Ontario Superior Court of Justice, Divisional Court

Court File No. 314/03

Date: 2003-08-27

Lane, Meehan and Linhares de Sousa JJ.A.

Counsel:

Andrew J. Roman and Margaret R. Sims, for applicant, St. Catharines Association for Community Living (SCACL).

John Zarudny and James Kendik, for respondent, The Queen in right of Ontario.

No one appearing for applicants, Heidi Byl, Litigation Guardian of Corey Byl, William F. Vaughn, Litigation Guardian of Brent Vaughn, and Community Living Ontario.

The judgment of the court was delivered by

Meehan J.:—

Nature of the Proceedings

1This is an application for judicial review of a decision of the Ministry of Community, Family and Children's Services ("Ministry") made February 19, 2003. The Ministry terminated the funding of the St. Catharines Association for Community Living ("SCACL") and directed another agency in Niagara Falls to "takeover" SCACL's programs and real and personal property.

2The Applicant SCACL asks the Court for an Order setting aside the Ministry's decision or alternatively, for a declaration that the decision was made without jurisdiction. The Applicant SCACL also seeks an order requiring the Ministry to restore SCACL's funding effective immediately as well as an order prohibiting the Ministry from interfering with or purporting to authorize or instruct any third party to use and occupy SCACL's real or personal property. The Applicant SCACL also requests an order that the court will retain jurisdiction for 60 days should further ancillary orders be required.

Background

3SCACL is an Association for Community Living (ACL) situated in Ontario. It is a non-profit, registered charity with over 300 employees providing services to 500 developmentally disabled people and their families in and around the City of St. Catharines. The Agency has an annual operating budget of $9.7 million, most of which comes from the Ministry. It provides a broad range of services to the intellectually disabled population.

4These people have a broad range of disabilities that arise from developmental and neurological conditions like Down's syndrome, autism, cerebral palsy, fetal alcohol syndrome, fetal alcohol affect, seizure disorders, behaviour disorders and more. These disabilities are generally permanent and require long-term stable support.

5SCACL has a staff made up of an executive director and two managers, 49 non-union staff and 184 unionized staff represented by CUPE (Canadian Union of Public Employees). In addition, it employs 71 contract workers.

6The services offered by SCACL are vital in the lives of intellectually disabled people and their families. The residents of group homes tend to live in them for many years, if not for most of their lives.

7SCACL is the fifth-largest agency of its type in the province. It has acquired significant assets, including 14 group homes, three independent living homes, an administration building, program buildings and vehicles. It owns 20 real properties worth approximately $3,973,000, as well as a fleet of approximately 20 vehicles.

8SCACL's operation was funded by the Ministry under the Developmental Services Act, R.S.O. 1990, c. D.11 (DSA), and since 1999 was partially covered by a rather skeletal written agreement. The Agreement does not have a fixed term and it was understood by the parties to be of indefinite duration, in accordance with an approved budget, unless terminated by either party. The Agreement does not specify any grounds for termination. There was, however, a 60-day notice period for termination.

9The Applicant SCACL maintains that the decision in this case to terminate funding to an agency without notice and without any clearly specified reason is unprecedented in Ontario.

10The Applicant SCACL speculates that the funding was cancelled because of a series of "serious occurrences" which are required to be reported to the Ministry within 24 hours. These serious occurrences range from death from natural causes to injuries caused by falls, bathtub scaldings, accidental deaths for a variety of reasons and so on.

11The Ministry apparently criticized SCACL in relation to one or more of three serious occurrences that occurred in recent years. Those three occurrences were:

(a) A drowning death: A resident died in the bath on April 16th, 2000. No fault was attributed to SCACL and there was a coroner's investigation.

(b) Scalding Death — 2002: A resident died after being scalded in the bath while staying at a hotel during renovations. SCACL terminated the employee involved immediately and dismissed his supervisor. The employee was subsequently charged with criminal negligence.

(c) Broken Leg Incident: On February 5, 2003, a group home resident fell and broke his leg. It is the position of SCACL that there was no negligence on the part of SCACL.

12Following the serious occurrence in regard to the scalding death, SCACL undertook a full-scale review and internal audit. It asked other ACLs to participate in the review.

13As well, there was a Ministry review as set out in a letter from Robert Bingham, Program Supervisor, Hamilton/Niagara Regional Office, to the Chairperson of the Board enclosing "the results of a review conducted at the agency by Linda Stumpf, Program Assistant. This was initiated as a follow-up to the Agency Review commissioned and completed on November 30th, 2000, after the accidental death of an individual being supported by your agency". He indicated:

I am pleased to advise your Board the findings of the report suggest that St. Catharines Association for Community Living has implemented many of the recommendations from the Agency Review of November 2000.

There will be another review conducted at your organization next year. Upon completion of this review, the Hamilton/Niagara Regional Office will evaluate the results and decide, based on the findings, whether or not to continue increased monitoring of your agency.

He requested a meeting with the Board to discuss the first report and thanked the agency for its co-operation with this phase of the process.

14At p. 8 of Ms. Stumpf's report, it indicates:

The agency Policy and Procedures Manual appears to be very thorough. However, in the case of the Behavioural Management section, it may be too thorough. The policy is 40 pages long and it is not until page 23 that a statement appears that speaks to under which circumstances restraints are allowed.

Recommendation: The Behavioural Management Policy made much more "user friendly".

15On January 21, 2003, at a meeting between SCACL Board and the Ministry, Mr. McCarthy, the Ministry's Regional Director, requested a "further action plan" in addition to the one already implemented by SCACL and asked SCACL to consult with further appropriate agencies within 30 days. Mr. McCarthy also stated: "Wait until the other shoe falls."

16There was, as well, a letter dated January 24, 2003 to Terry McCarthy from Nancy Stone, Vice-President, indicating that there had been a Ministry External Review, a Quality Enhancement Committee, Mandatory Training is in place, Operating Policy Review, Orientation Process, Supervision Standards, Supervisor Training, Hiring Practices, Annual Summary Report, Satisfaction Surveys completed by people receiving service, families, and employees on an annual basis. She then went on to outline in writing:

. . . what you will be expecting from us on February 18th, so that we will be better prepared to meet your objectives.

As well we would like to ask if you can offer any other specific suggestions or people or agencies, we should be in touch with in order to assure you and the Ministry that we are showing due diligence and are very capable of governing our organization.

17Mr. McCarthy responded on February 6, 2003 with a letter indicating a serious credibility issue to address. He required assurances that such tragedies cannot and will not be repeated. He indicated: "While the Board's actions to-date have not been sufficient, I do look forward to working with you to ensure that end." In any case, it developed a further action plan and presented it to Mr. McCarthy at a meeting on February 18, 2003.

18Keith Powell, the Executive Director of Community Living for Ontario (CLO), filed an Affidavit. His organization is the umbrella organization which represents all of the agencies called "Associations for Community Living in Ontario".

19His evidence was that SCACL is well-respected and that Maureen Brown, the Executive Director is held in high regard by CLO and her colleagues across the province. His evidence was that the Ministry favoured something other than Boards which have large numbers of concerned parents as members of the Board.

20Niagara Support Services (NSS), the association put in charge by the decision of the Ministry, currently has a Board with minimal parent representation.

21The Affidavit of Maureen Brown, the Executive Director of SCACL, outlines the organization, including the fact that, of a 14-member Board, six are parents of children who receive services provided by the organization.

22There were, as well, two self-advocate members on the Board. Those members are all elected by members of the Association on an annual basis.

23Maureen Brown testified that SCACL had been successful in raising millions of dollars through its own initiative, separate and apart, from Government funding. She, too, dealt with the matter of "serious occurrences" and indicated that there was a 24-hour notice requirement to the Ministry.

24The definition of "serious occurrences" is not limited to injury or death where there has been some kind of negligent conduct. The most common serious occurrence resulting in death is death by natural causes.

25According to her evidence, the relationship between SCACL and other agencies in Niagara, and the Regional Director, Mr. McCarthy, deteriorated in the late 1990s when he insisted on creating Contact Niagara, a new central agency dealing with placement. All of the agencies, but one, Niagara Support Services, were strongly opposed to the creation of that. She testified that she had heard Mr. McCarthy say on numerous occasions with seriousness: "I don't get mad. I get even." She went on to deal with the various occurrences, including one resulting in death by natural causes, and indicated, particularly in regard to the scalding death, that there was a review commenced and an internal audit. As well, SCACL requested other ACLs to participate in its review of this tragic occurrence which devastated the Association.

26At a November 21 Board meeting, Mr. McCarthy mentioned for the first time he was concerned about the death of the person scalded and he directed SCACL to develop something he called a "plan of action". He did not ask SCACL what action it already taken. At the conclusion of his presentation, he told the Board that if they thought he was being difficult then"the Board should wait until the other shoe falls".

27Mr. McCarthy was advised about the significant steps that were already taken about the committee and the work it had done and explained their internal and external review process. The Executive Director and the Board were uncertain as to exactly what it was that he wanted. As a result, they wrote a letter to him on January 24, 2003 outlining what had been done and asking Mr. McCarthy to kindly outline in writing what he expected so they would be better prepared to meet his objectives. They received no response to this letter with anything specific.

28She then indicated that, on February 5, someone fell and broke his leg, and a serious occurrence report was filed.

29Mr. McCarthy attended SCACL's meeting on February 18, 2003 and accused SCACL of failing to file the necessary serious occurrence report in regard to the broken leg. There was a dispute between the Executive Director and Mr. McCarthy when the Executive Director advised him that it had been faxed to his office within the 24-hour period.

30SCACL provided him with documentary proof that it had been faxed to him within the 24-hour period. One of the Board of Directors asked him to apologize to the Executive Director about this false allegation and he refused.

31Before the Board meeting on February 18th, SCACL learned that a person had died, apparently in her sleep. Once it was able to ascertain that this individual had died of natural causes, they completed a "serious occurrence report" and delivered it to the Ministry within the 24-hour period.

32Mr. McCarthy requested a meeting with the Board of Directors at 6 p.m. on February 19th, 2003. He then changed the time to 5 p.m. He arrived at 5:20 p.m. and delivered the two letters referenced above, indicating the immediate termination of the Agreement. He informed them that a press release had already been issued at 5 p.m. and the story was broadcast on the 6 o'clock news. A copy of the press release was attached to the material and marked as Exhibit "I".

33Her affidavit material indicates that at some time, on or before February 19, 2003, the Ministry designated Niagara Support Services to take over and manage the operation of SCACL. This caused a great deal of anxiety on the part of staff, families and other ACLs. Niagara was the only one of the seven local agencies to vote in favour of the plan to centralize admissions as proposed by the Ministry.

34An emergency Board meeting was held on Monday, February 24, 2003 after conversations between their officials and Mr. McCarthy and they later had a meeting with other Ministry officials.

35Apparently, at a later meeting, between officials of SCACL and officials of the Ministry, Mr. McCarthy once again brought up a serious occurrence of the man who broke his leg indicating he had heard about it from the television news. Once again, this was contrary to the documentation already presented to him that the facsimile had been sent to his office in a timely manner.

36Maureen Brown's Affidavit indicates that the Agency had cooperated with the Ministry pending consultations and a later court action so its clients would not be adversely affected. Exhibit "J" to her Affidavit was a letter from the Vice-Chair asking Mr. McCarthy to provide written assurance that funds would be forwarded to meet their financial obligations. There was, as well, a further letter from McCarthy dated February 25th, 2003 purporting to have Niagara Support Services assume control February 21st as a result of the meeting on February 21st. In response to that, a further letter of February 26th was directed by Mrs. Stone, the Vice-Chair, to Mr. McCarthy taking issue with the facts as set out in his letter and specifically noting it was not at their meeting of February 21st that Niagara Support Services assumed operational control but rather it was as they were advised by his letter of February 19th.

37The letter of February 19th, 2003, signed by Mr. McCarthy, is attached to her material and it is also an exhibit. It indicated:

The Ministry is taking this action due to its loss of confidence in the ability of the St. Catharines Association for Community Living to ensure the health and safety of vulnerable clients.

It went on to say:

The Ministry will immediately enter into a service contract with Niagara Support Services to assume the responsibility for all Ministry-funded programs and services currently operated by the St. Catharines Association for Community Living.

38The second letter given to them the same day also signed by Mr. McCarthy is outlined as follows:

Effective immediately, the agency has no discretion over the disposal of fixed or moveable assets and the issuance of any severance payments to staff without prior written approval of the Program Supervisor, Robert Bingham.

An Auditor will be appointed by the Ministry to review the holdings, other assets and liabilities and determine the appropriate interest of the agency and the Ministry.

After this, effectively, Niagara Support Services was in control of all the assets of the Applicant SCACL.

39The Ministry filed an affidavit by one Richard Beauchamp, who outlined the duties of the Hamilton Niagara Regional Office, in which he was apparently a manager. He outlined the nature of the service contracts and attached a more complete contract. He, as well, filed an old legal agreement with SCACL, apparently in 1989. It was expressed to be under the Developmental Services Act, s. 2(2).

40At para. 9 of Mr. Beauchamp's Affidavit, he indicates that the decision was based on SCACL's management of these serious occurrences and the Ministry's loss of confidence in their ability to respond appropriately in the future in relation to matters of safety with respect to a very vulnerable client group.

41He indicated in his Affidavit, para. 11, that the Ministry had engaged an independent auditor to establish the Ministry's interests in capital assets held by SCACL. The review had not been completed but "it is clear the Ministry has substantial interest in a number of these properties".

42Exhibit "M" to the Affidavit of Maureen Brown was a letter directed to the head of the CUPE union who represented their unionized workers setting forth the circumstances of the termination on February 19th, the turmoil which had been caused and the fact that they had granted Niagara Support Services access to its property so that continued service would be provided and that decision should not be construed as any consent to a transition process or a waiver of its legal rights.

43A similar letter was sent to the non-union staff indicating that it is SCACL's intention and desire, through litigation, to resume control of its operations.

44There was evidence by Wendy Larman, a Chartered Accountant, who served as auditor of the St. Catharines Association for Community Living from March 31, 1990 to March 31, 2002 and consulted for them for the year ending March 31, 2003. She gave as evidence that SCACL has operated in a professional and well-organized manner; that they had total revenues of over $9 million for the fiscal year ending March 31, 2002; that all of the 20 properties owned by SCACL were acquired during the period that she had been auditor; that all documentation examined by her indicated title resided solely in SCACL; those properties have been financed by community funds, sales of properties donated or owned by SCACL prior to 1990, bequests, cash reserves of SCACL and mortgages with the SCACL as the sole mortgagor.

45She indicates that only of two of the residential homes were purchased with capital grants provided by the Ministry and she is not aware of any conditions entitling the Ministry to any ownership interest as a result of these grants.

46She indicates in her material that she was subject to a routine practice inspection by the Institute of Chartered Accountants who inspected the SCACL file and found that the statements and their presentation were appropriate and were in full compliance with generally accepted accounting principles.

47She described a meeting at which she was present on February 21st where Mr. Beauchamp of the Ministry wanted a lease of the properties. The witness advised them that, in her opinion, all of the properties were owned by SCACL and the Ministry did not have title to any of them. The Ministry had apparently retained one Dan Natale, a chartered accountant, to advise on these financial matters. It was her information that all SCACL's staff were asked to sign an employment contract with NSS if they wished to continue their employment. It also contained a confidentiality clause which provided for termination for cause in the event that any confidential information concerning the operations of NSS, its employees or its clients is divulged to a third party.

Issues

Is this decision amenable to judicial review?

48Counsel for Her Majesty the Queen in right of Ontario submits that subject to the provisions of the Proceedings Against the Crown Act, R.S.O. 1990, c. R27, Her Majesty continues to enjoy all of the immunities, prerogatives and privileges enjoyed by the Crown prior to the enactment of that Act. Any limitations to those immunities, prerogatives and privileges must be done so expressly by statute.

49Counsel further submits that the Crown's right to contract for services pre-existed the Ministry of Community and Social Services Act, R.S.O. 1990, c. M.20 (MCSSA), and the Developmental Services Act (DSA), thus the Crown's ability to contract in this case was not dependent upon those Acts and was not the exercise of a statutory power.

50In the alternative, counsel argued that the Ministry's original decision to enter into the Agreement may properly be viewed as the exercise of a statutory power but that is not the decision of which the Applicant SCACL complains. The complaint about the decision to terminate the Agreement is not a matter provided for in any statute or regulation and is, thus, not an exercise of a statutory power whatsoever.

51Counsel for the Crown concedes that there may well be remedies under private law as a result of an implied contract or a real contract between the parties, but this is not a matter for the Divisional Court in an application for judicial review.

52Counsel for the Applicant SCACL, on the other hand, argues that the decision was twofold: one, to terminate the funding for the St. Catharines Association for Community Living, and two, to direct that another agency in Niagara Falls take over SCACL's programs and SCACL's real and personal property.

5353] The first submission is that under s. 1 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1:

"statutory power of decision" means a power or right conferred by or under a statute to make a decision deciding or prescribing,

(b) the eligibility of any person or party to receive, or to the continuation of, a benefit or licence, whether the person or party is legally entitled thereto or not,

54The Applicant SCACL argues that the legislative intent had to be that such a decision be considered the exercise of a statutory power. In these circumstances, that statutory power could only have been exercised under the Developmental Services Act or under the Ministry of Community and Social Services Act.

55The Applicant SCACL concedes that there are three categories where it would be unreasonable and unrealistic for the Courts to attempt to review decisions judicially.

56The first category is the mere exercise of a commercial or business power such as the purchase of a product, commodity or service to meet the government's needs or in tendering bids.

57The Applicant SCACL argues that the circumstances here may be distinguished because that funding to SCACL:

1. Is the payment of provincial aid for a facility in which a person with developmental disability resides per DSA, s. 35.

2. Is funding of indefinite duration.

3. Is funding a charitable organization to provide the services for the developmentally and physically handicapped.

4. The funds are in accordance with an annual budget.

5. There is a specific written agreement which could not be reasonably characterized as merely or primarily a commercial contract.

58A second category is conceded, as well, in circumstances where a public authority undertakes to implement a general fiscal policy of reduction of all funds to recipients of funding. Counsel submits that the evidence here does not disclose any sort of general fiscal policy involved.

59The third category, not amenable to judicial review, is when one seeks an Order to compel the Crown to give it funding for the first time or to increase existing funding when no clear, legal entitlement to such a benefit is established. Here, counsel submits, except in exceptional circumstances, such as a refusal to fund on improper or relevant grounds like race and religion, a Court will decline jurisdiction to review. Counsel for the Applicant SCACL submits that the evidence here does not involve the principles as set out in the third category.

60Counsel for the Applicant SCACL argues that SCACL could have been designated by regulation to be subject to the controls of the Minister under s. 13 of the MCSSA. No such regulation was made. According to the Applicant SCACL, if a regulation had been passed under s. 13 of the MCSSA to designate the institution to be subject to the control of the Minister, then that regulation would have been reviewable in limited circumstances under s. 1 of the Judicial Review Procedure Act:

"statutory power" means a power or right conferred by or under a statute,

(a) to make any regulation, rule, by-law or order, or to give any other direction having force as subordinate legislation,

61Counsel indicates that it cannot be that the Crown can avoid judicial review by failing to adhere to the procedures as set out in the statute.

62The Applicant SCACL also indicates that the decision of the Minister took something away from the Applicant SCACL to which it was entitled in law for no reason or for improper reasons and that it did so by means of procedures which were unfair. It also purported to give authorization to another agency to use their employees, real property, vehicles, and other assets, as if they were their own without compensation. All of these matters required a decision of the Ministry which should be amenable to judicial review.

The Law

63The oft-quoted words of Callaghan C.J.O.C. in this Court have set the parameters of judicial review for many years:

The nature of the action under review here is . . . observably and significantly different from those situations where the court requires government, be they municipal or provincial, to carry out mandates according to law and which require the expenditure of money. The decision in issue represents an exercise of the government's right to allocate its funds as it sees proper.

The government has the right to order its priorities and direct its fiscal resources towards those initiatives or programs which are most compatible with the policy conclusions guiding that particular government's action. This was simply a statement of funding policy and priorities and not the exercise of a statutory power of decision attracting judicial review.

. . . Such a decision is not subject to judicial review. It is in substance a decision for the disbursement of public funds.

As indicated above, there is no basis upon which this court can order the respondent Minister to expend public funds.

Hamilton-Wentworth (Regional Municipality) v. Ontario (Minister of Transportation) ("RedHill") (1991), 1991 7099 (ON SC), 2 O.R. (3d) 716 [at pp. 731-34], 78 D.L.R. (4th) 289 (Div. Ct.).

64A series of decisions find that the Minister of the Crown and other governmental agencies are not accountable to the courts with respect to policy and financial decisions:

• Metropolitan General Hospital v. Minister of Health (1979), 1979 2058 (ON SC), 25 O.R. (2d) 699, 101 D.L.R. (3d) 530 (H.C.J.).

• Simon v. Metropolitan Toronto (1993), 1993 9361 (ON SCDC), 99 D.L.R. (4th) 11 (Div. Ct.).

• Ontario Hospital Assn. v. Workplace Health and Safety Agency, [1995] O.J. No. 524 (QL) (Div. Ct.) [summarized 53 A.C.W.S. (3d) 729].

• Ontario Federation of Anglers and Hunters v. Ontario, 2002 41606 (ON CA), [2002] O.J. No. 1445 (QL) (C.A.) [reported 211 D.L.R. (4th) 741].

• Vernon and District Assn. for the Mentally Handicapped v. B.C., [1999] B.C.J. No. 1026 (QL) (S.C.) [summarized 88 A.C.W.S. (3d) 61].

• Gajic v. British Columbia, 1996 1432 (BC CA), [1996] B.C.J. No. 158 (QL) (C.A.) [reported 39 Admin. L.R. (2d) 94].

65The former Chief Justice Dickson in the case of R. v. Harrison, 1976 3 (SCC), [1977] 1 S.C.R. 238 at pp. 245-46, 66 D.L.R. (3d) 660, stated:

The tasks of a Minister of the Crown in modern times are so many and varied that it is unreasonable to expect them to be performed personally. It is to be supposed that the Minister will select deputies and departmental officials of experience and competence, and that such appointees, for whose conduct the Minister is accountable to the Legislature, will act on behalf of the Minister, within the bounds of their respective grants of authority, in the discharge of ministerial responsibilities. Any other approach would but lead to administrative chaos and inefficiency.

66Section 13(1) of the Ministry of Community and Social Services Act states:

13(1) Where any institution or organization is operated or managed for charitable objects or purposes and where,

(a) the persons operating and managing the institution so request; or

(b) the institution or organization procures funds for its operation from the public and the Lieutenant Governor in Council considers it necessary to ensure proper application of such funds; or

(c) any approval, licence or registration for the operation of the institution or organization required by any Act administered by the Minister, has been refused or revoked; or

(d) the Lieutenant Governor in Council considers it necessary in the best interests of those residing in or relying on the services of such institution or organization and for their immediate protection,

the Lieutenant Governor in Council may make regulations,

(e) designating such institution or organization to be subject to the control of the Minister;

(f) governing the operation and activities of any institution or organization designated under clause (e) and the procuring of funds from the public and the application thereof by such institution or organization;

(g) authorizing the Minister to operate and manage any such institution or organization designated under clause (e) and for that purpose, despite sections 25 and 39 of the Expropriations Act, authorizing the Minister to immediately occupy and operate, or arrange for the occupation and operation by a person or organization designated by him or her, any premises occupied or used by such institution or organization, but the rights of the owner under that Act, except the right to possession, shall not be affected thereby.

67Evans, Janisch, Mullan & Risk, Administrative Law: Cases, Text, and Materials, 4th ed. at p. 807 indicate:

An agency will commit an error of law, however, if it exercises its delegated discretion in a patently unreasonable manner, or if the reviewing court is satisfied that the text of the statute yields a clear answer to the problem (leaving no discretion to the agency), and the agency has got it wrong.

68The exercise of statutory powers by the Lieutenant Governor in Council or a Minister of the Crown may be subject to judicial review: Doctors' Hospital v. Ministry of Health (1976), 1976 739 (ON SC), 12 O.R. (2d) 164, 68 D.L.R. (3d) 220 (Div. Ct.).

69Can it be said that what the Ministry did on this occasion was merely the exercise of a commercial or business power? There was a contract between the parties but the contract demonstrates that the Ministry had the opportunity to review most of the actions of the Applicant SCACL. The schedules to the contract, as well, set out specific service descriptions in the manner in which the Applicant SCACL was to deal with those items. There is no evidence here of a tender. Apparently, the funding was for indefinite duration because of the nature of the services and the detail necessary to assist the residents. It cannot be said that this is merely a commercial or business contract. As well, the contract, itself, begins by stating in its preamble:

As Ontario has the authority pursuant to the legislation indicated in the attached service description schedules to enter into this contract for the provision of social services.

70There is no evidence before the Court that there was reduction in funding due to a general funding policy.

71The third category is not applicable as one that deals with the necessity of funding on first occasion or someone asking for an increase in funding.

72The beneficiaries of this type of contract aside from the Applicant SCACL are, of course, its residents. Those residents are a group of people in our society that the Courts have generally attempted to assist beyond any assistance provided to ordinary members of our society. The financial ramifications to the Applicant SCACL are substantial indeed and it faces, basically, a loss of $9 million a year, approximately. It has lost the use of its property, both real and personal. The exhibits reflect difficulties since this decision was made in communicating with its employees both union and nonunion. It is my view that this set of circumstances is not the type of action found in Hamilton-Wentworth, a decision reached when one government replaced another government and did not wish, as a matter of policy, to proceed with an expressway.

73The Supreme Court of Canada in the recent case of Canadian Union of Public Employees v. Ontario (Minister of Labour), 2003 SCC 29 [now reported 226 D.L.R. (4th) 193], indicated that the Minister in that case was required in the exercise of his power of appointment under s. 6(5) of the Hospital Labour Disputes Arbitration Act, R.S.O. 1990, c. H.14 (HLDAA), to be satisfied that the prospective chairpersons are not only independent and impartial, but possess appropriate labour relations expertise and are recognized in the labour relations field as generally acceptable to both management and labour. This is an illustration that the Minister's discretion is not totally unfettered in the exercise of duties under the Act. The decision of the Minister was obviously open to judicial review and ultimately ended up in the Supreme Court of Canada.

74In the circumstances, here, the failure of the Ministry to proceed under s. 13 of the MCSSA and obtain a regulation from the Lieutenant Governor in Council cannot be said to obtain the benefit of evading judicial review. The evidence, here, does not disclose in the Ministry's material any real evidence of a financial interest in the properties of the Applicant SCACL which would entitle it to deal with the Applicant SCACL's property as it did.

The Standard of Review

75The standard of review of a decision of a Minister involving the exercise or refusal to exercise a statutory power requires the following to be taken into account: A decision-maker is under a duty to act fairly when the decision will affect the rights, interests, property or liberties of any person (Abel v. Advisory Review Board (1980), 1980 1824 (ON CA), 31 O.R. (2d) 520, 119 D.L.R. (3d) 101 (C.A.); and Nicholson v. Haldimand-Norfolk Regional Board of Commissioners of Police, 1978 24 (SCC), [1979] 1 S.C.R. 311, 88 D.L.R. (3d) 671).

76In Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] S.C.J. No. 39 (QL) [reported 174 D.L.R. (4th) 193], the Court examined the subject of judicial review of discretionary decision-making. Madame Justice L'Heureux-Dubé indicated that one must take into account the well-known "pragmatic and functional" approach to judicial review articulated in U.E.S., Local 298 v. Bibeault, 1988 30 (SCC), [1988] 2 S.C.R. 1048. She said at para. 53:

Administrative law has traditionally approached the review of decisions classified as discretionary separately from those seen as involving the interpretation of rules of law. The rule has been that decisions classified as discretionary may only be reviewed on limited grounds such as the bad faith of decision-makers, the exercise of discretion for an improper purpose, and the use of irrelevant considerations: see, for example, Maple Lodge Farms Ltd. v. Government of Canada, 1982 24 (SCC), [1982] 2 S.C.R. 2 at pp. 7-8, 137 D.L.R. (3d) 558; Shell Canada Products Ltd. v. Vancouver (City), 1994 115 (SCC), [1994] 1 S.C.R. 231, 110 D.L.R. (4th) 1. A general doctrine of "unreasonableness" has also sometimes been applied to discretionary decisions: Associated Provincial Picture Houses, Ltd. v. Wednesbury Corp., [1948] 1 K.B. 223 (C.A.). In my opinion, these doctrines incorporate two central ideas — that discretionary decisions, like all other administrative decisions, must be made within the bounds of the jurisdiction conferred by the statute, but that considerable deference will be given to decision-makers by courts in reviewing the exercise of that discretion and determining the scope of the decision-maker's jurisdiction. These doctrines recognize that it is the intention of a legislature, when using statutory language that confers broad choices on administrative agencies, that courts should not lightly interfere with such decisions, and should give considerable respect to decision-makers when reviewing the manner in which discretion was exercised. However, discretion must still be exercised in a manner that is within a reasonable interpretation of the margin of manoeuvre contemplated by the legislature, in accordance with the principles of the rule of law (Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121,16 D.L.R. (2d) 689), in line with general principles of administrative law governing the exercise of discretion, and consistent with the Canadian Charter of Rights and Freedoms (Slaight Communications Inc. v. Davidson, 1989 92 (SCC), [1989] 1 S.C.R. 1038, 59 D.L.R. (4th) 416).

77There is no privative clause in either of the two statutes involved.

78The relative expertise of the decision-maker, here, is such that the Courts should be reluctant to interfere in a decision affecting the standards of care and accommodation of people with disabilities involved here. The Minister's duties in the MCSSA are defined as:

6. The Minister may,

(a) institute inquiries into and collect information and statistics relating to or affecting any matter for the provision or promotion of community and social services;

(b) disseminate from time to time information, in such manner and form as he or she considers suitable, for the promotion of community and social services;

(c) secure the observance and execution of all Acts and regulations for the administration of which he or she is responsible; and

(d) direct any officer of the Ministry or any other person to investigate and inquire into and report to him or her upon any activity, matter, agency, organization, association or institution having for any of its objects or relating to or affecting the social welfare of persons in Ontario and that is not under the jurisdiction of any other ministry of the public service of Ontario.

79The Minister is also responsible for the administration of the MCSSA (s. 3(1)) and can delegate a power or duty:

5(1) Where, under this or any other Act, a power is conferred or a duty is imposed upon the Minister or upon an employee of the Ministry, such power or duty may be exercised and discharged by any other person or class of persons whom the Minister appoints in writing, subject to such limitations, restrictions, conditions and requirements as the Minister may set out in his or her appointment.

80The Lieutenant Governor in Council can appoint a Deputy Minister (MCSSA s. 4(1)) and "such employees as the Minister considers necessary for the proper conduct of the business of the Ministry" can be appointed under the Public Service Act, R.S.O. 1990, c. P.47 (MCSSA s. 4(2)).

81Under the Developmental Services Act, the Minister may establish facilities "upon such terms and conditions as the Minister sees fit" (DSA s. 2(1)). Unless a board of governors has been appointed by the Lieutenant Governor in Council to maintain and operate a facility, that responsibility over administration of the facility is vested in the Director (DSA s. 3).

82Like s. 5 of the MCSSA, the DSA allows for someone to be appointed to do any act the DSA requires or authorizes the Minister, Director or administrator to do (DSA s. 3(5)). Third, the purposes of the Developmental Services Act are not clearly stated. The DSA establishes facilities and services in order to render services to individuals with developmental disabilities. Finally, Ministries are, by their very nature, involved in policy issues.

83Mr. Justice Binnie, in Canadian Union of Public Employees v. Ontario (Minister of Labour), supra, refers to the method at para. 149. He outlined:

. . . "pragmatic and functional" approach to ascertain the legislative intent. . .

(1) whether the legislation that confers the power contains a privative clause;

(2) the relative expertise as between the court and the statutory decision maker;

(3) the purpose of the particular provision and the legislation as a whole; and

(4) the nature of the question before the decision maker ...

84He indicated that the test is flexible and that that approach applies to judicial review, not only of the administrative tribunals but of decisions of Ministers: Baker, supra; Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services), 2001 SCC 41, [2001] 2 S.C.R. 281, 200 D.L.R. (4th) 193, at para. 54; Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19 [now reported 223 D.L.R. (4th) 599], at para. 21; Law Society of New Brunswick v. Ryan, 2003 SCC 20 [now reported 223 D.L.R. (4th) 577], at para. 21.

85Section 12 of the Ministry of Community and Social Services Act indicates the Minister "may enter into agreements with organizations, municipalities or other persons . . . respecting the provision of social services and community services" and so on. That is a signal that the Minister is to be afforded a broad latitude in making his selection.

86It is noteworthy that s-s. (2) of s. 13 of the MCSSA allows the Minister to apply to the Court for a warrant in the event of refusal or resistance.

87As already indicated in s. 13 of the MCSSA, the Minister may, in prescribed circumstances, ask the Lieutenant Governor in Council to make a regulation authorizing the Minister to operate and manage any institution and to occupy or arrange for the occupation of that institution by the Minister's agent. In our view, the purported exercise by the Minister of a power to appoint a third party to operate and manage the SCACL and to occupy its premises for that purpose without such an order in council is an error in law, a decision made without jurisdiction, and void.

88It is common ground that there are no alternative facilities in the area in which to house the persons housed in the SCACL premises. No doubt the possibility of such a situation arising is the reason for the existence of s. 13. The act of the Ministry in terminating the funding for SCACL is, in reality, necessarily accompanied by the seizure of the SCACL premises, otherwise the patients cannot be maintained. It is, therefore, artificial to divide the decision into two: one to cease funding and the other, to seize the assets. It is one decision and, without the order in council, it is an illegal decision.

89Therefore, it is not necessary for us to consider the legality of the decision to cease funding, as if it stood alone. It does not stand alone, and it is irrelevant whether it would be legal on its own.

90In view of the finding that the decision is illegal, it may not be necessary to deal with the other issues raised by counsel, but due to the importance of the matter to the Applicant, some of the other issues dealt with by counsel will be determined.

91It was submitted that certain correspondence after the decision amounted to a consent to the seizure. We reject the suggestion that letters sent acknowledging the reality of the situation created by the Ministry's act, and the need to continue the service to the patients at all costs, and offering co-operation in the care of the patients, can amount to a consent to the illegal acts of the Ministry. Indeed, the Respondent led no evidence on that subject while the evidence of the Applicants denied any such consent.

92The Minister was thus able to enter into a contract to provide the necessary services to the clientele. He had, as well, the power to set standards so that they would be protected and that any major events would be reported to the Ministry within 24 hours. As I indicated earlier, the Ministry would have substantial expertise in the field which was not available to the Court.

93The Ministry chose to terminate the contract outside the notice provisions in the contract. It purported to advise the Applicant SCACL not to deal with its property and it ordered another agency to "take over" the operations.

94Viewing the matter as opportunity to provide specific services to people who are developmentally disadvantaged, then the expertise of the Minister is substantial indeed. The particular provision, namely s. 13 allowing the passing of a regulation "authorizing the Minister to operate and manage any such institution" and authorizing the Minister to occupy or arrange for the occupation of such institution or organization is an indication that the legislature felt that substantial expertise was needed in this field. It is my view that the standard of review should be that of patently unreasonable.

95Mr. Justice Iacobucci described at para. 57 in Canada (Director of Investigation and Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, 144 D.L.R. (4th) 1:

The difference between "unreasonable" and "patently unreasonable" lies in the immediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal's reasons, then the tribunal's decision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreasonable. As Cory J. observed in Canada (Attorney General) v. Public Service Alliance of Canada, 1993 125 (SCC), [1993] 1 S.C.R. 941, at p. 963"[i]n the Shorter Oxford English Dictionary 'patently', an adverb, is defined as 'openly, evidently, clearly'". This is not to say, of course, that judges reviewing a decision on the standard of patent unreasonableness may not examine the record. If the decision under review is sufficiently difficult, then perhaps a great deal of reading and thinking will be required before the judge will be able to grasp the dimensions of the problem . . . But once the lines of the problem have come into focus, if the decision is patently unreasonable, then the unreasonableness will be evident.

96The Supreme Court of Canada revisited the subject in Canadian Union of Public Employees v. Ontario (Minister of Labour), supra, at paras. 164 and 165:

The Court recently returned to the distinction between reasonableness simpliciter and patent unreasonableness in Ryan, at para. 52:

"In Southam, supra, at para. 57, the Court described the difference between an unreasonable decision and a patently unreasonable one as rooted 'in the immediacy or obviousness of the defect'. Another way to say this is that a patently unreasonable defect, once identified, can be explained simply and easily, leaving no real possibility of doubting that the decision is defective ... A decision that is patently unreasonable is so flawed that no amount of curial deference can justify letting it stand."

However, applying the more deferential patent unreasonableness standard, a judge should intervene if persuaded that there is no room for reasonable disagreement as to the decision maker's failure to comply with the legislative intent. . .

A patently unreasonable appointment, then, is one whose defect is "immedia[te] and obviou[s]" (Southam, supra, at para. 57), and so flawed in terms of implementing the legislative intent that no amount of curial deference can properly justify letting it stand . . .

Unlimited or Arbitrary Exercise of Discretion

A decision to deny or cancel such a privilege lies within the "discretion" of the Commission; but that means that decision is to be based upon a weighing of considerations pertinent to the object of the administration.

In public regulation of this sort there is no such thing as absolute and untrammeled "discretion", that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator; no legislative Act can, without express language, be taken to contemplate an unlimited arbitrary power exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute. Fraud and corruption in the Commission may not be mentioned in such statutes but they are always implied as exceptions. "Discretion" necessarily implies good faith in discharging public duty; there is always a perspective within which a statute is intended to operate; and any clear departure from its lines or objects is just as objectionable as fraud or corruption.

Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121 [at p. 140], 16 D.L.R. (2d) 689.

97Counsel for the Respondent indicated that there was ample evidence to justify the decision to transfer funding to NSS and terminate the contract with SCACL:

(a) Deaths occurred within a very short time involving some of the most vulnerable members of society;

(b) SCACL apparently felt that Ministry requirements requiring accountability and prevention of future incidents was confusing;

(c) SCACL deliberately refused to inform the Ministry of the death at the meeting of February 8th;

(d) As apparent in the evidence filed in the Application Record, SCACL views serious occurrences involving death as industrial hazard;

98Thus, the Minister was entitled to terminate a contractual relationship where there had been a fundamental breach. It indicates there is no dispute that the Ministry warned SCACL that it was losing confidence in SCACL's ability or desire to respond appropriately to serious occurrences and that loss of confidence was the reason given for the transfer of SCACL's funding to another agency.

99The evidence before us indicates that there was only one unfortunate death which took place with any fault in relation to SCACL. Mr. McCarthy's letter dated January 24th was not exactly a model of clarity and it is difficult to impute any improper motive to SCACL's request for clarification. The failure to inform Mr. McCarthy of a death at the meeting of February 8th is not even mentioned in the material filed by the Ministry. There is no evidence that SCACL viewed serious occurrences involving death as industrial hazards. It does not then appear that the Minister was entitled to terminate the contractual relationship on the basis that there had been a fundamental breach. There is also no evidence that the Ministry at the time of the hearing before us was able to demonstrate in its material any financial interest in the properties and chattels of the Applicant SCACL. There is no evidence of an inability to protect its clients.

100There does not appear to be any evidence that any consideration was given to the possible effect upon the patients, the insurers of the Applicant SCACL, the employees of the Applicant SCACL, both union and non-union, and the difficulties of trying to grapple with such a decision in the complex society of today.

101There is no evidence here of a weighing of considerations pertinent to the object of the administration in this case. Thus, the decision offends the principles of Roncarelli and is patently unreasonable.

Duty of Fairness

102There was a duty to provide the Applicant SCACL:

(a) fair warning of what may ensue if certain reasonable and lawful Ministry requirements are not met;

(b) an opportunity to know the case it has to meet;

(c) a reasonable opportunity to make representations to avoid its financial demise, and

(d) timely and full disclosure of the reasons for the sudden reversal of its funding.

Nicholson v. Haldimand-Norfolk Regional Board of Commissioners of Police, supra, at p. 328 (Laskin C.J.C.).

103The evidence does not disclose that the Applicant SCACL received any fair warning. As well, despite their inquiry, they never really were advised as to what it was they were to do. They had no reasonable opportunity to make representations nor did they have timely and full disclosure of the reasons.

104There was, as well, an abuse of discretion under the principles set out in Baker v. Canada (Minister of Citizenship and Immigration), supra, at p. 820 [headnote]:

The concept of discretion refers to decisions where the law does not dictate a specific outcome, or where the decision-maker is given a choice of options within a statutorily imposed set of boundaries. Administrative law has traditionally approached the review of decisions classified as discretionary separately from those seen as involving the interpretation of rules of law. Review of the substantive aspects of discretionary decisions is best approached within the pragmatic and functional framework defined by this Court's decisions, especially given the difficulty in making rigid classifications between discretionary and non-discretionary decisions. Though discretionary decisions will generally be given considerable respect, that discretion must be exercised in accordance with the boundaries imposed in the statute, the principles of the rule of law, the principles of administrative law, the fundamental values of Canadian society, and the principles of the Charter.

105The method of announcing the decision in advance to the media before the Applicants were aware of it is not what Canadian society expects in regard to fair governmental action.

Improper Motive

106Argument was presented to us that the evidence showed that the Applicant SCACL was punished for voting against Mr. McCarthy's plan and the other agency, his sole supporter, was rewarded for its vote. Because of the earlier findings, it is not necessary for us to deal with this argument.

Result

107For these reasons, the judicial review is granted and the decision of the Ministry to cease to fund SCACL and to seize its property and authorize a third party to operate and manage SCACL and to occupy SCACL's property for this purpose is quashed as illegal. An order will go directing the Ministry to continue funding to SCACL and to direct its agent to vacate the premises and return them and the management of the institution to SCACL forthwith.

108Costs may be addressed in written submissions, those of SCACL within 30 days; those of the Respondent within a further 20 days and any reply within a further 7 days.

109Application granted.