Executive Summary: Key Legal and Evidentiary Issues

• The City of Stratford appealed a costs award made by the Ontario Land Tribunal under section 32(2) of the Expropriations Act following a lengthy expropriation compensation proceeding.
   
• Member Blais of the Tribunal had ordered the City to pay 1353837 Ontario Inc. its costs on a solicitor/client basis up to the date of a 2018 settlement offer, and on a partial indemnity basis thereafter.
   
• Simultaneously, the Tribunal ordered 1353837 Ontario Inc. to pay the City its costs for the entire proceeding on a partial indemnity basis.
   
• Central to the appeal was whether Rule 49.10 of the Rules of Civil Procedure should govern the Tribunal's costs discretion in an expropriation matter.
   
• Discretionary costs decisions attract significant appellate deference and will only be disturbed for an error in principle or a result that is plainly wrong.
   
• Ultimately, the Divisional Court found no such error and dismissed the City's appeal, awarding costs of the appeal to the respondent.
   

Facts of the case

In 2008, the City of Stratford decided to expropriate 11.42 acres of land owned by 1353837 Ontario Inc. ("135") to facilitate a satellite campus for the University of Waterloo. The land, acquired by 135 through mortgage foreclosure in 2001, contained only a derelict building and had significant environmental contamination. The City served notice of expropriation in June 2009 and, before 135 commenced its compensation claim, made a formal offer of $500,000 under section 25 of the Expropriations Act. After 135 initially resisted turning over possession, the parties settled the possession dispute in January 2010, with the City advancing a total of $5,024,629, of which $746,070 went to 135 and the remainder to its mortgagee.

135 subsequently commenced its compensation proceeding in 2012, seeking $25,000,000 for fair market value plus $7,900,000 in additional losses. The City made further settlement offers in 2013 and 2018, and again in 2021, none of which 135 accepted. Following a 26-day hearing in 2021, Vice-Chair Jacobs accepted an appraisal valuing the land at $4.3 million if clean, but found that substantial remediation costs reduced its actual value to a nominal $290,000, plus $51,683 in disturbance damages — an amount well below what the City had already advanced or offered. All of 135's other claims were dismissed, and a subsequent appeal by 135 was rejected by the Divisional Court in 2022.

Once the compensation proceeding concluded, the parties returned to the Tribunal to resolve costs. Member Blais heard the costs motions over four days on a record exceeding 19,000 pages, ultimately awarding 135 solicitor-client costs to the date of the City's June 2018 offer, partial indemnity costs afterward, and disbursements, for a combined total of $3,709,367. The Tribunal also ordered 135 to pay the City partial indemnity costs for the whole proceeding, totalling $2,901,380. The City appealed that costs decision to the Divisional Court.

Policy and legislative provisions at issue

The appeal turned on the interpretation of section 32 of the Expropriations Act. Subsection 32(1) requires the Tribunal to award an owner its reasonable costs where the compensation determined is 85 percent or more of the amount offered by the expropriating authority. Subsection 32(2) applies where the award falls below that threshold, giving the Tribunal broader discretion to order costs as it considers appropriate. Because the compensation ultimately awarded to 135 fell well short of the City's offers, subsection 32(2) governed.

The City argued that the Tribunal should have applied Rule 49.10(2) of the Rules of Civil Procedure, which generally entitles a party who beats its own settlement offer to costs from the date of that offer forward, while limiting the other party's recovery to costs incurred before that date. The Tribunal's own Rules of Practice and Procedure, specifically Rule 26.29, permit reliance on the Rules of Civil Procedure where the Expropriations Act and Tribunal Rules are silent on an offer to settle. The Tribunal treated Rule 49.10 as an informing guide rather than a formula to be applied rigidly, consistent with the twofold policy objectives underlying costs in expropriation matters: the indemnity principle, which favours broad compensation to landowners whose property is taken for public use, and the efficiency principle, which encourages early settlement.

Reasoning and analysis

The Divisional Court confirmed that discretionary costs decisions, including those of administrative tribunals, are reviewed only for an error in principle or a result that is plainly wrong, not on a standard of correctness. This deferential approach was drawn from Court of Appeal authority in Shergar Development Inc. v. Windsor (City) and related decisions, which recognize that reasonable decision-makers can differ on the proper exercise of costs discretion.

The Court rejected the City's position that the Tribunal had departed from established Rule 49 jurisprudence without principled justification. It found that the Tribunal appropriately distinguished expropriation proceedings from ordinary civil litigation, noting that the indemnity and efficiency principles do not map neatly onto the civil costs regime. The Tribunal had reasonably concluded that 135's early refusals to accept the City's offers, including the 2009 and 2010 offers, were not unreasonable given deficiencies in those offers, but that its later refusal of the City's June 2018 and April 2021 offers reflected unreasonable conduct warranting a costs consequence.

Rather than denying 135 all costs after 2018, as occurred in Shergar, the Tribunal chose a more measured response: reducing 135's post-2018 entitlement to partial indemnity costs while separately awarding the City its own partial indemnity costs for the entire proceeding. The Court found this approach was open to the Tribunal in the exercise of its discretion under section 32(2), and that awarding costs concurrently to both parties was not objected to by the City and fell within the Tribunal's jurisdiction. The Court further held that section 13(4) of the Ontario Land Tribunal Act, which limits review of procedural rule exercises, did not apply because the costs award stemmed from section 32(2) of the Expropriations Act itself, not from the Tribunal's practice and procedure rules.

Ruling and overall outcome

The Divisional Court dismissed the City of Stratford's appeal, finding no error in principle and no result that was plainly wrong in the Tribunal's costs decision. The successful party on this appeal was the respondent, 1353837 Ontario Inc. As agreed between the parties, the City was ordered to pay 135 costs of the appeal in the amount of $15,000, inclusive of all costs. The underlying Tribunal costs award — $3,709,367 payable to 135 and $2,901,380 payable to the City — remained undisturbed by this decision.