January 30th, 2013
In Williams v Toronto, 2012 ONCA 915, the Ontario Court of Appeal explores the relationship between the City and a tenant, Mr. Williams, over loss of rent paid by tenants owed reduced rent under a statutory rent-reduction scheme. This case determined that there could be sufficient relationship between the tenants and the City to ground a cause of action in negligence in the initial stage of a class proceeding against the City.
Mr. Williams was a rooming house tenant in the Parkdale area of Toronto. He is the proposed representative plaintiff in the proceeding brought on behalf of himself and other Parkdale tenants (para 7). The Parkdale tenants are part of a City project, known as the Parkdale Pilot Project, which brought unregulated apartment buildings into conformity with City by-laws. The tenants claim that the City failed to deliver statutorily-mandated notices informing the tenants of their right to access a rent-reduction scheme set out in the Residential Tenancies Act, 2006, SO 2006, c 17 [RTA] (para 16). They allege that this amounts to negligence.
In the RTA, when s 131(1) is read together with ss 41(1) and (5), it provides an automatic reduction in rent for tenants of residential buildings, provided that two criteria are met: first, the building must contain seven or more rental units; and second, the municipal property taxes for the building must be reduced in a year by an amount greater than 2.49% (The Divisional Court found that both criteria were satisfied for 32 properties within the Parkdale Pilot Project (Williams v City of Toronto, 2011 ONSC 6987 (CanLII) at para 35)).
Under the RTA, the municipality is obliged to send a notice in writing for a rental reduction to tenants and landlords of a residential unit (s 131(3)). According to the Divisional Court decision, the notice must “inform the tenants that their rent has been reduced; set out the percentage by which their rent is reduced and the date when the reduction takes effect and inform the tenants that they may apply to the Landlord and Tenant Board for the return of rent illegally collected if the rent is not reduced” (para 9).
The appellant lived in an apartment when the rent reduction scheme applied. He did not receive a reduction in his rent from his landlord and ended up paying more rent than the landlord was legally entitled to. The City failed to send statutory notices to tenants at 32 properties within the Parkdale Pilot Project (para 7). The tenants are barred from seeking relief from the Landlord Tenant Board because 1 year has lapsed between the rent reduction and their awareness of their entitlement to relief (para 15).
At the Superior Court of Justice, the Court held that Mr. Williams case did not have a cause of action against the City, which was necessary for certification under s 5(1)(a) of the Class Proceedings Act, 1992, SO 1992, c 6 (para 1).
The Divisional Court, however, reversed the Superior Court’s decision. In the view of Swinton and Mackinnon JJ, it was not plain and obvious that the City owed no duty of care to Mr. Williams (para 2). On this basis, they concluded that there was a cause of action. The Divisional Court certified the class proceeding and referred the case back to the motion judge (para 2).
The City then appealed to the Ontario Court of Appeal on the basis that the Divisional Court erred in finding a specific and special relationship between the City and Mr. Williams. In the absence of this relationship, there can be no grounds for an action in negligence against the City.
In dismissing the City’s appeal, the Court found that the harm was foreseeable and that the facts established that the relationship between Mr. Williams and the City to be of sufficient proximity such that the City owed the tenants a prima farcie duty of care.
This is a compelling argument because the group of individuals to whom the City owed a duty of care is fixed and finite. Those owed a duty are tenants living in housing within the Parkdale Pilot Project, who were denied notice of their entitlement to reduced rents under the RTA. The scope of the City’s liability is limited, which diminishes any concern of subjecting the City to far-reaching liability. Correspondingly, the Court held that it was not “plain and obvious that policy considerations would inevitably negate any private law duty of care otherwise found to attach to the City” (para 19). The fact that this case addresses a novel question of law likely influenced the Court’s decision. The Divisional Court held that in cases raising a novel interpretation of the duty of care, the pleadings should be read generously (para 50).
The rental reduction scheme created under the RTA is meant to provide benefits to tenants whose landlords have received tax benefits from the City. The landlords received a tax benefit and were under no obligation to inform the tenants. It was the City’s obligation to inform the tenants of their right to a reduction in rent, and the City failed in its duty to send a statutorily mandated notice to the tenants in the case at hand.
Moreover, a major objective of the Parkdale Pilot Project was to provide tax savings to landlords and to reduce rental payments for tenants (para 16). While the City argued that Mr. Williams and the other tenants could have learned of their entitlement to reduced rent elsewhere, Mr. Williams asserted that he, and others, could only have learned about his entitlement through a notice from the City (para 17). Given the facts, there is a cause of action that should allow the certification of a class action proceeding against the City.
The likelihood of success for the class action against the City is not addressed by the Court. If the City does not appeal further, the case will be referred back to the Superior Court to proceed as a class action. If the Superior Court finds that the City owed a private duty of care to the tenants, it will mark a significant development in tenants’ rights.[filed: Real Estate]