Court of Appeal for Ontario

Date: 2019-05-21 Docket: C65592

Judges: Simmons, Tulloch and Brown JJ.A.

Parties

Between

2386240 Ontario Inc., o/a Al-Omda Lounge, Habibi Lounge, Fusion Lounge, Saima Rogna Inc., o/a El Fishawy, 84921231 Canada Inc., o/a Mazaj Lounge and Shisalicious Café

Applicants (Appellants)

and

The City of Mississauga and The Regional Municipality of Peel

Respondents (Respondent)

Counsel

For the Appellants: Ryan P. Zigler

For the Respondent: Barnet H. Kussner and Sylvain R. Rouleau

Heard: February 28, 2019

On appeal from: The judgment of Regional Senior Judge Peter A. Daley of the Superior Court of Justice, dated June 5, 2018, with reasons reported at 2018 ONSC 3162, and from the costs order, dated August 9, 2018, with reasons reported at 2018 ONSC 4797.

Reasons for Decision

Introduction

[1] The appellants are the owners of several hookah lounges located within the Regional Municipality of Peel. In their lounges, the appellants supply waterpipes and smoking products (including herbal shisha, a legal substance) to their customers to be consumed on site, while the customers socialize on their premises.

[2] On April 28, 2016, the Region passed by-law No. 30-2016, Peel Waterpipe Smoking By-law ("the By-law"), which, among other things, prohibits smoking waterpipes in specified places that would include the appellants' lounges.

[3] The appellants applied under s. 273 of the Municipal Act, 2001, S.O. 2001, c. 25, for a declaration that ss. 2 (a), (b), and (c) as well as s. 5 of the By-law are illegal and should be quashed. Sections 2(a), (b) and (c) prohibit waterpipe smoking in an enclosed public place, an enclosed workplace and a restaurant or a bar patio. Section 5 prohibits a proprietor, an employer, or an employee from permitting waterpipe smoking in the locations specified in ss. 2(a), (b) and (c).

[4] The appellants argued that the Region acted outside the scope of its powers because the By-law targeted their businesses and would ultimately result in closure of their lounges and substantial economic loss. They maintained that the Region does not have the power to prohibit a business. Further, they argued that the By-law is inconsistent with provincial legislation and that the Region, though purportedly acting to protect employees, failed to consult with hookah lounge employees, and therefore acted in bad faith.

[5] The application judge dismissed the appellants' application. In his view, most of the issues raised had been canvassed in a case involving a City of Toronto by-law prohibiting waterpipe smoking in premises Toronto had licensed to carry on business. The challenged by-law was held valid and that decision was upheld by this court: 2326169 Ontario Inc. v. Toronto (City), 2016 ONSC 6221, 59 MPLR (5th) 279, aff'd 2017 ONCA 484, 67 MPLR (5th) 183 ("the City of Toronto case").

[6] In this case, the application judge found that the Municipal Act 2001 conferred powers on the Region resembling the powers conferred on Toronto under the City of Toronto Act, S.O. 2006, c. 11. Similar to the conclusion reached in the City of Toronto case, the application judge found there was ample evidence to support the conclusion that "the purpose of the By-law was protection of public health and safety, which is a purpose specifically authorized by section 11(2) subparagraph 6 of the Municipal Act, 2001." Further, relying in part on the City of Toronto case, the application judge concluded that the By-law did not conflict with the Occupational Health and Safety Act, R.S.O. 1990, c. O.1 ("the OHSA"), contrary to what the applicants had argued. Finally, he found diligent and thorough levels of consultation, research, and inquiry by the Region and no evidence of malicious or purposeful conduct in failing to consult the appellants' employees. He rejected the appellants' claim of bad faith.

[7] The application judge therefore dismissed the application with costs to the Region on a partial indemnity basis, totaling $86,580.99.

[8] The appellants raise three issues on appeal and seek leave to appeal costs. For the reasons that follow, we dismiss the appeal and deny leave to appeal costs.

Discussion

(i) The application judge did not err in failing to find the By-law ultra vires the Region

[9] First, the appellants submit that the application judge erred in failing to find the By-law ultra vires the Region. They say he erred in law in characterizing the subject matter of the By-law as the protection of public health and safety when the sole effect of the By-law was to prohibit their businesses. The appellants say that, on the record before council, waterpipe smoking was occurring in only 24 enclosed public places, all of which were waterpipe establishments. On these facts, the sole purpose of the By-law could only have been to prohibit the appellants' businesses. The appellants submit that the Municipal Act, 2001 does not grant municipalities the power to prohibit businesses and that the By-law was therefore beyond the Region's powers.

[10] Further, the appellants argue that the application judge erred in law in relying on the City of Toronto case for the broad proposition set out at para. 84 of his reasons that it was unnecessary to consider "the ultimate effect of the By-Law on the economic interest of the applicants … when determining whether the By-Law was lawfully enacted having regard to its purpose."

[11] The appellants rely on this court's decision in Canada Post Corp. v. Hamilton (City), 2016 ONCA 767, 134 O.R. (3d) 502, as establishing that it is necessary to consider not only the purpose, but also the effects of a by-law to determine if it is intra vires. They contend that the application judge erred in distinguishing Canada Post Corp. on the basis that the primary issues in that case were constitutional law issues, including conflict between federal and provincial legislation as well as the doctrine of paramountcy.

[12] We do not accept these submissions. The broad statutory authority conferred on the Region and the evidentiary record in this case amply support the application judge's conclusions that the purpose of the By-law was to protect public health and safety, a purpose authorized by s. 11(2) (6) of the Municipal Act, 2001, and that the By-law is therefore intra vires.

[13] Section 8(1) of the Municipal Act, 2001 requires that the powers of a municipality under the act "be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality's ability to respond to municipal issues."

[14] Section 11(2) of the Municipal Act, 2001 permits a municipality to pass by-laws respecting specified "matters". Subparagraph 6 of s. 11(2) specifies one such matter as: "Health, safety and well-being of persons." Section 8(3) (a) of the Municipal Act, 2001 provides that a by-law under s. 11 respecting a matter may "regulate or prohibit respecting the matter".

[15] As in the City of Toronto case, in determining the purpose of the By-law, the application judge reviewed the process that led to its enactment.

[16] In particular, the application judge noted that concerns had been raised relating to the harmful effects of waterpipe use by the Public Health Division of the Region's Health Services Department ("Peel Public Health") in a 2012 report entitled "Burden of Tobacco: the Use and Consequences of Tobacco in Peel". Subsequently, in February 2015, Peel Public Health issued a further report entitled "Health Effects from the Uses of, and Exposure to, Tobacco and Non-tobacco Waterpipes". The latter report included various recommendations, such as the possible development of a by-law prohibiting waterpipe smoking in enclosed public spaces and workplaces, including restaurants and bar patios.

[17] Further, as the result of a November 2015 report from the Medical Officer of Health and the Commissioner of Health Services, the Region conducted stakeholder consultations with a view to determining how the Region could best address public health risks associated with waterpipe smoking in public places.

[18] Following these consultations, in April 2016, the Medical Officer of Health and the Commissioner of Health Services submitted a report to council concerning the consultations, in which they recommended the enactment of a by-law prohibiting waterpipe smoking of both tobacco and non-tobacco products in enclosed public places, enclosed workplaces, and specified outdoor locations within the Region. After hearing submissions and receiving delegations relating to the recommendations in the April 2016 report, the Region enacted the By-law at the April 28, 2016 council meeting.

[19] Based on the evidence concerning this process as well as evidence concerning certain testing that had been conducted at waterpipe establishments, the application judge concluded that there was no evidence to support the submission that the purpose of the By-law was to prohibit business. He stated, "[i]ts true purpose was to prohibit a specific activity, namely smoking with waterpipes on the grounds that it posed a risk to public health and safety."

[20] While cognizant of the appellants' evidence of the potential economic impact of the By-law on their businesses, the application judge concluded that, just as this court held in the City of Toronto case, "that [potential impact on the operation of the appellants' businesses] is only an unfortunate incidental result of the By-law and not determinative of its purpose."

[21] The respondent disputes the appellants' submissions concerning whether Canada Post Corp. requires a court to consider the effects of a By-law when assessing whether the By-law is ultra vires. Like the application judge, the respondent relies on the fact that the primary issues in the Canada Post Corp. case involved questions of constitutional law in order to distinguish it.

[22] We are skeptical of the application judge's view that this court's discussion of vires in Canada Post Corp. can be distinguished only because, overall, that case addressed conflict between federal and provincial law and paramountcy. However, it is unnecessary that we determine that question for the purposes of this case.

[23] Assuming the effects of a by-law may be relevant to determining its purpose – or the "matter" of the by-law – we see no error in the conclusion that, on the facts of this case, the potential economic impact on the appellants' businesses is but an unfortunate incidental result of the By-law and not determinative of its purpose.

[24] Contrary to the appellants' argument, the sole effect of the By-law is not its potential economic impact on the appellants' businesses. Rather, the overriding effect of the By-law is prophylactic. It prevents the harmful effects of waterpipe smoking, both at the time of its enactment and into the future, in many specified places within the Region. Under s. 2 of the By-law, these places include not only the appellants' businesses, but also any location that is:

(a) an Enclosed Public Place;

(b) an Enclosed Workplace;

(c) a Restaurant or Bar Patio;

(d) a Playground;

(e) a Sporting Area;

(f) a Spectator Area adjacent to a Sporting Area;

(g) a School; or

(h) any area under public ownership that is within 20 metres of any point on the perimeter of a Playground, Sporting Area or Spectator Area adjacent to a Sporting Area.

[25] This prophylactic effect of the By-law is entirely in keeping with the application judge's finding that the true purpose of the By-law was to protect public health and safety from the risks posed by waterpipe smoking, a purpose authorized under s. 11(2) of the Municipal Act, 2001. Considering the By-law as a whole, we agree with the application judge's conclusion that, as in the City of Toronto case, while the By-law may have an economic impact on the operation of the appellants' businesses, that is only an unfortunate incidental result of the By-law and not determinative of its purpose.

(ii) The application judge did not err in failing to find the By-law conflicts with the OHSA

[26] The appellants' second argument is that the application judge erred in failing to find that the By-law conflicts with the OHSA. They rely on Control of Exposure to Biological or Chemical Agents, R.R.O. 1990, Reg. 833 ("Regulation 833"), which was made under the OHSA. The appellants contend that Regulation 833 comprehensively addresses the protection of Ontario workers from hazardous agents in the workplace, including carbon dioxide and particulate matter, the substances identified by the Region as posing a danger in this case. They say that, under s. 2(2) of the OHSA, Regulation 833 prevails over the By-law and the By-law is therefore void.[1] In the alternative, they say the By-law is incompatible with the purpose of Regulation 833 and is therefore void under s. 14 of the Municipal Act, 2001.[2] Finally, the appellants contend that the application judge erred in relying on this court's rejection of a similar argument in the City of Toronto case. That is because, say the appellants, the City of Toronto case focused only on the OHSA itself and did not address the appellants' arguments concerning conflict with Regulation 833.

[27] We reject these submissions. In the City of Toronto case, this court noted that the by-law at issue in that case "protect[ed] the health and safety of patrons as well as employees of businesses." Further, this court found the by-law at issue "complementary to both the purpose and the provisions of the OHSA." Importantly, this court concluded, "[c]ontrary to the appellants' submission, the OHSA does not require the City to adopt measures short of a prohibition on hookah smoking in order to protect employment in hookah lounges" (emphasis added).

[28] The appellants have identified nothing in Regulation 833 that suggests this court's conclusions concerning conflict with the OHSA are not equally applicable to it.

(iii) The application judge did not err in failing to find the Region acted in bad faith

[29] The appellants' third argument is that the application judge erred in failing to find that the Region acted in bad faith in enacting the By-law. The appellants contend that bad faith in this context does not require wrongdoing or personal advantage to a member of council. All that is required is that a municipality act arbitrarily and without the required degree of fairness, openness, and impartiality. The appellants submit that because their employees' economic interests were affected by the By-law, the employees were entitled, as a matter of procedural fairness, to be consulted concerning its impact. Further, the appellants point to the application judge's statement in his reasons that "[m]ere inadvertence of council to invite employees does not make out bad faith". They submit that the reason for a denial of procedural fairness is immaterial to the issue of bad faith.

[30] We do not accept the appellants' submissions. As we have said, the application judge found that the record disclosed "very diligent and thorough levels of inquiry, research and consultation by the Region prior to the enactment of the subject By-Law." He noted that a public meeting was held to allow members of the public and stakeholders to make their concerns known to the Regional council. His comment about inadvertence was made in the context of observing that it was open to the appellants' employees to attend the public meeting. In the circumstances, we see no basis on which to interfere with the motion judge's finding that the appellants failed to meet the heavy burden of establishing the presence of bad faith in the enactment of the By-law.

(iv) Leave to appeal costs is denied

[31] The application judge denied the Region's request for substantial indemnity costs. He also reduced its claim for partial indemnity costs by $10,000 by eliminating the claimed junior counsel fee, resulting in a total costs award of $86,580.99 on a partial indemnity basis.

[32] We reject the appellants' argument that the application judge should have followed the lead of the application judge in the City of Toronto case and made no order as to costs. The issues raised in this case bore substantial similarity to the issues already fully litigated in the City of Toronto case. As such, this case did not raise a matter of first impression and the appellants had no reason to expect that the Region's taxpayers should bear the burden of the appellants' legal challenge.

[33] An order for leave to appeal costs requires "strong grounds upon which the appellate court could find that the judge erred in exercising his discretion": Brad-Jay Investments Ltd. v. Szijiarto, 218 O.A.C. 315, at para. 21. We see no such grounds in this case.

(v) Disposition

[34] Based on the foregoing reasons, the appeal is dismissed and the request for leave to appeal costs is denied. Costs of the appeal are to the respondent on a partial indemnity scale fixed in the amount of $10,000 inclusive of disbursements and HST.

Janet Simmons J.A.

M. Tulloch J.A.

David Brown J.A.

Footnotes

[1] This subsection provides that "[d]espite anything in any general or special Act, the provisions of this Act and the regulations prevail."

[2] This section provides:

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

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

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

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