COURT OF APPEAL FOR ONTARIO

DATE: 20000405

DOCKET: C29876

WEILER, GOUDGE and BORINS JJ.A.

B E T W E E N :

HER MAJESTY THE QUEEN IN RIGHT
OF ONTARIO as represented by the
MINISTER OF MUNICIPAL AFFAIRS
AND HOUSING

(Appellant)

–and–

TRANSCANADA PIPELINES
LIMITED, THE CORPORATION OF
THE TOWNSHIP OF BEARDMORE,
THE CORPORATION OF THE TOWN
OF GERALDTON, THE CORPORATION
OF THE TOWN OF LONGLAC, THE
CORPORATION OF THE TOWNSHIP
OF NAKINA, LONG LAKE 58 FIRST
NATION, NISHNAWBE-ASKI NATION
and GINOOGAMING FIRST NATION,
BOB GRAY, COMMISSIONER OF THE
GREENSTONE RESTRUCTURING
COMMISSION, and THE TRANSITION
BOARD OF THE GREENSTONE
RESTRUCTURING COMMISSION

(Respondents)

Dennis W. Brown, Q.C.,
R. Tzimas and J. Mitchell,
for the appellant

Richard N. Poole and
J. Bradford Nixon for the respondent
TransCanada Pipelines Limited

Alan Pratt, for the respondent
Long Lake 58 First Nation

H.W.R. Townshend, for the
respondents Nishnawbe-Aski Nation
and Ginoogaming First Nation

A. Roman, for the respondent
Bob Gray, Commissioner of the
Greenstone Restructuring
Commission

Heard: April 13 and 14, 1999

On appeal from the judgment of the Divisional Court (O’Driscoll
J.) dated December 31, 1997.

BORINS J.A.:

[1] This appeal by Her Majesty the Queen in Right of Ontario on
behalf of the Minister of Municipal Affairs and Housing (the
“MMAH” or the “Minister”) arises out of the Final Proposal and
Order of the Greenstone Restructuring Commission. The commission
was established by the Minister under s. 25.3(1) of the Municipal
Act, R.S.O. 1990, c. M. 45.

[2] The Order, which implemented the Final Proposal, amalgamated
the Townships of Beardmore and Nakina and the Towns of Geraldton
and Longlac into a single municipality to be known as the
Municipality of Greenstone. The Order also annexed to the newly
created municipality unorganized townships contiguous to the
boundaries of Beardmore, Geraldton and Longlac, and non-
contiguous unorganized territory represented by the Caramat Local
Roads Board, comprising approximately 930 square miles.

[3] Three applications for judicial review were brought to the
Divisional Court. Sitting as a single judge of that court,
O’Driscoll J. quashed the Final Proposal and Order of the
commission for reasons reported in 1997 12446 (ON SC), [1998] 2 C.N.L.R. 240. This
appeal, brought with the leave of this court, seeks to set aside
the judgment of O’Driscoll J. In addition, there is a cross-
appeal by two of the respondents, described below as NAN and GFN,
for a declaration that the Final Order and Proposal of the
commission infringe Aboriginal rights confirmed and protected by
s.35(1) of the Constitution Act, 1982.

THE PARTIES

[4] As I have indicated, the Crown has appealed on behalf of the
Greenstone Restructuring Commission (the “commission”). The
Crown’s appeal is supported by Bob Gray, who was the sole
commissioner of the commission. In addition, Mr. Gray has asked
this court to state that O’Driscoll J.’s personal criticisms of
him in his reasons for judgment were unwarranted.

[5] The first respondent is TransCanada Pipelines Limited
(“TCPL”), which owns and operates four natural gas pipelines
which run through the geographic area which is the subject of
this appeal, as well as three compressor stations located in this
area. TCPL has traditionally paid municipal realty taxes to
Beardmore, Geraldton and Longlac, and provincial land tax in
respect to the portions of its pipelines which pass through the
unorganized territory. It has received virtually no municipal
services from Beardmore, Geraldton and Longlac. As for the
unorganized territory, for the most part, it is wilderness, and
is largely unoccupied. It is the position of TCPL that the
result of the commisson’s Final Proposal and Order will be a
significant tax, or revenue, windfall for the proposed
Municipality of Greenstone (“Greenstone”). TCPL has
characterized the restructuring as a “tax grab”.

[6] Nishnawbe-Aski Nation (“NAN”) and Ginoogaming First Nation
(“GFN”) are joint respondents. NAN is an umbrella organization
representing 47 First Nations in Northern Ontario regarding
common interests arising from Treaty 9 and other matters. GFN is
an individual First Nation and is a member of NAN. The
territorial application of Treaty 9 includes lands within
Greenstone, and purports to guarantee to its beneficiaries, who
are represented by NAN, land for reserves and for hunting,
trapping and fishing, which are constitutionally protected rights
under s.35(1) of the Constitution Act, 1982. On February 24,
1986, the Governments of Canada and Ontario signed a Memorandum
of Understanding (“MOU”) with NAN, which commenced a process of
negotiation to implement self-government for the NAN First
Nations, including land claims.

[7] NAN and GFN take the position that the proposed
restructuring may result in the infringement of First Nation
constitutionally protected rights and may impede, delay or thwart
future land claims negotiations dependent on the MOU.

[8] The final respondent is Long Lake 58 First Nation (“LL58”),
a First Nation which is affiliated with NAN, but not a member of
it. LL58 comprises about 1,000 members, about 400 of whom reside
on the habitable portion of a reserve northeast of Thunder Bay.
In response to LL58’s request for an addition to the reserve for
community expansion, in 1990 the Government of Ontario stated
that it was prepared to enter negotiations with LL58 to provide a
larger land base for the reserve as a first step to entering into
comprehensive negotiations on a wide range of items, including
land claims and self-government. It is the position of LL58
that, if its lands form part of Greenstone, this would create
obstacles to the settlement of its land claim and the expansion
of its reserve and that traditional Aboriginal treaty and other
rights may be adversely affected.

LEGISLATIVE SCHEME FOR MUNICIPAL RESTRUCTURING

[9] Pursuant to Schedule M of the Savings and Restructuring Act,
S.O. 1996, c. 1, the Municipal Act was amended by repealing s. 25
and substituting ss. 25, 25.1, 25.2, 25.3 and 25.4 for the
purpose of streamlining the process of municipal restructuring.
These amendments were intended by the Ontario Government to
provide municipalities with the mechanism necessary to
restructure to better cope with new municipal responsibilities.
The new responsibilities arise from the Government’s policy of
giving greater responsibility to the municipal sector for the
costs of a number of services, including policing, sewer and
water, transit, public health and social housing.

[10] As pointed out by Osborne J.A., on behalf of this court, in
Bruce (Township) v. Ontario (Minister of Municipal Affairs and
Housing) (1998), 1998 7155 (ON CA), 41 O.R. (3d) 309 at 312:

Before 1996, municipal restructuring took place by
application to the Ontario Municipal Board under the
Municipal Act, through the process established by the
Municipal Boundary Negotiations Act, 1981, S.O. 1981,
c. 70, or by special Act of the legislature. The
1996 Municipal Act amendments substantially changed
the process for municipal restructuring.

[11] The 1996 amendment removed the Ontario Municipal Board
(“OMB”) from the restructuring process and introduced two
restructuring processes – a restructuring proposal developed by a
municipality or a local body under s. 25.2 and a restructuring
proposal developed and implemented by a commission under s. 25.3,
as occurred in this appeal. Under s. 25.4, the Minister may
establish restructuring principles that shall be considered by
municipalities, local bodies and a commission when developing a
restructuring proposal.

[12] The purposes of the restructuring legislation, as contained
in s. 25.1, are:

25.1 The purposes of sections 25.2 to 25.4 are,
(a) to provide for a process which
allows municipal restructuring to proceed in
a timely and efficient manner;
(b) to facilitate municipal
restructuring over large geographic areas
involving counties or groups of counties,
local municipalities in counties and in
territorial districts and unorganized
territory; and
(c) to facilitate municipal
restructuring of a significant nature
which may include elimination of a level
of municipal government, transfer of
municipal powers and responsibilities and
changes to municipal representation
systems.

[13] In s. 25.2(1), “restructuring” is defined as follows:

“restructuring” means,
(a) annexing part of a municipality to
another municipality,
(b) annexing a locality that does not
form part of a municipality to a
municipality,
(c) amalgamating a municipality with
another municipality,
(d) separating a local municipality
from a county for municipal purposes,
(e) joining a local municipality to a
county for municipal purposes,
(f) dissolving all or part of a
municipality, and
(g) incorporating the inhabitants of a
locality as a municipality;

[14] Section 25.3 provides for the development of a restructuring
proposal by a commission and stipulates the procedure that it
must follow. As most of the provisions of s. 25.3 are relevant
to this appeal, it is helpful to reproduce them:

25.3 (1) The Minister may establish a commission
on or before December 31, 1999 at the request of
a municipality in a locality or at the request
of 75 or more residents of an unorganized
territory in a locality. The purpose of the
commission is to develop a proposal for
restructuring municipalities and unorganized
territory in the locality or in such greater
area as the Minister may prescribe.
(2) The commission shall develop a
restructuring proposal for the prescribed
locality or for such part of it as the
commission considers advisable.
(3) A restructuring proposal shall not provide
for a type of restructuring other than a
prescribed type of restructuring.
(4) The commission shall consult with each
municipality in the prescribed locality when
developing the restructuring proposal and may
consult with such other bodies and persons as
the commission considers appropriate.
(5) The commission shall prepare a draft of
the restructuring proposal and shall give a
copy of the draft to each municipality in the
prescribed locality and make it available for
inspection by members of the public in the
prescribed locality.
(6) The commission shall hold at least
one public meeting at which any person who
attends is given an opportunity to make
representations about the draft.
(7) The commission shall invite written
submissions about the draft and shall
establish a deadline for receiving them. The
commission shall make the submissions
available for inspection by each municipality
and by members of the public in the
prescribed locality.
(8) The commission shall notify each
municipality in the prescribed locality of
its opportunity to make representations and
shall advise them where they can inspect
written submissions received by the
commission.
(9) The commission shall give notice to
the public in the prescribed locality
advising them of the opportunity,
(a) inspect the draft;
(b) to make representations at the
public meeting and to give written
submissions by the deadline; and
(c) to inspect the written
submissions received by the
commission.
(10) After considering the representations
and submissions about the draft, the
commission shall finalize the restructuring
proposal and shall give a copy of it
to each municipality in the
prescribed locality and make it
available for inspection by members
of the public in the prescribed
locality.
(11) The commission shall give notice
to the public in the prescribed locality
advising them of the opportunity to inspect
the restructuring proposal.
. . . . .
(13) The commission may make orders to implement
the restructuring proposal. For the purposes of
implementing the proposal, the commission has the
powers under a regulation made under subsection
25.2 (11).
. . . . .
(18) The Minister may, for the purposes of this
section, make regulations,
(a) establishing a commission;
(b) providing for the composition of
the commission, which may be composed of one
person;
(c) describing the locality for which
the commission shall develop a
restructuring proposal;
. . . . .
(e) establishing types of restructuring;
(20) The Minister may require that a
commission follow such procedures as the
Minister may provide, in addition to the
procedures set out in this section. [Emphasis
added.]

[15] O. Reg. 143/96, made under the Municipal Act, contains the
powers of the Minister or a commission for the implementation of
a restructuring proposal. Of relevance to this appeal is s. 2,
which states:

2. The Minister or a commission may,
   (a) annex part of a municipality to
   another municipality;
   (b) annex a locality that does not form
   part of a municipality to a municipality;
   (c) amalgamate a municipality with another
   municipality;
   (d) separate a local municipality from a
   county for municipal purposes;
   (e) join a local municipality to a county
   for municipal purposes;
   (f) incorporate the inhabitants of a locality
   as a municipality.

[16] In my view, this legislative scheme discloses that the role
of a restructuring commission is not adjudicative, in the sense
that it does not establish a process for the resolution of a
dispute between opposing parties involving a hearing in which
parties present evidence. As I discuss in detail subsequently,
the commission was intended by the legislature to supersede the
adjudicative role performed previously by the OMB in municipal
restructuring. The role of the commission in this process, which
is the restructuring of political boundaries is a political
process and, therefore, is essentially legislative, and neither
quasi-judicial nor administrative. The commission is required to
comply with the procedural conditions precedent contained in s.
25.3. In addition, it is limited to proposing the types of
restructuring stipulated in s. 25.2(1) of the Act and s. 2 of O.
Reg. 143/96, as well as O. Reg. 253/97 and the commission’s Terms
of Reference to which I will refer subsequently.

[17] As s. 25.3 makes abundantly clear, a commission is given a
broad mandate and very little discretion. As s. 25.3(2)
provides, it “shall develop a restructuring proposal” for the
locality prescribed in the regulation that creates the
commission. It cannot refuse to do so. That is its legislated
task. Its discretion is limited to whether the restructuring
proposal will encompass the whole of the prescribed locality, or
part of it, and to the type of restructuring as prescribed by s.
2 of O. Reg. 143/96, and, in this appeal, by s. 3 of O. Reg.
253/97, which established the Greenstone Commission.

BACKGROUND

[18] There is an extensive history of attempts to achieve a
restructuring of the geographic area in issue in this appeal
leading up to the appointment of the commission. The following
summary contains the relevant background.

[19] In 1974, the Town of Geraldton applied to the OMB to annex
four unorganized townships. The application was dismissed.

[20] In 1987, Geraldton applied to the OMB to annex ten
unorganized townships. After a two and one-half week hearing,
which was adjourned at Geraldton’s request, the application was
withdrawn.

[21] In 1992, Geraldton applied to the OMB to annex seven
unorganized townships, which are located within the boundaries of
the proposed Municipality of Greenstone. The application was
opposed by a number of parties including TCPL, NAN, GFN, LL58, as
well as residents of Geraldton and the impacted unorganized
townships. The Ministry of Municipal Affairs appeared as a party
and presented evidence in support of the application. After a
seven-week hearing in 1993, the OMB released its decision on
March 11, 1994. It dismissed the application, but permitted
annexation of a significantly smaller area of built-up
neighbourhoods in close proximity to Geraldton’s then boundaries.

[22] Before the OMB, TCPL opposed the application on the ground
that there was no conceivable planning justification for such a
large transfer of land, and argued that the real reason for the
application was to increase assessment and, thus, tax revenues
originating from the presence of pipelines through four of the
five townships identified in the application.

[23] The First Nations opposed the application on the ground that
it was premature because it was contrary to agreements signed
between the First Nations and the provincial and federal
governments in respect to land claims and control over resources
asserted by the First Nations over lands throughout Northern
Ontario. They argued that the application should not be
considered until the negotiations were concluded because parts of
the territory to be considered for annexation were subject to
their claims. As well, the First Nations objected to the fact
that they had not been consulted as part of the annexation
process. In summary, their position was that the annexation
would adversely affect rights acquired by them under Treaty 9,
offend agreements reached with federal and provincial governments
and adversely affect outstanding land claims.

[24] In its reasons for decision, the OMB stated that “in the
absence of one overwhelming reason to justify annexation, the
application [should] be looked at as a balancing act between the
various stances of each party, through the help of a series of
‘filters’ which assist the Board in weighing the evidence before
it”. The Board then went on to explain this approach, known in
the Board’s jurisprudence as the “three filters” test. The three
filters are:

(1) The greatest common good – a consideration of the evidence
of all the parties with a view to making a determination which,
while attempting to address individual concerns, focuses on how
best to serve the greatest common good.

(2) Common sense – taking a long term view and reflecting on how
a specific solution at this time will assist in preventing future
planning problems and in facilitating other local government
pursuits.

(3) Fairness – a consideration of whether the impact of the
Board’s decision will unfairly affect one or more of the parties.

[25] Applying the three filters test, the OMB found that an
annexation of a portion of the unorganized territories around
Geraldton was warranted, but not to the extent applied for by the
town. In its analysis, the OMB considered the concerns raised by
TCPL and the First Nations.

[26] In its reasons, the OMB addressed the concern of TCPL as
follows:

The question of the assessment generated by the inclusion
of a significant portion of the TransCanada Pipelines was
raised and warrants some consideration by the Board. If
only to reaffirm what other panels of this Board have said
on the matter, this Board wants to make clear that it
would not support an annexation that would be based solely
on the financial benefit to the Town of bringing in
pipeline-related assessment. There is no doubt that there
is a natural tendency on the part of some northern
communities where business or commercial assessment is
limited and often very difficult to increase, to look at
pipeline assessment as some kind of providential manna. It
is after all, for the most part, a large revenue generator
with little requirement for services. In this Board’s
opinion, it is only to the extent that there is some
planning or development merit to an annexation application
that it becomes justifiable to support boundaries
reflecting an appropriate annexed area, including pipelines.
Just as there is no rationale to annex strictly for the
purpose of a tax grab, there is no reason to exclude pipeline
lands when new boundaries have been drawn. [Emphasis added.]

[27] As for the concerns raised by the First Nations, the OMB
accepted that there was a formal commitment between the First
Nations and the federal and provincial governments to a
negotiation process which included negotiations pertaining to
control over lands and resources, that the process was well-
established and, although progressing slowly, was making
progress. The OMB recognized that it was reasonable for the
First Nations to advocate that the Board should not approve
annexation of territory which included their lands until the
process of land claims had been completed. It also recognized
that the First Nations had a reasonable concern regarding the
ambiguity of the province’s position with the Ministry of
Municipal Affairs actively supporting the application without
considering its effect on the land claims process.

[28] The OMB went on to conclude:

This being said, this Board, given its
legislated authority, is empowered and has an
obligation to deal with the application. While
the Board could have decided to defer
consideration of the matter for an indefinite
period of time, it would only have done so if
it had been convinced that important information
was missing or that its decision would create a
prejudicial situation to the First Nations which
would jeopardize the rights of its members or put
to question the whole negotiation process which
is underway.

The Board, in order to assess the degree
of impact of its decision, has regard for
sound planning principles. It also has
regard for fairness by trying, whenever it is
possible and practical to do so, to mitigate
any undue adverse impact of its decision on
any party. In this present case, it has
considered the interest of First Nations,
both as communities and as individuals, the
long term pursuits they have in relation to
land and their own evidence in terms of the
perceived impact of annexation. It has heard
from some of the native witnesses that they
choose not to carry out their traditional
activities in built-up or municipally
organized lands. Annexing a large amount of
land would thus have a direct impact not only
on the land negotiations but, more
importantly, on their current practices.
This is largely why the Board has chosen to
exclude from the annexation decision any land
which is not immediately adjacent to the
current town, is not already built-up or
otherwise permanently occupied or used by non-
natives. On that basis, the Board is
satisfied that it is not taking away anything
which would prejudice whatever other
negotiation process is currently underway or
impacting too much, if at all, the acquired
right of individual members of First Nations
to carry out their traditional activities
over Crown land. [Emphasis added.]

[29] Subsequent to the amendment of the Municipal Act in 1996,
municipal officials from Beardmore, Geraldton, Longlac and Nakina
began to investigate restructuring options in the form of the
“Working Group for the Evaluation of Restructuring Options in the
Beardmore/Geraldton/Longlac/Nakina Areas”. In March 1997, the
Working Group issued a report outlining the benefits of
restructuring, including the resultant increased pipeline
assessment. In this regard, the report stated:

The predominant source of savings from
these restructuring options derives from
increased assessment that would result from
enlarging the four municipalities. It is
estimated that pipeline assessment within
the four municipalities would increase by
approximately 6.7 times. This would have the
effect of increasing the total assessment of
the four municipalities combined by
approximately 121%. These estimates do not
take into account the additional assessment
associated with compressor stations as a
result of upgrading these facilities for
cogeneration.

Taxes from pipeline assessment currently
provides [sic] about 77% of total own-
purposes tax revenue of Beardmore, 25% of
total own-purposes tax revenue of Geraldton,
2% of total own-purposes tax revenue of
Longlac and no tax revenues for Nakina.
Pipeline assessment currently generates 24%
of the combined tax revenues of all four
municipalities. Following restructuring, all
other things being equal, that proportion
would rise to 63%.

[30] In April 1997, the municipalities submitted a restructuring
proposal to the Minister under s. 25.2 of the Municipal Act
entitled “The District of Grand Proposal”. It was opposed by the
respondents. TCPL, NAN, GFN and LL58 each wrote to the Minister
objecting to the proposed restructuring. In his letter to the
Minister, the Grand Chief of NAN intimated that he represented
the interests of LL58 when, in fact, he did not. On May 14,
1997, the Ministry advised the four municipalities that it would
not implement the proposal.

[31] On June 11, 1997, the Mayor of Geraldton wrote to the
Minister requesting the appointment of a commission under s. 25.3
of the Act. Subsequently, Beardmore and Longlac withdrew their
support for the restructuring proposal for the District of Grand.

[32] On June 26, 1997, at a meeting with Charles Harnick, then
the Attorney General for Ontario and the Minister Responsible for
Native Affairs, representatives of NAN requested that there be a
meeting between the MMAH and NAN, the Union of Ontario Indians
and First Nations with interests in the Greenstone area. It
appears that NAN received no response to its request.

APPOINTMENT OF THE GREENSTONE RESTRUCTURING COMMISSION

[33] On July 2, 1997, O. Reg. 253/97, made June 26, 1997, was
filed establishing the Greenstone Restructuring Commission. The
Minister appointed Mr. Bob Gray as the sole commissioner.
Omitting the Schedule referred to in s. 1, as well as s. 4, the
Regulation stated:

1. A commission is established to develop a
   restructuring proposal for the locality
   described as the Town of Geraldton, Town of
   Longlac, Township of Beardmore and the Township
   of Nakina and the unincorporated areas described
   in the Schedule in the Territorial District of
   Thunder Bay.
2. The commission shall be composed of one
   member to be appointed by the Minister.
   3.(1) The following are the types of
   restructuring that may be included in the
   restructuring proposal to be developed by the
   commission:
3. Annexing part of a local municipality
   to another local municipality.
4. Amalgamating local municipalities.
5. Incorporating a local municipality.
6. Dissolving all or part of a local
   municipality.
7. Annexing unorganized territory to a
   municipality.
8. Incorporating a county.
   (2) Subsection (1) does not include a restructuring
   that results in,

(a) an increase in the number of local
municipalities;
(b) any part of a county not being part
of a local municipality;
(c) any part of a local municipality being
part of a county if any other part of the local
municipality is not part of the county;
(d) a county consisting of a single local
municipality;
(e) territory becoming unorganized territory;
(f) unorganized territory becoming part of a
municipality that is incorporated under paragraph
3 of subsection 3 (1).

(3) Subsection (1) does not include a restructuring
of a municipality outside the locality described in
section 1. [Emphasis added.]

[34] On June 27, 1997, the Minister issued Terms of Reference for
the Greenstone Restructuring Commission which are largely
procedural and are based, for the most part, on the provisions of
s. 25.3 of the Act, ss. 2 of O. Reg. 143/96 and “A Guide to
Municipal Restructuring” published by the MMAH in August, 1996.

[35] The relevant provisions of the Terms of Reference are the
following:

PURPOSE

The purpose of the Commission is:

To develop a proposal for restructuring
the Township of Beardmore, the Town of
Geraldton, the Town of Longlac and the
Township of Nakina including the surrounding
unincorporated territory in the locality
prescribed.

To define the most appropriate form of
municipal government for this area in terms
of municipal structure, boundaries,
organization, administration and
responsibilities.

To develop a restructuring proposal that
resources and meets the needs for local
governance in an efficient and effective
manner, while respecting sense of community
and providing appropriate access and
representation.

To commence an orderly and timely
transition period.

. . . . .

MANDATE

The Commission is appointed with a
mandate to undertake the following process:

1. Review previous studies – The
   Commission shall review all applicable
   studies and information available with regard
   to the local governance issues in the defined
   locality including those materials submitted
   in support of the request for restructuring
   by the municipalities within the locality.

2. Restructuring proposal – The
   Commission shall develop a restructuring
   proposal for the prescribed locality or
   for such part of it as the Commission
   considers advisable.

3. Limitation – A restructuring
   proposal shall not provide for a type of
   restructuring other than a prescribed type
   of restructuring as set out in the
   Regulation establishing the Commission.

4. Consultation – The Commission shall
   consult with the municipalities involved
   and members of the public in the
   prescribed locality when developing the
   restructuring proposal and may consult
   with such other bodies and persons as the
   Commission considers appropriate.

5. Draft proposal – The Commission
   shall prepare a draft of the restructuring
   proposal and shall give a copy of the
   draft to affected municipalities in the
   prescribed locality and make it available
   for inspection by members of the public in
   the prescribed locality.

6. Public meeting – The Commission
   shall hold at least one public meeting in
   each affected municipality at which any
   person who attends is given an opportunity
   to make representations about the draft.

7. Written submissions – The
   Commission shall invite written
   submissions about the draft and shall
   establish a deadline for receiving them.
   The Commission shall make the submissions
   available for inspection by affected
   municipalities and by members of the
   public in the prescribed locality.

8. Notice to municipalities – The
   Commission shall notify the municipalities
   in the prescribed locality of its
   opportunity to make representations and
   shall advise them where they can inspect
   written submissions received by the
   Commission.

9. Notice to the public – The
   Commission shall give notice to the public
   in the prescribed locality advising them
   of the opportunity,

(a) to inspect the draft restructuring
proposal;
(b) to make representations at the
public meeting and to give written
submissions by the deadline; and
(c) to inspect the written
submissions received by the
Commission.

10. Final proposal – After considering
    the representations and submissions
    about the draft, the Commission shall
    finalize the restructuring proposal
    and shall give a copy of it to the
    municipalities in the prescribed
    locality and make it available for
    inspection by members of the public in
    the prescribed locality.

. . . . .

13. Commission orders – The
    Commission may make an order to implement
    the restructuring proposal. For the
    purposes of implementing the proposal,
    the Commission has the powers under the
    regulations made under subsection
    25.2(11) of the Municipal Act and the
    regulation establishing the Commission.
    The order shall be drafted by MMAH Legal
    Branch under the direction of the
    Commissioner.

. . . . .

PRINCIPLES

The following principles are to be
considered on a province-wide basis in
regard to local government restructuring.
These principles will be taken into
consideration by the Commission within
the context of local circumstances when
developing a restructuring proposal for
the designated locality.

Less Government

– fewer municipalities
– fewer elected representatives
– reduced special purpose bodies

Effective Representation System

– accessible
– accountable
– representative of population served
– size that permits efficient priority-setting

Best Value for Taxpayer’s Dollar

– efficient service delivery
– reduced duplication and overlap
– ability to capture the costs and
benefits of municipal services
within the same jurisdiction
clear delineation of responsibilities
between local government bodies

Ability to Provide Municipal Services From
Municipal Resources

– local self reliance to finance municipal
services
– ability to retain and attract highly
qualified staff

Supportive Environment for Job Creation,
Investment and Economic Growth

– streamlined, simplified government
– high quality services at the lowest
possible cost

LEGISLATIVE FRAMEWORK

The Commission shall ensure that the impacts
of the provincial government’s recent
legislative and administrative initiatives
affecting municipal government shall be
considered prior to the issuance of the
Commission’s order. The Commission’s order
shall establish a municipal government
structure that will be well positioned to
accommodate future changes to municipal
government in Ontario.

TIMING

The Commission shall begin its work on July
2, 1997.

The Commission shall finalize its proposal
and issue an order to implement a
restructuring proposal on or before September
1, 1997.

The Commission shall assist the
municipalities with the establishment of a
transition process by September 30, 1997.

THE WORK OF THE COMMISSION

[36] O’Driscoll J. made several findings concerning the manner in
which the commission carried out its mandate, a number of which
informed the conclusions that he reached. Before outlining these
findings, it is helpful to provide an overview of the evidence
contained in the six-volume record which the parties filed in the
Divisional Court. Subsequently, I will discuss whether certain
of the affidavits filed by the parties were properly before the
Divisional Court and properly considered by O’Driscoll J.

[37] The appellant filed an affidavit of Douglas Barnes, the
Director of the Local Government Policy Branch of the MMAH, which
described the restructuring process under the 1996 amendments to
the Municipal Act. In addition, the appellant filed an affidavit
sworn by Ian Douglas Smith who, since 1986, was the manager in
the Northwestern Regional Office of the Regional Operations
Branch of the MMAH, located in Thunder Bay. This is a lengthy
document which, with its attached exhibits, comprised 867 pages.
It contained in substantial detail the background leading up to
the appointment of the Greenstone Restructuring Commission
together with the process followed by the commission. Finally,
the appellant filed the affidavit of Robb Anderson, Municipal
Advisor to the MMAH, who provided support to the commission,
including acceptance, compilation and distribution of
submissions, the provision of notices, the arrangement of
meetings, the recording of proceedings and the preparation and
distribution of commission reports. The focus of his affidavit
is the extent of consultation between the commission and the
representatives of the First Nations.

[38] TCPL filed five affidavits. Richard Johnston’s affidavit
indicated that the proposed Municipality of Greenstone will
receive a significant revenue windfall at no cost to it by virtue
of the fact that TCPL would receive no municipal services from
the realty tax it would be required to pay. It was his opinion
that the intent of the restructuring proposal is to raise
additional realty tax revenue from TCPL. A similar opinion was
expressed by Enid Slack in her affidavit. She was retained by
TCPL because of her extensive experience in municipal finance and
governance in Ontario. She testified on behalf of TCPL at the OMB
hearings initiated by Geraldton in 1993. She also expressed the
opinion that Geraldton’s 1993 application was motivated by its
desire to obtain significant new realty tax revenue from TCPL.
Based upon her review of the evidence before the Greenstone
Restructuring Commission, she concluded that the commission
failed to conduct a financial impact study and was of the opinion
that neither the four municipalities, nor the commission, was
able to demonstrate any significant cost savings resulting from
restructuring. She concluded: “It is my opinion that this
municipal restructuring, through amalgamation and annexation, is
a ‘tax grab’.”

[39] Robert Lehman, a registered land use planner, has been
retained by TCPL since 1988. He prepared two reports in 1993
arising from Geraldton’s application before the OMB, which form
part of his affidavit. He also conducted a study of all
applications for annexation in Northern Ontario dealt with by the
OMB prior to May 1996, from which he discerned that the OMB had
identified, and applied, four “justifiable reasons” for the
enlargement of municipal boundaries. Like Ms. Slack, he
extensively attacked the commission’s restructuring proposal on
planning principles, as well as on what he perceived to be the
commission’s failure to apply the principles prepared by the
Minister to guide municipal restructuring contained in the
Commission’s Terms of Reference.

[40] In addition, TCPL filed affidavits from Bruce Hall, a
consulting land use planner, and Dana Anderson, a registered
professional planner, retained by TCPL. In general, they are
critical of the restructuring proposal for a number of reasons
which include the commission’s rejection of the vast majority of
the oral and written submissions opposed to its draft proposal
and the belief that the premise of the proposal was to expand
municipal boundaries for the purpose of increasing municipal
assessment and tax revenues derived from TCPL to offset the
perceived costs of provincial downloading of service delivery
responsibility.

[41] As I will discuss when I analyze the issues presented by
this appeal, in my view, it is clear that the purpose of the very
substantial body of evidence which TCPL placed before the
Divisional Court was to attempt to demonstrate that the
commission’s restructuring proposal was either incorrect, or
patently unreasonable.

[42] NAN and GFN filed the affidavits of the Grand Chief of NAN,
Charles Fox, Peter Moonias, Lawrence Towegishig and Chief Gabriel
Echum of GFN.

[43] Grand Chief Fox provided evidence concerning Treaty 9 and
ongoing self-government and land claims negotiations. He
expressed his concern that the restructuring proposal “may
affect” the constitutionally protected rights of First Nation
members to use the lands encompassed by the proposal for the
traditional purposes of hunting, trapping and fishing, and that
the proposal “will make more difficult” the ongoing negotiations.
He stated that the proposed municipality of Greenstone may pass
by-laws regulating, or prohibiting, the discharge of firearms
which will affect the use of the land by First Nation members,
with the result that they will have to assume the expense of
constitutionally challenging any such by-law. Peter Moonias, the
Chairman of the Matawa Tribal Council, Chief Echum, and Lawrence
Towegishig, the Deputy Chief of GFN, also expressed their
concerns about possible infringements of constitutionally
protected rights. In addition, Deputy Chief Towegishig expressed
his concern that the inclusion of traditional aboriginal burial
sites in the proposed municipality would sever the link which
members of the GFN have with the land.

[44] Grand Chief Fox, Mr. Moonias and Chief Echum provided
evidence respecting their consultation with the commission. Grand
Chief Fox stated that the only consultation he had on behalf of
NAN was a meeting with the commission on July 6, 1997 to convey
NAN’s opposition and a letter to the commission of July 28, 1997,
following the receipt of its draft report, expressing NAN’s
opposition to it. In his view, “this amount of consultation was
inadequate since the amount of the affected land and the
importance of the rights of the Nishnawbe-Aski should require
more in depth consideration”. The only consultation with NAN of
which Mr. Moonias was aware was a meeting with the commission in
Thunder Bay which he attended with Grand Chief Fox. He felt that
the views of NAN were not considered seriously by the
commissioner whom, he believed, had essentially made up his mind
about restructuring as illustrated by the fact that the
commissioner was speaking about a transition team. Chief Echum
said that the only consultation which his First Nation had with
the commission was the same meeting attended by Grand Chief Fox
and Mr. Moonias.

[45] The evidence tendered by LL58 focused on the impact of the
restructuring proposal on its land claim which was launched in
1995. Frank Onabigon, an elected member of the Council of LL58,
described the land claim in considerable detail, including the
historical facts supporting it. He described its purpose as
securing a negotiated agreement that would formalize LL58’s
ownership of, and its governance over, lands within its
traditional territory. He explained that LL58’s aspirations for
self-government would be complicated and hampered by the
extension of municipal jurisdiction into areas that have
traditionally been free of municipal organization. He stated
that the commission made no attempt to involve LL58 in its work,
and that LL58 did not participate in any of the consultation
sessions it arranged. In his opinion, the commission completely
failed to take into account the interests of the members of LL58
in making its restructuring proposal.

[46] Paul Williams is a lawyer who, since 1982, has acquired
significant experience in First Nations land rights, or claims.
Based on his experience, it was his opinion that an Aboriginal
claimant involved in negotiations concerning land which is within
a municipality is at a distinct disadvantage compared to a
claimant negotiating in respect to land which is without
municipal organization. Mr. Williams provided extensive reasons
for his opinion, and concluded as follows:

The extension of municipal boundaries will “create”
financial and political reasons which did not exist
before to prevent the Ojibway people form securing
their just rights. The extension would also allow
a provincial government and federal governments to
find refuge from their legal and fiduciary obligations.

[47] In addition to the extensive documentary record, the record
before the Divisional Court also contained transcripts of the
cross-examinations of most of the deponents, as well as the
examination of Christopher Rees, a consultant retained by the
commission.

[48] The appellant presented no evidence which refutes the
evidence tendered by the First Nation respondents in support of
their objections to a restructuring proposal which placed the
lands that they occupy within a newly created municipality and
subject to municipal governance.

[49] In dealing with O’Driscoll J.’s findings in respect to the
workings of the commission, I intend to review only his findings
concerning the assistance provided to the commissioner by certain
individuals, the consultation undertaken by the commissioner with
representatives of the First Nation respondents and the response
made to the draft restructuring proposal by TCPL and NAN. These
findings are relevant to a number of the conclusions reached by
the commissioner in the reasons he provided for the Final
Proposal and Order.

[50] I have confined my findings to these areas because, as I
will explain in my analysis of the grounds of appeal, I am
satisfied that the commissioner complied fully with the
procedural requirements contained in the legislative scheme
governing the process of the commission. In this regard, it is
to be remembered that s. 25.3 (2) to (15) of the Municipal Act
contain a procedural code of conditions precedent to a commission
exercising its powers to develop a restructuring proposal, which
are supplemented by s.25.4 of the Act, O. Reg. 143/96 and O. Reg.
253/97. I accept, as accurately demonstrating that the
commissioner complied with the relevant procedural requirements,
Appendix “A” to the factum filed by counsel for Bob Gray.

[51] As for the assistance provided to the commissioner, before
embarking on his mandate, Mr. Gray retained a consultant,
Christopher Rees. Mr. Rees prepared the commissioner’s draft and
final proposals by following the commissioner’s instructions
concerning their contents. He did so with some assistance from
Robb Anderson and Ian Smith, who were employees of the MMAH. Mr.
Anderson read and provided comments with respect to the draft
proposal. The Final Proposal and Order were finalized during two
meetings attended by the commissioner, Mr. Rees, Mr. Anderson,
Mr. Smith and Ms. Yeta Herscher, a lawyer employed by MMAH, who
was counsel to the commission.

[52] Mr. Anderson, who kept the records of the commission at the
MMAH office in Thunder Bay, spent the majority of his time in
July and August 1997, working with the commission. He attended
most of the public meetings and statutory consultations
undertaken by the commissioner. As well, Mr. Anderson drafted
portions of the draft and final proposals. Mr. Smith provided
the commissioner with selected documents used during the 1993 OMB
hearing. However, he did not provide him with the reports
prepared for the hearings on behalf of TCPL by Ms. Slack and Mr.
Lehman, on which the OMB relied in reaching its decision.
Although the commissioner asked Mr. Smith to contact “the
aboriginal groups in the area”, he did not contact LL58. In this
regard, it was agreed by the parties on the argument of this
appeal that Mr. Smith was of the mistaken belief that NAN
represented LL58.

[53] As for the consultation which the commissioner had with
representatives of the respondent First Nations, O’Driscoll J.
found that on July 6, 1997 he met with Grand Chief Fox, Chief
Echum and Mr. Moonias representing NAN and GFN. Nobody on behalf
of LL58 attended this meeting. Grand Chief Fox informed the
commissioner that there were outstanding legal questions
concerning Aboriginal and treaty rights that could not be
resolved by the commission, and requested a meeting with the
Minister. No information was ever provided to the commission
respecting LL58’s treaty rights or land claim, nor was LL58 ever
provided with the opportunity to make submissions in respect to
the draft proposal.

[54] O’Driscoll J. also found that the commission made no contact
with the Ontario Native Affairs Secretariat, which is responsible
for native land claims in Ontario, nor with the Ministry of
Natural Resources, to determine the status of LL58’s land claim
or other outstanding issues with the Ontario government.

[55] By his letter of July 28, 1997, Grand Chief Fox of NAN
provided his comments on the draft proposal to the commissioner.
He said, in part:

The Commissioner’s Restructuring Proposal does
not indicate any due consideration for treaty
and aboriginal rights, rights which the Treaty
9 Parties submit were required to be considered
by the Commissioner. Ontario is a signatory to
Treaty 9, but the Commissioner’s Restructuring
Proposal fails to recognize Ontario’s
obligations under the Treaty. The Proposal
does not strive to interfere with treaty and
aboriginal rights as little as possible, as
required pursuant to s. 35 of the Constitution
Act. …

The Commissioner’s Restructuring Proposal was
also developed without regard to the province’s
fiduciary obligation to the Treaty 9 Parties.
No consideration whatsoever is given to the
fact that Ontario is a signatory to Treaty 9, a
Treaty which the Treaty 9 signatories submit
was intended to promote sharing of the lands
and resources by aboriginal and non-aboriginal
parties in the area, not to permit, as set out
in the Restructuring Proposal, a wholesale
takeover by municipalities of a vast area of
land within our treaty territory. In the view
of the Treaty 9 Parties, Ontario has a
fiduciary obligation to ensure that the Treaty
obligations are met, including provision of
reserve lands in accordance with that Treaty
and respecting the Treaty rights to hunt, trap
and fish; this obligation is clearly paramount
to any discretionary expansion of municipal
territory to include significant portions of
the Treaty territory.

[56] On July 28, 1997, counsel for TCPL provided the commissioner
with his client’s response to the draft proposal. His letter
stated, in part:

TCPL owns and operates 7,460 kilometres of
pipeline in the province of Ontario; 5,329
kilometres run through Northern Ontario. TCPL
annually pays approximately $50 million in
property taxes in the province of Ontario; $30
million of these taxes, including provincial
land tax, are paid in Northern Ontario.

TCPL is a significant investor throughout
Northern Ontario and is a significant ratepayer
in the Township of Beardmore and the Town of
Geraldton. In 1996, TCPL paid municipal taxes
of $580,580 to the Township of Beardmore and
$685,670 to the Town of Geraldton. …

The Draft Restructuring Proposal is completely
devoid of the necessary financial analysis
required for the Commission to fulfil its
mandate. There is no estimate of the financial
impact of the restructuring options. There is
no estimate of the financial impact of recent
provincial government initiatives. There is no
estimate of the impact of this restructuring
upon the economic viability of these
municipalities nor any consideration of the
proposed provincial property tax reform. There
is no analysis of the impact of this
restructuring on the efficiency and costs of
the delivery of services and municipal
administration.

FINAL RESTRUCTURING PROPOSAL AND ORDER

[57] The commissioner released his Final Proposal and Order on
August 29, 1997. Although not required to do so, he provided
extensive reasons in support of the Final Proposal. At the
outset, he observed that the commission’s mandate required “that
it determine the most appropriate form of municipal government
for the area in terms of municipal structure, boundaries,
organization, administration and responsibilities”. Subsequently
he added:

The Commission interprets its mandate to create
the simplest, most flexible, directly
accountable form of municipal government to
meet the challenges of the future particularly
in the light of recent and proposed future
changes in responsibilities attached to all
levels of government [announced by the
Government of Ontario].

[58] After outlining the commission process, background
information, the size and extent of the area, the local economy
and current local government structures and relationships, the
commissioner described “the principal issues raised by the
consultation”. Among the issues raised which are relevant to
this appeal, are the following:

5. What should be the Commission’s response to the
   position of TransCanada Pipelines?

6. What should be the Commission’s response to the
   position of the Nishnawbe Aski Nation and the Treaty
   9 Parties?

[59] The commissioner then proceeded to consider the views
expressed by individuals and municipalities in response to the
draft proposal. He extensively considered the objections of TCPL
and NAN.

[60] It is helpful to reproduce in its entirety the
commissioner’s response to the concerns raised by TCPL:

The Commission can understand the frustration
of TransCanada Pipelines with respect to the
way in which it pays property taxes in the
Province of Ontario, particularly in Northern
Ontario where its lines run through large
amounts of unincorporated territory. The
assessment of the pipelines is a natural
temptation to all municipalities to enlarge
their boundaries to capture that assessment and
thereby increase tax revenues - particularly at
a time when many municipalities are facing
increased responsibilities. TransCanada
Pipelines will do all it can to resist
municipal expansion which it interprets simply
as a “tax grab”. On the other hand,
municipalities have an obligation to their
residents to manage the municipality in the
best way they can and they would be remiss if
they did not consider all opportunities for
enlarging their assessment base. The
Commission can state, nevertheless, that
capturing more pipeline assessment must not be
the primary reason or fundamental basis for
municipal restructuring. For this reason,
while the Commission is prepared to extend
external municipal boundaries in the Orient Bay
(populated, presence of numerous businesses,
economic development potential, need for
services such as fire protection), it does not
see the justification for extending eastwards
to the Klotz Lake area.

The Commission understands that the Province is
currently reviewing the way in which
TransCanada Pipelines (TCPL) pays property
taxes and that changes may occur in the future.
However, for the present, the Commission can
simply acknowledge the existing system and the
antagonism it generates between TCPL and some
municipalities.

This being said, TCPL contends that “municipal
restructuring may properly be addressed without
necessarily expanding municipal boundaries”.
The Commission agrees that such a case may be
possible but points out that its mandate is
precisely to consider all options and make its
restructuring decision – including whether or
not boundaries need to be changed – in the best
interests of all parties – not just the
interests of one of them. The Commission can
state categorically that the principles of the
greatest common good, common sense and fairness
has [sic] guided its decision.

TCPL further admonishes the Commission for the
lack of financial analysis required for the
Commission to fulfill its mandate: financial
impact of restructuring options; financial
impact of recent government initiatives; impact
of restructuring upon the economic viability of
the municipalities; consideration of the
proposed provincial property tax reform; impact
of restructuring on the efficiency and cost of
the delivery of services and municipal
administration.

The Commission has a mandate to “review all
applicable studies and information available
with regard to the local governance issues
…..”. The Commission has done so including
studies and information of which it was already
aware as well as those referenced during the
consultations. Whenever the Commission has
identified the need for further financial
impact analysis beyond existing studies and
information, it has held appropriate
consultations to investigate likely parameters.
The Commission, however, is not under the
illusion that it can know all of the financial
impacts in advance of any option that is
selected or in advance of a measure actually
being implemented. It must use its best
judgment and the Terms of Reference for the
Commission state only that it “shall ensure
that the impacts of the provincial government’s
recent legislative and administrative
initiatives affecting municipal government
shall be considered (emphasis added) prior to
the issuance of the Commission’s order”.
The Commission has to the best of its ability
considered such impacts and makes its decision
on the basis of its consideration. [Emphasis
added.]

[61] The portion which I have italicized in the third paragraph
of the commissioner’s reasons is a statement of the “three
filters” guideline formerly applied by the OMB in considering
applications for municipal restructuring. The paragraph from the
commissioner’s reasons that I have reproduced in paragraph 57 is
the final paragraph of the commissioner’s response to the
concerns of TCPL.

[62] As for the opposition to the draft proposal raised by NAN,
the commissioner responded as follows:

The Grand Chief of the Nishnawbe-Aski Nation
(NAN) prepared a submission to the
Restructuring Commission. The submission draws
attention to the decision of the Ontario
Municipal Board of 1994 with respect to an
annexation application by Geraldton, wherein it
is stated that the Board:

“…. has regard for fairness by trying, whenever
it is possible and practical to do so, to
mitigate any undue adverse impact of its
decision on any party. In this present case,
it has considered the interest of First
Nations, both as communities and as
individuals, the long term pursuits they have
in relation to land and their own evidence in
terms of the perceived impact of annexation.
It has heard from some of the native witnesses
that they choose not to carry out their
traditional activities in built-up or
municipally organized lands. Annexing a large
amount of land would thus have a direct impact
not only on the land negotiations, but, more
importantly, on their current practices. This
is largely why the Board has chosen to exclude
from the annexation decision any land which is
not immediately adjacent to the current town,
is not already built-up or otherwise
permanently occupied or used by non-natives. On
that basis, the Board is satisfied that it is
not taking away anything which would prejudice
whatever other negotiation process is currently
underway or impacting too much, if at all, the
acquired right of individual members of First
Nations to carry out.” [Emphasis added in
submission by Treaty 9 Parties.]

The Commission agrees with this summation by
the OMB and indeed agrees that the existence of
two different systems to transfer land from the
Province to municipalities on the one hand and
to First Nations on the other “creates a great
deal of confusion and anxiety for all the local
groups involved.” The establishment of the
Commission process has further simplified and
speeded up the manner in which municipal
restructuring can occur without providing any
improved process for First Nations land
negotiation.

Furthermore, the Commission notes that area
municipalities and First Nation communities
have been able to work cooperatively in an
atmosphere of mutual trust as evidenced by
existing service sharing agreements, for
instance for water, sewer and landfill. The
Commission believes that such agreements are in
the best interests of all parties and is
mindful in its decision to further facilitate
their establishment and application.

Nevertheless, the Commission finds itself in a
similar position to the OMB. It has been
mandated by the Province to prepare a
restructuring proposal and order and has no
authority “to defer consideration of the matter
for an indefinite period of time”. The
Commission has considered the OMB principles,
as stated above, in its decision and has tried
to appropriately reflect them. However, it
does not consider that it has created a
prejudicial situation to the First Nations
which would jeopardize the rights of its
members. Existing treaty rights and
guarantees, land claims and fiduciary
obligations will be unaffected by municipal
restructuring. [Emphasis added.]

[63] The commissioner then stated “four initial conclusions”
based on a consideration of the principal issues that he had
identified previously, two of which were the commission’s
response to concerns raised by TCPL, NAN and the Treaty 9
Parties. One of the “initial conclusions” was stated in this
way:

The Commission has been convinced of the
desirability of extending the municipal
boundaries as compared to those set out in the
draft proposal, particularly to protect the
area’s natural environment and partially to
provide a reasonable basis for future economic
development initiatives. However, the
Commission rejects the notion that capturing
increased pipeline assessment can be the
primary reason for extending boundaries. Also,
while the Commission is convinced that
municipal restructuring will not adversely
affect First Nation treaty rights and
guarantees, land claims and fiduciary
obligations, it must deal with the perception
by NAN that it does so and in consequence limit
boundary extensions to what is defensible for
the reasons referred to above. [Emphasis
added.]

[64] Next, the commissioner referred to the three restructuring
options he had stated in the draft proposal – individual
municipal expansion, creation of an upper tier, and amalgamation
and stated:

As a preamble to reconsidering the options, the
Commission wishes to emphasize that “the window
of opportunity” to act decisively is now. The
Province has vastly streamlined the
restructuring process permitting an initial
voluntary approach while providing for
expediency and at low cost. No one can be
certain of future Provincial policy direction
but we do know that the prior process of
hearings before the Ontario Municipal Board
were [sic] frustrating, extremely time-
consuming and very expensive.

The Commission intends to avail itself of the
current window of opportunity and act
decisively to put forward a comprehensive
municipal restructuring proposal which has a
clear long-term perspective.

I assume that “the window of opportunity” is a reference by the
commissioner to s. 25.3(1) of the Act which precluded the
Minister from establishing a restructuring commission at the
request of a municipality after December 31, 1999.

[65] The commissioner rejected the first two restructuring
options and accepted the third option – amalgamation – as
representing the only realistic long-term option. In his reasons
for doing so, he made no reference to the position of TCPL or
NAN. His justification for a single amalgamated municipality
was, as he put it, that “it meets the Restructuring Principles in
the following manner”, which consisted of a recitation of the
principles contained in the Terms of Reference which are
reproduced in paragraph 35 of these reasons.

[66] I note that one of the reasons given by the commissioner for
rejecting the option of individual municipal expansion was: “The
appearance of a ‘tax grab’ of TCPL assessment would appear more
evident.” [Emphasis added.]

[67] Finally, the commissioner addressed the specifics of the
structure of the new municipality, such as its name and
boundaries, wards and councillors and area rating, and then
addressed such subjects as a transition board, elections and
official plans. With respect to the official plan, he made the
following recommendation:

It is further recommended that the provisions
of any new official plan adopted by the new
municipality acknowledge the treaty and
aboriginal rights of First Nations, indicating
that nothing in the plan affects those rights.
As an example of the intent of the Commission,
it is recommended that the Section 3.9 of the
Geraldton and Suburban Planning Area Official
Plan be incorporated into the official plan of
the new municipality.

“ Aboriginal Land Use Activities

It is a policy of the Planning Board to
recognize the importance of the
traditional Aboriginal resource values
wherever they have been identified in the
Rural Area to exist. This includes
recognition of licensed trap lines and
traditional native land use activities
such as wild rice harvesting, gathering
of plants for medicinal or ritual
purposes and resource management
activities.”

THE APPLICATIONS FOR JUDICIAL REVIEW

[68] It is helpful, in considering the reasons of the Divisional
Court, to place them in the context of the grounds for judicial
review advanced by the respondents. Each of the respondents
applied for judicial review under ss. 2 and 6(2) of the Judicial
Review Procedure Act, R.S.O. 1990, c. J.1.

[69] TCPL relied on the following grounds in seeking an order to
quash the Final Proposal and the Order which implements it:

(a) The Final Proposal and implementation Order
are ultra vires the authority of the
Commissioner as being contrary to the
provisions of the Municipal Act and O. Reg.
143/96 as amended by O. Reg. 557/96.

(b) The Final Proposal and implementation Order
are ultra vires the objects and policy of the
Act.

(c) The Final Proposal and implementation Order
are patently unreasonable.

(d) The Final Proposal and implementation Order
are contrary to the principles of municipal
restructuring contained in the Commission’s
Terms of Reference.

(e) The Commission failed to conduct the
appropriate and necessary investigations and
analysis to fulfill its statutory mandate.

(f) The Commission ignored, or discarded, the
principles of municipal reorganization
historically established in that its Final
Proposal is not in the greatest common good
and prejudicially affects the interests of
TCPL.

(g) The Commissioner failed in his duty to act
fairly in exercising his statutory powers
under the Municipal Act.

[70] In addition to seeking an order quashing the Final Proposal
and Order, NAN and GFN asked for a declaration that the Final
Proposal and Order infringed s. 35 of the Constitution Act, 1982,
and are therefore of no force and effect. In addition to relying
on the grounds for judicial review advanced by TCPL, NAN and GFN
relied on the additional ground that the commissioner did not
adequately consult with them, or other aboriginal governing
bodies with regard to the restructuring proposal and that he did
not intend to do so. As well, NAN and GFN submitted that the
Final Proposal and Order “may affect potential or existing
aboriginal land claims or aboriginal governance negotiations
which are in progress or contemplated by the applicants”, “may
affect the exercise of treaty and aboriginal rights, particularly
rights regarding hunting, fishing, trapping and gathering” and
Smay affect the current use of lands and resources for
traditional purposes by Aboriginal persons who are represented by
the Applicants”. [Emphasis added.]

[71] In its application for judicial review, in addition to
seeking the relief requested by TCPL, NAN and GFN, LL58 sought,
in the alternative, an order varying the Final Proposal and
Order, to establish, as the boundaries of the Municipality of
Greenstone, the boundaries of the four municipalities, that is,
to exclude the unorganized territory from the Municipality of
Greenstone.

[72] LL58 adopted the grounds relied on by TCPL in its
application for judicial review. In addition, it relied on the
following grounds:

3. The First Nation has an unresolved claim based on aboriginal
   rights and title, or alternatively based on treaty land
   entitlement or alternatively based on the Crown’s failure to give
   the First Nation an opportunity to enter into Treaty No. 9 in
   1906;

4. The existing Reserve of the First Nation would be completely
   surrounded by the proposed Municipality of Greenstone if its
   boundaries are not altered;

5. The resolution of the Land Claim of the First Nation will
   likely involve the transfer of significant amounts of Crown land
   to the First Nation within an area reasonably proximate to the
   existing Reserve of the First Nation and the enormous expansion
   of municipal boundaries will create severe impediments to the
   transfer of such land;

6. Traditional activities of members of the First Nation will
   come under municipal jurisdiction and regulation, including
   taxation, if the boundaries of Greenstone are not altered.

7. The First Nation was not accorded procedural fairness in
   connection with the work of the Commission;

8. The Order of the Commission does not give reasons for the
   annexation of previously unorganized territory to the
   Municipality of Greenstone, or in the alternative, such reasons
   as are given are insufficient in law to justify the annexation
   of that territory;

9. The provisions of the Constitution Act, 1982, as amended,
   particularly section 35(1);

THE REASONS FOR JUDGMENT OF THE DIVISIONAL COURT

[73] As I have noted, the reasons for judgment of O’Driscoll J.
are reported in 1997 12446 (ON SC), [1998] 2 C.N.L.R. 240. Following an extensive
review of the substance of the applications for judicial review,
the parties, the personnel of the MMAH, previous annexation
applications, the legislative scheme which established the
commission, the workings of the commission and the reasons of the
commissioner in support of the restructuring proposal at p. 272,
O’Driscoll J., commenced his analysis of the issues raised by the
applicants.

[74] He concluded that the court’s “jurisdiction” to hear the
applications is to be found in the definition of “statutory power
of decision” in s. 1 of the Judicial Review Procedure Act, and in
s. 2 of the Act. He then described the ambit of review which
applied to the court’s review of the commission’s Final Proposal
and Order. In doing so, he adopted as the appropriate standard of
review the reasoning of the Divisional Court (per Archie Campbell
J.) in Pembroke Civic Hospital v. Ontario (Health Services
Restructuring Commission) (1997), 1997 16241 (ON CA), 36 O.R. (3d) 41 at 44, on an
application for judicial review of an order of the Health
Services Restructuring Commission. At pp. 272-3 O’Driscoll J.
stated:

My review of the Final Proposal and Order is
confined to whether the Commission:

(i) contravened the law, or

(ii) exceeded its jurisdiction, or

(iii) acted in such a way as to lose its
jurisdiction, or

(iv) failed to exercise its jurisdiction

In his endorsement expressing the unanimous
opinion of the Divisional Court, Campbell J.
wrote:

The court’s role is very limited in
these cases. The court has no power to
inquire into the rights and wrongs of
hospital restructuring laws or policies,
the wisdom or folly of decisions to
close particular hospitals, or decisions
to direct particular hospital governance
structures. It is not for the court to
agree or disagree with the decision of
the Commission. The law provides no
right of appeal from the Commission to
the court. The court has no power to
review the merits of the Commission’s
decisions. The only role of the court
is to decide whether the Commission
acted according to law in arriving at
its decision. [Emphasis added.]

Thus, O’Driscoll J. concluded that the power of the court to
review a decision of the commission was limited to deciding
“whether the Commission acted according to law in arriving at
its decision”.

[75] The Divisional Court applied the standard of review
articulated in Pembroke in a subsequent judicial review of
another order of the Health Services Restructuring Commission in
Russell v. Ontario (Health Services Restructuring Commission)
(1998), 13 Admin. L.R. (3d) 196. An appeal from that decision to
this court was dismissed: (1999), 1999 3199 (ON CA), 175 D.L.R. (4th) 185; leave to
appeal to the Supreme Court of Canada was refused on February 17,
2000: [1999] S.C.C.A. No. 395. In Russell there was no
consideration given by this court to the appropriate standard of
review, nor was there any reference to the standard of review
articulated in Pembroke. I note, as well, that the Pembroke
standard of review was also applied in Wellesley Central Hospital
v. Ontario (Health Services Restructuring Commission) (1997), 3
Admin. L.R. (3d) 137 (Ont. Div. Ct.) and in Lalonde v. Ontario
(Commission de restructuration des services de sant‰) (1999), 181
D.L.R. (4th) 263 (Ont. Div. Ct.).

[76] As I understand his reasons for judgment, O’Driscoll J.
allowed the three applications for judicial review on five
grounds. Some of the grounds are common to all of the
applications, while others are unique to TCPL’s application and
the applications of the First Nation respondents. What follows
is a review of each of the grounds.

(1) The legality of the restructuring proposal and
order

[77] In a ground that is common to all of the respondents,
O’Driscoll J. concluded that in ordering the amalgamation of the
towns of Geraldton and Longlac and the townships of Beardmore and
Nakina as a town under the name “The Corporation of the
Municipality of Greenstone” and annexing thereto the unorganized
territory, the commissioner exceeded his statutory jurisdiction.
His reasons for this conclusion are found in the following brief
passage at p. 273:

Ontario Regulation 253/97, (filed July 2,
1997), which established the Commission
states:

“3. (1) The following are the types of
restructuring that may be included in the
structuring proposal to be developed by the
commission: …

3. Incorporating a local municipality.

(2) Subsection (1) does not include a
restructuring that results in, …

(f) unorganized territory becoming part
of municipality that is incorporated under
paragraph 3 of subsection 3(1). …”

Section 25.3(3) of the Municipal Act states:

“A restructuring proposal shall not provide
for a type of restructuring other than a
prescribed type of restructuring.”

In my view, the Final Proposal and Order
proposes the incorporation of a new
municipality (Greenstone) and purports to
annex unorganized territory to Greenstone.
The annexation of such unorganized territory
is directly contrary to Ontario Regulation
253/97 and, therefore, the annexation
provision of the Final Proposal and Order is
null and void and of no force and effect.
[Emphasis added.]

As I understand it, the effect of this conclusion is that the
unorganized territory inhabited, in part, by the First Nation
respondents, was excluded from the restructuring proposal, much
as the OMB had decided in 1994.

(2) Failure to consult with First Nations

[78] In a ground that is common to the First Nation respondents,
at p. 276 O’Driscoll J. found that “the Commission lost its
jurisdiction when it failed to consult at all with LL58 and
failed to properly, adequately and meaningfully consult with NAN
and GFN” because these respondents “would have been impacted the
most by the annexation”. He appears to have based this finding
on certain conclusions reached by Wilson J. and Dickson J. in
Guerin v. The Queen, 1984 25 (SCC), [1984] 2 S.C.R. 335, which are relevant to
the facts of that case, and on certain passages from the reasons
of Dickson C.J.C. and La Forest J. in R. v. Sparrow, [1990] 1
S.C.R 1075 which, when read in context, are part of their
analysis in respect to the burden that rests on the government
when government action or legislation is challenged on the ground
that it has infringed or has a negative effect on any Aboriginal
right protected under s. 35(1) of the Constitution Act, 1982.
Section 35(1) reads:

35. (1) The existing aboriginal and treaty
    rights of the aboriginal peoples of Canada are
    hereby recognized and affirmed.

[79] As well, O’Driscoll J. based this conclusion on his findings
drawn from the evidence presented by the First Nation
respondents, to which I have referred, that these respondents
have “bona fide unresolved [land] claims” and “have genuine, well
grounded fears that they will be adversely affected if the Crown
lands are brought under a municipal cover”. In addition, he found
that the “land claims of LL58 would be made more difficult and
NAN and GFN would lose some of their traditional hunting grounds
to municipal strictures”. He appeared to be critical of “the
Minister Responsible for Native Affairs and all his counsel and
solicitors” for not “protecting/explaining the position of the
aboriginal people” to the commission.

[80] On this ground, O’Driscoll J. concluded at p. 277:

. …in view of the history of what has
transpired between one branch of the Government
of Ontario and these First Nations regarding
claims and treaty rights, the Commission failed
to carry out its duty to consult with and
protect these aboriginal peoples from threats
to aboriginal rights and interests that were
being proposed and propounded by another branch
of the same government. [Emphasis added.]

As I interpret this finding, the judge superimposed on the
legislative scheme a duty on the commission to consult with
Aboriginal people whose constitutionally protected rights or land
claims might be affected by a restructuring proposal.

(3) Failure to apply the “three filters” test

[81] The third ground on which the applications for judicial
review were granted was the failure of the commissioner to apply
the “three filters” test, applied previously by the OMB when it
had jurisdiction over municipal restructuring, in deciding an
application for municipal restructuring. O’Driscoll J. rejected
the submission of counsel for the Crown that the Municipal Act
does not require that the commission consider principles
previously applied by the OMB in its decision-making process
under different legislation and that the amendments to the Act
establishing a restructuring commission, together with the
principles to be considered contained in the commission’s Terms
of Reference, were intended to replace any criteria for
restructuring that had been established previously. O’Driscoll J.
reached this conclusion at p. 279:

The amendments, regulations, guidelines and terms
of reference state that “these principles will be
taken into consideration”. Nothing has been
pointed out to me in the “new regime” that says
“only these principles” will be taken into
consideration.

…..

In my view, the touchstones and benchmarks in
restructuring and annexation that still apply are
the “filters” described by the OMB:

(i) the greatest good,

(ii) common sense, and

(iii) fairness.

Nowhere in the “new process” do I see that it is
to be “restructuring by ministerial or commission
fiat”. Surely, the Respondents do not contend
that the “three filters” are obsolete and
inapplicable.

[82] As I interpret this, and the following ground, O’Driscoll J.
was engaged in a review of the merits of the commission’s
decision which, as the Divisional Court had stated in the passage
from Pembroke that he had quoted earlier, was beyond the role of
the court on an application for judicial review of the
commission’s decision.

(4) The restructuring proposal constituted a “tax
grab”

[83] The fourth ground on which the judicial review was granted
pertains to the application of TCPL. This ground bears the sub-
title “The ‘Filters’ and TCPL”. O’Driscoll J.’s analysis
considered, and applied, the evidence of the experts retained by
TCPL, Mr. Lehman and Ms. Slack, to which I referred earlier, as
well the following statement of the OMB in the reasons given by
it following Geraldton’s 1993 application for restructuring:
“There is no rationale to annex strictly for the purpose of a tax
grab”. Referring to this statement, at p. 279 O’Driscoll J.
concluded: “In my view, that principle remains because it
complies with the ‘three filters’.”

[84] On the basis of Mr. Lehman’s evidence, O’Driscoll J. found
that nothing had changed since the reasons given by the OMB’s
decision of March 11, 1994. As well, he accepted Ms. Slack’s
opinion that there had been insufficient analysis by the
commissioner to enable him to make an informed decision as to the
financial impact of the contemplated restructuring and that “this
municipal restructuring, through amalgamation and annexation is a
‘tax grab’.” Finally, he referred to Canadian National Railway
Co. v. Fraser-Fort George (Regional District) (1996), 140 D.L.R.
(4th) 23 (B.C.C.A.) in which a by-law had been quashed on the
ground that it had been passed without jurisdiction because its
purpose was solely to create a tax base.

[85] O’Driscoll J. expressed his conclusions with respect to this
ground at pp. 281-2:

3. In my view, the Commission acted without any
   evidence upon which to base its annexation
   order. It had no financial analysis or report
   that would in any way give credence to the
   annexation order.

The Commission viewed this as a “window of
opportunity” to order the annexation that the
OMB had consistently referred to as a “tax
grab” because it did not qualify under the
“three filter test”.

In my view, the Final Proposal is deceptive.
It claims to adhere to the “three filters” of
the OMB but then turns about and comes to the
opposite result on the same set of facts.

…..

In my view, the Commissioner lost
jurisdiction and credibility when he closed
his eyes to a “tax grab” and then opened his
eyes, looked through a “window of
opportunity” and, on the same facts, saw the
basis for annexation.

(5) Reasonable apprehension of bias

[86] The fifth ground on which the applications for judicial
review succeeded was that there was a reasonable apprehension
that the commissioner was biased. O’Driscoll J. referred to a
speech made by the Minister in 1996 in which he stated that the
legislation was to be amended to provide for the determination of
municipal restructuring by “an independent third party”, and to
his earlier review of the workings of the commission, and made
the following findings at p. 282:

3. In my view, the review shows beyond all doubt
   that MMAH was anything but a disinterested party to
   the outcome of this Commission. The Commission had
   its office in the office of MMAH, Mr. Rees
   “collaborated” with the Commissioner and “crafted”
   the Draft Proposal. The Draft Proposal did not go
   out until after the Commissioner met with MMAH staff
   and went over the text. Everything was filtered
   through Mr. Robb Anderson, Mr. Ian D. Smith or Mr.
   Rees. Mr. Ian D. Smith passed on documents from the
   OMB hearing that he felt were relevant. The
   Commissioner travelled with and socialized with MMAH
   personnel.
4. It would not be unfair to say that if you saw
   the Commissioner, there would be someone from MMAH
   with him.
5. The bottom line question is this: were the
   Applicants treated fairly in view of the conduct of
   the Commission? My answer is: “No”.
   It is difficult to ascertain whether the Commissioner
   was a willing or an unwilling captive of MMAH but it
   makes no difference. Either way, the perception of an
   informed spectator had to be that the Commissioner was
   simply doing the bidding of MMAH and doing it on a fast
   track.

[87] After quoting Dickson J. in Martineau v. Matsqui
Disciplinary Board, 1979 184 (SCC), [1980] 1 S.C.R. 602 at 630 dealing with
principles of natural justice which apply to administrative
tribunals, including the duty of the tribunal to act fairly,
O’Driscoll J. arrived at this conclusion at p. 283:

I hold that the Commission lost jurisdiction
through the appearance of bias and thereby
denied fairness to the Applicants.

It is not my duty or place to comment upon
how a Commission under s. 25.3 of the
Municipal Act should be conducted. However,
I am constrained to say that this case could
be used as a text book of how it should not
be conducted.

(6) Violation of Aboriginal or treaty
rights

[88] O’Driscoll J. expressly declined to consider the request of
NAN and GFN that the Final Proposal and Order be quashed on the
ground that they infringed their rights guaranteed by s. 35 of
the Constitution Act, 1982, for the following reason found at p.
277:

In view of the fact that the Applications
succeed on other grounds, I do not find it
necessary to go through the extensive
analysis as set out in R. v. Sparrow (supra):

(i) was there an infringement?
(ii) if yes, was it reasonable?
(iii) did it impose undue hardship?
(iv) did it deny the aboriginal people
the preferred means of exercising
their rights?

Therefore, these reasons are neutral on the
question of whether or not there has been an
infringement of “existing aboriginal and
treaty rights” of NAN and/or GFN contrary to
s. 35(1) of the Constitution Act, 1982.

ISSUES

[89] In my view, the overriding issue presented by this appeal is
the extent of the supervisory jurisdiction of the court in an
application for judicial review of a restructuring proposal made
by a restructuring commission appointed under s. 25.3 of the
Municipal Act to carry out a legislative function in a political
process. On the basis of the findings and conclusions of the
Divisional Court and the record before it, this issue can be best
discussed by an analysis of the following sub-issues:

(1) The role of the court on judicial review of a restructuring
proposal ordered by a restructuring commission.
(2) The standard of review in reviewing the Final Proposal and
Order of a restructuring commission.
(3) Whether the Divisional Court, in the exercise of its
supervisory role, was correct in quashing the Final Proposal and
Order on the grounds that the commission:

(a) exceeded its jurisdiction in ordering a restructuring
proposal that was precluded by the applicable legislation;
(b) lost its jurisdiction by failing to consult with NAN, GFN
and LL58;
(c) erred in failing to apply the “three filters” test
developed and applied by the OMB when it had jurisdiction over
municipal restructuring;
(d) erred in ordering a municipal restructuring which
constituted, or resulted in, a “tax grab”;
(e) performed its statutory role in a manner which gave rise
to an appearance of bias on its part, thereby denying fairness
to the respondents.

(4) Whether this court should express disapproval of allegedly
ad hominem remarks about the commissioner made by O’Driscoll J.

(5) The cross-appeal of NAN and GFN.

[90] There is an additional issue arising from the cross-appeal
of NAN and GFN asking that the judgment of the Divisional Court
be varied to include a declaration that the commission’s Final
Proposal and Order infringed rights guaranteed by s. 35 of the
Constitution Act, 1982 and are therefore of no force and effect.

[91] As I will explain, I would allow the appeal on the ground
that the Divisional Court erred in respect to each of the grounds
on which it quashed the Final Proposal and Order. As well, it is
my view that it is inappropriate for this court to consider the
issue raised by the commissioner concerning the comments made
about him personally. As for the cross-appeal of NAN and GFN,
this issue was not suitable for resolution in a summary manner by
the Divisional Court on the basis of the record before it and,
for the same reason, cannot be considered by this court.

ANALYSIS

[92] Before considering the issues that I have identified, I find
it helpful to elaborate on my earlier comments concerning the
nature, purpose and process of a restructuring commission
appointed pursuant to s. 25.3(1) of the Municipal Act.

[93] As for the nature of the commission, unlike a tribunal such
as the OMB which, as a creature of statute, has an ongoing
function, a commission under s. 25.3 is created as needed. When
the commission has developed its restructuring proposal and made
its order, it is at an end. Unlike the OMB, the members of which
are long serving and have developed an expertise in matters
within its jurisdiction the person, or persons, appointed to a
commission do not necessarily have expertise in municipal
restructuring. Indeed, such persons may serve on a commission
but once. Unlike the OMB, a commission is not required to hold
an adversarial hearing in which opposing parties present evidence
and in which a decision is reached by the application of
substantive rules. At most, it is required to consult with
certain parties, may consult with others and must give persons
living and carrying on business in the impacted geographic area
the opportunity to respond to its draft proposal. It must
provide its Final Proposal by a stipulated date and, as I read
the applicable legislative scheme, there is no statutory
requirement that it provide reasons supporting its Final
Proposal. No appeal lies from the Final Proposal and Order of a
commission. No privative provision is contained in the
legislative scheme that applies to a commission.

[94] Therefore, a commission does not engage in an adjudicative
process. In my view, the nature of the decision required of the
commission is clear and is stipulated by s. 25.3(2) of the Act
read together with s. 1 of O. Reg. 253/97, which created it.
Section 25.3(2) states:

25.3 (2) The Commission shall develop a
restructuring proposal for the prescribed
locality or for such part of it as the
Commission considers advisable. [Emphasis
added.]

The “prescribed locality” is the geographic area described in
the Schedule referred to in s. 1 of the Regulation. Thus, the
commission had no discretion to refuse to develop a
restructuring proposal. Its discretion was limited to whether
the proposal encompassed all, or part, of the prescribed
locality.

1. Judicial review of a restructuring proposal ordered

by a restructuring commission

[95] In the context of the above background, I will consider the
scope of judicial review of a restructuring proposal ordered by a
restructuring commission in the exercise of its statutory powers.
There is nothing which I can add to the opinion of Campbell J. on
behalf of the Divisional Court in Pembroke, supra, in commenting
on the role of the court in reviewing a decision of the Health
Services Restructuring Commission appointed under the Ministry of
Health Act, R.S.O. 1990, c. P. 40 to restructure health care
services throughout Ontario. Each commission was established
with a broad mandate to effect restructuring - the Health
Services Restructuring Commission to restructure health services
in Ontario, and a restructuring commission to develop a proposal
for municipal restructuring. As well, each commission was
clothed with the power to issue directions or an order in the
place of the relevant Minister, and was given a relatively short
period of time to complete its task. Because of the similarity of
the tasks of the Health Services Restructuring Commission and a
restructuring commission appointed under s. 25.3 of the Municipal
Act, I am of the view that the opinion of Campbell J. applied to
the role of the Divisional Court in this appeal. For the sake of
convenience, I will repeat what was said by Campbell J. at p. 44:

The court’s role is very limited in these
cases. The court has no power to inquire into
the rights and wrongs of hospital restructuring
laws or policies, the wisdom or folly of
decisions to close particular hospitals, or
decisions to direct particular hospital
governance structures. It is not for the court
to agree or disagree with the decision of the
Commission. The law provides no right of
appeal from the Commission to the court. The
court has no power to review the merits of the
Commission’s decisions. The only role of the
court is to decide whether the Commission acted
according to law in arriving at its decision.

[96] These principles are quite clear and, as noted previously,
were applied in Russell, Wellesley Central Hospital and Lalonde.
Indeed, early in his reasons O’Driscoll J. appeared to adopt them
and stated that his review of the Final Proposal and Order was
confined to whether the commission contravened the law, exceeded
its jurisdiction, lost its jurisdiction or failed to exercise its
jurisdiction.

[97] As well, it is helpful to refer to the reasons of the
Divisonal Court in Lalonde in which the directions issued by the
Health Services Restructuring Commission were attacked on
constitutional and administrative law grounds. In rejecting the
administrative law attack, at p. 295 the Divisional Court stated
that it “has repeatedly emphasized the limited scope for judicial
review of directions given by the Commission” for the reasons
stated by Campbell J. in Pembroke. After quoting Campbell J.’s
reasons which I have quoted, the court added at p. 296:

This role reflects the very broad public policy
mandate assigned to the Commission by the Government
for the purpose of restructuring the system of health
care in Ontario. The Court can interfere only when
the Commission has not acted according to law in
arriving at its decision.

After pointing to the many submissions received and considered by
the commission, as well as the consultations in which it engaged,
the court continued at p. 296:

It acted on evidence and materials provided to it
and applied its policy criteria regarding the quality,
accessibility and affordability of health care services
in the Region. The Commission’s decisions are
fundamentally matters of judgment. Moreover, as the
Pembroke Hospital case reminds us, they are made in a
context which “engages strong feelings with the community”.
Reasonable people can differ on the solutions to be
applied.

In my view, these observations apply to the circumstances of this
appeal.

[98] I would also observe that in Lalonde the parties were in
agreement that the court could review the directions issued by
the commission on the ground that they were “patently
unreasonable” or “clearly irrational”. Without commenting on
whether this constituted the appropriate standard of review, the
Divisional Court found that the evidence failed to establish that
the commission based its directions on irrelevant considerations,
and, at p. 297, rejected the argument that the directions “should
be set aside on ordinary administrative law grounds because they
are patently unreasonable or based upon irrevelant
considerations”.

[99] I cannot say, that in principle, O’Driscoll J. was wrong in
describing the limited nature of the judicial review of the
commission’s Final Proposal and Order. The review is limited to
a consideration of whether the commission properly exercised the
powers conferred on it by the Municipal Act and the Regulations.
In other words, the judicial review is limited to whether a
restructuring commission, as a creature of statute, properly
exercised the powers conferred on it by the legislature. Its
exercise of its statutory powers is reviewable to the extent of
determining whether its actions are intra vires. Such a review
does not encompass a consideration of the merits of the
restructuring proposal, or agreement or disagreement with it.
Regrettably, O’Driscoll J. strayed from the narrow path of the
review that he had charted. Perhaps because the respondents had
invited him to examine the large amount of evidence which they
had filed in support of their applications, as I will explain it
is difficult to escape the conclusion that he applied the “three
filters” test formerly applied by the OMB, assessed the merits of
the restructuring proposal and substituted his own opinion for
that of the commission.

2. Is there a standard by which the court, on judicial review,

can review the merits the restructuring proposal?

[100] In my view, prior to the decision of the Supreme Court
of Canada in Baker v. Canada (Minister of Citizenship &
Immigration (1999), 1999 699 (SCC), 174 D.L.R. (4th) 193 (S.C.C.) the short
answer to this question would have been “no”. There was some
argument by counsel about whether the appropriate standard of
review was correctness, patent unreasonableness, or
reasonableness simpliciter. However, this analysis generally
applies to judicial review of an adjudicative tribunal, and the
commission was not such a tribunal. Clearly, it did not engage
in, nor was it required to engage in, the three-step process
inherent in adjudicative decision-making: finding the facts;
identifying or declaring the applicable legal rule or principle;
and applying the rule or principle to the facts as found. The
commission was not required to make a decision at all. As I have
pointed out, under s.25.3(2) the commission was given a
responsibility it could not refuse: “The Commission shall develop
a restructuring proposal for the prescribed locality or for such
part of it as the Commission considers advisable.”

[101] In my opinion, the statutory grant of power to the
commission comes within the category of what has been described
as “hard to review” administrative action: Donald J.M. Brown and
The Honourable John M. Evans, Judicial Review of Administrative
Action in Canada, (1998) Canvasback Publishing 15-61 to 15-65.
As Brown and Evans point out at 15-62, the courts have narrowly
circumscribed judicial review of administrative action because of
its political, policy or legislative nature. In this regard, in
Pembroke, supra, at p. 46, in discussing the Health Services
Restructuring Commission, Campbell J. described that commission
as the surrogate of the Minister, adding: “The Commission stands
in the shoes of the Minister and exercises the Minister’s powers.
On the spectrum between political decision-making and judicial
decision-making, the Commission is close to the extreme
political/legislative end of the spectrum.” Although it may not
be that the restructuring commission stands in the Minister’s
shoes, it is not far removed from them as its statutory role is
political, policy and legislative in nature. A similar opinion
was expressed by this court in Bruce (Township) v. Ontario
Minister of Municipal Affairs and Housing, supra, in which
judicial review was sought of a municipally generated
restructuring proposal under s. 25.2 of the Municipal Act. In a
comment at p. 320 which has application to this appeal, Osborne
J.A. stated: “It is not for the courts to second guess the
restructuring decision made by County Council.”

[102] Historically the courts have limited their review of
the type of administrative action at issue in this appeal to an
assessment of whether the commission acted according to law in
arriving at its restructuring proposal or directions as
illustrated by the series of cases dealing with directions issued
by the Health Services Restructuring Commission. This would
exclude any consideration of the merits of the proposal or
directions.

[103] It is arguable that after Baker a reviewing court may
go beyond this to scrutinize the administrative action using the
standard of review that is appropriate to the administrative
action under review. See the contrasting views of Brown and
Evans at pp. 15-66 to 15-68 and Robertson J.A. in Suresh v.
Canada (Minister of Citizenship & Immigration), a judgment of the
Federal Court of Appeal released January 18, 2000, at paragraphs
129-141. In this appeal, the highly specialized task given to
the commission together with the nature of the task, centered as
it is on policy formulation, require the greatest deference of a
reviewing court. As I have pointed out, this was the approach
which the Divisional Court was prepared to take in Lalonde
without considering Baker. In my view, unless the restructuring
proposal developed by the commission is patently unreasonable,
the court will not interfere.

[104] The restructuring proposal developed by the commission
can by no stretch be said to be patently unreasonable. It is
not, in the language of Canada (Director of Investigation &
Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, irrational. The
commission’s reasoning, reproduced earlier in these reasons, is
clear and is there for all to see. Even if a reviewing court,
after Baker, can apply a standard of review to the restructuring
proposal put forward by the commission, no intervention is
warranted.

[105] I would, however, add the caveat that non-adjudicative
administrative action is subject to review on the grounds that it
is arbitrary, discriminatory, or not taken in good faith which,
in my view, would include bias on the part of the commission.

3(a) The legality of the commission’s Final Proposal and

Order

[106] The Divisional Court found that the Final Proposal and
Order was “null and void and of no force and effect” because it
contravened s. 3(2)(f) of O. Reg. 253/97, which is the Regulation
that established the commission. The court found that the Final
Proposal and Order proposed “the incorporation of a new
municipality ‘Greenstone’ and purports to annex unorganized
territory to Greenstone”, which was found to be contrary to s.
3(2)(f).

[107] Under s. 3(1) of the Regulation the commission was
empowered to include in a restructuring proposal six types of
restructuring including, inter alia, amalgamating local
municipalities, incorporating a local municipality and annexing
unorganized territory to a municipality. However, it was
precluded by s. 3(2)(f) from including in a restructuring
proposal the annexation of an unorganized territory to a
municipality that is incorporated under s. 3(1).

[108] It appears that O’Driscoll J. misinterpreted the nature
of the commission’s Order of August 29, 1997, which is two parts.
Under the first part, the Towns of Geraldton and Longlac and the
Townships of Beardmore and Nakina were “amalgamated as a town
under the name ‘The Corporation of the Municipality of
Greenstone’.” Under the second part, the unorganized territory
was “annexed to” Greenstone. As the first part of the Order did
not incorporate a municipality, it follows that O’Driscoll J.
operated on a misinterpretation of the nature of the Order when
he declared it to be null and void. The Order did not, as he
believed, annex unorganized territory to a newly incorporated
municipality.

[109] Therefore, O’Driscoll J. erred in finding the Final
Proposal and Order to be illegal on the ground that the
commission did not have the power to make it.

3(b) The duty of the Crown to consult with First Nations

[110] O’Driscoll J. held that the commission lost its
jurisdiction when it failed to consult with LL58, and did not
consult “properly, adequately and meaningfully” with NAN and GFN.
In doing so he purported to apply the reasoning of the Supreme
Court of Canada in Sparrow, supra. This holding was informed by
his findings that First Nations had “bona fide, unresolved [land]
claims” which, as a result of the restructuring proposal, would
be “made more difficult”, and that NAN and GFN would lose some of
their traditional hunting grounds to “municipal strictures”. It
was informed, as well, by his belief that “the Minister
Responsible for Native Affairs” had not performed his duty to
advocate “the position of the Aboriginal people“ before the
commission.

[111] Apart entirely from my view that O’Driscoll J.’s
findings, which inform his conclusion, were not available on the
record before him, it is my opinion that he erred in concluding
that the commission had lost its jurisdiction when it failed to
consult with the First Nation respondents. It will be recalled
that under s. 25.3(4) of the Municipal Act the commission was
required to consult only with each municipality in the geographic
area in question. As for additional consultation, s. 25.3(4)
provides that the commission “may consult with such other bodies
and persons as the commission considers appropriate”. Therefore,
under the Act no obligation was placed on the commission to
consult with First Nations whose people lived on land situate
within the geographic area. It follows, that even if the
commission had no consultation with the First Nations, it could
not lose its jurisdiction through any failure to comply with s.
25.3(4). Accordingly, any obligation that the commission may
have had to consult with the First Nations had to derive from
another source.

[112] In my view, O’Driscoll J. incorrectly applied the
concept of the Crown’s duty to consult with First Nations in
setting aside the restructuring proposal on the ground of loss of
jurisdiction. As I will explain, he elevated the Crown’s duty to
consult with First Nations from merely being one, of several,
justifactory requirements to be met by the Crown when a challenge
is mounted to a law, or government action, on the ground that it
unduly interferes with Aboriginal rights or treaty rights
recognized and affirmed by s. 35(1) of the Constitution Act,
1982, to an independent ground on which such a law, or government
action, may be challenged.

[113] The starting point is the proposition that Aboriginal
rights and treaty rights are recognized and affirmed by s. 35(1).
The case in which the Crown’s duty to consult with a First Nation
first was discussed is R. v. Sparrow, 1990 104 (SCC), [1990] 1 S.C.R. 1075. At
issue in that case was the constitutionality of federal fishing
regulations imposing a permit requirement and prohibiting certain
methods of fishing. The Musqueam First Nation argued that the
federal fishing requirements interfered with their Aboriginal
fishing rights and were invalid pursuant to s. 35(1). At trial,
the Musqueam proved that salmon is not only an important source
of their food, but also plays a central role in Musqueam cultural
identity.

[114] The Supreme Court of Canada found for the Musqueam
First Nation, holding that Aboriginal rights recognized and
affirmed by s. 35(1) include practices that form an integral part
of an Aboriginal community’s distinctive culture. What emerged
from this case is that where a First Nation, in challenging the
constitutionality of a law, or governmental action, establishes a
prima facie infringement of a right recognized and affirmed by s.
35(1), it is for the government, where it intends to respond to
the challenge, to establish that the law in question meets
certain articulated justificatory standards. This process is
similar to that applied where a law is challenged on Charter
grounds and the government seeks to justify it under s. 1 of the
Charter.

[115] In Sparrow, one of the articulated justificatory
requirements is that the Crown consult with Aboriginal people
prior to introducing natural resource conservation measures that
interfere with the Aboriginal right to fish. At p. 1119 the
Supreme Court held that the constitutionality of fish
conservation regulations that interfere with the exercise of an
Aboriginal right to fish would depend, in part, “on whether the
Aboriginal group in question has been consulted with respect to
the conservation measures being implemented”.

[116] In two subsequent decisions the Supreme Court indicated
that the Crown is under a duty to consult with Aboriginal people
in the event of an infringement of a treaty right recognized and
affirmed by s. 35(1) and where the Crown seeks to interfere with
rights associated with Aboriginal territorial interests.

[117] In the first decision, R. v. Badger, [1996] 1 S.C.R.
771, the issue was whether the Treaty 9 right to hunt provided a
defence under Alberta’s wildlife legislation which prohibited
hunting out-of-season and hunting without a license. After
finding that the right to hunt was a treaty right within the
meaning of s. 35(1), the Supreme Court held that the Crown can
abridge treaty rights provided the law in question meets
justificatory standards similar to those that operate in relation
to laws that interfere with the exercise of Aboriginal rights,
which includes a duty to consult.

[118] In the second decision, Delgamuukw v. British Columbia,
1997 302 (SCC), [1997] 3 S.C.R. 1010, hereditary chiefs of two First Nations
claimed Aboriginal title to 58,000 square kilometers of the
interior of British Columbia. The Supreme Court ruled that
Aboriginal title is protected by s. 35(1). The court stated at
p. 1113 that where it is established that there has been an
interference with rights associated with Aboriginal title,
“[t]here is always a duty of consultation” which forms part of
the inquiry into “whether the infringement of Aboriginal title is
justified”

[119] In my view, what these cases decide is that the duty of
the Crown to consult with First Nations is a legal requirement
that assists the court in determining whether the Crown is
constitutionally justified in engaging in a particular action
that has been found to prima facie infringe an existing
Aboriginal or treaty right of a First Nation. It is only after
the First Nation has established such infringement through an
appropriate hearing that the duty of the Crown to consult with
First Nations becomes engaged as a factor for the court to
consider in the justificatory phase of the proceeding. Thus, as
Sonia Lawrence and Patrick Macklem point out in their helpful
article, From Consultation to Reconciliation: Aboriginal Rights
And The Crown’s Duty To Consult (2000), 79 Can. Bar Rev. 252 at
255:

… Properly understood, the duty to consult also
acts as a prelude to a potential infringement
of an Aboriginal or treaty right. Consultation
requirements ought to be calibrated according
to the nature and extent of Aboriginal
interests and the severity of the proposed
Crown action in order to provide incentives to
the parties to reach negotiated agreements. In
most cases, the duty requires the Crown to make
good faith efforts to negotiate an agreement
with the First Nation in question that
translates Aboriginal interests adversely
affected by the proposed Crown action into
binding Aboriginal or treaty rights.

[120] As Lawrence and MacKlem point out at p. 262, “in most
cases involving the assertion of Aboriginal or treaty rights, the
First Nation in question is simultaneously attempting to
establish the existence of its rights and prevent interference
with those rights by the Crown or a third party.” As the
decisions of the Supreme Court illustrate, what triggers a
consideration of the Crown’s duty to consult is a showing by the
First Nation of a violation of an existing Aboriginal or treaty
right recognized and affirmed by s. 35(1) of the Constitution
Act, 1982. It is at this stage of the proceeding that the Crown
is required to address whether it has fulfilled its duty to
consult with a First Nation if it intends to justify the
constitutionality of its action.

[121] Although NAN and GFN challenged the commission’s Order
on both the administrative law ground, based on the failure of
the Crown to consult, and on the ground that the Final Proposal
and Order infringed s. 35(1) of the Constitution Act, 1982,
because of his finding on the administrative law ground
O’Driscoll J. concluded that there was no need to deal with this
issue. I note, however, that NAN and GFN based their
constitutional challenge to the proposal on the ground that it
may result in the infringement of constitutionally protected
Aboriginal rights. Because it bears on my disposition of the
cross-appeal of NAN and GFN, I find it convenient at this time to
observe that if O’Driscoll J. had dealt with the constitutional
challenge to the restructuring proposal, it appears to me that
the evidence before him did not conclusively establish the
requisite treaty or Aboriginal rights. Moreover, from this
inadequate evidentiary record, in my view, it is speculative
whether such treaty or Aboriginal rights, should they exist, will
be impacted adversely by the restructuring proposal.

[122] As well, to the extent that it is relevant, there was
also a serious deficiency as to the particulars of the First
Nation respondents’ land claims, including the status of the
negotiations and precisely how the creation of a new municipality
would in fact impede, or jeopardize, the resolution of the
claims. There was no evidence that this would prevent the land
claims from continuing. The land claims may, or may not, succeed
in whole or in part. In my view, nothing in the record enables
this court to even predict their outcome.

[123] In summary, for the reasons I have given, O’Driscoll J.
erred in setting aside the commission’s Final Proposal and Order
on the ground that the commission lost its jurisdiction when it
failed to consult the First Nation respondents. In coming to
this conclusion, I have found it unnecessary to deal the position
taken by the appellant, that, if the commission were under a duty
to consult, there was a reciprocal duty on the First Nations to
engage in the consultative process, which they had not fulfilled.
However, in my view, I am bound to say that there is considerable
merit to this position: see, e.g., Halfway River First Nation v.
British Columbia (Ministry of Forests) (1999), 178 D.L.R. (4th)
666 at 718 per Finch J.A. (B.C.C.A.).

3. (c) Was the commission required to apply the “three

filters” test?

[124] The Divisional Court was of the view that the
commission should have applied the “three filters” test formerly
applied by the OMB when considering applications for municipal
restructuring. O’Driscoll J. concluded that it was required to
do so. It appears, as well, that he felt the commission was
bound to follow the result reached by the OMB in 1994 on
Geraldton’s restructuring application. It appears that he then
examined the merits of the Final Proposal and Order and
concluded, in essence, that the commission should not have
developed the restructuring proposal. In examining the merits of
the proposal, he took into consideration evidence which TCPL had
filed and seemingly applied the “three filters” test.

[125] In my view, the commission was not required to apply
the “three filters” test. There are two reasons why I have
reached this conclusion. The first reason is that the statutory
scheme under which the commission operated did not require that
it do so. The second reason is that at common law the commission
was not required to follow the approach taken by the OMB, nor was
it bound to reach the same conclusion which the OMB reached in
1994 on Geraldton’s restructuring application. Thus, the
Divisional Court’s opinion that the “three filters” test ought to
have been applied by the commission was not relevant to the
commission’s jurisdiction on judicial review where, as I have
explained, the issue was whether the commission had properly
exercised its statutory powers.

[126] Dealing with the first reason, as I have explained
earlier, the legislation which provided for the appointment of a
commission to develop a restructuring proposal was new
legislation intended to replace the role of the OMB in respect to
municipal restructuring. It did not require the commission to
apply the “three filters” test in developing its restructuring
proposal. Consequently, O’Driscoll J. was incorrect in
interpreting the statutory scheme as containing “the touchstones
and benchmarks … described by the OMB”. The principles of
restructuring prescribed by the Minister were new and different.
In any event, in that portion of the commissioner’s reasons which
are reproduced in paragraph 60, he stated that he took into
consideration principles which were identical to the “three
filters” in carrying out his mandate and in arriving at a
restructuring proposal that was “in the best interests of all
parties … not just the interests of one of them”. This passage
from the commissioner’s reasons was included in his response to
the concern of TCPL that the restructuring proposal amounts to a
“tax grab”, which is the next issue I will consider.

[127] I do not take from the commissioner’s comments, read in
the context of the totality of his reasons, that he undertook to
apply these principles exclusively, or in the same manner as had
the OMB. Unlike the process and restructuring principles that
are prescribed by the statutory scheme, the “three filters” are
not prescribed by law as conditions precedent. As well, the OMB
applied the “three filters” test while performing an adjudicative
role that required it to resolve competing interests. As I have
explained, the commission was not engaged in an adjudicative
exercise.

[128] As for the second reason, the commission was not
required by the principle of stare decisis to follow the
decisions of the OMB. Rather, it was required to apply its own
judgment, unfettered by previous decisions of the OMB,
particularly its 1994 decision respecting Geraldton’s
application. O’Driscoll J. asked, rhetorically, whether anything
had changed since the OMB’s reasons of March 11, 1994. Whether
anything had changed was a matter for consideration by the
commission and not by the court, and any determination in respect
to changed circumstances is not reviewable by the court on
judicial review.

[129] Moreover, there is a well-accepted principle of
administrative law that stare decisis does not apply to
administrative tribunals. A tribunal is not bound to follow its
own decisions on similar issues, although it may consider an
earlier decision persuasive and find that it is of assistance in
deciding the issue before it. See, e.g., Evans v. Public Service
Commission Appeal Board, 1983 141 (SCC), [1983] 1 S.C.R. 582; Domtar Inc. v.
Qu‰bec (Commission d’appel en matiˆre de l‰sions professionelles)
(1993), 1993 106 (SCC), 105 D.L.R. (4th) 385 (S.C.C.).

[130] Thus, the Divisional Court erred in holding that the
commission was required to apply the “three filters” test, that
it was bound by the 1994 OMB decision and in substituting its own
view of the merits of the restructuring proposal.

3 (d) Did the Final Proposal and Order constitute a “tax

grab”?

[131] As I have indicated previously, it is difficult to
separate this issue from the previous issue because O’Driscoll
J., in concluding that the restructuring proposal amounted to a
“tax grab” at the expense of TCPL, purported to apply the “three
filters” test in substituting his own decision for that of the
commissioner. In doing so, he took into consideration the
evidence of Robert Lehman, a land use planner, and Enid Slack,
who is experienced in municipal finance and governance, which
formed part of the material filed by TCPL. Based on this
evidence, he concluded that “the commission acted without any
evidence upon which to base its annexation order”. He concluded:

In my view, the Commissioner lost jurisdiction and
credibility when he closed his eyes to a “tax grab”
and then opened his eyes, looked through a “window
of opportunity” and, on the same facts, saw the
basis for annexation.

It appears that O’Driscoll J.’s conclusion that the annexation of
the unorganized territory amounted to a “tax grab” was derived
from Canadian National Railway Co. v. Fraser-Fort George
(Regional District) (1996), 1996 3361 (BC CA), 140 D.L.R. (4th) 23 (B.C.C.A.).

[132] As I interpret what is at the heart of the position of
TCPL, it has submitted that the restructuring proposal unfairly
affects its economic position because it will be required to pay
more taxes to the new municipality than it had paid to the
province in the past. It submitted, if the commission had before
it the evidence which it presented on its application for
judicial review, that it would have recognized this unfairness
and proposed a form of restructuring that excluded the land on
which its pipelines are situated. Thus, its challenge to the
restructuring proposal was on its merits.

[133] I begin my analysis of this issue by repeating my
conclusion that it was not open to the respondents, by way of
judicial review, to challenge the proposal on its merits.
Whether a particular restructuring proposal is or is not “timely
and efficient”, or is or is not consistent with “the greatest
good of society”, do not represent questions of law answerable on
judicial review. These are policy issues that the legislature
intended the commission, not the court, to decide. To reiterate
what I have stated earlier, on judicial review, the court has no
authority to decide such questions, nor to quash the commission’s
order if it differs from the judge’s personal opinion, or that of
the OMB in an earlier case, as to what form of municipal
restructuring achieves “the greatest good”. Indeed, with
respect, the court had no institutional expertise in arriving at
political, economic and social compromises in restructuring the
boundaries and the infrastructure of municipalities and
unincorporated areas.

[134] Moreover, the statutory scheme that applied to the
jurisdiction of the commission makes no reference to the level of
taxes to be paid by any particular resident, or business, in any
municipality or unorganized territory – nor, indeed, to
Aboriginal land claims. The commission was given a broad mandate
to consider and balance a number of competing interests, which
included those of taxpayers. There was no requirement that the
restructuring proposal developed by the commission be tax
neutral. It will be for the new municipality to determine the
taxes to be paid by residents and businesses, who will have
available to them the statutory means to challenge the assessment
on which their municipal taxes are based.

[135] The Divisional Court’s view of the merits of the
restructuring proposal was informed by the affidavits of Mr.
Lehman and Ms. Slack. It was Ms. Slack, in her affidavit, who
provided the opinion that the annexation of the unorganized
territory ordered by the commission was a “tax grab”. The court
accepted this opinion and concluded that the commission, instead
of carrying out its duty to weigh all of the competing interests,
was motivated entirely, or primarily, by an improper desire to
impose a large tax on TCPL. To repeat what has been said
earlier, it was not for the court on judicial review of the
commission’s restructuring proposal and order to weigh the
credibility of the experts who provided evidence for TCPL against
the credibility of the commission on substantive matters such as
planning or the sufficiency of financial analysis.

[136] O’Driscoll J. relied on Canadian National Railway Co.
to support his finding that the annexation order was a “tax
grab”. However, that case is clearly distinguishable on its
facts. The decision in that case was based on evidence that a
municipality had deliberately created boundaries that were
“eccentric and gerrymandered” for the purpose of imposing a tax
burden on the railway. In this appeal, there is no evidence that
the annexation of the unorganized territory was for the purpose
of imposing a tax burden on TCPL. Although an improper motive
may permit the court to intervene on judicial review where there
is a proper evidentiary foundation, in this appeal there was no
evidence of a precise tax increase, if any, and no evidence of
bad faith on the part of the commission, such as that it had
artificially included a narrow strip of land in the annexation
order for no purpose other than to capture tax revenues. Whether
a complex municipal restructuring will have some income
redistributive effects, with some taxpayers paying more, and
others, less, is not relevant to the jurisdiction of the
commission.

[137] Although O’Driscoll J. placed great reliance on a
purported “tax grab”, in my view, it is essentially a rhetorical
expression to which no legal meaning was assigned. I believe
that it can fairly be stated that by alleging a “tax grab”, TCPL
was claiming that the annexation order was discriminatory. In
this regard, I would refer to Gander (Town) v. Tulk (1990), 1
M.P.L.R. 123 (Newf. Sup. Ct.), in which it was held that an
extension of municipal boundaries which resulted in different
levels of service to taxpayers within a town was not reviewable
as being discriminatory.

[138] It is my opinion that the decision of the Supreme Court
of Canada in Thorne’s Hardware Ltd. v. R., 1983 20 (SCC), [1983] 1 S.C.R. 106
affords a complete answer to the position of TCPL. In that case,
the appellants alleged that an Order in Council of the federal
Cabinet extending the limits of St. John Harbour had been passed
for improper motives to increase harbour revenues. By way of
background, the Governor in Council had passed an Order in
Council extending the limits of the port of St. John. As a
result, the water lot of the appellants was brought within the
limits of the port. Consequently, harbour dues were claimed from
the appellants in respect to their ships that used their water
lot. The appellants challenged the validity of the Order in
Council extending the harbour limits on the ground, inter alia,
that it was passed for improper motives, namely, to permit the
National Harbours Board to collect harbour dues from the
appellants without offering any service in return. The
appellants said that this amounted to “bad faith” on the part of
the Governor in Council.

[139] The Supreme Court rejected the position of the
appellants. Accepting that Dickson J., who delivered the judgment
of the Supreme Court, was speaking about the powers of the
federal Cabinet, there are passages from his reasons that apply
to this appeal. It is important to recognize that in passing the
Order in Council, the federal Cabinet, like the commission, was
acting under statutory authority.

[140] In commencing his analysis of the appellants’ position,
Dickson J. stated at p. 111:

The mere fact that a statutory power is vested in the
Governor in Council does not mean that it is beyond
judicial review: Attorney General of Canada v. Inuit
Tapirisat of Canada, 1980 21 (SCC), [1980] 2 S.C.R. 735 at p. 748.
I have no doubt as to the right of the courts to act
in the event that statutorily prescribed conditions
have not been met and where there is therefore fatal
jurisdictional defect. Law and jurisdiction are
within the ambit of judicial control and the courts
are entitled to see that statutory procedures have
been properly complied with: R. v. National Fish
Co., 1931 726 (CA EXC), [1931] Ex. C.R. 75; Minister of Health v. The
King (on the Prosecution of Yaffe), [1931] A.C. 494 at
p. 533. Decisions made by the Governor in Council in
matters of public convenience and general policy are
final and not reviewable in legal proceedings.
Although, as I have indicated, the possibility of
striking down an order in council on jurisdictional or
other compelling grounds remains open, it would take an
egregious case to warrant such action. This is not such
a case.

[141] Dickson J. continued at p. 112:

Counsel for the appellants was critical of the failure
of the Federal Court of Appeal to examine and weigh the
evidence for the purpose of determining whether the
Governor in Council had been motivated by improper
motives in passing the impugned Order in Council. We
were invited to undertake such an examination but I
think that with all due respect, we must decline. It is
neither our duty nor our right to investigate the motives
which impelled the federal Cabinet to pass the Order in
Council, Attorney-General for Canada v. Hallet & Carey
Ld., 1952 336 (UK JCPC), [1952] A.C. 427, at p. 445; Reference re Chemical
Regulations, 1943 1 (SCC), [1943] S.C.R. 1, at p. 12….

[142] Dickson J. went on at pp. 114-115 to observe that in
the Federal Court there was evidence from which one could
conclude that the collection of harbour dues was not an
unimportant consideration in the decision to extend the harbour
boundaries, but that there was ample evidence that the
expectation of increased revenues was not the only reason for
doing so. He also observed that the appellants had not been
denied an opportunity to be heard. Dickson J. then concluded at
p. 115:

I have referred to these several pieces of evidence,
not for the purpose of canvassing the considerations
which may have motivated the Governor in Council but to
show that the issue of harbour extension was one of economic
policy and politics; and not one of jurisdiction or
jurisprudence. The Governor in Council quite
obviously believed that he had reasonable grounds
for passing Order in Council P.C. 1977-2115
extending the boundaries of Saint John Harbour and
we cannot enquire into the validity of those beliefs
in order to determine the validity of the Order in
Council.

[143] As I observed earlier, the commissioner indicated that
he was convinced that it was desirable to extend the municipal
boundaries to protect the area’s natural environment and to
provide a reasonable basis for future economic development. This
illustrates that the prospect of increased tax revenues for the
new municipality was not the exclusive reason for the
restructuring proposal. As well, as discussed earlier, the
statutory scheme did not require the commissioner to hold a
hearing and the commissioner fulfilled his mandate in respect to
consultation.

[144] There is one final point that should be addressed. In
my view, affidavit evidence should not have been received by the
Divisional Court in respect to this issue. Whether the “tax
grab” aspect of the commission’s Final Proposal and Order is
characterized as an excess of jurisdiction, or a failure to
exercise jurisdiction, it is clear that the evidence was
presented to supplement the record before the commission for the
purpose of demonstrating that the court should substitute its
decision for that of the commission. It is precisely to avoid
these kinds of non-jurisdictional, non-legal debates on judicial
review that this court has held inadmissible affidavit evidence
which adds to the record of the tribunal being reviewed without
showing jurisdictional error: Keeprite Workers’ Independent Union
v. Keeprite Products Ltd. (1980), 1980 1877 (ON CA), 29 O.R. (2d) 513 (C.A.), leave
to appeal to S.C.C. refused (1980), 35 N.R. 85n.

[145] For the foregoing reasons, the Divisional Court erred
in quashing the commission’s Final Proposal and Order on the
ground that it constituted a “tax grab”.

3. (e) Was the commission biased?

[146] O’Driscoll J. found that there was a reasonable
apprehension that the commission was biased. He based this
conclusion on the evidence that the commissioner received
considerable assistance from staff members of the Ministry which,
to him, showed “beyond all doubt that MMAH was anything but a
disinterested party to the outcome of this Commission”. He found
it “difficult to ascertain whether the Commissioner was a willing
or unwilling captive of MMAH”, and concluded that, either way,
“the perception of an informed spectator had to be that the
Commissioner was simply doing the bidding of MMAH”.
Consequently, he held “that the Commissioner lost jurisdiction
through the appearance of bias and thereby denied fairness to the
Applicants.” In my view, neither the test to be applied where it
is alleged that a tribunal such as this commission was biased,
nor the evidence relevant to that test, established bias.

[147] As the Supreme Court of Canada explained in
Newfoundland Telephone Co. v. Newfoundland (Board of
Commissioners of Public Utilities), 1992 84 (SCC), [1992] 1 S.C.R. 623 at 636,
638-39, the test to be applied to determine whether bias exists,
which would be sufficient to nullify a decision of a tribunal, is
a flexible one, which will vary with the nature and function of
the decision-making body. As I have stated, the commissioner’s
role required that he make a policy decision after taking into
account broad social and economic factors. He was not performing
an adjudicative role in the resolution of a dispute between
competing parties. The applicable test to determine whether the
commission acted with bias is the “closed mind” test: Old St.
Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R.
1170 at 1197.

[148] In my view, the opinion of Cory J. in Newfoundland
Telephone states the test that the Divisional Court should have
applied. That case concerned comments made by a member of a
public utilities board responsible for regulating the telephone
company. After noting at p. 636 that “all administrative bodies,
no matter what their function, owe a duty of fairness to the
regulated parties whose interest they must determine”, he
reviewed the spectrum approach to determining bias in
administrative law, and the test applied in cases involving
municipal councillors, such as Old St. Boniface. In cases, where
elected councillors are involved as members of a board, “dealing
with planning and development”, Cory J. outlined the appropriate
bias test as follows at pp. 638-39:

… the standard will be much more
lenient. In order to disqualify the members
a challenging party must establish that there
has been a pre-judgment of the matter to such
an extent that any representations to the
contrary would be futile. Administrative
boards that deal with matters of policy will
be closely comparable to the boards composed
of municipal councillors. For those boards,
a strict application of a reasonable
apprehension of bias as a test might
undermine the very role which has been
entrusted to them by the legislature.

[149] Since the commissioner was not engaged in an
adjudicative process, the test, therefore, is not whether bias
can be reasonably apprehended, but whether, as a matter of fact,
the requirement of open-mindedness had been lost to the extent
that it can reasonably be said that he had pre-determined the
nature of the restructuring proposal he was by statute mandated
to develop. In other words, the reason for not imposing on the
commissioner the adjudicative standard of impartiality, namely, a
reasonable apprehension of bias, is that the statutory scheme
under which he operated contemplates the necessity that he
develop a restructuring proposal in respect to all, or part, of
the geographic area stipulated in his mandate. See Zundel v.
Canada (Attorney General) (1999), 1999 9357 (FC), 175 D.L.R. (4th) 512 at 521-525
(Fed. Ct., T.D.)

[150] Applying the closed mind test, and recognizing that it
was incumbent on the commissioner to develop a restructuring
proposal, the evidence does not support a finding that the
commissioner was biased in the sense that his mind was closed to
the concerns expressed by the respondents. A review of his
reasons indicates that he was alert to their concerns.

[151] Moreover, the evidence does not support the finding
that the commissioner was the “captive” of the Ministry. There
was no evidence that the Ministry had expressed its view
respecting the nature of the restructuring proposal and that the
commissioner merely rubber-stamped it. The commissioner
fulfilled his statutory duty to consult with the municipalities,
conduct meetings and entertain submissions concerning his draft
proposal, and to consult with others at his discretion. Although
the commissioner was provided with the assistance of Ministry
staff in gathering information and drafting his reasons for the
restructuring proposal, there was no evidence that these persons
interfered with the integrity or independence of the commission’s
decision-making process. Indeed, the evidence was to the
contrary and is capable of supporting a finding that the
commission came to an independent decision.

[152] For the foregoing reasons, it is my opinion that the
Divisional Court erred in quashing the Final Proposal and Order
on the ground of bias.

4. Should this court indicate its disapproval of certain

remarks made about the commissioner by O’Driscoll J.?

[153] The commissioner, through his counsel, maintained that
the Divisional Court in its reasons made unnecessary, harshly
critical and disrespectful comments about him, which stand to
have adverse consequences for his career and livelihood. In his
factum, counsel for the commissioner referred to seven passages
from the reasons of O’Driscoll J. that it was submitted were both
gratuitous and unfair to the commissioner, as well as harmful to
his reputation. Counsel invited this court to state clearly in
its reasons that the personal criticisms of the commissioner were
unwarranted. We were given no authority for why we should do so.

[154] Given the reasons which I have outlined in finding that
there were no grounds on which the Divisional Court could have
interfered with the commissioner’s restructuring proposal and
order, it is possible to understand that the commissioner may
feel that the comments were unfair. No doubt the commissioner
will draw some comfort from the result of this appeal. In all
other respects, however, I do not feel that it is appropriate for
this court to comment further about the remarks that the
commissioner feels are unfair.

5. The cross-appeal of NAN and GFN

[155] As mentioned previously, NAN and GFN have cross-
appealed in the event that the appeal is allowed. They ask this
court to declare that the Final Proposal and Order of the
commission infringe Aboriginal rights of hunting, fishing and
trapping guaranteed by Treaty 9, and, therefore, infringe
Aboriginal rights recognized and affirmed by s. 35(1) of the
Constitution Act, 1982. The Divisional Court found it
unnecessary to deal with this issue in light of its decision to
quash the restructuring proposal and order on the ground that the
commissioner failed to consult with NAN and GFN.

[156] In my view, on the basis of the record before this
court, it is impossible for this court to consider the cross-
appeal. Because O’Driscoll J. considered it unnecessary to deal
with this issue, he made no findings and rendered no decision for
this court to review. Generally speaking, it is not for this
court to act as a court of first instance and resolve issues that
the court below has failed, or declined, to resolve.

[157] It is important to keep in mind that there is a
significant difference between judicial review of the
restructuring proposal and order on administrative law
principles, where the attack is on executive or administrative
conduct rather than legislative enactment, which was the focus of
the applications before the Divisional Court, and an attack on
the restructuring proposal and order on constitutional law
principles based on their effect on Aboriginal rights and treaty
rights recognized and affirmed by s. 35(1) of the Constitution
Act, 1982. As the case law illustrates, whether a constitutional
attack is launched by a proceeding seeking a declaration of
constitutional invalidity of legislation or governmental action,
or whether it is raised as a defence to a criminal, or quasi-
criminal, charge, the process in which the court of first
instance must engage is usually complex and lengthy. This
process is well illustrated by cases like Sparrow and Badger.
Those who launch a constitutional attack on s. 35(1) grounds must
establish an existing treaty or Aboriginal right and a prima
facie infringement by government action. Should the government
seek to justify its action, it must receive the opportunity to do
so. O’Driscoll J. considered none of these issues. In light of
the fact that the Divisional Court did not consider these issues,
they cannot be litigated de novo before this court. This is not
intended as a criticism of O’Driscoll J. Having quashed the
Final Proposal and Order on the ground that the commissioner had
failed to consult with the First Nations, he was justified in not
considering the constitutional issue.

[158] Because of its complexity, the constitutional issue may
not be easy to decide. It would likely require the court to
consider whether the legislature, in creating a restructuring
commission, has provided the commissioner with an acceptable
process for recognizing and affirming Aboriginal and treaty
rights and for developing a proposal which does not adversely
affect the process of ongoing land claims. This legislative
scheme, unlike that in Halfway River, is completely silent in
respect to these subjects. In other words, the legislative
scheme is silent on how the commission is to approach the
accommodation of competing claims and uses – on the one hand,
established Aboriginal rights and treaty rights, and, on the
other hand, the government’s policy with respect to municipal
restructuring. These, and other possible issues, illustrate that
the constitutional question is both complex and difficult.

[159] There is a further observation to be made arising from
the fact that the cross-appeal raises what, in my view, is an
important constitutional issue. The issue concerns the impact of
a restructuring proposal made under s. 25.3 of the Municipal Act
on Aboriginal and treaty rights affirmed by s. 35(1) of the
Constitution Act, 1982. This issue may affect many persons in
Ontario in addition to the respondents NAN and GFN and the
appellant. There has been no finding of the constitutional facts
required to resolve this issue. As Dickson J. stated in Northern
Telecom Ltd. v. Communication Workers of Canada, [1980] 1 S.C.R.
115 at 139-140:

I am inclined toward the view that, in the
absence of the vital constitutional facts,
this Court would be ill-advised to essay to
resolve the constitutional issue which lurks
in the question upon which leave to appeal has
been granted. One must keep in mind that it
is not merely the private interests of the two
parties before the Court that are involved in
a constitutional case. By definition, the
interests of two levels of government are also
engaged. In this case, the appellant did not
apply to the Court, pursuant to Rule 17 of the
Supreme Court Rules, for the purpose of having
a constitutional question stated. If the
appellant had intended to raise a question as
to the constitutional applicability of the
Canada Labour Code, then the obligation was
upon the appellant to assure that the
constitutional issue was properly raised. As
no constitutional question was stated nor
notice served upon the respective Attorneys
General, the Court lacks the traditional
procedural safeguards that would normally
attend such a case and the benefit of
interventions by the governments concerned.

This view was followed in Stoney Creek Indian Band v. British
Columbia (1999), 1999 BCCA 527, 179 D.L.R. (4th) 57 (B.C.C.A.) in which the
Court of Appeal declined to deal with a constitutional issue in
the absence of a proper constitutional record from the court
below. At p. 72 Southin J.A. stated:

It is not, in my opinion, in the broad public
interest with which this Court must always be
concerned, that a profoundly important
question of constitutional law should be
decided without the vital facts, both those
inter partes and constitutional.

[160] It is likewise, not in the public interest for this
court to deal with the constitutional issue raised by the cross-
appeal in the absence of a proper constitutional record. As
well, the record before us is silent in respect to whether NAN
and GFN have served on the Attorney General of Canada and the
Attorney General of Ontario the notice of a constitutional
question required by s. 109(1) of the Courts of Justice Act,
R.S.O. 1990, c. C.43.

[161] This raises the question of how the court is to dispose
of the cross-appeal. The matter could be referred back to the
Divisional Court to make the required findings of fact, if it is
able to do so in a summary manner on the basis of a paper record,
and consider arguments on the constitutional question. However,
I do not think this would be an appropriate disposition of the
cross-appeal. As in Stoney Creek, I very much doubt that the
Divisional Court would be able to make a finding of the
constitutional facts on what is, in essence, a summary
application. Moreover, more than two and a half years have
passed since the commissioner released his Final Proposal and
Order. It would work a serious injustice on the municipalities
affected by the restructuring proposal, and their residents, if
the matter were to be referred back to the Divisional Court for a
determination of the constitutional issue.

[162] As I am satisfied that this court is in no position to
give a definitive answer to the constitutional question raised by
the cross-appeal and that it would not be helpful to refer this
question back to the Divisional Court for a re-hearing, I believe
that the better course to follow is to dismiss the cross-appeal.
I do so, however, without prejudice to NAN and GFN raising the
constitutional issue in a subsequent proceeding, if so advised.

CONCLUSION

[163] For the foregoing reasons, I would allow the appeal and
set aside the judgment of the Divisional Court quashing the
commission’s Final Proposal and Order. The Crown is entitled to
its costs of the hearing before the Divisional Court and this
court from TCPL, NAN, GFN and LL58. The cross-appeal of NAN and
GFN is dismissed with costs of the cross-appeal payable to the
Crown. The commissioner is neither entitled to costs, nor
responsible for the payment of costs.

Released: April 5, 2000 “S. Borins J.A.”
“I agree K.M. Weiler J.A.”
“I agree S. T. Goudge J.A.”