CITATION: City of Toronto v. Resource Productivity & Recovery Authority, 2020 ONSC 599
DIVISIONAL COURT FILE NO.: 545/19 DATE: 20200130
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
CITY OF TORONTO and ASSOCIATION OF MUNICIPALITIES OF ONTARIO
Applicants/Moving Parties
– and –
RESOURCE PRODUCTIVITY & RECOVERY AUTHORITY and STEWARDSHIP ONTARIO
Respondents/Responding Parties
Paula L. Lombardi, Glenn K.L. Chu and Matthew Cornett, for the Applicants/Moving Parties
Adam J. Stephens, for Resource Productivity & Recovery Authority, Respondent/ Responding Party
Lisa M. Constantine, for Stewardship Ontario, Respondent/Responding Party
HEARD at Toronto: January 24, 2020
Swinton J.
Overview
[1] The applicants, the City of Toronto (the “City”) and the Association of Municipalities of Ontario (“AMO”), have brought a motion seeking an interim injunction to stop an arbitration between the respondents, Resource Productivity & Recovery Authority (“RPRA”) and Stewardship Ontario (“SO”) scheduled to commence on February 18, 2020. They argue that the arbitration is not the proper forum to challenge RPRA’s decision that set a funding obligation known as the “2019 Steward Obligation”. The applicants take the position that any challenge to RPRA’s decision can be made only by judicial review, and they seek a declaration to that effect in the judicial review proceeding, as well as a permanent injunction to stop the arbitration.
[2] For the reasons that follow, the motion is dismissed.
Background
[3] RPRA, an administrative body, is the “authority” as described in the Resource Recovery and Circular Economy Act, 2016, S.O. 2016, c. 12, Sch. 1 and the Waste Diversion Transition Act, 2016, S.O. 2016, c. 12, Sch. 2 (“WDTA”). It is the successor to Waste Diversion Ontario (“WDO”), which was established by the Waste Diversion Act, 2002, S.O. 2002, c. 6 (“WDA”). RPRA performs regulatory, compliance and enforcement duties under the WDTA.
[4] Pursuant to the earlier WDA, WDO was required to develop waste diversion programs in cooperation with industry funding organizations. Its successor, RPRA, currently oversees three waste diversion programs under the successor legislation, the WDTA. One of those programs is the Blue Box Program that was developed with SO. One of RPRA’s obligations is to set the Steward Obligation in respect of the Blue Box Program pursuant to s. 5(i) of the WDTA, which states that it is to “determine the amount of money required by the industry funding organizations to carry out their responsibilities under this Act.”
[5] SO is a not-for-profit special purpose corporation. It was designated under the WDA and continued under the WDTA as the “industry funding organization” for “Printed Paper” and “Packaging,” as those terms are defined in the Blue Box Program Plan. It operates the Blue Box Program, subject to RPRA oversight. Notably, the Blue Box Program Plan states at s. 5.1 that “[r]esponsibility for delivery of the Blue Box Program Plan as outlined in this document rests with Stewardship Ontario and the WDO.” While the Plan continues, “Municipalities and AMO have important roles to play,” they are not responsible for the Plan’s delivery.
[6] Subsection 25(5) of the WDA provided that a waste diversion program developed for blue box waste “must provide for payments to municipalities to be determined in a manner that results in the total amount paid to all municipalities under the program being equal to 50 per cent of the total net costs incurred by those municipalities as a result of the program.” Similar wording is found in s. 11(1) and (2) of the WDTA.
[7] The SO Blue Box Program Plan was developed by WDO in conjunction with SO, with input from municipalities and other stakeholders. It was approved by the Ontario Minister of the Environment and began in 2003. This Program is to be distinguished from the municipalities’ curbside pickup and processing of recyclables, which commenced in 1994 pursuant to the Environmental Protection Act and O. Reg. 101/94. The SO Blue Box Program is a funding program. It generates funds from businesses (the “stewards”) that supply “Printed Paper” and “Packaging” to residential consumers to defray some of the municipalities’ costs associated with their recycling services. The Blue Box Program Plan contains provisions about annual municipal Blue Box Program cost calculations.
[8] Currently, there are over 1,400 registered stewards, and they pay fees to SO to fund the Steward Obligation. They also fund SO.
[9] Pursuant to s. 25(3) of the WDA, a waste diversion program developed under the Act must include an agreement between WDA and the funding organization that cooperated in the development of the program, “governing the role of the industry funding organization in the implementation and operation of the program and governing the exercise of the industry funding organization’s powers under this Act.” SO entered a Program Agreement with WDO in 2003 defining the roles and responsibilities of the two parties and their operating relationship. In 2016, when RPRA replaced the WDO, the Program Agreement with SO was continued pursuant to s. 9(2) of the WDTA. Material changes to the Agreement and the Blue Box Program Plan can be made only with ministerial approval (Agreement, s. 3.5). The Agreement also includes a detailed code for dispute settlement culminating in binding arbitration (see s. 16).
[10] Each year, RPRA determines the annual funding obligation of the industry stewards that must be transferred to municipalities in accordance with the WDTA, the Blue Box Program Plan and the Program Agreement. Before the funding decision is made, municipalities may submit their costs associated with recycling printed paper and packaging to RPRA in accordance with RPRA’s Datacall User Guide. RPRA’s obligation is to determine the annual Steward Obligation fairly and in a manner consistent with its legislative mandate and the provincial interest.
[11] The 2019 Steward Obligation was set at $126.4 million on September 10, 2018. Prior to setting the Steward Obligation, RPRA received input from the Municipal-Industry Program Committee (“MIPC”), a committee of representatives of SO and the municipalities established under the Blue Box Program Plan, and it heard from delegations from SO and municipalities.
[12] During the discussions prior to the setting of the 2019 Steward Obligation, SO objected to the legality of three inputs:
a) a “Steward Cost Containment” fee,
b) a fee for the municipalities’ use of free newspaper advertising, and
c) the inclusion of costs to manage materials which were not “paper” or “packaging” as those terms are defined in the Blue Box Program Plan.
When RPRA decided to include these inputs, SO provided notice to RPRA on October 15, 2018 that it was invoking the dispute resolution procedure under the Program Agreement. It challenged the use of the three inputs both in 2019 and in years to come.
[13] On December 18, 2018, RPRA produced what it described as a “high level process” to resolve the dispute and asserted that the dispute resolution process must include the City and AMO. It claimed that it had authority pursuant to s. 5(j) of the WDTA to create and impose this process on SO’s dispute.
[14] On December 20, 2018, RPRA advised the City and AMO about SO’s dispute and had discussions with them about that dispute. In February 2019, RPRA proposed a dispute resolution process that would involve the municipalities as well as SO. However, SO objected, taking the position that its dispute was bilateral with RPRA.
[15] On February 20, 2019, SO commenced an application in the Superior Court of Justice to obtain a ruling on the legality of the proposed dispute resolution process. Subsequently, RPRA and SO agreed to convert the application to a preliminary arbitration to determine the correct scope of the dispute resolution process, including whether RPRA had the authority to include AMO and the City (the “Process Arbitration”).
[16] Arbitrator Ronald Slaght was appointed to hear the Process Arbitration, as well as a preliminary motion to determine whether the City and AMO should be given standing to make submissions at the Process Arbitration. Before the motion was heard, the City and AMO sent a letter dated March 22, 2019 indicating that they were not willing to participate in the proposed dispute resolution procedure. As a result, the preliminary motion did not proceed.
[17] In the Process Arbitration decision, dated June 7, 2019, Mr. Slaght held that the dispute should be determined pursuant to s. 16.5 of the Program Agreement, not s. 16.2 as SO had argued. He held that AMO and the City were not proper parties, because the Program Agreement is a bilateral agreement between RPRA and SO, and the Agreement confers no authority to include non-parties in the arbitration process. He also noted that there was no dispute with the municipalities. The AMO and the City were provided with a summary of the arbitrator’s reasons on June 24, 2019.
[18] Meanwhile, AMO and the City had commenced an application for judicial review in May, 2019 in an effort to obtain reasons for the 2019 Steward Obligation decision. RPRA provided further reasons on May 24, 2019, and AMO and the City did not proceed with the application, abandoning it in October 2019.
[19] In July 2019, SO and RPRA agreed to appoint Mr. Slaght as the arbitrator for the merits arbitration, and agreed on a timetable for the exchange of pleadings and expert opinions. A ten day hearing on the merits was scheduled to commence February 18, 2020.
[20] In July 2019, AMO and the City asked SO to convert the impending arbitration into a joint judicial review application to challenge RPRA’s decision on the 2019 Steward Obligation. SO refused.
[21] On August 15, 2019, the Minister of the Environment, Conservation and Parks directed SO to wind up the Blue Box Program by December 31, 2025. The Minister required SO to complete and submit a Blue Box Wind Up Plan to RPRA by June 30, 2020. This includes detailed financial forecasting in accordance with RPRA’s Wind Up Guide.
[22] On October 9, 2019, the City and AMO launched the present application for judicial review. They seek to quash RPRA’s 2019 Steward Obligation decision because of the use of a statistical model to calculate the Steward Obligation. They take the position that as a result of this methodology, municipalities receive less than 50% of their total net costs, contrary to the legislation. They also seek a declaration that any challenge to the Steward Obligation decision may be made only by way of judicial review, as well as a permanent injunction to prevent SO and RPRA from engaging in an arbitration proceeding to alter the 2019 Steward Obligation.
[23] On December 9, 2019, two months after commencing the application for judicial review, the applicants gave notice that they would bring an urgent motion to obtain an interim injunction to prevent the merits arbitration from proceeding until the determination of the application for judicial review. At the time that this motion was heard on January 24, 2020, no date had been obtained for a hearing before the Divisional Court with respect to the merits of the application for judicial review.
The Issues
[24] The only relief sought in this motion is an interim injunction to prevent the arbitration between SO and RPRA from proceeding on February 18, 2020 until the application for judicial review has been determined.
The Test for an Interlocutory Injunction
[25] The Divisional Court has jurisdiction to “make such interim order as it considers proper pending the final determination of the application” pursuant to s. 4 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”).
[26] The test for an interim or an interlocutory injunction requires the moving party to show that there is a serious issue to be tried, that the moving party will suffer irreparable harm if the relief is not granted, and that the balance of convenience between the parties favours the granting of the injunctive relief (RJR MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311).
Analysis
[27] The relief sought by the applicants in this motion is unusual. They are not seeking to prevent a decision maker from continuing a hearing while the decision of the decision maker is under judicial review. Nor are they seeking to stay a decision that has been made and is under review. Here, the applicants seek to stop a private arbitration proceeding that was commenced pursuant to an agreement between RPRA and SO, which is proceeding under the Arbitration Act, 1991, S.O. 1991, c. 17.
[28] While SO has made arguments based on issue estoppel, abuse of process, and lack of jurisdiction, I choose to approach this motion by determining whether the applicants have met the test for an interim injunction.
Serious issue to be tried
[29] I accept that there is a serious issue to be determined in the application for judicial review with respect to the challenge to the decision concerning the 2019 Steward Obligation. However, it should be noted that the applicants’ attack on this decision, as set out in the Notice of Application for Judicial Review, focuses on the statistical model used by RPRA. That is not an issue raised in the arbitration proceeding, where the focus is three inputs used in determining the Stewards’ funding obligation. The applicants have provided no rationale as to the need for an interim injunction to protect its rights in relation to its claim respecting the 2019 Steward Obligation.
[30] However, the applicants raise a further issue in the application for judicial review. They seek a declaration that judicial review is the only method to challenge RPRA’s exercise of its statutory power of decision in determining the 2019 Steward Obligation. They submit that the arbitrator has no authority to determine the validity of that decision. In other words, they are challenging the jurisdiction of the arbitrator in the arbitration proceedings, although RPRA, a party to that arbitration, does not take the position that the arbitrator lacks jurisdiction.
[31] In oral argument, the applicants focused on what they say is the following serious issue – whether the arbitration should be stopped because it improperly purports to determine the rights of municipalities without their presence.
[32] Declaratory and injunctive relief are available under the JRPA only with respect to the exercise or refusal to exercise or proposed or purported exercise of a statutory power (s. 2(1)2). The Divisional Court will not give a declaration in the abstract.
[33] It is not clear to me what statutory power of decision underlies the declaratory relief sought. The arbitrator is not exercising a statutory power of decision. He obtains his authority from the agreement between RPRA and SO, and the arbitration process is governed by the provisions of the Arbitration Act. His rulings are not subject to judicial review by the Divisional Court (Universal Settlements International Inc. v. Duscio, 2011 ONSC 41 (Div. Ct.) at paras. 3-5).
[34] Therefore, it must be RPRA’s exercise of a statutory power of decision that is the basis for the declaratory and injunctive relief sought. However, when one looks to the Notice of Application for Judicial Review, one finds very little to explain the basis for this claim for relief. It is said that RPRA has fettered its discretion without any detail as to how. I am not sure whether the applicants allege that RPRA acted without authority in entering into the present arbitration process. In their factum, the applicants state that RPRA does not have the authority to delegate to an arbitrator the power to redetermine the 2019 Steward Obligation.
[35] In my view, participation in the arbitration is not an exercise of a statutory power of decision by RPRA, but rather compliance with RPRA’s obligations in the Program Agreement with SO – an agreement that has been approved by the Minister, and that cannot be changed in a material way without ministerial approval.
[36] Alternatively, the impugned exercise of a statutory power may be the entering into the Program Agreement that contains the arbitration process. The applicants have provided no judicial authority to the effect that this would be an improper exercise of RPRA’s statutory power of decision.
[37] The applicants also argue in their factum that the determination of the Steward Obligation can never be characterized as a “dispute” between RPRA and SO. That is a question of arbitrability. The arbitrator’s jurisdiction to deal with the dispute raised by SO has not been challenged in the arbitration. Implicitly, the parties to the arbitration accept he has jurisdiction. Thus, the applicants are improperly seeking to collaterally attack the ruling of the arbitrator in the Process Decision in the guise of this motion for an interim injunction.
[38] While the serious issue to be tried test is a low threshold, I see no merit to the argument concerning the claim for declaratory and injunctive relief as pleaded. Nevertheless, I will go on to consider the criteria of irreparable harm and balance of convenience.
Irreparable Harm
[39] The applicants claim that municipalities will suffer irreparable harm if the interim injunction is not granted, because the declaratory relief they seek will be rendered moot if the arbitration proceeds. They also argue that there is a strong likelihood that the judicial review and the arbitration will reach inconsistent results. Finally, they submit that RPRA will not be able to maintain its impartiality in setting future Steward Obligations if it participates in the arbitration proceeding as a litigant.
[40] Evidence of irreparable harm must be clear and not speculative. In my view, the applicants have not demonstrated irreparable harm. There is no affidavit evidence from the City respecting irreparable harm. The affidavit from Dave Gordon on behalf of the AMO is very general and sparse.
[41] I fail to see a strong likelihood that there may be inconsistent results. The applicants’ attack on the 2019 Steward Obligation is based on different grounds than those raised by SO. They argue that the statistical model is inconsistent with the statutory requirement that they receive 50% of their costs. In contrast, the arbitration concerns obligations under the Blue Box Program Plan as well as the legislation. SO argues that the three contested inputs are contrary to the Blue Box Program Plan to which they are a party with RPRA, and RPRA has no legal authority under the Plan to include them. Thus, I fail to see the possibility of inconsistent results, nor do I see how the applicants’ application for judicial review would be moot if an interim injunction is not granted.
[42] Nor do I find the argument about RPRA’s role a basis to find irreparable harm to the applicants. RPRA is an administrative and regulatory body that developed the Blue Box Program Plan in conjunction with SO and entered into the Program Agreement with it. Most importantly, it agreed to arbitrate disputes about the Blue Box Program Plan with SO.
Balance of convenience
[43] In any event, the balance of convenience in this case does not favour the granting of an interim injunction for a number of reasons. I am satisfied that the injunction would prejudice SO if the arbitration proceeding is stayed.
[44] First, SO has a right to proceed to arbitration pursuant to the Program Agreement with RPRA. Indeed, it appears to be obligated to do so, as s. 16.5 of the Program Agreement requires SO and RPRA to resolve “any dispute with respect to the determination of the total steward obligation to municipalities and payments or in-kind contributions to be made to the municipalities under the Blue Box Program Plan for resolution” in accordance with that section. While the applicants may be restricted to judicial review as a way to challenge the Steward Obligation decision, the Program Agreement requires SO to resort to a non-judicial forum to resolve its dispute about the inputs permitted under the Blue Box Program Plan.
[45] Judicial intervention in arbitration proceedings under the Arbitration Act is strictly confined by s. 6 of that Act, an Act that recognizes the primacy of arbitration over judicial proceedings (Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642 at para. 14). In Advanced Explorations Inc. v. Storm Capital Corp., 2014 ONSC 3918 (S.C.J.), the Court stated that if the Legislature wishes to preclude an issue from being the subject of an arbitration, it must state this expressly (at paras. 61-62).
[46] Second, SO has provided evidence that it will suffer financial harm of two kinds if the arbitration does not proceed. It must meet the June 30, 2020 deadline for reports required in conjunction with the windup of the Blue Box Program Plan. SO provided affidavit evidence that it is imperative to have a ruling on the three contested inputs, and that a stay of the arbitration would have a devastating impact on its ability to meet the Minister’s deadlines. The applicants suggest that this is not real harm, as SO could provide alternative forecasts, dependent on the possible outcomes of the judicial review. I disagree, given that there is no date yet set for the judicial review and a decision on the legality of the inputs is important to SO in fulfilling its obligations.
[47] SO will also suffer financial costs if the arbitration does not proceed, since it has been preparing for the hearing on the merits for many months and engaged experts. According to the affidavit of David Pearce, SO will be responsible for approximately $150,000 in expenses associated with the dispute with RPRA before the arbitration hearing commences. If the applicants are successful in the judicial review, those costs will not be recoverable. I do not accept the applicants’ suggestion that the work could be used in a judicial review proceeding.
[48] Third, the equities do not favour the applicants. There has been significant delay in this proceeding. The original decision that the applicants seek to overturn was communicated to them in September 2018. The application for judicial review was not launched until October 2019, a significant delay in commencing a judicial review proceeding. No date has been set for the application for judicial review.
[49] In this motion. the applicants are seeking to stop an arbitration proceeding that has been scheduled since July of 2019 and is to start in mid-February 2020. The motion was not brought until December 2019. All this suggests that there is no real urgency or irreparable harm to the applicants if the arbitration proceeds.
[50] This brings me to the argument made by RPRA on this motion. RPRA did not take a position on the merits of the motion, but submitted that the best outcome would be the determination of the challenges of both SO and the applicants in a single forum with both SO and the municipalities as parties.
[51] It may be that a single forum is preferable, but it is not the task of this Court to design a dispute resolution procedure for the parties. The City and AMO were offered an opportunity to participate in a single, arbitral forum in early 2019, and in their letter in March 2019, they refused that offer.
[52] My task is to determine whether the applicants have met the criteria to obtain an interim injunction to stop the scheduled arbitration on the facts of this case. In my view, the balance of convenience does not favour the granting of injunctive relief to prevent the arbitration from proceeding.
Conclusion
[53] Accordingly, the motion for an interim injunction is dismissed. Costs to the respondents are fixed in the agreed amount of $55,000 to be payable in the time period agreed upon by the parties.
Swinton J.
Released: January 30, 2020
CITATION: City of Toronto v. Resource Productivity & Recovery Authority, 2020 ONSC 599
DIVISIONAL COURT FILE NO.: 545/19 DATE: 20200130
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
CITY OF TORONTO and ASSOCIATION OF MUNICIPALITIES OF ONTARIO
Applicants/Moving Parties
– and –
RESOURCE PRODUCTIVITY & RECOVERY AUTHORITY and STEWARDSHIP ONTARIO
Respondents/Responding Parties
REASONS FOR JUDGMENT
Swinton J.
Date of Release: January 30, 2020