1318706 Ontario Ltd. et al. v. The Regional Municipality of Niagara [Indexed as: 1318706 Ontario Ltd v. Niagara (Regional Municipality)]

75 O.R. (3d) 405

[2005] O.J. No. 1907

Docket: C42440

Court of Appeal for Ontario,

Catzman, Rosenberg and Juriansz JJ.A.

May 16, 2005

Civil procedure -- Costs -- Municipality successful on motion to dismiss action attacking anti-smoking by-law -- Motion judge denying municipality its costs because of his belief that, by excluding casinos from application of by-law for reasons disassociated with public health, municipality had made inflammatory political decision that it should have known would invite litigation -- Motion judge exercising his discretion on wrong principle -- Municipality entitled to its costs.

Municipal law -- By-laws -- Validity -- Regional municipality enacting anti-smoking by law in 1997 after obtaining approval from local municipalities -- Local municipalities expressing approval through resolutions rather than by-laws -- Local municipalities not exercising "powers" when granting approval -- Local municipalities' failure to manifest approval by by- law rather than resolution not vitiating regional municipality's exercise of its power to pass 1997 by-law -- Regional municipality not requiring approval of local municipalities to repeal by-law and pass new anti-smoking by- law in 2002 -- New by-law not discriminating against bar owners in municipal law sense by excluding casinos but not bars from application of by-law -- By-law valid -- Municipal Act, R.S.O. 1990, c. M.45, ss. 101, 213.

In 1997, the defendant regional municipality sought the approval of its 12 component lower-tier municipalities (the "local municipalities") for an anti-smoking by-law. Eleven of the 12 local municipalities passed resolutions signifying their approval. Acting upon those approvals, the defendant enacted a by-law to regulate the smoking of tobacco in "public places". Excluded from the definition of "public places" were bars, billiard parlours, casinos and hospitals. In 2002, the defendant repealed the 1997 by-law and enacted a new anti- smoking by-law which proscribed smoking in an enclosed public place other than a designated smoking room. The definition of "public place" excluded casinos, dwellings, hospitals, private clubs, private function facilities and racetracks, but did not exclude bars. The plaintiffs operated a bar. They brought an action for a declaration that the 2002 by- law was of no force or effect. They argued that the validity of the 2002 by-law depended on the approvals given for the 1997 by-law, and that the 1997 by-law was not validly enacted as the local municipalities' expression of approval by way of resolution, rather than by-law, was insufficient. The plaintiffs also argued that the 2002 by-law was invalid because no approvals were obtained from the local municipalities. Finally, they argued that the 2002 by-law was discriminatory. The defendant moved for summary judgment dismissing the action as disclosing no genuine issue for trial. The motion was granted and the action was dismissed. The motion judge denied the defendant its costs, stating that, in excluding casinos for reasons unrelated to public health, the defendant made an inflammatory political decision that it should have known would invite litigation, and that it should pay the economic consequences of its political decision. The plaintiffs appealed, and the defendant cross-appealed the denial of costs.

Held, the appeal should be dismissed; the cross-appeal should be allowed. [page406]

Section 101(1) of the Municipal Act, R.S.O. 1990, c. M.45 provides that the powers of a municipality shall be exercised by by-law. In 1997, it was the defendant that exercised its power under s. 213 of the Act to enact an anti-smoking by-law. All that the local municipalities were called upon to do was to indicate their approval of the defendant's exercise of that power. The local municipalities were not exercising a power. Neither s. 101 nor s. 213 of the Act requires that an expression of approval must be given by by-law. The local municipalities' failure to manifest their approvals by by-law rather than by resolution did not vitiate the defendant's exercise of its power to pass the 1997 by-law.

The resolutions clearly manifested the approval required by s. 213(4) of the Act from a majority of the local councils to the defendant's exercise of its power to pass the 1997 by-law.

The approvals given in 1997 were not limited to the specific smoking by-law put forward by the defendant. Rather, the approvals sought and received were the approvals required by s. 213(14) of the Act to the defendant's exercise of its power, conferred by s. 213(2), to pass a by-law to regulate smoking in public places and workplaces. The defendant was not required to obtain similar expressions of approval before it repealed the 1997 by-law and enacted the 2002 by-law.

The 2002 by-law was not discriminatory, in a municipal law sense, because it included the plaintiffs' establishment but excluded casinos from its restrictions. A by-law passed pursuant to an enabling statute that expressly authorizes some form of discrimination is not open to attack on the ground of discrimination. Nor is it open to attack if the discrimination is a necessary incident to exercising the power delegated by the province. The general reasonableness or rationality of the distinction is not in issue. Rather, the appropriate question is whether discrimination is expressly or impliedly authorized. In this case, any discrimination was authorized by the power, conferred by s. 213(2), to designate public places as places in which smoking is prohibited, and to define "public place" for the purposes of the by-law. There was no suggestion that the inclusion of the plaintiffs' establishment and the exclusion of Casino Niagara was founded on considerations of bad faith or of conferring a competitive advant age, or for any improper purpose.

The motion judge's disposition of costs was clearly motivated by his disapproval of the defendant's decision to enact the 2002 by-law in the form that it did and his distaste for its decision to exclude Casino Niagara from its operation. In penalizing the defendant for actions which he found to be unimpeachable in law, on a basis that was unsustainable in law, the motion judge exercised his discretion on a wrong principle. The defendant was entitled to its costs of the action.

APPEAL from the order of Quinn J. of the Superior Court of Justice reported at [2004] O.J. No. 3785, 1 M.P.L.R. (4th) 1 (S.C.J.) dismissing an action attacking a by-law; CROSS- APPEAL from the costs order.

Cases referred to Larter v. Freightliner of Canada Ltd. (No.1), 1991 4077 (NB CA), [1991] N.B.J. No. 35, 113 N.B.R. (2d) 11, 285 A.P.R. 11, 50 C.P.C. (2d) 66 (C.A.); Ontario Restaurant Assn. v. Toronto (City), [1996] O.J. No. 5401 (Gen. Div.); Pub and Bar Coalition of Ontario v. Ottawa (City), [2001] O.J. No. 3496, [2001] O.T.C. 670, 23 M.P.L.R. (3d) 42 (S.C.J.); R. v. Sharma, 1993 165 (SCC), [1993] 1 S.C.R. 650, [1993] S.C.J. No. 18, 100 D.L.R. (4th) 167, 149 N.R. 169, 79 C.C.C. (3d) 142, 19 C.R. (4th) 329, 14 M.P.L.R. (2d) 35; Royal Canadian Horse Artillery Brigade Assn. v. Kingston (City), [2003] O.J. No. 2621, 39 M.P.L.R. (3d) 41 (S.C.J.); Shell Canada Products Ltd. v. Vancouver (City), 1994 115 (SCC), [1994] 1 S.C.R. 231, [1994] S.C.J. No. 15, 88 B.C.L.R. (2d) 145, 110 D.L.R. (4th) 1, 163 N.R. 81, [1994] 3 W.W.R. 609, 20 M.P.L.R. (2d) 1 [page407] Statutes referred to Interpretation Act, R.S.O. 1990, c. I.11, s. 28 [as am.] Municipal Act, R.S.O. 1990, c. M.45, ss. 101, 213 [repealed S.O. 2001, c. 25] Municipal Act, 2001, S.O. 2001, c. 25, ss. 1(1), 115, 455 Regional Municipality of Niagara Act, R.S.O. 1990, c. R.13 Tobacco Control Act, 1994, S.O. 1994, c. 10, s. 21

Ronald N. Brady and Brian R. Simpson, for appellants. Stanley M. Makuch and Signe B. Leisk, for respondent.

The judgment of the court was delivered by

CATZMAN J.A.:--

The Appeal

[1] In 1997, the Regional Municipality of Niagara (the "Region") enacted a by-law to regulate the smoking of tobacco in public places throughout the Region. Among the "public places" excluded from the definition of that term in the by-law were bars, billiard parlours, casinos and hospitals.

[2] In 2002, the Region repealed the 1997 by-law and enacted a second by-law regulating smoking in public places throughout the Region. The 2002 by-law specifically included bars in the definition of "public place", and specifically excluded from that definition such places as casinos, private clubs and racetracks.

[3] The appellants operate an adult entertainment parlour in the city of Thorold under the name of Cristal's Gentlemen's Club. Its establishment, classified under both by-laws as a "bar", was excluded from the operation of the 1997 by-law but was caught by the 2002 by-law.

[4] The appellants commenced an action for a declaration that the 2002 by-law was of no force and effect. The Region moved for summary judgment dismissing the action as disclosing no genuine issue for trial. The parties agreed that the motion should be decided as raising pure questions of law, that is, whether the Region had the power to pass the 2002 by-law and whether it was discriminatory. Quinn J. granted the Region's motion and dismissed the action without costs.

[5] Both sides appeal from the decision of the motion judge. The appellants appeal against the decision on the merits. The Region seeks leave to cross-appeal against the denial of its costs. [page408]

[6] For the reasons that follow, I would dismiss the appeal on the merits, grant leave to cross-appeal from the costs disposition, and award the Region its costs of the motion and of the action.

The 1997 By-law

[7] In 1994, the Municipal Act, R.S.O. 1990, c. M.45 (the "Act") was amended to empower municipalities to pass by-laws regulating smoking in designated public places and workplaces. The amendment [See Note 1 at the end of the document] was achieved by adding s. 213 to the Act. [See Note 2 at the end of the document] Section 213(2) read as follows:

213(2)The council of a local municipality may pass a by-law regulating the smoking of tobacco in public places and workplaces within the municipality and designating public places or workplaces or classes or parts of such places as places in which smoking tobacco or holding lighted tobacco is prohibited.

[8] The power so conferred was exercisable by a regional municipality under s. 213(14), which provided:

213(14) A county, district, regional or metropolitan municipality of the County of Oxford may exercise the powers under this section if a majority of the councils of the area or local municipalities within those municipalities approve the exercise of such powers.

[9] The Region is an "upper-tier" municipal corporation established pursuant to the Regional Municipality of Niagara Act, R.S.O. 1990, c. R.13. [See Note 3 at the end of the document] It is made up of 12 smaller municipalities, described as "lower-tier municipalities" [See Note 4 at the end of the document]. They are the cities of Niagara Falls, Port Colborne, St. Catharines, Thorold and Welland; the towns of Lincoln, Fort Erie, Grimsby, Niagara-on-the-Lake and Pelham; and the townships of Wainfleet and West Lincoln.

[10] In July 1997, the Region's Public Health Department sent a letter to the mayor and councils of each of the 12 local municipalities regarding a proposed Regional Smoke-Free Public Places by-law. The letter enclosed an "information package" and a draft by-law, and requested the local council's approval "to ensure that the current Regional Council can act on your recommendations". [page409]

[11] By September 1997, 11 of the 12 local municipalities had passed resolutions signifying their approval. A number of the resolutions specifically conveyed the municipality's endorsement of the draft by-law that the Region had circulated; others simply registered their approval in principle of the notion of a smoke-free by-law.

[12] In November 1997, acting upon the approvals it had received, the Region enacted the 1997 by-law. The by-law was entitled "A by-law to regulate the smoking of tobacco in public places". As noted, the definition of "public places" specifically excluded bars, billiard parlours, casinos and hospitals [See Note 5 at the end of the document]. Because the appellants' establishment fell within the definition of "bar" [See Note 6 at the end of the document], its operations were excluded from the by-law's operation.

[13] The by-law was enacted on November 6, 1997. A certified copy of the by-law, together with formal notice of its passage, was sent to the 12 local municipalities on November 21, 1997.

[14] The 1997 by-law came into force on January 19, 1998.

The 2002 By-law

[15] On April 4, 2002, the Region repealed the 1997 by-law and enacted a new anti-smoking by-law. It was entitled "A by- law regulating the smoking of tobacco in public places and workplaces". The by-law proscribed smoking in an enclosed public place within the Region, other than in a designated smoking room. It set out, in Schedule C, a number of establishments excluded from the definition of "public place": casinos, dwellings, hospitals, private clubs, private function facilities and racetracks. But, unlike its predecessor, the 2002 by-law not only did not exclude "bars" from its application, it specifically included them. Schedule B, which listed "Places included in the definition of public place", listed bars, billiard parlours, bingo halls, bowling centres, common areas of a building, funeral homes, public transit vehicles, recreational facilities, restaurants, shopping malls and sports facilities. "Bar" was defined in the schedule to include "a place where alcoholic beverages are purchased and consumed by the public and admittance is restricted to persons 19 years of age or older". It is common ground on this appeal that the appellants' establishment falls within the ambit of the definition of "bar" in the 2002 by-law. [page410]

[16] The local municipalities were not asked for their prior approval of the 2002 by-law. On April 30, 2003, copies of the by-law and of an information package containing "educational materials" were sent to each of the 12 local municipalities.

[17] The 2002 by-law came into force on May 31, 2003. Shortly thereafter, a number of charges alleging contraventions of the by-law were laid against employees and customers of Cristal's Gentlemen's Club. This action followed.

The Attack on the By-laws

[18] The appellants' attack on the 2002 by-law was, as the motion judge stated"intertwined with the legality of the 1997 by-law", on the theory that the validity of the 2002 by-law depended on the approvals given for the 1997 by-law. Thus, the issues canvassed on the argument of the appeal were these:

(1) was the 1997 by-law validly enacted?

(2) did the resolutions convey the clear and unequivocal approval of the local municipalities ?

(3) was the 2002 by-law validly enacted? and

(4) was the 2002 by-law discriminatory?

1. Was the 1997 by-law validly enacted?

[19] The appellants submitted that the local municipalities' expression of approval of the 1997 by-law by way of resolution was insufficient in law and that the local municipalities could signify their approval only by passing by-laws to that effect [See Note 7 at the end of the document].

[20] The starting point for this submission is s. 101(1) of the Act, which provided:

101(1) Except where otherwise provided, the jurisdiction of every council is confined to the municipality that it represents and its powers shall be exercised by by-law.

(Emphasis added)

[21] The appellants concede that there are some circumstances where, despite this section, a municipality may act other than by by-law. But, they argue, the motion judge was in error when he said, at paras. 41-42 of the reasons for judgment: [page411]

The true issue here is whether the Region had approvals from a majority of the lower-tier municipalities and not whether the form of those approvals is sufficiently formal. It is clear that a majority of the lower-tier municipalities intended to approve the passage of the 1997 by-law and it is equally clear that the Region interpreted the responses of the lower-tier municipalities as constituting such approval.

In the circumstances, by-laws were not necessary for conveyance of the approvals. Resolutions conveyed the approvals equally as well.

[22] I respectfully agree with the motion judge that by-laws were not required for the local municipalities to signify their approval to the Region.

[23] Section 101 of the Act refers to a municipality's exercise of its "powers". It was the Region that exercised its power under s. 213 of the Act to enact an anti-smoking by-law. All that the local municipalities were called upon to do was to indicate their approval of the Region's exercise of that power. In language applied to the circumstances of the present case, s. 213(14) provided:

[The Region] ... may exercise [its] powers under this section if a majority of the councils of the ... local municipalities ... approve the exercise of such powers.

(Emphasis added)

[24] In enacting the anti-smoking by-law, the Region was exercising a power, and it did so - as it was obliged to do - by by-law. The local municipalities, however, were not exercising a power, nor were they called upon to exercise a power. They were simply indicating to the Region their approval to the Region's exercise of that power, and those approvals were adequately and appropriately conveyed by resolution.

[25] It is undisputed that 11 of the 12 local municipalities intended to approve the Region's exercise of its power under s. 213. Each of them gave such approval. Neither s. 101 nor s. 213 of the Act requires that the expression of that approval must be given by by-law. The local municipalities' failure to manifest their approvals by by-law rather than by resolution did not vitiate the Region's exercise of its power to pass the 1997 by-law.

[26] I am fortified in this conclusion by a consideration of s. 213 in its entirety. Ten of the subsections of s. 213 contain express references to "a by-law" or "the by-law": ss. 213(2) (by-law regulating smoking of tobacco in public places and workplaces within the municipality); 213(3) (defining "public place" for purposes of the by-law, and provisions for signage, permitted smoking areas in a public place and workplace); 213(4) (by-law inapplicable to streets, roads or highways); 213(5) (appointment of inspectors for the purpose of a by-law); 213(6) (power of inspectors to enter public places or workplaces designated by a by-law); 213(8) (powers [page412] of inspector to determine whether there is compliance with a by-law); 213(10) (issuance of a warrant where reasonably necessary to determine whether there is compliance with a by-law); 213(15) (region's by-law supersedes by-laws made by area or local municipalities); 213(16) (repeal of by- law if majority of area municipalities rescind their approval); and 213(19) (in the event of conflict between a provision of a by-law under the section and a provision of an Act or regulation, the provision most restrictive of smoking prevails).

[27] Section 213(14), on the other hand, contains no reference to "by-law". It authorizes the Region to "exercise the powers under this section" if a majority of local municipalities approve the exercise of such powers. The "power" is the Region's, not the municipality's. Section 213(2), which refers to a municipality's power to pass the anti- smoking by-law, expressly requires that the Region act by "by-law"; s. 213(14), which requires local municipality approval before the Region can act, has no such requirement. Nor, it should be noted, does s. 213(16) require that a local municipality seeking to rescind its approval under s. 213(14) do so by by-law.

[28] I therefore conclude that expression of approval by the local municipalities in the form of resolutions was sufficient in law to signify the approval of the exercise of the Region's power required under s. 213(14) of the Act.

2. Did the resolutions convey the clear and unequivocal approval of the local municipalities?

[29] The appellants next submitted that, assuming that the approval of the local municipalities could be signified by resolution, the motion judge erred in finding that the resolutions in the present case were clear and unequivocal.

[30] It is sufficient, to deal with this submission, to refer in summary form to the 11 resolutions passed by the local municipalities.

[31] The most lukewarm expression of support came from Grimsby, whose resolution recorded that it "has no objection to passage of the by-law". Of the rest, one (Pelham) approved"in principle, the draft ... by-law" that had been circulated; one (Wainfleet) "encouraged" it; five (Lincoln, Niagara Falls, Port Colborne, St. Catharines and West Lincoln) "endorsed" it; two (Niagara-on-the-Lake and Thorold) "supported" it; and one (Fort Erie) "endorsed and supported" it.

[32] The motion judge addressed this submission at paras. 43-45 of his reasons. He said:

The plaintiffs point to the wording of the resolutions and submit that they do not constitute true approvals of the 1997 by-law. [page413]

Some of the resolutions state that the lower-tier municipalities "support" the Region's by-law, some say that they "endorse" the by-law and one indicates that it "endorses and supports" the by-law. On behalf of the plaintiffs it is argued that these words do not mean "approve." I respectfully disagree; they are close enough. ...

One of the resolutions spoke of approving of the draft 1997 by-law "in principle" and several gave a "conditional approval" to the by-law. However, even if one were to exclude these as not constituting approvals in law, the rest amount to a majority.

[33] I do not read more than one of the resolutions of the local municipalities as giving a "conditional approval" to the by-law. That one came from the Town of Grimsby, whose council resolved to advise the Region that "Grimsby has no objection to passage of the by-law, however, [it] does not agree with any enforcement by local staff and recommends that the proposed by- law be enforced entirely by the Region's Public Health Department".

[34] In any event, the remainder of the resolutions clearly manifested the approval required by s. 213(14) of the Act from a majority of the councils of the local municipalities to the Region's exercise of its power to pass the 1997 by-law.

3. Was the 2002 by-law validly enacted?

[35] The appellants next submitted that, if the approval of the majority of the councils of the Region's local municipalities was validly given for the purposes of s. 213(14) of the Act, that approval was limited to the specific smoking by-law that was put forward by the Region in July 1997. It argued that the Region was obliged to obtain similar expressions of approval before it repealed the 1997 by-law and enacted the 2002 by-law, and that the 2002 by-law was of no force and effect in the absence of such approvals.

[36] The motion judge responded to this submission in this way [at paras. 51-53]:

The plaintiffs submit that the Region did not have the approval of the lower-tier municipalities to repeal the 1997 by-law and to pass the 2002 by-law and, therefore, the latter is invalid. The plaintiffs contend that the language of the resolutions of the majority of the lower-tier municipalities was restricted to passage of the 1997 by-law and was insufficient to constitute approvals in respect of the 2002 by-law. The resolutions of the Towns of Fort Erie, Pelham, Grimsby, Lincoln and Niagara-on-the Lake and the Cities of Niagara Falls and Port Colborne, refer to "the draft Regional Smoke Free Public Places By-law" whereas the resolutions of only the Cities of St. Catharines, Thorold and the Township of Wainfleet, mention "a by-law."(Emphasis added).

In my opinion, the plaintiffs are suggesting an unwarranted level of grammatical precision in the responses of the lower- tier municipalities. [page414]

Although it would have been preferred for the Region to seek the approval of the lower-tier municipalities in respect of the 2002 by-law, as it had done with the 1997 by-law, I believe it was reasonable for the Region to have proceeded as it did, remembering that the lower-tier municipalities had, and still have, the option of rescinding their approvals. To put it another way, because of the approvals received in respect of the 1997 by-law, it was reasonable for the Region to infer that the approvals applied to the repeal and the new enactment.

(Emphasis in original)

[37] The local municipalities did not have to give their approval to a specific by-law. While it was helpful of the Region to forward a draft by-law with its information package in July 1997, the approval of the local municipalities was not limited to that very by-law. The approvals that the Region sought and the approvals it received were not limited in their legal effect to the very by-law that had been circulated. Rather, the approvals that the Region sought and received were the approvals required by s. 213(14) to the Region's exercise of the power, conferred by s. 213(2), to pass a by-law to regulate smoking in public places and workplaces. Although the local municipalities were entitled to do so under s. 213(16) of the Act, none of them ever rescinded its approval.

[38] In an alternative argument, the Region sought to uphold the repeal of the 1997 by-law and the enactment of the 2002 by- law by reference to s. 28(g) of the Interpretation Act, R.S.O. 1990, c. I.11. That section, which appears under the heading of "Implied Provisions", reads:

28. In every Act, unless the contrary intention appears,

(g) where power is conferred to make by-laws, regulations, rules or orders, it includes power to alter or revoke the same from time to time and make others;

[39] The motion judge rejected this argument because, in his view, it did not address the situation where, as here, the power conferred to make by-laws had first to be approved before it could be exercised.

[40] I also reject this argument. As I read them, the detailed and specific provisions of s. 213 laid out a code covering the enactment by local municipalities, or by regions with local municipalities' approval, of by-laws regulating the smoking of tobacco in public places and workplaces. The implication of provisions in a statute of general application, such as the Interpretation Act, is neither necessary nor appropriate in the face of such a code. [page415]

4. Was the 2002 by-law discriminatory?

[41] The appellants submitted that the motion judge should have declared the 2002 by-law to be void for discrimination because it included the appellants' establishment but excluded casinos from its restrictions. The first class of place listed in Schedule B to the by-law, that sets out places included in the definition of "public place", is "bar", which is defined as including a place where alcoholic beverages are purchased and consumed by the public and admittance is restricted to persons 19 years of age or older. This definition catches both the appellants and Casino Niagara. But the first class of place listed in Schedule C to the by-law, that sets out places not included in the definition of "public place", is "casino", which is defined as including a place which is kept for the purpose of gambling.

[42] In the appellants' submission, the inclusion of both the appellants and Casino Niagara as public places by reason of their character as a "bar" within Schedule B but the exclusion of Casino Niagara as a "casino" under Schedule C results in an impermissible discrimination that vitiates the by-law for discrimination, based on gambling, the entertainment activity at Casino Niagara. They argue that the fact that Casino Niagara, a "bar" like the appellants' establishment, continues to have access to a class of customers -- smokers -- to whom access is denied to the appellants, is an unwarranted discrimination within a class of regulated businesses.

[43] Discrimination has a specific meaning in the municipal law sense. In Shell Canada Products Ltd. v. Vancouver (City), 1994 115 (SCC), [1994] 1 S.C.R. 231, [1994] S.C.J. No. 15, McLachlin J., who dissented in the result but not on this point, described discrimination in these terms, at p. 259 S.C.R.:

The rule pertaining to municipal discrimination is essentially concerned with the municipality's power. Municipalities must operate within the powers conferred on them under the statutes which create and empower them. Discrimination itself is not forbidden. What is forbidden is discrimination which is beyond the municipality's powers as defined by its empowering statute. Discrimination in this municipal sense is conceptually different from discrimination in the human rights sense; discrimination in the sense of the municipal rule is concerned only with the ambit of delegated power.

[44] A by-law passed pursuant to an enabling statute that expressly authorizes some form of discrimination is not open to attack on the ground of discrimination. Nor is it open to attack if the discrimination is a necessary incident to exercising the power delegated by the province: R. v. Sharma, 1993 165 (SCC), [1993] 1 S.C.R. 650, [1993] S.C.J. No. 18, at p. 668 S.C.R. The general reasonableness [page416] or rationality of the distinction is not in issue. Rather, the appropriate question is whether discrimination is expressly or impliedly authorized: Shell Canada,at p. 282 S.C.R.

[45] The Region conceded that the 2002 by-law was "discriminatory" in the sense that it prohibited smoking in some establishments and not others. However, it argued, s. 213(2) of the Act granted municipalities the explicit power to pass by-laws regulating the smoking of tobacco in public places and workplaces within the municipality and to designate public places or workplaces, of classes or parts of such places, as places in which smoking tobacco or holding lighted tobacco was prohibited. Furthermore, s. 213(3)(a) granted to municipalities the power to define "public place" for the purposes of such by-laws.

[46] The motion judge rejected the argument that the Region was discriminating against businesses within the same class, and concluded that the true nature of the "discrimination" created by Schedule B and Schedule C was in respect of "places", not businesses, and thus permissible under s. 213(2).

[47] I agree. Any discrimination that resulted from the operation of those two schedules was authorized by the power, conferred by that subsection on municipalities, to designate public places or classes of parts of such places as places in which smoking was prohibited, and to define "public place" for the purposes of the by-law. There is no suggestion that the inclusion of the appellants' establishment and the exclusion of Casino Niagara was founded on considerations of bad faith or of conferring a competitive advantage or, indeed, any improper purpose. The fact that the by-law may operate to the benefit of Casino Niagara or to the detriment of the appellants is not, in itself, a ground to set it aside [See Note 8 at the end of the document]. There is no discrimination in the municipal law sense of that term.

The Costs of the Action

[48] Although the motion judge granted the Region's motion and dismissed the appellants' action, he denied the Region its costs. He gave these reasons for doing so: [page417]

The decision of the Region to exclude casinos from the operation of the 2002 by-law can only be understood by suspending all notions of logic and fairness. In the light of the preamble to the 2002 by-law,

AND WHEREAS research has proven the adverse effects and risk to health posed by environmental tobacco smoke (exhaled smoke and the smoke from idling cigarettes, cigars or pipes);

AND WHEREAS environmental tobacco smoke is a health hazard to the inhabitants, visitors and workers of the Region;

AND WHEREAS environmental tobacco smoke is also a public nuisance because of its irritating and discomforting properties;

one need not be a lineal descendent of Albert Einstein to conclude that the exclusion of casinos was based on economic, not health, considerations (after all, if there was a more palatable explanation it would have been trumpeted by the Region long ago). The Region has made a political decision to place a price tag on lung cancer, cardio-vascular disease, asthma, etc. The councillors of the Region have been duly elected and their decision must be accepted, as medically immoral as it may be. Democracy is not perfect.

If costs are a problem, I will entertain oral submissions. However, I offer this preliminary view. While the Region, as the winning litigant, would normally be awarded its costs of the motion and of the action, my inclination is to order that there be no costs. In excluding casinos from the smoking by-laws of 1997 and 2002, for reasons unassociated with public health, the Region made an inflammatory political decision that it should have known would invite litigation. Consequently, the Region should pay the economic consequences of its political decision.

[49] The motion judge's disposition of costs was clearly motivated by his disapproval of the Region's decision to enact the 2002 by-law in the form that it did and his distaste for its decision to exclude Casino Niagara from its operation.

[50] This court will rarely interfere with the disposition of costs at first instance. However, as Stratton C.J.N.B. said in Larter v. Universal Sales Ltd., 1991 4077 (NB CA), [1991] N.B.J. No. 35, 50 C.P.C. (2d) 66 (C.A.), at pp. 67-68 C.C.C.:

In M.M. Orkin, The Law of Costs, 2d ed. (Aurora, Ont.: Canada Law Book, 1987) at p. 2-13, the author points out that the principle that a successful party is entitled to his costs is of long standing and should not be departed from except for very good reasons. One might depart from the rule if there has been (1) misconduct of the parties, (2) miscarriage in the procedure, or (3) oppressive and vexatious conduct of proceedings.

[51] None of those factors is present in this case. The Region was entirely successful on the motion for summary judgment, [page418] and the action was dismissed. There was no suggestion that the Region had been guilty of misconduct or procedural miscarriage or oppressive and vexatious conduct. The sole basis on which the Region was denied its costs was the motion judge's view of the political correctness of the 2002 by-law and the manner in which the Region chose to define the ambit of its operation.

[52] In penalizing the Region for actions which he found to be unimpeachable in law, on a basis that is unsustainable in law, the motion judge exercised his discretion on a wrong principle. I would vary his order by substituting an order that the Region is entitled to its costs of the action, including the motion for summary judgment.

Disposition

[53] I would dismiss the appeal, grant leave to cross-appeal the order respecting costs, allow the cross-appeal against that order, and substitute the order appearing in para. 52.

[54] Counsel agreed that the successful party on the appeal should have costs, fixed at $40,000 for the action, including the motion for summary judgment, and costs fixed at $30,000 for the appeal. I would order that the respondent is entitled to costs in those amounts, inclusive of disbursements and GST.

Appeal dismissed; cross-appeal allowed.

SCHEDULE

The Municipal Act, R.S.O. 1990, c. M.45, s. 213

Definitions

213(1) In this section"public transit vehicle" includes a school bus and a passenger vehicle used for hire;

"workplace" includes a public transit vehicle.

By-law, smoking in public places and workplaces

(2) The council of a local municipality may pass a by-law regulating the smoking of tobacco in public places and workplaces within the municipality and designating public places or workplaces or classes or parts of such places as places in which smoking tobacco or holding lighted tobacco is prohibited.

Same

(3) A by-law made under subsection (2) may,

(a) define "public place" for the purposes of the by- law; [page419]

(b) require a person who owns or occupies a place designated in the by-law to post signs referring to the prohibition or to such other information relating to smoking as is required by the by-law;

(c) prescribe the form and content of signs referred to in clause (b) and the place and manner in which the signs shall be posted;

(d) permit persons who own or occupy a place designated in the by-law to set aside an area that meets criteria prescribed by the by-law for smoking within the place;

(e) prescribe the criteria applicable to smoking areas in clause (d), including the standards for the ventilation of such areas;

(f) require areas set aside for smoking in places designated by the by-law to be identified as an area where smoking is permitted; and

(g) require the employer of a workplace or the owner or occupier of a public place to ensure compliance with the by-law.

Public places

(4) Despite any definition of "public place" contained in a by-law made under subsection (2), no by-law made under subsection (2) shall apply to a street, road or highway or a part thereof.

Inspectors

(5) A local municipality may appoint inspectors for the purpose of a by-law made by the municipality under subsection (2).

Entrance without warrant

(6) An inspector may, at any reasonable time, enter any public place or workplace designated by a by-law under subsection (2) for the purpose of determining whether there is compliance with the by-law.

Dwelling

(7) Despite subsection (6), an inspector shall not exercise a power to enter a place, or a part of a place, that is used as a dwelling unless,

(a) the occupier of the dwelling consents to the entry, having first been informed by the inspector of his or her right to refuse consent; or

(b) if the occupier refuses to consent, the power to enter is exercised under the authority of a warrant issued under section 158 of the Provincial Offences Act.

Powers of inspector

(8) An inspector may make such examinations, investigations and inquiries as are necessary to determine whether there is compliance with a by-law made under subsection (2).

Obstruction

(9) No person shall obstruct an inspector carrying out an inspection under this section. [page420]

Warrant

(10) A judge or justice of the peace may, upon application by an inspector appointed under subsection (5), issue a warrant authorizing the inspector to enter, examine, investigate or make inquiries with respect to a public place or workplace if the judge or justice of the peace is satisfied by evidence under oath that,

(a) the entry, examination, investigation or any inquiry is reasonably necessary for the purposes of determining whether there is compliance with a by- law made under subsection (2); and

(b) the inspector has been prevented or is likely to be prevented from exercising any of his or her powers under this section or the inspector has been obstructed.

Expiry of warrant

(11) A warrant shall name the date on which it expires.

Execution of warrant

(12) A warrant may specify the days and hours during which it may be executed and if there is no such specification in the warrant, the warrant shall be executed between 6 a.m. and 9 p.m. on any day of the week.

Use of force

(13) The inspector may use such force as is reasonably necessary to execute the warrant and call on police officers to assist in the execution of the warrant.

Application to upper tier municipalities

(14) A county, district, regional or metropolitan municipality or the County of Oxford may exercise the powers under this section if a majority of the councils of the area or local municipalities within those municipalities approve the exercise of such powers.

Conflict with other by-laws

(15) A by-law made by a county, district, regional or metropolitan municipality or the County of Oxford under subsection (14) supersedes any by-laws respecting smoking made under this section by the area or local municipalities within those municipalities.

Repeal of by-law

(16) A by-law made under subsection (14) is repealed if a majority of the area municipalities rescind their approval.

Offence

(17) Any person who contravenes subsection (9) is guilty of an offence.

Crown bound

(18) This section binds the Crown.

Conflict with other legislation

(19) In the event of a conflict between a provision in a by-law made under this section and a provision of any Act or regulation, the provision that is the most restrictive of smoking prevails. [page421]

Notes

Note 1: For the amendment, see The Tobacco Control Act, 1994, S.O. 1994, c. 10, s. 21.

Note 2: For reference, s. 213 is reproduced in its entirety as a schedule to these reasons. The corresponding section in the Municipal Act, 2001, S.O. 2001, c. 25, is s. 115. Though enacted prior to the Region's 2002 by-law, the Municipal Act, 2001 did not come into force until January 1, 2003.

Note 3: Since repealed and continued under the Municipal Act, 2001, S.O. 2001, c. 25.

Note 4: The designations "upper-tier municipality" and "lower-tier municipality" appear in the Municipal Act, 2001, ss. 1(1) and 455. For convenience, I refer in these reasons to the latter class of municipalities as "local municipalities".

Note 5: By s. 213(3)(a), a by-law made under s. 213(2) could define "public place" for the purposes of the by-law.

Note 6: The definitions section of the by-law defined "bar" to include "a place where alcoholic purchases are purchased and consumed by the public and the sale of alcoholic beverages represents over fifty percent of the revenue".

Note 7: This argument could not be made in respect of a by-law enacted under the Municipal Act, 2001, which expressly provides for approval of such a by-law by a majority of the councils of the local municipalities in the form of resolutions giving their consent to the by-law: see s. 115(5)(b).

Note 8: It should be noted that attacks, on the ground of discrimination, made on anti-smoking by-laws enacted by three other Ontario cities have also been rejected: Ontario Restaurant Assn. v. Toronto (City), [1996] O.J. No. 5401 (Gen. Div.); Pub and Bar Coalition of Ontario v. Ottawa (City), [2001] O.J. No. 3496, 23 M.P.L.R. (3d) 42 (S.C.J.); and Royal Canadian Horse Artillery Brigade Assn. v. Kingston (City), [2003] O.J. No. 2621, 39 M.P.L.R. (3d) 41 (S.C.J.).