City of Toronto v. Consumers' Gas Company of Toronto, [1941] SCR 584

Supreme Court of Canada

City of Toronto v. Consumers’ Gas Company of Toronto, [1941] S.C.R. 584

Date: 1941-10-07

The Corporation of the City of Toronto (Defendant) Appellant;

and

The Consumers’ Gas Company of Toronto (Plaintiff) Respondent.

1941: May 19, 20; 1941: October 7.

Present: Duff C.J. and Rinfret, Davis, Kerwin and Hudson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Municipal corporations—Highways—Public utilities—Drainage—Company supplying gas in city—Removals, replacements and repairs of portions of its mains and pipes made necessary by works done by city on its

[Page 585]

streets—Recovery of cost by the gas company from the city—Application of The Public Service Works on Highways Act (now R.S.O., 1937, c. 57)—“Constructing, reconstructing, changing, altering or improving any highway”—Nature of works done by city—Construction of (inter alia) sewers—Claim by gas company against city for cost of alterations made necessary by construction of subways ordered by Board of Railway Commissioners for Canada.

Plaintiff was a company distributing artificial gas through its mains and pipes in the streets of defendant, the City of Toronto. From time to time, to enable defendant to do, or by reason of its doing, certain works—construction of sewers, pavements, sidewalks, street gradings, street diversions, street widenings, drainage systems, retaining walls, etc.—plaintiff made removals, replacements and repairs of portions of its mains and pipes; and for the cost thereof it claimed payment from defendant.

Sec. 2 of The Public Service Works on Highways Act (now R.S.O., 1937, c. 57) provides: “Subject to the provisions of section 3, where in the course of constructing, reconstructing, changing, altering or improving any highway it becomes necessary to take up, remove or change the location of appliances or works [which, by the Act, include pipes and pipe lines] placed on or under the highway by an operating corporation [which, by the Act, includes a company distributing gas], the road authority [which, by the Act,. includes a municipal corporation] and the operating corporation may agree upon the apportionment of the cost of labour employed in such work and in default of agreement the cost of such work shall be apportioned equally between the road authority and the operating corporation, but such costs shall not include the replacement or renewal of the appliances or works nor the cost of any materials or supplies, nor any other expense or loss occasioned to the operating corporation.” (Plaintiff contended, inter alia, that said provisions did not affect its rights, in view of provisions of its incorporating Act (11 Vict., (Canada), c. 14) and of Acts relating to it).

Plaintiff also claimed payment from defendant of plaintiff’s cost of making alterations in its mains and pipes ordered by the Board of Railway Commissioners for Canada and made necessary by reason of construction, ordered by said Board, of subways at certain places on streets of the city where railway tracks crossed them.

Held (affirming judgment of the Court of Appeal for Ontario, [1941] O.R. 175):

(1) The term “highway” in said Act includes the public streets of a city.

(2) Said Act governed plaintiff’s right to compensation when defendant’s operations, in exercise of its powers, were of the character described in said s. 2; and in such cases plaintiff was entitled to recover no more than 50% of the labour cost only of its removals, replacements and repairs.

(3) The construction of certain sewers in question, whether for sanitary purposes or for surface drainage (storm water sewers), could not be regarded as works of defendant which came within the description in said s. 2 (though a storm water sewer might, on a particular set of facts, be properly regarded as “an improvement to a highway”

[Page 586]

within the meaning of said Act); and for relocations of gas mains by reason of such construction the plaintiff was entitled to payment in full. (Kerwin J. dissented as to the storm water sewers, holding that, generally speaking, storm water sewers are constructed by municipalities in the course of improving a highway and that, on the evidence, highways were improved by the storm water sewers in question; a drain may improve a highway under which a gas company has its mains and also other highways from which surface water is drained, but, so long as the first condition exists, said s. 2 applies).

(4) Plaintiff was not entitled to recover for its cost of the alterations made necessary by reason of said construction of subways.

APPEAL by the defendant from the judgment of the Court of Appeal for Ontario[1] in so far as it varied the judgment of Hogg J.[2]; and CROSS-APPEAL by the plaintiff from the said judgment of the Court of Appeal for Ontario in so far as it denied to the plaintiff payment in full of its claims.

The plaintiff is a Gas Company incorporated in 1848 by an Act of the late Province of Canada, 11 Vict., Cap. XIV (Canada), for the purpose amongst others of supplying the inhabitants of the City of Toronto with gas and it is a Company distributing artificial gas for light, heat and power in the City of Toronto and surrounding municipalities and it has the right under its Act of Incorporation and amending Acts to lay and maintain its mains and pipes in the streets, squares and public places of the said City. The defendant is the Corporation of the City of Toronto.

From time to time, for the purpose of enabling the defendant to do certain works—construction of sewers, pavements, sidewalks., street gradings, street diversions, street widenings, drainage systems, retaining walls, etc.—the plaintiff removed to other locations portions of its mains and pipes, and replaced other portions destroyed and repaired other portions damaged by reason of the defendant’s works. The removals, replacements and repairs now in question were made between March 28, 1929 (the date of the amendment hereinafter mentioned to The Public Service Works on Highways Act) and November 20, 1935. For the cost of these the plaintiff claimed payment from the defendant in full. The defendant contended that it was not liable to pay more than 50% of the labour cost thereof

[Page 587]

only, by reason of The Public Service Works on Highways Act, as amended on March 28, 1929, (the Act is now c. 57 of R.S.O. 1937). Sec. 2 of that Act provides:

Subject to the provisions of section 3, where in the course of constructing, reconstructing, changing, altering or improving any highway it becomes necessary to take up, remove or change the location of appliances or works placed on or under the highway by an operating corporation, the road authority and the operating corporation may agree upon the apportionment of the cost of labour employed in such work and in default of agreement the cost of such work shall be apportioned equally between the road authority and the operating corporation, but such costs shall not include the replacement or renewal of the appliances or works nor the cost of any materials or supplies, nor any other expense or loss occasioned to the operating corporation.

By said amendment of March 23, 1929 (19 Geo. V, c. 19), the words “appliances and works” in the Act were made to include “pipes and pipe lines,” and the words “operating corporation” in the Act were made to include “a company or individual * * * distributing or supplying * * * artificial or natural gas for light, heat or power.” (The plaintiff contended, inter alia, that, in view of provisions of its incorporating Act and of Acts relating to it, its rights could not be held to be affected by the provisions of The Public Service Works on Highways Act).

In the formal judgment at trial (Hogg J.) it was declared that the plaintiff was entitled to be paid 50% of the cost of labour employed for the said removals, replacements and repairs “except the relocations of gas mains by reason of the construction of certain sanitary sewers, certain water-mains and the repairing of a leak in a gas main on Dover-court Road” for which excepted items the plaintiff was entitled to payment in full.

That part of the judgment at trial was varied by the Court of Appeal by substituting for the words in the judgment at trial “by reason of the construction of certain sanitary sewers” in the said excepted items for which the plaintiff was to be paid in full, the words “by reason of the construction of sewers,” thus including within the excepted items for which the plaintiff was to be paid in full the relocations by reason of the construction of “storm” or “surface drainage” sewers, as well as sanitary sewers.

The Court of Appeal agreed with the trial judge in holding that the term “highway” in said Act included the public streets of a city, and that said Act governed the

[Page 588]

plaintiff’s right to compensation when the defendant City’s operations were of the character described in said s. 2. But it held that the statute could be applied only in cases where, in undertaking the work that had made it necessary to take up, remove or change plaintiff’s mains or pipes, the defendant City had proceeded in the exercise of its powers to “construct, reconstruct, change, alter or improve” a highway; and that the construction of a sewer, whether for sanitary purposes or for surface drainage, does not come within that description, even if incidentally it does effect some improvement in the highway. The Court stated that it is common knowledge that when intended to carry surface water only, a sewer usually has connections for surface drainage with the private properties that front on the street, and in many cases carries as well the surface water from other streets than that upon which it is laid.

The plaintiff also claimed payment from the defendant of the plaintiff’s cost of making alterations in its mains and service pipes ordered by the Board of Railway Commissioners for Canada and made necessary by reason of construction, ordered by the said Board, of subways on streets of the defendant City at certain places where tracks of railway companies crossed streets of the defendant. On this claim the defendant denied liability. This claim was dismissed by the trial judge and the dismissal was affirmed by the Court of Appeal.

By the judgment at trial, costs were given to defendant. This was changed by the Court of Appeal, which ordered that there be no costs to either of the parties. The Court of Appeal (by express statement) made no order as to costs of the appeal.

The defendant appealed to the Supreme Court of Canada from that part of the judgment of the Court of Appeal which varied the judgment of Hogg J. The plaintiff cross-appealed, asking that the judgment of the Court of Appeal should be varied in so far as it allowed the plaintiff only 50% of the cost of labour employed for certain removals, replacements and repairs as aforesaid, and in so far as it dismissed the plaintiff’s claim for the cost of the alterations made necessary by reason of the construction of subways as aforesaid; and asked that the plaintiff’s claim in the action be allowed in full.

[Page 589]

By the judgment of this Court, now reported, the appeal and cross-appeal were dismissed with costs; Kerwin J. dissenting in respect of the appeal.

F.A.A. Campbell K.C. and John Johnston for the appellant.

W.N. Tilley K.C. and J.L. Wilson K.C. for the respondent.

The judgment of the Chief Justice and Rinfret, Davis and Hudson JJ. was delivered by

DAVIS J.—I should dismiss both the appeal and the cross-appeal with costs.

There is nothing that I can usefully add to the careful reasons for the judgment of the Court of Appeal[3], which were written by the Chief Justice of Ontario, except to say (and I do not think the Chief Justice would disagree with this) that a storm water relief sewer might, on a particular set of facts, be properly regarded as “an improvement to a highway” within the meaning of The Public Service Works on Highways Act. But where, as in the present case, you have a storm sewer built from Yonge street at Hayden street southerly to and along Wellesley street and southeasterly into the Don river, serving such a large central district of the city (the evidence puts it: “almost the entire district north of Wellesley street and east of Yonge, south of Bloor street”), I quite agree with the judgment in appeal that it cannot be treated as the improvement of a particular highway within the meaning of the statute so as to require the gas company to remove or change the location of its appliances or works placed on or under the highway, on the statutory basis of being compensated only to the extent of one-half its cost of labour, without any compensation for the cost of materials or supplies necessitated by the replacement or renewal of the appliances or works or for any other expense or loss thereby occasioned to the company.

KERWIN J. (dissenting in part)—I agree with what the trial judge and the Court of Appeal have said with reference to the matters involved in the cross-appeal, and

[Page 590]

have nothing further to add. The appeal itself is concerned with three storm water sewers, constructed by the appellant and in connection with which it became necessary for the respondent to change the location of its gas pipes. The trial judge found that each of the sewers fell within the terms of section 2 of The Public Service Works on Highways Act, but the Court of Appeal considered that the statute could be applied only “in cases where, in undertaking the work that has made it necessary to take up, remove or change [the Gas Company’s] mains or pipes, [the City] has proceeded in the exercise of its powers to construct, reconstruct, change, alter or improve a highway,” and that the construction of a sewer for surface drainage did not come within that description, even if it incidentally effected some improvement in the highway.

With deference, I am of opinion that, generally speaking, storm water sewers are constructed by municipalities in the course of improving a highway, and that the evidence in this case makes it clear that highways were improved by the particular storm water sewers. By section 455 of the Municipal Act, the council of every municipality has jurisdiction over all highways within the municipality, and by section 480 they are to be kept in repair by such municipality. This power and duty are irrespective of any other authority, such, for instance, as that conferred by subsection 7 of section 404, to construct and maintain drains, sewers or water-courses. A drain may improve a highway under which the Gas Company has its mains and also other highways from which surface water is drained, but, so long as the first condition exists, section 2 of The Public Service Works on Highways Act applies. I understand no difficulty arises in connection with the work at the Eastern Avenue bridge over the Don river, in the sense referred to in the reasons for judgment in the Court of Appeal. The appeal should be allowed and the judgment at the trial restored.

The appellant pleaded tender of the total amount found to be due the respondent, with the exception of $443.79. The trial judge, ordered the respondent to pay the costs of the action, but the Court of Appeal, after pointing out that there was no proper plea of tender before action and

[Page 591]

that no money was paid into Court by the appellant, directed that there should be no costs of the action or of the appeal. This direction might stand, but the appellant is entitled to its costs of the appeal and cross-appeal to this Court.

Appeal and cross-appeal dismissed with costs.

Solicitor for the appellant: C.M. Colquhoun.

Solicitors for the respondent: Mulock, Milliken, Clark & Redman.