Supreme Court Judgments

Supreme Court of Canada

Nipigon v. Red Rock, [1975] 1 S.C.R. 40

Date: 1973-11-05

The Corporation of the Township of Nipigon (Plaintiff) Appellant;

and

The Corporation of the Improvement District of Red Rock (Defendant) Respondent.

1973: October 24; 1973: November 5.

Present: Judson, Ritchie, Spence, Laskin and Dickson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Interpretation—Adjoining municipalities entering cost sharing agreement—Cost sharing based on assessment levels in 1956—1956 assessment levels based on 1940 costs—Question as to whether agreement refers to original levels or to assessment levels from time to time—The Secondary Schools and Boards of Education Act, 1954 (Ont.), c. 87, ss. 33(3) and 33(5) as amended by 1955 (Ont.), c. 76.

The parties, adjoining municipalities in the District of Thunder Bay, entered into an agreement in 1956 for sharing liability for the cost of a high school with the provision that the proportionate costs to be borne by the parties were to be calculated with reference to their respective taxable assessments. In 1956 at the time the agreement was made the assessments in both municipalities were based on 1940 costs and this continued until 1967. For the 1968 taxation year a provincial assessor reassessed the property in Red Rock on the basis of 100 per cent of market value. As the basis of assessment in Nipigon had not changed when the formula of the agreement was applied to the 1968 assessment figures it appeared that the liability of Nipigon was only $15,137.89 as opposed to $28,372.39 had the original figures still applied. Red Rock sued for the difference of $13,234.50, failed at first instance but succeeded in the Court of Appeal for Ontario.

Held: The appeal should be dismissed.

The agreement embodied the assessment formula in force at the time of entering the agreement; in this instance an assessment formula based on 1940 costs. The sharing formula was predicated on a stable and continuing relationship between the respective assessments not as to their total amount from time to time but as to the basis on which these amounts

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would be calculated. The reassessment in Red Rock on a different basis could not alter the basis of the sharing formula in the agreement.

APPEAL from a judgment of the Court of Appeal for Ontario[1] allowing an appeal and setting aside the judgment at trial. Appeal dismissed with costs.

J.J. Robinette, Q.C., for the appellant.

J. Sopinka, for the respondent.

The judgment of the Court was delivered by

LASKIN J.—The appellant Nipigon and the respondent Red Rock, adjoining municipalities in the District of Thunder Bay, obtained ministerial approval under The Secondary Schools and Boards of Education Act, 1954 (Ont.), c. 87, as amended by 1955 (Ont.), c. 76, for the establishment of a high school district, envisaging the erection of a high school within Red Rock to serve both communities. They entered into an agreement on February 13, 1956 for sharing liability for the cost of the high school under a debenture issue. The operative part of the agreement was as follows:

That the calculation of the respective costs to be borne by the parties hereto shall be based on the actual total taxable assessment of the party of the Second Part, and the total taxable assessment of the party of the First Part multiplied by two (2), providing that the latter assessment by such multiplication shall at no time exceed one half of the assessment of the Party of the Second Part.

There was a statutory prescription in s. 33(3) of the Act for apportionment of the cost, but by s. 33(5) this could be modified by agreement as was done in the present case. The two provisions read as follows:

33(3) Where a high school district comprises two or more adjoining municipalities or parts thereof in a territorial district, each municipality shall be liable for

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such proportion of the principal and interest payable under the debentures and of the expenses connected therewith as the assessment of the municipality or part bears to the total assessment of the whole district, and the council of each municipality shall levy on the property liable for school purposes in the municipality or part and pay its proportion to the municipality that has issued the debentures.

33(5) Any municipality may offer to assume and may assume a greater proportion than its proportion under subsection 1, 2 or 3 and may issue its own debentures therefor, and in that case the proportion of the balance to be paid by each of the other municipalities shall be such as may be agreed upon and if the councils of the other municipalities fail to agree upon the proportion within thirty days of the making of the offer, the proportion of the balance to be paid by each of the other municipalities shall be determined in accordance with subsection 1, 2 or 3, as the case may be.

I should note that subsections 1 and 2, mentioned above, refer to high school districts comprising municipalities within a county.

It is common ground, and there is, in any event, a concurrent finding, that at the time the aforesaid agreement was made the assessments in each of the municipalities were based by their respective assessors on 1940 costs, and this continued to be the basis of the assessments until 1967. On this footing, the respective proportions of debenture liability under the agreement were, roughly, two-thirds on the part of Red Rock and one-third on the part of Nipigon. The actual assessments in the two municipalities for the period 1956 to 1967 inclusive are shown in the following table:

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Under the formula in the agreement, Nipigon’s share of the debenture cost for 1967 was that fraction of the debenture cost for the year represented by $5,157,832 (being twice its assessment for 1967) divided by $13,759,776 (being the total of the Red Rock assessment and twice the Nipigon assessment). If the statutory formula had applied, the Nipigon assessment would not have been doubled for the purposes of the required fraction. The agreement, made in the light of s. 33(5), resulted in Nipigon assuming a greater proportion, but with a limitation to a maximum of one-third.

As a result of a dispute between Red Rock and two other municipalities (Nipigon not being involved) over the sharing of costs of a home for the aged, the Department of Municipal Affairs had a provincial assessor re-assess the property in Red Rock for the 1968 taxation year, and he made his assessment on the basis of 100 per cent of market value. In the result, Red Rock’s assessment rose to $24,088,955. That of Nipigon for 1968 did not undergo any change in its basis and was fixed at $2,605,477, an increase of $26,531 over that for the preceding year. The formula of the agreement applied to these figures for 1968 in respect of a debenture cost of $85,117.50 resulted in Red Rock’s share being $69,979.61 and that of Nipigon $15,137.89. Nipigon paid this sum, but Red Rock claimed that Nipigon’s proper share under the formula basis upon which the agreement was founded was $28,372.39, and it sued for the balance of $13,234.50. It failed at first instance on a holding by the trial judge that he could not rewrite the agreement. The Ontario Court of Appeal set aside the judgment at trial and gave judgment for Red Rock, holding that the agreement embodied an assessment formula based on 1940 costs.

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In my opinion, the Court of Appeal reached the proper conclusion. The sharing formula was predicated upon a stable and continuing relationship between the respective assessments, not as to their total amounts from time to time, but as to the basis upon which those amounts would be calculated. The reassessment in Red Rock on a different basis, although effective for its particular purpose and in its impact upon taxpayers, could not have the effect of altering the basis of the sharing formula in the agreement.

It was contended that the agreement must be viewed as part of a statutory scheme reflected in s. 33, and that if the statutory formula in s. 33(3) had applied the result objected to by Red Rock would have been the same. This contention assumes, however, that the statutory formula would have applied notwithstanding that at the time approval for a high school district was given the assessments of the two municipalities were on different bases. That might not have been the case if the parties invoked s. 33(5) to make an agreement; and, in any event, the fact that the parties might have proceeded on the statutory formula when their assessments were on different bases does not tell against the sharing formula in the present case.

The result I would arrive at in this case, in confirmation of that reached by the Court of Appeal, is not affected by the use of the word “actual” in the agreement. I take it to be a quantitative reference to the assessments in the two municipalities and not as marking any manifested agreement for changes in the common basis of the assessments during the currency of the contract.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

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Solicitors for the appellant: Carrick, O’Connor, Coutts & Crane, Toronto.

Solicitors for the respondent: Fasken & Calvin, Toronto.