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Applicant - andCITY OF OTTAWA Respondent - andOTTAWA SPORTS AND ENTERTAINMENT GROUP Intervenor APPLICATION UNDER section 273 of the Municipal Act, 2001, S.O. 2001, c.25.
FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR OTTAWA SPORTS AND ENTERTAINMENT GROUP (Application to be heard June 21-23, 2011)
FRASER MILNER CASGRAIN LLP Barristers and Solicitors 1420 - 99 Bank Street Ottawa ON KIP IH4
K. Scott McLean
LSUC# 16455G Tel: (613) 783-9600 Tel: (613) 783-9665 (direct) Fax: (613) 783-9690 Lawyers for the Intervener Ottawa Sports and Entertainment Group
INDEX PART I - BACKGROUND Position of OSEG in Argwnent PART II - FACTS CITED BY THE PARTIES OSEG Affidavits of John Moss Negotiations Risk Applicant's Facts Kent Kirkpatrick PART III - STATEMENT OF ISSUES PART IV - SUBMISSIONS Bad Faith The Allegation that the City Has Violated its Own Procurement By-Laws The Allegation that the Respondent City Has Conferred a Bonus on OSEG within the Meaning ofs. 106 of the Municipal Act, 2001 PART V - ORDER SOUGHT Schedule A - List of Authorities Schedule B - Statutes 1 1 4 4 5
6 15 16 20 21 21 23 24 26 28 29
Court File No.1 0-49352 ONTARIO SUPERIOR COURT OF JUSTICE BET WEE N: FRIENDS OF LANSDOWNE INC. Applicant - andCITY OF OTTAWA Respondent -andOTTAWA SPORTS AND ENTERTAINMENT GROUP Intervenor APPLICATION UNDER section 273 of the Municipal Act, 2001, S.O. 2001, c.25. FACTUM OF OTTAWA SPORTS AND ENTERTAINMENT GROUP PART I BACKGROUND
Position of OSEG in Argument 1. The Applicant and Respondent City have each filed voluminous records together
with written argument in excess of 100 pages in support of their positions in this attack by the Applicant on the exercise by the Respondent City of its legislative authority in the redevelopment of Lansdowne Park.
It will not necessarily assist this Court if the Intervener does likewise, and that is
not, in any event, the role of an intervener generally or, specifically, the role which Master MacLeod described in granting his order, opposed by the Applicant, allowing Ottawa Sports and Entertainment Group ("OSEG") to intervene. Accordingly, while the full record will be
available to OSEG in its submissions to this Court on the hearing of this Application, in this
Factum OSEG proposes not to repeat unnecessarily what has been set out by the parties and by the City in particular, whose position OSEG supports. Indeed, in support of its motion to intervene, OSEG undertook to follow the submissions of the Respondent City at the argument of the Application, and to avoid unnecessary duplication.
Endorsement of Master MacLeod dated December 17, 2010 FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 1
Principles Attending this Application
This Application is about more than transparency and accountability in the
exercise of democratic municipal government authority. It is about proportionality and balance in that exercise. It starts with recognition of the administrative and legislative authority granted to the Respondent City under the provisions of the Municipal Act, 2001.
It includes the
important principle that administrative and legislative actions of the Respondent City are presumed to be valid unless shown demonstrably to be otherwise. It must take account of the proposition, as Master MacLeod has recently noted, that our system values both democracy and the rule of law, and that while the legislation governing Municipalities permits citizens to challenge municipal actions before the Court or the Ontario Municipal Board, illicit or misguided attempts to impede the decisions of elected bodies are profoundly undemocratic.
Endorsement of Master MacLeod dated December 17,2010 FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, See Authorities cited below Tab 1
In assessing the validity of the Applicant's attack on the redevelopment plan
initiated by the Respondent City, it must therefore be remembered that there is nothing inherently wrong or illegal about a proposal to convert a portion or even a substantial portion of Lansdowne Park to private and commercial uses. It is within the administrative and legislative authority of the Respondent to-do so, if that is the will of a duly elected, properly constituted
Council exercising its authority appropriately.
Nor is there anything inherently wrong or illegal
about the commitment by Council of public funds for that purpose. And the presumption which populates the submissions of the Applicant to the effect that Council has failed to seek out the best ideas to assure Ottawa residents of value for money, is irrelevant. There is no such duty on Council.
OSEG was throughout the period under attack entitled to take account of and be by these presumptions of validity. It does not assist the Applicant that the
redevelopment plans involve a private - public partnership.
Nor does it assist the Applicant that
the plans underpinning the private - public partnership are, as the Applicant puts it, "exceedingly complex" (if they are so read). Nor does it assist the Applicant that the City and OSEG have entered into a form of partnership under which each has the expectation of earning a profit over the life of the arrangement. These factors, although relied upon by the Applicant, in fact support
rather than negate the validity of the by-laws under attack.
For all of these reasons section 272 of the Municipal Act, 2001 provides that "a
by-law which is passed in good faith shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law".
Council is entitled to act in ways which others might view, coming from a perspective different than that of Council, as unreasonable. principles with the rule of law.
Section 272 of the Municipal Act, 2001
That is what is anticipated in the marrying of democratic
All parties before this Court acknowledge that Council must act in good faith.
The presumption is therefore that Council in this instance has acted in good faith; the burden of showing otherwise, as section 272 makes clear, rests entirely on the Applicant.
This burden applies to each of the issues which the Applicant has raised and
which it summarizes in paragraph 4 of its Factum.
FACTS CITED BY THE PARTIES Both parties cite and review material facts throughout their Facta, interwoven
with their argument. 10. OSEG adopts and relies upon the facts as cited and reviewed by the City, and, as
indicated below, OSG adopts the submissions of the City.
OSEG 11. As has been noted, OSEG is comprised of companies whose principals include
individuals well known to the Ottawa area and beyond as experienced and committed business persons who have contributed development to the community and who are equally committed to the
of Lansdowne Park.
Specifically these individuals are Roger Greenberg, Bill
Shenkman, Jeff Hunt, John Ruddy and John Pugh.
Affidavit of John Moss sworn December 23, 2010 RECORD OF THE INTERVENOR, p.5, para. 12
Although the Applicant elected not to name OSEG as a party to the Application, A
there is no issue that OSEG has a direct interest in both the subject matter and the outcome.
significant theme of the Application is that the City deliberately conflated the interests of the City with those of OSEG. A fundamental allegation in this respect is that the City, wrongfully and in bad faith, has conferred a "bonus" on OSEG. linked allegations of bad faith by the City to OSEG.
Amended Notice of Application amended December 3,2010 APPLICATION RECORD OF THE APPLICANTS, Tab 1, pp. 1-24
In this and other ways the Applicant has
As is the case with respect to the City, the heavy burden of establishing or preferred treatment
allegations tying OSEG into bad faith, procedural misrepresentation (including an alleged "bonus") rests on the Applicant.
These allegations are irresponsible and
unfair to OSEG and the entities and individuals that comprise it, and will not be borne out. Affidavits of John Moss 14. OSEG filed two affidavits from Mr. John Moss in answer to the Application.
Commencing on or about August, 2009 Mr. Moss, a partner in the Soloway firm, was deeply involved in advising interests that came to be organized as OSEG, in relation to the development of Lansdowne Park. As such he had knowledge intricacies of the Legal Framework of and was extremely familiar with the
(a term used here to connote the various documents,
including the LLP, which set out the legal relationship of the City and OSEG), as the legal point person on the OSEG side of the file.
Affidavit of John Moss sworn December 23,2010 RECORD OF THE INTERVENOR, pp. 1-2, para. 2, Affidavit of John Moss sworn February 24,2011 SUPPLEMENTARY RECORD OF THE INTERVENOR,
elected not to cross-examine
on either of these affidavits.
Accordingly, this Court is entitled to accept the fact evidence of Mr. Moss as both true and unchallenged. 16. The Applicant pretends to discern an inconsistency between the evidence of Mr.
Moss and Mr. Kirkpatrick. Both Mr. Moss and Mr. Kirkpatrick made reference to the same legal framework, comprised of the same elements, in place at the same time.
Negotiations 17. Mr. Moss describes the negotiations leading up to the Plan under attack as
protracted and intense; a real negotiation in all respects, with give and take, and necessary compromise on both sides; not a "give-away" by the City, as the submissions by the Applicant appear to suggest. Both OSEG and the City were supported by counsel experienced in complex commercial real estate transactions.
Affidavit of John.Moss sworn December 23,2010 RECORD OF THE INTERVENOR, p. 5, para. 15
Risk 18. The evidence of Mr. Moss is that in its partnership with the Respondent City,
OSEG not only shares risk with the City along with the legal formalities and mutual rights and obligations formed by the legal partnership which the City and OSEG have constructed, but also assumes risk which is OSEG's alone to bear.
Affidavit of John Moss sworn December 23,2010 RECORD OF THE INTERVENOR, pp. 8-9, paras. 26, 27
A central focus of the Moss affidavits is the inaccurate, misleading or incomplete
description of the Legal Framework set out, and relied upon, by the Applicant in the Amended Notice of Application, when contrasted to the Legal Framework as at June 20, 2010, the date of the impugned resolutions.
Affidavit of John Moss sworn December 23,2010 RECORD OF THE INTERVENOR, pp. 9-24, paras. 29-68
As is repeated below, and as the factum of the Respondent City makes plain, just
as the Applicant was unfair to the comprehensive character of the Legal Framework in setting out the grounds for its Application, it has been equally unfair to the comprehensive character of the Legal Framework in its factum.
in the Amended
addressed by Mr. Moss are the following.
Affidavit of John Moss sworn December 23,2010 RECORD OF THE INTERVENOR, pp. 9-24, paras. 29-68 Source of paragraphs 22-45 below
In clarification of what is asserted in Para. 2 (ee) (i) of the ANA, which identifies
a commitment (obligation) of the City to pay $129,300,000 (the "Maximum Cost") for "the entire costs" of refurbishing Frank Clair Stadium and the Civic Center Arena, if there are cost ovemms for those costs that are included in the Maximum Cost, then it is OSEG and its members, and not the City, who are responsible for those cost ovemms. 23. The assertion in Para.2 (ee) (ii) of the ANA to the effect that OSEG has been
granted a "Head Lease" for the entire Lansdowne Park site and a Stadium Lease for the same period is also not entirely correct and is once again misleading. Under the Legal Framework,
OSEG is not granted a 30 year head lease for the entire Lansdowne Park site. There is no lease for the Urban Park of any kind, there is no lease to which OSEG is directly or indirectly a party for the proposed residential component of the site (the "Residential Component") and there is no single lease for the balance of the site. 24. Component" The three leases for the balance of the site, the "Stadium Lease" for the "Stadium of the site, the "Retail Lease" for the "Retail Component" of the site and the
"Office Head Lease" for the "Office Component" partnerships (the "Stadium Limited Partnership", respectively).
of the site, will be with individual limited the "Retail Limited Partnership" and the
"Office Limited Partnership"
The limited partner of each of those limited OSEG and
partnerships will be a master limited partnership (the "Master Limited Partnership").
the City each own one-half of the limited partnership interests in the Master Limited Partnership,
and OSEG and the City will each own one-half of the shares of the general partner of the Master Limited Partnership.
The Stadium Lease, the Retail Lease and the Office Head Lease, each a formal
legal instrument, are to entities in which OSEG and the City are indirect equal partners, ignoring the nominal interest that will be held by the general partner of each partnership (in each case, a company that will be owned directly or indirectly by OSEG or its members). While it is correct
that the Stadium Lease, although not to OSEG, is for a 30 year term and is for an annual base rent of $1.00, the Stadium Limited Partnership is responsible for all costs of operating the Stadium Component, including all costs of maintenance, repairs and replacements (and including costs of a capital nature). 26. In clarification of Para.2 (ee) (iv) of the ANA, the proposed initial term of the
Retail Lease is 50 years, with two options to extend for 10 years each. The proposed term of the Office Head Lease is 70 years, but it is automatically surrendered after 30 years, with the intent that for what would have been the balance of its term, the City will assume (and receive the full economic benefit from) the sublease (the "Office Sublease") between the Office Limited The base rent
Partnership and the developer of the Office Component (the "Office Developer").
under each of the Retail Lease and the Office Head Lease will be $1.00 per year during the first 30 years of its term, although there are certain events under the Retail Lease that may result in fair market value rent becoming payable (none of which are relevant if there is no disposition of the Retail Lease and no default under the Retail Lease or the mortgage of the Retail Component). 27. After the first 30 years of the term of the Retail Lease, (a) the City no longer has
an interest in the Retail Limited Partnership, and (b) the City receives fair market rent under the
Retail Lease, plus it is entitled to one-half of the Retail Limited Partnership's annual net cash flow. Finally, the City has an option to terminate the Retail Lease on the 30th anniversary of the commencement of the operating term of the Retail Lease by buying out the Retail Limited Partnership's interest in it and assuming (and receiving the economic benefit from) the various subleases of the Retail Component. As with the Stadium Lease, the Retail Limited Partnership is responsible for all costs of operating the Retail Component and the Office Developer will be responsible for all costs of operating the Office Component.
In clarification of Para.2 (ee) (vi) of the ANA, while it is true that the general
partner of a limited partnership is responsible for the day-to-day management of the business and affairs of the limited partnership, the exercise of these responsibilities by the Stadium Limited Partnership under the Plan is not unfettered, being subject to the agreements themselves. In addition, some of these rights (for example, the naming rights and, generally, the advertising rights) are subject to compliance with existing City policies, and other rights (for example, programming) are subject to standards set out in the lease or to be otherwise agreed with the City.
Under the proposed Stadium Component, the City determines what is built, in its
discretion. OSEG is retained as project manager for the construction. It is not paid a fee for this, but it is entitled to be paid its costs. As agent for the City, OSEG will enter into the construction contract for the Stadium Component with a general contractor, but, once again, the terms of that contract and all fundamental decisions under it are subject to the approval of the City.
will be responsible
for the development,
construction and management of the Retail Component, although the City approves the plans and specifications for the Retail Component, acting reasonably. 31. With respect to the Office Component, and in clarification ofPara.2 (ee) (viii) of
the ANA, the Office Limited Partnership will be entering into the Office Sublease with the Office Developer. The Office Developer is selected by the City and the Office Developer will be responsible for the construction and management of the Office Component. 32. The CFL team, contrary to what is suggested in Para 2 (gg)(i) of the ANA, will be As with the
acquired and operated by a limited partnership (the "CFL Limited Partnership").
Stadium Limited Partnership, the Retail Limited Partnership and the Office Limited Partnership, the limited partner of the CFL Limited Partnership will be the Master Limited Partnership (OSEG and the City) and the general partner will be a company owned directly or indirectly by OSEG or its members. Accordingly, the CFL Limited Partnership is an entity in which the City
and OSEG are indirect equal partners, ignoring the nominal interest held by the general partner. However, and notwithstanding this equal ownership, the costs of acquiring the CFL team will be paid solely by OSEG, although those costs do form part of OSEG' s equity for the purposes of the Waterfall. 33. Contrary to the allegations set out in Para. 2 (gg)(i) of the ANA, OSEG has
agreed that the CFL team must be operated for a minimum of 5 years (as opposed to for only 5 years). If OSEG unilaterally (i.e., without the City's agreement) elects to cause the CFL team to cease to operate after 5 years, then there are serious financial repercussions for OSEG.
Specifically, the 8% return on the City's Deemed Equity payable under step 5 of the Waterfall
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will, instead, be payable together with the City's 8% return on its Funding Equity under step 2 of the Waterfall. 34. The Ottawa 67's will also be operated by a limited partnership (the "Ottawa 67's As with the Stadium Limited Partnership, the Retail Limited Partnership,
the Office Limited Partnership and the CFL Limited Partnership, the limited partner of the Ottawa 67's Limited Partnership will be the Master Limited Partnership (OSEG and the City) and the general partner will be a company owned directly or indirectly by OSEG or its members. Accordingly, once again, the Ottawa 67's Limited Partnership is an entity in which the City and OSEG are indirect equal partners, ignoring the nominal interest held by the general partner. As a further point of clarification, the home-ice of the Ottawa 67's does not include Frank Clair Stadium (compare with Para. 2 (gg)(ii) of the ANA). Notwithstanding that it is the Retail Limited Partnership (indirectly equally owned
by the City and OSEG) that is developing the Retail Component, it is OSEG that is solely responsible for the costs of constructing the Retail Component to the extent that costs are not paid from third party financing. By the terms of the Project Agreement and Retail Lease, third OSEG will
party financing is capped at 75% of the hard costs and soft costs of construction.
accordingly be responsible for, at a minimum, 25% of these costs, and perhaps more if the maximum allowable financing cannot be arranged. The costs paid by OSEG form part of
OSEG's equity for the purposes of the Waterfall (compare with Para. 2 (gg)(iv) of the ANA) 36. In clarification of Para.2 (gg)(vi) of the ANA, in reference to the reserve fund
contributions for lifecycle repairs and replacements for the Stadium Component and the portion of the parking garage to be leased under the Stadium Lease, the obligation to maintain and repair
the obligation of the Stadium Limited Partnership, including lifecycle repairs and
replacements. A reserve fund is established for the purpose of funding the cost of lifecycle repairs and replacements. Contributions to the reserve fund are funded, in the first instance, from revenues of the Stadium Limited Partnership. If the revenues of the Stadium Limited Partnership are inadequate to fund those contributions, then the net cash flow of the Master Limited Partnership would be used to fund those payments pursuant to the first tier of the Waterfall. If there is insufficient net cash flow of the Master Limited Partnership (OSEG and the City) to fund the reserve contributions, then OSEG must fund them.
While the City shares an interest with OSEG in the Stadium Component, the
Retail Component and the Office Component, from a practical perspective, OSEG will be responsible for all losses within the Master Limited Partnership, failing which, if that failure results in a default by OSEG under the Project Agreement or by the Stadium Limited Partnership, the Retail Limited Partnership or the Office Limited Partnership under the Stadium Lease, the Retail Lease or the Office Head Lease, respectively, OSEG will lose its investment and interest in the Stadium Component, the Retail Component and the Office Component, all of which will revert to the City (subject to the rights of the mortgagee of the Retail Component). 38. The situation is hot dissimilar with respect to the CFL team and the Ottawa 67's.
If OSEG does not cover losses of the CFL team or the Ottawa 67' s, with the result that the team ceases to operate, OSEG will lose its investment and interest in the team, the City will have certain rights to acquire the team and, if the team ceases to operate within the 5 year period described above, OSEG also will lose its investment and interest in the Stadium Component, the Retail Component and the Office Component.
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While OSEG and the City are partners in the project, OSEG bears the risk of
either assuming responsibility for ongoing losses or having a fundamental and conclusive loss to OSEG of its time, effort and investment in the Plan, the fruits of which would revert to the City (contrary to assumptions contained in Para. 2(gg) of the ANA). 40. OSEG's practical liability for losses is also relevant to consideration of the
priority of payments under the Waterfall.
Both the CFL team and the Ottawa 67' s form part of
the closed system (contrary to Para. 2 (gg)(i) of the ANA). 41. The obligation to pay property taxes is the obligation of the Stadium Limited Partnership,
the Retail Limited Partnership and the Office Developer under each of the Stadium Lease, the Retail Lease and the Office Sublease, respectively, and not OSEG. Financing for the Retail
Component is an obligation of the Retail Limited Partnership, not OSEG (contrary to Para. 2(hh) of the ANA) In clarification of Para.Ztjj) of the ANA, no part of the Waterfall goes to the That is because the debenture is paid from general City
payment of the City's debenture. revenues.
The payment to the City of property taxes generated from the project occurs before
any monies are available for distribution pursuant to the Waterfall, including any distribution to OSEG. 43. In clarification of Para.2(1l) of the ANA, the financial model projects net cash
flows from the operations of the Stadium Component, the Retail Component and the Office Component as well as the CFL team and the Ottawa 67's. If there is negative or inadequate net cash flow from the Stadium Component, the Retail Component, the Office Component, the CFL team and/or the Ottawa 67's, then not only may the City not receive any return of or on its
investments, but (a) OSEG also may not receive any return of or on its investments, and (b) OSEG must fund any shortfall or risk losing its investment and interest in the Stadium Component, the Retail Component and the Office Component, all of which will revert to the City (subject to the rights of the mortgagee of the Retail Component). 44.
Contrary to what is set out at Para.2 (ggg)(xii) of the ANA, unless the City elects
to sell the air rights for the Residential Component, it does maintain ownership of the entire Lansdowne site. Under the various agreements for the Stadium Component, Retail Component and Office Component, the City maintains ownership of the portions of the site leased under the leases for those components. The City also maintains its ownership interest in (and is not
leasing) the Urban Park. Moreover, at the end of the day (whether as a result of the expiry of the terms of the Retail Lease and the Office Sublease or as a result of an event of default under those leases), the City will become the owner of the various improvements constructed on the Retail Component and the Office Component, all of which, constructed at private expense, must be turned over to the City at no cost and in good repair. Finally, payments for costs overruns are made pari passu with payments on
account of the City's Funding Equity (contrary to 2(ggg)(xiv) of the ANA). 46. In his unchallenged evidence Mr. Moss also corrected errors in statements made
by Mr. Lee in his affidavit sworn on October 4,2010 in support of the Application, errors which persist in the submissions of the Applicant, to be contrasted once again with the description of the Legal Framework publicly known as at June 20, 2010.
Affidavit of John Moss sworn December 23, 2010 RECORD OF THE INTERVENOR, pp. 24-26, paras. 70-71
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Applicant's Facts 47.
As demonstrated in the factum of the Respondent City, there are many difficulties
with the facts stated in the Applicant's factum.
Some are more egregious than others. All suggest that the submissions of the
Applicant bear a close reading. By way of example: (a) in paragraph 22 of its factum, the Applicant states that "a principal of what was would become OSEG is reported to have stated that the CFL franchise granted the group was 'conditional upon the revitalization of dilapidated Frank Clair Stadium at Lansdowne Park"', relying on Exhibit "D" to the affidavit of Elizabeth Ballard, sworn September 30, 2010. A careful scrutiny of the exhibit reveals no support for the statement by Ms. Ballard, and therefore no support for the statement by the Applicant.
Affidavit of Elizabeth Ballard sworn September 30,2010
APPLICAnON RECORD OF THE APPLICANTS, Vol. 2, Tab 4, p. 196;
Exhibit D, p. 245
The description at paragraph 93 of the factum in relation to Additional Equity is incomplete, repeats the style of the ANA, and is therefore unfair. It fails to acknowledge the risk which OSEG assumes for costs in excess of the minimum in the event that the maximum allowable financing cannot be arranged. The cost of the overall project may result in OSEG needing to contribute Additional Equity, irrespective of whether the maximum allowable financing is arranged. If the maximum allowable financing is not arranged, then the amount of Additional Equity will be that much greater, but the Additional Equity may be required in any event.
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At paragraph 318 of its factum, the Applicant misstates the content and context of the Urban Park Project Management Agreement, confusing it (it would appear) with the Urban Park Property Management Agreement.
The reference at paragraph 377 (f) of the factum is, due to the brevity of expression, incomplete and potentially misleading. It omits the obvious fact that
everything occurring in the transaction referred to is inside the closed system. (e) The description (and argument) at paragraph 379 of the factum is agam
incomplete and unfair, once again on the issue of risk which is assumed by OSEG as part of the Legal Framework. In no circumstances can it be said that the
obligations (and risk, to which the Applicant does not refer) are "nominal".
Given the potential for confusion and lack of clarity in descriptions of the Legal
Framework, OSEG is of the view that it will be helpful, as well as important, for the Court to read the documents that comprise the Legal Framework in their entirety. Kent Kirkpatrick 50. In his principal affidavit (sworn December 20, 2010) Mr. Kirkpatrick lays out a
detailed chronology of the procedural and legislative history that resulted in the June, 2010 resolutions which are under attack, fulsomely supported by exhibit evidence. The Kirkpatrick
affidavit is the only affidavit evidence before this Court that has done so in this detail and Mr. Kirkpatrick is the only witness capable of doing so.
Affidavit of Kent Kirkpatrick sworn December 20,2010
APPLICATION RECORD OF THE RESPONDENT, CITY OF OTTAWA,
Vol. 1, Tab A, pp. 1-62
Further, it is important to note that Mr. Kirkpatrick is the only witness before this
Court expert in municipal politics and procedures, in the laws which govern municipal conduct and in the workings of this Council. All the evidence suggests that he has the best grasp on the detailed chronology, on what was before Council, and in particular, on what Council did with
what was before it. Where blanks in the global evidence must necessarily be filled in, it is the
observation ofOSEG that this Court is entitled to look to the evidence of Mr. Kirkpatrick, which in the main is before this Court unchallenged in any material particular on his cross-examination. 52. The cross-examination of Mr. Kirkpatrick was extensive. The cross-examination
of Mr. Kirkpatrick covered each of the procedural and substantive issues relied upon by the Applicants. The record makes it clear that in every instance Mr. Kirkpatrick was frank and fair,
and that the process and the Legal Framework stand up to scrutiny.
If any doubt to the contrary exists, the affidavit and cross-examination must be read as a whole. It is not fair to Mr. Kirkpatrick
or to the
of his evidence to do otherwise.
It is Mr. Kirkpatrick's evidence that
"Council was always in control of this decision. And in my view, in my opinion, they were always presented with good information and recommendations about process, " (Vol. I, p. 196, Q. 745), noting that there was "never an in camera meeting with Council on any of this through the two and a half years " (Vol. II, p. 212, Q. 787)
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"I intend to report back to Council but the delegated authority Council gave me was to negotiate and execute agreements within the Project Agreement Framework Even if I do that, even if that is the final conclusion, I intend to report back". (Vol. VI, p. 660, Q. 2328). "I can tell you it's certainly my intent to report back to Council on all of the conditions precedent prior to closing" (Vol. II, p. 274, Q.983).
56. Framework Mr. Kirkpatrick also confirmed in cross-examination that the Agreement
"requires that there is a final evaluation prior to closing to the benefit of both parties. So, you know, the leasing is in, the tenders are in,financing rates are known, and there's a host of 6 or 7 other conditions precedent, all of which would need to be reassessed and a decision made, this pro forma is close enough to what was anticipated in June 2010 that we will close this and move to stage 3. " (Vol. II, p. 271-272, Q. 977)
57. In responding in cross-examination to the presumed relevance of the fact that
there is a version of the Waterfall set out in the Project Agreement Framework that differs in the order of priority from the version contained in the PWC report, Mr. Kirkpatrick was clear and consistent in expressing his understanding that Council could not have been and was not in fact confused, that Council
"would have looked at the description in the staff report, the description in the Project Agreement Framework and the geographical representation of the anticipated distributions" (Vol. II, p. 387, Q. 1457)
In this context he again repeated that Council will, "know the risk before the
project is closed" (Vol. II, p. 385, Q. 1446).
59. The cross-examination evidence of Mr. Kirkpatrick also makes the fundamental
and governing role of the Waterfall clear. On cross-examination,
Mr. Kirkpatrick noted that he
pressed this concept on OSEG as a means of responding to concerns by members of Council as to how OSEG was going to benefit financially:
"And one of the principles was, I said to the OSEG members that, 'Although it wasn't part of your original proposal, you were proposing to something different in terms of sharing the revenues. ' - I felt that it was very important the closed system was established ...I thought it needed to be very clear how OSEG was going to benefitfinancially from this. And that's why I put on the table the issue of the closed financial system, where everything flows in and the basis upon which we share in what flows out is determined by agreement... But frankly, I was concerned about to what extent that OSEG was going to extract value out of this partnership related to the retail use, the stadium operation, all of it. And that's why I thought, 'here's a prime directive that can relate to the financial concerns that Council stated in this motion and all others. ...It took a lot of time as part of the early Which was that participation rates would negotiations because OSEG - came into the negotiation with a different goal, I think be different depending on which aspect of the operation we were talking about ....So that closed system principle met Council's concern ...and all other concerns of that nature. " (Vol. V, p. 511, Q. 1834; p. 516, Q. 517)
And further: "It actually goes right back to what we talked about yesterday in terms of the closed financial system, that a principle in this had to be that OSEG had to make an equity contribution that was significant and would motivate this thing in the way that the City benefits from and that they would stay there". (Vol. VI, p.
STATEMENT OF ISSUES
PART III 61.
The Main Question raised by the Applicant has the following parts: (i) Has the Applicant met the burden that the Respondent City has acted in bad faith to the extent that the subject resolutions should be quashed by this Court? (ii) Has the Applicant demonstrated that the Respondent City has violated its procurement by-laws and rules? (iii) Has the Applicant met the burden of establishing that the Respondent City has bonused OSEG, contrary to s. 106 of the Municipal Act, 20017
As is noted above in our Overview, as the Applicant has acknowledged, and as
the Municipal Act, 2001 makes clear, there is a presumption oflegality. The argument which the Applicant brings in relation on this presumption and on To get to the point that the
deference, as its submissions make clear, is a bootstraps argument.
Applicant can remove deference owed to the actions of Council from consideration of this Court,
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it must demonstrate lack of transparency, bad faith and the other elements upon which it relies. It is not enough to merely assert it.
PART IV Bad Faith 64.
There is no evidence in particular or in the aggregate that would suggest that the
City, with or without the complicity of OSEG, has acted in bad faith, or in the absence of good faith, in the sense of s. 273 of the Act. On all of the evidence, as reviewed by the Respondent City, City Council acted in good faith in pursuing its statutory mandate, as did servants of the City. The affidavit evidence of its Senior Bureaucrat, unchallenged on cross-examination material particular, cannot be read otherwise. in any
The Respondent City does not have to meet a standard of perfection.
and perfection are not the same thing. The standards applicable to the City are not measured in the absolute. The City is entitled to err. As stated above, it is entitled to act unreasonably. A reading of ss. 272 and 273 of the Act together makes it clear that Again,
or supposed unreasonableness
are not the same thing as illegality.
neither the Act nor the authorities require perfection.
Sections 272 and 273 Municipal Act, 2001
Further, as Master MacLeod has stated, s. 273 of the Municipal Act does not policy debates about the future development of
invite the court to engage in sweeping Lansdowne Park.
Reasons for Decision of Master MacLeod dated February 14,2011, para. 9 BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 2
The authorities relied upon by the Applicant are distinguishable on the facts of
this case. There is no evidence that Council acted ''to subserve the interests of private persons" (Howard); that there was no due diligence taken (Grosvenor); that Council had undertaken no studies nor prepared or received any report (Grosvenor) that it acted in haste or alarm
(Southwold Township) that it made no attempt to inform itself, or failed to make at last minimal diligence (Xentel); or that it effectively ignored the obligation to implement or to follow a balanced review (Xentel).
Howard & City of Toronto (1928), 61. O.L.R. 563 (Tab 9) Grosvenor v. East Luther Grand Valley (Township),  0.1. No. 5562 (Tab
Southwold (Township) v. Buwalda,  OJ. No. 1202 (Sup. Ct.) (Tab 26) Xentel DM Inc. v. City of Windsor, 2004, CanLII 22084 (On. S.C.) (Tab 28) BOOK OF AUTHORITIES OF THE APPLICANT
On the particulars cited by the Applicant in support of these allegations, OSEG
relies upon and adopts the submissions of the Respondent City.
In doing so OSEG notes that the very fact of the public-private
underpinning the Legal Framework rails against the notion, as the Applicant repeats variously in its submissions that the City acted arbitrarily and in favour of private interests. There is no
interest of OSEG that is promoted by the City independently of a corresponding interest of the City. This is the object and result of the partnership, the strict legal framework, shared rights and obligations, and the Waterfall and the closed system, all of which were actively developed and promoted by Mr. Kirkpatrick to ensure (on the evidence summarized above) that such was not the case. 71. This is not to say however that the interests must match. Or that the Legal
Framework cannot recognize, as indeed it does, a global interest on the part of the City to see the
- 23 -
redevelopment of Lansdowne Park proceed with the commitment and partnership of a private party.
As referred to above, the emphasis which the Applicant places on the existence of
some notional confusion between two "versions" of the Waterfall highlights a significant defect in the theory which it postulates, which is that Council throughout was either misinformed, or failed to understand the material before it and the consequences of its decisions. There is no
evidence to support speculation by the Applicant that Council was confused on this or any point. The hard evidence, the evidence of Mr. Kirkpatrick, which is the only evidence on this point worthy of note, is entirely to the contrary. The Allegation that the City Has Violated its Own Procurement By-Laws 73. Issue. OSEG relies upon and adopts the submissions of the Respondent City on this
In doing so OSEG notes, on the evidence, that the unsolicited proposal from
OSEG was not "accepted" by the Respondent City at a time its subject matter was already the subject of an active procurement. In the context of procurement by-laws and applicable
legislation, it is a moot point whether the proposal has been "accepted" at all by Council, given that the parties have a cooling off period and the opportunity to retract, and given that the intention of Mr. Kirkpatrick in any given circumstance is to return to Council before closing of the agreements. issue. These facts are materially damaging to the position of the Applicant on this
The Allegation that the Respondent City Has Conferred a Bonus on OSEG within the Meaning of s. 106 of the Municipal Act, 2001 75. Issue. OSEG adopts and relies upon the submissions of the Respondent City on this
Courts interpret the objective of s. 106 of the Act as preventing the benefiting of Section 106 is not
one tax-paying entity over or at the expense of another tax paying entity.
intended to impair the interests of citizens of a municipality by prohibiting cooperation such as joint ventures or public-private partnerships. Further, the prohibition against granting bonuses
will be considered by viewing the facts as a whole. Bonuses will be restricted where there is (1) a lack of mutual obligations and benefits and (2) where the bonus confers an obvious advantage to the benefiting party. restrictively. The prohibition against conferring bonuses should be interpreted
To do otherwise would be to unduly restrict public-private partnerships that are of
increasing importance in the establishment of municipal facilities and which often depend upon a complex exchange of benefits, assets and services to facilitate development.
Section 106 of the Municipal Act, 2001
Gilbert et al v. Municipality of Metropolitan Toronto (1985), 50 O.R. (2d) 654
(Div. Ct.) at 657 FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 3
Kendrickv. Nelson (City), (1997),38 M.P.L.R. (2d) 175 (B.C. S.C.)
FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 4
1085459 Ontario Ltd. (c.o.b. Kingston Online Services) v. Prince Edward County)  O.J. No. 3471, 77 O.R. (3d) 114
FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 5
In this context, the purpose of creating the Municipal Act, 2001 "was to give the tools they need to tackle the challenges of governing in the 21st
century .. .including more authority, accountability and flexibility so that municipal government would be able to deliver services as they saw fit."
Fourth Generation Realty Corp. and 914006 OntoLtd. v. Ottawa (City) (2005), 197 O.A.C. 389, as cited in 1085459 Ontario Ltd (c.o.b.
Kingston Online Services) v. Prince Edward County)  0.1. No. 3471,77 O.R. (3d) 114 FACTUM AND BOOK OF AUTHORITIES OF THE INTERVENOR, Tab 6
The public-private partnership between the City and OSEG, as delineated in the
Legal Framework, is such a tool. 79. The evidence of Mr. Kirkpatrick on the purpose and significance of the Waterfall
(the closed system) referred to above is worth repeating:
"It actually goes right back to what we talked about yesterday in
terms of the closed financial system, that a principle in this had to be that OSEG had to make an equity contribution that was significant and would motivate this thing in the way that the City benefits from and that they would stay there". (Vol. VI,p. 647, Q.
When read as a whole, the Legal Framework confers a benefit on OSEG only in The Legal
the sense and context of a corresponding advantage to the Respondent City.
Framework of benefits, assets and services engaged in by OSEG in partnership with the City allows the City to do something which the City could not, or could chose not, to do on its own. Both OSEG and the City are mutually and reciprocally engaged in this endeavour.
That is not a bonus. Further, the Applicant underplays the risk described by Mr. Moss as falling on
OSEG. Two examples underline this point.
At paragraphs 191 and 192 of its factum (as well as elsewhere), the Applicant
argues that the City is subsidizing the two sports franchises, referring to these as "generous subsidies". 84. At paragraph 135 of its factum, the Applicant argues that OSEG has the option to
abandon the LPP, and that "its loss would be limited to invested equity and its ownership interest in LLP". Some limit, some loss. Both of these statements ignore the fundamental truth of the Legal Framework At the end of the day in the closed system
which includes the operation of the Waterfall.
represented by the Waterfall, if things relative to the sports franchises or to other investments in the redevelopment go awry, OSEG has the very real potential of losing everything. The
Respondent City has, in contrast, the reversionary right of ownership of the assets within the system, all of which will comprise a redeveloped Lansdowne Park. OSEG has the potential of losing its investment and interest in the Stadium Component, the Retail Component and the Office Component, all of which will revert to the City (subject to the rights of the mortgagee of the Retail Component). 86. In its submissions on the bonus issue, the Applicant fails to acknowledge this
clear and potent reality of risk.
OSEG asks that this Application be dismissed.
Pursuant to the Endorsement of Master MacLeod dated December 17, 2010, the
question of whether or not OSEG may seek costs against the Applicant will be left to the Applications Judge.
OSEG seeks costs in the Application against the Applicant on the appropriate
ALL OF WHICH IS RESPECTFULLY 2011.
Lawyer for the Intervener Ottawa S and Entertainment Group
Schedule A - List of Authorities
3. 4. 5. 6.
Endorsement of Master MacLeod dated December 17, 2010 Reasons for Decision of Master MacLeod dated February 14,2011
Gilbert et al v. Municipality of Metropolitan Toronto (1985), 50 O.R. (2d) Kendrick v. Nelson (City), (1997),38 M.P.L.R. (2d) 175 (B.C.S.C.) 1085459 Ontario Ltd. (c.o.b. Kingston Online Services) v. Prince Edward County)
 O.J. No. 3471, 77 O.R. (3d)
Fourth Generation Realty Corp. and 914006 Onto Ltd. v. Ottawa (City) (2005), 197
Schedule B - Statutes Sections 106, 272,273 of the Municipal Act, 2001
ECONOMIC DEVELOPMENT SERVICES
Assistance prohibited 106. (1) Despite any Act, a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose. 2001, c. 25, s. 106 (1). Same
limiting subsection (1), the municipality shall not grant assistance by,
(a) giving or lending any property of the municipality, including money; (b) guaranteeing borrowing; (c) leasing or selling any property of the municipality at below fair market value; or (d) giving a total or partial exemption from any levy, charge or fee. 2001, c. 25, s. 106 (2). Exception Subsection (1) does not apply to a council exercising its authority under subsection 28 (6), (7) or (7.2) of the Planning Act or under section 365.1 of this Act. 2001,c.25,s. 106 (3); 2002, c. 17, Sched.A, s. 23; 2006, c. 23, s. 34.
Restriction on quashing by-law 272. A by-law passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law. 2001, c. 25, s. 272. Application to quash by-law 273. (1) Upon the application of any person, the Superior Court of Justice may quash a by-law of a municipality in whole or in part for illegality. 2001, c. 25, s. 273 (1). Definition
ill In this
"by-law" includes an order or resolution. 2001, c. 25, s. 273 (2).
ill If an application to quash alleges a contravention of subsection 90 (3) of the Municipal Elections Act, 1996, the Superior Court of Justice may direct an inquiry into the alleged contravention to be held before an official examiner or a judge of the court, and the evidence of the witnesses in the inquiry shall be given under oath and shall form part of the evidence in the application to quash. 2001, c. 25, s. 273 (3). ill The court may direct that nothing shall be done under the by-law until the application is disposed of. 2001, c. 25, s. 273 (4).
An application to quash a by-law in whole or in part, subject to section 415, shall be made within one year after the passing of the by-law. 2001, c. 25, s. 273 (5).
Pages295 - 298
Court File No. 10-49352 Motion December 17, 2010
Friends of the City et al v. City of Ottawa
FayeBrunning for the Applicants Peter Doody for the Respondent, City Scott McLean for the proposed intervenor As I said earlier in my reasons for refusing an adjournment, I recognize the risks individuals take when they put their names forward in a challenge to governmental action (see pp. 284-286 this book). There are however situations in which citizens unhappy with particular decisions launch litigation that ultimately proves to be devoid of merit and may be devoid of merit and may be found to be an improper attempt to impede the workings of democratic institutions. Our system in Canada values both democracy and the rule of law. On the one hand being elected does not mean carte blanche to act outside the powers conferred on a particular level of government or to avoid legal pre-requisites to administrative or legislative action. For that reason the legislation governing municipalities permits citizens to challenge municipal actions before the court or the Ontario Municipal board. On the other hand illicit or misguided attempt to impede the decisions of elected bodies are profoundly undemocratic. It would be presumptuous to try to determine that question in any formal way at this time. I am satisfied on the evidence that for the purpose of this motion, Mr. Sealey and Mr. Ward believe they are acting as public interest litigants and indeed that it is probably they fall within the definition of that term in Incredible Electronics (2006) 80 D.L.R.(3d) 723 (SJ.C.) There can be no real doubt that OSEGis a "person" which may be affected by the outcome of this application. The main purpose of the application is to ultimately subrogate the contracts between the City of Ottawa and OSEG and to halt the proposed plan for redevelopment of Lansdowne ParI. Furthermore there are specific allegations against OSEGin the material which should entitle it to notice and to respond. OSEGis alleged to have made misrepresentations, to have received in "illegal bonus" and to have misled City council. I do not agree OSEGshould be made a full party at this stage but that determination is without prejudice to a request to revisit the issue should the evidence of the City or further evidence, by the applicants demonstrate the need for such status or if the applications judge converts the application to an action or orders trial of an issue. Leave is granted to intervene and as such to file materials once the City has done so. OSEGshall file such materials by December 23,2010. OSEGmay also cross examine on the affidavits once the other parties have done so and will otherwise adhere to the application timetable. OSEGshall not be entitled to seek costs against the personal applicant unless it is subsequently determined that they are acting in bad faith, frivolously or vexatiously.
The question of whether or not OSEG may seek costs against Friends of lansdowne will be left to the applications judge who may determine whether or not Friends is a public interest litigant. Under the circumstances the costs of this motion are also reserved to the applications judge. remains case managed and I may be
I reserve the right to elaborate on these reasons. The application spoken to for further direction if necessary.
Master C. Macleod
Endorsement on Back Page of Motion Record
December 17, 2010 See pp. 284-286 and 295-298 book # 19. Master C. Macleod
OFFICE OF THE MASTER
CITATION: Friends of Lansdowne v, Ottawa, 2011 ONSC 1015 COURT FILE NO.: 10-49352 DATE: 2011/02114
Friends of Lansdowne et. al., Applicants and Respondent Group, Intervener
City of Ottawa.
Ottawa Sports and Entertainment BEFORE: COUNSEL: Master MacLeod
Ste-ven Shrybman for the Applicants Peter
K. Doody for the Respondent
K. Scott McLean for the Intervener
HEARD: January 31.1011 REASONS FOR DECISION
This decision concerns three motions heard by the court at the end of January. Since every aspect of the dispute over Lansdowne Park has attracted public interest, it is important to explain clearly what is and is not in issue. The three motions were procedural motions in the context of an application to quash the by-laws approving the Lansdowne Park Redevelopment Plan. The motions were as follows: a. A 1Il0tion dealing with
the Hability for- eests of the individual
of additional documents; and,
b. A motion to compel production eo A motion to strike affidavits 
med by the applicant after the dty's response.
A summary of the decision is as follows. A preliminary version was provided to counsel following a meeting on February 7th, 2011 :
a. With respect to the motion concerning costs, Ottawa has agreed that the personal
applicants may discontinue the proceeding in their own names and permit it to continue only in the name of the corporate applicant, Friends of Lansdowne Inc. The city also agrees that Friends of Lansdowne Inc, has standing to bring the
OFFICE OF THE MASTER
application and furthermore it has affirmed that the policy on public interest litigants will apply. That policy is that Ottawa will not seek costs against a public interest litigant unless it acts frivolously and vexatiously and a committee of council authorizes the request for costs. The intervener takes no position on the motion. Accordingly I have signed an order permitting discontinuance by two of the applicants and providing that neither Ottawa nor OSEG may challenge the standing of the remaining applicant. b. With respect to the motion for documents. I am satisfied that the majority of the documents referred to in the affidavit evidence have been produced. I have directed that a small number of additional documents which appear to be referred to in the affidavits be produced for inspection. Alternatively the references in the affidavit to such documents are to be corrected under oath. For reasons of economy and time I have also directed that certain documents which are not referred to specifically in the affidavits be produced prior to the cross examinations. This is the primary focus of my reasons. It is my hope and expectation that on the basis of these rulings. the parties will avoid becoming enmeshed in further procedural disagreement as they proceed with the next steps. I have declined to strike the affidavits tendered by the applicant as expert evidence though I agree that they are not strictly speaking "reply evidence". To ensure faimess.-I have permitted the respondent or the intervener to file additional expert evidence in "sur-reply" and I am requiring the parties to establish a time frame for doing so. I also deal with the very real probability there will be an attempt to file additional expert evidence.
d. I have clarified the right of the intervener to file evidence and to cross examine on
the affidavits of either the applicant or the respondent.
e. In light of the policy and law in respect of public interest litigants, and the
agreement of the applicant not to seek costs against the respondent, motions such as this are reserved to the motions judge.  any costs of
Before setting out the specific orders in detail, it is helpful to summarize the background to the Lansdowne Park redevelopment plan and the procedures that apply to an application. Park ·Debate
The Lansdowne 
There is perhaps no function of municipal government more important than planning and development. Decisions made by cities regulating use of land, construction of buildings and the location and design of parkland are fundamental decisions that alter the. structure of urban life for generations. The redevelopment of Lansdowne Park is just such a decision. The park has been a central feature in Ottawa for almost a.century and a half. It has a storied sports history, houses a stadium. an arena, heritage buildings, a fanners' market and the former fair grounds. The stadium is crumbling and half demolished and there are
OFFICE OF THE MASTER
acres of uninspiring asphalt. There is universal agreement that something must be done but there are competing views on the future of the park and how it can best be integrated with neighbouring uses. The canal of course is a world famous UNESCO heritage site. Bank Street is frequently congested but is also one of Ottawa's most iconic shopping and dining areas. Surrounding the area are quiet residential streets and additional parkland. Evidently Lansdowne requires a cohesive vision for its future and a large investment in new infrastructure. A shared vision bas proven elusive however and the appropriate use, rehabilitation and development of the park bas been the subject of much disagreement.
In June of 2010 Ottawa city council approved a proposal by OSEG (originally "Lansdowne Live") for redevelopment of the park through a form of public private partnership. Although the city had been about to launch a competitive process in conjunction with a design competition, no competitive bidding process was undertaken. The ostensible reason foX'this was because OSEG approached the city with its own proposal including at least one key element that only OSEG could deliver. OSEG had acquired the rights to a CFL franchise conditional on access to an adequate stadium and this was a central feature of the proposal. If the return of CFL footba11 is part of the vision for Lansdowne then OSEG is in a unique position since it holds those rights. In addition, OSEG proposes to acquire the rights to the Ottawa 67s hockey team currently owned by a member of the consortium. The OSEG offer therefore included both professional football (CFL) and professional hockey (OHA).)
Municipal governments of course are legislative bodies. Providing they are operating legally within their assigned sphere of jurisdiction (and providing of course that their decisions are not overruled or blocked by another level of govemment') they are the democratically elected body with the right to make such decisions. While the decision made by city council is said to be final, that has not tempered the debate about either the plan the process.
It is important to understand the small piece of this large public debate that is now before the court. The applicant. Friends of Lansdowne Inc., seeks to overturn the decision on the basis that it is "illegal". Section 273 (1) of the Municipal Act provides that the superior court may quash a by-law of the municipality in whole or in part for "illegality". This cannot involve the court in sweeping policy debates about the future of Lansdowne Park. In fact, despite the phrase appearing in the applicant's factum, this is not an application for judicial review but a limited statutory remedy.3 All that will be argued is whether the resolutions are actually illegal within the meaning of the Act. In fact section 272 of the same act specifically prohibits the court from reviewing the reasonableness of any by-law passed in good faith. Consequently, as Mr. Doody put it, this is not a review of the wisdom of council's decision but only of whether it is legally permissible.
plan also contemplates the possibility of professional soccer. In this case J aut advised there will be review by the Ontario Municipal Board and certain aspects of the plan will require approval by the National Capital Commission. 3 Applications for judicial review Wlder the JudiCial Review Procedure Act are made to a three judge panel of the Divisional Court. This section of the Mrmicipul Act predates the JRPA and permits an application to a singlc judgc.
OFFICE OF THE MASTER
[I0] The court cannot concern itself with whether or not it is a good idea to build a new stadium in the park, .whether professional sports should be located there, or whether commercial and residential uses should be allowed as part ·of the redevelopment, Nor is the court asked to rule on the heritage consequences of moving the Horticulture Building, the adequacy of parking or of public transit, or the proposed design. The only issue is whether or not the actions of the City are prohibited under the Municipal Act or the city's own internal rules and regulations. The motions that occupied the court on January 31st were an even smaller aspect of the dispute. Procedural decisions made on such motions affect the evidence and how it is presented but do not decide the application or whether evidence will be admitted or accepted by the judge who will ultimately hear the matter. Of course procedural rulings may have a very real impact on how the application proceeds but it is not for the court at this stage to venture into the merits of the application. The most significant of the procedural questions was whether or not the applicant had the right to production of more documents and how those documents will be used by the experts. That is the focus of these reasons.
Production of Do~ments
and the Nature of an Applieation
It is important to understand the nature of an "application". The Ontario rules of civil procedure provide for two main routes to obtain a court decision; "actions" and "applications". An action is a full blown law suit engaging the entire panoply of civil procedure and ending in a trial. An application by contrast is supposed to be a relatively quick adjudication of a narrow issue amenable to determination on a written record." For the purpose of this motion, one of the most significant differences between these procedures is the provision for documentary production in an action as compared to an application. In simplest terms, in an action, the rules require a party to index and disclose all of its relevant documents in an affidavit of documents whether or not the documents will be introduced as evidence. This is supposed to take place before oral examinations for discovery. Thus in an action a party is entitled to early and broad disclosure of documents relevant to the allegations set out in the pleadings. In an action, a party may plead a theory without actual evidence and may hope to obtain the evidence through the process of production and discovery. Documents include e-mails and other electronic documents. Some documents may be privileged and immune from production. As a consequence, the process of locating, reviewing, cataloguing and producing documents can be onerous and very expensive. Massive overproduction of information has become a feature of modern litigation and has been increasingly criticised. Recent reforms to the production and discovery rules for actions have attempted to bring some discipline to this process through the requirement of discovery plans. adoption of the Sedona Canada principles, and the requirement of
.. See Collins
Canada (2005) 76 C.R. (3d) 228 (S.C.J.)
OFFICE OF THE MASTER
proportionality. S Thus, even in actions there is recognition that documentary production needs to become more focused.  It is here that questions of practicality, common sense, proportionality and court control of the process have to enter into play. The concepts of documentary production described in the rules begin to break down .hopelessly if there are demands to produce massive amounts of ultimately unnecessary but superficially relevant information. This is particularly true in the current jnformation age when e-mail is ubiquitous and multiple copies or variants of messages may be held on various kinds of data storage devices including individual hard drives, e-mail and Blackberry servers. Even documents that ultimately exist in paper form normally begin their life on computers and negotiations frequently involve exchanges of electronic drafts. To find every scrap of paper and every electronic trace of relevant information has become a nightmarish task that threatens to render any kind of litigation extravagantly expensive. The city introduced evidence suggesting that the cost and time involved in responding to a broad request for documents could exceed $500,000 and take up to 6 months. That evidence is regarded as exaggerated by the applicant but despite its scepticism 1 accept it is possible this could be the result of unrestrained demands for production. In fact it is exactly this phenomenon which has led to the introduction of new rules governing actions. Production in applications is not usually so problematic because it follows a different process. When it comes to production of documents, applications are almost the reverse of actions. In. an application, the parties are required to serve all of the evidence they wish to put before the judge in affidavit form. Documents forming part of the evidence are normally marked as exhibits to the affidavits and filed as part of the record. But there is a three part process by which each party can compel the other to produce additional documents prior to the hearing. In the case at bar, the applicant has served a notice (and supplementary and amended notices) under Rule 30.04. It is worth reproducing the rule. It reads as follows:
ReqUest to Inspect 30.04 (1) A party who serves on another party 8 request to inspect documents (Form 3OC) is entitled to Inspect any document that is not privileged and that Is referred to in the other party's affidavit of documents as being in th8t party's possession, control or power. R.R.O. 1990, Reg. 194. r. 30.04 (1). (2) A request to inspect documents rnay also be used to obtain the inspection of any document in another party·s possession, control or power that is refemtd to in the originating process, pleadings or an affidavit served by the other party. R.R.O. 1990, Reg. 194, r. 30.04 (2). (3) A party on Whom a request to Inspect documents is served shall forthwith inform the party making the request of a date" within five days after the service of the request to
S See Rule 29.1 and the report of the Honourable Coulter Osborne which may be accessed on the attorney general's web site: http://www.attomeygeneral.jus.gov.on.calcnglishlaboutlpubSlcjrp
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inspect documents and of a time bel'Neen 9:30 am, and 4;30 p.m. when the documents may be inspected at the office of the lawyer of the party served, or at some other convenient place, and shall at the time and place named make the documents available for inspection. R.R.O. 1990, Reg. 194, r. 30.04 (3): O. Reg. 575107, s. 1.
Rule 30 deals with "discovery of documents" in an action and most of it does not apply to applications. Rule 30.04 (2) however makes it possible to serve Form 30C to "inspect documents" "referred to in the originating process ... or an affidavit served by the other party". Thus documents specifically referred to in the notice of application, answer or responding affidavit are amenable to this rule. In this case the intervener has also filed an affidavit and is subject to the same requirement. The next rule applicable to applications is the rule in connection with cross examinations. This is Rule 34 which applies to all oral examinations "out of court". The relevant portion of the rule is as follows:
PRODucnON OF DOCUMENTS ON EXAMINAnON
34.10 (1) ...
Penson to be Examined Must Bring Required Documents
(2) The person to be examined shall bring to the examination and produce for inspection.
(b) on any examination ••. all documents and things in his or her possession, control or power that are not privileged and that the notice of examination or summons to witness requires the person to bring. R.R.O. 1990, Reg. 194, r. 34.10 (2). Norlce or Summons May Requite Documents and Things
(3) Unless the court orders otherwise, the notice of examination or summons to witness may require the person to be examined to bring to the elCamination and produce for
(a) all documents and things relevant to any matter in issue in the proceeding that are in his or her possession, control or power and are not privileged; ...
Thus the parties may demand that relevant documents not referred to in the affidavits be brought to the cross examination by listing them in a notice.
The third step is the cross examination itself. Additional revealed through that process and such documents must reads as follows:
Duty to Produc. Othe,. Documents
be produced. Rule 34.10 (4)
(4) Where 8 person admits, on an examination, that he or she has possession or control of or power over any other document that is relevant to a matter in issue in the proceeding and Is not privileged, the person shall produce it for inspection by the examining party forthwith, If the person has the document at the elCamination, and if not, within two days thereafter, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 34.10 (4); O. Reg. 453109, s. 2.
The applicant therefore has three separate tools at its disposal to compel production of relevant documents. Firstly, a form 30C notice to inspect may be served with respect to documents specifically referred to in the material. Secondly, a notice of examination
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may specify documents which if relevant must be brought to the examination. Thirdly, cross examination may result in the requirement to produce additional documents.
In summary, an application is not an action and the procedure for obtaining access to relevant documents is significantly different. It is possible however to end up in the same place by these different routes. It would be ironic however if a party to an application could make more sweeping demands for production than would be pennitted in an action at least without imposing the same discipline that is now required for discoveries. Mr. Shrybman for the applicants is at pains to state that the applicants are not asking for random or generalized production. It is his submission that the applicants are attempting to focus their demands and not to impose unreasonable costs on the city. On the other hand, the wording of the request to inspect is not reassuring. It contains wording such as "all documents, including correspondence. emails, memorandum, minutes or reports arising from or relating to". This is not the specific language ordinarily found in such a document.
FOnD 30C demand and has not yet served a notice of examination or conducted cross examination. Because the process is not yet exhausted there appears to be some futility in arguing about whether or not the response to the Form 30C was technically adequate or straining the words of an affidavit to discern if there are more documents. This is because any ambiguity can be cleared up on cross examination and the party conducting the examination can demand additional documents whether or not they.are referred to in the affidavit.
In a sense this motion is premature because the applicant has only served the
Unless the Form 70C identifies specific documents referred to in the affidavits but not attached as exhibits and which the deponent refuses to produce, neither the city nor the intervener are in breach of the rules. That is a relatively simple determination and I tum to it first.
Tbe documents in the affidavits  When dealing with documents referred to in affidavits. it is not necessary to consider relevance to the questions in issue. A party which tenders evidence is open to being examined on that evidence.6
The main affidavit from the city is the affidavit of its most senior employee. Kent Kirkpatrick. the city manager. The affidavit is a 1S4 paragraph affidavit which sets out in detail the history of the negotiations and decisions leading up to the resolutions approving the Lansdowne redevelopment plan. There are six volumes of documents comprising 91 exhibits. The city has therefore produced a great deal of documentation and offered Mr. Kirkpatrick for cross-examination.
~See Caputo v. Imperial Tobacco Inc: (2002) 2S C.P.C. (S~ 78 (Master) @ para. 14
OFFICE OF THE MASTER
 There is only one document that is clearly referred to in the affidavit that was not made an exhibit and that is a tax revenue estimate mentioned in paragraph 64. The city produced that document in response to the request to inspect. The only other document which appears to be referred to and which has not been produced is the "detailed evaluation of the LPP" referred to in paragraph 73. I agree with the applicant that the paragraph gives the impression the "evaluation" is a document and if that is the case it forms part of the affidavit evidence and must be produced. If the evaluation is not a document, then that should be clearly explained. The intervener, Which was entitled but not required to file material, has delivered an affidavit of John Moss. Mr. Moss is the lawyer who has been the "legal point person" for OSEG in its dealings with the city legal department. That affidavit does not attach documents but refers to some of the documents forming the evidence of the applicants or the respondents. Counsel for OSEG questioned whether the same rules should apply to the OSEG affidavit as to the affidavits of parties but if there is any ambiguity about that I will clarify, When I alJowed OSEG to intervene I did not give it full party status but I did permit it to file affidavit evidence and 10 cross examine the parties. If OSEG exercises those rights it is on the same basis as for parties. In some paragraphs Mr. Moss appears to be working from memory and in others he may be referring to the same documents as are attached to the other affidavits. When he refers to the head Jease or the master agreement however the affidavit certainly sounds like he is referring to drafted documents. In paragraphs 36, 37 and following, Mr. Moss refers to various leases and other agreements. His affidavit says the agreements "say" and not that they "will say" or are "intended to say". It must be noted that the document city council approved in June did not contain the agreements themselves but only a summary of agreements that would form part of the plan. The city manager was empowered to execute agreements compliant with the summary. It is noted on the summary itself that the summary does not contain all of the terms of the agreements, It follows that the agreements will be more detailed than the approved plan. Although the agreements have not been executed. if he is referring to actual documents then they form part of his evidence. Accordingly he is to produce the documents he was referring to or is to correct the affidavit.7 These are the only documents that in my view are referred to in the affidavits and have not been produced. At that there is some ambiguity which could have been clarified through the process of cross examination. It appears however that the applicant is afraid it will be met with refusals at the next stages and the respondent is concerned that it will be exposed to increasingly onerous demands for production. Thus it has not been possible for the parties to simply agree on what ought to be produced and the court is asked to intervene in order to reduce the potential for the cross examinations to generate further motions and delay.
Va/eo Sylvania LLC v. Ventra Group Inc.  0.1. No. 1998 (Master)
OFFICE OF THE MASTER
Advance RUDes and Directions  The applicant has asked for production of certain categories of documents and in particular for production of documents referred to in the affidavits of its own witnesses. In fact the original request to inspect documents is an exhibit to the report of Mr. Mak who is one of the experts retained by the applicants. It is his evidence that he requires access to these documents to critique the financial assumptions forming part of the approval process. At the conference I convened on February 71h.2011 I canvassed with counsel the possibility of the parties reaching agreement and I was told that it would be very difficult to do this without guidance from the court. The court certainly has the authority to impose controls on the process of cross examination and to limit requests for documents if it appears appropriate to do so. That is not quite the same thing as ruling in advance on the relevance of categories of documents. It is difficult to give precise direction or rulings when dealing with hypothetical documents that are not actually in evidence. Any directions given by the court must be such as not to pre-judge a specific dispute that may have to be adjudicated. Though it may be possible to determine that certain classes of documents wilJ be important and relevant, it is not possible to know whether some of those documents may be subject to privilege and counsel will have to have an opportunity to review the actual documents before they are produced. Furthermore the direction cannot be completely limiting. It is possible and even probable that a basis for further production of specific documents may be established during the cross examination process. For that reason these directions cannot be viewed as final rulings and they win have to be on the basis that parties may return -before the court to resolve specific disagreements should it be necessary to do so. There are very good reasons for giving directions in this situation. The first is a reason of efficiency. Both parties have agreed to an aggressive timetable because both recognize the imperative to have the issues raised by this application determined as soon as possible. It is not efficient to go through a cumbersome three step process with motions at each stage. The second reason is that this application is being case managed so it is appropriate to do whatever is reasonable to conserve court resources. The third is the fact that the parties have agreed to a limited costs regime. As such. the tool of "pay as you go" costs on motions is not readily available. Thus it is appropriate to adopt procedures that may limit the costs incurred by either party. I approach this matter in the following way. If it is clear that a category of documents exists. that production will be requested, and it is relevant to the issues then those documents should be presumptively open to production. This is subject to proper claims of privilege, to proof that a particular document does not exist or to argument about how deeply into source documents it may be necessary to go. As an example, if I order production of the documents actually provided to PWC or the Auditor General, it does not follow that I am finding that rough notes or other documents used to generate those documents are subject to production. As another example, it may
OFFICE OF THE MASTER
be that a final draft or the most recent iteration of a draft document is relevant but it will not follow that all previous drafts or notes of the negotiations leading up to the agreement are relevant. The issue before the court is whether the plan as approved should be quashed and not whether some other potential agreement would have been better.  In order to consider relevance, it is necessary to examine the issues framed by the application. Broadly speaking the allegations that approval of the plan is "illegal" fall into four categories: a. The by- law is said to be illegal as it failed to comply with certain technical requirements of the Municipal Act such as requiring a 2/3 majority to alienate parkland or offending the "lame duck" provisions by incurring obligations after a municipal election. The by-law approving the plan. is said to be illegal because the plan is a form of sole source procurement prohibited by internal regulations and policies of the city and allegedly contrary to norms contained in interprovincial agreements and international treaties.
c. The by-law is said to be illegal because th.e plan involves granting a prohibited "bonus" to a commercial enterprise contrary to section 106 of the Municipal Act. Prohibited bonuses under the Act are not completely defined but may include giving loan guarantees, lending, leasing or selling municipal property below fair market value, or exemption from levies and charges. d. Finally jt is alleged the by-law is mega! because the city failed to act in good faith, with appropriate due diligence and with the standard of candour, frankness, impartiality and fairness required of a municipal government.  It will be evident that the first two categories are reasonably narrow and specific while the question of whether or not the plan as structured is a "bonus" is potentially a much broader inquiry. 8 The allegation of bad faith, lack of due diligence and lack of fairness appears exceedingly broad indeed. Even the :first two issues are not as simple as they appear because of the complexity of the plan. For example, part of the proposal includes leases for $1.00 per year for 30 years or more but those are net leases in which all expenses are paid by the tenant. Moreover the tenant is not OSEG but a general partnership jointly owned by OSEG and the city. The proposed residential development includes creation of "air lots" so that a purchaser win have the exclusive use of an area above Lansdowne Park. It is therefore not clearly apparent whether parkland is actually being alienated for less than fair market value. Similarly the contention that sole source contracting is illegal depends on whether or not the OSEG proposal qualifies for the exception in the procurement by-law that permits such arrangements. For example if the ability to deliver a CFL franchise is a legitimate
See 1085459 Ontario Ltd. v. Prince Edward County [200S) O.J. No. 3471 (S.C.J.)
OFFICE OF THE MASTER
criteria to have included in an RFP and OSEG has the exclusive rights, it would have been a colossal waste of time and money to run a sham international competition when only OSEG could meet the criteria. The issue is not whether the condition imposed by the CFL mentions Frank Clair Stadium.specifically but whether the ability to deliver a CFL franchise as part of the proposal permits sole source procurement.  The applicants have been at pains to make it clear they are not seeking overly broad disclosure notwithstanding the broad language of the notice of application. They are not seeking production of every e-mail that mentions Lansdowne nor are they seeking production of every iteration of draft leases or other documents. They are seeking production of specific documents their experts require to finalize their opinions on whether or not the plan is actually as it was described to city council when it was approved.
At the heart of the allegations is the question of whether or not the project as approved is a "sweetheart deal" for the intervener. This is tied up with the concept of "bonus" under the Municipal Act. The applicant contends that OSEG obtains a benefit in this agreement
at the expense of the city. They wish to challenge the contention that the project will generate revenue to offset the debt incurred by the city. They wish to challenge the revenue and expense assumptions. They hope to show that the effect of the project is that the city is incurring substantial debt and alienating public land to the benefit of OSEG and the detriment of the city and its taxpayers. They hope to show that the risks to the city were understated and the risks to OSEG exaggerated. Thus the documents they are seeking are the documents supporting the analysis and recommendations ultimately given to council.
It seems to me that the allegations of bad faith and lack of candour stand or fallon this determination even if the city could be criticized for lack of transparency. If in fact the plan has been accurately described, if it is designed to deliver the promised benefits and if the estimated costs and risks are contained then it will be difficult to prove bad faith or lack of candour. Thus the focus of the application is to ask the court to find that the plan has been misrepresented and its impact inaccurately described. It is not necessary that the plan be perfect or results guaranteed. The court is not to second guess the wisdom of city council. It is surely not enough to render a by-law illegal or convert a plan Into a bonus if it could work out badly or less well than hoped. No plan based on assumptions about future revenue or expenses can be. ironclad. On the other hand if the assumptions are nonsensical or improbable, if the plan is built on projections that cannot possibly be attained or are extremely unlikely then it might be argued that council has been mislead. If the most likely outcome is that OSEG will profit and the city will incur expense then it may be possible to persuade a judge that the plan is in reality a "bonus".
Relevance of doeuments demanded by the applicants
 One of the central requests of the applicants is for .access to the source documents provided to Price Waterhouse Cooper ("PWC) and to the city Auditor General. Reports
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were requested by council and were before council when the plan was approved. The applicant alleges that both were provided with misleading or partial information. Thus the infonnation provided to PWC and the Auditor General is of fundamental relevance and in my view it will have to be produced.
Hunden Strategic Partners was retained by the Auditor General to assist the Auditor General. The work done by Hunden informed the work of the Auditor General but it would have been the Auditor General and not the city which communicated with Hunden. , Unless it is shown that the city was providing information to Hunden directly and not through the AG then I would not direct the city to produce the work done by Hunden. The claim asserted by the applicant is not that the Auditor General failed. in his duty but rather that the Auditor General was given inadequate, incomplete or misleading information. At paragraph 127 of the Kirkpatrick affidavit there is reference to "srudies and reviews" of OSEG's financial proposal conducted by city staff. I do not find that the affidavit is based on specific docwnents entitled "studies, and reviews" but clearly such studies and reviews took place. Studies and reviews which formed the basis for recommendations to council would be relevant. In my view these are documents that will have to be produced. Another challenge by the applicants is to the assumptions that have been used when calculating taX revenue and other revenues to be generated by the project. There is a request for those working documents. The basis for projecting tax revenue appears to be relevant. The same is true of expenses and debt financing costs. These are the type of documents referred to in paragraph 10 of the demand to inspect. I do not agree that at this stage it is relevant to ask for e-mails between the former mayor, the city manager and OSEG or for minutes of negotiation meetings. I see no obvious relevance to the process of negotiation or even the contents of those negotiations. Whether Mr. O'Brien supported the OSEG bid is not the issue. There is no allegation of conflict of interest. What is in issue is whether the plan as approved confers an illegal benefit on a commercial enterprise and whether the plan as presented actually does what city council was told it does. It is the final iteration of the plan as actually presented and actually approved that is in question not some other version of the plan that might have been. In summary, the respondent is directed to compile an index of the documents provided to PWC and the AG and to locate and index the staff studies and reviews underlying the final recommendation to council. The documents supporting tax, revenue, expense and debt projections are to be dealt with in similar vein. In complying with this direction, the city is not required to undertake heroic efforts to search out notes or e-mails which have not been preserved in specific project files or in the Official Business Records. Once the index is available, the documents are to be produced unless there is a specific well founded objection. This brings me back to the subject of discovery planning and by analogy the need for cross examination planning in a complex case. What is required
OFFICE OF THE MASTER
( documents to be produced and the scope of cross examination. To deal with these issues and the expert issues I am about to address, I direct counsel to meet and confer in order to minimize the need for further rounds of motions and cross examinations. I may be spoken to for further direction if necessary. The reply affidavit problem  In an application ordinarily either party is at liberty to serve affidavits up until cross examinations commence. In this case there was a case management order providing that the applicant was to serve all affidavits in support of the application after which the respondent and intervener could serve responding affidavits. Then the order provided that the applicant might serve "reply" affidavits. When an order such as this is in place, the parties are intended to proceed in a manner similar to a trial. As such, reply evidence should be limited to proper reply. That is it should respond to evidence raised by the other party and it should not be evidence that ought to have been submitted in the first place," Though that was clearly the intent of the order, procedural .orders are intended to bring order to the proceedings and ensure fairness: They are not intended to be rigidly applied so as to suppress evidence that may be important. Striking the affidavits is a simplistic response." The applicants have tendered expert evidence as part of the reply. This evidence of a university professor and an accountant is actually based on the information that was available in the public record before the receipt of the Kirkpatrick and Moss affidavits. That however is precisely what the motion for production of documents is all about. Their experts state that they need access to the information the applicants are now requesting in order to properly assess the plan and in particular to assess the reports of PWC and the AG presented to city council. This evidence foretells an additional problem with the sequencing of evidence. Any unfairness to the respondent can be addressed by permitting a "sur-reply", That is I can now permit the city to respond to these affidavits. The difficulty is that it is quite evident the applicant will want the experts to review the documents which are subject to my direction and which in any event they would have hoped to obtain on cross examination. Indeed the main purpose of obtaining those documents will be to subject them to expert review. It is then probable they will wish to tender supplementary expert affidavits. I observe in passing that although expert evidence for use on an application must be provided in affidavit form, the affidavits are in reality expert reports which mayor may not be admitted by the applications judge. It is not possible to determine in advance if the applications judge will admit the expert opinion or give it any weight. It is for example entirely possible that an opinion of one of the professors concerning tax policy will not be admitted because the applications judge may view that as unhelpful on the question of
here to permit the most efficient use of cross examination is agreement concerning the
See Melrose Homes Ltd 11. Donald Construcnon Ltd.  O.l. No. 5275 (Master) Crown Resources Corp. SA. v. NaJiorwllranian Oil Co. 2005 CanLii 6053 (Ont. OJ,,, Ct.)
OFFICE OF THE MASTER
illegality and instead that it is directed to the question of wisdom. In addition, expert evidence must meet the tests of neutrality, necessity and professional credibility that are for the judge hearing the matter to decide. This is not my role.
It makes no sense to wind up with repeated rounds of supplementary expert affidavits. Perhaps the way to deal with this is to separate factual evidence from expert evidence. Thus I will permit the city time to consider how it will respond to the Kitchen and Mak affidavits. If it wishes to respond simply with additional factual evidence from Mr. Kirkpatrick or another wimess there should be time to do so. If the respondent wishes to retain its own expert that may require a different time frame. Probably what is needed is an agreement on timing of expert opinions. In any event, I suggest that counsel discuss the matter further. If the applicant intends to have its experts review the documents to be produced by the city or obtained on cross examination and will then want to produce a supplementary expert report. this should probably take place before the city has an expert respond and likely before the experts are cross examined.
The most practical
solution would probably
be to give the experts access to the
them and then complete
they require to complete their opinions, obtain those opinions, respond to cross examination. All this must be accomplished without postponing the hearing .of the application indefinitely. This should be part of the planning process emerging from the "meet and confer" mandated above.
I advised counsel that it is possible to obtain alternative dates for the hearing of the application. After counsel have the opportunity to review these reasons and to discuss the matter a further scheduling conference may take place.
Right of the intervener to cro~s examine
 A question was raised as to whether the intervener has the right to cross examine the witness for the respondent. I am directing that the intervener may be cross examined on its affidavit by the parties and the intervener may cross examine the parties. Obviously this right is not for the purpose of prolonging or repeating the cross examination. but only to permit the intervener to protect the interests of OSEG.
Motion relating to costs
 The disposition of this part of the motion is reflected in the summary. As it was ultimately on consent, 1 need say no more here. The city's policy on costs in such cases is a matter of public record and is consistent with the case law. u
Costs  As indicated above, there will be no immediate costs of this motion. In case costs are ultimately felt to be appropriate. costs of the motion would be part of the costs of the application and are reserved to the applications judge.
Incredible Electronics Inc. v. Canada (2006) 80 O.R. (3d) 723 (S.C.J.)
OFFICE OF THE MASTER
( Conclusion 
. In summary, counsel are directed to consider these reasons and then to meet and confer in an effort to arrive at a plan for production and review of documents, orderly preparation of expert opinions or other affidavits and cross examination. More specific direction may be obtained from the court if necessary but the parties are expected to co-operate on a procedural level. It is probable a case conference will be helpful in any event to adjust the schedule for the application. If that is the case, counsel may arrange an appointment.
Date: February 14,2011
Page 1 of3
Gilbert et al. and Municipality of Metropolitan Toronto
50 O.R. (2d) 654
ONTARIO HIGH COURT OF JUSTICE DIVISIONAL COURT
14TH MAY 1985. Municipal law -- Council -- Powers -- Council of municipality making financial contribution to stadium corporation and leasing land to corporation -- Contribution not bonus to commercial enterprise -Contribution proper -- Municipal Act, R.S.a. 1980, c. 302, ss. 112, 113(1) -- Municipality of Metropolitan Toronto Act, R.S.a. 1980, c. 314, s. 245(1). Appeal -- Leave to appeal -- Divisional Court -- Applicants seeking leave to appeal decision of municipal board approving making of financial contribution by municipality to stadium corporation -Contribution proper -- No important question of law involved -- Leave to appeal refused -- Courts of Justice Act, 1984 (Ont.), c. 11, s. 199.
t.: I. .
The respondent municipality agreed to make a financial contribution to a stadium corporation and to lease certain lands to the corporation for the purposes of a sports stadium. These actions were approved by the Ontario Municipal Board. The applicants thereupon brought an application for leave to appeal the decision of the municipal board to the Divisional Court. Held, the application should be dismissed. The financial contribution was a grant to a Crown corporation, which the respondent municipality was permitted to make under s. 113(1) of the Municipal Act, R.S.O. 1980, c. 302, which is made applicable to the respondent municipality by s. 245(1) of the Municipality of Metropolitan Toronto Act, R.S.O. 1980, c. 314. The contribution was not a bonus to a commercial enterprise, which is proscribed by s. 112 of the Municipal Act. In any event, s. 112 is not made applicable to the respondent municipality. There being no point of law of sufficient importance to merit the attention of the Divisional Court, leave to appeal should not be granted under s. 199 of the Courts of Justice Act, 1984 (Ont.), c. 11 Statutes referred to Courts of Justice Act, 1984 (Ont.), c. 11, s. 199 Municipal Act, RS.O. 1980, c. 302, ss. 112, 113(1) Municipality of Metropolitan Toronto Act, RS.O. 1980, c. 314, s. 245(1) (rep. & sub. 1984, c. 18, s. 17 (1)) APPLICATION for leave to appeal to the Divisional Court from a decision of the Ontario Municipal
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Board approving the making by the respondent municipality of a fmancial contribution to a stadium corporation and approving the leasing of certain lands to the stadium corporation. C. Campbell, for appellants. R. M. Parker, Q.C., for respondent. E. A. Cronk, for Stadium Corporation of Ontario Ltd. T. W. Bermingham, for Canadian National Railway.
MONTGOMERY J. (orally):-- This is an application for leave to appeal to the Divisional Court from the decision of the Ontario Municipal Board (O.M.B.) approving the making of a financial contribution to the Stadium Corporation of Ontario Limited and approving the leasing to the Stadium Corporation ofa portion of lands owned by the Municipality of Metropolitan Toronto (Metro) presently used in connection with the operation of the John St. Pumping Station.
No leave to appeal is sought from the O.M.B.'s decision that it was not necessary to hold a public hearing nor from the O.M.B.'s failure to state a case to the Divisional Court. The board has jurisdiction to decide these matters as part of its administrative function in any event. The issue The sole issue upon which leave is sought is an alleged error oflaw by the O.M.B. in: (a) (b) (c) The facts The six applicants are aldermen for the City of Toronto. The O.M.B. dispensed with a public hearing and approved Metro's financial contribution to the Stadium Corporation for the construction of a dome stadium near the C.N. Tower and Metro agreed to lease lands to the Stadium Corporation to facilitate the dome. The financial contribution and the lease to be given by Metro were approved by the Metropolitan Executive Committee in January, 1985, subject to O.M.B. approval. The O.M.B. heard each of the applicants personally and also heard legal argument from their counsel. The law Leave to appeal pursuant to s. 199 of the Courts of Justice Act, 1984 (Ont.), c. 11, should only be granted when the court is satisfied that there is a point of law of sufficient importance to merit the attention of the Divisional Court. The statutory authority for Metro Toronto's contribution is found in s. 113(1) of the Municipal Act. The applicants contend that the proposed contribution by Metro Toronto is proscribed by s. 112 of the Municipal Act which prohibits "bonuses in aid of ... commercial enterprises". Sections 112 and 113(1) of the Municipal Act provide: finding that the contribution of Metro to the dome project was not a bonus within the meaning of s. 112 of the Municipal Act, R.S.O. 1980, c. 302 (the Act); finding that the contribution of Metro was not to a commercial enterprise within the meaning of s. 112 of the Act; failing to find that s. 112 of the Act applied to Metro.
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112. Notwithstanding any general or special Act, a council shall not grant bonuses in aid of any manufacturing business or other industrial or commercial enterprise. 113(1) Notwithstanding any special provision in this Act or in any other general or special Act related to the making of grants or granting of aid by the council of a municipality, the council of every municipality may, subject to section 112, make grants, on such terms and conditions as to security and otherwise as the council may consider expedient, to any person, institution, association, group or body of any kind, including a fund, within or outside the boundaries of the municipality for any purpose that, in the opinion of the council, is in the interests of the municipality. Section 113 of the Municipal Act is made applicable to Metro by virtue of s. 245(1) of the Municipality of Metropolitan Toronto Act, R.S.O. 1980, c. 314, which states: 245(1) Section 5, Parts XIII, XIV, XV and XIX, sections 78a, 78b, 104a, 105, 106, 113, 114, 115, 116, 121 and 122, subsection 165(3), paragraphs 3, 11, 12,23,24,27,30,50 and 54 of section 208, subparagraph ii of paragraph 125 of Section 210, and paragraph 10 of section 315 of the Municipal Act apply with necessary modifications to the Metropolitan Corporation. Since s. 112 of the Municipal Act is not specifically listed in the Municipality of Metropolitan Toronto Act it does not apply. Expressio unius est exclusio alterius.
Since s. 112 of the Municipal Act is not applicable to the Metropolitan corporation there is no question of law for the Divisional Court to consider. The proposal in any event deals not with a bonus within the meaning of s. 112 but a grant within the meaning of s. 113 of the Municipal Act. The proposed donee of the grant is the Stadium Corporation which is a provincial Crown corporation. As such the donee does not in my view qualify as a manufacturing business or other industrial or commercial enterprise within the meaning of s. 112. There is no suggestion of bon using one tax-paying firm at the expense of others contrary to the intention of s. 112. Rather, the dome stadium project is a unique proposal intended to benefit the Metropolitan corporation in a general way in terms of civic pride and prestige. Any profit it might make is secondary to its main objective of furnishing Metropolitan Toronto with a facility considered by its elected representatives to be appropriate for a large metropolitan North American centre. The proposal represents in the minds of the legislators and the members of council the most feasible and appropriate means of accomplishing this result. The O.M.B. found that the proposed financial contribution is a grant and that moneys will be contributed to a Crown corporation, not a commercial enterprise. I find therefore that the application for leave to appeal must fail. The application is dismissed. Costs if demanded to the Metropolitan corporation and no costs as far as the C.N. or the Stadium Corporation are concerned.
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Page 1 1997 CarswellBC 83, 31 B.CL.R(3d) 134,38 M.P.L.R. (2d) 175,68 A.C.W.S. (3d) 758
1997 CarswellBC 83,31 B.CL.R (3d) 134,38 M.P.L.R (2d) 175,68 A.C.W.S. (3d) 758 Kendrick v. Nelson (City) Michael Kaye Kendrick, Mary Nerissa Berginger, Broca Ryon, Roy Anthony Brooks, June M. Price, Members of the Nelson Citizen's Coalition (petitioners) and The Corporation of the City of Nelson and Huber Developments Ltd. (respondents) . British Columbia Supreme Court McEwanJ. Heard: September 26, 1996 Judgment: January 13, 1997 Docket: Nelson 5714 © Thomson Reuters Canada Limited or its Licensors (excluding individual court documents). All rights reserved.
Counsel: Donald W. Skogstad, for petitioners. Daniel R. Bennett, for respondent Corporation of the City of Nelson. Subject: Public; Civil Practice and Procedure; Contracts Municipal law --- Actions involving municipal corporations - Practice and procedure - Judicial review. Municipal law - Actions involving municipal corporations - Practice and procedure - Judicial review Standing - Status of ratepayer to seek declaratory or injunctive relief - City entering into agreement for development of hotel complex on waterfront - Residents arguing that city exercising power to contract in manner inconsistent with s. 292 and city by-laws - Minister asked to intervene but declining - Residents seeking declaratory and injunctive relief on judicial review of agreement - Ratepayer filing affidavit with authority of other residents - Ratepayer not suffering interference with private right or damages peculiar to himself - Case being determined regardless of standing where full hearing on merits held, and matter clearly being of public interest - Question of standing inextricable from consideration of merits - Municipal Act, RS.B.C. 1979, c. 290, ss. 19,292. Municipal law --- Powers of municipal corporation - Power to contract. Municipal law - Powers of municipal corporation - Power to contract - City having long-standing plan to develop waterfront area for tourist uses - City entering into agreement for development of hotel complex on waterfront - Residents arguing that city exercising power to contract in manner inconsistent with s. 292 and
© 2011 Thomson Reuters. No Claim to Orig. Govt. Works
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Page 2 1997 CarswelffiC 83, 31 B.C.L.R. (3d) 134,38 M.P.L.R. (2d) 175,68 A.C.W.S. (3d) 758
city by-laws - Residents objecting to city's agreement to build sewer, water and electrical facilities, to construct dyke and pathway, and to transfer city-owned lands for nominal consideration - Agreement representing attempt to co-ordinate public objectives with form of private enterprise - City not "assisting" developer in commercial undertaking within meaning of s. 292 - Municipal' Act, R.S.B.C. 1979, c. 290, ss. 19,292. From very early on, the city's waterfront area had been used for transportation and industrial purposes. In 1980, an official community plan was adopted which identified tourism as the most important economic area for the city to pursue. In 1987, the area was rezoned as a waterfront tourist commercial zone, in order to encourage tourist uses in the area. In 1996, the city entered into an agreement with a developer for the development of a hotel complex in the central waterfront area. The petitioners were city residents who claimed that this was an unlawfully improvident or disadvantageous arrangement, and that the city had exercised its power to contract under s. 19 of the Municipal Act (B.C.) in a manner inconsistent with s. 292 of the Act, and city by-laws. They objected to three separate areas in the agreement, namely, those provisions in which the city agreed to construct a dyke and pathway, those provisions in which the city agreed to build sewer, water, and electrical facilities, and, finally, the transfer of city-owned lands for apparently nominal consideration. When asked to intervene, the Minister of Municipal Affairs expressed concern, but indicated that she was in no position to do so. The petitioners applied for judicial review of the agreement, seeking declaratory relief, and an order enjoining the city from carrying through with the agreement. Only one of the residents, MK, filed an affidavit, purportedly with the authority of the others. He was the only person identified as a registered owner of land, and as a municipal taxpayer in the city.
The petition was dismissed. In determining whether a private person can seek declaratory or injunctive relief on a matter of public importance, it must be shown that there was direct interference with a private right, or that there was special damage peculiar to the plaintiff as a result of the public act. In cases where neither condition is met, the Attorney General is ordinarily a necessary party, and ought to permit at least the use of its name unless the action is entirely frivolous. Where a petitioner has neither a direct interest, nor the co-operation of the Attorney General, and there is no other reasonable or effective way to bring the matter before the court in a manner that would satisfy the basic conditions of standing, the court retains a discretion to grant standing, provided there is a serious or justifiable issue, and the petitioner can show a genuine interest in the issue to be determined. This discretion is retained for the sound policy reason that a serious question of alleged excess of legislative power should not be immunized from challenge by a strict application of the basic rules. Where the threshold issue of standing cannot be determined without a hearing of the merits, the court retains a discretion to decide on the merits, even if it ultimately fmds that there is no standing, where the matter is of significant public interest. In the present case, there was no evidence or suggestion that MK had suffered any interference with any private right, or that he had suffered any damages peculiar to himself. Nevertheless, the matter was clearly of public interest, and there had been a full hearing on the merits. It was an appropriate case for determination on that basis, regardless of whether the residents as petitioners in fact had standing. Where there is doubt about the characterization of a municipal council's impugned activity, the question of standing will often be inextricable from a consideration of the merits. The agreement represented an attempt to co-ordinate public objectives with a form of private enterprise, in ac-
© 2011 Thomson Reuters. No Claim to Orig. Govt. Works
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1997 CarswellBC 83, 31 B.C.L.R. (3d) 134,38 M.P.L.R. (2d) 175,68 AC.W.S. (3d) 758
cordance with the city's long-standing policy to encourage economic development. It was a complex exercise in allocating responsibilities within a co-ordinated approach to the overall waterfront development. With respect to matters governed by by-law, such as sewer, water, and electrical servicing, there was no evidence that the city had "assisted" the developer by putting it on any different footing from any other citizen. The infrastructure was constructed on city property, and the decision to extend sewer and water services in the manner chosen was within the discretion of the municipality. In co-operating with the developer to achieve its long-standing object, the city did not make an arrangement which "assisted" the developer within the meaning of s. 292 of the Act. With respect to the construction services and nominal transfers of land, the agreement's complicated matrix of covenants, viewed as a whole, did not clearly confer a benefit on the developer unsupported by any concomitant obligation benefiting the city. Among the obligations undertaken by the parties, those involving transfers of property or property rights approximately offset one another. The term "assistance" within s. 292 of the Act implied the conferring of an obvious advantage. Where, as in the present case, a municipality exercises its power to contract under s. 19 of the Act to effect purposes that are clearly within the realm of public policy, s. 292 of the Act is not an available mechanism to obtain a review of the contract, weighing the tangible and inchoate benefits, to determine if the municipality has made a good deal or not. Cases considered:
Affleck v. Nelson (City) (1957),23 W.W.R. 386, 10 D.L.R. (2d) 442 (B.C. S.C.) Armstrong applied
v. Langley (City) (1992), 69 B.C.L.R. (2d) 191, 11 M.P.L.R. (2d) 121, 6 Admin. L.R. (2d) 161, 94 D.L.R. (4th) 21, 16 B.C.A.C. 174, 28 W.AC. 174 (C.A.) - applied
applied con- sidered
Boyce v. Paddington Borough Council (1902),  1 Ch. 109 -
Hooper v. North Vancouver (City),  1 W.W.R. 1249,31 B.C.R. 51,65 D.L.R. 286 (C.A) -
Hy & Zel's Inc. v. Ontario (Attorney General), 107 D.L.R. (4th) 634,  3 S.C.R. 675, 18 C.R.R. (2d) 99, (sub nom. Magder (Paul) Furs Ltd. v. Ontario (Attorney Genera/)) 160 N.R. 161,67 O.AC. 81 - ap- plied Livingstone
v. Edmonton Industrial Assn. Drilling Co. (1915), 8 W.W.R. 976, 24 D.L.R. 191 (T.D.) [varied (1915),9 W.W.R. 794,9 Alta. L.R. 343, 25 D.L.R. 313 (C.A)] - referred to
MacIlreith v. Hart (1908),39 S.C.R. 657,4 E.L.R. 468 MacNeil applied
v. Nova Scotia (Board of Censors) (1975),  2 S.C.R. 265, 12 N.S.R. (2d) 85, 32 C.R.N.S. 376, 5 N.R. 43, (sub nom. Nova Scotia Board of Censors v. McNeil) 55 D.L.R. (3d) 632, 4 C.E.L.N. 65 applied
Smith v. Ontario (Attorney General),  S.C.R. 331, 42 C.C.C. 215,  3 D.L.R. 189 Thorson v. Canada (Attorney General) (No.2) considered
(1974),  1 S.C.R. 138,43 D.L.R. (3d) 1, 1 N.R. 225 referred to
Whitton v. Ottawa (City),  2 O.R. 509, 64 D.L.R. (2d) 265 (H.C.) -
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Statutes considered: Assessment Act, RS.B.C. 1979, c. 21 s. 26considered s. 26(3) [re-en. S.B.C. 1984, c. 11, s. 16(a);am. S.B.C. 1986, c. 2, s. 5(c)]considered s. 26(3.2) [en. S.B.C. 1985, c. 20, s. 5(b)]considered s. 36referred to Judicial Review Procedure Act, RS.B.C. 1979, c. 209 s. 2(2)pursuant to s. 2(2)(b)pursuant to Municipal Act, RS.B.C. 1979, c. 290 s. 19considered
s. 292considered JUDICIAL REVIEW of agreement entered into between city and land developer for development of hotel complex on waterfront.
1. The Cause of Action 1 The petitioners seek judicial review of an Agreement made by the City of Nelson (Nelson) with a land developer Huber Development Limited (Huber) in January, 1996, on the grounds that the Agreement violates s. 292 of the Municipal Act, RS.B.C. 1979, c. 290 and certain by-laws of the City of Nelson. 2. The Parties 2 The named petitioners are residents of the City of Nelson. Only one of them, Michael Kaye Kendrick, filed an Affidavit, purporting to do so with the authority of the others. The "Nelson Citizens Coalition" was not identified in any of the material as a legal entity. The only person identified as a registered owner of land and as a municipal taxpayer in the City of Nelson is Mr. Kendrick. 3 The respondent, City of Nelson, is a municipality lawfully incorporated within the Province of British Columbia. 3. Background
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4 The impugned Agreement concerns the development of waterfront land on Kootenay Lake.
5 The City of Nelson, like many places in British Columbia, came into being at a time when the imperatives of industry and transportation largely dictated land use. As a consequence, the waterfront area of Nelson has, from very early on, been given over to railways and various industrial enterprises. 6 Changes in transportation patterns, the demise or relocation of historic industries and the consequent erosion of Nelson's traditional economic foundations, led civic politicians and planners to consider other alternatives for Nelson, at least as far back as 1979. 7 An "Official Community Plan" was adopted in 1980 identifying tourism as "the most important economic area for Nelson to pursue". Within that plan the importance of the waterfront area in connection with tourism was recognized. In 1983 the City commissioned a "Waterfront Development Plan" which was incorporated by amendment into the Official Community Plan in 1984. 8 This plan included among its recommendations the development of a HotellMotellMarina complex on the waterfront. 9 In 1987, the City rezoned the area the Waterfront Tourist Commercial Zone, C4, "to encourage tourist uses in that area". That remains the zoning at the present time. 10 In 1988 the City commissioned a further report entitled the "City of Nelson Comprehensive Development Planning Program for Town centre and Waterfront Areas". This report considered, among other things, the infrastructure that would be necessary to encourage economic development of the waterfront. 11 Starting in or about 1990 the City began the process of updating its Official Community Plan. There was broad consultation in connection with this Plan including: (a) a questionnaire distributed to all households in the City in the spring of 1992;
(b) a series of public meeting held in several local communities of the City in May of 1992 and then again in June 1993;
(c) Council received the input and advice from an Advisory Planning Commission; (d) a public opinion survey conducted by the Nelson and Area Economic Developments Commission (the "Commission") in 1991; and
(t) advice and assistance provided by planning consultants retained by the City.
12 This Plan was adopted October 19, 1993. It included a detailed Waterfront Area Plan and Recreational Development and promotes "commercial, industrial and residential uses ... to stimulate economic sustainability for the City". 13 In 1994 a report was commissioned specifically to address a waterfront pathway. From at least 1984 plans for waterfront use had included provision of a public pathway along the waters' edge. 4. The Current Project
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14 In 1995 a developer, "Huber" proposed a 101 unit hotel complex for the central waterfront area.
15 On January 2, 1996 "Huber" and the City ratified an Agreement (styled a "Memorandum ing") setting out the terms and conditions upon which the City would permit the project to proceed. 16 The agreement was in the following terms: The City of Nelson agrees to:
1. undertake the expense of the actual cost of construction of the dyke to a maximum of $450,000, whichever is less, associated with the construction of the public dyke to the length of the hotel and width which accommodates the 12 feet wide pathway, landscaping and sloping along the waterfront of the hotel; 2. undertake the expense of the actual cost of construction or to a maximum of $150,000, whichever is less, associated with the construction of 12 FOOT WIDE pathway and all amenities including but not limited to, paving stones, benches, railings, waste receptacles, gates, trees, shrubs, electrical wiring and lighting. 3. undertake 50% of the mitigation expense required by the Department of Fisheries and Oceans along the waterfront dyke for the waterfront public pathway. 4. undertake all expenses associated with the completion of Hall Street public amenities and parking. 5. undertake Hall Street. all expenses associated with water utility connection up to the property line adjacent to
6. undertake all expenses associated with sanitary sewer connection up to the property line on Lakeside Drive along the sewer right-of-way no. 18400. 7. undertake all expenses associated with the storm sewer outfall relocation of way No. 18400 and allow connection from the hotel/resort complex. away from the sewer right
8. undertake to make an application for the acquisition of the Crown Land for the public pathway to the length of the hotel and width of 12 feet including that portion required for landscaping and sloping required by the Department of Fisheries. 9. undertake 50% of the surveying costs of the property as required by the Department of Lands. 10. undertake to provide an agreement to the owners of the Hotel/Resort the public pathway fronting the hotel/resort complex. for the use and maintenance of
11. undertake a specified area bylaw that imposes a 10% capital cost financed over a ten-year term of the construction of the dyke, pathway and improvements to Hall Street to the three benefiting properties, one of which will be the proposed hotel/resort, 12. undertake to make an application for a government grant for the amount of $200,00 and further undertake that should the amount of grant be zero or less than the amount specified to share in the shortfall at 50% level.
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13. undertake to share in the compensation cost required by the Department of Fisheries and Oceans at the estuary of Cottonwood Creek in the same percentage proportion as the public dyke is to the total area of the proposed hotel/resort development site. 14. undertake the ownership of the compensation site at the estuary of Cottonwood Creek after approval and final inspection has been given by the Department of Fisheries and Oceans. 15. undertake to accept soils removed from the proposed development site at the City's proposed sports field site located east of the Mall. 16. undertake to provide access through the Mall property for the transportation of the removed soil from the development site. 17. undertake to provide temporary storage of building materials, equipment and other access required for the construction of the proposed HotellResort. 18. undertake to provide development permit approval based on meeting all the requirements of the development permit process which shall not exceed a maximum of four weeks from the date of applica- tion. 19. undertake to provide all the applicable zoning for the development. 20. undertake to provide all documents relevant to the Landfill site adjacent to the estuary of Cottonwood Creek and accept responsibility of any future environmental concerns arising out of the Landfill site. 21. undertake to sell lot 1 of plan 13535 Hotel/Resort Complex for a sum of $1
a portion of a strip of DL 2384 adjacent to west side of
In consideration of the above terms and conditions of the City of Nelson, the Huber Development under-
takes to proceed to construction of a Hotel/Resort Complex on the site commonly referred to as the bottom of Hall Street based on the following commitments from Huber Development: 1. to construct a hotel/resort class development comprising of a minimum of 100 rooms and a minimum of 350 seat banquet and convention facility and to construct and complete the dyke and waterfront public pathway and all amenities as outlined in sections 1 and 2 above with a total maximum fmancial contribution from the City of Nelson of $600,000. 2. undertake 50% of the mitigation expenses required by the Department of Fisheries and Oceans along the waterfront dyke for the waterfront public pathway. 3. undertake 50% of the surveying cost of the property as required by the Department of Lands. 4. undertake to share in the compensation cost required by the Department of Fisheries and Oceans at the estuary of Cottonwood Creek in the same proportion as the hotel/resort is to the total area of the proposed development site. 5. undertakes to accept a specified area bylaw that imposes a 10% capital cost financed over a 10 year
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term of the construction of the dyke, pathway and improvements properties, one of which will be the proposed hotel/resort.
to Hall Street to the three benefiting
6. undertake that should the amount of grant be zero or less than the $200,000, shortfall at 50% level.
agree to share in the
7. undertake the construction of the compensation site at the estuary of Cottonwood Creek that meets the approval of the Department of Fisheries and Oceans and obtain approval from the same. 8. undertake $8,000 cost associated with the electrical service from the property line to the connecting pole. 9. undertake all expenses associated with the clean-up and removal of any spills in the transportation soil through the Mall property. of
10. undertake to make applications for all permits associated with this development and comply with all city bylaws unless a waiver has been granted by the City prior to the commencement of the construe- tion. 11. undertake to give the City or the Province of BC a performance bond or a letter of credit of not less than $700,000 including the DFO requirement which shall be returned after completion of the project. 12. undertake to provide a give to the City a Gazebo interpretative Centre of a size and design mutually agreed between the parties at the foot of Hall Street public amenity area. 13. provide the City right of way for the tramway rail lines and access to public using the tram. 14. provide the City right of way for all city utilities overhead or underground as required. 15. undertake all expenses associated with minor maintenance to keep the public pathway clean, in good repair and remove snow and ice as required and when necessary. 16. to hold a public open house with displayed tion for a development permit. The parties further agree jointly to undertake lowing: construction and building plans prior to make applica-
after the construction
of the hotel/resort
is complete the fol-
1. enter into a joint 50150 cost sharing capital maintenance agreement for repairs and replacement of items and fixtures associated with or on the waterfront public pathway fronting the hotel/resort prop- erty. 2. maintain a general liability policy that covers the encroachment hotel/resort complex. 3. the City agrees to grant an allowance equivalent pathway. The parties further agree to the following: on the public pathway fronting the
to the deemed electrical usage for lighting the public
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1. the construction to commence no later than March 15, 1996 and the project completed by no later than June 30,1997 unless prevented by circumstances beyond the control of the developer.
2. the City of Nelson undertakes to make 50% of payment for the construction of the public dyke and pathway 30 days after the commencement of the construction and the balance of 50%, 30 days after the completion of the dyke and the pathway. 3. the development will provide a minimum of 100 parking stalls. 17 The petitioners particularly object to those provisions in the Agreement in which the City agrees to: (a) build a dyke and pathway (Clauses 1 and 2);
(b) build sewer, water and electrical facilities (Clauses 5, 6 and 7); and (c) transfer City owned lands, more particularly described as: (1) Lot 1, District Lot 4644, Kootenay District, Plan 13535 and (2) a portion of District Lot 2384 (Clause 21) to Huber for apparently nominal consideration. [From the Petition] S.lssues
(AJ Statutory Provisions
18 the petition is brought under S. 2(2) of the Judicial Review Procedure Act RS.B.C. 1979 c. 209 which provides: 2(2) On an application for judicial review, the court may grant any relief that the applicant would be entitled to in anyone or more of the proceedings for (a) relief in the nature of mandamus, prohibition or certiorari;
(b) a declaration or injunction, or both, in relation purported exercise, of a statutory power.
the exercise, refusal to exercise, or proposed or
19 The petitioners claim specifically under S. 2(2)(b) that the City has exercised its power to contract under S. 19 of the Municipal Act in a manner inconsistent with S. 292 of the Municipal Act. They seek a declaration to that effect, and an order enjoining the City from carrying through with the agreement. 20 The relevant provisions of the Municipal Act are as follows: 19.(1) Every municipality incorporated under this act is a corporation ... with all the rights and liabilities of a corporation, and with full power to acquire, hold and dispose of real and other property, subject to this Act, and to contract for materials and services. 292. the council shall not, directly or indirectly, assist an industrial or commercial undertaking, and, without
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limiting this section's generality, shall not grant assistance by (a) giving or lending money or other security, or giving the use or ownership of any immovable; (b) guaranteeing borrowing; (c) granting an exemption from taxation; (d) granting as a gift property owned by the municipality.
21 There is a threshold question as to whether the petitioners' declaratory or injunctive relief. status as private citizens entitle them to seek
22 The basic rule is stated in Armstrong v. Langley (City) (1992), 69 B.C.L.R. Justice Rowles, at p. 202:
(2d) 191 (C.A.) per Madam
The appellant did not seek the consent of the Attorney General to lend his name to relator proceedings. A private person has standing to sue for declaratory or injunctive relief in respect of a matter of public interest without the Attorney General being a party if the person is able to satisfy one of the two conditions set out by Buckley J. in Boyce v. Paddington Borough Council,  1 Ch. 109 at 114: A plaintiff can sue without joining the Attorney-General in two cases: first, where the interference with the public right is such that some private right of his is at the same time interfered with ... and, secondly, where no private right is interfered with, but the plaintiff, in respect of his public right suffers special damage peculiar to himself from the interference with the public right. 23 In this case the petitioner Kendrick is the only person whose status is before the court. He deposes in paragraph 2 of his Affidavit of March 13, 1996: ... I am the registered owner of land in the City of Nelson and a property tax payer and have been for at least the preceding year. 24 There is no evidence and no suggestion that Mr. right or that he has suffered any damages "peculiar to by the Agreement. He brings action on the theory that an Agreement they allege is in breach of a statutory breach arises out of what they allege to be an unlawfully 25 The authorities Kendrick has suffered any interference with any private himself." His property does not adjoin the lands affected as a taxpayer he (and all other taxpayers) are affected by requirement imposed on the City, particularly where the improvident or disadvantageous arrangement.
Assn. Drilling Co. (1915),8
have held generally, though not universally, (see Livingstone v. Edmonton Industrial W.W.R. 976 (Alta. T.D.» that the status of a ratepayer or taxpayer does not in itself confer the special interest necessary to found status, Hooper v. North Vancouver (City),  1 W.W.R. 1249 (B.C. C.A.), cited with approval in Affleck v. Nelson (City) (1957) 23 W.W.R. 386 (B.C. S.C.). The latter case, a decision of Wilson, J., (as he then was), distinguishes (albeit with some hesitation) between an attack on a resolution of a City Council on the grounds that it contravenes a by-law (which would require the intervention of the Attorney General), and an attack on the grounds that it authorizes the illegal expenditure of municipal funds
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(which would not). The authority cited for this distinction is MacIlreith v. Hart (1908) 39 S.C.R. 657. There, after reciting the principle in Boyce v. Padding ton Borough Council (set out in Armstrong v. Langley (City) (supra» the court goes on to say: Does the principle involved in the second proposition of Buckley J., and on which it necessarily rests, apply to the facts of this case? Assuming, as we have already decided and on which assumption alone the question arises, that there has been an interference with a public right by the misappropriation of the moneys of the municipality to purposes outside of its powers, can it fairly be said that the plaintiffs have suffered damage peculiar to themselves qua ratepayers. The public right, interference with which justifies the intervention of the Attorney-General is, I take it, the application of moneys devoted by the terms of the incorporation Act of the municipality to certain specified purposes, to purposes other and different from these, in other words, to purposes ultra vires of the municipality. The peculiar damage sustained by the ratepayers as the result of such misappropriation, arises out of the increased rates which they will have to pay by reason of the misappropriation of the moneys of the corporation. It matters not whether the damage be great or small, unless indeed the whole transaction was so trivial that the court would refuse to interfere on that ground. But the broad contention is put forward that even where personal misappropriation of the corporate funds by the officers of the municipality is shewn, coupled with the refusal by the controlling officials of the use of the corporate name to enable the wrong to be rectified, the ratepayers are helpless unless and until they can get the Attorney-General to intervene; and that any special damage which the plaintiffs individually or as a special class will sustain cannot and does not give them a right to sue. The misappropriation here complained of is only $270. If it was $2,700, it should not make any difference in the determination of the right of the injured class to sue for their own protection. As ratepayers, they seem to me to have suffered special and peculiar damage to themselves distinct from the public damage which the Attorney-General has the sole right to represent, and, as a result of such special and peculiar damage, have a right to sue in their own name, in equity, to have the wrong rectified or proposed wrong enjoined, where their trustee, (the municipality), refuses to allow the corporate name to be used for the pur- pose. I quite concede, alike on principle as on authority, that where the general right of His Majesty's subjects alone is involved, and with respect to any interference with that right, the Attorney-General is the only and proper person, with or without relators, to sue. The relator only came in for the purpose of costs. AttorneyGeneral v. Logan( 1). The Attorney-General comes in as the officer of the King, who, as parens patriae, by his proper officer, files his information to see that right is done to his subjects who are incompetent to act for themselves. But it does not seem reasonable or consistent with principle to apply the rule to cases where persons or a class, being members of municipal corporations, complain of the action of officials, having control for the time being of the corporation, diverting or appropriating its money or property for purposes ultra vires of the corporation so as to work a special injury to such persons or class of persons and refusing to allow the corporation name to be used to test the legality of the action complained of. 26 It is obvious that where there is doubt about the characterization of a Municipal Councils' impugned
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activity, the question of standing will often be inextricable from a consideration of the merits. As Mr. Justice
Laskin C.J.C. observed in MacNeil v. Nova Scotia (Board of Censors),  S.C.R. 265 at 278: In granting leave, this Court indicated that where, as here, there is an arguable case for according standing, it is preferable to have all the issues in the case, whether going to procedural regularity or propriety or to the
merits, decided at the same time. A thoroughgoing examination of the challenged statute could have a bearing in clarifying any disputed question on standing. I note that in Smith v. Attorney General of Ontario [ S.C.R. 331.], Duff J. thought that the issue of standing was an arguable one and since the merits had been canvassed "we are loath to give a judgment against the appellant solely based upon a fairly disputable point of procedure, and accordingly we think it right to say that in our opinion the appellant's action also fails in substance ... 27 Thus, although "standing" is a "threshold" issue, it is sometimes necessary to embark upon a detailed consideration of the merits as a whole to determine the matter. Once that is necessary, public policy considerations militate against ruling on what Duff J. in Smith v. Ontario (Attorney General),  S.C.R. 331 termed a "disputed point of procedure." For that reason, as found by Rowles J.A. in Armstrong v. Langley (City) (supra) atp.202: ... the courts retain a discretion to decide substantive issues that are fully argued, if the case is one of public importance: see P.I.P.S. v. Northwest Territories (Commissioner),  2 S.C.R. 367 at 400 ... even where there is no standing. 28 Another issue arises in the circumstances of this case. In some cases, Armstrong v. Langley(City) (supra) for example, the issue of standing comes about in the context of a failure of the person initiating an action to seek the consent of the Attorney General to lend his name to the proceedings. In other cases, action is commenced in the face of a refusal by the Attorney General to do so. In Affleck v. Nelson (supra) Wilson, J. comments that this should only happen where the action is "entirely frivolous." 29 In the present case, the material discloses that the Minister of Municipal Affairs was asked to intervene. the Minister, while expressing concern about the situation, indicated that she was "in no position" to do so. 30 I do not think it is necessary to decide whether the Minister was correct or this exchange was tantamount to a refusal by the Attorney General to intervene. It is significant to note, however, that the Supreme Court of Canada has articulated the proposition that it is open to the Court to grant standing to an interested person in cases alleging excess of legislative power where the alternative is that the purported exercise of power would be immune from judicial review because there is no person or class of persons particularly affected and an Attorney General is unwilling to intervene. In Thorson v. Canada (Attorney General),  1 S.C.R. 138 Mr. Justice Laskin, J. said at p. 145: The courts are quite able to control declaratory actions, both through discretion, by directing a stay, and by imposing costs; and as a matter of experience, MacIlreith v. Hart, to which I will return, does not seem to have spawned any inordinate number of ratepayers' actions to challenge the legality of municipal expenditures. A more telling consideration for me, but on the other side of the issue, is whether a question of constitutionality should be immunized from judicial review by denying standing to anyone to challenge the impugned statute. That, in my view, is the consequence of the judgments below in the present case. The substantive issue raised by the plaintiffs action is a justiciable one; and, prima facie, it would be strange and,
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indeed, alarming, if there was no way in which a question of alleged excess of legislative power, a matter traditionally within the scope of the judicial process, could be made the subject of adjudication. 31 More recently, in Hy & Zel's Inc. v. Ontario (Attorney General); Magder (Paul) Furs Ltd. v. Ontario (Attorney General),  3 S.C.R. 675 the Supreme Court of Canada, per Major J. at p. 690, set out the following test in the context of a Charter Argument: ... in order for the Court to grant standing in a civil case, where as in the present case, the party does not claim a breach of its own rights under the Charter but those of others (1) there must be a serious issue as to the Act's validity, (2) the appellants must be directly affected by the Act or have a genuine interest in its validity, and (3) there must be no other reasonable and effective way to bring the Act's validity before the court. [italics mine] 32 From the above authorities I derive the following principles: (1) The Rule in Boyce v. Paddington Borough Council,  I Ch. 109 at 114 requiring either: (1) direct interference with a private right; or (2) special damage peculiar to the plaintiff as a result of a public act, is the starting point in determining matter of public importance. whether a private person can seek declaratory or injunctive relief on a
(2) In cases where neither condition is met the Attorney General is ordinarily a necessary party. (3) The Attorney General ought to permit at least the use of its name unless the action is "entirely frivol- ous". (4) Where a petitioner has neither a direct interest, nor the co-operation of the Attorney General, and there is no other reasonable or effective way to bring the matter before the court in a manner that would satisfy the basic conditions of standing, the court retains a discretion to grant it provided there is a "serious" or "justiciable issue" and the petitioner can show a "genuine interest" in the issue to be determined. This discretion is retained for the sound policy reason that a serious question of alleged excess of legislative power should not be "immunized" from challenge by a strict application of the basic rules. (5) Where the threshold issue of standing ample, where the proper characterization on the merits, even if it ultimately finds interest, for the reason articulated by Duff, cannot be determined without a hearing of the merits (as, for exof the activity is in doubt) the court retains a discretion to decide that there is no standing, where the matter is of significant public J. in Smith v. Attorney General of Ontario (supra).
33 In the present case the matter is clearly of public interest (at least in the City of Nelson), and there has been a full hearing on the merits. It is an appropriate case for determination on that basis, regardless of whether the petitioners in fact have standing. (C) Issues Arising on the Petition 34 The City is empowered, under the Municipal Act S. 19 to make contracts subject to the Act.
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35 The petitioners submit that S. 292 is one of the provisions of the Act which qualifies this basic power to contract. They suggest, although not in quite these terms, that the long standing rule that courts will not enquire into the adequacy of consideration is modified by S. 292 such that any contract or arrangement that has the effect of "assisting" an industrial or commercial undertaking is invalid. 36 There is no doubt that the HotellMarina complex being developed by Huber is a "commercial undertak- ing". 37 It was clearly established in the extensive affidavit material filed on behalf of the City (and, for that matter, in the material filed on behalf of the petitioners) that the City of Nelson has, for most of the last twenty years, been developing plans for its waterfront that included a hotel complex and sea wall. It was foreseen that such a development might have an impact on the design characteristics of the sea wall. The 1994 "Pathway" re'port, for example, noted ... "the ultimate design of [the Hall Street terminus area] is contingent on yet undetermined development (such as a potential hotel and potential higher density residential development ... "). 38 In 1987 a developer proposed a hotel/resort came to the City until the Huber project in 1995. project which did not ultimately proceed. No other proposals
39 The City was clearly receptive to Huber and the issue comes down to whether, in co-operating Huber to achieve its longstanding objective the City made an arrangement which "assisted" Huber. 40 The three separate areas in which the petitioners (expressed in their terms): (a) Nominal Transfers of Land: say the agreement with Huber violated
S. 292 are
Clause 21 of this agreement provides that the City transfer property it owns legally described as Lot 1, Plan 13535, District Lot 6466, Kootenay Land District which has an assessed value of $126,000.00 and a portion of D.L. 2384 the whole of which is assessed at $134,000.00, to Huber Developments Ltd., referred to in the agreement as Huber Developments [sic], hereinafter referred to as "Huber" for the price of $1.00. [From the Petition] (b) Construction Services:
In addition, the agreement provides that the City provide construction services to Huber, at a greater expense to the City than would otherwise be necessary for City purposes, so as to facilitate the development of a Hotel by Huber, at little or no cost to Huber. [From the Petition] (c) City Services: Pursuant to Clauses 5 6 and 7 of the said agreement, the City was to provide water, sewer and electrical utility hook-ups to Huber at the City's expense. By-laws of the City in force at the time, provided that a substantial hook-up fee would be charged for the provision of water, sewer and electrical services to any applicant. [From the Petition] 41 I will deal with each in turn.
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Page 15 1997 CarswellBC 83, 31 B.C.L.R (3d) 134,38 M.P.L.R. (2d) 175,68 A.C.W.S. (3d) 758
(i) The Nominal Transfer of Land
42 The City agreed to sell two parcels of land for $1.00. Whether S. 292 was breached in this respect requires evidence of what the lands were worth, followed by evidence of what the City realized, directly or indirectly, in consideration. The whole contractual relationship between the parties is relevant (see Whitton v. Ottawa (City) (1957), 2 O.R. 509 (H.C.». 43 The lands were not appraised by the City before it entered into its agreement with Huber. According to the affidavit material the value at the time of the agreement was thought to be around $30,000.00. 44 The petitioners point to the fact that at the time the "Assessment" value of one of the parcels was $126,000.00 (Lot 1) and the other (Lot 2384), a small portion of which was to be sold, was $134,000.00. They offered no other proof of value. 45 The City obtained an appraisal when this transaction was questioned. The qualifications of the appraiser, D.G. Johnson RI.(B.C.) were not challenged. I accept his report to be independent and disinterested. He arrived at a value of $33,000.00 for Lot 1 and approximately $8,640.00 for the fraction of Lot 2384 that was transferred, for a total land value of $41,640.00. 46 The petitioners challenge the appraisal on the basis that the City, in describing the properties in its instructions to the Appraiser "restricted" him. They suggest it was inappropriate to premise the lands' value on the basis that its use was limited to "tramway stop and parking purpose for a hotel/resort complex on the adjoining property ..." as the City represented in the "Statutory Notice of Intention to Sell Real Property" published in the local press prior to the transfer to Huber. For a variety of reasons the petitioners suggest that the land was "extremely valuable, at least to the respondent Huber Development Limited." 47 The Appraisal is dated March 20, 1996. While it may have been prepared at a time when the lands' probable future use was linked with the Huber project, there is no evidence to suggest that the Appraiser was either governed by what have been termed the City's "instructions" or that he improperly took account or failed to take account of considerations relevant to his assessment of value. The Appraiser suggested both a limited range of uses (parking lot, billboard site, tourist information kiosk site) and a rather dormant market for industrial or commercial vacant land (no sales for the past three years). There was nothing to suggest his methodology was unsound or that he failed in any way to fulfil his professional obligations. 48 In considering what weight, if any, to give the property tax notice as evidence of value I have reviewed the Assessment Act RS.B.C. 1979 C. 21 as amended. In essence it provides that municipally held land is subject to assessment on an "actual value" basis (S. 36). Under S. 26 "actual value" is defmed as "the market value of the fee simple interest in land and improvements". The Act is permissive in suggesting what factors an assessor "may" take into account: 26(3) In determining actual value, the assessor may, except where this Act has a different requirement, give consideration to present use, location, original cost, replacement cost, revenue or rental value, selling price of the land and improvements and comparable land and improvements, economic and functional obsolescence and any other circumstances affecting the value of the land and improvements. 49 Under S. 26(3.2) I note that restrictions placed on the land by the municipality sessing value. are to be considered in as-
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Page 16 1997 CarswelmC 83, 31 B.CLR. (3d) 134,38 M.PLR. (2d) 175,68 A.C.W.S. (3d) 758
50 I do not think I can make much more of assessed value than that it purports by statute to be market value. It might (though I do not decide) be prima facie evidence of value in the absence of contradiction. But where, as here, it is put up against a detailed Appraisal setting out the factors that have actually been considered in evaluating the property, it stands as merely a number, supported by conjecture as to which of the S. 26(3) factors, if any, were considered. On the evidence before me I fmd that the Appraisal performed on behalf of the City by Concord Appraisals is the more reliable guide to value, and that the actual market value of the properties the City transferred in accordance with the agreement is in the range of $40,000.00 to $45,000.00. I do not think anything turns on a more precise figure.
51 The City identifies extensive consideration from Huber. The "Memorandum" describes as a "gift" back from Huber a "Gazebo Interpretive Centre" valued at $35,000.00. That value is uncontradicted. It also identifies an agreed "right of way for the tramway rail lines and access to the public using the trams" on Prestige owned lands as worth a notional $44,275.00 assuming the City would otherwise have had to relocate the lines. 52 The City further submits that other aspects of the agreement costs on the public pathway estimated at $150,000.00. constitute "consideration" including shared
53 The petitioners for their part submit that a number of costs are higher than they should have been had the Huber development not been accommodated. They suggest, to deal with an example, that the pathway would have been less expensive absent the hotel and that, rather than sharing the costs of the integration of the Hotel plans into the waterfront development as it did the City could have driven a harder or more favourable bargain with Huber. 54 While these contentions do not specifically address the "nominal" transfer of City lands, they are advanced to negate the City's suggestion that the shared cost arrangements are advantageous to the City such that they form "consideration" for the transfers of lands. 55 Looking at the agreement as a whole, it is rather artificial to set the "nominal" transfers of land by the City against the nominal transfer of a right of way and the gift of a "gazebo". It is only possible to say that among the obligations undertaken by the parties, those involving transfers of property or property rights approximately offset one another. The agreement is obviously an attempt to accommodate a waterfront development that includes public uses and a private business there was a public interest in promoting as part of an overall plan to enhance the economic viability and diversity of the City. (U) Construction Services 56 With respect to the waterfront development issues, the agreement, fairly considered, appears to be an attempt to allocate as between public and private interests, the costs of an integrated project. Unless there were an obvious aspect of "something for nothing" I see no basis on which this court can "pick the bones" of this agreement for signs of a S. 292 breach. The affidavit material filed by both sides articulately - and exhaustively - details the various considerations that each says were or should have taken into account in coming to an agreement. This has the flavour of a political debate, which is, of course, what it really is. The court is in no position to ascertain he point at which the City'S demands would have been unacceptable and Huber would have abandoned the project, or to weigh that possibility against the interests of the City in the project proceeding. These judgments are allover matters of public interest within Council's mandate and discretion. (iii) The Sewer, Water and Electrical Services
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57 The petitioners take the position that by virtue of the Huber project, the City has been required to relocate storm sewers at costs estimated at $7,900 and $29,000. This was because of the hotel construction. Prior to the purchase of the waterfront lands by Huber the storm sewer outfalls crossed Crown lands without easement. Once the lands were in private hands one outfall had to be moved. A right of way was negotiated with respect to the new outfall in the agreement. The City suggests the other outfall is impacted by the Hall Street Centennial Project and needed to be relocated in connection with that project. The City says this was contemplated in the 1988 Development Plan. 58 The position of the petitioners on this issue appears to be that the City should have driven a harder bargain with Huber than it did. It is not alleged that the City did anything improper. In view of the City's lack of any legal interest once the lands were sold into private hands it is difficult to see what leverage the City had in this respect. In any event, it is hard to see how the relocation of the sewer outfalls, once they were in effect trespassing on private land as a result of a transaction involving the Crown and not the City could be characterized as "assistance". 59 The petitioners next submit that the City's extension form of assistance in the circumstances. of water and sewer services to the Hotel site is a
60 The construction and extension of such services is within a municipality's discretion. The City suggests certain long range planning benefits will accrue to the City in expending money now to extend these services to the waterfront area. The petitioners submit that the costs of extending sewer and water to the site are $6,000 and $15,900 respectively. As I understand the material, their contention is that these costs so far eclipse the amounts that can be recovered by connection fees as to constitute another form of subsidy. 61 Again, however, there is no suggestion of any illegality. Whether the City's decision to extend sewer and water services in the manner chosen is astute planning or not, the decision is within the discretion of the municipality. The services are located on City lands and become, in effect, municipal assets once they are built. 62 There is no suggestion that the City is providing these hook-ups at its expense in any sense other than that it has determined to build the infrastructure on its own lands to service this and potential future projects. The services portion of the agreement extends only to the property line and does not entail construction that would ordinarily be the responsibility of the developer. 63 The "Facts" in the Petition suggest that "pursuant to Clauses 5, 6 and 7 of the Agreement the City was to provide ... electrical utility hookups to Huber at City expense." this is not where that obligation is found. Huber's obligation is spelled out in Clause 8 of the "developer's commitments" portion of the Agreement. It provides that Huber pays the $8,000 cost from his property line to the connecting pole. There is nothing in the material suggesting that this is in breach of the City's by-law. The petitioners refer to an earlier, rather tentative, cost estimate of some $35,000 respecting electrical for a different project. The City's material includes the deposition of the Chief Administrative Officer that, in fact, the cost of the electrical service is being paid by the developer. It stands uncontradicted. As such there is no evidence that, respecting electrical services, the City bas provided any form of "assistance" . . 6.Summary 64 In Summary:
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Page 18 1997 CarswelffiC 83,31 B.C.L.R. (3d) 134,38 M.P.L.R. (2d) 175,68 AC.W.S. (3d) 758
(a) The agreement entered into between the City and Huber Developments Ltd. represents an attempt to coordinate public objectives (e.g.: the enhancement of civic amenities) with a form of private enterprise, a Hotel complex, it has been a longstanding policy of the City to encourage in the interests of economic development.
(b) The agreement is a complex exercise in allocating responsibilities within a co-ordinated approach to the overall waterfront development.
(c) With respect to those matters governed by by-law, (sewer, water, and electrical servicing), there is no evidence that the City has assisted the developer by putting it on any different footing from any other citizen. There is no evidence, in other words, that the developer got a "break" in any sense from with respect to services. The "assistance" the petitioners point to is in the infrastructure development the City has undertaken to service the project and, the City suggests, future projects. That infrastructure is constructed on City property. It is within the City's discretion to build such infrastruction. It is not "assistance" within the meaning of S. 292 of the Municipal Act. 65 With respect to the construction services and "nominal" transfers of land, the Agreement's complicated matrix of covenants, viewed as a whole, do not clearly confer a benefit on Huber unsupported by any concomitant obligation benefitting the City. I think "assistance" within Section 292 of the Municipal Act implies the conferring of an obvious advantage. Where, as here, a municipality exercises its power to contract under S. 19 to effect purposes that are clearly within the realm of public policy, I do not think S. 292 is an available mechanism to obtain a review of the contract, weighing the tangible and inchoate benefits, to determine if the municipality has made a good deal or not. That is, in essence, what the petitioner are seeking. 66 The petition is therefore dismissed with costs. Petition by residents dismissed.
END OF DOCUMENT
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1085459 Ontario Ltd. (c.o.b. Kingston Online Services) v. Prince Edward (County)
Between 1085459 Ontario Ltd., operating as Kingston Online Services, applicant, and The Corporation of Prince Edward County, respondent  O.J. No. 3471
77 O.R. (3d) 114  O.T.C. 706 14 M.P.L.R. (4th) 1 141 A.C.W.S. (3d) 1039 2005 CarswellOnt 3705 Kingston Court File No. 15981/05
Ontario Superior Court of Justice
C.T. Hackland J.
Heard: July 14,2005. Judgment: August 18, 2005. (28 paras.) !!MU89 !!MU90 Municipal law -- Contracts -- Construction contract -- Contract for services. Application by Kingston Online Services, under Rule 14.05 of the Rules of Civil Procedure, seeking a declaration that the respondent, Corporation of Prince Edward County, contravened section 106 of the Municipal Act by granting a bonus to a partnership, W3 Connex and mmWave Technologies, in a contract between Prince Edward County and W3. The contract required W3 to construct a telecommunications system to provide broadband high-speed internet service for the use of the municipal government and the residents of Prince Edward County. Pursuant to the contract, the municipality paid $115,000 to W3, at the initial stages of the system development for the purpose of assisting W3 in performing its obligations under the contract. Kingston alleged that that payment was a bonus to a commercial contract and was therefore prohibited by section 106.
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HELD: Application dismissed. The municipality had assisted in funding the provision of a capital structure in technical non-compliance with section 110 of the Municipal Act. However, Kingston lacked standing to seek the claimed declaratory relief. It did not have a sufficient interest in the subject matter of the dispute. The court noted that Kingston deliberately chose not to participate in the bidding process. Second, Kingston stood by and omitted to challenge the municipal by-law which authorized the municipality to enter into the contract in question. Finally, Kingston did not establish a direct financial loss to it arising from the impugned payment to W3.
Statutes, Regulations and Rules Cited:
Municipal Act, 2001, S.O. 2001, c. 25, s. 106, s. 107, s. 110
T. Anthony Ball, for the Applicant Donna M. Crabtree, for the Respondent
REASONS FOR DECISION C.T. HACKLAND 1.:-Overview 1 This is an application under Rule 14.05 of the Rules of Civil Procedure in which the applicant Kingston Online Services ("KOS ") seeks a declaration that the respondent, the Corporation of Prince Edward County ("the municipality") contravened section 106 of the Municipal Act, 2001, S.O. 2001, c. 25 by granting a bonus to a partnership, W3 Connex Inc. and mmWave Technologies Inc. ("W3"), in a contract between the municipality and W3 dated February 16,2004, ("the contract"). 2 The contract in question required W3 to construct a telecommunications system to provide broadband high-speed Internet service for the use of the municipal government and the residents of Prince Edward County. Pursuant to the contract, the municipality paid a sum of $115,000 to W3, at the initial stages of the establishment of the system, for the purpose of assisting W3 in performing its obligations under the contract. As noted, KOS alleges that this payment is a bonus to a commercial enterprise and is therefore prohibited by section 106 of the Municipal Act, which provides: 106.(1) Despite any Act, a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose. (2) Without limiting subsection (1), the municipality shall not grant assistance by, (a) (b) (c) (d) giving or lending any property of the municipality, including money; guaranteeing borrowing; leasing or selling any property of the municipality at below fair market value; or giving a total or partial exemption from any levy, charge or fee.
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3 The municipality argues that the payment in question is not properly characterized as a bonus in contravention of section 106 of the Municipal Act. Alternatively, the municipality argues that the payment is authorized by section 110 of the Municipal Act which allows municipalities to enter into agreements for the provision of municipal capital facilities, including the giving or lending of money for this purpose. The municipality further argues that the payment was a grant as permitted by section 107 of the Municipal Act. In any event, the municipality argues that KOS lacks standing to bring this application and that, as a matter of the courts' discretion, declaratory relief should not be granted. Procedural Concerns 4 It is to be noted that the contract is between the municipality and W3. W3 is not a party to this application. Therefore, the court is not in a position to consider ordering a termination of the contract or the return of the $115,000 paid to W3 as requested in the Notice of Application. The court will therefore deal only with the request for a declaration concerning the alleged non-compliance of the contract with the requirements of the Municipal Act. Further, the absence ofW3 from this proceeding precludes any detailed assessment of KOS's allegation that the alleged bonus paid by the municipality to W3 enabled W3 to gain an unfair market advantage and engage in predatory pricing practices to the financial detriment ofKOS. There is simply no adequate record to assess these allegations. However, in my opinion, the proper disposition of this application does not require factual findings or conclusions about the effect of the alleged bonus on W3's pricing strategies or on the detriment allegedly suffered by KOS as a result. Issues (1) (2) (3) Is the payment of$115,000 under the contract, a "bonus" to assist W3 as a commercial enterprise, in contravention of section 106 of the Municipal Act? Is the payment of$115,000 to W3 a grant, authorized by section 107 of the Municipal Act? Is the payment of $115,000 to W3 authorized as part of an agreement for the provision of municipal capital facilities under section 110 of the Municipal Act? Does the applicant KOS have standing to challenge the contract, dated February 16,2004, between the municipality and W3? Should the court exercise its discretion to grant declaratory relief in the circumstances?
(4) (5) Background
5 The applicant KOS is in the telecommunications business and in 2003 it provided so called dial-up Internet services to the municipality. This enabled the municipality to link its various offices using the telephone lines. Prince Edward County is a large, predominantly rural municipality of approximately 100 square miles with a population of25,000 people. It was formed in 1998 by the amalgamation of the Town of Picton, the Villages of Wellington and Bloomfield, the Townships of Ameliasburgh, Athol, Hallowell, Hillier, North Marysburgh, South Marysburgh and Sophiasburgh, plus the former County of Prince Edward. The administrative services for the County continued to be provided through offices located in the various former municipalities. The municipalities' experience was that telephone lines were severely restricted in their ability to transmit large data files in a timely and effective way. 6 The municipality concluded that broadband transmission was required and that it would be the most effective means of responding to the need for rapid electronic file transfer between its branch offices.
?jobHandle= 1825%3A2903 210...
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Specifically, the objectives of the municipality were to link the satellite municipal administrative offices with an effective high-speed network and to provide the impetus for the establishment of a broadband network capable of supporting a variety of applications for the benefit of the community.
7 The applicant KOS believed that the private sector alone was best able to respond to consumer demand for Internet services, without the need for any municipal government initiative. They therefore declined to participate in the tendering process ("the RFP process"). Nevertheless, the evidence establishes that the RFP process was fairly and openly conducted, six proposals were received with the assistance ofa consultant, and W3 was ultimately awarded the contract, made as of February 16,2004, for a five-year term. The contract included a provision obligating the municipality to provide to W3 "$115,000 of County Funded Contributions ...". The contract did not restrict the manner in which W3 was to use these funds in the construction of the network. The contract includes, among other things, the following key provisions:
PEC [The Municipality] shall provide funding for the Project as follows: (a) PEC shall provide to W3 $115,000.00 of County Funded Contributions subj ect to receipt of sufficient claims from W3 .... PEC may provide Funded Contributions in excess of $115,000.00 subject to prior written agreement from PEC.
PEC shall provide such financing guarantees or minimum service contracts to PEC municipal locations as identified in Schedule J as may be required by W3 to secure financing for the project under reasonable commercial terms. The amount of such financing guarantees or minimum service contracts shall be negotiated between the parties based on terms acceptable to PEC and W3's financiers. W3 will provide PEC the ability to recover the PEC Funded Contribution provided to W3 for this project through the provisions of services at special discounted rates from W3's standard commercial price for such services.
PEC shall provide Funded Contributions within ten (10) business days of receipt of the claim from W3 ....
Operational Contributions provided by PEC shall be used by PEC for PEC activities including, but not limited to, the following: (a) to promote W3 and its services within the PEC Region;
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to assist W3 in marketing in consumer education within the PEC Region; to stimulate demand ofPEC customers for the Services.
8 The contract contained a breakdown of the cost of providing the wireless broadband network of $244,577. W3's obligation was to provide and implement four Wireless Access locations in Ameliasburgh, Wellington, Picton, and Belleville. The contract stipulated the fees that W3 would charge its customers in the County and that the County and W3 would review the fees annually. As noted, the contract included a provision for partial pre-payment for services to the County in the amount of $115,000 broken down into five payments to be made at five identified milestones. The pre-payments were credited to future services to be provided to the County with the result that instead of paying $4,459 monthly over the five-year term for services provided to the various municipal facilities, Council would pay $2,529 monthly. At the end of the five-year period, the monthly reductions would amount to a total of $115,800. In short, to facilitate installation of the broadband wireless telecommunications service in the County, Council made a partial pre-payment for the services that it would receive. 9 On February 16,2004, the Council of the municipality passed By-Law 1195-2004 authorizing the execution of the contract between the municipality and W3 Connex. No application was taken to quash the By-Law. Bonus Contrary to Section 106 of the Municipal Act 10 Considerable argument was directed to the issue of whether the $115,000 payment is a bonus as prohibited by section 106 of the Municipal Act. The section states that a "municipality shall not grant assistance by, (a) giving or lending any property of the municipality, including money; ...". I begin with the observation that this section does not simply aim to prohibit activities carried out in bad faith nor does it exempt arrangements which are bona fide and designed to advance the interests of the citizens of the municipality. This project is an example of the latter. This contract was clearly entered into for a valid municipal purpose. Section 106 of the Municipal Act is a longstanding provision which is designed to prevent municipal bodies from giving an unfair advantage to private parties in the commercial market place. The term "bonus" is not defined. There is little jurisprudence under the section, which in its present form was introduced over 40 years ago. The original provision provided: s. 248a. Notwithstanding any general or special Act, a council shall not grant bonuses in aid of any manufacturing business or other industrial or commercial enterprise. (S.O. 1961-62,c.86,s.36)
11 The old case ofRe Village of Markham et al. and Town of Aurora (1902),3 O.L.R. 609 (Ont. C.A.), interpreted section 591 of the Municipal Act, R.S.O. 1897, ch. 223 which enabled municipalities to pass by-laws for granting aid by way of bonus for the promotion of manufactures within the limits of the municipality, but which stipulated that "(e) no by-law shall be passed by a municipality for granting a bonus to secure the removal of an industry already established elsewhere in the province". The court concluded on the facts of that case that the town's actions in issuing debentures for the purpose of granting a manufacturer a bonus of $1 0,000 to relocate to the respondent municipality, contravened the section. 12 In Kendrick v. Nelson (City) (1997), 38 M.P.L.R. (2d) 175 (B.C.S.C.), the court interpreted section 292 of British Columbia's Municipal Act which is similar to section 106 of Ontario's Municipal Act. The British Columbia legislation does not speak of bonuses but instead prohibits municipal councils to "directly or indirectly assist ... a commercial undertaking" and in particular "... [they] shall
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not grant assistance by (a) giving or lending money ...". That case concerned a waterfront development project being carried out by the City of Nelson. The contractual arrangements between the City and the developer involved, among other things, the transfer of municipal land to the developer at a nominal value, no cost city services and subsidized construction services. Certain ratepayers alleged that these arrangements constituted the granting of "assistance" to a commercial undertaking, in contravention of the Municipal Act. In a learned and careful judgment McEwan J. examined the complex contractual arrangements concerning the project. He declined to assess the concept of assistance to the developer by viewing the contractual benefits to the developer in isolation from the overall obligations of the parties. On the evidence, the court was unable to identify the conferring of an obvious advantage on the developer unsupported by any concomitant obligation benefitting the City. The court characterized the contractual arrangements as "a complex exercise in allocating responsibilities within a co-ordinated approach to the overall waterfront development." McEwan J. stated at p. 195:  With respect to the construction services and "nominal" transfers of land, the Agreement's complicated matrix of covenants, viewed as a whole, do not clearly confer a benefit on Huber unsupported by any concomitant obligation benefitting the City. I think "assistance" within Section 292 of the Municipal Act implies the conferring of an obvious advantage. Where, as here, a municipality exercises its power to contract under S. 19 to effect purposes that are clearly within the realm of public policy, I do not think S. 292 is an available mechanism to obtain a review of the contract, weighing the tangible and inchoate benefits, to determine if the municipality has made a good deal or not. That is, in essence, what the petitioners are seeking. 13 In my opinion, the prohibition against the granting of bonuses in section 106 of the Ontario Municipal Act is the precise equivalent of the prohibition against assisting a commercial undertaking in the British Columbia legislation. I respectfully agree with the approach taken by McEwan J. of the British Columbia Supreme Court in concluding that "assistance" within the prohibition in section 292 of the British Columbia Municipal Act is to be interpreted restrictively in the sense of "conferring an obvious advantage". The prohibition against granting bonuses should be similarly restricted. To do otherwise would be to unduly restrict the public/private joint ventures that are of increasing importance in the establishment of municipal facilities and which often depend upon a complex exchange of benefits, assets and services to facilitate development. This approach was followed by the Ontario Municipal Board in approving a joint venture between the City of Waterloo and a developer that -involved the City providing lands at its cost for the construction of a parking garage as part of a downtown redevelopment. The City was alleged to be providing an unlawful bonus but the Board was unable to identify an obvious advantage to the developer. (See Uptown Community Improvement Plan: 2000 (2001), 20 M.P.L.R. (3d) 149.) 14 A restrictive interpretation of the bonus prohibition in section 106 of the Municipal Act is also consistent with recent appellate jurisprudence that has urged a "benevolent construction" or "broad and purposive" approach and "more generous interpretation of municipal powers" that have the objective of "showing deference to, and respect for the decisions of locally elected officials." It has been said that the purpose of creating the Municipal Act, 2001 "was to give municipalities the tools they need to tackle the challenges of governing in the 21st century ... including more authority, accountability and flexibility so that municipal government would be able to deliver services as they saw fit." (See Fourth Generation Realty Corp. and 914006 Ont. Ltd. v. Ottawa (City) (2005), 197 O.A.C. 389, at paras. 29-37 (Ont. C.A.).) 15 In examining the contract and the evidence of the parties it is apparent that the $115,000 payment made by the municipality to W3 is in essence a prepayment of a portion of the municipality's projected
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costs of using the network over the 5-year term of the arrangement. As to the purpose of the payment, the Mayor of the municipality said in a press release dated April 8,2004: "we provided seed money, which is refunded to the Municipality over a five year period, to W3 Connex, the organization who submitted the winning request for proposal." 16 A "Backgrounder" document from W3 Connex in April 2004 describes the funding arrangement as one whereby: "a significant component of the proposal was the return of the $115,000.00 investment from the municipality over a five year time period in the form of discounted services to the municipality for the operation of its accounting, payroll and communication systems". 17 In my opinion, the evidence before the court establishes that the parties intended the payments totalling $115,000 in the first two and one half months of the contract to be a general contribution to W3's costs in establishing and operating the network over the 5-year term of the contract. As noted, the purpose of the contract was to establish a telecommunications infrastructure in the community, but the payment itself could be used by W3 for any contract related purpose it might choose. I see no "complicated matrix of covenants" as existed in Kendrick v. Nelson (City), supra, which prevented the court from assessing the concomitant obligations of each party to determine if the municipality conferred "an obvious advantage" on the developer. In my view, the $115,000 payment in this case is an obvious advantage (and therefore a bonus within section 106 of the Municipal Act) in that it is a simple unqualified payment supported only by the developers' reciprocal obligation to reduce its charges to the municipality for its use of the network, in an approximately equal monetary amount, over the 5-year contract term. Municipal Capital Facility (Section 110 of the Municipal Act) 18 However, in my opinion, because the purpose of this contract was to establish a municipal capital facility, the matter is required to be dealt with under section 110 of the Municipal Act which was enacted in 1993 for the express purpose of dealing with that category of undertaking. Section 110 of the Municipal Act supersedes section 8 which empowers a municipality to contract as a natural person, section 106 which restricts that power in respect of granting bonuses and section 107 which permits municipalities to make grants. The well-established principle of statutory interpretation which applies in the circumstances is expressio unius est exclusio alterius. Because section 110 of the Municipal Act and Ontario Regulation 46/94, (amended O. Reg. 401/02) govern agreements such as this for the provision of municipal capital facilities, the other general enabling sections of the Municipal Act do not apply. Moreover, section 110 is expressly stated in section 110(3) to apply "despite section 106". 19 Section 110 of the Municipal Act provides: 110.(1) A municipality may enter into agreements for the provision of municipal capital facilities by any person, including another municipality. (2) An agreement may allow for the lease, operation or maintenance of the facilities and for the lease payments to be expressed and payable partly or wholly in one or more prescribed foreign currencies. Despite section 106, a municipality may provide financial or other assistance at less than fair market value or at no cost to any person who has entered into an agreement to provide facilities under this section and such assistance may include, (a) (b) (c) giving or lending money and charging interest; giving, lending, leasing or selling property; guaranteeing borrowing; and
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(d) (4) (5)
providing the services of employees of the municipality.
The assistance shall only be in respect of the provision, lease, operation or maintenance of the facilities that are the subject of the agreement. Upon the passing of a by-law permitting a municipality to enter into an agreement under this section, the clerk of the municipality shall give written notice of the by-law to the Minister of Education.
20 The term "municipal capital facilities" is defined in ant. Reg. 46/94, (amended O. Reg. 401102) which provides: Municipal and School Capital Facilities - Agreements and Tax Exemptions 1. In this Regulation,
"municipal capital facilities" and "school capital facilities" include land, as defined in the Assessment Act, works, equipment, machinery and related systems and infrastructures. 2. The council of a municipality may enter into an agreement under subsection 110(1) of the Act for the provision of the following classes of municipal capital facilities: Facilities used by the council. Facilities used for the general administration of the municipality.
Municipal local improvements and public utilities, except facilities for the generation of electricity. Municipal facilities related to the provision of telecommunications, transit and transportation systems.
Municipal facilities related to policing, fire-fighting and by-law enforcement.
Municipal facilities for public libraries. Municipal facilities that combine the facilities described in paragraphs 1 to 11.
21 I am satisfied that the contract in issue is for the provision of one or more of the classes of municipal capital facilities defined in the regulation. In particular, it provides for the provision of municipal facilities related to telecommunications and for facilities used for the general administration
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of the municipality. I see nothing in the section to support the applicant's argument that the subject matter of the contract is excluded from the defmition of municipal capital facilities in the regulation simply because the broadband network is to be available for the use of the community as a whole and not simply the municipal government. Roads, public utilities and transportation systems are all examples of capital facilities used for the general benefit of the community.
22 The municipality does not appear to have recognized the need for compliance with section 110 of the Municipal Act in reference to this project and to the contract. By-law 1195-2004, which authorized the municipality to enter into the contract does not refer to section 110 of the Municipal Act and instead refers to section 8 of the Act (which provides that the municipality has the capacity, rights, powers and privileges of a natural person). Moreover, written notice of the passing of the by-law was not given to the Minister as required by section 11 O( 5). Although not mentioned by counsel, another problem, in my view, is that the payment of $115,000 was in the nature of a general grant to the developer and was not restricted in its use (see questions 377 and 378, cross-examination of Mr. Shannon), contrary to the requirement of section 110(4) of the Municipal Act which provides: 110(4) The assistance shall only be in respect of the provision, lease, operation or maintenance of the facilities that are the subject of the agreement. 23 In summary, I find that the municipality, while pursuing a valid municipal purpose in good faith, has assisted in funding the provision of a municipal capital structure in technical non-compliance with section 110 of the Municipal Act. Standing 24 The municipality argues that the applicant KOS lacks standing to seek the claimed declaratory relief. Standing is normally a threshold issue requiring determination prior to an examination of the substantive merits of a claim. In this case, the issue of standing was argued together with the merits of the claim, by agreement of counsel. An examination of the nature and merits of this application is useful if not necessary to address the issue of standing. As McEwan J. stated in Kendrick v. Nelson (City), supra,  Thus, although "standing" is a "threshold" issue, it is sometimes necessary to embark upon a detailed consideration of the merits as a whole to determine the matter. Once that is necessary, public policy considerations militate against ruling on what Duff J. in Smith v. Ontario (Attorney General),  S.C.R. 331 termed a "disputed point of procedure." For that reason, as found by Rowles J.A. in Armstrong v. Langley (City), 69 B.C.L.R. (2d) 191, (supra) at p. 202: ... the courts retain a discretion to decide substantive issues that are fully argued, if the case is one of public importance: see P.I.P.S. v. Northwest Territories (Commissioner)  2 S.C.R. 367 at 400
even where there is no standing. 25 In determining whether to grant standing to the applicant, the court must, in exercising its discretion, consider whether the applicant has a sufficient interest in the subject matter of the dispute. In Hy & Zel's Inc. v. Ontario (Attorney General); Magder (Paul) Furs Ltd. v. Ontario (Attorney General),  3 S.C.R. 675 the Supreme Court of Canada, per Major J. at p. 690, set out the following test in the context of a Charter argument:
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... in order for the Court to grant standing in a civil case, where as in the present case, the party does not claim a breach of its own rights under the Charter but those of others (1) there must be a serious issue as to the Act's validity, (2) the appellants must be directly affected by the Act or have a genuine interest in its validity, and (3) there must be no other reasonable and effective way to bring the Act's validity before the court. 26 In this case, I do not think the applicant has demonstrated a proper basis to be accorded standing and accordingly I exercise my discretion against granting standing. In doing so, I rely on the following considerations collectively: (a) The applicant deliberately chose not to participate in the bidding process, which was conducted openly and fairly for a valid municipal purpose. In my view, this significantly lessens the weight to be given to the fact that the applicant is a competitor in the industry; The applicant stood by and omitted to challenge the municipal by-law which authorized the municipality to enter into the contract in question. Section 273 of the Municipal Act permits a ratepayer to apply to the Superior Court to quash a by-law, in whole or in part, within one year of passing the by-law; and The evidence does not establish a direct financial loss to the applicant arising from the impugned payment of$115,000 to the developer W3. The applicant complains of unfair competition from W3, but W3 is not a party to the application and it is purely speculative and doubtful as to whether the applicant's alleged competitive disadvantage has any connection with the payment in question.
Declaration 27 It has been observed that the granting of a declaration is discretionary relief and "is in the absolute jurisdiction of the Court" per Epstein J. in Rogers Cable TV Ltd. v. 373041 Ontario Ltd.,  0.1. No. 2033 at p. 18. I exercise my discretion against granting a declaration in this case for the following reasons, considered collectively: (a) A declaration of illegality pertaining to the contract in question has the potential to adversely and materially affect the rights of one of the contracting parties W3, who is not a party to this application; A declaration would not assist the applicant in the absence of an order with respect to the contract or repayment of the funds, which relief is unavailable when W3 is not before the court; The applicant has been denied standing; and By-law 1195-2004 and the contract of February 16,2004, was entered into by the municipality in good faith and for a valid municipal purpose, notwithstanding the contravention of section 110 of the Act.
Disposition 28 This application is dismissed. While the relief requested has not been granted, the applicant has established a technical breach of the Municipal Act. In the circumstances, success is divided and accordingly there will be no order as to costs.
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C.T. HACKLAND J. cp/e/qw/qlmxd/qlkjg
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2005 CarswellOnt 1939,254 D.L.R. (4th) 315,197 O.A.C. 389,11 M.P.L.R. (4th) 1, 139 AC.W.S. (3d) 573 Fourth Generation Realty Corp. v. Ottawa (City) FOURTH GENERATION REALTY CORPORATION and 914006 ONTARIO LIMITED (Applicants / Appellants) AND CITY OF OTTAWA (Respondent) Ontario Court of Appeal Simmons, Gillese, Laforme JJ.A Heard: March 2, 2005 Judgment: May 18,2005 Docket: CA C42201 © Thomson Reuters Canada Limited or its Licensors (excluding individual court documents). All rights reserved. Proceedings: affirming Fourth Generation Realty Corp. v. Ottawa (City) (2004), 50 M.P.L.R. (3d) 19, 2004 CarswellOnt 2769 (Ont. S.C.J.) Counsel: Phillip L. Sanford, Sarah Chesworth for Appellants Michael S. Rankin, Kim Melanson for Respondent Subject: Civil Practice and Procedure; Public; Tax - Miscellaneous Civil practice and procedure --- Judgments and orders Where question academic Declaratory judgments or orders Availability -
Provincial legislation required municipalities to place five per cent cap on tax increases on certain properties, but cap did not protect residential properties - Due to market value assessment, residential property owners were faced with average tax increases of 6.5 per cent, despite fact that city council voted to freeze taxes for year 2003 - Council enacted by-law to authorize payment of grant for 2003 only, to non-commercial homeowners who experienced increase in their property tax bill due to transfer of tax burden from industrial, commercial and multi-residential property classes to residential property class - Taxpayers who owned and leased office and industrial properties were concerned that municipality would pass similar by-law in future - Taxpayers applied pursuant to s. 273(1) of Municipal Act, 2001 for order that at time it was in effect, by-law was illegal- Application judge dismissed application on ground that issue was moot, but went on to determine matter in city's favour on merits - On issue of mootness, taxpayers sought order quashing by-law which passage of time had rendered obsolete - Because taxpayers did not seek compensation or reparation as consequence of by-law they claimed was illegal, there was no live issue between parties - Hearing application could significantly impact proper and effective allotment of judicial resources - Taxpayers appealed - Appeal was dismissed - City
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raised preliminary question as to whether appeal was moot - Matter had become academic, particularly in light of new regulation that changed taxation regime for 2004 - Resolution of matter on merits would have no practical effect on rights of parties - However, court's discretion should be exercised to determine substantive issue on merits in any event - Decision of application judge dismissing taxpayers' application on merits was af- firmed. Municipal law --- Attacks on by-laws Grounds Ultra vires Beyond power of municipality General
Provincial legislation required municipalities to place five percent cap on tax increases on certain properties, but cap did not protect residential properties - Due to market value assessment, residential property owners were faced with average tax increases of 6.5 percent despite fact that city council voted to freeze taxes for year 2003 - Council enacted by-law to authorize payment of grant for year 2003 only, to non-commercial homeowners who experienced increase in their property tax bill due to transfer of tax burden from industrial, commercial and multi-residential property classes to residential property class - Taxpayers who owned and leased office and industrial properties were concerned that municipality would pass similar by-law in future and applied pursuant to s. 273(1) of Municipal Act, 2001 for order quashing by-law on grounds of illegality - Application judge dismissed application on ground that by-law was not illegal - Given wide scope of interpretation that jurisprudence and s. 10 of Interpretation Act suggested should be given, general powers conferred on municipality under Municipal Act, 2001 were sufficient to give city required jurisdiction - Taxpayers appealed - Appeal was dismissed - Matter was moot, but discretion of court should be exercised to decide matter on merits - Given wide scope of s. 107(1) of Municipal Act, it was clear that city had power to pass by-law in question - Nor did by-law conflict with provincial tax legislation - City fully followed all assessment and collection processes required by provincial legislation - Then, through valid exercise of its grant-giving power, city ameliorated part of difficult consequences created, in part, by provincial regime - Compliance with by-law did not amount to defiance of provincial legislation - Money given to residential taxpayers were grant and not tax rebate - Nor was by-law passed for improper purpose of circumventing provincial legislation - Rather, city took reasonable steps to deal with unexpected and difficult situation. Cases considered by Gillese J.A.:
Borowski v. Canada (Attorney General) (1989),  3 W.W.R. 97,  I S.C.R. 342, 57 D.L.R. (4th) 231,92 N.R. 110,75 Sask. R. 82,47 C.C.C. (3d) 1,33 C.P.C. (2d) 105,38 C.R.R. 232,1989 CarswellSask 241, 1989 CarswellSask 465 (S.C.C.) - followed Colony Farm Holdings Ltd. v. British Columbia Racing Commission S.C. [In Chambers]) - considered (1991), 1991 CarswellBC 1386 (B.C.
Goldlist Properties Inc. v. Toronto (City) (2003), 232 D.L.R. (4th) 298, (sub nom. Toronto (City) v. Goldlist Properties Inc.) 178 O.A.C. 11, (sub nom. Toronto (City) v. Goldlist Properties Inc.) 44 M.P .L.R. (3d) 1, 46 O.M.B.R. 1,2003 CarswellOnt 3965, 67 O.R. (3d) 441 (Ont. c.A.) - referred to Multiple Access Ltd. v. McCutcheon (1982),  2 S.C.R. 161, 138 D.L.R. (3d) 1,44 N.R. 181, 18 B.L.R. 138, 1982 CarswellOnt 128, 1982 CarswellOnt 738 (S.C.C.) - followed Shell Canada Products Ltd. v. Vancouver (City) (1994), 20 M.P.L.R. (2d) 1,  3 W.W.R. 609, 20 Admin. L.R. (2d) 202, 110 D.L.R. (4th) 1, 88 B.C.L.R. (2d) 145,  1 S.C.R. 231, 163 N.R. 81, 41 B.C.A.C. 81,66 W.A.C. 81, 1994 CarswellBC 115, 1994 CarswellBC 1234 (S.C.C.) - considered
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114957 Canada Ltee (Spray-Tech, Societe d'arrosage) v. Hudson (Ville) (2001), 2001 scc 40, 2001 CarswellQue 1268, 2001 CarswellQue 1269, (sub nom. 114957 Canada Ltee (Spray tech, Societe d'arrosage) v. Hudson (Town)) 19 M.P.L.R. (3d) 1, 200 D.L.R. (4th) 419, 271 N.R 201,40 C.E.L.R. (N.S.) 1, (sub nom. 114957 Canada Ltee (Spray tech, Societe d'arrosage) v. Hudson (Town))  2 S.C.R. 241 (S.C.C.) - followed
Assessment Act, RS.O. 1990, c. A.31
Generally - referred to
Municipal Act, 2001, S.O. 2001, c. 25
Generally - considered Pt. VIII-X - referred to s. 107 - referred to s. 107(1) - considered ss. 357-365 - referred to Words and phrases considered grant ... the distinction to be drawn between a grant and a rebate is this. The essence of a grant is the giving of a benefit, including money, from a fund. The word "rebate", on the other hand, refers to the return of a portion of money actually paid. APPEAL from judgment reported at Fourth Generation Realty Corp. v. Ottawa (City) (2004),  0.1. No. 2894, 2004 CarswellOnt 2769 (Ont. S.C.J.), dismissing taxpayers' application for declaration that city by-law was ultra vires.
1 The City of Ottawa passed a by-law that granted tax relief to residential property owners facing large tax increases in 2003. A group of commercial property owners applied to have the by-law declared ultra vires on the basis that the by-law defeated a provincially legislated tax scheme that stipulated set tax ratios as between residential and commercial property owners. 2 In a judgment dated July 6, 2004, Valin J. found the by-law valid and dismissed the application. The commercial property owners appeal. 3 For the reasons that follow, I would dismiss the appeal. Background
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4 In 1997 and 1998, the Ontario provincial government enacted legislation that changed the property assessment and taxation system in Ontario. The relevant provisions are contained in Parts VIII to X of the Municipal Act, 2001, S.O. 2001, c. 25 and the Assessment Act, R.S.O. 1990, c. A.31 ("the provincia11egis1ation"). 5 The provincial legislation made municipal councils subject to new restrictions in relation to the taxation of property. The restrictions were imposed by means of tax ratios that created upper limits on the tax rates for various property classes. In addition, the provincial legislation stipulated that, beginning in 2001, property tax increases on individual commercial, industrial, and multi-residential properties were limited to 5% of the previous year's taxes. The 5% cap did not apply to residential property. 6 One of the significant changes made by the provincial legislation was to provide for shifts in taxation between property tax classes. Prior to the enactment of the provincial legislation, reassessment occurred within classes, not between classes. 7 The purpose of the provincial legislation was to ease the tax burden on commercial property owners. It had the effect of making residential property owners assume a greater share of the municipal tax burden. 8 In early 2003, the Ottawa City Council adopted its annual budget. The budget contained no increase in expenditures over the prior year. Property taxes were effectively frozen at 2002 levels. 9 However, residential property values in the municipality had substantially increased between June 30, 1999, and June 30, 2001. Because property taxes for 2003 were based upon assessments as at June 30, 2001, it became apparent that most residential property owners would be required to pay substantially increased property taxes for 2003. 10 A report by city staff dated April 24, 2003, confirmed this. City Council was informed that the increase in residential property values, in combination with the provincially legislated tax ratios, meant that residential property owners would experience an increase in taxes in excess of $23 million, while the property classes whose taxes had been capped would experience a corresponding decrease. The average tax increase for a homeowner was expected to be 6.5%. 11 When the general public learned of the situation, there was a "tax revolt" by residential property owners. adopted, by resolution, a grant program funded by the reduced expenditures to provide relief for noncommercial homeowners affected by the tax increase.
In response, Council re-opened budget discussions. It cut municipal expenditures by more than $20 million and
12 On June 11, 2003, in order to implement the resolution, Council enacted By-law 2003-280. By-law 2003-280 authorized payment of grants for the year 2003 to non-commercial property owners who experienced an increase in their 2003 property taxes. The by-law stipulated that the amount of any grant would be limited to the lesser of either the 2003 tax change due to the reassessment of property values or 6.5% of the homeowner's 2002 taxes. It applied only to the taxation year 2003. 13 Tax bills were sent out in accordance with the legislated tax ratios. Monies were collected accordingly and the grant scheme was administered. 14 Ottawa's mayor continued to press the provincial government to make changes to the provincial legislation, which he said was unfair to residential property owners. The province then passed a regulation that gave
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municipalities the ability to avoid tax shifts from businesses to residential property holders. 15 Fourth Generation Realty Corporation and 914006 Ontario Ltd., a group of commercial property owners in the City of Ottawa ("the applicants"), brought an application for an order quashing By-law 2003-280 on the grounds that the by-law was ultra vires. 16 The application was dismissed. 17 The applicants appeal saying that the application judge erred in failing to find that the Ottawa City Council exceeded its jurisdiction in enacting the by-law. Issues 18 The central question raised by this appeal is whether By-law 2003-280 is valid. In deciding this question, it is necessary to consider the scope of the powers conferred on the City by the Municipal Act, 2001, whether the by-law is in conflict with the provincial legislation, whether the distributed funds are more properly characterized as grants or rebates, and the purpose of the by-law. 19 The City raises, as a preliminary question, whether the appeal is moot. Mootness 20 Mootness was not raised by the parties in the proceedings below. The application judge raised it after hearing submissions in which the applicants informed the court that if successful, they would seek only a declaration that the by-law was illegal. 21 After receiving brief submissions on mootness, the application judge reviewed the applicable legal principles and concluded that there was no live issue between the parties.: He noted that the passage of time had rendered the by-law obsolete and that the applicants did not seek damages or an order requiring the City to collect the grants they say were illegally paid out. In those circumstances, he was of the view that the matter was academic, particularly in light of the new regulation that changed the taxation regime for 2004. The application judge also noted that it was hypothetical to consider the validity of possible future by-laws that might be similar in nature, as the applicants had asked him to do. 22 Despite concluding that the matter was academic, the application judge chose to exercise his discretion and decide the matter. He stated that, in the absence of full submissions on mootness and in light of having fully heard the application on its merits, it was "in the best interests of all concerned" that he rule on the merits. 23 I agree with the application judge, and for the reasons he gave, that the matter has become academic. As the Supreme Court of Canada stated in Borowski v. Canada (Attorney General)',  1 S.C.R. 342 (S.C.C.), at 353, a court may decline to hear a case on the basis of mootness where the case raises a hypothetical issue and a decision by the court would not have the effect of resolving some controversy that affects the rights of the parties. In the case at hand, the by-law'S force is exhausted, as it applied only to the 2003 tax year. And, the applicants seek only a declaration of the by-law'S validity. Therefore, in my view, the resolution of this matter will have no practical effect on the rights of the parties. 24 However, like the application judge, I would exercise my discretion and decide the matter. There have been no changes to the factual context or the governing legal principles since the matter was decided below. The
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City opposed the notion of mootness before the application judge and obtained a favourable result on the application; it does not now lie in the mouth of the City to argue that the appeal ought not to be decided on its merits. The Validity of By-Law 2003-280 25 The applicants attack the validity of the by-law on a number of grounds. First, they argue that the City was not entitled to use its general powers to pass a by-law that defeated the specific, mandatory tax regime created by the provincial legislation. In a closely related argument, the applicants argue that the by-law is invalid because it conflicts with the provincial legislation. The applicants' third argument is that the by-law authorized the giving of rebates, not grants, and s. 107(1) of the Municipal Act, 2001 does not authorize the City to give rebates. Finally, the applicants submit that even if the by-law did authorize the giving of grants, s. 107(1) was used for the improper purpose of evading the provincial legislation and the by-law is invalid for that reason. 26 As the following analysis explains, I do not accept these arguments. valid and the City acted within its powers in passing it. Did the City Have the Power to Pass the By-law? 27 The City relied on s. 107(1) of the Municipal Act, 2001, when it passed By-law 2003-280. reads as follows: Section 107(1) In my view, By-law 2003 - 280 is
107.( 1) Despite any provision of this or any other Act relating to the giving of grants or aid by a municipality, subject to section 106, a municipality may make grants, on such terms as to security and otherwise as the council considers appropriate, to any person, group or body, including a fund, within or outside the boundaries of the municipality for any purpose that council considers to be in the interests of the municipality [emphasis added]. 28 The applicants submit that the City was not entitled to use s. 107(1) to enact the by-law, which they say is incompatible with the provincial legislation. 29 In addressing this submissions, the application judge began by noting that traditionally, the courts adopted a strict approach to interpreting municipal powers. He observed that, as a result of the downloading of services on municipalities by the federal and provincial governments, modem municipalities have greatly enhanced functions, obligations and responsibilities. The application judge then considered the applicable jurisprudence from the Supreme Court of Canada, which has mandated a new approach to the interpretation of a municipality's powers. He summarized that approach, saying, "[T]he Supreme Court of Canada has made it abundantly clear that courts must adopt a deferential approach to municipal governments and apply a liberal and benevolent interpretation of their powers." He concluded that the City had the authority to pass the by-law pursuant to s. 107(1) of the Act. 30 In my view, the application judge correctly decided this issue. 31 The Municipal Act, 2001 gives municipalities broad authority over generally defined matters. It is meant to provide municipalities with a broader, more flexible framework within which to work. The language of s. 107(1) of the Municipal Act, 2001 itself is very broad, giving the City the power to make grants "for any purpose that council considers to be in the interests of the municipality." 32 In 114957 Canada Ltee (Spray-Tech, Societe d'arrosage) v. Hudson (Ville),  2 S.C.R. 241
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(S.C.C.), the Supreme Court of Canada held valid a municipal by-law that was allegedly in conflict with provincial legislation. The Court affirmed the test for determining whether an enactment was passed "for a municipal purpose" given by Sopinka J. in Shell Canada Products Ltd. v. Vancouver (City),  1 S.C.R. 231 (S.C.C.), quoting from I. M. Rogers, The Law of Canadian Municipal Corporations, 2nd ed. (Toronto: Carswell, 1971): The provision at hand should be construed with reference to the object of the municipality: to render services to a group of persons in a locality with a view to advancing their health, welfare, safety and good government. 33 In other words, for the provision to meet the test, it must have a reasonable ality's permissible objectives. connection with the municip-
34 The stated purpose of By-law 2003-280, as captured in its preamble, was to provide grants to noncommercial homeowners who faced unexpected and significant property tax increases in 2003. It can scarcely be contested that - in the language of s. 107(1) - counsel considered such a purpose to be "in the interests of the municipality." The City was facing a tax revolt. It needed to deal fairly, effectively and quickly with an explosive situation that had been created, in large measure, by forces beyond its control. 35 For the same reason, the by-law also meets the test enunciated connected to the municipal objective of advancing "good government". in Hudson as, in my view, the by-law is
36 Hudson re-affirms that, in light of the changing role and responsibilities of municipalities, by-laws passed for a legitimate municipal purpose are to be reviewed deferentially. Municipal powers should be accorded a liberal and benevolent interpretation and only in the clearest of cases should a municipal by-law be held to be ultra vires. See also Goldlist Properties Inc. v. Toronto (City) (2003), 67 O.R. (3d) 441 (Ont. C.A.) at para. 57.
37 This broad and purposive approach is in keeping with the greater role that municipal governments play in the everyday lives of citizens. As the Supreme Court explained in Hudson, at para. 3, municipal governments are closest to the members of the public that they serve and thus are "most responsive to their needs, to local distinctiveness, and to population diversity." 38 Given the wide scope of s. 107(1) and the appropriate clear that the City had the power to pass By-law 2003-280. Does the By-law Conflict with the Provincial Legislation? 39 The applicants also argue that the by-law is invalid because it conflicts with the provincial legislation. 40 It is trite law that different levels of government Court of Canada stated at para. 39 of Hudson: may regulate the same subject matter. As the Supreme approach to its interpretation, in my view, it is
As a general principle, the mere existence of provincial (or federal) legislation in a given field does not oust municipal prerogatives to regulate the subject matter. 41 Consequently, there can be no objection per se to the municipality passing a by-law in respect of property taxes. The question is whether the by-law conflicts with the provincial legislation.
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42 The test to determine whether two laws conflict is the "impossibility of dual compliance" test established in MUltiple Access Ltd. v. McCutcheon,  2 S.C.R. 161 (S.C.C.). At p. 191 of McCutcheon, Dickson J. (as he then was) wrote:
In principle, there would seem to be no good reasons to speak of paramountcy and preclusion except where there is actual conflict in operation as where one enactment says "yes" and the other says "no"; "the same citizens are being told to do inconsistent things"; compliance with one is defiance of the other.
43 The Supreme Court of Canada affirmed the impossibility of dual compliance test in Hudson, supra, and its applicability to an alleged conflict between provincial and municipal laws. In Hudson at para. 41, the Supreme Court reiterates that it is only in cases of actual conflict that the inferior legislation is invalid: A potential inconsistency is not sufficient to invalidate a by-law; there must be a real conflict. 44 Thus, the question is whether By-law 2003-280 actually conflicts with the provincial legislation or whether both laws may apply simultaneously. 45 The application judge found that the City complied with the provincial legislation. Far from ignoring the provincial taxation regime, the City fully followed all assessment and collection processes required by it. Then, through the valid exercise of its grant-giving power, the City ameliorated part of the unexpected and difficult consequences created, in part, by that regime. 46 By-law 2003-280 did not change or displace the taxation regime created by the provincial legislation. It did not result in Ottawa citizens being told to do inconsistent things. Ottawa properties were assessed in accordance with the provincial legislation and Ottawa citizens were instructed to pay in accordance with that assessment. They were then at liberty to apply for a municipal grant. Compliance with the by-law did not amount to defiance of the provincial legislation. 47 Accordingly, in my view, it cannot be said that there is a conflict between the by-law and the provincial legislation.
Grant or Rebate?
48 The applicants contend that By-law 2003-280 enabled the City to return a portion of residential taxpayers' payments and, in so doing, the City made tax rebates, rather than grants. As the tax rebate authorized by the by-law were not among those expressly provided for by the Municipal Act, 2001, so the argument runs, the bylaw is invalid. 49 In my view, there is no merit to this argument. The Municipal Act, 2001 has a number of provisions that empower a municipality to cancel, refund or reduce taxes, or to make rebates. See sections 357-365 of the Act. The legislation does not limit tax relief to that provided for in those sections. Nor does the legislation restrict the right of municipalities to make grants under s. 107(1). 50 In that context, it follows that there is nothing improper in the City making such grants even if the grants are akin, in effect, to a tax rebate. Having said that, I am of the view that the proper characterization of the City's actions in giving money pursuant to the by-law is that of a grant, rather than a rebate. I base that conclusion on the following reasons.
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51 The Municipal Act, 2001 offers no assistance as to the meaning of the words "grant" and "rebate". Despite providing for both grants and rebates, neither term is defined in the Act.
Holdings Ltd. v. British Columbia Racing Commission,
52 Nor is there jurisprudence that assists in distinguishing grants from rebates. Indeed, in Colony Farm  B.C.J. No. 2837 (B.C. S.C. [In Chambers]), the application judge speaks of a grant as taking the form of a rebate. In the third paragraph of the reasons, he states: What is at stake is an incentive grant by the government to a developer for the construction of a new racetrack to replace Exhibition Park when its lease at Hastings Park in Vancouver expires on December 31, 1993. The grant takes the form of a 10-year rebate of a substantial portion of the revenue collected pursuant to the Horse Racing Tax Act, R.S.B.C. 1979, c. 175 [emphasis added].
53 "Grant" is defined in Black's Law Dictionary, 6th ed., (1990) at p. 699 as: To bestow; to confer upon some one other than the person or entity which makes the grant. To bestow or confer with or without compensation ... as of land or money. 54 "Rebate" is defined at p. 1266 as: Discount; deduction or refund of money in consideration of prompt payment....A deduction or drawback from a stipulated payment, charge, or rate...not taken out in advance of payment, but handed back to the payer after has paid the full stipulated sum. Tax rebate is an amount retumed ...to the taxpayer after he has made full payment of the tax. 55 Based on these definitions, in my view, the distinction to be drawn between a grant and a rebate is this. The essence of a grant is the giving of a benefit, including money, from a fund. The word "rebate", on the other hand, refers to the return of a portion of money actually paid. In certain circumstances, a rebate can be subsumed within the concept of a grant. In this case, a rebate would involve the return of part of the property taxes actually paid by an individual. 56 By-law 2003-280 enabled the City to provide non-commercial property owners with a one-time payment from a fund created from monies garnered by a reduction in municipal expenditures. Residential taxpayers had to pay the full amount of their tax assessments before applying for tax relief pursuant to the by-law. The money given to any individual taxpayer did not come from his or her tax payment; it came from the fund. Based on the foregoing notion of the meaning of the words "grant" and "rebate", in my view, the money given to residential taxpayers pursuant to the by-law was a grant.
Was the By-law Passed for an Improper Purpose?
57 The applicants submit that the by-law ought to be declared invalid because its real purpose was to cumvent the provincial legislation. In my view, there is nothing in the record to support such an inference.
58 The express language of the by-law does not bear such an interpretation. Its purpose, as reflected in its preamble, was to offer one-time-only relief to taxpayers who faced unexpected, large tax increases. The preamble recites: WHEREAS there has been a shift in the property tax burden from the commercial, industrial and multi-
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residential property classes to the residential property class; AND WHEREAS non-commercial homeowners in the residential property class are facing significant increases in their property tax bills for 2003 due to this transfer of the tax burden; AND WHEREAS Section 107 of the Municipal Act 2001, S.O. 2001, c.25, as amended, permits a municipality to give grants to any person or body for any purpose council considers to be in the interests of the municipality; AND WHEREAS Council has determined that it is in the interest of the municipality to establish a grant program to provide a grant to certain non-commercial homeowners facing significant tax increases. 59 And, the actions of the City do not support the view that the by-law was passed for an improper purpose. The application judge found that the City complied "in every respect" with the assessment and taxation regime established by the provincial legislation. Rather than attempting to evade its duties under the provincial legislation, as the applicants suggest, the City appears to have done everything that was required of it. 60 The City, acting within its powers, took reasonable steps to deal with an unexpected and difficult situation. In the circumstances, and on this record, there is nothing to support a fmding that the by-law was enacted for the improper purpose of circumventing the provincial legislation. Disposition 61 Accordingly, I would dismiss the appeal with costs to the respondent fixed at $15,000, inclusive of disbursements and GST.
END OF DOCUMENT
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