CITATION: 30 Bay ORC Holdings Inc. et al. v. City of Toronto, 2021 ONSC 251

DIVISIONAL COURT FILE NO.: 800/18

DATE: 20210209

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Penny, Doyle and Favreau JJ

BETWEEN:

30 BAY ORC HOLDINGS INC., CPPIB 30 BAY INC., BAC SURFACE INC., ONTREA INC., FRONTSIDE DEVELOPMENTS L.P., MENKES 55 LAKESHORE INC. and BCIMC REALTY CORPORATION

Applicants

– and –

CITY OF TORONTO

Respondent

Alan Mark, Ian Andres and Michael Wilson for the Applicants

Diana W. Dimmer, Christopher J. Henderson and Rodney Gill for the Respondent

HEARD (by videoconference): October 21 and 22, 2020

Penny J.

Overview

[1] This is an application for judicial review. The Applicants are commercial real estate developers with projects in the City of Toronto. The City passed a community improvement plan by-law under which a portion of increased property taxes resulting from eligible development could be rebated to the developer after completion of the project. Many projects received the benefit of grants under two different versions of the by-law between 2008 and 2018.

[2] In 2018, City Council declined to approve six grants to the Applicants (“Decision”). These grant applications were, in total, valued at approximately $364 million. It is common ground that the Applicants’ grant applications met the eligibility requirements under the by-law. The City maintains, however, that it retained discretion under its power to control the expenditure of public funds (among other things) to decline to approve the grants. The Applicants maintain that the City’s discretion was constrained by the eligibility criteria contained in the by-law: if an applicant met the eligibility criteria, the City was required to approve the grants.

[3] There are three basic issues on this application:

(a) what is the applicable standard of review?

(b) was Council’s Decision to decline to approve the grants reasonable? and,

(c) if the answer to the second question is no, what is the appropriate remedy?

[4] The City has also brought a motion to strike large swathes of the affidavit evidence filed by the Applicants in support of their application for judicial review and large portions of the Applicants’ cross examination of the City’s witness, who filed a responding affidavit. By common agreement between the parties, the motion was agreed to be brought before the panel hearing the application for judicial review. At the outset of the hearing, the panel advised the parties that we would not hear the motion as a freestanding, preliminary issue but asked the parties to address those issues in the course of their oral submissions. Neither party chose to spend any material amount of time in oral argument on the issues raised in the motion to strike; both elected to rely on their written submissions filed on the City’s motion. I will deal with this issue at the conclusion of these reasons.

[5] The Applicants advance four grounds in support of their argument that Council’s Decision not to approve the grants was unreasonable:

(i) the Decision was contrary to the governing legislative scheme;

(ii) the Decision was an unjustified departure from past practice;

(iii) the Decision is the result of irrational and incoherent reasoning; and,

(iv) there was a denial of procedural fairness.

[6] For the reasons that follow, I would dismiss the application for judicial review.

Background

[7] In 2004, the City determined that high commercial property taxes were interfering with the City’s economic development objectives. Among other things, the City decided to implement a program of grants in the form of rebates on increased property taxes from development in targeted sectors. This included the new development of corporate headquarters and certain office uses in key downtown locations.

[8] Under s. 82(1) of the City of Toronto Act, 2006, S.O. 2006, c. 11, Sched A (“COTA”), the City is prohibited from granting any business a financial benefit or bonus.

[9] Section 82(3), however, provides an exception where the City exercises powers under s. 28 of the Planning Act, R.S.O. 1990, c. P.13. Section 28(7) of the Planning Act grants the City the authority to make financial grants provided those grants are made “in conformity with” a community improvement plan (“CIP”).

[10] CIPs must be established using the City’s by-law making powers. Accordingly, in 2008, the City passed a series of CIP by-laws collectively referred to as the imagination, manufacturing, innovation and technology (“IMIT”) program (the “2008 By-law”).

[11] The 2008 By-law authorized the provision of IMIT grants to eligible projects within defined areas to stimulate construction and to advance the City’s stated objectives. IMIT grants are annual payments made by the City, following the completion and reassessment of eligible development, to refund a portion of the increased municipal taxes attributable to the development. For commercial office developments, the value of IMIT grants is typically passed on to the tenants, who are usually responsible for payment of property taxes under the terms of their lease. The benefit of IMIT grants to developers is in being able to represent to prospective tenants that the IMIT grants will be available, so as to secure early lease up of the commercial office projects.

[12] The 2008 By-law set out criteria to determine who would be eligible for an IMIT grant. First, it stated that a property must undergo “development”. Second, the property needed to be occupied by an “eligible use”, which was defined in the 2008 By-law and corresponded to a “key sector” that was identified as a priority growth area for the City.

[13] The two eligible uses relevant to the Applicants in these proceedings were “Corporate Headquarters” and “Corporate Office Building”.

[14] A third eligible use was for a “Transformative Project”, reserved for exceptional projects of significant magnitude for which the merits of awarding IMIT grants were to be assessed on a project-specific basis. Among other things, the eligibility criteria for transformative projects required applicants to submit a business plan demonstrating the project benefits and the “need for financial incentives in order for the development to be economically viable.”

[15] The only other type of project that required an applicant to submit a business plan was a “Tourism Attraction”, for which the applicant also had to demonstrate that the project had a “need for financial incentives in order for its capital development to be viable”.

[16] The staff report to Council recommending the enactment of the 2008 By-law stated that “[i]n order to be equitable, the incentives will be available to any property in the City that meets the necessary criteria for receiving assistance”. It described the approval process as follows:

The [IMIT] program will be administered by City staff. The CIP sets out clear limits and criteria for the amount of assistance, eligible uses, and various other conditions. There are no discretionary criteria. An application either meets the program requirements or it doesn’t.

[17] Section 3.2.1(ii) of the 2008 By-law stated that IMIT grants “will be available” for Corporate Headquarters located “in Downtown or on Sites in Subway Corridors”. Similarly, section 3.2.2 stated that IMIT Grants “will be available” for Corporate Office Buildings with tenants in one of the key listed sectors.

[18] Other than for Transformative Projects and Tourism Attractions, the eligibility criteria in the 2008 By-law did not require individual applicants to demonstrate the need for financial incentives. Rather, the program for corporate offices and headquarters assumed that a program offering financial incentives was needed to achieve the City’s economic development objectives. City staff have referred to this as the “but for” assumption (i.e., the assumption that development would not occur “but for” the financial incentives). Given that assumption, the eligibility criteria for corporate offices and headquarters did not include a specific requirement that the need for financial incentives would have to be demonstrated by each applicant for each project, although it is fair to say that “but for” considerations, in general, were always material factors in the IMIT program as a whole.

[19] Under the 2008 By-law, Council’s authority to approve IMIT grants was delegated to the General Manager of Economic Development, Culture and Tourism. The General Manager was instructed to approve grants of applicants whose projects met the eligibility criteria.

[20] As required by the 2008 By-law, in 2011, City staff conducted a comprehensive review to evaluate the impact of the IMIT program to date. Staff’s overall conclusion was that the IMIT program had been successful in achieving its objectives and attracting significant employment development to Toronto. Accordingly, staff recommended “that the IMIT program continue”, albeit with improvements which staff characterized as “minor changes”.

[21] Staff further recommended that the City continue to rely on stringent and clearly defined eligibility criteria to identify projects in key employment sectors that needed financial incentives to stimulate development, and as a means of ensuring that, to the extent possible, the underlying “but for” principle would be followed.

[22] Another change recommended by staff was a by-law amendment that would transfer the authority for approving IMIT grants for projects with an estimated construction value of greater than $150 million from the General Manager to Council. The explanation provided for this amendment was that the projects of this size would “benefit from additional oversight”.

[23] In October 2012, Council passed By-law 1323-2012 (the “2012 By-law”), which amended the 2008 By-law in accord with staff’s recommendations.

[24] It is common ground that, under the 2008 By-law, City staff (the General Manager) approved at least five IMIT grants for projects with a construction value of $150 million or more, amounting to approximately $97 million in financial assistance, as well as several other applications with a construction value below $150 million. No project specific “viability” financial analysis was requested from any of these applicants and no analysis was conducted to evaluate whether the projects would proceed in the absence of IMIT grants. The grants were approved based on the eligibility criteria having been met.

[25] It is also common ground that in the first four years following the enactment of the 2012 By-law, three applications with a construction value greater than $150 million were submitted to and approved by Council.

[26] For at least one of these applications, however, the City retained an external consultant, Hemson Consulting Ltd., to review the application and “to provide a detailed analysis of the transformative nature of this development and the need for financial incentives.” As part of its review, Hemson sought and obtained extensive project-specific financial data from that applicant, including the discounted cash flow model used by the applicant. This data was used to consider different scenarios and to isolate the impacts of certain assumptions. Hemson prepared a report outlining its findings. Hemson ultimately concluded that the grant was required in order to assure the viability of the project. Staff’s report to the City on this project concluded that although the IMIT grant would “have a relatively minor direct financial impact” on this project, the grant would allow for a shorter lease-up period which would improve the project’s internal rate of return. Staff recommended that Council approve the grant. Council adopted the staff recommendation and approved this grant as well.

[27] In 2016, staff initiated a second review of the IMIT program as required by the 2012 By-law. This included a review and report by Hemson on the financial implications of the IMIT program. In a January 2018 report, staff noted that after ten years, new development associated with approved IMIT grants was expected to result in about $889 million in new municipal taxes, about $556 million of which would be returned to the property owners and tenants by way of IMIT grants. On an annual basis, the City could expect to receive an average of about $29 million in new municipal tax revenue from these developments.

[28] The Hemson study concluded that the IMIT program had been effective in stimulating investment but that market conditions had changed such that the IMIT program was no longer needed in the financial district to stimulate office development. Staff subsequently recommended a repeal of the existing IMIT by-laws and replacement with one, more simplified by-law (the “2018 By-law”) which would, among other things, effectively exclude from grant eligibility development projects in Toronto’s core financial district and establish much more stringent criteria on grant eligibility in general. Proposed amendments to the existing IMIT by-laws were tabled reflecting these recommendations.

[29] The 2018 By-law was passed by Council on July 27, 2018 but is the subject of an appeal (by various developers, including the Applicants) to the Local Planning Appeal Tribunal (“LPAT”). The effect of the 2018 By-law has therefore been stayed pending that appeal.

[30] The six applications which are the subject of this application were submitted under the 2012 By-law from the summer of 2017 to April 2018. They seek, collectively, a total of about $364 million in IMIT grant approvals.

[31] The City retained Hemson to aid staff and Council in their assessments of these applications. Each of the Applicants was asked to submit project-specific, detailed financial documentation to Hemson, in part to assist in determining whether the IMIT grants were necessary to make the projects financially viable.

[32] Hemson agreed that the applications met the threshold eligibility criteria but concluded that IMIT grants were not necessary to ensure these projects would be economically viable. City staff relied on the Hemson report in their own report to the Economic Development Committee, recommending that Council deny these six applications for IMIT grants.

[33] Most of the Applicants made written submissions to the Committee, and all made oral submissions at the Committee’s meeting to consider staff’s recommendations. Following these submissions and the Committee’s deliberations, the Committee voted to send the IMIT grant applications forward to Council without any recommendation on whether they should or should not be approved.

[34] These IMIT grant applications came before Council on July 26, 2018. A number of the Applicants made written and oral submissions to Council. Hemson submitted a supplementary report, responding to the Applicants’ submissions. City staff submitted a supplementary joint report from the General Manager, further explaining staff’s recommendation to deny these grant applications.

[35] Council considered the issue in a lengthy debate, with members making arguments on both sides. The City has, in its factum, fairly summarized the issues raised during these deliberations as including:

Opposed:

(a) Broad Discretion - City Council had reserved to itself a broad, discretionary authority to consider these IMIT applications;

(b) No Basis for Reliance – the City had been clear to applicants that IMIT grants were subject to approval by City Council;

(c) Consistent Application of ‘but-for’ Consideration - City Council had considered “but for” consideration in all the other projects that it approved;

(d) Fair Process - relying on an independent expert was a fair process;

(e) Too Expensive – providing IMIT grants to the Developers would cost too much;

(f) Competing Priorities - the City had other more pressing needs for the money such as public transit, infrastructure, parks, child care, affordable housing, and maintaining City properties in a state of good repair;

(g) Commercial Tax Reductions – the Developers would enjoy the benefit of reductions in commercial property taxes that had occurred, even without IMIT grants;

(h) No Need for Further Development – the IMIT program was enacted in 2008 due to a then prevailing economic downturn, in order to induce development. After the passage of 12 years, times had changed and the existing level of development was straining infrastructure in the City's downtown. Development pressure needed to be managed, rather than further promoted;

(i) Geographic Fairness - there was a development boom “downtown,” and grants should be focused to promote other areas of the City;

(j) Educated Workforce - the City should rely on its other strengths to attract business, such as an educated workforce, instead of grants and favourable tax treatment.

In Favour:

(a) Job Creation – large number of jobs at the proposed developments;

(b) Reliance - the Developers submitted their applications in good faith and some had started construction, and they may have believed they would receive IMIT grants;

(c) Competitive Advantage – giving IMIT to some applicants but not others may give some businesses an advantage over others;

(d) Past Practice - City Council had never rejected an IMIT grant application before;

(e) Long-Term Benefits – there were important long-term economic and financial benefits to the City;

(f) Reputation - the City's reputation may be hurt if it denied the IMIT applications;

(g) Suburban Flight - development could leave the City for its suburbs;

(h) Global Competitiveness - development incentives are important globally;

(i) Large Job Creators - regardless of whether the Developers are very large corporations, they are creating jobs for Toronto residents;

(j) Change Should be Prospective - it may be appropriate to change the IMIT program on a go-forward basis so similar projects would not be eligible to apply in the future, but the Developers' applications should be granted.

[36] Following this debate, a motion to approve the Applicants’ IMIT grant applications resulted in a 20-20 tie vote. Therefore, under the City’s procedural by-law, the motion was defeated. With that motion defeated, a subsequent vote was held on the recommendation of City staff, which was to deny the Applicants’ grant applications (but to approve two other grant applications involving development projects at 1755 Steeles Avenue West and 440 Front Street West). That motion passed in a vote of 34-6.

[37] It is from the Decision of Council denying the Applicants’ IMIT grant requests that the Applicants seek judicial review.

Standard of Review

[38] The parties agree, and I would accept, that on the principal issues, the standard of review in this case is reasonableness. I observe, however, that while reasonableness is a single standard requiring a consistent level of scrutiny by a reviewing court, the context in which the decision is being reviewed constrains what will be reasonable in the particular case. See Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 90:

The approach to reasonableness review that we articulate in these reasons accounts for the diversity of administrative decision making by recognizing that what is reasonable in a given situation will always depend on the constraints imposed by the legal and factual context of the particular decision under review. These contextual constraints dictate the limits and contours of the space in which the decision maker may act and the types of solutions it may adopt. The fact that the contextual constraints operating on an administrative decision maker may vary from one decision to another does not pose a problem for the reasonableness standard, because each decision must be both justified by the administrative body and evaluated by reviewing courts in relation to its own particular context.

[39] This is an important gloss on reasonableness review, that has particular relevance in this case, where important issues raised in the judicial review involve statutory interpretation and the rationality and coherence of the decision of an elected body, Toronto City Council.

[40] On the issue of alleged denial of procedural fairness, the standard of review is, in effect, correctness; in other words, the question on review is whether or not the circumstances disclose a denial of procedural fairness.

Whether the Decision to Deny the Grants was Consistent with the Governing Legislative Scheme

[41] The Applicants argue that the text, context, and purpose of the 2012 By-law all indicate that Council’s power of decision-making is limited to considering whether the grant applications satisfy the eligibility criteria and, if the applications meet the eligibility criteria, Council is required to approve and pay the grant. The Applicants submit that the 2012 By-Law did not grant Council broad discretion to refuse IMIT grant applications for any otherwise valid municipal purpose.

[42] The Applicants ground this argument in four related submissions:

(i) as a matter of pure statutory interpretation, the words of the 2012 By-law require Council to approve grants which meet the eligibility criteria. Because it is conceded that the grant applications in issue met the eligibility criteria, it was unreasonable for the City to deny the applications on other grounds, irrespective of whether they arose from the otherwise valid exercise of discretionary authority available to Council under the COTA and related legislation;

(ii) Council can not reserve to itself as administrative decision-maker in the context of deciding specific grant applications, the same broad scope of powers, public interest considerations and discretion available to it as a legislative decision-maker when deciding whether to pass a by-law. Purporting to exercise such powers in the context of considering specific grant applications under the By-law was unreasonable;

(iii) the City’s claim to broad discretion to approve grants under the 2012 By-law undermines the purpose of s. 82 of the COTA. The purpose of s. 82 is to establish procedural safeguards required under the Planning Act when adopting a CIP, thereby forcing the City to establish clear rules governing the award of benefits in advance, ensuring transparency, and preventing the City from acting arbitrarily or capriciously when deciding to give tax dollars to private parties. Accepting the City’s claim to a broad public interest discretion when deciding whether to approve a grant of taxpayer dollars would permit the very mischief s. 82 was designed to prohibit, namely, the risk of unfair, arbitrary, or capricious decision-making. Therefore, Council’s Decision, undermining s. 82’s purpose, was unreasonable; and,

(iv) Council (and the City) employed improper and irrelevant criteria in their evaluations and denial of the Applicants’ grant applications, namely:

(a) advice provided in a July 2018 staff report to the effect that if the grant applications were approved, it would adversely affect the City’s ability to finance its SmartTrack initiative;

(b) a requirement to satisfy a “but for” requirement that is not found in the 2012 By-law; and,

(c) the proposed 2018 By-law, which had not yet come into effect.

This too, the Applicants submit, renders the Decision unreasonable.

Analysis

[43] What are the “limits and contours of the space in which the decision-maker may act and the types of solutions it may adopt” in this case?

[44] As a general proposition, where an approval power to dispense public funds is exercised by elected officials, the presumed legislative intent is that the administrative power to be exercised is to be broadly construed:

The identity of the person or body exercising the power may also be a significant indicator of the breadth of the statutory grant of discretion…. [P]owers exercisable by Ministers are likely to be construed more generously than, say, those conferred on bodies that are not politically accountable through the legislature. And on the basis that their members are democratically elected and politically accountable to the electorate, a broad and purposive approach is taken with regard to the construction of municipalities' powers: Donald J.M. Brown et al., Judicial Review of Administrative Action (Thomson Reuters, Toronto, 2019), at para. 15:1212.

[45] The Applicants rely on several cases concerning the issuance of business licences and land-use development permits. Neither business licences nor development permits are analogous to grants of public funds. As Westfair Foods Ltd. v. Saanich (District of) (1997), 1997 3686 (BC CA), 49 B.C.L.R. (3d) 299 (C.A.), a case upon which the Applicants rely, makes clear, business licensing and land use regulation seek to restrain and regulate private persons from doing what they would otherwise be free at law to do - operate a business or develop and build on their own land - and therefore these provisions are strictly construed. By contrast, grants are the gratuitous provision of public funds to private persons who would otherwise have no claim to such funds.

[46] The government has the power to make executive decisions regarding the expenditure of public funds to which members of the public have no enforceable entitlement: R. v. Criminal Injuries Compensation Board, [1967] 2 Q.B. 864 (Div. Ct.), at pp. 885-886.

[47] In general, the court exercises significant deference when called upon to review determinations, by elected officials, about the expenditure of public funds. Governments can order their priorities and direct their funds toward the initiatives or programs that are most compatible with their public policy decisions; such decisions about the disbursement of public funds are within the authority of the legislature: Hamilton-Wentworth (Regional Municipality) v. Ontario (Minister of Transportation) (1991), 1991 7099 (ON SC), 2 O.R. (3d) 716 (Div. Ct.), leave to appeal refused, [1991] O.J. No. 3201 (C.A.). In addition, multi-member bodies, like the elected Council, embody legitimate scope for differing reasons among members for supporting or opposing the decision or measure in question: David J. Mullan, Administrative Law, (Irwin Law, Toronto, 2001) at pp. 141-142.

[48] Courts should be very reluctant to interfere in policy and financial decisions made by any level of government. This is especially so when called upon to deal with isolated applications when the court has no knowledge or real understanding of the overall financial problems faced by a municipality in making such decisions: Simon v. Metropolitan Toronto (Municipality) (1993), 1993 9361 (ON SCDC), 99 D.L.R. (4th) 11 (Ont. Div. Ct.).

The Legislative Scheme

[49] Determining the scope of Council’s discretion to approve grants under the 2012 By-law is, first and foremost a matter of statutory interpretation. The modern approach to statutory interpretation was set out in Rizzo & Rizzo Shoes (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27, at para. 21, that is, “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.” The same principles apply when interpreting a municipal by-law, Montreal (Ville) v. 2952-1366 Quebec Inc., 2005 SCC 62, [2005] 3 S.C.R. 141.

[50] Section 6 of the COTA provides that the powers of the City under “any other Act” (this would include s. 28 of the Planning Act) are to “be interpreted broadly so as to confer broad authority on the City to enable the City to govern its affairs as it considers appropriate”.

[51] Section 131 of the COTA stipulates a broad role for Council, including representing the well-being and interests of the City, developing policies and programs, and maintaining the financial integrity of the City:

It is the role of city council,

(a) to represent the public and to consider the well-being and interests of the City;

(b) to develop and evaluate the policies and programs of the City;

(c) to determine which services the City provides;

(d) to ensure that administrative policies, practices and procedures and controllership policies, practices and procedures are in place to implement the decisions of council;

(e) to ensure the accountability and transparency of the operations of the City, including the activities of the senior management of the City;

(f) to maintain the financial integrity of the City; and

(g) to carry out the duties of council under this or any other Act.

[52] Section 83 of the COTA confers, subject to s. 82, a general power to make grants. Section 83(1) provides:

Despite any provision of this or any other Act relating to the giving of grants or aid by the City, subject to section 82, the City may make grants, on such terms as to security and otherwise as the council considers appropriate, to any person, group or body, including a fund, within or outside the boundaries of the City for any purpose that council considers to be in the interests of the City.

[53] As noted earlier however, s. 82(1) of the COTA, prohibits the City from granting any bonus to a commercial enterprise:

Despite this or any other Act, the City shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose.

[54] Section 82(3), however, provides an exception where the City exercises powers under s. 28(7) of the Planning Act:

Subsection (1) does not apply to city council’s exercise of its authority under subsection 28 (6) or (7) of the Planning Act or under section 333 of this Act.

[55] Section 28(7) of the Planning Act grants the City the authority to make financial grants to private parties, including commercial enterprises, provided those grants are made “in conformity with” a CIP:

For the purpose of carrying out a municipality’s community improvement plan that has come into effect, the municipality may make grants or loans, in conformity with the community improvement plan, to registered owners, assessed owners and tenants of lands and buildings within the community improvement project area … to pay for the whole or any part of the eligible costs of the community improvement plan.

[56] CIPs must be established using the City’s by-law making powers. This was done when the City enacted the 2008 and 2012 By-laws.

[57] Section 2 of the 2012 By-law provides that, in order to be eligible for IMIT grants, a property “must undergo development” for certain specified uses.

[58] Section 3.2.1 provides that IMIT grants “will be available for buildings and facilities … occupied by one of the following sectors or uses”. One of those uses is “Corporate Headquarters, in the Downtown”. The terms “Corporate Headquarters” and “Downtown” are defined in s. 3.1.

[59] Similarly, s. 3.2.3, provides that IMIT grants “will be available” for Office Buildings “with a minimum GFA of 5000 square metres on Sites in Transit Corridors, but not within the Financial District.” The terms “Office Building”, “Sites in Transit Corridors” and “Financial District” are all defined in s. 3.1.

[60] A third eligible use is a “Transformative Project”. The eligibility criteria for Transformative Projects set out in s. 3.1(xxvii) required applicants to submit a business plan demonstrating the project benefits and the “need for financial incentives in order for the development to be economically viable.”

[61] “Tourism Attraction” projects are also an eligible use. The eligibility requirements for a Tourism Attraction include the requirement that an applicant must demonstrate that the project has a “need for financial incentives in order for its capital development to be viable”.

[62] Section 3.2.5 provides (in a significant departure from the 2008 By-law) that IMIT grant applications involving a project with a construction value exceeding $150 million require Council approval.

Interpretation

[63] Based on a careful reading of the 2012 By-law in its proper legislative context, I am unable to agree with the Applicants that the plain words of this legislative scheme, having regard to its context and purpose, require Council to approve any IMIT grant that meets the threshold eligibility requirements.

[64] The statutory scheme provides that the City “may” make grants. Neither the 2012 By-law nor s. 28(7) of the Planning Act create a legal entitlement to any grant. Rather, s. 28(7) of the Planning Act provides that a grant program may be created in the form of a CIP, and grants pursuant to that program may be paid, provided they are in conformity with the CIP. Further, the 2012 By-law establishes a grant regime that will be available from which grants may be paid. The Applicants’ argument confuses “eligibility” for and the “availability” of a grant with an entitlement to or right to payment of that grant. Council’s authority to approve a grant, considered in the context of ss. 6, 82, 83, and 131 of the COTA, s. 28(7) of the Planning Act, and s. 3.2.5 of the 2012 By-law is permissive, not mandatory.

[65] There are no provisions in the 2012 By-law, or the legislative scheme, which compel the City to approve an application or to award a grant. There are no rules or restrictions in s. 3.2.5 of the 2012 By-law which dictate the decision to be made by Council in any particular case. The text of s. 3.2.5 contains no express or implied limitation on the scope of Council’s approval. Compliance with the basic eligibility criteria of the 2012 By-law is thus a necessary, but not a sufficient, condition for an applicant to obtain a grant.

[66] There are sound policy justifications for this conclusion as well. Taken to its logical extension, the Applicants’ argument would require the City to approve their grant applications even if doing so would put the City in default of its financial obligations to lenders and other third parties. I cannot conceive that the Legislature or the City would have had such a result in contemplation when enacting ss. 82 of the COTA or s. 28 of the Planning Act, or the 2012 By-law itself.

[67] In addition, s. 83 of the COTA provides the City with broad discretion to make grants for any purpose that Council considers to be in the interests of the City. It confers this grant-making discretion “[d]espite any provision of this or any other Act relating to the giving of grants”, including s. 28(7) of the Planning Act. While s. 83 is subject to s. 82 of the COTA, which prohibits grants to commercial enterprises, the s. 82 prohibition does not apply to the exercise of Council’s authority under s. 28(7) of the Planning Act. Thus, Council’s discretionary authority under s. 28(7) of the Planning Act to enact a CIP is clothed with the powers described under s. 83 of the COTA, by which Council may make grants on terms it considers appropriate, to any person, group, or body, for any purpose that Council considers to be in the interests of the City, provided, of course, that the grant is “in conformity with” the CIP.

[68] When considering a similar provision under Yukon territorial law, the court in Yukon Housing v. Dawson (City), 2002 YKSC 65, at para. 6, held that elected municipal councillors are presumed to act in the public interest. Yukon Housing further held that where a municipality intends to act in the public interest, that decision should be respected.

[69] The result of the permissive nature of s. 28(7) of the Planning Act and the 2012 By-law, as informed by the principles of ss. 82 and 83 of the COTA, is that while the City cannot make grants that go beyond or are contrary to what is authorized in the 2012 By-law (for example, Council could not approve a grant for a project that did not meet the eligibility criteria), it does not follow that the City is compelled to approve or pay out a grant simply because to do so would be in compliance with threshold eligibility requirements under the CIP.

[70] Finally, if the Province or Council had intended to circumscribe the grant approval authority so that Council’s approval was required upon proven compliance with eligibility criteria in the 2012 By-law alone, they would have clearly said so in the relevant enactments. In Durham Rapid Taxi Inc. v. Ajax (Town) (2006), 2006 41662 (ON SCDC), 218 O.A.C. 227 (Ont. Div. Ct.), upon which the Applicants rely heavily, the legislative provision, s. 150(11) of the Municipal Act, 2001, S.O. 2001, c. 25, at that time provided that “council shall exercise its discretion … upon such grounds as are set out in the by-law”. The by-law, however, set out the grounds upon which a taxi licence would be granted. Those grounds did not include successful completion of a Request for Proposal (“RFP”) mechanism. Thus, Ajax had no authority under the by-law to require an applicant for a taxi licence to comply with an RFP mechanism. This is not the case here. While s. 28(7) of the Planning Act permits grants only if they are “in conformity with” the CIP, the 2012 By-law does not require Council to approve a grant merely because it meets the minimum eligibility threshold. Durham Rapid Taxi is also illustrative of the different interpretive approach required where the by-law seeks to regulate private persons from doing what they would otherwise be free to do – where the provisions are strictly construed – and the very different situation of gratuitous grants of public funds: Westfair Foods, cited in para. 45 above.

[71] Once it is determined that meeting the eligibility threshold for a grant does not entitle the applicant to receive the grant, the question then becomes, upon what grounds, apart from the eligibility criteria, could Council decide to approve or deny an IMIT grant under the 2012 By-law?

[72] As clearly stated by Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121, at p. 140, in virtually all matters of public regulation “there is no such thing as absolute and untrammeled ‘discretion’ … [N]o legislative Act can, without express language, be taken to contemplate an unlimited arbitrary power exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute…. ‘Discretion’ necessarily implies good faith in discharging public duty; there is always a perspective within which a statute is intended to operate; and any clear departure from its lines or objects is just as objectionable as fraud or corruption.”

[73] But, here, there is no suggestion of fraud, corruption or other impropriety, or of an intent to discriminate by favouring friends and punishing enemies when Council approved some, and denied other, grants in its Decision of July 26, 2018. Indeed, the Applicants’ complaint is not that the factors Council took into account, such as the ongoing need for the incentive (the “but for” consideration) or other, competing initiatives in need of available funds (such as the SmartTrack initiative) were “improper” in this sense, but that they were, however well-intentioned, external to the considerations available to Council under the 2012 By-law.

[74] Council has broad powers, especially in connection with the expenditure of public funds. As noted earlier, s. 6 of the COTA directs that the City’s powers are to be interpreted broadly, “so as to confer broad authority on the City to enable the City to govern its affairs as it considers appropriate”. Section 131 of the COTA stipulates the role of Council includes fostering “the well-being and interests of the City” and maintaining “the financial integrity of the City”.

[75] It necessarily follows from the conclusion that Council was not bound to approve the IMIT grants merely because the Applicants met the threshold eligibility criteria, that Council was entitled to consider other criteria that fell within its jurisdiction to employ. This would include control of the City’s purse-strings and responsible management of the City’s finances, including the disbursement of public funds in aid of policies intended to incentivize high value growth in targeted sectors and geographic locations.

[76] The City, it goes without saying, does not have unlimited resources. Council must balance the City’s needs against the availability of funds. The court has little knowledge or understanding of the overall financial constraints faced by Council in making such decisions and is ill-equipped to assess the result of such balancing in the face of Council’s decisions to allocate public funds.

The “But For” Consideration

[77] Specifically, I would add, the text of the 2012 By-law, read as a whole, makes it clear that the purpose of the IMIT program is to stimulate and induce desired types of development in desired areas of the City. Providing grants for a development that would have occurred in any event is neither a stimulus nor an inducement. In this case, the City determined, through an independent process, that the requested grants would be for something that would likely happen in any event (i.e., the Applicants would build their commercial official buildings with or without the grant). Accordingly, Council reasonably concluded that approval of these grants would not meet the purpose of the 2012 By-law as required by s. 28(7) of the Planning Act.

[78] Given Council’s status as an elected body and its powers under the COTA, the Planning Act, and the 2012 By-law, Council may consider other valid municipal purposes in the course of deciding whether or not to exercise its permissive authority to provide grants. This could include a consideration of whether the grant is necessary for the development project to proceed (the “but-for” consideration) or other municipal spending priorities, such as the SmartTrack initiative.

[79] The mere fact that under the 2008 By-law, Council instructed the General Manager to approve all IMIT grants that met the eligibility criteria is not a limitation on Council’s subsequent authority once IMIT grant applications for projects over $150 million were brought under Council’s purview in the 2012 By-law. The scheme of the 2008 By-law was the exercise of a policy choice made at the time that was changed with the enactment of the 2012 By-law.

[80] While the “but for” consideration was not established as an express eligibility requirement for the particular Head Office and Office Building projects which have given rise to this application for judicial review, it is clear that “but for” considerations were always front and centre in the City’s consideration of the IMIT programs and policies as a whole. There is an obvious potential “free rider” problem with a grant program of this kind and it was never the City’s intention to give away public funds to help property developers do what they would have done in any event. Rather, in 2008, the City made a policy choice not to require each applicant for an IMIT grant to specifically prove that the grant was necessary for the economic viability of their project. The policy employed at that time effectively assumed, for certain types of projects, that the grants were needed as stimulus and an incentive to develop desired types of projects in desired areas of the City.

[81] But, as the various measures adopted by the City to induce more “high value” development unfolded and began to bear fruit, the circumstances changed. Periodic reviews of the IMIT program bore this out, in part on the basis of the City’s assessment of the continuing need for the IMIT grants to induce the desired “high value”-type development. For example, in the 2018 review leading to the 2018 By-law, the City found that downtown Toronto office vacancy rates were at “a historical low”, despite the large amounts of office space recently added, and were among the lowest in major North American markets. Similarly, base rents had increased approximately 27% in the preceding seven years. Commercial office space in the City’s downtown core was becoming increasingly attractive compared to suburban competition outside of Toronto. And, the City’s gradual shift of the property tax burden away from commercial properties had taken effect; the commercial to residential tax ratio had dropped from approximately 4:1 in 2005 to under 3:1 by 2016, with a target ratio of 2.5:1 by 2023.

[82] The centrality of the “but for” element in the IMIT program, as a whole, was explicitly demonstrated in the City’s assessment of one of the three grants that Council approved in 2016 and in the City’s review of proposed amendments to the IMIT program between 2016 and 2018. As noted earlier, the applicant in one of the grant applications approved in 2016 was required to provide extensive project-specific financial data, including the applicant’s discounted cash flow model used in its own assessment of the financial viability of the development. In staff’s assessment at the time, although the IMIT grant had a “relatively minor” financial impact on this project, the grant would allow for a shorter lease-up period which improved the project’s internal rate of return. As a result, that application was recommended and the Council gave its approval of the grant. Further, the question of the continued need for the IMIT grant program as a stimulus and incentive for various targeted types of commercial development was a key issue in the overall program review commenced in 2016. This review conceived many of the amendments to the program embedded in the 2018 By-law, the effect of which has been stayed by the developers’ appeal of the 2018 By-law to the LPAT.

[83] The Applicants argue that the doctrine of implied exclusion applies to the interpretation of the 2012 By-law and, specifically, to Council’s authority to approve IMIT grant applications under s. 3.2.5. This doctrine holds that an intention to exclude certain powers in a legislative provision may be implied from the express inclusion of those powers in another provision. The Applicants point out that the eligibility criteria for a Transformative Project and a Tourism Attraction specifically include the requirement to show an IMIT grant is necessary to make the project economically viable. This requirement is notably absent from the eligibility criteria for a Corporate Headquarters and an Office Building project. Thus, the Applicants argue, By-law 2012 specifically and intentionally excluded any “but for” considerations from the approval requirements for Corporate Headquarters and Office Building IMIT grants.

[84] I cannot agree with this submission for two reasons. First, as noted earlier in these reasons, eligibility criteria are different from approval criteria. Under the 2012 By-law, meeting the eligibility criteria is a necessary, but not sufficient, condition for receiving an IMIT grant. The fact that “but for” considerations are an added requirement for IMIT grant eligibility in the case of Transformation and Tourism projects says nothing about whether “but for “considerations can be a relevant factor in deciding whether to approve grants in other categories. Put another way, under By-law 2012, Council is prohibited from making a grant to a Transformation Project that has not shown the grant is required for the project to be economically viable. Council is not, however, prohibited from considering economic necessity in other contexts as well.

[85] Second, it is important to remember that the “doctrines” of statutory interpretation are the servants, not the masters, of the interpretation exercise. They cannot be applied indiscriminately, and, in many cases, different canons of interpretation may drive the result in different directions. This very point is made in the case relied upon by the Applicants for the implied exclusion rule: Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, at paras. 65-66. In Third Eye Capital, the Court of Appeal declined to apply the implied exclusion principle, holding that reliance upon this principle is “misplaced” when reliance is placed “exclusively on the text” without regard to the “underlying rationale” of the statutory provision. As noted earlier in these reasons, the purpose of the 2012 By-law is to use grants from incremental property tax revenues as a stimulus and incentive for targeted development in specified areas of the City. Implicit in that purpose is a consideration of whether the stimulus and incentives are necessary in order to foster the desired development outcomes.

SmartTrack

[86] The Applicants also allege that it was improper for Council to consider its funding needs for other programs, such as the SmartTrack initiative, when assessing whether to approve these particular grant applications under the 2012 By-law. There is certainly evidence from which a possible inference could be drawn that the looming costs of the SmartTrack initiative was a factor in Council’s decision to deny these IMIT grants. It is not necessary, in the circumstances however, to come to a final conclusion on this question. I say this because, assuming it were true, I would find, in light of the analysis set out above and the permissive rather than mandatory language of the 2012 By-law, that Council’s consideration of the competing demands of other policy initiatives (such as SmartTrack) in assessing these grant applications, was “in conformity with” the CIP.

Anti-Bonus Rule

[87] The Applicants argue that the City’s interpretation of its discretionary power under s. 3.2.5 of the 2012 By-law defeats the purpose of the prohibition in s. 82 of the COTA. This amounts to an assertion that any by-law passed under s. 28(7) of the Planning Act cannot confer any discretion on Council. Otherwise, the Applicants say, Council could use its discretionary powers to play favourites, and confer competitive advantages on some while denying them to others. No authority has been cited for this proposition. On a plain reading of s. 82 of the COTA and s. 28(7) of the Planning Act, this argument cannot be sustained.

[88] Section 28(7) of the Planning Act is a clear exception to the “anti-bonus rule”: a grant may be permitted if it is made in conformity with an existing CIP. There is no prohibition on the scope of the considerations that may be authorized by the CIP nor, short of conformity with the CIP, is there any express limitation on the factors that may be brought to bear in making the decision to approve a grant.

[89] The definition of a CIP in the Planning Act itself, for example, grants broad and multifaceted discretion to Council to enact a CIP which could work to the advantage of some property owners and not others. To take one example, a “community improvement project area” is an “area within a municipality, the community improvement of which in the opinion of the council is desirable because of age, dilapidation, overcrowding, faulty arrangement, unsuitability of buildings or for any other environmental, social or community economic development reason” (emphasis added). The 2012 By-law itself also favours particular sectors (such as Biomedical, Computer Systems Design and Services, and Creative industries) and eligible uses (such as Corporate Offices and Head Offices) to the exclusion of others. In any event, the fact that a decision may give one developer a competitive advantage over another renders neither the 2012 By-law nor the approval of a grant under the By-law vulnerable to attack, provided the decision is made for a valid municipal purpose: Out-of-Home Marketing Association of Canada v. Toronto (City), 2012 ONCA 212, at para. 29. There is no suggestion in this case that Council was not acting in what it reasonably believed to be the best interests of the City when it decided to deny the six grant applications now under judicial review.

Administrative vs. Legislative Decision-Making

[90] The Applicants also argue that, by purporting to retain discretionary criteria to decide grant applications, the City has engaged in impermissible sub-delegation, citing cases such as Brant Dairy Co. v. Milk Commission of Ontario, 1972 11 (SCC), [1973] S.C.R. 131 and Air Canada v. City of Dorval, 1985 40 (SCC), [1985] 1 S.C.R. 861.

[91] The sub-delegation cases, in my view, have no application to the circumstances of this case. Unlike those and similar sub-delegation cases, the 2012 By-law does not simply repeat the power granting words of s. 28(7) of the Planning Act. The 2012 By-law is a 28-page document setting out, in great detail, the basis upon which eligible projects may receive IMIT grants.

[92] The principle against improper sub-delegation does not necessarily result in the total neutralization of otherwise legitimate discretion conferred upon the decision-maker.

[93] The Applicants’ real complaint comes back to the core issue discussed above – does the language of the 2012 By-law limit the factors that may be considered in approving a grant application to only the specified eligibility criteria, such that if those criteria are met, the grant must be approved? For the reasons already stated, I would hold that it does not.

Improper and Irrelevant Criteria

[94] The same approach applies to the Applicants’ final argument on this issue. For reasons already stated, a consideration of the underlying efficacy and need for the stimulus and incentive of an IMIT grant (the “but for” consideration) or other spending priorities (SmartTrack) were not improper or irrelevant criteria for Council to take into account. There is no evidence that Council’s considerations were arbitrary or capricious in the sense required for a successful challenge under Roncarelli.

[95] For these reasons, I would dismiss the application for judicial review on this ground.

Whether the Decision to Deny These Grants was an Unjustified Departure from Past Practice

[96] Citing Vavilov, at para. 131, the Applicants argue that they were entitled to expect that like cases would generally be treated the same and that a departure from the City’s past practices required the City to adequately justify that departure, failing which the Decision of Council would be unreasonable. The Applicants further argue that applying “but for” considerations to their grant applications was a significant and unjustified departure from the City’s past practice. Since the City had approved every previous IMIT application that met the stated eligibility criteria in the Office Building and Corporate Headquarters categories, without specifically questioning the economic need for the grants to make the projects viable, the City’s choice to change course was unreasonable.

[97] I would not accede to this argument for several reasons. First, I do not read the relevant passage from Vavilov as in any way rejecting or undermining the well-established administrative law principle that legitimate expectations cannot give rise to substantive rights: see Brown et al., at para. 7:1730. The fact that the Applicants may have believed that Council would approve their IMIT grant applications, based on the City’s past practice, does not give rise to any enforceable right to have their applications approved: Skypower CL I LP et al. v. Minister of Energy (Ontario), 2012 ONSC 4979 (Div. Ct.), at paras. 53, 84.

[98] In any event, in respect of the third application that was approved by Council under the 2012 By-law, that applicant was invited to produce and make submissions on its economic need for the grant. The applicant’s submissions in that case reflected a consideration of factors broader than the eligibility criteria, including “but for” considerations, the choice to locate in Toronto compared to its surrounding suburbs, the revitalization of the City’s downtown, growth to the City’s long-term tax base, and job creation. This was all done without complaint that these considerations were an unjustifiable departure from past practice.

[99] Further, in my view, the City has adequately explained why staff decided to retain an external consultant to examine the “but for” considerations associated with the Applicants’ grant requests and why Council ultimately decided that the examination of economic need for these IMIT grants was a relevant consideration in the circumstances. This included evidence that the desired “high value” employment in the downtown office market had grown, rents had increased, office vacancy rates had dropped, and commercial property taxes had fallen, such that the need for the grants in all cases should perhaps no longer be assumed.

[100] For these reasons, I would deny the application for judicial review on this ground.

Whether Council’s Reasons for Denying the Grant Applications Were Irrational and Incoherent

[101] Under this argument, the Applicants primarily argue that Council’s reliance on a report from Hemson on the ongoing need for IMIT grants to incentivize desired forms of property development was improper because, as they allege, the Hemson report was full of errors and incorrect assumptions.

[102] This was not a civil trial. The Applicants’ were seeking hundreds of millions of dollars of public money under a permissive grant scheme from the duly elected council of the largest city in Canada. In Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342, a municipal council was, as here, exercising an administrative, not a legislative, power. The Supreme Court held, nevertheless, that decisions of elected municipal councils are to be reviewed with deference because their decisions are the result of a balancing of complex and divergent interests: at para. 35. Council is accountable to its constituents. A democratically accountable delegated decision-maker such as a municipal council is not a court-like quasi-judicial decision maker such as a human rights tribunal, labour relations board, or workers compensation tribunal, and is not to be reviewed as though it was.

[103] When Council considered these IMIT grant applications, it was considering a proposed expenditure of public funds up to $364 million. Council’s deliberations on the Applicants’ grant applications included consideration of a variety of important topics and considerations of public policy and public finance, not just the Hemson report of which the Applicants’ are so derisive. Where a decision-maker is an elected official considering the discretionary expenditure of public funds, based primarily on factual and policy matters with very little legal content, the acceptable outcomes can be expected to be very broad: Mills v. Ontario (Workplace Safety and Insurance Appeals Tribunal), 2008 ONCA 436, at para. 22.

[104] Whatever the merits of the Hemson analysis, it was for Council to decide what factors to weigh and how to weigh them. I would not give effect to this ground of judicial review.

Whether the Applicants Were Denied Procedural Fairness

[105] The Applicants argue, in the alternative, that if the City was entitled to apply “but for” considerations in its deliberations on the grant applications, Council’s Decision was unreasonable because the Applicants were denied procedural fairness. Specifically, the Applicants say they were not provided an opportunity to review and respond to key data and assumptions (in effect, Hemson’s working papers) that Hemson used for its financial analysis, which supported its recommendations to City staff. The evidence is that neither the Committee nor Council were provided with the Hemson working papers which are now in controversy. Hemson’s financial analysis was, nevertheless, an important factor underlying Council’s Decision. The Applicants argue that if Council was lawfully entitled to rely on that analysis, then basic procedural fairness required that the Applicants be given an opportunity to review and respond to it: 1657575 Ontario Inc. v. Hamilton (City), 2008 ONCA 570, 92 O.R. (3d) 374, at para. 25. The Applicants, they claim, were not given that opportunity and, therefore, the Decision must be set aside.

[106] There is no question that, although the time frames were short, the Applicants received the June 2018 Hemson report and the July 2018 staff report in advance of the Committee meeting and the Council meeting. Most of the Applicants or their legal counsel made written submissions to the Committee in which they asked the Committee to reject the advice of City staff and grant their IMIT applications. In their written submissions, these Applicants argued that:

(1) “but for” considerations ought not be used to evaluate their applications;

(2) the City was improperly applying the not-yet in force 2018 By-law, and had improperly delayed considering the applications until such time as the City had enacted the 2018 By-law;

(3) they had assumed their applications would be granted, and had relied on that in the way in which they organized their business affairs;

(4) rejecting their applications would place them at a competitive disadvantage;

(5) the proposed awarding of IMIT grants would be discriminatory and violate the “anti-bonusing” provisions of the COTA, and Council's discretionary authority should be construed to be narrow so as to be consistent with these anti-bonusing provisions; and

(6) Hemson’s conclusion, that the Applicants’ IMIT grant applications did not meet “but for” considerations, was wrong.

[107] No Applicant in their written submissions alleged the City’s hearing process was unfair. No one alleged they had not been given enough time or that they were denied the opportunity to submit documents to Hemson or to the Committee. No one asked for production of Hemson’s underlying calculations supporting the analysis in its June 2018 report. It is generally fatal to a procedural fairness allegation if the issue was not raised by the applicant before the decision-maker at the time: McCurvie v. Canada (Citizenship and Immigration), 2013 FC 681, at para. 45.

[108] Further, all of the Applicants made oral representations to the Committee. Some of their submissions were made by their employees and some were made by legal counsel. In addition, two of the Applicants’ tenants or prospective tenants also made submissions through their own legal counsel. The arguments advanced in these oral submissions were consistent with, and generally repeated, the arguments listed above that were advanced in the written submissions.

[109] The Applicants’ grant applications came before Council on July 26, 2018. A lobbyist on behalf of the Applicants was present. In addition, Cadillac Fairview, which had not made written submissions to the Committee, made written submissions to Council. Oxford and Brookfield also provided written submissions to supplement the submissions they advanced before the Committee.

[110] Unlike the circumstances in 1657575 Ontario Inc. v. Hamilton (City), 2008 ONCA 570, upon which the Applicants rely (there, the applicants had sought, but were refused, production of details underlying the challenged analysis), none of the Applicants asked to see the detailed Hemson calculations underlying its report. Council did not have the Hemson working papers. The Applicants nevertheless knew Hemson’s reasoning and its conclusion that they did not meet “but for” considerations. They were given, and exercised, the opportunity to make written and oral submissions and, in doing so, had the opportunity to provide their own analysis.

[111] The scope and content of procedural fairness is, of course, drawn from the particular context: Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, at paras. 21-22. In the context of this case, I am satisfied that non-disclosure of the underlying calculations made by Hemson in reaching its conclusions was not a breach of the duty of procedural fairness. The substance of Hemson’s reasoning and arguments was provided and the Applicants were very clearly aware of the case they had to meet; the Applicants were not entitled to every detail: Michael Di Biase v. City of Vaughan, 2016 ONSC 5620 (Div. Ct.), at para. 146, citing Syndicat des Employés de Production de Québec et l'Acadie v. Canada (Canadian Human Rights Commission), 1989 44 (SCC), [1989] 2 S.C.R. 879, at para. 27. Keeping in mind, once again, the direction from the Supreme Court in Nanaimo, to the effect that a request for a grant from a municipal council payable out of public funds is not a civil trial subject to the Rules of Civil Procedure, I am unable to conclude that the Applicants were denied procedural fairness in the circumstances of this case.

[112] I would therefore dismiss this ground of the application for judicial review.

Motion to Strike New Evidence

[113] The City’s motion to strike significant portions of the Applicants’ evidence is premised on both the restricted availability of filing new evidence on a judicial review and general principles surrounding the admissibility of affidavit evidence.

[114] In general, the evidence on an application for judicial review is restricted to the evidence that was before the original decision-maker. There are, however, exceptions to this general rule. What have come to be known as the Keeprite principles govern new evidence on judicial review: Keeprite Workers' Independent Union v. Keeprite Products Ltd. (1980), 1980 1877 (ON CA), 29 O.R. (2d) 513 (C.A.) These principles were most recently confirmed by this Court in Canadian National Railway Company v. Teamsters Canada Rail Conference, 2019 ONSC 3644 (Div. Ct.). There are three criteria:

(a) the materials ought to have been included in the record of proceedings (i.e., they are properly part of the record pursuant to s. 20 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22);

(b) although the materials are not part of the record, they are properly added to the record because of one of the narrow exceptions to the principle that the record before the Divisional Court is the official record from the tribunal below. The usual examples of materials that may be admissible on this basis are:

(i) to set out general background that would assist the court;

(ii) to show procedural defects that are not apparent from the record or the reasons – for example, a reasonable apprehension of bias or a denial of procedural fairness; or

(iii) to show a complete lack of evidence to support a material finding of fact; and

(c) materials that are properly “fresh evidence” on the application.

[115] In addition to these exceptions, which the City says are not met here, the City also argues that a great deal of the evidence filed by the Applicants is inadmissible on basic evidentiary grounds; that it is speculative, irrelevant, non-expert “opinion”, “summary” in nature or legal argument.

[116] The most controversial aspect of this evidence is that which attempts to refute and discredit the Hemson report. The City argues that the Applicants are, in essence, trying to attack the factual basis for Council’s Decision by introducing new evidence going to the merits of the Decision that was not before the decision-maker. The Applicants argue that this evidence goes to their argument for a denial of procedural fairness in that they were prejudiced by the untimely and incomplete disclosure of the Hemson report (and the basis upon which that report reached its conclusions).

[117] This evidence was manifestly not part of the record before the Committee or Council in July 2018. Nevertheless, I might have been inclined to allow this evidence for the narrow purpose of trying to show material prejudice resulting from an alleged denial of procedural fairness. However, for the reasons outlined earlier, even taking this evidence into account, I am unable to agree with the Applicants’ argument that there was a denial of procedural fairness. What the evidence cannot be used for is a re-argument of the “but for” issue on the merits. It is not the role of the court on judicial review to “re-try” the merits of the Decision, especially on the basis of evidence that was not before Council. Therefore, even if the evidence is properly admitted, albeit for a limited purpose, it has no material impact on the outcome.

[118] As to the City’s other complaints, I would say with some regret that it seems to be the rare affidavit these days that strictly adheres to the facts; attempts at argument, summarizing, spinning the facts, and drawing inferences is not at all uncommon. While in no way condoning this trend, the court is well aware of the difference between fact and argument and that the drawing of inferences is for the lawyers to argue and the court to decide, not the witnesses. While there is something to be said for the City’s concerns, the new evidence which falls into this category was not such as to have any material impact on the outcome. In the circumstances, I would treat the City’s objections under the second ground as going more to weight than admissibility.

Conclusion

[119] For all these reasons, I would dismiss the application for judicial review.

Costs

[120] The Applicants, would, if successful, have sought a costs award of $230,000 (being approximately one-half of the Applicants’ partial indemnity costs and less than one-third of their actual costs). The City sought $140,000. This was a lengthy and complex application, raising many issues, which required two days to argue. The stakes were high, involving possible grant claims of up to $364 million. In the circumstances, I would find the request of the City to be reasonable, proportional, and warranted under Rule 57. I award costs to the City, fixed at $140,000.

Penny J.

I agree _______________________________

Doyle J.

I agree _______________________________

Favreau J.

Released: February 9, 2021

CITATION: 30 Bay ORC Holdings Inc. et al. v. City of Toronto, 2021 ONSC 251

DIVISIONAL COURT FILE NO.: 800/18

DATE: 20210209

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Penny, Doyle and Favreau JJ

BETWEEN:

30 Bay ORC Holdings Inc., CPPIB 30 Bay Inc., BAC Surface Inc., Ontrea Inc., Frontside Developments L.P., Menkes 55 Lakeshore Inc. and BCIMC Realty Corporation

Applicants

– and –

City of Toronto

Respondent

REASONS FOR JUDGMENT

Released: February 9, 2021