Ontario Harness Horse Association v. Alcohol and Gaming Commission of Ontario, 2018 ONSC 5160

CITATION: Ontario Harness Horse Association v. Alcohol and Gaming Commission of Ontario, 2018 ONSC 5160

DIVISIONAL COURT FILE NO.: 17-480-JR
DATE: 2018-09-24

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Swinton, Whitten, and Gray JJ.

BETWEEN:

ONTARIO HARNESS HORSE ASSOCIATION

Applicant

– and –

THE ALCOHOL AND GAMING COMMISSION OF ONTARIO (PREVIOUSLY THE ONTARIO RACING COMMISSION) and WOODBINE ENTERTAINMENT GROUP

Respondents

S. Stieber & N. Brankley for the Applicant

A. Harari & F. Kidman for the Respondent Alcohol and Gaming Commission

HEARD at Toronto: June 25, 2018

REASONS FOR DECISION

A. Whitten:

I. Introduction

[1] The applicant herein, the Ontario Harness Horse Association (OHHA), sought judicial review of a decision of the Ontario Racing Commission (ORC) dated June 9, 2017. Shortly after the decision ORC became subsumed within the Alcohol and Gaming Commission.

[2] The majority decision of ORC upheld an earlier decision of ORC’s Executive Director, Jean Major rendered January 7, 2016. The Executive Director had allocated certain funds - namely the Standardbred Revenue Allocation (SRA) marketing funds - between two standardbred horsepersons’ associations, OHHA and the Central Ontario Standardbred Association (COSA).

[3] In this application for judicial review, OHHA essentially argued that ORC had exceeded its jurisdiction in recognizing COSA as a horsepersons’ association capable of receiving the funds. It also took issue with the sufficiency of the reasons and the treatment of certain evidence.

II. Background

[4] In the mid-nineties, the horse racing industry in Ontario was struggling. The Ontario Horse Racing Industry Association (OHRIA) submitted a business plan in support of a proposed reduction of the pari-mutual tax, which was a tax payable every time a wager was made at a track. Ultimately, a Memorandum of Understanding and attached Business Plan (MOU/BP) was negotiated between the Ministry of Consumer and Commercial Relations (MCCR), ORC and OHRIA. OHRIA as of April 2016 was replaced by an organization known as Ontario Racing. The successor to the Ministry of Consumer and Commercial Relations is the Ministry of the Attorney General.

[5] The MOU/BP came into effect September 30, 1996. Basically, the tax reduction was still to be collected, but used in specific ways to improve the lot of those participating in the horse racing industry. The horsepersons’ share represented 1% of the amounts available. The BP required that the SRA would be shared between Thoroughbred, Standardbred and Quarter Horse Horsepeople. Each would benefit based on their respective track affiliation and the wagering level at those tracks. Twenty per cent of the amount allocated to the standardbred horsepeople was to be used for marketing purposes and to promote standardbred racing in the province.

[6] As of the time of the implementation of the MOU/BP, OHHA was the only “provincially recognized horsepersons’ association” for standardbred racing, having been formed in 1961. The term itself is not defined in either the MOU or the BP.

[7] Woodbine Raceway and Mohawk Raceway are both owned by Woodbine Entertainment Group (WEG). WEG had until December 31, 2008 a contract with OHHA as its representative horsepersons’ association and consequentially, remitted the SRA marketing funds to OHHA. With the end of the contract, WEG stopped remitting the SRA funds and instead placed them in a non-interest bearing account. Coincidentally, WEG entered into a contract with the newly formed COSA, whereby the latter was recognized as the exclusive representative of the owners, trainers, drivers, and other participants in standardbred racing at WEG owned tracks; namely Woodbine and Mohawk.

[8] This refusal to remit the funds to OHHA continued to the present time. As of the time of the Director’s decision WEG held $2,125,827.00. The Director decided that for certain time periods and for non-aligned WEG tracks a portion of the funds would be payable to OHHA, namely $515,172.41 and the rest, namely $1,610,654.59 would be payable to COSA. The Director in his decision noted

At the time these documents (the MOU/BP) were signed, OHHA was the only standardbred horseperson’s association which held contracts for the racetracks, this is no longer the case [sic]. Further, with respect to the three parties to the MOU: the Ministry of Consumer and Commercial Relations no longer exists, the Ontario Horseracing Industry Association is currently undergoing a transformation and the Ontario Racing Commission is scheduled to dissolve on April 1, 2016.

In light of these developments, it is necessary to revise the approach to the SRA funds. As stated in the May 22, 2014 letter from OHRIA to the ORC… it was hoped that the issue of the funds in trust would be dealt with during the mediation process to determine one standardbred horsepersons group. Unfortunately to date this has not occurred and this matter cannot continue to languish” [underline mine].

III. Developments in the Period of Time (Almost 7 Years) between the Failure to Remit by WEG and the Director’s Decision

[9] OHRIA, amongst other responsibilities set out in the MOU, was to assume responsibility for the resolution of disputes arising out of the allocation of revenues from the wagering dollars. Furthermore, OHRIA was to ensure that there would be no changes to the Business Plan without ORC approval and agreement by its Board of Directors.

[10] The Business Plan itself contained a dispute settlement mechanism. If there was a dispute between members of the horse racing industry as to the allocation of revenues from the wagering dollars, it was to be submitted initially to the OHRIA Board of Directors or a committee appointed by the board for non-binding conciliation.

[11] If that process was not successful, OHRIA was to refer the matter to a single retired judge of the Ontario Court of Justice (General Division) for alternative dispute resolution.

[12] Prior to the commencement of the holdback by WEG, there had been instances of tracks failing to remit the SRA to OHHA. The evidence of Brian Tropea suggests that these tracks had formed relationships with other “horseperson associations” (Tab 9, page 526 of Application Record (AR), Volume 2).

[13] On March 15, 1999, the Executive Director of ORC wrote to the Windsor track requesting that the track address SRA monies not forwarded to OHHA (see Tab 4.4 of AR).

[14] On June 25, 1995, the Director of ORC directed Sudbury Downs to remit the SRA funds to OHHA (Tab 4.4 of AR).

[15] On June 17, 2005, the Director directed the Rideau Carleton Raceway to send the SRA funds to OHHA (Tab 4.5 AR).

[16] On October 2, 2009, OHHA sought a hearing before ORC to determine the status of COSA. WEG counter moved before the Commission claiming that ORC had no jurisdiction to hold a hearing on the merits of the issue. ORC in its decision Re Ontario Harness Horse Association OHHA acceded to the WEG motion and declined to conduct a hearing as requested by OHHA.

[17] In passing, it was observed that the impact of the holdback to OHHA was substantial in that the WEG tracks generated about 80% of the Ontario wagering revenue, which is the source of SRA funding.

[18] The 2009 ORC decision is summed up in paragraph 45, which states: “Distilled to the nucleus, this controversy is squarely within the ambit of the OHRIA Business Plan dispute settlement mechanism. In the Panel’s view, that conciliation/arbitration route is the proper course”.

[19] “The contest relates to which of two unlicensed trade associations (OHHA/COSA) has status as bargaining agent for the horsepeople at WEG tracks” (paragraph 48). This was not perceived by the panel then as a racing issue. Furthermore, it lacked a public interest element, as held in Ontario Harness Horse Assn. v. Ontario Racing Commission (2002), 62 O.R. (3d) 44 (C.A.) (“Sudbury Downs”).

[20] The panel went on to say that it was not there to intervene in commercial disputes (paragraph 51).

[21] OHRIA by May 4th, 2010, sought to amend the MOU/BP to delete any references to OHHA and insert the phraseology “the standardbred horsepeople’s representative organization under contract with a racetrack licenced by ORC” (Tab 4.6 AR).

[22] This motion was significant in that it came from one of the three signatories to the MOU/BP.

[23] ORC conditionally accepted this motion, subject to certain questions (Tab 4.7 AR). The correspondence on this issue went back and forth throughout 2010 and its contents illustrate that both OHHA and COSA participated in the debate. However, by April 28th, 2010, the president of OHHA wrote objecting to the motion (Tab 4.12 AR).

[24] The correspondence of May 22nd, 2014 (three years later from OHRIA) appears to suggest that the issue of SRA funds in trust was being dealt with by way of mediation (Tab 4.14 AR).

[25] Other correspondence from the Director of ORC, namely June 13th, 2014 and July 21st, 2014, suggests that the proposed changes by OHRIA with respect to the distribution of the SRA was an ongoing issue (Tab 4.14 and 15 AR).

[26] By September 29th, 2015, OHHA correspondence to ORC suggests that the issue of “other horseperson association” was far from resolved, as OHHA was reverting back to the original phraseology of the MOU/BP, as it did in this application, in which OHHA is the only organization participating.

[27] Therefore, by the time of the Director’s decision of January 2016, the matter of the recognition of COSA as another horsepersons’ association, or the holdback by WEG had not been resolved by: 1) an order from ORC; 2) an internal resolution within OHRIA; 3) a change to the MOU/BP; 4) non-binding conciliation by OHRIA; and 5) alternative dispute resolution by a retired jurist.

[28] Given this lack of resolution, it was not surprising that the holdback grew to the significant funds that the Director dealt with in January 2016 which he characterized as having “languished”, no doubt to the detriment of the fulfilment of the original purpose for the SRA.

[29] This certainly was the view of Robert Cooke, Executive Director of Ontario Racing (the successor to OHRIA) who, in correspondence dated September 16th, 2016 to counsel for the successor to ORC, namely the Alcohol and Gaming Commission, wrote:

The Ontario Racing Association does not believe that the Standardbred Revenue Allocation (SRA) funds are best serving the horse racing industry by being made unavailable through continuous tactical and litigious maneuvring [sic] by one or more parties. These funds are significant and have been unavailable to assist the horse racing industry since 2010 – almost six years.

The Ontario Racing Association therefore supports the decision of Jean Major, ORC Executive Director, dated January 7th, 2016 regarding the disposition of the Standardbred Revenue Allocation (SRA) funds. (Tab 5.5 AR)

IV. The Decision of the Ontario Racing Commission, dated June 9th, 2017

The Majority

[30] The panel of ORC dealt with the decision of the Director as a hearing “de novo”. The two person majority ultimately concluded that the decision taken by the Director was in the best interests of racing.

[31] The background and the events over the previous six and-a-half to seven years as described above were touched upon in their reasons.

[32] The majority set out ORC’s objects and powers pursuant to the Racing Commission Act, 2000, S.O. 2000, c. 20, specifically sections 5, 6, and 7:

Section 5: The objects of the Commission are to govern, direct, control and regulate horse racing in Ontario in any and all of its forms.

Section 6: The Commission shall exercise its powers and perform its duties in the public interest and in accordance with the principles of honesty and integrity, and social responsibility.

Section 7: The Commission has power,

(a) to govern, direct, control and regulate horse racing...

[33] The majority also stated that the Rules of Standardbred Racing 2012 reinforce the broad powers of the Commission.

[34] As well, the breadth of the Commission’s powers is acknowledged in Sudbury Downs, above. The judgment of Justice Morden recognized that the Commission’s power could be exercised even though the exercise may interfere with property rights.

[35] The majority also considered Ontario Harness Horse Association v. Ontario Racing Commission, et al., 2012 ONSC 821, 290 O.A.C. 56 (Div. Ct.). In the words of Justice Lauwers, the Commission’s power to regulate and govern may involve some modification of existing legal rights, whether it be property or contractual rights. To hold otherwise, as Justice Lauwers stated, would be a “straightjacketing... inconsistent with the normal sequence of valid regulation” (at para. 82).

[36] The majority believed that “it must take into account the changing dynamics and transformations within the Standardbred horseracing industry” (para. 98). Obviously, one such change is the emergence and the establishment of COSA.

[37] The majority noted, as stated before, “provincially recognized horsepersons’ associations” is not defined in the MOU/BP; nor, for that matter, is “respective racetrack affiliations”.

[38] The majority concluded, “that the MOU/BP intends that ‘horsepeople for each of the three breeds should ‘benefit’ based upon two factors: (i) the racetrack where the separate breeds race; and (ii) the amount of money bet by the customers.” It also commented that it would be inappropriate for ORC to stipulate which association is chosen by a track.

[39] The majority referred to the history set out above, which resulted in no change and no recourse to dispute resolution. ORC was essentially the remaining signatory of the MOU/BP and existed as “the last man standing”.

[40] The majority did not give any weight to a legal opinion prepared by Heenan Blaikie of June 2009 (Tab 4.22 AR). The opinion itself has an interesting caveat in that it states:

We have not considered the broader regulatory context in which Woodbine and OHHA operate, matters relating to the current contractual situation between Woodbine and OHHA, the concerns raised over OHHA’s membership requirements or the rights of standardbred horsepeople that are not members of OHHA to benefit from the SRA Funding allocated to Marketing or Pensions.

[41] The legal opinion, according to the majority, was not tendered in accordance with the ORC procedural rules pertaining to experts and was considered “hearsay”.

[42] Noting the hitherto failure to resolve the matter, the lack of revision of the MOU/BP, the reduction of the signatories to ORC which in itself will be subsumed, the majority held that it was necessary that “a proper allocation of the SRA funds, which according to the MOU/BP are necessary for and are to be made available to assure horseracing into the future [be made]” (para. 129).

[43] The majority stated that “the continued freeze of the funds is counterproductive to the purpose and objectives of the MOU/BP” (para. 130). “Thus, despite the difficulties and challenges the facts of this case present, a decision must be made” and in so doing, the majority agreed with the administration’s submission that “ ‘the MOU/BP must be read within the context of all laws, regulations and rules applicable to the horseracing industry’ and not in a vacuum” (para. 133).

[44] The majority believed its responsibility was to interpret the MOU/BP “in the best interests of racing” and in the “public interest” (para. 134).

[45] Consequently, the majority found COSA to be a “provincially recognized horsepersons’ association” and entitled to a share of the SRA funds. That power to so recognize was found to be contained within the power “to govern, direct, control” as previously referenced in the Racing Commission Act. In closing, the majority noted how COSA had grown to represent 1,800 members who were all harness (or standardbred) horsepersons. One notes that OHHA has approximately 3,000 members.

[46] Even if this represents a substantial and fundamental change to the MOU/BP, the majority believed it was an acceptable outcome.

[47] Basically, the majority, having reviewed the progress, or lack of it, in resolving the representational issue and the consequential release of the SRA funds, believed it was time “somebody did something”. This lack of resolution was hurting the industry.

The Dissent

[48] The dissenting member of the panel also reflected on how the MOU/BP came into existence, and the developments or lack of from the time of the WEG holdback to the Director’s decision.

[49] The member characterized the action of WEG as being unilateral and without the prior approval of any of the signatories to the MOU/BP. The member held that the Heenan Blaikie opinion was admissible and agreed with the authors that WEG was not entitled to refuse to remit the SRA funds to OHHA.

[50] The OHRIA motion to delete a specific reference to OHHA as “the standardbred horsepeople’s representative” never received final approval from ORC. The MOU/BP still stands to direct the SRA funds to OHHA, yet WEG continues to fail to remit.

[51] The member noted that no concern nor complaint had been raised as to the past performance of OHHA.

[52] The member noted that there was no evidence of COSA’s ability to market and promote the industry using the SRA funds.

[53] The prior directions by ORC to the various tracks were of precedential value. The member concluded in observing (as did the majority) that the freeze of these funds was detrimental to the industry. The freeze was contrary to the MOU/BP and WEG should be directed to remit the funds as per the agreement.

V. Applicant’s Position

[54] OHHA argued that the majority exceeded its jurisdiction in unilaterally changing the designated “horsepersons’ association” contained in the MOU/BP to include COSA as a recipient of SRA funds. OHHA opined that case law did not support such a fundamental change to the original agreement. Case law such as Sudbury Downs was fact specific. By acting as it did, the applicant argued, the panel had made a fundamental change to the MOU/BP without any evidence that either the public interest or the industry interest merited such a change.

[55] The applicant questioned the sufficiency of the reasons provided by the majority to base their decision, especially so in the absence of negative evidence with respect to OHHA’s performance of its responsibilities with respect to the SRA.

[56] The applicant asserted that the majority had erred in not considering the legal opinion or what the applicant considered binding precedent. The concluding objection referred to the failure to consider that WEG did not come with “clean hands”.

VI. Applicable Law and Analysis

1. The Standard of Review

[57] The parties agree that the standard of review is that of reasonableness, a presumption that applies whenever an administrative tribunal applies or administers its home statute or rules (Horkins J. in Ontario (Director, Racing Commission) v. Ontario Racing Commission, 2016 ONSC 3312 (Div. Ct.).) The practical elements of this standard are as described in the following observations of Thorburn J. in Cotton Inc. v. Labourer’s International Union of North America, Local 837, 2016 ONSC 3524, at paras. 17-22 (Div. Ct.):

A decision is reasonable when it is justifiable and intelligible, meaning that the basis for the decision has been given, it is understandable and there is some discernible rationality and logic. The reader must be able to understand what the decision maker has done and why. The decision must fall within a range of possible, acceptable outcomes that are defensible in respect of the facts and law.

While not all evidence needs to be referred to in a decision, the more important the evidence, the greater the obligation to provide reasons for its rejection. Failure to explain the rejection of important evidence seriously affects the reasonableness of a decision.

Where findings are based upon inference made from the evidence, the reviewing court should examine the evidence that formed the basis for the inference.

Where a decision depends on credibility assessments, an appellate court, in reviewing the sufficiency of the reasons, must be sensitive to both the advantage the tribunal has over the appellate court when it comes to assessing credibility and the difficulties inherent in articulating reasons for credibility findings.

There can be more than one reasonable interpretation of legislation or more than one reasonable decision in answer to the question before the decision maker. In McLean v. British Columbia (Securities Commission), the Court stated, at para. 33:

[T]he resolution of unclear language in an administrative decision maker’s home statute is usually best left to the decision maker. That is so because the choice between multiple reasonable interpretations will often involve policy considerations that we presume the legislature desired the administrative decision maker – not the courts – to make. Indeed, the exercise of that interpretive discretion is part of an administrative decision maker’s “expertise”.

On judicial review on a reasonableness standard, the Court will not reweigh the evidence or substitute its own view of a preferable outcome. A finding of fact will be reviewed only where there is no evidence to support it.

2. Jurisdiction of the Ontario Racing Commission

[58] The seminal case on the jurisdiction of ORC is, as the majority noted, the Court of Appeal decision in Sudbury Downs.

[59] Justice Morden, writing for the panel, set out (as did the majority in the matter at hand) the objects and powers of ORC as set out in the Racing Commission Act, 2000 (para. 34).

[60] The wide scope of these powers had already been recognized by the Court of Appeal in Re Morrissey, Armstrong and Ontario Racing Commission (1958), 12 D.L.R. (2d) 772 (Ont. C.A), aff’d 1959 23 (SCC), [1960] S.C.R. 104.

[61] Justice Morden quoted Justice Roach who wrote for the panel in Re Morrissey:

One only has to look at the powers granted to the Commission to grasp and understand the wide scope of administrative powers granted to it, all with the manifest intention that the Commission should regulate horse racing as it affects those who participate in it and the public who patronize it, and that as a public sport it shall not be adversely affected by those who participate in it or any odium cast upon it (para. 38).

[62] Re Morrissey was affirmed by the Supreme Court of Canada. Justice Martland agreed with the Court of Appeal in stating that, “[t]he wide scope of administrative powers entrusted to the commission by [virtue of] the Racing Commission Act was sufficient to enable it to do what it said it would....” (para. 40).

[63] Justice Morden interpreted the phraseology of the statute, which spoke of ORC’s power to govern and regulate, to “necessarily involve the power to alter the existing landscape in some ways – providing for some modification of legal rights, including property rights” (para. 43). The responsibility of ORC with respect to the public interest and the interests of the racing industry is touched upon by Justice Morden’s reference to Driedger on the Construction of Statutes, 3rd ed. by Ruth Sullivan (Markham: Butterworths Law, 1994) at page 373:

The idea that a legislature might intend to limit the free and full enjoyment of individual property rights for the purpose of securing a public benefit or promoting the interests of a larger community is familiar to modern courts and excites little resistance. The focus is on striking an appropriate balance between individual property rights which remain important and legislative goals (para. 54).

[64] The same respect for the broad powers of the Commission and the permissible intrusion upon legal rights that the exercise of those rights may cause is reaffirmed in the Divisional Court decision in Ontario Harness Horse Association v. Ontario Racing Commission, et al. Justice Lauwers reiterated Justice Morden’s belief that the modification of the legal landscape by the exercise of the powers of the Commission would encompass contractual rights as well as property rights (at para. 82).

[65] OHHA asserts that a recognition of other horsepersons’ associations is a fundamental change to the MOU/BP, a major rewrite that goes beyond the incidental changes referred to in Sudbury Downs and Ontario Harness Horse Association v. Ontario Racing Commission, et al. Notwithstanding that assertion, the Commission reasonably concluded that any change to the MOU/BP was incidental and was in the public interest. The basic format of the SRA and the conditions that prevail over its goals and distribution remain the same. There is, with the majority decision, a recognition that there are other associations than OHHA that can be utilized in the SRA fund’s deployment for marketing purposes. The purposes of the MOU/BP remain intact.

[66] The majority decision resolved a longstanding, unresolved disagreement with respect to the distribution of the SRA marketing funds. Given the passage of time and unsuccessful efforts to address the issue, the Commission reasonably concluded that it had to act; “someone had to do something”. ORC was the only existing signatory. There was a longstanding stalemate and a significant sum of money available for the marketing of the standardbred racing industry was languishing.

[67] Had the Commission acceded to the request of the OHHA, as did the minority decision, it would have essentially left things as they were, unresolved. It was reasonable for the majority to conclude that the public interest engages the resolution of the hitherto unresolved issue of the allocation of the SRA marketing funds.

[68] While the applicant took issue with the sufficiency of the reasons, those reasons adequately explain the majority’s analysis. Moreover, the majority did not err in rejecting the legal opinion of Heenan Blaikie, which was not tendered in accordance with the procedural rules governing expert opinions. The majority was entitled to disregard this opinion.

VII. Conclusion and Costs

[69] Therefore, for all of the above, the application for judicial review is dismissed.

[70] With respect to the issue of costs, the applicant OHHA seeks $31,456.66 in partial indemnity costs. The Commission seeks $1,000.00.

[71] This litigation was in the public interest. Hopefully, the majority decision and the decision by this Court resolves this longstanding dispute to the benefit of the standardbred horse racing industry. Therefore, there will be no order of costs.

Whitten J.

I agree _______________________________

Swinton J.

I agree _______________________________

Gray J.

Date of Release: September 24, 2018

CITATION: Ontario Harness Horse Association v. Alcohol and Gaming Commission of Ontario, 2018 ONSC 5160

DIVISIONAL COURT FILE NO.: 17-480-JR
DATE: 2018-09-24

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Swinton, Whitten, and Gray JJ.

BETWEEN:

ONTARIO HARNESS HORSE ASSOCIATION

Applicant

– and –

THE ALCOHOL AND GAMING COMMISSION OF ONTARIO (PREVIOUSLY THE ONTARIO RACING COMMISSION) and WOODBINE ENTERTAINMENT GROUP

Respondents

REASONS FOR DECISION

Whitten J.

Date of Release: September 24, 2018