Redmond et al. v. The City of Hamilton

Redmond et al. v. The City of Hamilton McGrath v. The City of Hamilton [Indexed as: Redmond v. Hamilton (City)]

94 O.R. (3d) 305

Ontario Superior Court of Justice,

Divisional Court,

Karakatsanis J.

December 17, 2008

Civil procedure -- Costs -- Municipal employees bringing application for judicial review claiming that they were denied natural justice in termination of their employment for cause -- After release of decision of Supreme Court of Canada in Dunsmuir, applicants commencing action for damages for wrongful dismissal -- Judicial review application quashed on basis that it was plain and obvious that claim under public law could not succeed -- Issue of costs of application deferred until merits of wrongful dismissal action had been resolved.

Employment law -- Public servants -- Municipal employees bringing application for judicial review claiming that they were denied natural justice in termination of their employment for cause -- Applications quashed on basis that it was plain and obvious that claim under public law could not succeed -- Applicants governed by contract law rather than public law. [page306]

The applicants were municipal employees. One applicant was chief building official under the Building Code Act, 1992, S.O. 1992, c. 23. The other two applicants were appointed as municipal law enforcement Officers pursuant to the Police Services Act, R.S.O. 1990, c. P.15 and the Municipal Act, 2001, S.O. 2001, c. 25. After they were dismissed for cause, they brought an application for judicial review claiming that they were denied natural justice and a hearing. The judicial review application was commenced before the release of Dunsmuir v. New Brunswick, in which the Supreme Court of Canada held that where a public employee is employed under a contract of employment, regardless of his or her status as a public office holder, the applicable law governing his or her dismissal is the law of contract, not general principles arising out of public law. After that decision was released, the applicants commenced an action for wrongful dismissal in the Superior Court. The applicants brought a motion to consolidate the judicial review application with the wrongful dismissal action or to stay it, and the respondent brought a motion to quash the application.

Held, the applicants' motion should be dismissed; the respondent's motion should be granted.

Given the Dunsmuir decision, it was plain and obvious that the claim under public law could not succeed. The applicants' employment was governed by an employment contract. Neither of the two exceptions to the general rule recognized in Dunsmuir applied. The applicants were not acting in constitutionally defined state roles or holding office "at pleasure" without any other remedy. The Building Code Act, the Municipal Act and the Police Services Act did not explicitly or by necessary implication create a public law duty of procedural fairness. The judicial review application should be quashed.

The issue of the costs of the application should be deferred until the wrongful dismissal action had been resolved on the merits. It was not clear that the application would have been unsuccessful based upon the law at the time it was brought. Most of the costs in the application arose before Dunsmuir made the application untenable. If the court in the wrongful dismissal action found that the respondent acted improperly in terminating the applicants, it would not seem just that the applicants were required to pay the respondent's costs in defending an application that was properly commenced in the Divisional Court at the time.

MOTION by applicants to consolidate a judicial review application with a wrongful dismissal action or to stay it; MOTION by respondent to quash a judicial review application.

Cases referred to Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65, folld Other cases referred to East Luther Grand Valley (Town) v. Ontario (Minister of Environment and Energy) (2000), 2000 22361 (ON SC), 48 O.R. (3d) 247, [2000] O.J. No. 1424, 33 C.E.L.R. (N.S.) 23, 96 A.C.W.S. (3d) 529 (S.C.J.); First Real Properties Ltd. v. Hamilton (City) (2002), 2002 49478 (ON SC), 59 O.R. (3d) 477, [2002] O.J. No. 1796, 21 C.P.C. (5th) 93, 29 M.P.L.R. (3d) 314, 113 A.C.W.S. (3d) 806 (S.C.J.); Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, [1999] O.J. No. 4600, 181 D.L.R. (4th) 614, 128 O.A.C. 2, 93 A.C.W.S. (3d) 222 (C.A.); Knight v. Indian Head School Division No. 19, 1990 138 (SCC), [1990] 1 S.C.R. 653, [1990] S.C.J. No. 26, 69 D.L.R. (4th) 489, 106 N.R. 17, [1990] 3 W.W.R. 289, J.E. 90-602, 83 Sask. R. 81, 43 Admin. L.R. 157, 30 C.C.E.L. 237, 90 CLLC Â 14,010 at 12078 [page307] Statutes referred to Building Code Act, 1992, S.O. 1992, c. 23, ss. 1.1 [as am.], (6) [as am.], 7.1 [as am.], (3) [as am.] Criminal Code, R.S.C. 1985, c. C-46 Municipal Act, 2001, S.O. 2001, c. 25 Police Services Act, R.S.O. 1990, c. P.15, ss. 25 [as am.], (1) (a) [as am.], (4.1) [as am.] Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.03

G. James Fyshe, for applicants Redmond, Charlton and McGrath. Gary D. Graham and Heather C. Devine, for respondent the City of Hamilton.

[1] Endorsement of KARAKATSANIS J.: -- Two applications for judicial review have been commenced by three employees of the City of Hamilton dated July and November 2007. They claim that they were denied natural justice and a hearing in the termination of their employment for cause. They seek to set aside the City's decision to terminate them and to be reinstated in their positions. The applicants also seek a declaration that the City must afford them procedural fairness. Counsel advised that the two applications were initially brought as one application but were divided after discussions between the parties.

[2] The applicants brought a motion on April 1, 2008 to once again consolidate the two applications (on consent) and a motion for disclosure of the investigation report that formed the basis for the termination of their employment. Those motions were adjourned in order that the parties consider the recent decision of the Supreme Court of Canada in Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9, 2008 SCC 9, which radically changed the law with respect to the right of a public employee to seek judicial review.

[3] As a result, the applicants have since brought an action for wrongful dismissal in the Superior Court of Justice seeking both damages and reinstatement to their positions. In the action, the employees claim that they were public officers and as such were entitled to natural justice. The action also claims the employees were denied natural justice under the City's Harassment and Discrimination Policy.

[4] There are two motions before me. The applicants seek to consolidate the two applications for judicial review with the [page308] Superior Court action for wrongful dismissal or to stay the judicial review applications pending determination of the action. The City brings a motion to quash the applications and seeks costs on a substantial indemnity basis in the amount of $191,893, all inclusive (including disbursements of $6,353.39). I heard oral submissions on October 15, 2008. I requested follow up submissions on the narrow issue of whether the applications fit within the Dunsmuir exceptions and specifically the statutory sections relied upon to give rise to those exceptions. Both parties responded broadly, raising new issues and changing some positions.

[5] At the hearing of this motion, counsel for the applicants advised that they were content that the applications be stayed with conditions that the merits of the applications not be heard in the Divisional Court or that the applications be abandoned with prejudice. Counsel advised that they did not intend to revive the applications for judicial review at any future time. The applicants sought a stay in order not to prejudice their rights with respect to procedural fairness in the action and to defer the issue of costs. However, in follow up written submissions, counsel acknowledged that "consolidation would not be a fit in the current situation"; instead he advised that the applicants seek a stay in order to preserve their rights to return to Divisional Court in the event that the court determines it does not have jurisdiction to deal with the procedural fairness issue in the action.

[6] The City advises it seeks finality regarding the applications for judicial review and its costs, and does not wish to face future proceedings in the Divisional Court. The City, in written submissions, takes the position that consolidation is not available as there is no concurrent jurisdiction in both the Divisional Court and the Superior Court; that the Superior Court cannot perform judicial review or provide the remedy claimed in the application; and that the applicants cannot proceed on claims based upon both contract and public law, but instead must advance either an action or an application.

[7] With respect to the motion to quash the applications, the City submits that it is plain and obvious the claim under public law cannot succeed given the decision of the Supreme Court of Canada in Dunsmuir and that the applications should therefore be quashed. The applicants submit that they fall within certain exceptions to this rule enunciated in Dunsmuir. They further submit that costs should await a determination on the merits.

[8] For the reasons that follow, the applications for judicial review are quashed and costs are deferred until after there has [page309] been a resolution on the merits of the action. These public employees are governed by contract law and, pursuant to Dunsmuir, contract law displaces public law as the more appropriate forum in which the applicants must seek a remedy. In these circumstances, it was unnecessary to consider any public law duty of procedural fairness. The statutory provisions regarding their public office do not give rise to a public law right to procedural fairness in this case, and the applications do not come within one of the Dunsmuir exceptions. It is therefore plain and obvious they must fail. As a result, the issue of consolidation or a stay of the proceedings is moot and I need not decide the issue of whether it is possible to advance both a claim in a Superior Court action based on contract and an application for judicial review in Divisional Court based on public law.

Motion to Quash

[9] The test on whether to quash an application is whether it is plain and obvious that the application will fail before the Divisional Court: East Luther Grand Valley (Town) v. Ontario (Minister of Environment and Energy) (2000), 2000 22361 (ON SC), 48 O.R. (3d) 247, [2000] O.J. No. 1424 (S.C.J.), at para. 24.

The Dunsmuir decision

[10] The City seeks to quash the applications on the basis that pursuant to the authority of Dunsmuir, it is plain and obvious that the applications cannot be sustained. The City submits that the law in Dunsmuir is clear and any relief for the City employees must arise under contract law even if they, in the course of their employment, hold public office.

[11] In Dunsmuir, a public servant who held office "at pleasure" in the civil service of New Brunswick, was terminated without cause and with pay in lieu of notice. The grievance adjudicator concluded that the appellant had been denied procedural fairness because he had not been granted a hearing by the employer before being dismissed with four months' pay in lieu of notice. The New Brunswick Court of Appeal found that based on the Supreme Court of Canada decision in Knight v. Indian Head School Division No. 19, 1990 138 (SCC), [1990] 1 S.C.R. 653, [1990] S.C.J. No. 26, the holder of an office "at pleasure" was entitled to be given the reason for his or her dismissal and an opportunity to be heard before being dismissed. In Dunsmuir, the Supreme Court of Canada determined it would reconsider the principles in Knight that established the applicability of a duty of fairness in the context of public employment and decided that [page310] in the specific context of dismissal from public employment, disputes should be viewed through the lens of contract law rather than public law.

[12] The Supreme Court of Canada in Dunsmuir held at paras. 81 and 102:

In our view, what matters is the nature of the employment relationship between the public employee and the public employer. Where a public employee is employed under a contract of employment, regardless of his or her status as a public office holder, the applicable law governing his or her dismissal is the law of contract, not general principles arising out of public law. . . . . .

In our view, the existence of a contract of employment, not the public employee's status as an office holder, is the crucial consideration. Where a public office holder is employed under a contract of employment the justifications for imposing a public law duty of fairness with respect to his or her dismissal lose much of their force.

[13] Moreover, the court states, at para. 112, that "the distinction between office holder and contractual employee for the purposes of a public law duty of fairness is problematic and should be done away with". The court concluded, at para 113:

The starting point, therefore in any analysis, should be to determine the nature of the employment relationship with the public authority. Following Wells, it is assumed that most public employment relationships are contractual. Where this is the case, disputes relating to dismissal should be resolved according to the express or implied terms of the contract of employment and any applicable statutes and regulations, without regard for whether the employee is an office holder. A public authority which dismisses an employee pursuant to a contract of employment should not be subject to any additional public law duty of fairness. Where the dismissal results in a breach of contract, the public employee will have access to ordinary contractual remedies.

[14] The applicants submit that it is not clear and obvious that the claim for procedural fairness is doomed. At para. 114 of its judgment, the court specifically did not overturn the principles of natural justice expressed in Knight in which it found that the general duty of fairness owed by public authorities when making decisions that affect the rights, privilege or interests of individuals is valid and important. However, the Supreme Court of Canada held that regardless of whether employees held public office, where the relationship was governed by a contract of employment, their remedies were to be found under the law of contract and applicable legislation unless the claimants fit within certain exceptions. The court stated that to the extent that the majority decision in Knight ignored the important effect of a [page311] contract of employment, it should not be followed. Where the public employee is protected from wrongful dismissal by contract, his or her remedy should be in private law, not in public law.

[15] The required approach under Dunsmuir is to first identify the nature of the employment relationship and the applicable law. If the relationship is contractual, a public law duty of fairness is not engaged and should play no role unless it falls into one of the exceptions articulated by the court.

[16] The court contemplated two narrow exceptions. It stated, at para. 115:

The dismissal of a public employee should therefore generally be viewed as a typical employment law dispute. However, there may be occasions where a public law duty of fairness will still apply. We can envision two such situations at present. The first occurs where a public employee is not, in fact, protected by a contract of employment. This will be the case with judges, ministers of the Crown and others who "fulfill constitutionally defined state roles" . . . . It may also be that the terms of appointment of some public office holders expressly provide for summary dismissal or, at the very least, are silent on the matter, in which case the office holders may be deemed to hold office "at pleasure". . . . Because an employee in this situation is truly subject to the will of the Crown, procedural fairness is required to ensure that public power is not exercised capriciously.

[17] At para. 116, the court stated:

A second situation occurs when a duty of fairness flows by necessary implication from a statutory power governing the employment relationship. In Malloch, the applicable statute provided that dismissal of a teacher could only take place if the teacher was given three weeks' notice of the motion to dismiss. The House of Lords found that this necessarily implied a right for the teacher to make representations at the meeting where the dismissal motion was being considered. Otherwise, there would have been little reason for Parliament to have provided for the notice procedure in the first place . . . . Whether and what type of procedural requirements result from a particular statutory power will of course depend on the specific wording at issue and will vary with the context. (Knight, at p. 682).

[18] It is common ground that the applicants were employees of the City of Hamilton and the applicants do not dispute that their employment is governed by a contractual relationship. The claim that these employees were owed a duty of procedural fairness based upon public law because of their public office depends upon whether it is arguable that they fall within one of the exceptions contemplated in Dunsmuir. While the court left open the possibility of further exceptions, there is nothing in the circumstances of this case to suggest that exceptional considerations are merited.

[19] In submitting that it is not plain and obvious that the applications cannot succeed in the present case, the applicants rely on the exceptions to the general rule set out in the Dunsmuir [page312] decision, that the existence of an employment contract will take precedence over the public law duty of fairness. The applicants argue that it is not yet clear if the statutory component of the duties performed by the public officers brings them within the realm of public law and therefore of judicial review. It is also unclear what impact a violation of the City's own procedural fairness policy will have on the right of these individuals to procedural fairness and the interplay of the harassment and discrimination policy with the entitlements of individuals performing public law duties. These, the applicants submit, are important issues that should be explored with the benefit of full argument and in the context of all the issues in the action.

[20] The City submits that the narrow exceptions set out in Dunsmuir have not been pleaded in the application or action. In my view, this is not determinative. The applications plead that the applicants were public officers employed by the city of Hamilton to perform public and statutory duties. The pleadings in the action claim that the employees are public officers with powers and responsibilities under statute and are entitled to procedural fairness before any decision was made to terminate their employment. Both claim that the City breached its duty of fairness. In any event, an insufficiency of the pleadings may be addressed directly within the trial proceedings. The applicants have raised the exception in their submissions and given the change in the law, the applications could be amended if necessary.

The first exception does not apply

[21] On the facts set out in the application, it is clear that the first exception does not apply. These employees were not acting in constitutionally defined state roles or holding office "at pleasure" without other remedy. They are not public officers without the protection under contract law. Both parties concede a contractual employment relationship in the factual foundation of the applications.

The second exception: Do the statutory provisions explicitly or by necessary implication create a public law duty of procedural fairness?

[22] All three applicants hold public office as part of their employment responsibilities. Mr. Redmond had management responsibilities as head of the standards and licensing sections and was also chief building official under the Building Code Act, 1992, S.O. 1992, c. 23. Mr. Charlton and Ms. McGrath both had [page313] management responsibilities and were appointed as municipal law enforcement officers pursuant to the Police Services Act, R.S.O. 1990, c. P.15 and the Municipal Act, 2001, S.O. 2001, c. 25, which made them peace officers for the purposes of enforcing municipal by-laws. Ms. McGrath was hired for a probationary period.

[23] The applicants submit that the provisions of the statutes governing their public office may create the requirement of public law duty of fairness. The applicants argue that the Municipal Act, the Building Code Act and the Police Services Act may give rise to circumstances that import public law procedural fairness by necessary implication from the statutory power governing the employment relationship. It is not sufficient, however, for the applicants to merely assert such a possibility or to suggest the implications of Dunsmuir have yet to be explored in this area. The applicants did not identify any specific provisions of the legislation that could arguably give rise to such a requirement. As a result, I requested written submissions with the particular request that relevant statutory provisions be identified.

Relevant statutory provisions governing the public office of chief building official do not give rise to a public law duty of fairness

[24] Mr. Redmond has been an employee with the City for over 21 years and is the senior employee of the Building and Licensing Division, responsible for 170 employees in his department. He was appointed to the position of chief building official and inspector in 2004 pursuant to a by-law of Hamilton's City Council. The by-law provides that his title shall be "Director of Building and Licensing" and that he has all the power and duties of such office as assigned by statute and under the by-laws.

[25] As part of his employment, Mr. Redmond performs statutory duties of a public nature as chief building official under the Building Code Act, s. 1.1, which sets out the roles and responsibilities of a person occupying this position, in particular, oversight of the enforcement of the Act.

[26] The Building Code Act sets out the role of a chief building official in s. 1.1(6):

1.1(6) It is the role of a chief building official, (a) to establish operational policies for the enforcement of this Act and the building code within the applicable jurisdiction; (b) to co-ordinate and oversee the enforcement of this Act and the building code within the applicable jurisdiction; [page314] (c) to exercise powers and perform the other duties assigned to him or her under this Act and the building code; and (d) to exercise powers and perform duties in accordance with the standards established by the applicable code of conduct.

[27] In their dealings with the public in carrying out their roles and responsibilities, the chief building official and inspectors are subject to a code of conduct found in the Act. The specific terms of the code of conduct are not specified in the legislation; nor does the legislation set out the sanctions that flow from a breach of the code.

[28] A code of conduct for the chief building official and inspectors is to be established and enforced under s. 7.1 of the Act for the following purposes:

1. To promote appropriate standards of behaviour and enforcement actions in the exercise of a power or the performance of a duty under the Act or the building code;
2. To prevent practices which may constitute an abuse of power, including unethical or illegal practices in the exercise of a power or the performance of a duty under the Act or the building code; and
3. To promote appropriate standards of honesty and integrity in the exercise of a power or the performance of a duty under the Act or the building code.

[29] Section 7.1(3) provides that the code of conduct must provide for its enforcement and include policies or guidelines governing the response to alleged breaches and the disciplinary actions that may be taken where violations are established.

[30] In my view, it is clear that the provisions in the Building Code Act do not create a public law duty of fairness in relation to Mr. Redmond's dismissal. There is no mandatory statutory provision governing the employment relationship in this case, or the requirements for dismissal. Although the legislation requires the establishment of a code of conduct that must address allegations of breaches of the code, it does not specify the particular terms of that code. It may be that in an appropriate case, the legislative provisions and the code of conduct may give rise to requirements of procedural fairness. In the circumstances at hand, however, even if the alleged cause for Mr. Redmond's termination involved performance of his statutory duties as chief building official, there is no suggestion that applicable code of conduct is engaged in this case. The code of conduct is not part of the evidentiary record in the applications and is not referred to in the pleadings of the wrongful dismissal action. There is no allegation that Mr. Redmond's conduct breached the code and no such suggestion was made when [page315] his employment was terminated by his supervisor, the general manager of planning and economic development. Rather, his employment was terminated for cause as a result of allegations relating to the personal harassment and mismanagement of an employee in his branch as found in an investigation under the City's Harassment and Discrimination Policy. There is also no suggestion that the City breached the code in dismissing Mr. Redmond.

[31] Although Mr. Redmond was appointed by by-law as chief building official and responsibilities are provided for in the Act, his duties and responsibilities were required as part of his private contractual agreement with the City.

[32] There is no duty of fairness that flows by necessary implication from any provisions governing the employment relationship in the Building Code Act and no basis to find that the applicant Mr. Redman comes within the exceptions articulated by the Supreme Court of Canada in Dunsmuir. It is therefore plain and obvious that a claim for judicial review based upon a public law duty of procedural fairness in this instance must fail. This does not mean that the statutory or regulatory provisions cannot give rise to a public law duty of fairness. However, in this case, Mr. Redmond's dismissal must be addressed within the express or implied terms of the contract of employment and any applicable statutes and regulations rather than a duty of procedural fairness grounded in public law.

Relevant statutory provisions governing the public office of municipal law enforcement officer do not give rise to a public law duty of fairness

[33] Ms. McGrath was offered the position of manager of the Standards and Licensing Section, reporting to Mr. Redmond, starting July 2006. The offer of employment stated that she would have a six-month probationary period during which the City could terminate her employment at any time without notice or pay in lieu of notice. Ms. McGrath was terminated shortly before the six-month period expired.

[34] Mr. Charlton had been a municipal law enforcement officer since 1990 and was employed by the City under an indefinite term of employment. As one of two co-ordinators in the City's Standards and Licensing Section since June 2001, Mr. Charlton supervised seven other officers. At the time of his termination, Mr. Charlton reported to Ms. McGrath.

[35] Both Ms. McGrath and Mr. Charlton were appointed municipal law enforcement officers pursuant to by-laws enacted [page316] by City Council. The by-laws bestow all the powers and impose duties on these officers necessary for the enforcement of City by-laws. In order to fulfill this mandate, Ms. McGrath and Mr. Charlton were authorized to perform statutory duties under the Police Services Act and the Municipal Act. In enforcing municipal by-laws, they had the power and responsibility to conduct investigations and inspections, present cases in show cause hearings and appear in prosecutions. Also, as peace officers pursuant to the Police Services Act, they had special powers of arrest and authorization to use force under the Criminal Code, R.S.C. 1985, c. C-46.

[36] Under s. 25 of the Police Services Act, the Civilian Police Commission may investigate any complaint concerning the actions of municipal law enforcement officers and has the power to direct their dismissal. Section 25(1)(a) provides that the Commission may conduct an investigation on its own motion, or at the request of the solicitor general, a municipal council or board, and inquire into and report on the conduct or the performance of duties of a police officer, a municipal chief of police, any auxiliary member of a police force, a special constable, a municipal law enforcement officer or a member of a board. Under s. 25(4.1), "if the Commission concludes after a hearing, that . . . a municipal law enforcement officer is not performing or is incapable of performing the duties of his or her position in a satisfactory manner, it may direct that (a) the person be demoted . . . ; (b) the person be dismissed; (c) the person be retired if the person is entitled to retire; or (d) the person's appointment be suspended or revoked".

[37] This section gives the Commission oversight of municipal law enforcement officers' conduct or their performance of their statutory duties. The applicants argue that these provisions suggest that the removal of a municipal law enforcement officer from his or her statutory position is a public concern and reflects the importance of ensuring that politics cannot influence the integrity of law enforcement. They submit that decisions regarding the status of this statutory official are legislatively mandated to be made by elected officials and government bodies working in the public domain and should be subject to judicial review.

[38] Investigation and dismissal under s. 25 of the Police Services Act is not mandatory and does not exclude other courses of action on the part of the City in the event of alleged misconduct. The Commission is not obligated to investigate the actions of a municipal law enforcement officer. There is no suggestion in either the application or the action that the Commission was [page317] involved in any way and/or was relied upon in either proceeding. No request or suggestion that the Commission conduct an inquiry under s. 25 was made. It is plain and obvious that the public law duty of fairness cannot arise as a result of a process that is optional and which was not even engaged in this case. No duty of fairness flows by necessary implication from the statutory power governing the employment relationships in issue, because the statute does not provide mandatory conditions for dismissal.

[39] The applicants held public office in the course of their employment with the City. However, the by-law appointing them as municipal law enforcement officers does not set out any terms of employment.

[40] As was the case with Mr. Redmond, even if the alleged cause for termination involved performance of their statutory duties, resolution of issues surrounding dismissal would be governed by the express or implied terms of the contract of employment and any applicable statutes and regulations, rather than a public law duty of procedural fairness. In this case, however, the alleged causes for termination did not involve the officers' performance of their duties as enforcement officers or peace officers, but rather their actions in their management capacity in allegedly harassing and mismanaging another City employee and in relation to their conduct as City employees during an investigation under the Harassment and Discrimination Policy.

[41] None of the applicable statutory provisions gives rise to a public law duty of procedural fairness. It is plain and obvious that Ms. McGrath and Mr. Charlton do not fit within either exception articulated in Dunsmuir and cannot succeed in an application for judicial review in the present case.

Procedural Fairness under the Harassment and Discrimination Policy

[42] The applicants seek to avoid the quashing of these applications so that it will not adversely affect their claim for procedural fairness in the wrongful dismissal action. Consolidation of an action and an application for judicial review is not appropriate. A. Campbell J. stated in First Real Properties Ltd. v. Hamilton (City) (2002), 2002 49478 (ON SC), 59 O.R. (3d) 477, [2002] O.J. No. 1796 (S.C.J.), at para. 16, that a proposal to consolidate an action and a Divisional Court application is unsuitable, in part because "it blurs the bright line between trial court jurisdiction and Divisional Court jurisdiction, a distinction which has been [page318] sedulously maintained in order to preserve the integrity of the jurisdiction of both courts (subject to the rarely used power provided in s. 8 of the JRPA)".

[43] The determination that there is no public law requirement for procedural fairness in this case in the aftermath of Dunsmuir should not also be taken as an adverse comment on the merits of the action. The applicants allege the City did not comply with procedural fairness in its own Harassment and Discrimination Policy that applies to all employees. They have pleaded that the policy gives rise to such an obligation, independent of any duty founded in public law principles. Dunsmuir does not stand for the proposition that procedural fairness is not relevant in private law.

[44] In my view, although it is plain and obvious that Dunsmuir precludes the success of the application for judicial review, a finding that procedural fairness is not required under public law in the circumstances should not prejudice the applicants in their claim that procedural fairness was breached in the wrongful dismissal action. I agree with the applicants that Dunsmuir does not represent a categorical denial of a duty of fairness in private law, but only a direction that where a private contract of employment exists, the source, nature and consequences of such a duty in the context of a wrongful dismissal action are determined by the express or implied terms of the contract of employment and any applicable statutes and regulations rather than public law principles.

Costs of the Motions

[45] The parties agreed that $1,250 was an appropriate cost order for the successful party on the motions before me. The City succeeded in its motion to quash but not on the important issue of costs. Bearing in mind the partial success of the City, but also the increased costs resulting from the request for written submissions, the applicants shall pay the City $1,250 as costs for these motions within 30 days.

Costs of the Applications

[46] The City seeks $176,027 ($191,893 all inclusive) for its costs for defending the applications on a substantial indemnity basis. It submits that the allegations were serious and needed to be vigorously defended and these employees should have sought its relief in an action for wrongful dismissal rather than by way of application for judicial review. The City submits that its costs were increased by the necessity of responding to two applications [page319] that properly ought to have been one, and that the applicants have gained the advantage of two cross-examinations by proceeding in such fashion. Furthermore, it asks that costs be fixed and payable within 30 days.

[47] In the normal course, the successful party is entitled to costs of proceedings that are finally determined. Rule 57.03 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] requires that costs be fixed and payable within 30 days unless the court is satisfied that a different order would be more just. In this case, I agree with the applicants that it would be more just in this case that costs be determined after a determination of the wrongful dismissal action on the merits.

[48] The circumstances in this case are unusual. These public employees sought relief in the Divisional Court in accordance with the Supreme Court jurisprudence at the time. I am not persuaded that it is clear that these applications would have been unsuccessful based upon the law at the time they were brought. Most of the costs in these applications, including five days of cross-examination, arose before Dunsmuir made this application untenable in March 2008 and radically changed the legal basis and forum for relief for public employees who also hold public office in the event of dismissal.

[49] Furthermore, the employees continue to claim in the wrongful dismissal action that the City acted without procedural fairness under either the terms of their contracts or under its own Harassment and Discrimination Policy. The allegations and supporting affidavits regarding lack of procedural fairness under the policy are serious and very troubling. While the basis and forum for relief have changed, there has been no determination on the merits as to the validity of the City's actions in terminating these employees. If the court finds the City acted improperly in terminating the employees, it would hardly seem just that the employees be required to pay the City's costs in defending an application that was appropriately commenced in the Divisional Court at the time. Furthermore, it is difficult to assess to what extent the legal work will be of use in the action, in particular as it relates to the factual foundation.

[50] The April 1, 2008 motions, scheduled for just three weeks after the release of Dunsmuir, were adjourned as a result and these new motions have ensued. Most of the costs in the applications, therefore, were incurred while there was a bona fide basis to proceed with an application for judicial review.

[51] Modern costs rules are designed to foster three fundamental purposes; first, to indemnify successful litigants for the cost of litigation; second, to encourage settlements; and third, to [page320] discourage and sanction inappropriate behaviour of litigants: see Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, [1999] O.J. No. 4600 (C.A.). These purposes would not be served in the circumstances of this case by imposing cost sanctions at this time.

[52] For these reasons, I defer the issue of costs to the conclusion of the wrongful dismissal action. If the parties cannot agree on these costs, following a determination on the merits of the action, a motion may be scheduled before me on a date to be fixed by the registrar.

[53] Given that quantum was also argued before me, and it may be helpful to the parties in ultimately resolving the issue of costs, I make the following comments. First, the amount sought by the City is excessive. These applications did not go to a hearing. To a large extent, they were based upon common underlying facts. Eighteen different lawyers and law students worked on this file, often claiming the maximum hourly rate. The fact of two applications does not add significantly to the costs or unduly advantage the applicants in the action. I do not find that the material before me justifies an order of costs on a substantial indemnity basis.

Orders

[54] The motion to consolidate or stay the applications is denied.

[55] The applications are quashed.

[56] A determination of entitlement and quantum regarding costs of the applications is deferred until after the merits are resolved in the wrongful dismissal action or otherwise. If the parties cannot agree on these costs, a motion may be scheduled before me on a date to be fixed by the registrar. If further direction is required, I may be spoken to.

[57] The applicants shall pay costs of $1,250 to the respondents, all inclusive, as costs of these motions.

Applicant's motion dismissed; respondent's motion granted.