DIVISIONAL COURT FILE NO.: 1057/17 DATE: 20181108
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
C. Horkins, Bale, Labrosse JJ.
BETWEEN:
CARMINE PERRELLI
Plaintiff /Respondent
THE CORPORATION OF THE TOWN OF RICHMOND HILL
Defendant/ Appellant
Matthew Stroh, for the Plaintiff/ Respondent
Amanda Pinto, for the Defendant/ Appellant
HEARD at Oshawa: September 26, 2018
INTRODUCTION
1This is an appeal from the October 11, 2017 order of Sutherland J. (the “Motion Judge”).
2The respondent Carmine Perrelli was a municipal councillor with the Corporation of the Town of Richmond Hill (the “Town” or the “Appellant”) from December 1, 2010, to November 30, 2014.
3Under By-law 138-01 (“the severance by-law”), Mr. Perrelli was entitled to severance remuneration of $24,043.24 on November 30, 2014, the day he ceased to be a member of Council.
4A dispute arose between Mr. Perrelli and the Town about a $5,434.21 postage expense that Mr. Perrelli incurred in April 2014 and whether he should be required to reimburse the Town for this expense.
5On December 15, 2014, the Town passed By-law 135-14. This by-law resolved that Mr. Perrelli was responsible for reimbursing the Town for the postage expense and directed the Town’s staff to deduct $5,434.21 from his severance remuneration.
6Mr. Perrelli brought a motion for summary judgment. The Motion Judge granted summary judgment in favour of Mr. Perrelli. By-law 135-14 was declared “illegal and enacted in bad faith” and quashed.
7The Town appeals the order. It alleges that the Motion Judge failed to consider the Town’s limitation period defence and therefore did not provide reasons to allow for meaningful appellate review. As well, it is alleged that the Motion Judge erred in finding that the Town acted in bad faith and in quashing the entire by-law.
background facts
8The following facts are relevant to this appeal.
The Dispute between the Parties
9In 2013, Mr. Perrelli used the Town’s corporate postage account to send out a town-wide survey that cost the Town $8,573.91 in postage fees. While there was some opposition to the postage fees, the Town Council voted against a motion to require Mr. Perrelli to reimburse the Town for this expense. The Town had obtained legal advice that the postage fees were not ineligible for reimbursement.
10In April 2014, Mr. Perrelli wanted to send out another town-wide survey and sought the required authorizations from staff to use the corporate postage account. He was told by staff to wait as the Town was in the process of revising its town-wide mailing policy. Mr. Perrelli proceeded in any event and incurred $5,434.21 in postage fees that were charged to the Town’s corporate postage account.
11The Town received a formal complaint regarding the second town-wide survey. On May 12, 2014, Town Council referred the complaint to the Integrity Commissioner to ascertain if Mr. Perrelli had breached the Town’s Code of Conduct, policies and/or rules.
12In a report dated November 5, 2014, the Integrity Commissioner found that Mr. Perrelli did not breach the Council’s Code of Conduct. However, Mr. Perrelli was found to have breached one or more of the Town’s policies, procedures and rules because he did not obtain authorization to use the Town’s corporate postage rate for the town-wide survey.
13At para. 105 of the Integrity Commissioner’s report she stated as follows:
In finding that Councillor Perrelli did not have authority to access the corporate postal rate, it is not within our jurisdiction – either under the Municipal Act or the Code of Conduct - to impute penalties for violation of the Town’s policies, procedures, and rules. In the interests of fairness and due process, those penalties must be explicit in respect of democratic principles. Members of Council ought to be informed, explicitly and clearly, that a breach of the Town’s policies, procedures, and rules that govern the ethical behaviour of members of council will attract the specific penalties provided by the Municipal Act or a Council’s Code of Conduct.
14On December 15, 2014, after Mr. Perrelli had left Council, the Town passed By-law 135-14. This by-law directed staff to deduct the amount of $5,434.21 from the severance payment owed to Mr. Perrelli under the severance by-law.
15The Town deducted $5,434.21 from Mr. Perrelli’s severance remuneration and paid him $18,609.03 on December 24, 2014.
The Litigation
16On December 10, 2015, Mr. Perrelli issued a Claim against the Town in Small Claims Court seeking payment of $5,434.21 that the Town withheld under By-law 135-14. In that Claim, he pleaded that the severance by-law was valid, and that this by-law entitled him to a severance payment of $24,043.24. He claimed that neither the by-laws of the Town, nor any legislation of the Province, allowed the Town to arbitrarily withhold his severance payment. He also pleaded that the Town’s actions were without legal basis.
17Mr. Perrelli attached to his claim a copy of the decision in Methuku v. Barrow, 2014 ONSC 5277. This is a decision that involved the then mayor of the Town of Richmond Hill. The events in question happened in 2013 and 2014, while Mr. Perrelli was still on Council. The issue was whether the mayor had failed to disclose a pecuniary interest when he voted on a motion that he personally repay the Town for an over expenditure in the Town’s Marketing account. The court found on the facts of that case that the Town did not have a by-law that authorized the Town to seek “restitution or reimbursement for any over expenditure within a Town budgeted item”.
18Mr. Perrelli’s Small Claims Court action was stayed because the Claim raised the validity of municipal by-laws, an issue that falls within the jurisdiction of the Superior Court of Justice.
19On November 30, 2016, Mr. Perrelli issued a Statement of Claim in the Superior Court of Justice, once again seeking the following:
(i) a declaration that the severance by-law was valid;
(ii) payment of $5,434.21 pursuant to the severance by-law; and
(iii) interest and costs.
20The Statement of Claim alleged breach of contract and unjust enrichment and included the following paragraphs:
Neither the by-laws of the Town, nor any legislation of the Province, allow for the arbitrary withholding of payment by the Town to Mr. Perrelli.
The actions of the Town are without legal basis, constitute a breach of the contract between the Town and Mr. Perrelli, and further represent an unjust enrichment of the Town to the detriment of Mr. Perrelli.
[Emphasis added.]
21In its Statement of Defence filed on December 28, 2016, the Town pleaded the following:
(i) Mr. Perrelli is entitled to severance remuneration under the severance by-law.
(ii) By-law 135-14 authorized the Town to deduct $5,434.21 from Mr. Perrelli’s severance remuneration.
(iii) By-law 135-14 remains a valid and enforceable by-law and Mr. Perrelli’s action cannot succeed unless By-law 135-14 is quashed.
(iv) The Statement of Claim does not disclose a tenable cause of action.
(v) Mr. Perrelli’s claims are statute barred under ss. 272 and 273 of the Municipal Act, 2001, S.O. 2001, c. 25
22In April 2017, the Town served Mr. Perrelli with a motion to strike his Statement of Claim.
23On May 3, 2017, after retaining counsel, Mr. Perrelli filed a Notice of Motion returnable on June 29, 2017, seeking leave to file a Fresh as Amended Statement of Claim, a Rule 21 determination that By-law 135-14 was ultra vires the authority of the Town and summary judgment on the Fresh as Amended Statement of Claim.
24Mr. Perrelli filed an affidavit in support of his motion. This affidavit included evidence that Mr. Perrelli did not receive notice of the Town’s intention to pass By-law 135-14 or Council’s intention to invoke a penalty. In his affidavit, Mr. Perrelli also stated that he was not given an opportunity to make submissions before Council decided to adopt By-law 135-14.
25The Town filed a responding affidavit sworn by a law clerk that was based on information and belief. The affidavit did not dispute Mr. Perrelli’s evidence that he received no notice of By-law 135-14.
26The Town’s motion to strike did not proceed. Instead, Mr. Perrelli’s motions were heard by the Motion Judge on June 29, 2017.
27The Motion Judge first allowed Mr. Perrelli’s motion to amend his Statement of Claim. As well, the Town was permitted to amend its Statement of Defence to plead reliance on a statutory limitation period. The Motion Judge gave oral reasons that are not before us. Counsel at the appeal advised that they were not transcribed. Immediately after delivery of the oral reasons, the Motion Judge proceeded to hear the rest of Mr. Perrelli’s motion (motion for summary judgment and declaratory relief concerning the by-law).
The Decision of the Motion Judge
28The Motion Judge addressed one issue: Is By-law 135-14 a valid by-law or is it ultra vires or void for bad faith?
29It is agreed that the Motion Judge correctly set out the law that governs this issue. In summary, the Motion Judge stated that a by-law is presumed to be valid and enacted in good faith. The onus is on the party seeking to quash the by-law to prove bad faith. The onus is a “high one”. At paras. 21-23 the Motion Judge stated:
21 To establish bad faith, the conduct of the municipality "connotes a lack of candour, frankness and impartiality. It includes arbitrary or unfair conduct and the exercise of power to establish purposes at the expense of the public interest..."
22 The Court of Appeal in Equity Waste Management of Canada Corp. v. Halton Hills (Town) also cited the Ontario Divisional Court in H.G. Winton Ltd. v. North York (Borough) in stating:
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 its members... 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... [Citations omitted.]
23 A by-law that is passed which is a "one-shot reimbursement device" directed to a specific person alone, without notice and in response to law suit is bad faith legislation. Consequently, the legislation enacted in such circumstances should be quashed.
30The Motion Judge reviewed the factual background and noted at para. 24:
The factual circumstances that gave rise to the By-Law is not in dispute. The Town enacted the By-Law without notice to the plaintiff. There was no evidence presented that allowed the plaintiff to respond to the motion that resulted in the By-Law. The By-Law is dealing only with the plaintiff's use of the Town's postal account with Canada Post.
31At para. 25, the Motion Judge noted that the Integrity Commissioner found that the “plaintiff did not violate the reimbursement policy but did breach the policy concerning the use of the Town's account with Canada Post. Additionally, the Integrity Commissioner found that By-Law 138-01 did not permit any assessment of “penalty”.”
32The Motion Judge found that the Town did not have the statutory authority to enact By-law 135-14. He stated at para. 29 that the Town “has not directed this court to any previous by-law of the Town or any other municipality that sanctions the actions taken by the Town in these circumstances.”
33The Motion Judge’s review of the severance by-law supported his conclusion that the Town lacked statutory authority. He explained this at para. 31:
Furthermore, [the severance by-law] sets out circumstances that the Town may not pay the severance pay authorized by the By-Law. These circumstances do not include a deduction from the severance pay for "set off". The Town in effect failed to comply with the terms of its own [severance by-law], which predates the enactment of the By-Law [135-14].
34Finally, the Motion Judge pointed out that the Town’s solicitor had provided advice in 2013, following Mr. Perrelli’s first town wide survey. At para. 32, the Motion Judge explained that the Town ignored this advice:
The Town solicitor provided Council with an opinion in 2013 that the reimbursement of the expense for the survey was not ineligible. The Town solicitor also indicated to Council that the process to recover the costs by the plaintiff for the postage costs was to commence a law suit. Council ignored that advice and enacted the By-Law which determined the result Council wished to achieve: reimbursement for the postage expense incurred by the plaintiff.
35As a result, the Motion Judge found that the Town acted "unreasonably and arbitrarily and without the degree of fairness, openness and impartiality required of a municipal government." The Motion Judge therefore came “to the conclusion that Council did not have the statutory authority to enact the By-Law and that Council acted in bad faith in enacting the By-Law”. He found that the “By-Law is not sustainable” as it was “illegal” and ordered that the by-law be quashed.
GROUNDS OF APPEAL
36The Town advances the following grounds of appeal:
(i) The Motion Judge erred because he entirely failed to consider the Town’s Limitations Act, 2002 defence on the summary judgment motion. As a result, no reasons were given that allow meaningful appellate review.
(ii) The Motion Judge erred in finding bad faith against the Town.
(iii) The Motion Judge erred in quashing the entire by-law.
STANDARD OF REVIEW
37The standard of review on an appeal of a judge’s order is set out in in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness. On questions of fact, the standard is palpable and overriding error. On questions of mixed fact and law, the Court stated that there is a spectrum. Where there is an extricable legal principle, the standard of review is correctness. However, with respect to the application of the correct legal principles to the evidence, the standard is palpable and overriding error.
ANALYSIS
Failure to Consider the Limitation Period Defence
38The parties disagree on whether the limitation period issue was before the Motion Judge.
39Mr. Perrelli argues that the Motion Judge decided the limitation period in his favour on his motion to file a Fresh Amended Statement of Claim. He states that in oral reasons, the Motion Judge found that the Fresh as Amended Statement of Claim did not advance a new cause of action after the expiration of any limitation period. As previously noted, the transcription of the oral reasons is not available.
40Mr. Perrelli also argues that the Town did not raise the limitation period defence when the summary judgment motion was heard.
41The Town states that the Motion Judge did not make a final determination about the limitation period defence. The Motion Judge authorized the amendment of the Statement of Defence to include reliance on the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. and this shows it was a live issue to be decided.
42The Town’s position makes sense. It is also consistent with para. 2 of the Motion Judge’s reasons, where he states the summary judgment motion would proceed as if the Town had pleaded the limitation period defence.
43The parties each filed one factum for both motions. In the Town’s factum the limitation period was raised in response to the pleadings motion. Since the Motion Judge allowed the Town to plead this defence, it obviously continued to be a live issue on the summary judgment motion.
44The manner in which these two motions proceeded, back to back, may have caused some confusion. Either way, it is clear that the Motion Judge failed to address the limitation period defence issue and whether it raises a genuine issue requiring a trial. This ought to have been decided first.
45This is a situation where it is appropriate for this court to exercise its power under s. 134 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and decide the limitation period issue. S. 134 states:
134 (1) Unless otherwise provided, a court to which an appeal is taken may,
(a) make any order or decision that ought to or could have been made by the court or tribunal appealed from;
(b) order a new trial;
(c) make any other order or decision that is considered just.
46The limitation period issue requires the court to review the pleadings and decide if the Fresh as Amended Statement of Claim raises a new cause of action. This question can be decided on the record before us. It does not involve assessing the credibility of witnesses. As such, it is in the interests of expediency and finality to decide the issue now. To do so respects the direction in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.), where at para. 2, the Supreme Court of Canada stated"a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system." This direction applies equally to civil appellate courts (see Cook v. Joyce, 2017 ONCA 49 at paras. 77-83).
No New Cause of Action
47It is agreed that Mr. Perrelli’s Claim in the Small Claims Court was issued well within any applicable limitation period, either the one-year limitation period to quash a by-law under s. 273 of the Municipal Act, 2001, or the general two-year limitation period in the Limitations Act, 2002.
48The following analysis shows a new cause of action was not raised when Mr. Perrelli issued his Statement of Claim in this court and amended it, as allowed by the Motion Judge.
49The initial Claim sought payment of the $5,434.21 that the Town withheld. Mr. Perrelli pleaded entitlement to the full severance payment under the severance by-law. In para. 12 of the Claim, he states that, “[n]either the by-laws of the Town, nor any legislation” allowed the Town to arbitrarily withhold $5,434.21. As a result, he alleges that the “actions of the Town are without legal basis, constitute a breach of contract between himself and the Town and is an unjust enrichment to the detriment of Mr. Perrelli”. He states that the Town’s decision was “egregious behaviour” [emphasis added].
50Mr. Perrelli relied on Methuku v. Barrow and attached a copy of this decision to the Claim.
51While Mr. Perrelli did not specifically refer to By-law 135-14 in the Claim, he did refer to the Town’s “by-laws” to support his allegation that the Town’s withholding of $5,434.21 was without legal basis.
52The Town argues that this Claim did not allege that By-law 135-14 was ultra vires or passed in bad faith. “Ultra vires” describes an act that is unauthorized or beyond the scope of power granted by law.
53Pleadings should be read generously, particularly a pleading of a self-represented litigant in Small Claims Court. While the Claim does not specifically state that By-law 135-14 is ultra vires, this allegation is clearly captured by the pleading that none of the Town’s “by-laws” allowed it to arbitrarily withhold $5,434.21 and as a result, the “actions of the Town are without legal basis”.
54We note that the Town’s Defence in the Small Claims court makes no reference to any by-law to support its position that it was entitled to withhold $5,434.21 from Mr. Perrelli’s severance payment. The gist of its defence in Small Claims court was that Mr. Perrelli breached the Town’s policies procedures and rules, when he mailed the town wide survey, and for this reason the Town was entitled to be reimbursed.
55When the matter was stayed in the Small Claims court in June 2016, it was stayed because the litigation was dependent on the validity of municipal by-laws, namely the severance by-law and By-law 135-14. The Town knew that the validity of By-law 135-14 was in issue. It conceded this point in the affidavit of William Irwin that it filed on the motions before the Motion Judge. At para. 10 of the affidavit Mr. Irwin states:
On June 16, 2016, Deputy Judge Wales stayed the Small Claims Court matter and indicated that “After the Plaintiff’s evidence was completed it became apparent that the basis of the Defendant’s position, and to a lesser extent the Plaintiff’s position, was dependent on the validity of municipal by-laws”. I am advised by Ms. Pinto [the Town’s lawyer] and do verily believe that the municipal by-laws referenced were By-Law 138-01 [the severance by-law] and 135-14.
56On November 30, 2016, within the two-year limitation period, Mr. Perrelli issued his Statement of Claim in the Superior Court of Justice, seeking the same relief.
57On December 28, 2016, the Town filed a brief Statement of Defence. For the first time, the Town pleaded that it withheld $5,434.21 pursuant to By-law 135-14, that this by-law was “valid and enforceable” and that Mr. Perrelli’s claim could not succeed unless the by-law was quashed. The Town pleaded that Mr. Perrelli’s claim was statute barred and it should be struck because there was no tenable cause of action.
58Mr. Perrelli retained counsel and on May 3, 2017, served the Fresh as Amended Statement of Claim with a Notice of Motion to authorize the amended pleading and obtain summary judgment on the amended pleading. The Motion Judge allowed the amendment.
59The Fresh as Amended Statement of Claim seeks a declaration that By-law 135-14 is ultra vires, or was “otherwise passed in bad faith, to the extent that it purported to grant the [Town] the legal authority to arbitrarily and retroactively withhold payment of [the severance] following the conclusion of [Mr. Perrelli’s] elected term in office”.
60This Fresh as Amended Statement of Claim does not raise a new cause of action. Black’s Law Dictionary defines a new cause of action as being: “A claim not arising out of or relating to the conduct, occurrence, or transaction contained in the original pleading”.
61There is a difference between asserting a new cause of action and pleading new or alternative remedies based on the same facts, as stated in Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55 at para. 5.
The distinction between pleading a new cause of action and pleading new or alternative remedies based on the same facts is set out in one of the seminal cases, Canadian Industries Ltd. v. Canadian National Railway Co., [1940] O.J. No. 266 (C.A.), aff’d. 1941 16 (SCC), [1941] S.C.R. 591. The plaintiff sued for damages following the destruction of a cargo of sodium cyanide due to a derailment on the defendant's railway line. He pleaded that the defendant was a common carrier and that the goods had been damaged. The trial judge, 1940 355 (ON SC), [1940] O.J. No. 222, allowed an amendment, at trial, to plead negligence. Middleton J.A., writing for the court, held at para. 18 that the amendment was properly allowed - it was not the institution of a new cause of action, but simply an alternative claim with respect to the same cause of action: "The amendment relates to the remedy sought upon facts already pleaded."
62Mr. Perrelli’s Fresh as Amended Statement of Claim advances a new remedy; a declaration that the by-law is ultra vires. This is an alternative remedy based on the same factual matrix that was pleaded in the Claim. The factual matrix in Mr. Perrelli’s pleadings has not changed. From the outset, he has alleged that the Town’s by-laws do not authorize the withholding of $5,434.21. The legality of the Town’s conduct has always been part of the factual matrix. In the Claim, the conduct was described as “egregious”, and in the recent amendment, it is described as bad faith.
63It is acknowledged that the allegation of “bad faith” is made for the first time in the Fresh Amended Statement of Claim. However, the seriousness of the Town’s conduct was part of the factual matrix set out in the Claim that described such conduct as “egregious”. Both allegations relate to Mr. Perrelli’s pleading that the Town withheld the money “without legal basis”.
64Based on this analysis, we conclude that the Fresh as Amended Statement of Claim does not raise a new cause of action. As a result, there is no genuine issue requiring a trial with respect to the Town’s Limitations Act, 2002 defence.
Did the Motion Judge err in finding bad faith?
65The Motion Judge’s decision was made on a summary judgment motion. He found bad faith and issued a declaration that By-law 135-14 is “illegal and enacted in bad faith.” This was done without any reference in the reasons to the test for summary judgment under Rule 20 and the leading decision of Hyrniak.
66As stated in Hyrniak, there is no genuine issue requiring trial when a judge is able to reach a fair and just determination on the merits of a motion and that this would be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
67While the Town does not raise the Motion Judge’s failure to identify and apply the summary judgment test as a ground of appeal, it is important to recognize this test. In our view if it had been applied, the same result would follow.
68It is agreed that the Motion Judge correctly stated the law that governs bad faith. The grounds of appeal are matters of fact. The Town alleges that the Motion Judge misapprehended the evidence as follows:
(i) He found that the factual circumstances giving rise to the by-law were not in dispute and particularly that the Town enacted By-law 135-14 without notice to Mr. Perrelli;
(ii) He found that the Town ignored the advice of its solicitor in failing to pursue reimbursement of the postage costs by way of a law suit;
(iii) He found that By-law 135-14 was solely directed at Mr. Perrelli as a "one-shot reimbursement device";
(iv) He found that the Integrity Commissioner concluded that the severance by-law did not permit any assessment of "penalty".
69To succeed, the Town must prove a palpable and overriding error. A “palpable and overriding error” is one that is “clearly wrong”. An appellate court should not interfere with the judge’s findings of fact unless it can “plainly identify the imputed error, and that error is shown to have affected the result” (H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401 at para. 55).
70There was ample evidence on the summary judgment motion to support the findings of the Motion Judge and the decision that was made. The decision was not clearly wrong and no palpable and overriding error has been demonstrated. Although there is no reference to the summary judgment test, the Motion Judge’s reasons support a conclusion that there is no genuine issue requiring a trial.
71The dispute between the parties has been before the Courts since the Claim was issued in Small Claims Court in December 2015. While we recognize that allegations of bad faith are serious, the amount in dispute is not great. Use of the summary judgment tool in this case respects the need to promote timely and affordable access to the civil justice system.
72On the summary judgment motion, Mr. Perrelli filed a lengthy affidavit and was not cross-examined. The Town did not present any direct evidence from a person with knowledge of the situation at the Town. The Town relied solely on an affidavit from a law clerk, based on information and belief. There was no direct evidence that challenged Mr. Perrelli’s affidavit, which was based on his direct knowledge. As a result, it was open to the Motion Judge to conclude that Mr. Perrelli’s evidence was not in dispute, particularly his evidence that he did not receive prior notice of the Town’s intention to pass By-law 135-14.
73There was ample evidence, set out below, to support the Motion Judge’s decision.
74On November 25, 2013, the head of the Town’s legal department, Mr. Melitzer, advised Council, in open session, that nothing in the Town’s policies made expenses associated with Mr. Perrelli’s previous 2013 Survey ineligible for reimbursement.
75Mr. Perrelli relied on this legal opinion from the Town’s chief solicitor when he distributed the 2014 Survey because the applicable policies had not changed in the interim.
76The evidence demonstrated that the policies needed to be changed. Council had asked staff to address some of the gaps in the Member of Council Expense Policy. Staff reported to Council, but the matter was differed. The Integrity Commissioner also identified the gaps in this policy.
77The identified gaps in the Town’s policies had not been addressed when Mr. Perrelli distributed his 2014 Survey, despite discussions at both the Council and staff level to do so. Mr. Perrelli was therefore of the opinion that Mr. Melitzer’s legal opinion applied equally to his 2013 Survey and 2014 Survey, a view that the Motion Judge shared.
78The Integrity Commissioner specifically found that Mr. Perrelli did not contravene the Council Code of Conduct. While the Integrity Commissioner found that Mr. Perrelli breached one or more of the Town’s policies, procedures or rules, related to use of the corporate postage rate with Canada Post, the Integrity Commissioner found that no specific penalties were identified in the applicable policies, procedures and rules for such breaches. The Integrity Commissioner was, therefore, not even in a position to recommend any penalties, as doing so would violate democratic principles of fairness and due process.
79The Integrity Commissioner advised the Town that it should change its policies. Council decided to disregard the Integrity Commissioner’s advice and unilaterally imposed a retroactive penalty on Mr. Perrelli through the enactment of By-law 135-14.
80Mr. Perrelli’s right to severance under the severance by-law had fully vested on November 30, 2014, when he ceased to be an elected Councillor. About two weeks later the Town passed By-law 135-14 to retroactively reduce his severance by $5,434.21.
81Mr. Perrelli was not given any advance notice of the Town’s intention to pass By-law 135-14 which was, in effect, a penalty. This was contrary to the Integrity Commissioner’s recommendation that "in the interests of fairness and due process" any penalty must be "explicit" and Council members should be "informed, explicitly and clearly, that a breach of the Town's polices procedures and rules" would attract "specific penalties provided by the Municipal Act or a Council's Code of Conduct".
82Section 4.0 of by-law 135-14 was directed solely at Mr. Perrelli. He was the only person impacted by the Town’s decision to retroactively strip $5,434.21 from his severance. This part of the by-law stated that Mr. Perrelli was responsible for reimbursing the Town $5,434.21 for the postage expense. The by-law directed Town staff to set this off against what was owed to Mr. Perrelli under the severance by-law. On this evidence, it was open to the Motion Judge to find that the by-law was a “one-shot reimbursement device”.
83As the Motion Judge stated in para. 23, “[a] by-law that is passed which is a “one-shot reimbursement device” directed to a specific person alone, without notice and in response to law suit is bad faith legislation. Consequently, the legislation enacted in such circumstances should be quashed.”
84The Motion Judge also relied on the severance by-law and stated at para. 31:
Furthermore, By-Law 138-01 sets out circumstances that the Town may not pay the severance pay authorized by the By-Law. These circumstances do not include a deduction from the severance pay for “set off”. The Town in effect failed to comply with the terms of its own By-Law 138-01, which predates the enactment of the By-Law.
85The Motion Judge’s conclusion at paras. 33-35 was fully supported by the evidence:
33In the circumstances of this matter, I find that the Town acted “unreasonably and arbitrarily and without the degree of fairness, openness and impartiality required of a municipal government.”
34I therefore come to the conclusion that Council did not have the statutory authority to enact the By-Law and that Council acted in bad faith in enacting the By-Law.
35The result is that the By-Law is not sustainable and I find it illegal.
86Although the Motion Judge did not apply the summary judgment test, this analysis confirms that there is no genuine issue requiring a trial.
87Finally, the issue was raised about the Motion Judge’s analysis of ultra vires and how it forms part of the analysis of bad faith. Mr. Perrelli relies on the decision in London Lane Industrial Park Ltd. v. Richmond (City), 2005 BCCA 452 in support of his position that the passing of a by-law without statutory authority can be indicia of bad faith. We agree.
88In the end, it is not a question of whether we agree with the finding of bad faith. The finding of bad faith was available to the Motion Judge on the record before him and he made no palpable and overriding error in coming to the conclusion that the Town acted in bad faith.
Did the Motion Judge err in quashing the entire by-law?
89By-law 135-14 was a confirmation by-law passed at the end of the Town Council meeting. It provided for other resolutions to be incorporated into a by-law. The parties agree that the remainder of By-law 135-14 should not be affected by the Motion Judge’s decision. The Motion Judge should not have quashed the entire by-law.
90To correct this problem, paragraphs 2 and 3 of the Motion Judge’s order are amended to read as follows:
A declaration that section 4.0 of Town By-Law 135-14 titled “Integrity Commissioner Report – Review of a Complaint Regarding Town-wide Mailing by Councillor Perrelli” is illegal and enacted in bad faith.
An order that section 4.0 of Town By-Law 135-14 titled “Integrity Commissioner Report – Review of a Complaint Regarding Town-wide Mailing by Councillor Perrelli” is hereby quashed.
91In summary, the appeal from the decision of Justice Sutherland is allowed in part to amend paragraphs 2 and 3 of the Motion Judge’s order and the appeal is otherwise dismissed.
92Mr. Perrelli is entitled to costs of this appeal. We order the Town to pay his costs fixed at $6000 all inclusive. In our view this is a fair and reasonable amount.
Conclusion
93We make the following orders:
(1) Paragraphs 2 and 3 of the Motion Judge's order are amended to read as follows:
A declaration that section 4.0 of Town By-Law 135-14 titled "Integrity Commissioner Report - Review of a Complaint Regarding Town-wide Mailing by Councillor Perrelli" is illegal and enacted in bad faith.
An order that section 4.0 of Town By-Law 135-14 titled "Integrity Commissioner Report - Review of a Complaint Regarding Town-wide Mailing by Councillor Perrelli" is hereby quashed.
(2) Aside from the order in (1), the appeal is dismissed.
(3) The appellant shall pay the respondent costs fixed at $6000 all inclusive.
___________________________ C. Horkins J.
Bale J.
Labrosse J.
Released: November 8, 2018
CITATION: Perrelli v. Richmond Hill (Town), 2018 ONSC 6414
DIVISIONAL COURT FILE NO.: 1057/17 DATE: 20181108
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
C. Horkins, Bale, Labrosse JJ.
BETWEEN:
CARMINE PERRELLI
Plaintiff /Respondent
THE CORPORATION OF THE TOWN OF RICHMOND HILL
Defendant/Appellant
REASONS FOR JUDGMENT
Released: November 8, 2018