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PUBLIC UTILITIES - Operation of utility - Facilities - Costs - Cost sharing between municipality and utility

Friday, February 02, 2018 @ 7:47 AM  


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Appeal by Union Gas Limited (Union) from a decision of an application judge requiring the appellant to assume the entire cost of relocating parts of a gas pipeline. Parts of the appellant’s gas pipeline had to be relocated as a result of the respondent municipality’s construction of certain drainage works. The appellant argued that the respondent was required to pay 35 per cent of the relocation costs in accordance with the parties’ Franchise Agreement. The Franchise Agreement provided for the sharing of the appellant’s costs occasioned by municipal works. The respondent argued that the appellant should assume the full cost of relocation. The application judge held that the cost to relocate gas works when a drain was constructed under the Drainage Act (Act) was an increase in the cost of “drainage works”, and therefore subject to s. 26 of the Act, which provided for the utility to assume the entirety of the increased cost of drainage works caused by the existence of the public utility’s works. He held that the cost-sharing provisions of the Franchise Agreement did not trump and hold priority over s. 26 of the Act. On appeal, Union submitted that the application judge erred: 1) in interpreting s. 26 of the Act to apply to the cost of relocating gas works; and 2) in concluding that the Act overrode the cost-sharing provisions of the Franchise Agreement.

HELD: Appeal allowed. It was unnecessary to determine in this appeal the full scope of s. 26 of the Act, and in particular whether the reference to the increased cost of "drainage works" could include a utility's cost to relocate gas works. The cost-sharing provisions of the Franchise Agreement applied to the parties’ dispute. The application judge erred in law when he refused to give effect to the parties’ agreement on the basis that it could not oust or override the provisions of the Act. The application judge erred in holding that parties could not contract out of statutory provisions. Enforcement of the parties’ contractual cost-sharing agreement would not undermine the detailed procedures set out in the Act for the proposal, planning and approval of drainage works, and the sharing of the municipality’s own costs. There was nothing in the legislative scheme to suggest that the ability to contract for the allocation of relocation costs between a municipality and a utility was contrary to public policy. There was nothing in the Franchise Agreement that would exclude drainage works from “municipal works”, or that would remove from its cost-sharing provisions the drainage works undertaken by the respondent.

Union Gas Ltd. v. Norwich (Township), [2018] O.J. No. 91, Ontario Court of Appeal, H.S. LaForme, S.E. Pepall and K.M. van Rensburg JJ.A., January 10, 2018. Digest No. TLD-January292018010