Russell Inns Ltd v Manitoba, 2016 MBCA 124

Citation: Russell Inns Ltd v Manitoba, 2016 MBCA 124 Date: 20161216 Docket: AI16-30-08536 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice William J. Burnett Mr. Justice Christopher J. Mainella Madam Justice Janice L. leMaistre BETWEEN : RUSSELL INNS LTD. ) T. J. Björnson ) for the Appellant ) (Owner) Respondent ) J. A. Mercury and ) D. A.

Barchyn - and - ) for the Respondent ) ) Appeal heard: HER MAJESTY THE QUEEN IN RIGHT ) September 20, 2016 OF THE PROVINCE OF MANITOBA ) ) Judgment delivered: ) December 16, 2016 (Authority) Appellant ) BURNETT JA Introduction [ 1 ] This appeal relates to this Court’s ability to entertain an appeal from a decision of the Land Value Appraisal Commission (the Commission) awarding appraisal, legal and other costs pursuant to section 15(7) of The Expropriation Act , CCSM c E190 (the Act ). (All references in this judgment to

section numbers are references to sections of the Act .) [ 2 ] For the reasons which follow, this Court does not have that jurisdiction unless the costs are certified by the Commission as part of the compensation payable for the expropriation pursuant to section 15(2). Relevant Statutory Provisions [ 3 ] The sections of the Act which are relevant to the issues raised in this appeal are as follows: Application to commission to determine compensation 15(1) After an offer of compensation is served under

section 16, the authority or an owner of the land may, subject to

section 37 (time limits), apply to the commission, in accordance with the rules of the commission, for the determination of compensation payable by the authority to the owner for the expropriation. Certification of amount by commission 15(2) On receiving an application under subsection (1), the commission shall give the authority and owner of the land an opportunity to be heard and shall determine and certify the compensation payable by the authority to the owner. Certified amount is binding

15(3) Subject to subsection (6) and

section 44 (appeal), an amount certified by the commission under subsection (2) is binding on the authority and the owner.

Commission may vary certified amount 15(5) Where new evidence is available after an amount is certified under subsection (2), the authority or owner may, within 30 days after the date of the certificate, apply to the commission for a variation of the certified amount, and the commission may, where it is satisfied that the new evidence was not available at the time of the certification, vary the certified amount and, where the amount is varied, the commission shall certify the new amount of compensation payable.

Authority to pay costs of owner 15(6) The authority shall pay reasonable appraisal, legal and other costs that are reasonably incurred by an owner for the purpose of determining the compensation payable under this Act for an expropriation. Commission may determine costs 15(7) Where the amount of compensation payable under this Act for an expropriation is settled by the authority and an owner without a hearing or is determined by the commission, the commission may, on application by the authority or owner, determine the costs.

Due compensation for land 26(1) Where land is expropriated, the due compensation payable to the owner therefor shall be the aggregate of (

a) the market value of the land determined as hereinafter set forth; (

b) the reasonable costs, expenses and losses arising out of or incidental to the owner’s disturbance determined as hereinafter set forth; (

c) damages for injurious affection as hereinafter set forth; and (

d) the value to the owner of any special economic advantage to him arising out of or incidental to his actual occupation of the land, to the extent that no other provision is made therefor in due compensation. Appeal of certified amount to Court of Appeal 44(1) A party to a proceeding before the commission may appeal the amount certified as compensation payable to The Court of Appeal within 40 days after the day the commission certifies the amount under subsection 15(2), or within seven days from the day the commission issues a decision or certifies an amount under subsection 15(5), whichever is the later.

Powers of Court of Appeal 44(2) An appeal under subsection (1) may be made on questions of law or fact or mixed law and fact, and The Court of Appeal may (

a) refer any matter back to the commission for determination; or (

b) make any determination that the commission has the power to make.

Costs 44(3) The costs of an appeal are in the discretion of The Court of Appeal, and the court may order that costs be awarded to the owner and assessed in accordance with subsection 15(6) where the owner’s appeal is successful or where the appeal of an authority is unsuccessful.

Background [ 4 ] On June 30, 2006, the authority (Manitoba) expropriated six parcels of land in Russell, Manitoba for the purpose of widening a provincial highway. [ 5 ] On April 13, 2010, the Commission ordered Manitoba to pay, on a without prejudice basis, all of the appraisal costs which had been incurred by the owner (the respondent) in connection with the expropriation.

The Commission stated that it would determine the appropriateness of the appraisal costs “when all other relevant matters have been determined.” [ 6 ] Manitoba challenged the Commission’s jurisdiction to order payment of the appraisal costs on an interim basis. Both the Court of Queen’s Bench and this Court agreed that the Commission had no authority to order payment on an interim basis, and the Commission’s order was quashed.

See Manitoba v Russell Inns Ltd et al , 2011 MBQB 112 , 265 ManR (2d) 99; and Manitoba v Russell Inns Ltd et al , 2013 MBCA 46 , 291 ManR (2d) 244 ( Russell Inns #1 ). [ 7 ] Legal costs were not awarded to Manitoba or to the respondent for the proceedings in the Court of Queen’s Bench and this Court (the court proceedings), but in her reasons for decision, Beard JA added ( Russell Inns #1 at para 191 ): [T]he decisions regarding costs, in both this court and the court below, will in no way preclude [the respondent] from seeking compensation before the [Commission] pursuant to ss. 15(6) and (7) for its full expenses in regard to the application for judicial review and this appeal.

It will be for the [Commission] to determine whether the expenses were reasonable and reasonably incurred pursuant to the Act , based on the relevant principles and the applicable law. [ 8 ] A hearing to determine the compensation payable for the expropriation of one lot was held on April 15-16, 2015 and May 22, 2015. [ 9 ] On June 11, 2015, the Commission issued reasons for its decision and certified that the due compensation payable for the lot in question, as of June 30, 2006, was: $81,000.00, plus reasonable appraisal, legal and other costs that are reasonably incurred.

It is to be noted that the sum of $81,000 was the amount certified by the Commission as the compensation payable for injurious affection. No amount was certified for the legal costs relating to the court proceedings, and the words “reasonable appraisal, legal and other costs that are reasonably incurred” mirror the wording of section 15(6). [ 10 ] In accordance with section 44(1), an appeal of the amount certified by the Commission as compensation payable for injurious affection (i.e. $81,000) was filed by Manitoba within 40 days of June 11, 2015.

That appeal was heard and dismissed on April 25, 2016 (see Russell Inns Ltd v Manitoba , 2016 MBCA 43 , 326 ManR (2d) 317). [ 11 ] On August 10, 2015, the respondent requested a cost hearing (the cost hearing) pursuant to section 15(7) of the Act , seeking payment of the legal costs in relation to the court proceedings, as well as the legal costs associated with the cost hearing itself. [ 12 ] At the cost hearing, Manitoba argued that the issue in the court proceedings was the jurisdiction of the Commission to award interim costs.

As the court proceedings were not for the purpose of determining the compensation payable for the expropriation, Manitoba’s position was that the legal costs incurred by the respondent were not compensable under section 15(6). [ 13 ] Notwithstanding Manitoba’s submission, the Commission awarded the legal costs claimed by the respondent for the court proceedings, as well as the legal costs incurred for the cost hearing. The Commission’s Decisions [ 14 ] The Commission issued two sets of reasons for its decisions to award the legal costs claimed by the respondent.

The first decision addressed the legal costs associated with the court proceedings (decision dated December 15, 2015) and the second decision addressed the legal costs for the cost hearing (decision dated February 4, 2016). Notably, the Commission determined the amounts to be paid but did not certify the amounts as compensation payable under section 15(2), and no certificate was issued for either decision. [ 15 ] In the decision dated December 15, 2015, the Commission stated:

The issue before the Commission is whether the legal costs incurred by the [respondent] in the Court of Queen’s Bench and theManitoba Court of Appeal resulting from the decision taken by the Commission ordering that the payment of full appraisal costs shouldbe paid, on a without prejudice basis, prior to the hearing of [the] matter of compensation between the [respondent] and [Manitoba]. As noted earlier, the Court of Queen’s Bench quashed the Commission’s order on the basis that it did not have the jurisdiction to makesuch an order pursuant to the Act.

This decision was appealed by the [respondent] to the Manitoba Court of Appeal which agreed thatthe order should be quashed and that the issue of costs could be dealt with by the Commission pursuant to the provisions of the Act if the[respondent] chose to bring the matter before it. Consideration of the evidence resulted in the Commission reaching several conclusions: • The Commission erred in making its initial decision on [the respondent] that, on a without prejudice basis, the full appraisalcosts should be paid.

These [appraisal] costs are part of the normal compensation awards made by it at the time compensation isdetermined and therefore, we view the court proceedings to be directly related to compensation. • The [respondent] matter did distinguish it from Fouillard v. Ellis [2007 MBCA 108, 220 ManR (2d) 113] in that the matterbefore the court was a direct challenge to the right of the Municipality to expropriate the property, and had nothing to do withcompensation. • Smith v. Alliance Pipeline Ltd. [2011 SCC 7, [2011] 1 SCR 160], among other matters, speaks to the issue of fullindemnification.

This is a legal principle established by the Supreme Court and is the basis for decisions made by the Commission. InDell [Toronto Area Transit Operating Authority v Dell Holdings Ltd, (SCC), [1997] 1 SCR 32], for example, the courtawarded full indemnification even though the relevant legislation did not speak directly to full indemnification. • The argument of [Manitoba] that to award these costs would open a flood gate of litigation is not supported by theevidence.

The Commission has not experienced a flood of legal challenges by claimants. • When weighing all the arguments made by the parties, the preponderance of the evidence supported awarding the legalcosts being claimed. [16] In its decision dated February 4, 2016, the Commission stated: It was acknowledged by both parties that the costs of the hearing were not unreasonable but rather that the dispute was whether the costsin Exhibit No. 3 ($13,096.20) are payable pursuant to the legislation. The positions of the parties were as outlined for Invoices 1 and 2.

In its Decision of December 15, 2015, the Commission determined that the legal costs in question were related to compensation andeligible for payment. Exhibit No. 3 outlines the legal and related costs of Aikins, MacAulay & Thorvaldson LLP dated September 25,2015 at $13,096.20. The issue before the Commission is whether these legal costs meet the legal test for reimbursement. The Commission holds that for the same reasons as outlined in the Decision of December 15, 2015, the Invoice of Aikins, MacAulay &Thorvaldson LLP dated September 25, 2015 meets the legal test for reimbursement.

DECISION The Commission, having found in favour of the [respondent] in its Decision, on the first two invoices, determines that the [respondent]’srequest for payment of $13,096.20 on the third invoice should be granted on the same grounds. This award shall be added to the originalaward of $48,292.86 for a final award of $61,389.06.

Manitoba’s Position [ 17 ] Simply stated, Manitoba’s position is that section 15(6) limits compensation for legal costs to “costs that are reasonably incurred by an owner for the purpose of determining the compensation payable under this Act for an expropriation.” Such costs do not include legal costs for court proceedings unrelated to the determination of expropriation compensation. [ 18 ] Manitoba argues that the sole issue in the court proceedings was whether the Commission had the jurisdiction to award interim costs before the total amount of compensation had been determined.

According to Manitoba, the courts were not asked to determine a question that would affect the total amount of compensation payable, and it was therefore not reasonable for the Commission to assume that the legal costs incurred in the court proceedings were for the purpose of determining the compensation payable.

The Commission provided no explanation as to why it came to that conclusion. [ 19 ] Manitoba submits that the Commission failed to properly apply the principles enunciated by Beard JA in Russell Inns #1 , namely (at para 179 ): . . . the principles applicable to expropriation proceedings and the applicable law, including the presumption of full indemnification, who had initiated the incidental proceedings, the nature of those proceedings and whether they were necessary, and the requirement in s. 15(6) that the costs and expenses be both reasonable and reasonably incurred. [ 20 ] Manitoba says that the Commission did not apply section 15(6) nor did it determine that the actual legal costs incurred by the respondent were reasonable in amount or reasonably incurred for the purpose of determining the compensation payable under the Act for the expropriation. (I note parenthetically that at the cost hearing Manitoba said that it was not challenging the reasonableness of the amount charged for legal costs.) [ 21 ] Finally, Manitoba says that the Commission’s decision fails to meet the reasonableness standard because it provides no justification, transparency or intelligibility within the decision-making process. [ 22 ] Manitoba requests that the Commission’s cost awards be set aside and that it be awarded costs on this appeal.

The Respondent’s Position [ 23 ] The respondent submits that this Court does not have jurisdiction to hear an appeal of a discretionary cost award made by the Commission. [ 24 ] The respondent points out that the appeal provisions in section 44(1) are silent with respect to the right, if any, to appeal a cost award made by the Commission pursuant to section 15(7) . According to the respondent, section 44(1) only contemplates an appeal of “the amount certified as compensation payable” and the elements of “compensation payable” are set out in section 26(1).

The respondent says that the present appeal involves a challenge to the Commission’s cost awards made under section 15(7) and that such awards cannot be made until after due compensation has been settled by the parties or determined by the Commission.

Given the wording of section 44(1), this Court has no jurisdiction to consider an appeal relating only to the Commission’s determination of costs. [ 25 ] If this Court does have jurisdiction, the respondent says that the awards were reasonable and that there is no basis for appellate intervention. [ 26 ] The respondent submits that the Commission properly considered the relevant facts and law, and turned its mind to each of the factors identified in para 179 of Russell Inns #1 .

Further, the Commission’s award was discretionary and reasonable, and it cannot be said to be “plainly wrong”. [ 27 ] The respondent says that this appeal should be dismissed and seeks costs on a solicitor-client basis. Jurisdiction and Standard of Review [ 28 ] Appeals from the Commission to this Court are governed by

section 44. [ 29 ] Manitoba submits that the standard of review applicable to the issues raised on this appeal is the standard of reasonableness. As I observed in Houle v Manitoba , 2016 MBCA 76 , 330 ManR (2d) 221 (at para 22 ): The classic articulation of that standard, found in Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190 , is that (at para. 47): [R]easonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[30] If this Court has jurisdiction, the respondent agrees that the standard of review is reasonableness. Having said that, therespondent emphasizes that the Commission’s decision regarding costs is entitled to considerable deference and says that an appellatecourt will only interfere with an order of costs in “very limited circumstances” where it can be established that there was “an error inprinciple or if the costs award is plainly wrong”.

Analysis and Decision [31] As Professor Todd observes, “the jurisdiction and powers of the court to which any appeal is made are derived fromand depend upon the wording of the statute by which the right of appeal is conferred” (Eric CE Todd, The Law of Expropriation andCompensation in Canada, 2nd ed (Scarborough: Carswell, 1992) at 536, citing In Re Ogilvie Flour Mills Co, Ltd and Winnipeg (1927), (MB KB), 36 ManR 412 at 428 (KB)). [32] Does section 44(1) contemplate an appeal to this Court from a cost award made by the Commission? The question isone of statutory

interpretation. As Cromwell J recently stated in R v Borowiec, 2016 SCC 11, [2016] 1 SCR 80 (at para 18): To answer it, we apply the often reiterated “modern” approach which requires that we read the words in their “entire context and in theirgrammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: E. A.Driedger, Construction of Statutes (2nd ed. 1983), at p. 87. [33] To provide context, I begin with a concise

summary of the key statutory provisions. [34] Section 15(2) requires the Commission to determine and certify the compensation payable to the owner for theexpropriation. The compensation payable is the aggregate of the four components set out in section 26(1).

With the exception of thespecific legal costs contemplated by section 28(1)(c)(ii) (i.e. legal fees reasonably incurred in acquiring other lands), legal costs do notgenerally form part of the compensation payable. [35] Section 15(6) requires the authority to pay reasonable appraisal, legal and other costs that are reasonably incurred by anowner for the purpose of determining the compensation payable under the Act for the expropriation.

Section 15(7) provides that, wherethe amount of compensation payable is determined by the Commission, the Commission may, on application by the authority or theowner, determine the reasonable appraisal, legal and other costs contemplated by section 15(6). [36] Section 44(1) limits appeals to this Court to “the amount certified as compensation payable”, further requiring that suchappeals be brought “within 40 days after the day the commission certifies the amount under subsection 15(2)”. [37] It is apparent from a plain reading of these provisions that: a) Section 15(2) and section 15(7) contemplate two applications, one to determine compensation payable for the expropriation(section 15(2)) and the second to determine costs (section 15(7)).

b) In addition to the requirements that the costs must be reasonable and reasonably incurred, section 15(6) clearly provides that, inorder to qualify for payment, the costs must be incurred for the purpose of determining the compensation payable.

c) While, in practice, an application to determine compensation payable and an application to determine costs may be made at thesame time, reasonable appraisal, legal and other costs must be determined after the compensation payable has been determined. (SeeRussell Inns #1 at paras 133, 136 and 143, where Beard JA emphasized that the Commission determines costs after the finalcompensation amount payable has been determined by it or settled by the parties.)

d) A determination of costs pursuant to section 15(7) is not part of the compensation payable certified by the Commission pursuant tosection 15(2). This view is reinforced by section 15(3), which makes it clear that the amount certified by the Commission is binding onthe authority and the owner, subject to the payment of costs pursuant to section 15(6) and any appeal pursuant to section 44(1).

e) Finally, and perhaps most importantly, an award of costs made by the Commission pursuant to section 15(7) is not appealablepursuant to section 44(1) because section 44(1) only permits an appeal of the amount certified as compensation payable under section15(2). [38] Unfortunately there was no discussion of

section 15 and

section 44 when The Expropriation Amendment Act, SM 1993,c 25 was considered in the Legislature. Section 44(1) of the former version of the Act (i.e. The Expropriation Act, RSM 1987, c E190)provided: Appeal. 44(1) An appeal lies to The Court of Appeal from any judgment or order of the court. If the Legislature wanted to preserve the right to appeal an award of costs made by the Commission pursuant to section 15(7), it wouldhave been a simple matter to amend section 44(1) as it previously read by replacing the word “court” with the word “Commission”.

Iwould also observe that if the Legislature intended to permit an appeal of a costs award, it could have used a variation of section 14(5) ofThe Land Acquisition Act, CCSM c L40, which has been in force since February 1988:

Commission may award costs 14(5) In certifying due compensation in respect of an acquisition of land, the commission may include in due compensation an amount for the costs incurred by the owner in appearing before, submitting evidence to and presenting argument to the commission including expenses incurred by the owner for the purpose of preparing and presenting his case before the commission. [emphasis added] [ 39 ] Jurisprudence from other provinces is of limited assistance as the appeal provisions in Manitoba’s legislation are quite different from those in other jurisdictions. [ 40 ] For the foregoing reasons, it is my view that, when the relevant provisions of the Act are read in context, and in their grammatical and ordinary sense, the statutory right of appeal contemplated by section 44(1) is limited to the amounts certified by the Commission as compensation payable to the owner pursuant to section 15(2).

More specifically, the express wording of section 44(1) does not permit an appeal solely from the Commission’s determination of costs pursuant to section 15(7). [ 41 ] It is my further view that, unless section 44(1) is amended, issues arising from a decision of the Commission to award appraisal, legal or other costs pursuant to section 15(7) must be taken to the Court of Queen’s Bench by way of judicial review, subject to the proviso that “whether a court will hear an application for judicial review rests in the court’s discretion” (Robert W Macaulay & James LH Sprague, Practice and Procedure Before Administrative Tribunals (Toronto: Carswell, 2004) vol 3 (loose-leaf revision 14:3) at 28-26.101.

See also Donald JM Brown & The Hon John M Evans, Judicial Review of Administrative Action in Canada 2 (Toronto: Thomson Reuters, 2016) (loose-leaf revision 2016:2) at 3:1100). I would add that any delay in bringing an application for judicial review attributable to pursuing this appeal should not be counted against the parties in any future proceedings. [ 42 ] The present situation may be contrasted with the situation in Houle .

There, the legal costs for incidental court proceedings were certified by the Commission pursuant to section 15(2) as part of the compensation payable for the expropriation, an appeal was taken pursuant to section 44(1), and this Court exercised the jurisdiction given to it pursuant to section 44(2) (i.e. the ability to make any determination that the Commission has the power to make). [ 43 ] This appeal falls to be decided on the basis of jurisdiction, or more precisely the lack of jurisdiction, and not on a standard of review analysis.

Having said that, several additional comments are in order: • In deciding whether to award legal costs for incidental court proceedings, the factors identified by Beard JA in Russell Inns #1 at para 179 should be taken into account by the Commission. • The list of factors in para 179 is not exhaustive, and certainly the success or failure of the court proceedings is another factor to be taken into account. • As stated in Houle (at para 129 ), the fundamental question is whether the costs were incurred for the purpose of determining compensation payable under the Act for the expropriation.

The Commission’s reasons must explain why it concluded that the costs were incurred for that purpose. To use the Dunsmuir terminology, the reasons must provide a justifiable, transparent and intelligible basis for arriving at that conclusion ( see Dunsmuir v New Brunswick , 2008 SCC 9 , [2008] 1 SCR 190 ).

This is particularly important in the present case where Beard JA observed that the issues raised before the Commission and in the court proceedings “had nothing to do with the determination of . . . the compensation payable” (para 181) but nonetheless felt that the respondent could apply pursuant to sections 15(6) and (7) for its costs in relation to those proceedings (para 191). [ 44 ] Given my conclusion that there is no right of appeal from the Commission’s decision, this appeal is dismissed for want of jurisdiction.

The respondent shall have its costs pursuant to the Manitoba, Court of Appeal Rules , Man Reg 555/88R , r 47(1), calculated in accordance with Tariff B in

Schedule A.1. JA I agree: JA I agree: JA