the alienation (

a) were not used to finance expenditures related to the debt on the alienated property; (

b) were not used directly to improve infrastructures or equipment located on the territory of the former municipality and related to the exercise of a power that is not referred to in Division II of

Chapter IV; and (

c) were not added to the former municipality’s accumulated surplus for the exclusive benefit of the residents and ratepayers of the territory of that municipality. The compensatory amount is equal to the lesser of the proceeds of the alienation and the balance of the debt. Each related municipality, including the reconstituted municipality for which the compensation is established, shall pay part of the compensatory amount. The part to be paid by each is based on the standardized real estate value of each related municipality. §4. — Deficits, surpluses and other amounts available or receivable 145.

The unpaid balance, as it existed immediately before the reorganization, of a deficit whose related expenditures must be financed by revenues derived exclusively from the territory of a former municipality or a part of that territory becomes a deficit of the reconstituted municipality whose territory corresponds to that of the former municipality.

The unspent balance, as it existed immediately before the reorganization, of a surplus that is for the exclusive benefit of the residents and ratepayers of the territory of a former municipality or a part of that territory becomes a surplus of the reconstituted municipality whose territory corresponds to that of the former municipality. 146. A deficit or surplus of the city that is not referred to in

section 145 and that existed immediately before the reorganization remains or becomes a deficit or surplus of the central municipality, as the case may be. The central municipality shall cover the deficit or use the surplus in the exercise of its powers under Division II of

Chapter IV.

Section 146 applies, with the necessary modifications, to any fund of the city that existed immediately before the reorganization. However, a fund created specifically for the exercise of a power that is not referred to in Division II of

Chapter IV preserves its original purpose. When such a fund is made up of revenues derived exclusively from the territory that will become the territory of a reconstituted municipality, the monies that were in the fund immediately before the reorganization and have not yet been appropriated become that municipality’s monies.

If the revenues used to create such a fund derive exclusively from the territory of former municipalities at least one of which is to become the territory of a reconstituted municipality, particularly when the fund was created by the council of a borough made up of such territories, such a reconstituted municipality is entitled to part of the monies referred to in the third paragraph. That

part is equal to the fraction of the total standardized real estate value of the territories concerned that is attributable to that municipality’s territory. 148. An amount to which a city is entitled under a government programdesigned to encourage amalgamations, and that is to be paid after the reorganization, shall be paid to the central municipality. The central municipality shall use this amount in the exercise of its powers under Division II of

Chapter IV. The Consultation Act also provides for the referral to a mediator-arbitrator with respect to the effects of the reorganization on the personnel of a municipality (s 128 and following). It also provides for a referral to arbitration by the Municipal Commission with respect to disputes relating to any reimbursements owed by the government to the municipalities or vice-versa, to various expenses for impact studies, to public information, to the holding of referendum polls, and to the transition committee's works. No procedure of this nature, whether mediation, arbitration, or a referral to a competent tribunal, is provided for in the case of issues governed by Division II of

Chapter V of this statute. [ 7 ] Indeed, in light of its Title V, titled "Orders", the Municipal Powers Act provides the legal basis for the measures that the government may enact by order during the transition resulting from the demergers. It is noteworthy, however, that these orders are central to setting up "reconstituted municipalities", "agglomerations", "related municipalities" and "central municipalities' (terms that are defined in sections 3, 4, and 15 of this statute). Sections 119, 120, and 145 of the Municipal Powers Act state the following, among other things: 119.

The provisions of any order under this Title may, for transition purposes, create a rule of municipal law or derogate from any provision of

an Act under the administration of the Minister, a special Act governing a municipality or an instrument under such

an Act. ... 120. The provisions of an order under this Title come into force on the date of the publication of the order in the Gazette officielle du

Québec or on any later date indicated in the order. ... 145. An urban agglomeration order must contain a list of the property, debts, claims, deficits, surpluses and all other assets and liabilities of the city that are transferred to each reconstituted municipality, or refer to a document containing such a list. An urban agglomeration order may assign any power or obligation to a related municipality as regards an asset or liability that remains with the central municipality or is transferred to a reconstituted municipality. If it assigns such a power or obligation to the central municipality and

an act of the council or executive committee is required for the exercise of the power or the performance of the obligation, the order must specify whether or not the act is under the authority of the deliberative body authorized to exercise urban agglomeration powers.

Chapter II of Title V (sections 123 to 128) governs reconstitution orders,

Chapter III, amending orders (sections 129 to 134), and

Chapter IV, agglomeration orders (sections 135 to 147.3). In the present case, the government adopted several orders relating to the appellant's situation, including the initial order 980-2005 "Reconstitution of Ville de Westmount" [7] , order 1229-2005 "Urban agglomeration of Montréal", [8] and order 1003-2006 "Amendment to certain Orders in Council relating to the municipal reorganization". [9] [ 8 ] Order 1229-2005 contains a provision that the appellant now uses to argue that the Superior Court could not find that its claim in docket 500-17-045993-089 was inadmissible. It is

section 53, which states: 53. The unpaid balance, as it exists immediately before the coming into force of this Order, of a deficit whose related expenditures must be financed by revenue derived exclusively from a territory that is to become part of the territory of a reconstituted municipality becomes a deficit of the reconstituted municipality.

The unspent balance, as it exists immediately before the coming into force of this Order, of a surplus that remains for the exclusive benefit of the inhabitants and ratepayers of a territory that is to becomes part of the territory of a reconstituted municipality becomes a surplus of the reconstituted municipality. It should be noted first that this provision, which is very broad in scope, appears in an agglomeration order affecting the fifteen reconstituted municipalities that are listed in the second whereas clause of the order. In this case, the provision reiterates only the "principle" – see

section 120 of the Consultation Act , supra – set out in

section 145 of that statute, from which the rules of transition may depart. It is also noteworthy that this first order (1229-2005) was the subject of numerous detailed amendments introduced by the order 1003-2006 almost one year after the Montreal agglomeration transition committee had filed its final report on December 21, 2005.

Between those two dates, the government drew up the final measures that were to give effect to the sharing of the assets and liabilities of the central municipality and of the reconstituted municipalities. [ 9 ] It is common ground that the appellant does not dispute the validity of the orders in question. Its position, when stripped to its essentials, is to argue that everything that should have been done pursuant to

Chapter V of the Consultation Act was not done, that litigious issues between it and the respondent remain unanswered, and that it may now address the Superior Court to have them determined. [ 10 ] This argument is misguided. Undoubtedly, with respect to the sharing of the assets and liabilities of the interested municipalities, the intended scope of the Municipal Powers Act is to delegate to the government the power to determine that sharing once and for all by means of orders. This is what the government did with orders 1229-2005 and 1003-2006. Nevertheless, as with any governmental measure – in this case,

an act of the Executive made pursuant to a statute – these orders may be subject to a review of their lawfulness. There are two possibilities on this point. The appellant might have argued that the silence of the orders concerning the amounts to which it lays claim showed that the government failed to exercise a power that it was compelled by statute to exercise: in all likelihood, a mandamus application would have then been the appropriate remedy.

Alternately, the appellant might have argued that the measures taken by the order were ultra vires because they contravened a statutory provision; a declaratory action or an action in nullity would then have been the appropriate remedy. In either case, however, prior to submitting a monetary claim, which it asserts is based on a legal obligation, the appellant should first fully determine whether orders 1229-2005 and 1003-2006 are lawful since, in its opinion, they prevent a complete sharing of the parties' assets and liabilities in keeping with the statute.

The appellant's application, as constituted, is "unfounded in law, even if the facts alleged are true". The trial judge correctly found that the remedy was inadmissible. [ 11 ] FOR THESE REASONS, the Court: [ 12 ] DISMISSES the appeal with costs in docket 500-09020340-105 and without costs in dockets 500-09020333-100 and 500- 09020341-103. MARC BEAUREGARD, J.A. YVES-MARIE MORISSETTE, J.A. JACQUES A. LÉGER, J.A. Mtre Claude Mageau Mtre Marie-Claude Drouin

CAIN LAMARRE CASGRAIN WELLS For the Appellant Mtre Paule Biron Mtre Annie Gerbeau CHAREST GAGNIER BIRON DAGENAIS For the Respondent Date of hearing: April 4, 2011