CITATION: Queensway Excavating & Landscaping Ltd v. Toronto (City), 2019 ONSC 5860

DIVISIONAL COURT FILE NO.: 605/18 DATE: 2019/10/15

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Ellies R.S.J., Sachs and Thorburn JJ.

BETWEEN:

QUEENSWAY EXCAVATING & LANDSCAPING LTD.

Applicant

– and –

CITY OF TORONTO

Respondent

Eric A. F. Grigg, for the Applicant

Michael Sims, Michele A. Wright, for the Respondent

HEARD at Toronto: May 14 and 15, 2019

REASONS FOR DECISON

Ellies R.S.J.

OVERVIEW

[1] Queensway Excavating & Landscaping Ltd. ("Queensway") applies to quash two related decisions made by the City of Toronto (the "City") under a policy known as the "Fair Wage Policy" (the "Policy"). In the first decision, Queensway was ordered to pay unpaid wages to its employees by the City's Fair Wage Office (the "FWO"). In the second, it was disqualified from working on City contracts for a period of two years by City Council.

[2] Queensway argues that it was denied procedural fairness in both decisions and that the City's interpretation of the Policy was incorrect. It seeks orders quashing the decisions, various declarations relating to the proper interpretation of the Policy, and damages in the amount of $998,730.88.

[3] For the following reasons, I would grant the application. Queensway was denied procedural fairness in the process leading up to the FWO's decision (the "Breach Decision”). For that reason, the Breach Decision must be quashed. Because the decision by City Council (the "Disqualification Decision") was based upon the Breach Decision, it cannot stand alone. It must also be quashed.

[4] This court is not in a position to grant any of the other remedies sought. The matter must be remitted to the decision makers.

FACTUAL BACKGROUND

The Policy

[5] Pursuant to the Policy (Toronto Municipal Code, Chap. 67, Sch. A), certain non-unionized employers undertaking work for the City, including Queensway, must pay their employees at a defined hourly rate, depending on the type of work involved. The Policy is administered and enforced by the FWO, a department of the City. The FWO reports to the City's Government Management Committee (the "Committee").

[6] Where a contractor is found to have violated the Policy, the FWO may impose certain penalties, including paying the affected worker(s) directly from funds owing to the contractor by the City. Where a contractor is found to have violated the Policy in two separate instances over a period of three years, the Manager of the FWO may recommend to the Committee that the contractor be disqualified from conducting business with the City for a period of two years.

[7] The Policy contemplates that the final Disqualification Decision will be made by City Council.

Toronto Water Contracts

[8] In 2013, Queensway became one of a number of contractors providing excavation equipment and operators to the City's Water Department ("Toronto Water").

[9] Contractors wishing to bid on Toronto Water contracts were required to do so on the basis of a "unit price", which represented the capital and maintenance cost of the machinery, the wages and benefits paid to the operator, a portion of the contractor's overhead, and the contractor's profit. Successful bidders were told how many machines and operators to supply and were ranked such that the lowest bidder was placed at the top of the callout list and the highest bidder was placed at the bottom.

[10] Queensway was one of four successful bidders for the 2013 contract, but it was placed at the bottom of the callout list. According to Queensway, this proved to be economically unfeasible for the company and its operators because the hours of work were unpredictable and there was significant unpaid travel time to the worksite from Queensway's premises in Etobicoke. Under the 2013 system, whenever Queensway's operators did get called out, Queensway had to pay them for more time than it was being paid by Toronto Water. As a result, Queensway was losing both money and operators.

[11] Queensway later bid on the contract for 2014. However, according to Queensway, Toronto Water and the contractors involved in the 2013 contract agreed upon a different method of payment with respect to the 2014, and subsequent, contracts. Instead of paying only for the hours the operators and their machinery were on site, Toronto Water's site foreman would provide the operator with a "Contractor Work Card" (the "Work Cards") that reflected an eight hour shift, regardless of the length of time that the operator actually spent on site. In addition, says Queensway, the contractor would be permitted to invoice one additional "travel hour", also reflected in the Work Card, to compensate for the time it took to get the machinery to the jobsite. Queensway was paid by Toronto Water on the basis of the hours shown in the Work Cards.

[12] Queensway was again one of the successful bidders on the 2014 contract. That contract was extended through to 2015. It also bid on and succeeded with respect to contracts for 2016 (which was extended through 2017) and 2017 - 2018 (to August 31).

The 2016 Policy Violation

[13] In 2016, the FWO determined that Queensway had not paid its employees the rates required by the Policy with respect to the 2016 contract. According to a report prepared by the FWO on April 16, 2018, referred to below, Queensway alleged that it was exempt from the Policy because its operators were actually shareholders of a small business company. However, the FWO determined that they were employees, instead, because Queensway controlled the conditions of their employment, including their wages.

[14] As a result of the FWO’s determination, Queensway received a letter from the FWO dated August 24, 2016, requiring it to pay its employees certain specified amounts and to pay an administrative fee, as permitted by the Policy. According to Queensway, all of the contractors on the 2016 contract were penalized. As Queensway admits, it was advised in that letter of the consequences of violating the Policy two times within three years.

[15] According to Queensway, a number of its operators subsequently decided to return the amounts that Queensway was ordered to pay them, a fact which the FWO did not learn about until later.

The 2017-2018 Alleged Policy Violation

[16] In 2018, the FWO began another investigation of Queensway's payment practices after receiving complaints from two of its former employees that they had not been paid for the hours they worked. On January 2, 2018, the FWO's Assistant Manager delivered a letter to Queensway, demanding documents relating to its payroll for the year 2017, with which Queensway complied. Initially, Queensway provided copies of its payroll records, including pay stubs, tax deductions, and weekly time sheets for each employee. Later, Queensway provided copies of documents called "Circle Check Forms" with respect to the two former employees. These forms were intended for the purpose of having the operator report on the condition of his equipment, but they also noted the hours actually worked each day for the operator completing it and were used by Queensway for that purpose, as well.

[17] On March 29, 2018, the FWO wrote to Queensway, advising Queensway that it had determined that Queensway had once again violated the Policy, this time by not paying its employees for all of the hours they worked. In the letter, the FWO advised that it had compared Queensway's payroll records with the Work Cards and concluded that Queensway had underpaid its employees an average of two hours per shift. Included with the letter was a spreadsheet showing the number of hours that the FWO had determined each employee had not been paid. The FWO calculated the wages owing to employees in the amount of $180,174.40, and assessed a 15 percent administration fee, for a total of $207,200.56 owing under the Policy.

[18] In addition to advising Queensway that it violated the Policy in 2017, the March 29 letter advised that the FWO had learned that Queensway's operators were "allegedly" forced to return to Queensway the funds that the FWO had ordered they be paid because of the 2016 Policy violation (the "2016 Back Pay"). The letter stated that FWO saw this as an indication of Queensway's unwillingness to comply with its obligations to its employees. The FWO ordered that Queensway make restitution to the operators who had returned the funds and required that all payments be made by April 5, 2018.

[19] The March 29 letter concluded by advising Queensway that, given the 2016 violation, it would be recommending to the Committee that Queensway be disqualified for a period of two years under the Policy.

Communications between Queensway and the FWO following the March 29 Letter

[20] On the day by which Queensway was to make restitution (April 5), Queensway's lawyer, Macdonald Allen, wrote to the FWO on Queensway's behalf. He stated that Queensway "unequivocally" denied the allegation that it had forced its employees to hand back the 2016 Back Pay and asked for more time "in order to properly respond to the items raised" in the FWO's letter.

[21] In response, Lorraine Searles-Kelly, of the City Solicitor's office, wrote to Mr. Allen via email and advised that the City would grant Queensway an extension until Friday, April 27 only, as the Committee meeting was to be held on Monday, April 30. Between the date of Ms. Searles-Kelly's email and the date of the Committee meeting, there were a number of further communications between Mr. Allen and Ms. Searles-Kelly, including some with members of the FWO. These included:

• a conference call on April 10 between Mr. Allen and Ms. Searles-Kelly;

• an email on April 11 from Ms. Searles-Kelly to Mr. Allen in which she provided him with a copy of the spreadsheet that the FWO attached to the March 29 letter;

• a meeting on April 19 involving representatives of Queensway, the FWO, Mr. Allen and Ms. Searles-Kelly during which Queensway provided the City with a detailed breakdown showing the hours on the Work Cards, actual hours worked and actual hours paid for each of its employees for the period from January to October 2017; and

• emails from Mr. Allen to Ms. Searles-Kelly attaching copies of documents entitled "Acknowledgement and Release" (the "Acknowledgements"), signed by four of the five employees who had not accepted the 2016 Back Pay, in which they acknowledged that they were returning the funds voluntarily, among other things.

The Report for Action

[22] On April 16, 2018, the FWO prepared a report for the Committee entitled "Report for Action" (the "Report"). In it, the FWO advised the Committee that (p. 5):

The Fair Wage Office interviewed numerous workers employed by Queensway engaged on the work sites. The backhoe operators indicated that they typically work from 7:00 a.m. to 3:00 p.m. However, they only get paid for the hours worked from 7:00 a.m. to 1:00 p.m. at the prescribed Fair Wage Rate. Workers are apparently not paid for, on average, two of the hours worked daily.

After examining the employee hours worked shown on the company's payroll records and the employee hours worked shown on Toronto Water's Contractor Work Cards and taking into account information from the worker interviews, a variance averaging two hours per day, per worker was verified. The Fair Wage Office determined that Queensway failed to pay workers the Fair Wage rates for unreported work hours, and failed to provide true and accurate payroll records.

Queensway failed to pay its workers the appropriate wage rate in accordance with the Fair Wage schedule. The calculation for unpaid hours involving 15 backhoe operators results in owed back wages of $180,174.40, with $27,026.16 (15%) in administrative penalties, totaling an amount of $207,200.56.

Additionally, during the course of the 2018 investigation, certain workers provided the Fair Wage Office with certain documentation allegedly showing that Queensway's workers were required to return to Queensway their back wages restitution payments with respect to the 2016 violation.

[23] The Report finished by recommending the two year disqualification the FWO said it would make in the March 29 letter.

[24] The Report was made available to members of the public, including Queensway, via the Internet.

The Committee Meeting

[25] The Committee met as planned on April 30, 2018. Mr. Allen was present, along with representatives of Queensway and two of the employees whom Queensway says were among those who decided on their own to return the 2016 Back Pay. Also in attendance was a representative from the FWO, a representative from Toronto Water, and one of the two complainants, Fulvio Savini. Mr. Savini was also one of the employees who returned the 2016 Back Pay. At that point, however, he was working for one of Queensway's competitors.

[26] Mr. Allen had provided written materials to the Committee on the Friday prior to the meeting (April 27). These consisted of six type-written pages of submissions in the form of a letter, together with attachments totalling another 112 pages. The submissions and the attachments were directed at refuting the allegations that Queensway had forced its employees to return the 2016 back wages and that Queensway had breached the Policy in 2017. With respect to the first allegation, Mr. Allen submitted that the employees who returned the funds or refused to cash their cheques had done so completely voluntarily. He supported his submissions by providing copies of the Acknowledgements.

[27] With respect to the second allegation, Mr. Allen submitted that the Work Cards did not represent the actual hours worked by an employee and that Queensway was not in breach of the Policy because it paid the required wages to its employees for the hours that they actually worked. In support of this submission, Mr. Allen attached copies of Work Cards, invoices from Queensway to Toronto Water, and Circle Check Forms for various employees for the months of January 2017 and January 2018.

[28] In accordance with the City's procedural by-law, Mr. Allen was permitted to address the Committee for five minutes and was then asked questions by the three members of the Committee, whose questions were also limited by the by-law to five minutes each. During his oral submissions and in answer to questions posed of him by Committee members, Mr. Allen told the Committee with respect to the 2016 Back Pay that two of the five employees who had voluntarily refused to accept the back pay were there with him that day. With respect to the allegations relating to 2017, Mr. Allen submitted that the Policy does not require contractors to pay their employees for anything other than the hours they actually work. He told the Committee about the history leading up to the agreement with Toronto Water that it would issue Work Cards for eight plus one hours regardless of the time actually spent on the jobsite by workers.

[29] Mr. Allen also told the Committee about an agreement between Queensway and its employees involving the "banking" of hours. According to the materials filed by Queensway in support of this application, in anticipation of Queensway's bid on the 2017 contract, their operators proposed that they be paid the Policy rates, but that they take an unpaid one hour lunch and two 15-minute breaks for every 8 hours worked, such that they would only be paid for 6.5 hours in an 8 hour shift. It was proposed that 6.5 hours would be the least amount for which they would be paid, even if they worked less on a particular day, and it was assumed that, between being underpaid on some days and overpaid on others, it would "average out" over the course of any given year.

[30] According to Queensway, its operators later proposed to be paid for even fewer minimum hours each day. Queensway contends that in August 2017, because the hourly rates set by the Policy were due to increase, the operators proposed that the two unpaid breaks be increased from 15 minutes to 30 minutes, thereby reducing the paid hours to 6, rather than 6.5, for an 8 hour shift.

[31] Following Mr. Allen's presentation, the Committee then heard from Mr. Savini, who told the Committee that he and his colleagues "never signed any papers saying they agreed to six hours a day". He told them that Queensway had been forced by the FWO to give them a raise (in 2016)"and they (Queensway) cut our hours." He also told the Committee that he was now being paid eight hours per day and the one hour travel time shown on the Work Cards by his new employer. Finally, Mr. Savini told the Committee that there was, in fact"a verbal agreement that we would repay the money that was deemed ours by the Fair Wage when they (Queensway) were first audited" in 2016.

[32] After hearing from Mr. Savini, the Committee spent the rest of the public part of the meeting asking questions of Mark Paplica, the FWO Manager, and the representative from Toronto Water. Mr. Paplica told the Committee that "the hours that [the FWO was] able to determine were worked were based on Toronto Water work Contractor Work Cards" and that it was the City's expectation that Queensway's employees were working eight hours. The representative from Toronto Water told the Committee that this was also Toronto Water's expectation.

[33] The two employees of Queensway who attended the meeting were not permitted to address the Committee because Queensway's lawyer had failed to register them as deputants, as required by the procedural by-law.

[34] The Committee then went in camera. According to the transcript, the purpose of the Committee meeting in camera was to discuss personal information relating to one or more individuals and to obtain legal advice from members of the City Solicitor's office. When the Committee reconvened in public about 40 minutes later, it unanimously adopted the FWO's recommendation. As a result, the Committee recommended to Council that Queensway be disqualified from conducting business with the City for a period of two years.

The Council Meeting

[35] The Committee's recommendation was moved and carried without debate at a City Council meeting held on May 22, 2018, at which Queensway had been advised beforehand it would not be permitted to make submissions.

Post-decision Communications

[36] Immediately after the Council meeting, Queensway was advised both orally and in writing that it would no longer be receiving assignments from the City. As a result of the Disqualification Decision, Queensway was not permitted to complete work on the 2018 contract.

[37] A further meeting between representatives of Queensway and the FWO took place on May 31, 2018, at which Queensway was advised that the FWO was also taking the position that Queensway had violated the Policy in the way in which it paid vacation pay to its workers.

[38] Queensway and its counsel engaged in further communications with the FWO and with the City Solicitor's office after May 31. In one of those communications, dated June 27, 2018, the FWO advised Queensway that it had recalculated the amount it owed to its employees for back pay and to the City as an administrative fee, this time for the period from January 1, 2017 to April 30, 2018. The new total was $294,029.62. This new total included the travel hour, which the FWO concluded should also be paid to the workers. The FWO demanded that Queensway pay this amount by July 6, 2018, failing which it would make the payments from Queensway's holdback. The record is not clear as to whether this has been done.

[39] In an email to the City solicitor dated July 19, 2018, counsel for Queensway demanded that the City release the amount of the holdback exceeding the disputed back pay and administration fee. There is nothing in the record to indicate that the City has done so.

Queensway's Calculations of Back Pay Owed

[40] Queensway has conducted its own analysis of the amount of wages owed, comparing its records with those relied upon by the FWO. According to Queensway, using only the hours Queensway says that its employees actually worked and using the rate of pay that FWO alleges should have been used, the amount owing is $126,447.09, rather than the $255,677.93 alleged by the FWO. If one assumes that the hourly wages Queensway paid were correct, as Queensway maintains they were, the amount owing is reduced to $1,902.58.

[41] The City objects to this calculation being filed and to Queensway filing additional Work Cards on the basis that these documents were not before the FWO, the Committee, or Council at the time the impugned decisions were made.

Damages

[42] Queensway contends that, but for the disputed Disqualification Decision, it would have earned profits for completing the balance of the 2018 contract in the amount of $74,113.53. It also contends that, had the City not disqualified two of the three approved contractors (one of its competitors was disqualified at the same time for violating the Policy), Toronto Water would have extended the 2018 contract for a further four years and it would have earned an additional $924,617.35, bringing the total loss to $998,730.88

ISSUES

[43] There is no issue about this court's jurisdiction to hear this application under the Judicial Review Procedure Act, R.S.O. 1990, c. J.1.

[44] The issues raised on this application were:

Should the additional documents be admitted?
Was Queensway denied procedural fairness?
What is the standard of review with respect to the City's interpretation of the Policy?
Did the City's interpretation of the Policy meet that standard?
If not, what is the remedy?

[45] Given my conclusion that Queensway was denied procedural fairness in the Breach Decision, I will not be addressing the last three issues.

ANALYSIS

Should the additional documents be admitted?

[46] The record on judicial review is normally restricted to the evidence that was before the decision maker: Association of Professors of the University of Ottawa v. University of Ottawa, 2016 ONSC 2897 (Div. Ct.), at para. 15. However, exceptionally, affidavit evidence may be admitted to show an absence of evidence on an essential point or to disclose a breach of natural justice that cannot be proven by reference to the record alone: 142445 Ontario Ltd. (Utilities Kingston) v. International Brotherhood of Electrical Workers, Local 636 (2009), 251 O.A.C. 62, 2009 24643 (Div. Ct), at para. 18; Re. Keeprite Workers' Independent Union et al. and Keeprite Products Ltd. (1980), 1980 1877 (ON CA), 29 O.R. (2d) 513 (C.A.).

[47] Queensway filed two affidavits sworn by Edith Erdelyi, Queensway's administrator, in support of its application. The first was sworn on October 3, 2018. Ms. Erdelyi attached a document to that affidavit in which a comparison was done of the amount of wages owing to Queensway employees, calculated using Queensway's figures for hours actually worked and what Queensway says is the correct wage rates, versus the FWO's calculations (Exhibit 34). That comparison shows that, using Queensway's hours but the FWO's wage rates, the amount owing for wages would be $116,326.65. Using Queensway's hours and Queensway's wage rates, the amount would be as low as $11.88.

[48] The second affidavit was sworn on October 18, 2018. Attached as an exhibit to that affidavit is an updated comparison (Exhibit 1). As I indicated above, it shows that, using Queensway's hours, but the FWO's wage rate, the amount of wages owing is $126,447.09 (exclusive of the administration fee) and that, using Queensway's hours and wage rates, the amount is only $1,902.58. Also attached to the affidavit are copies of the Work Cards for the period from January 3, 2017 to May 28, 2018 (Exhibit 2).

[49] The City objects to the admission of the exhibits attached to the October 18 affidavit on the basis that these records were not before the decision makers. Queensway responds that the additional materials are necessary to show that it was not provided with procedural fairness. It argues that the documents show that the calculation of wages owing was not a straightforward exercise, that these records should have been considered by the decision makers, and that they go to prove its claim for damages.

The Updated Comparison

[50] In her October 3 affidavit, Ms. Erdelyi made it clear that Queensway was missing certain records at the time and was still working to reconcile the information it had with the information used by the FWO in arriving at its decision. At para. 81, she deposed that Queensway had compared the FWO's calculations with its own "based on … the payroll records [Queensway] could locate to date". At para. 83, Ms. Erdelyi deposed that Queensway had not been able to reconcile the information it had concerning one employee and that Queensway was "continuing to investigate" with respect to that employee. The City makes no objection to this earlier, incomplete comparison.

Contractor Work Cards

[51] Ms. Erdelyi also attached copies of the Work Cards for the period from March 24, 2018 to May 22, 2018 to her October 3 affidavit (Exhibit 17). At para. 48 of her affidavit, she deposed that these are "all of the Contractor Work Cards that Queensway has been able to locate at this time." Again, no objection is made by the City to the admission of these records.

[52] To her October 18 affidavit, Ms. Erdelyi attached copies of Work Cards spanning the period from January 2, 2017 to May 28, 2018 (Exhibit 2). The City objects to these documents forming part of Queensway's Application Record (the "APAR"). However, the record shows that most of them were before the FWO when it made its decision.

[53] The ROP contains copies of a number of emails from staff at the FWO to staff at Toronto Water. On January 16, 2018, Mr. Piplica of the FWO wrote to Toronto Water, indicating that the FWO had reviewed the Work Cards for the period from January 1, 2017 to April 30, 2017 and would be returning them to Toronto Water. In the email, Mr. Piplica requested that Toronto Water provide the FWO with the Work Cards from May 1, 2017 to December 31, 2017.

[54] On April 11, 2018, Mr. Piplica again wrote to Toronto Water, requesting the Work Cards for the period from January 1, 2018 to "the current pay period".

[55] Finally, the letter dated June 27, 2018 from the manager of the FWO to Queensway to which I referred earlier states that the FWO compared Queensway's payroll information with Toronto Water's Work Cards for the period from January 1, 2017 to April 30, 2018 in arriving at the new calculation.

Conclusion re Admission of Additional Documents

[56] I would allow the additional documents into evidence as I agree with Queensway that these documents demonstrate that the calculation of wages owing was not a straightforward exercise. This is an important factor when considering whether Queensway was provided with procedural fairness before the FWO made the Breach Decision.

[57] In addition, with respect to the Updated Comparison, I can see no reason not to allow Queensway to correct the comparison using the reconciliation that Queensway was subsequently able to complete. If anything, the updated comparison is prejudicial to Queensway, as it shows more wages owing to its workers.

[58] There is also another reason to admit the Work Cards. Based on the evidence, I find that the FWO had the Work Cards for the period from January 1, 2017 to April 30, 2018, but did not have the Work Cards for the period from May 1, 2018 to May 28, 2018. The City did not object to the admission of the Work Cards spanning the period from March 24 to May 22 that were attached Ms. Edelyyi's first affidavit. Therefore, I can see no basis for the objection with respect to the Work Cards from January 1, 2017 to May 22, 2018 and I would allow them into evidence.

Was Queensway denied procedural fairness?

[59] The parties agree that the decisions at issue (the Breach Decision and the Disqualification Decision) were administrative in nature, rather than legislative, and that Queensway was owed a duty of procedural fairness as a result: Nicholson v. Haldimand-Norfolk Regional Board of Commissioners of Police, 1978 24 (SCC), [1979] 1 S.C.R. 311, at p. 324.

[60] The parties also agree that there is no standard of review analysis necessary with respect to the issue of procedural fairness; either Queensway was provided with procedural fairness, or it was not: see Moreau-Bérubé v. New Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 S.C.R. 249, at para. 74; London (City) v. Ayerswood Development Corp., 2002 3225 (C.A.), at para. 10; Platinum Auto Gallery Inc. v. Registrar, Motor Vehicle Dealers Act, 2002, 2015 ONSC 1299 (Div. Ct.), at para. 3.

[61] The issue in this application is the scope of the duty in the circumstances of this case. Queensway submits that, given the potentially severe consequences to it of the impugned decisions, it was owed a high level of procedural fairness, a level which was not met with respect to either decision.

The Breach Decision

[62] The nature of the duty of procedural fairness varies with the context in which the administrative decision is being made: Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, at para. 21. In Baker, the Supreme Court identified five factors important to determining the content of the duty of fairness in the context of a particular administrative decision, namely: (1) the nature of the decision being made, (2) the nature and terms of the statutory scheme involved and the role of the decision within that scheme, (3) the importance of the decision to the affected party, (4) the legitimate expectations of the affected party, and (5) the decision maker's choice of procedure.

[63] The scope of each of the different facets of the duty of procedural fairness at issue must be assessed in light of these factors.

Notice

[64] The City does not contest that Queensway was entitled to notice that the FWO was considering whether it had breached the Policy. Instead, it maintains that Queensway had notice by virtue of the letter the FWO wrote on January 2, 2018 to request Queensway's payroll information. It relies on the contents of a letter written on January 6, 2018 by Ms. Eredelyi in response to the request, in which she stated that Queensway is "fully aware of the reasons which prompted this investigation…" and makes reference to one of its competitors luring away three of its employees.

[65] As it turned out, the FWO had received complaints from two identified former employees of Queensway (including Mr. Savini) and, possibly, from one unidentified employee.[^1] However, there is nothing in the January 6 letter that indicates that Queensway knew that it was being accused of failing to pay its employees for all of the hours they worked. Nor is there anything in the circumstances surrounding the January 2 request that could lead reasonably to the inference that Queensway ought to have known of the reason for the request. The provisions of the City's Municipal Code permit the FWO to audit a contractor's records without cause. The only inference that can reasonably be drawn from Queensway's January 6 letter is that it thought that one of its competitors was maliciously using the FWO's auditing powers as part of a campaign against Queensway.

[66] The notice requirement normally considered part of the duty of fairness is complicated in this case by the fact that the FWO has both investigative and adjudicative functions. It could be argued that imposing a requirement that the FWO disclose the reasons for its request might well serve to defeat the purposes of the Policy provisions permitting spot audits. However, I agree with the submission of counsel for Queensway that, given the amount of money potentially at stake and the consequences of a finding that Queensway was in breach of the Policy, Queensway was entitled to know that the FWO was considering whether it was in breach of the Policy for failing to pay its employees for hours actually worked and for requiring its employees to pay back monies they received as a result of the 2016 Policy Breach. The FWO provided no such notice in this case.

Disclosure

[67] In its submissions, the City argues that Queensway was provided with adequate disclosure prior to the Committee meeting. This may well be true. However, this submission fails to recognize that, as counsel for Queensway correctly points out, the FWO was the final decision maker with respect to whether Queensway breached the Policy. It was a decision from which the Policy provided no right of appeal. Neither City Council nor the Committee had jurisdiction to set aside the Breach Decision. All they were entitled to do was consider whether, because of that decision (and the previous Policy breach) Queensway should be disqualified from obtaining any City contracts. Queensway was entitled to disclosure with respect to both the Disqualification Decision and the Breach Decision.

[68] Unfortunately, there was no disclosure provided by the FWO to Queensway before the FWO wrote on March 29. While Queensway had its own payroll records and the Work Cards in its possession, it did not have the letter of complaint from the two identified former Queensway employees (ROP, v.1, tab 3), the letter of complaint from the unidentified spouse of someone who worked for an unidentified "excavating contracting company" (ROP, v. 1, tab 4), or a letter from another former employee of Queensway, praising the company and stating that the employees all agreed with the pay they received (ROP, v. 1, tab 16). Nor did it have the results of the interviews that the FWO said in its Report it had conducted with Queensway employees.

[69] The City argues that the FWO's obligation to disclose arose only upon request and points out that no such request was made: Siad v. Canada (Secretary of State), 1996 4099 (FCA), [1997] 1 F.C. 608. This submission ignores the fact that no notice was given. It would be unreasonable to expect a party to request disclosure that it did not even know it needed.

[70] For these reasons, I believe that Queensway's right to disclosure was breached by the FWO.

Right to be heard

[71] Perhaps the most important aspect of the duty of procedural fairness is the right to be heard before a decision is made. This is a requirement at even the lowest levels of procedural fairness: Mavi v. Canada (Attorney General), 2011 SCC 30, 2 S.C.R. 504, at para. 11. This important right was entirely absent from the process leading up to the Breach Decision.

[72] During argument, counsel for the City submitted that, although there is no formal obligation on the part of the FWO to reconsider its March 29 decision under the Policy, it was open to the FWO to do so. He argued that Queensway must have believed that the FWO could reconsider its decision because of the communications between Mr. Allen and Ms. Searles-Kelly between April 5 and the Committee meeting on April 30.

[73] It is certainly true that reconsideration by a tribunal can cure procedural defects in an earlier decision: Khan v. University of Ottawa, 1997 941, 34 O.R. (3d) 535, at p. 548; Interpaving Ltd. v. Greater Sudbury (City), 2018 ONSC 3005 (Div. Ct.), at para. 40. However, while it is perhaps also true that Queensway believed that the FWO was open to reconsidering its position, there is no evidence in the record that the FWO was prepared to do so. In fact, the evidence is to the opposite effect.

[74] In response to Mr. Allen's first communication with her on April 5, Ms. Searles-Kelly responded in her email of April 6 to the effect that, while the FWO was prepared to grant an extension of the time for payment of the back pay, with respect to the issue of non-compliance:

The Fair Wage Office has made its determination of your client's non-compliance based on information made available to the Manager, Fair Wage. As you have noted your client's intention; - when the report recommending the disqualification of your client goes to the Government Management Committee, your client can contact the City Clerk's office, obtain a copy of the report from the City's website, and advise the City Clerk's office that they would like to make a deputation to the Committee.

[75] The inference from this email was that the only issue Queensway could now contest was the issue of disqualification, not non-compliance. As I have already pointed out, under the Policy, the Committee had no power to overturn the FWO's finding of a breach.

[76] In the email she sent to Mr. Allen following their telephone conversation of April 10, Ms. Searles-Kelly wrote nothing about the possibility of a reconsideration. Instead, she wrote:

The Manager, Fair Wage Office, also needs to know when we can expect to receive, for review, Queensway's payroll for the period of January 1 2018 to the current pay period. That information is required to obtain the total non-compliance owed to individual backhoe operators.

[77] There was nothing in this or any other communication that could possibly be interpreted as a willingness on the part of the FWO to reconsider its decision. Nor is there any record of it having done so.

[78] The procedural unfairness that preceded the Breach Decision was not cured in this case by the possibility of a reconsideration.

Reasons

[79] Queensway argues that the reasons set out by the FWO in its March 29 letter were insufficient.

[80] The duty to give reasons may arise by statute or by virtue of the duty of procedural fairness. Where reasons are given, the sufficiency of those reasons is normally dealt with as part of the assessment of the reasonableness of the decision in question, and not as part of the procedural fairness analysis: Les Supermarchés Jean Labrecque Inc. v. Flamand, 1987 19 (SCC), [1987] 2 S.C.R. 219, at p. 233: N.L.N.U. v. Newfoundland & Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708 ("Newfoundland Nurses"), at para. 14.

[81] However, there is no need in this case to consider the reasonableness of the Breach Decision. It is a well-settled principle of judicial review that a decision that was arrived at unfairly cannot be upheld, regardless of the apparent merits of the decision. This principle was explained by the Supreme Court of Canada in Cardinal v. Kent Institution, 1985 23 (SCC), [1985] 2 S.C.R. 643, in which Le Dain J. wrote for the court (p. 661):

[T]he denial of a right to a fair hearing must always render a decision invalid, whether or not it may appear to a reviewing court that the hearing would likely have resulted in a different decision. The right to a fair hearing must be regarded as an independent, unqualified right which finds its essential justification in the sense of procedural justice which any person affected by an administrative decision is entitled to have. It is not for a court to deny that right and sense of justice on the basis of speculation as to what the result might have been had there been a hearing.

[82] Queensway was denied procedural fairness in the process leading up to the Breach Decision. It was not provided with notice, disclosure or the right to be heard. For this reason, the Breach Decision must be quashed. In light of this, there is no need to consider the reasonableness of the FWO’s decision and, consequently, no need to consider the sufficiency of its reasons.

The Disqualification Decision

[83] Nor is there any need to consider whether Queensway was denied procedural fairness in the context of the Disqualification Decision or whether that decision was reasonable. Because it was based on the Breach Decision, the Disqualification Decision must also be quashed.

[84] Pursuant to the Policy, a contractor can only be disqualified if it has been found in breach of the Policy on two occasions within three years. Section 67-A10, para. A, of the Policy reads:

When a contractor or any sub-contractor is found to be in non-compliance with the provisions of the Fair Wage Policy in two separate instances over a period of three years inclusive, the Manager, Fair Wage Office must report and may recommend to the Government Committee that the said contractor or sub-contractor be disqualified from conducting business with the City for a period of two years, inclusive.

[85] There is nothing in the Policy that allows the Committee to overrule a finding by the FWO that a contractor is in breach of the Policy. The Committee's only power is to decide whether, in light of the FWO's finding of a breach, a contractor should be disqualified. In this case, the Committee recommended that Queensway be disqualified. Under the Policy, that can only happen if there has been a second breach found by the FWO to have occurred within the required time frame. In other words, the Disqualification Decision could not have been made without the Breach Decision. For that reason, if the Breach Decision must be set aside, so must the Disqualification Decision.

Other Relief

[86] In addition to asking the court to quash the impugned decisions, Queensway seeks declarations with respect to the rate at which it was obliged to pay its employees, the hours for which it was obliged to pay those wages, whether it was obliged to include the travel hour, and the amount of back pay owed to its employees. In addition, it seeks damages as a result of the wrongful decisions of the FWO and the Committee.

[87] I would not grant any of the additional relief sought, for two reasons.

[88] First, there are factual issues that this court is not in a position to resolve. Queensway says its employees voluntarily agreed to be paid for only six hours per shift; Mr. Savini says that is not true. Queensway says that Toronto Water agreed with all of its contractors that the Work Cards would not reflect the number of hours for which an employee was to be paid; Mr. Savini and the representative from Toronto Water told the Committee otherwise. The City says that, in addition to forcing or allowing its employees to bank hours without the necessary approval under the Employment Standards Act, 2000, S.O. 2000, c. 41 (which the City argues must be complied with under the terms of the contract with Queensway), Queensway was shortchanging its employees even when it came to the number of hours they banked.

[89] Second, I agree with the City's submission that it is not open to this court to award damages on judicial review. In Chol v. York University [2004] O.J. No. 1093, this court dismissed an application for judicial review of a decision of the Ontario Human Rights Commission in which the Commission refused to refer the applicant's complaint to the Board of Inquiry. The applicant had also claimed damages of $55,000,000 against respondent. Writing for the court, Swinton J. held (para. 14):

The Divisional Court has no jurisdiction to give this relief. The Divisional Court is a statutory court restricted to granting the relief set out in s. 2(1) of the Judicial Review Procedure Act. It does not have the jurisdiction to award damages (Khalil v Ontario College of Art (1999), 2000 26985 (ON SCDC), 183 D.L.R. (4th) 186 (Div. Ct.) at 188, 190). Section 2(1) restricts the relief to which an applicant for judicial review is entitled to one or more of the following:

(i) Proceedings by way of application for an order in the nature of mandamus, prohibition or certiorari; or

(ii) Proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise or proposed or purported exercise of a statutory power.

Therefore this court has no jurisdiction to grant the relief sought against the University.

[90] For these reasons, I would dismiss Queensway's requests for declarations and for damages.

Conclusion

[91] Queensway was denied the right to notice, to disclosure and to be heard in the process leading up to the Breach Decision. For that reason, that decision must be quashed. The matter is remitted to the FWO for reconsideration in accordance with these reasons.

[92] Because the Disqualification Decision was based on the Breach Decision it, too, must be quashed.

[93] The court is not in a position to grant any of the other relief sought.

Costs

[94] The parties were unable to agree on the issue of costs. The City submitted a Costs Outline in the total amount of $13,376.18 on a partial indemnity basis. Queensway submitted a Bill of Costs totalling $68,663.82 on a full indemnity basis and $43,479.74 on a partial indemnity basis.

[95] Queensway was the more successful party and I see no reason to depart from the rule that the costs follow the event. However, I also see no reason to award costs on a full indemnity basis.

[96] In my view, the costs sought by Queensway on a partial indemnity basis are excessive for two reasons. First, they include costs associated with the issues of declarations and damages with respect to which Queensway was not successful. Second, they exceed what the losing party might expect to pay for costs in a case of this nature. The issues of procedural fairness upon which Queensway was successful could possibly have some impact upon parties outside of this litigation and were important to Queensway. However, those issues were relatively straightforward, involving the application of well-settled principles of law.

[97] Bearing in mind the overarching goal that a costs award should be fair and reasonable, I would fix Queensway's costs in the amount of $18,000, all-inclusive and order that they be paid by the City forthwith.

Ellies R.S.J.

I agree.

Sachs J.

I agree.

Thorburn J.

Released: October 15, 2019

Queensway Excavating & Landscaping Ltd. v. Toronto (City), 2019 ONSC 5860