Wpd Sumac Ridge Wind Inc. v. Corporation of the City of Kawartha Lakes, 2015 ONSC 4164

CITATION: Wpd Sumac Ridge Wind Inc. v. Corporation of the City of Kawartha Lakes, 2015 ONSC 4164

DIVISIONAL COURT FILE NO.: 37/15

DATE: 20150813

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Sachs, Harvison Young, Gray JJ.

BETWEEN:

Wpd Sumac Ridge Wind Incorporated

Applicant

– and –

Corporation of the City of Kawartha Lakes

Respondent

Andrew Faith and Andrew Max, for the Applicant

Clifford I. Cole and Konstantine Stavrakos, for the Respondent

HEARD: Thursday, April 23, 2015 at Toronto

Harvison Young J.

Overview

1The applicant wpd Sumac Ridge Wind Inc. (“wpd” ) obtained a Renewable Energy Approval (“REA”) from the Ministry of the Environment (“the Ministry”) in December 2013. The REA authorized the construction of five industrial wind turbines (“IWTs”) and associated infrastructure in the municipality of City of Kawartha Lakes (“the City”). In this application for judicial review, wpd claims that the City has (1) deliberately frustrated the REA and (2) acted in bad faith in denying wpd the use of a roadway, Wild Turkey Road (“WTR”) which wpd characterizes as the “spine” of the project approved by the REA. It asks this court for two particular forms of relief.

2First, it seeks an order quashing the resolution passed by the City on 25 March 2014 (“the Resolution”). The Resolution (CR2014-279) provided that

… any request by wpd Canada and/or future successors for use of the unopened portion of Wild Turkey Road for property access and/or other vehicular traffic to support proposed wind turbine development be refused….

3Second, wpd seeks orders directing the City

a. To consider and decide in good faith wpd’s applications to allow for the upgrading and use of WTR;

b. To consider and decide in good faith wpd’s applications for any municipal permits necessary for the expeditious construction and operation of wpd’s Sumac Ridge Wind Project; and

c. To allow the expeditious construction and operation of wpd’s Sumac Ridge Wind Project.

4During the oral hearing, Mr. Faith for the applicant advised the court that it was not pursuing the third head of relief.

5Two submissions lie at the core of wpd’s application. The first is its claim that the City’s conduct over the past few years, culminating in and evidenced by the 25 March 2014 Resolution, leaves no doubt of the City’s opposition to and intention to prevent the construction of the Sumac Ridge Project (“Sumac Ridge”). The second is the claim that upgrading and using WTR is a central and integral part of the REA as sought and approved, so that the Resolution frustrates the REA.

6The Notice of Application also submits that the City’s “denials and delay” may either frustrate its FIT contract entirely, or require wpd to assume additional costs to extend that contract so that wpd can maintain its 20 year term. Although wpd sought an expedited hearing on this basis, it has since obtained an extension under the FIT contract and this issue was not emphasized during oral argument.

7The City asserts that its decision not to permit the upgrading and opening of WTR is a lawful exercise of its jurisdiction over roads. That jurisdiction is granted by the province and, it asserts, is not diminished by the Green Energy and Green Economy Act, 2009 S.O. 2009 C.12 (the “GEA”). The City also argues that the Resolution does not frustrate the purpose of the GEA or the REA, because wpd has alternative access routes to the construction and maintenance sites. It states that its decision

not to open and upgrade Wild Turkey Road was made having regard to the reports provided by its staff and outside independent consultant and further having regard to the public interest. [The City’s] conduct was consistent with municipal practice and not the result of bad faith.

8In addition, the City submits that wpd is not entitled to an order compelling Kawartha Lakes to reconsider opening and upgrading WTR: such an order is in the nature of mandamus, and the applicable test for such relief has not been satisfied in this case. In the course of oral argument, wpd advised the court that it would be satisfied with an order similar to that ordered by this court in East Durham Wind Inc. v. West Grey (Municipality), 2014 ONSC 4669, [2014] O.J. No. 3742 (Div. Ct.) [East Durham Wind]. There, the municipality was directed to enter into negotiations with East Durham Wind in good faith, so as not to frustrate the REA.

9The City also disputes wpd’s assertion that its conduct jeopardized the project, given that wpd obtained an extension under its FIT contract.

10At the outset of the hearing before this Court, the applicant clarified the relief it is seeking. On behalf of the applicant, Mr. Faith advised that wpd seeks the City’s permission to use an unopened road allowance (WTR). This would not require the City to open the road, which would remain an unopened road allowance. Wpd seeks a permit to widen and use the road, at its own expense, for the purpose of the Sumac Ridge Project as authorized by the REA. Mr. Faith also advised that wpd is prepared to pay the reasonable costs of indemnifying the City with respect to costs such as liability and decommissioning costs, submitting that the record shows that the City has simply refused to enter into such negotiations.

11While Mr. Faith conceded that the onus is on the party seeking to use the road to satisfy the requirements of the City, he argued that a decision to refuse is an exercise of municipal power over roads and must be exercised within its jurisdiction. The City’s jurisdiction with respect to roads is subject to s. 14 of the Municipal Act and must therefore be exercised in a manner consistent with provincial law. While wpd agrees that the City may “bargain” with respect to issues such as liability, de-commissioning costs and the like, it submits that the City cannot simply refuse to issue a road permit or otherwise act in a manner that frustrates the REA. The City replies that it may do so in the exercise of its jurisdiction over roads.

12For the reasons that follow I would allow wpd’s application as set out above (at paras. 3 a and b) on the basis that the City’s Resolution frustrates the purpose of the REA, and that in passing the Resolution the City acted in bad faith. I would emphasize that this Court has considered this application for judicial review on the basis upon which Mr. Faith framed wpd’s submission above at para. 10. That is, wpd does not seek to require the city to open WTR, but only seeks permission to upgrade it for its own use as contemplated by the REA, at its own expense, and is prepared to pay the reasonable costs to indemnify the City for liability and decommissioning costs and the like.

BACKGROUND

13In September 2010 wpd initiated a project to build and operate five IWTs within City boundaries. Sumac Ridge is one of three proposed wind farms in the area. Like many other Ontario municipalities, Kawartha Lakes is “not a willing host” to wind energy projects. In February 2012, for example, the City asked the provincial government to impose “a moratorium on approvals of IWT projects in Ontario” pending further study of their impact on human health. At a Special Council meeting on 5 February 2013, after hearing a series of presentations from residents opposed to wind turbines, City Council adopted a resolution calling on the provincial government to reject Sumac Ridge.

14In December 2013, pursuant to the GEA and applicable Regulations, the Ministry granted wpd an REA for Sumac Ridge. Among other conditions, the REA sets a three-year deadline for the construction and installation of the turbines and a nine-month deadline for concluding a Road Users Agreement with the City of Kawartha Lakes. The use of local roads, and in particular WTR, is at the heart of this application. City Council adopted the impugned Resolution – that any requests by wpd “for property access and/or other vehicular traffic to support wind turbine development be refused” – on March 25, 2014.

15The applicant wpd submits that it cannot build Sumac Ridge unless it obtains the City’s permission to open, upgrade and use WTR. It relies on the City’s February 2013 description of WTR as “a public road allowance” with no registered easements or rights of way. The City counters that wpd’s own Municipal Class Environmental Assessment (“MCEA”) identifies seven additional options for road access to the planned turbine sites. The City suggests that wpd insists on access to WTR, not because it is the only possible route, but because the alternatives would require the company to acquire or lease private land at a higher cost. It adds that wpd’s preferred option (i.e., using WTR) would bring no benefit to Kawartha Lakes. The City has moved away from its earlier description of WTR as “an unopened road allowance established by the Crown”. It now suggests that the Road is on private land, although it acknowledges that “there is no clear delineation of [WTR’s] legal location”. Wpd cites this change in position as an indication of bad faith.

16Wpd says that it advised the City early in the approval process that it wished to open, upgrade and maintain Wild Turkey Road, but the City refused to consider the issue until after the Ministry decided whether to grant the REA. The City agrees that it was advised of the plan to use WTR, but says that it never made any promise to open WTR for development and that it “consistently advised that there was no public support for the opening of Wild Turkey Road”. The City says that the Company’s plans for WTR conflict with its long-term strategy for improving and maintaining its transportation network. It also argues that “the requested opening of [WTR] would result in a private access road, constructed solely for the benefit of wpd’s commercial interests, on public property” with no public benefit.

17The issues that arise in this case, and the disputes between the parties, may most effectively be addressed through the prisms of the relief sought as outlined above. As previously noted, the overarching issues are whether the City’s actions in passing the March 25, 2014 Resolution and in relation to wpd’s requests to upgrade and use WTR constitute (1) frustration of the REA and/or (2) bad faith.

Standard of Review

18The parties agree that correctness is the appropriate standard of review for the central issue: whether the City had the jurisdiction to pass the Resolution and exercise its authority in the manner it did.

19In East Durham Wind, supra at para. 20, this Court explained that correctness is the appropriate standard where the applicant asserts a conflict between a by-law and a provincial law:

[t]he issue of whether the by-laws conflict with East Durham Wind’s REA is a question of the vires of the by-laws. The question is not whether the by-laws fall within the scope of the Municipality’s authority to regulate, but rather whether the by-laws conflict with a provincial instrument. The Supreme Court of Canada has made it clear that reasonableness, taking its colour from the context, is the standard to be applied when the question is the scope of the authority to regulate… Where the issue is conflict, this is more akin to the Superior Court of Justice’s ability to quash a by-law for illegality under s. 273(1) of the Municipal Act, and therefore the standard of review is correctness… [citations omitted]

20The City makes a few additional points with respect to the standard of review. First, it notes that reasonableness is not a basis upon which by-laws and resolutions may be challenged. Section 272 of the Municipal Act, 2001, S.O. 2001, c. 25 (“the Act”) provides that “A by-law passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law.” The City submits that while questions respecting jurisdiction are reviewed on a correctness standard, courts should take a broad and deferential approach to municipal decision making: London Taxicab Owners’ and Drivers’ Group Inc. v. London (City), 2013 ONSC 1460, [2013] O.J. No. 1039 at para. 42.

21I agree with this articulation of the standard of review.

Law and Analysis

22At this point, it is helpful to set out two principles that are not in dispute.

23First, to the extent that a municipal by-law conflicts with a provincial act or approval, the by-law is without effect.

24The Act empowers a city Council to enact by-laws regulating matters within its jurisdiction. Section 14 reads as follows:

Conflict between by-law and statutes, etc.

14. (1) A by-law is without effect to the extent of any conflict with,

(a) a provincial or federal Act or a regulation made under such an Act; or

(b) an instrument of a legislative nature, including an order, licence or approval, made or issued under a provincial or federal Act or regulation.

Same

(2) Without restricting the generality of subsection (1), there is a conflict between a by-law of a municipality and an Act, regulation or instrument described in that subsection if the by-law frustrates the purpose of the Act, regulation or instrument.

25As Rogers explains in The Law of Municipal Corporations, “it is a cardinal rule of municipal law that all by-laws are subject to the general law of the realm and are subordinate to it and any by-laws which are repugnant to or inconsistent with general provincial legislation are void and of no effect, or else superseded to the extent that the legislature has acted”: see Ian Rogers, Q.C., The Law of Municipal Corporations, loose-leaf, 2nd ed. (Toronto: Carswell, 1971) at 63.16.

26In addition to by-laws, all exercises of municipal power, including resolutions, are without effect to the extent that they conflict with a provincial act or legislative instrument. Section 5(3) of the Municipal Act requires municipal power be exercised through by-law. Thus, as this Court held in East Durham Wind, to the extent that the underlying by-law allows for the exercise of a power pursuant to a policy or resolution that conflicts with a provincial legislative instrument, it will be without effect. This is supported by a “basic principle of administrative law” as set out in Brown and Evans, Judicial Review of Administrative Action in Canada, vol. 3 loose-leaf (Toronto: Canvasback Publishing, updated 2014) at ¶15:3283:

Like other forms of administrative legislations, a rule, policy, guideline, letter of understanding, manual, or directive will be invalid if it is inconsistent with or in conflict with a statutory provision (quoted in East Durham Wind at para. 26).

27Put differently, a municipal exercise of power will be ultra vires if it frustrates the purpose of a provincial legislative instrument.

28Second, in order to determine whether a municipal exercise of power frustrates the purpose of a provincial legislative instrument and is thus ultra vires, the court must consider (1) the purpose of the legislative instrument and (2) whether the exercise of municipal power is incompatible with this purpose.

29The applicant must establish the purpose of the legislative instrument (here, the REA) and then prove that the municipal exercise of power (the Resolution) frustrates that purpose: East Durham Wind at para. 33. The standard is high. As this court stated in East Durham Wind at para. 33:

In Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536] the Supreme Court noted that the standard for invalidating provincial legislation on the basis of frustration of federal purpose is high where federal legislation is permissive in a general sense. Similarly, the Ontario Court of Appeal has directed that courts should not “struggle to create a conflict where none exists” between a municipal by-law and provincial legislative instrument: Brantford (City) Public Utilities Commission v. Brantford (City) (1998), 1998 1912 (ON CA), 36 O.R. (3d) 419 (Ont. C.A.). Rather, they should require a “clear demonstration” of the by-law’s invalidity: Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273, [2012] O.J. No. 1860] at para. 14.

30As indicated above, wpd’s first submission is that the Resolution frustrates the REA, a provincial legislative instrument, and must be quashed for that reason alone. Wpd also submits that the Resolution was passed in bad faith, as defined in East Durham Wind (at para. 50), and must be quashed for that reason as well.

31Wpd relies extensively on East Durham Wind as authority supporting its characterization of the regulatory scheme and defining municipal authority in relation to wind turbine projects that have received an REA. While the City submits that the case is distinguishable on its facts from the present case, it does not take issue with the principles set out in East Durham Wind in relation to frustration and bad faith. Given the relevance of that case to the present case, it will be useful to summarize it briefly here.

32East Durham Wind sought certain permits from the Municipality of West Grey. To construct its project, it required “‘entrance permits’ to connect access roads on private lands where the turbines [were to] be located to public highways in the municipality”. It also required “oversize/overweight haulage permits” to allow for the conveyance of large and heavy project materials by truck along public highways (East Durham Wind at para 5).

33Like Kawartha Lakes, West Grey had passed a “not a willing host” resolution. It also amended an existing by-law “to require a $100,000 performance bond for each new wind turbine constructed in the municipality” (East Durham Wind at para. 7). These actions predated East Durham’s applications to West Grey for permits. The company submitted applications for entrance permits to the municipality in anticipation of receiving its REA, and then re-applied after the approval was granted.

34West Grey ultimately refused the applications for the entrance permits. After receiving the first applications, the municipality changed the application form for entrance permits to add a category entitled “intended for industrial use” (as opposed to commercial, residential, field/bush or public street use). In addition, council amended the policy to make itself, not an administrative delegate of council, responsible for approving entrance permits intended for “industrial” use. Council then refused the permits on the basis of a particular interpretation of the method of measurement used to apply the maximum width limit for any entrance, which was 8 metres. East Durham Wind disputed that interpretation.

35West Grey’s by-law with respect to oversize/overweight vehicles contemplated various conditions to be imposed on permits. Examples included restricted travel hours, the use of police escorts, and requiring modest security for damages. An appended page also contemplated that the municipality could refuse permission altogether for “Exceptional Movement Vehicles”. East Durham Wind had attempted to negotiate a comprehensive “Road Use Agreement” for some time with West Grey before it submitted its applications for oversize/overweight permits. These broke down when the company refused to fund a peer-reviewed study on its proposed road use “without an express condition prohibiting the use of that study in any appeal of its forthcoming REA” (at para. 16). After receiving the permit applications, the council asked for more details about the $250,000 security which the company undertook to provide. East Durham Wind advised that it would post a performance bond. Council met and determined that a security contract would have to be negotiated with East Durham Wind before council would consider the applications and that could take 6-8 months. West Grey also revived the peer review issue but no agreement was reached. East Durham Wind then applied for judicial review of the two relevant by-laws, arguing that they conflicted with East Durham Wind’s REA by frustrating its purpose. The Court noted that if there was no conflict, the secondary issue was whether the permit applications had complied with the relevant criteria and should have been granted.

36The Court observed, first, that an REA is “an instrument of a legislative nature” within the meaning of s. 14(1) of the Act. Second, it noted that the test for conflict set out in s. 14 mirrors the two-pronged test for determining whether conflict exists between federal and provincial laws: see East Durham Wind at para. 30, citing Croplife Canada v. Toronto (City) (2005), 2005 15709 (ON CA), 75 O.R. (3d) 357, [2005] O.J. No. 1896 (C.A.) at para. 63.

37The central question in East Durham Wind was whether the by-laws frustrated the purpose of the REA as a provincial legislative instrument. The Court stated that East Durham Wind had to establish the purpose of the legislative instrument (the REA) and then prove that the permitting by-laws were incompatible with this purpose (see para. 26, supra). After reviewing the nature of the regulatory framework and the REA, the Court concluded (at paras. 37-38):

We find that the purpose of the GEA regime as a whole is to encourage and facilitate the development of renewable energy projects in Ontario, including wind energy projects. […]

The purpose of East Durham Wind’s REA in particular is to authorize “the construction, installation, operation, use and retiring” of its 14 turbine wind energy project on lands in the Municipality of West Grey. In other words, the purpose of the REA is to authorize East Durham Wind to build its particular wind energy project, which will contribute to the overall policy goals underlying the GEA regime. The project application went through the streamlined process described above and a REA was granted by the Director, having regard to the “public interest.” The REA itself contains 20 pages of detailed terms and conditions, including three dealing with “Traffic Management Planning” that require East Durham Wind to create a Traffic Management Plan and to make reasonable efforts to reach a “Road Users Agreement” with the Municipality and Grey County based on this plan. As noted earlier, the efforts between East Durham Wind and the Municipality to reach such an agreement have proved fruitless. [Emphasis added.]

38The Court rejected the Municipality’s submission that East Durham Wind had not shown positively that the permits were required to construct the project. It concluded that such permits were necessary for both the initial construction and the subsequent maintenance of the wind turbines. Accordingly, it declared the by-laws inoperative to the extent that they frustrated the purpose of the REA, i.e. “to authorize the building of the project in furtherance of the province’s goal of increasing renewable energy generation”: see para. 47. It also quashed two decisions of the Municipality which had rejected two approval applications, and ordered it to reconsider those applications in a manner that does not frustrate the REA, in a manner consistent with the intent and purpose of the Municipal Act. It continued to note at paras 49-50 that “acting without a rational appreciation of that intent and purpose, or for an improper purpose, will mean it acts in bad faith, citing: Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121 at p. 143.

39I will return to the issue of bad faith later in these reasons.

40As this Court held in East Durham Wind, “there is no question that the REA in this case is ‘an instrument of a legislative nature’ within the meaning of s. 14(1) of the Municipal Act”. Accordingly, to the extent that a by-law conflicts with the REA or with a provincial act such as the GEA or the Environmental Protection Act (the “EPA”), that by-law is without effect. Wpd’s REA is an approval issued under the EPA. The applicant submits that East Durham Wind and the cases upon which it relied are directly applicable to the case at bar, and consequently the Resolution must be quashed because it frustrates the purpose of the REA. The City argues that its decision not to permit the opening or upgrading of WTR is a lawful exercise of the jurisdiction over roads bestowed upon it by the province. In addition, it submits that this jurisdiction is not altered or removed by the GEA. Finally, it submits that the court should not readily conclude that its Resolution frustrates a legislative instrument. It argues that in this case, unlike in East Durham Wind, the purpose of the provincial law was not frustrated because the City’s position with respect to WTR does not render the implementation of the REA impossible.

41As already noted, the applicant must first establish the purpose of the REA. In this respect, as in East Durham Wind, the particular purpose of the REA is to authorize the “construction, installation, operation, use and retiring of [the] Class 4” Sumac Ridge Wind Project. This approval furthers the overall policy goals underlying the GEA regime, as described in East Durham Wind at para. 37:

The GEA provides a complete regime for carrying out the government’s policy in this regard. It features an economic incentive for project developers (the FIT program); a comprehensive approval process to scrutinize the potential effects of each project on the health of humans, plants and animals and to identify any conditions that might be necessary to account for local conditions (the REA); and an appeal process for REAs that utilizes a specialized tribunal (the ERT) and the oversight of the courts on questions of law. To maintain this streamlined system the ability of municipalities to restrict renewable energy development through various powers under the Planning Act and the Municipal Act has been curtailed.

42The central issue in this case is whether the Resolution frustrates the purpose just described. The City submits that the Resolution does not frustrate the REA because wpd has a number of alternatives to WTR including the use of certain private roadways. Therefore wpd’s inability to use WTR would not frustrate the REA. This argument cannot succeed.

43The REA approves the project as it was presented in wpd’s application. It is not merely an abstract approval in principle. It is a detailed and specific approval granted after an extensive and comprehensive process including consultation with the City. The REA approves five IWTs at specified coordinates, as well as “on-site access roads” in accordance with the Application submitted by the company.

44The City takes the position that “nothing in the REA Permit approves the use of Wild Turkey Road as part of the Project”. However, a review of the REA, together with the mandatory components of the Application which are incorporated into the REA itself, supports wpd’s position that the REA approves and requires the use and upgrading of Wild Turkey Road. The REA requires the construction of the “Facility” in accordance with the “Application” and the Approval. Condition A1 of the REA provides that

The Company shall construct, install, use, operate, maintain and retire the Facility in accordance with the terms and conditions of this Approval and the Application and in accordance with the following schedules attached hereto…

45The REA makes numerous references to the application and it is clear that such approvals are granted only with respect to the specific application. The REA defines “application” as the application submitted by wpd and all supporting documentation submitted with it. Wpd’s mandatory application materials make extensive reference to and thoroughly consider the use and upgrading of Wild Turkey Road. Schedule A to the REA specifies that:

The Facility shall consist of the construction, installation, operation, use and retiring of the following:

(a) five (5) wind turbine generators… sited at the locations shown in Schedule B of this Approval; and

(b) associated ancillary equipment, systems and technologies including, but not limited to, one (1) switching station, on-site access roads, below and above grade cabling, and below and above grade distribution and transmission lines,

all in accordance with the Application.

46Schedule B sets out the exact geographic co-ordinates at which the wind turbines are to be constructed. The on-site access roads” for turbines 2, 4 and 5, which according to the REA wpd “shall” construct as part of the Facility, are set out in the Application.

47In short, having reviewed the material before the court and heard the submissions of the parties I am satisfied on the record before this Court that the use of WTR is central to the REA as granted. The approval contemplates, assumes and approves the use of WTR to access the sites as the application clearly sought. This means that wpd would have to seek an amendment to the REA in order to obtain approval for alternate access routes.

48In passing, I note that the City seems to have recognized that wpd would have to seek such an amendment. In the March 9, 2015 affidavit sworn by Mr. Ron Taylor in support of the City’s position, Mr. Taylor states (at para. 99) that

[s]ince the City rejected its request in March 2014, wpd has had a year to take steps to obtain Ministry approval to modify its onsite access road network. It has elected to take no steps to do so [and] wpd is solely responsible for the position it finds itself in.

49This of course suggests that the City recognized the centrality of WTR to the REA,

50The question of whether a legislative instrument frustrates the purpose of the REA must be considered in terms of the way the REA is as it exists, not as it might be if it were amended. The comprehensive and specialized process established under the GEA is designed to provide for the consideration of such issues as access routes. In my view, it would be inappropriate for this court to effectively second-guess such determinations, particularly in a proceeding which is collateral to the REA application process as established pursuant to the GEA regime. The City made no objections to the use of WTR during that process, or at any time prior to the issuance of wpd’s REA, despite having ample occasion to do so. I will return to this below in addressing the bad faith issue.

51When the Ministry issues an REA, it approves the specific and detailed application submitted by the proposer. Consequently, the City’s argument that other access routes would be preferable to WTR is beside the point. The REA as granted contemplates WTR as the spine of the project. Refusing to permit its use as the Resolution purports to do, even if it were otherwise a legitimate exercise of the municipality’s jurisdiction over roadways, would frustrate the purpose of the REA. The Resolution must be declared inoperative to that extent. As previously noted, the City may legitimately require agreements with respect to indemnity, liability, decommissioning costs and the like. But it may not exceed the limits on its authority imposed by s. 14 of the Act.

52In short, because the REA contemplated the use of WTR as the artery of the project, the Resolution purporting to refuse wpd any use of WTR frustrates the purpose of the REA and must be quashed.

Bad Faith

53Having found that the Resolution must be quashed because it frustrates the purpose of the REA, it is not strictly speaking necessary to determine whether it should be quashed on the basis of bad faith. This issue was, however, argued before us, and addressing it here may inform further discussions and negotiations in relation to wpd’s use of WTR.

54The applicant submits that the City’s actions, as a whole, demonstrate bad faith. The City acted for an improper purpose by attempting to frustrate a provincial legislative instrument. It also acted unreasonably, arbitrarily and without the requisite fairness, openness and impartiality when it enacted the Resolution. In response (as noted at para. 6, supra), the City submits that “its decision not to open or upgrade WTR was made having regard to the reports provided by its staff and outside independent consultant and further having regard to the public interest. Its conduct was consistent with municipal practice and not the result of bad faith”. The City adds that no public interest would be served by allowing wpd to use WTR. The respondent further argues that courts are and should be unwilling to find bad faith on the part of a democratically-elected representative unless there is “no other rational conclusion” respecting their actions: see MacMillan Bloedel Ltd. v. Galiano Island Trust Committee, 1995 4585 (BC CA), 126 D.L.R. (4th) 449, [1995] B.C.J. No. 1763 (C.A.) at para 178, cited by Low J. in Uukkivi v. Lake of Bays (Township), [2004] O.J. No. 4479 at para 32.

55In Grosvenor v. East Luther Grand Valley, 2007 ONCA 55, (2007) 84 O.R. (3d) 346 at para 44, Blair J.A. considered what constitutes bad faith on the part of a municipality. He endorsed the following statement of Robins J. in H.G. Winton Ltd. v. North York:

To say that Council acted in what is characterized in law as "bad faith" is not to imply or suggest any wrongdoing or personal advantage on the part of any of its members: Re Hamilton Powder Co. and Township of Gloucester (1909), 13 O.W.R. 661. But it is to say, in the factual situation of this case, that Council acted unreasonably and arbitrarily and without the degree of fairness, openness, and impartiality required of a municipal government. [Underlining added by Blair J.A.].

56Acting for an improper purpose will also constitute bad faith:

The Municipality must discharge its public duties in accordance with the intent and purpose of the Municipal Act, and acting without a rational appreciation of that intent and purpose, or for an improper purpose, will mean it acts in bad faith: Roncarelli c. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121 (S.C.C.) at p. 143. The Municipal Act does not allow for conflict between municipal by-laws and provincial legislative instruments. (East Durham Wind at para. 50)

57In my view, the record establishes that the City acted in bad faith when it passed the Resolution for an improper purpose. It was not exercising or attempting to exercise any legitimate jurisdiction over the use of roads. As noted above, that jurisdiction is curtailed by the combined effect of the GEA scheme and s. 14 of the Act. The record indicates that the Resolution was intended to accomplish indirectly that which the City had been unable to achieve directly through the REA process: to stop the Sumac Ridge IWT project. Given s. 14 of the Act, it was not open to the City to frustrate the REA. Exercising its powers with a view to doing so amounts to bad faith, as defined above.

58The City clearly opposed the Sumac Ridge project. Like many other municipalities across Ontario, it passed an “unwilling host” by-law. In its consultation document, submitted as part of the REA process, the City urged the provincial government not to approve the project. The City was entitled to take these positions. However, it is not entitled to use its jurisdiction over roadways in order to thwart or frustrate Sumac Ridge as authorized by its REA.

59It is clear from the jurisprudence that courts must be cautious about finding bad faith. But the evidence in this case leads to one inexorable conclusion: the prohibition on wpd’s use of WTR in the Resolution was driven by the City’s opposition to Sumac Ridge, not by the legitimate exercise of its jurisdiction over roadways. I say this for five reasons.

60First, it is clear from the record that wpd attempted to negotiate for the use of WTR from early 2012. More generally, the company had tried to engage the City in discussions about the necessary municipal approvals for Sumac Ridge since early 2011. The evidence shows that the City rebuffed these efforts, indicating that it wished to go through the REA process first.

61Second, the City did not express any concerns about WTR before the REA was granted in December 2013. On March 11, 2013 the City wrote to the Director and the Ministry enclosing the Municipal Consultation Form pursuant to the Environmental Protection Act Regulation 359/09. The letter also attached Council resolution CR2013-112 and City report PLAN2013-003. The March 11 letter and its attachments comprised the City’s participation in the municipal consultation process for Sumac Ridge.

62Nowhere in the City’s response did it object to the use and upgrading of Wild Turkey Road, despite being invited to do so in the Municipal Consultation Form. Part B of that form invites municipalities to comment on proposed access routes for any renewable energy project. Section 5.2 of the form reads as follows:

Provide comment on the proposed project’s plans respecting proposed road access.

Identify any issues and provide recommendations with respect to road access.

Provide comment on any proposed Traffic Management Plans

Identify any issues and provide any recommendations with respect to the Proposed Traffic Management Plan.

63Under each of these items, the City wrote the same three words: “Development agreement required”. No other comments related to Wild Turkey Road appear anywhere on the form.

64The City explained what it meant by “Development agreement required” in relation to wpd’s proposed road upgrades and use of WTR in its report “PLAN2013-003,” submitted along with the Consultation Form. Under the heading “Consultations”, the report states at pg. 8:

Should this project be approved by the province, staff will require that the proponent enter into a development agreement to address various City interests prior to any construction activity related to this project. Those interests include but are not limited to:

Engineering Division

The project requires upgrades to municipal roads and construction of private access roads to the turbine sites. Sight lines and grading must be confirmed by an engineer. Any entrance to and from private property will require an entrance permit. The City will not assume any roads as part of this project. Road assumption requires a petition that must contain signatures from 100% of property owners fronting the road in question. Maintenance and access should be the responsibility of the applicant. All rights of way shall be left in a condition equal to or better than existing.

Land Management

Wild Turkey Road is a public road allowance in the former Township of Manvers. The Provincial Ministry office does not reveal any easements or rights of way in favour of an abutting landowner over Wild Turkey Road, therefore there is no easement information relevant to this road.

65While the Report addressed various issues that would have to be considered “should [the] project be approved by the province”, it made no objection whatsoever to the use of Wild Turkey Road. Nor did it suggest that there were alternate preferable routes. In particular, the City’s subsequent suggestion that WTR is a nature trail in need of protection could and should have been made at that time.

66Thus, despite its opposition to Sumac Ridge, the City did not express any objections to the use and upgrading of WTR between early 2012 – when it began to rebuff wpd’s attempts to discuss the use of WTR – and the successful completion of the REA process in December 2013.

67Third, the City’s arguments for refusing to allow the use of WTR have changed. As mentioned earlier, the argument that WTR was used as a nature trail only arose in the course of this application. The City previously described WTR as “an unopened road allowance established by the Crown”, but now suggests that it is on private land, although it acknowledges that there is no clear delineation of its legal location.

68Fourth, the Report to Council that formed the basis for the Resolution supports the inference that the City was motivated by its opposition to the IWT project. It contains the following paragraphs at page 6:

Given that City Council passed a resolution requesting the Province to refuse the project, staff is now seeking clarification from Council of the City’s position respecting any changes to Wild Turkey Road to accommodate the proposed development. Should Council wish to consider the opening and use of Wild Turkey Road to accommodate the proposed wind turbine development, then the proponent would be requested to consider and address the following matters: Maintenance of the road when upgraded and opened for public use (and cost to the City to maintain)…

69The Report went on to list a number of other matters that the City would need to address were it to consider the opening and use of WTR, including:

• any restoration or additional improvements required (enhanced drainage, for example);

• resultant impact on the surrounding road network and existing natural environment;

• alternative entrances on existing opened roads and private internal access; and

• potential for future development (severances) fronting Wild Turkey Road if opened.

70As I will discuss below in relation to the orders sought, these considerations relate to the proper exercise of the City’s jurisdiction over roadways. But it did not pursue any of these, choosing instead to pass a Resolution denying wpd the use of WTR altogether.

71Fifth, while the REA was pending – and following wpd’s approach to the City to discuss WTR – the City advised that the company would have to conduct a Municipal Class Environmental Assessment (“MCEA”). Wpd had embarked on this process when the REA was granted in December 2013. Despite assurances from counsel for the City that the results of the MCEA would be considered in making its decision about wpd’s use of WTR, City Council passed the Resolution before the report could be completed.

72It is impossible, in my view, to review the cumulative actions of the City in relation to wpd and its proposed use of WTR and conclude that its purpose in passing the Resolution was anything other than stopping the Sumac Ridge project. The City’s refusal to discuss the use of WTR before the REA was granted; its failure to raise the WTR issue as part of the REA consultation process; and its subsequent position that the road should not be used – all of these actions placed wpd in an untenable position. Had the City objected to the use of WTR during the REA process, those concerns could have been addressed. So could the issues that wpd now says arise with respect to the alternative routes that the City says are available to the company. Permitting the City to take issue with the use of WTR at this stage and in these circumstances, given WTR’s centrality to the project and the failure to propose alternative routes during the REA process, would permit the City to launch a collateral attack on the REA and undermine the comprehensive process set out in the GEA. This is unfair to wpd and is further evidence of improper purpose in passing the Resolution.

73In my view, the combination of all these factors leaves no doubt that the Resolution was an attempt to stop the Sumac Ridge project and was not a legitimate exercise of municipal jurisdiction over roadways. As I have stated above, the use of WTR was central to the REA. The City’s awareness of this was demonstrated by its assumption that alternate routes would require an amendment to the REA. One would have expected that the City would have marshalled any bona fide concerns about the use of WTR during the approval process. The fact that it only raised these issues after the REA was granted, despite wpd’s prior attempts to discuss the use of WTR, reinforces the view that the Resolution was passed with the intent to frustrate the Sumac Ridge project and not for the purpose of regulating local roadways.

74The City clearly and legally opposed the approval of the project in the course of the REA process. Once the REA was granted, however, it was not entitled to use its authority over roadways to collaterally attack the REA. Doing so amounted to bad faith: see Grosvenor v. East Luther Grand Valley (Township), supra at paras. 42-45.

75Accordingly, on the facts of this case, the applicant has established that the City acted in bad faith in passing the Resolution. It must be quashed on that basis, as well on the basis that it frustrated the purpose of the REA as granted.

Further relief sought

76In its material filed on this application, wpd sought orders directing the City

a. to consider and decide in good faith wpd’s applications to allow for the upgrading and use of Wild Turkey Road;

b. to consider and decide in good faith wpd’s applications for any municipal permits necessary for the expeditious construction and operation of wpd’s Sumac Ridge Wind Project; [and]

c. to allow the expeditious construction and operation of wpd’s Sumac Ridge Wind Project….

77As I indicated at the beginning of these reasons, Mr Faith advised the court that the applicant was not pursuing the relief outlined at paragraph c. He further advised that wpd would be satisfied with the same relief that had been granted in East Durham Wind requiring the City to consider the applications without frustrating the REA and in good faith.

78I agree with the City that the relief set out in paragraph c would not have been available to the applicant. As it submitted, an order of mandamus cannot compel the City to “allow the expeditious construction and operation of wpd’s Sumac Ridge Wind Project”. While, as discussed above, the City’s jurisdiction over roadways is curtailed somewhat by the Act and the GEA regime, there are legitimate considerations to be applied to wpd’s use of WTR, such as indemnity, liability and decommissioning costs. These are to be negotiated in good faith with wpd, without frustrating the REA and in good faith.

79In conclusion, the March 14, 2014 Resolution (CR2014-279) is quashed and orders will issue requiring the City to

a. consider and decide in good faith wpd’s applications to allow for the upgrading and use of Wild Turkey Road; and

b. consider and decide in good faith wpd’s applications for any municipal permits necessary for the expeditious construction and operation of wpd’s Sumac Ridge Wind Project.

80The parties advised at the hearing before this court that they had agreed that costs should be fixed in the amount of $55,000.00 to be payable by the successful party to the unsuccessful party. Accordingly, costs are payable by the City to wpd in the amount of $55,000.00 (inclusive of HST and disbursements).

Harvison Young J.

Sachs J.

Gray J.