DIVISIONAL COURT FILE NO.: 14/21 DATE: 20210608
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt A.C.J.S.C., D.L. Corbett and Kristjanson JJ.
B E T W E E N:
WISE ELEPHANT FAMILY HEALTH TEAM
Christopher G.T. Tan and Dr. Ran He for the Applicant
Applicant
- and -
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO (MINISTER OF HEALTH)
Eunice Machado for the Respondent
Respondent
HEARD at Toronto by videoconference: April 28, 2021
REASONS FOR DECISION
Kristjanson J.
[1] Wise Elephant Family Health Team (“Wise Elephant” or the “Corporation”) is a corporation operating a Family Health Team (“FHT”), an interdisciplinary team of health care professionals providing community-based health services in Brampton. Wise Elephant is one of four FHTs in Brampton. It employs 11 people, including eight healthcare professionals, and receives 7,000 patient visits a year. Wise Elephant serves several vulnerable populations. Among its patients, Wise Elephant serves 150 transgender medicine patients, 250 patients who are not rostered with any family physician, many people experiencing homelessness, and “visible minorities, particularly those who require healthcare services/information in other languages, e.g. Punjabi.” Wise Elephant’s specialized transgender medicine clinic, TransMC, is the only comparable program in Peel Region.
[2] Since 2010, Wise Elephant has been funded under a series of transfer payment agreements approved by the Minister of Health and Long-Term Care. On December 14, 2020, Ontario gave notice that it was terminating the funding agreement without cause in accordance with the terms of the agreement, and that Wise Elephant would have to cease providing patient services at the end of March 2021.
[3] Wise Elephant submits that Ontario’s decision to terminate the funding agreement was made in bad faith and for an improper purpose, primarily to cover up fraud by Wise Elephant’s former Board of Directors, and to avoid scrutiny of Ontario’s negligence in failing to stop the fraud. It has brought this judicial review application for an order setting aside the decision to terminate the agreement.
[4] Ontario raises a preliminary issue of jurisdiction, arguing that the decision to terminate the agreement is not subject to judicial review because it is a private law dispute in contract, and lacks a sufficiently public character. If subject to judicial review, Ontario takes the position that Wise Elephant’s application is devoid of merit; the funding agreement was properly terminated in accordance with its terms; and there was no bad faith or improper purpose in the termination.
[5] I dismiss the application for judicial review. I find that the decision to terminate the agreement is not a decision subject to judicial review. It is a question of contract; it lacks a sufficiently public character that would lead this court to judicially review the decision. There was no bad faith or improper purpose by state actors constituting “exceptional circumstances” that would elevate this to a question of public law subject to judicial review.
Factual Background
The Wise Elephant Family Health Team
[6] Wise Elephant is a corporation created under the Corporations Act, R.S.O. 1990, c. C.38, in April 2010. The purpose of the Corporation is in part to “assist health care service providers to function within a collaborative interdisciplinary setting”. To fulfill this corporate purpose, Wise Elephant operates the FHT, as an interdisciplinary team of professionals providing community-based health services based on the needs of a population.
The Agreement Between Wise Elephant and Ontario and the Decision Below
[7] Since its founding in 2010, Wise Elephant has been funded through five successive transfer payment agreements with the Ministry of Health and Long-Term Care (“MOHLTC” or the “Ministry”). The final transfer payment agreement was to operate from April 1, 2018, to March 31, 2022 (the “Agreement”). It is the termination of this Agreement which led to the judicial review application.
[8] On December 14, 2020, Ontario sent Wise Elephant a notice of its decision to terminate the Agreement effective March 31, 2021, pursuant to Article 18.1 of the Agreement. The notice stated that the FHT will cease operations and delivery of programs and services by March 31, 2021. This is the decision under review.
[9] There are two methods of terminating the Agreement. Ontario terminated under Article 18.1 of the Agreement, entitled “Termination for Convenience”. Article 18.1 provides either party with the ability to terminate the Agreement without cause, but with notice, as follows:
Subject to the terms and conditions herein, either Party may terminate this Agreement at any time without liability, cost, or penalty, and without cause for any reason, upon giving at least 90 days written notice of its intention to do so.
The other method of termination under Article 19.1 provides that Ontario may terminate the Agreement for cause, without notice.
[10] Article 18.2 of the Agreement provides that where notice to terminate for convenience is given, as was the case here, then the parties are to agree on a plan for a wind-down of the operations of the FHT:
Where notice to terminate is given under [Article] 18.1, the Ministry and the Recipient, having regard to the obligations of the Recipient under this Agreement, shall jointly assess the state of the health programs and services being provided under the Service Plan as of the time such notice is given and shall agree to a plan and a budget that allows for the reasonable and orderly wind-down of the Service Plan until the end of the notice period. If such a plan and a budget are not agreed to within 30 business days from the date such notice to terminate is given, the Ministry shall prepare such a plan and a budget and the Recipient agrees to abide by such plan and budget. Where the Ministry prepares such a plan and budget, the Ministry will consider the reasonable estimates of the Recipient’s costs to wind-down the Service Plan in an orderly and responsible manner, including any of the Recipient’s obligations pertaining to termination of the Recipient Personnel. For further clarity, the Ministry’s ability to provide any funding for wind-down costs under this section is subject to the limits set out in [Article] 7.9 of this Agreement.
[11] The parties did not agree on a wind-down plan within 30 days. Therefore, pursuant to Article 18.2, Ontario unilaterally imposed a wind-down plan. Ontario’s wind-down plan for continued patient care until March 31, 2021 was completed and delivered to Wise Elephant on February 5, 2021. At an attendance before Corbett J. on March 8, 2021, Ontario agreed to extend the Agreement’s termination date to April 30, 2021.
Relationship with the Family Health Organization
[12] From 2010 until late 2019, Wise Elephant was affiliated with the Wise Elephant Family Health Organization, which is a group of affiliated physicians. Article 3.2 of the Agreement required an affiliation by the Corporation with a recognized physician group, and specifically named Wise Elephant Family Health Organization as the affiliated physician group for the FHT:
3.2 Affiliated Physician Collaboration
a) The Funding of this Agreement does not apply to physician compensation however, as a condition of continued Funding, the Recipient shall be affiliated with at least one of the following physician services groups (“Affiliated Physician Group”) as funded separately by the Ministry:
i. Family Health Network;
ii. Family Health Organization; or,
iii. Rural and Northern Physician Group Agreement.
b) All physicians who are signatories to the physician services agreement, of the Affiliated Physician Group must agree to be affiliated with the Recipient and to act as physician service providers in support of the Service Plan carried out by the Recipient.
c) The Affiliated Physician group(s) for the FHT is (are) Wise Elephant Family Health Organization.
[13] There are three models of FHTs funded by Ontario. Wise Elephant provides services under a capitated model. FHTs in the capitated model must be affiliated with a physician group, such as a Family Health Organization. Family Health Organizations are a group of at least three physicians that provide comprehensive primary health care services on a capitation basis. Under the capitation model, physicians are compensated at a set rate per patient enrolled on their roster. Family Health Organization physicians refer their patients to members of the FHT to receive non-physician care and education through targeted programs.
[14] The requirement of FHTs to affiliate with a Family Health Organization was agreed to between the Ministry and the Ontario Medical Association under a 2004 Physician Services Agreement between the parties. The Ontario funding model does not permit that an FHT affiliate only with individual doctors outside of the capitation model, although the MOHLTC has occasionally consented to the expansion of a FHT to extend their services in the context of existing affiliations with an affiliated physician group.
[15] Significant problems developed both among the affiliated physicians, and between the affiliated physicians, the Family Health Organization, and Wise Elephant, from 2018 onwards.
[16] In 2018 one of the affiliated physicians sued Wise Elephant, the Family Health Organization, some of the other affiliated physicians, and some medical professional corporations controlled by those affiliated physicians. Wise Elephant settled the lawsuit as against it in May 2019.
[17] Some of the affiliated physicians served on the Board of Wise Elephant until January 2019 (the “Former Board”). In February 2019, however, a new Board was elected that did not include any of the affiliated physicians but did include patients.
[18] On October 15, 2019, the Wise Elephant Family Health Organization gave notice that it was disaffiliating from Wise Elephant and the FHT.
[19] On October 23, 2019, Wise Elephant filed a Statement of Claim against some of the former affiliated physicians and their medical profession corporations for breach of contract, breach of fiduciary duties, fraud, defalcation, conspiracy, breach of trust, intentional interference with economic relations, and conversion.
[20] In this same lawsuit, Wise Elephant sued Her Majesty the Queen in Right of Ontario as represented by the Minister of Health and Minister of Long-Term Care (the party funding the Agreement), seeking among other relief that:
(a) Ontario remove some of the affiliated physicians from the Wise Elephant Family Health Organization,
(b) an interim and permanent injunction to prohibit Ontario from dissociating the Wise Elephant Family Health Organization from Wise Elephant,
(c) an Order that Ontario create a new Family Health Organization to be affiliated with Wise Elephant, and
(d) an interim and permanent injunction to prohibit Ontario from ceasing or to provide funds, or decreasing the amount of funds provided, to Wise Elephant.
[21] Wise Elephant has also made complaints to the Information and Privacy Commissioner and the College of Physicians and Surgeons of Ontario regarding alleged breaches and misuse of confidential patient health information and records.
[22] At no time prior to the hearing of the application did Wise Elephant come forward with the name of a new Family Health Organization with which it would partner.
Treasury Board Audit, February 2018
[23] In 2018, the Treasury Board Secretariat conducted an audit of Wise Elephant for the 2015-2016 fiscal year (the “Audit”). The Audit noted significant governance deficiencies, recommended strengthening governance and compliance frameworks, and made a number of suggestions for improvement.
[24] The Audit recommended strengthening governance of Wise Elephant by:
• documenting all Board meeting minutes to record key decisions made;
• completing Board member declarations for conflict of interest, confidentiality, and code of conduct;
• completing an annual Board self-evaluation;
• establishing a Finance Committee;
• implementing a continuing education process for Board members; and
• updating by-laws to clarify the directors’ term and to set term limits for elected officers.
[25] The Audit found that key areas needed to be addressed by Wise Elephant to ensure compliance with the Agreement, including:
• disclosing to the Ministry any situation that amounts to a potential/perceived conflict of interest;
• not using funding for purposes other than those outlined in the funding agreement without prior written consent of the Ministry;
• obtaining tenant liability insurance coverage for all Wise Elephant locations;
• ensuring that the Wise Elephant website does not promote other health services which are not part of the FHT without prior Ministry consultation;
• segregating duties within the cash and payroll functions and reviewing of cash and payroll activities regularly by management;
• reporting complaints to the Board quarterly and updating the Board policy to address complaints related to staff and affiliated FHT physicians; and
• maintaining adequate documentation to support expenditures which should be reviewed and approved by management.
[26] Ontario’s response to the Audit was as follows:
It is evident that management and governance issues in the organization are impacting its ability to discharge its accountability obligations as per the funding agreement. Effective 2017/18, the Ministry will require [Wise Elephant] to report on a quarterly basis on its progress in addressing the engagement recommendations with a view to ensuring the FHT can provide a high level of interdisciplinary primary care services to the community of Brampton while being accountable for the use of public funds. The submission of these reports and progress towards meeting these objectives will be a condition of on-going Ministry funding.
[27] The Audit was received by Wise Elephant’s Former Board in February 2018.
[28] On April 27, 2018, Ontario met with the Former Board to review the findings of the Audit. The speaking notes from the meeting provide an historical context for issues which existed with the Corporation:
There is a strong desire in the sector for increased access to the Family Health Team model. The ministry frequently fields requests to create new FHTs. When existing models such as Wise Elephant FHT demonstrate that they are not able to meet ministry expectations or meet contractual requirements, it raises grave concerns and illustrates that the FHT is not taking the responsibilities imparted on them seriously.
Wise Elephant FHT is the only FHT in the province that did not submit an annual operating plan last May. It is the only FHT in the province with continuous challenges, for 7 years, submitting reports that were correct and on-time to the ministry. This illustrates, again, that the board is not taking its role of transfer payment recipient seriously. Wise Elephant FHT is the only one in the province that has exhibited this consistently poor behavior.
[29] The Executive Director resigned and as mentioned, a new Board, composed of independent volunteer directors, assumed office in February 2019. The affiliated physicians who had previously been on the Board did not continue in office. The evidence of Wise Elephant is that upon assuming office in February 2019, the Board discovered signs of financial misconduct by the Former Board and began to investigate.
The Lawsuit Settlement and the July 2019 Preliminary Report
[30] As noted above, in 2018, one of the affiliated physicians commenced a lawsuit against other affiliated physicians, medical professional corporations controlled by some of the affiliated physicians, and Wise Elephant. The lawsuit alleged financial mismanagement, breach of contract, and breach of fiduciary duty by some of the affiliated physicians and their medical professional corporations to the detriment of Wise Elephant.
[31] On May 8, 2019, the Corporation entered into Minutes of Settlement with the affiliated physician where it agreed to conduct a forensic audit of the Corporation, together with the affiliated physician, in exchange for release of the Corporation and members of the new Board from the civil suit. The affiliated physician funded the preliminary forensic audit.
[32] The Forensic Audit Preliminary Report dated July 17, 2019 (the “Preliminary Report”) was provided to the Board and Executive Director of Wise Elephant and to the MOHLTC. The focus of the audit was stated as identifying areas in which the funds disbursed by Wise Elephant were not disbursed in compliance with the Agreement. The Preliminary Report acknowledged that the ultimate decision as to whether disbursements were compliant, or not, rested with the MOHLTC.
[33] The Preliminary Report identified a number of related party transactions and payments to a number of people who appear to have provided services which benefitted related parties. The Preliminary Report indicated, however, that no assessment was made as to whether any of these transactions were based on the fair market value of the services or supplies exchanged. The Preliminary Report also identified funds borrowed and repaid with interest, in one instance identifying a loan payment to a service provider which had been accounted for as part of payroll costs by Wise Elephant. There was an in-and-out transaction which did not involve Ministry funds. The Preliminary Report recommended further investigation and review.
[34] There is a disagreement between the parties as to the meaning of the Preliminary Report. Mr. Gaskin, Wise Elephant’s Executive Director, states in his affidavit that the Preliminary Report “raise[s] prima facie grounds for suspicion of fraud, embezzlement, misappropriation of funds, payroll fraud, and money laundering.” Although he is a Chartered Professional Accountant, Mr. Gaskin was not qualified as an expert.
[35] In a letter to the Minister of Health dated July 15, 2019, the Corporation stated that “[p]reliminary results from the forensic audit have indicated that a lack of functional governance, accountability and oversight have led to a list of questionable transactions of approximately $2,500,000 that appear to breach the terms of the [Agreement].”
[36] Later, Wise Elephant stated that the alleged fraud increased to $3.2 million. When asked on cross-examination what caused the increase, Mr. Gaskin responded that he decided to take a “more conservative approach” to various payroll transactions.
[37] The Preliminary Report did not conclude that there was fraud, embezzlement, misappropriation of funds, payroll fraud, or money laundering. It did not conclude that there were questionable transactions of $2.5 or $3.2 million. The Preliminary Report specifically stated that no assessment was made as to whether any of these related party transactions, or those which appeared to benefit related parties, were based on the fair market value of the services or supplies exchanged.
[38] Ontario’s witness, Ms. Wong, states in her affidavit that:
The Ministry reviewed the preliminary audit and did not agree with a number of its preliminary findings. In large part, the audit appeared to misapprehend what charges were and were not permissible under the terms of the [Agreement]. Furthermore, the Corporation had provided the Ministry with yearly Audited Financial Statements. Those audited statements also did not raise the kinds of concerns set out in the preliminary forensic audit, which was conducted in order to settle litigation.
[39] Of note, Article 6.3 of the Agreement does not prohibit all related party transactions; it adopts a disclosure and fair market value model:
The Recipient shall disclose to the Ministry without delay any situation that … a reasonable person would interpret as an actual, potential, or perceived conflict of interest. All non-arms-length transactions between the Recipient and its Members and/or their family members must be based on the fair market value of the services and/or supplies exchanged, and must be appropriately disclosed in the Reports provided by the Recipient to the Ministry.
Public Funds Owed to the Ministry
[40] Under the Agreement, there was an annual reconciliation of funds advanced to Wise Elephant and funds spent on Ministry-approved services. The reconciliation was based on the Corporation’s audited financial statements. Wise Elephant owes the Ministry $138,003 for 2016-2017, and $220,244 for 2017-2018. The Ministry has made a demand for the overpayment.
[41] On October 19, 2018, the Corporation asked the Ministry to forgive the $358,247 debt. On March 11, 2019, the Ministry indicated that it was not willing to forgive the debt.
[42] The Ministry also states that based on the Corporation’s 2018-2019 amended audited financial statements, the Corporation owes the Ministry $166,914, and an additional $342,413 for 2019-2020. To date, based on the Corporation’s audited financial statements, the Ministry takes the position that the Corporation owes the Ministry $867,574. These are monies advanced for the provision of health care through the FHT that the FHT did not spend, thus undersupplying health care professional services in the community.
Reporting to the Police
[43] There is no direct evidence from either the Ontario Provincial Police (“OPP”) or the Peel Regional Police as to the status of any ongoing investigations, although both parties have reported potential issues to the police.
[44] Ms. Wong, Ontario’s affiant, stated in her affidavit that on August 19, 2019, the Ministry referred the matter to the OPP’s Health Fraud Investigation Unit. Ministry staff advised the OPP that the final forensic audit had not yet been received but was anticipated by the end of 2019. There is an internal MOHLTC memorandum dated August 16, 2019, from the Primary Health Care Branch of the MOHLTC, indicating that the Branch had conducted an initial review of the Preliminary Report, consulted with the Legal Services Branch, and recommended that the Preliminary Report be referred to the OPP’s Health Fraud Investigation Unit.
[45] The August 2019 internal MOHTLC document reviewed some of the findings of the Preliminary Report, noting that:
There is currently insufficient information contained in the preliminary report for the Ministry to determine if any of these concerns violate the terms of the funding agreement.
The Ministry will be in a better position to assess whether additional violations of the terms of the funding agreement occurred, beyond those previously identified by the Ministry, once the final forensic report is submitted. The estimated date of completion of the report is December 2019.
This is a reference to the final audit that Wise Elephant had told the Ministry it was preparing. The Primary Care Branch noted that it was seeking “advice on referring this preliminary internal forensic audit report, initiated by the FHT, to the OPP’s Health Fraud Investigation Unit”.
[46] On January 9, 2020, an MOHLTC Primary Care Branch representative met with the Ministry’s Payment Accountability and Fraud Control Unit to discuss the matter.
[47] On February 3, 2020, the Primary Care Branch sent six files relating to Wise Elephant to the OPP’s Health Fraud Investigation Unit, including the Preliminary Report. The Ministry met with the Health Fraud Investigation Unit to do a briefing on the Agreement on February 28, 2020, so that the OPP could better understand the nature of the relationship between the parties. Thus, it does not appear that the matter was reported to the OPP until February 3, 2020, as it appears that the August 19, 2019 memorandum was internal to MOHLTC and did not include any OPP recipients.
[48] There is no affidavit evidence from the OPP as to the status of the referral or any investigation.
[49] In December 2020, an Acting Detective Staff Sergeant with the OPP Health Fraud Investigation Unit wrote an e-mail to Wise Elephant’s counsel: “Due to not receiving a referral regarding suspicion of offences from the Ministry of Health, the OPP is unable to commence an investigation. Until we have confirmation from the Ministry, our status will not be entering the investigation stage.”
[50] Counsel for Wise Elephant wrote to the OPP Health Fraud Investigation Unit inquiring about whether Wise Elephant could refer the matter to the Health Fraud Investigation Unit. On January 25, 2021, the same OPP Staff Sergeant clarified in an e-mail that:
Unfortunately, [Wise Elephant] does not fit into our mandate for investigation. The misappropriation of funds investigation should continue with Peel Regional Police Service as it falls within their jurisdiction.
The OPP Health Fraud Investigation Unit works pursuant to an agreement with the Ministry of Health whereby we investigate allegations of fraud upon their reasonable suspicion. The only way at this time, would be for the Ministry to do a preliminary audit / review of the findings and once they are complete and feel further investigation is needed, they would refer the file to us.
[51] Wise Elephant reported the alleged fraud to Peel Regional Police and provided Peel Regional Police with a copy of the Preliminary Report. An email chain between counsel for Wise Elephant and Peel Regional Police records a Peel Regional Police officer confirming to counsel that, in November 2019, MOHLTC staff advised the Peel Regional Police that the matter had been referred by the Ministry to the Ontario Provincial Police for consideration. More recently, the MOHLTC staff member advised Peel Regional Police that the Ministry had not received the final forensic audit from Wise Elephant.
[52] On December 24, 2020, Peel Regional Police advised Wise Elephant’s counsel as follows in an e-mail exchange:
As discussed previously, due to the nature of this matter the Ministry of Health is conducting a thorough review which supersedes our authority, That said, should elements arise in their analysis which necessitate a criminal investigation the file will be referred to the OPP by the MOH as per provincial mandate.
Of note, the Ministry of Health and the OPP are aware of our involvement however, neither body has contacted us for assistance therefore our file is suspended pending further information.
[53] I conclude that Ministry staff provided the Preliminary Report to the OPP and met with the OPP in February 2020; Peel Regional Police suspended their investigation during the period the Ministry and the OPP were meeting to discuss the file; and the Ministry conveyed to both the OPP and the Peel Regional Police that they were waiting for the final forensic audit from Wise Elephant which was expected to be delivered in December 2019.
Use of Public Funds
[54] Article 7.3 of the Agreement provides:
All Funding shall be applied directly to the payment of Schedule “B” expenditures, and for no other purpose. The Recipient shall expend the Funding in each Funding Year only in accordance with the Annual Budget for each Funding Year. No changes to the approved items in Schedule “B” are permitted without the prior written consent of the Ministry, unless otherwise specified in this Agreement.
[55] Neither legal fees nor forensic audit fees are covered in the Budget at Schedule “B”. The Ministry raises a concern that the Corporation (a) hired counsel to commence this application and another lawsuit, and (b) retained a new forensic accountant to complete a final audit, using the Ministry’s funds, without the Ministry’s consent.
Termination of the Agreement and the Wind-Down Plan
[56] Wise Elephant has raised concerns about what it refers to as the heavy-handed manner of communicating the December 14, 2020 termination decision, and the failure of the Ministry to engage in negotiation of alternatives following the notice:
• On December 8, 2020, the MOHLTC requested a teleconference on less than a day’s notice, without disclosing the agenda or subject matter. The Chair of Wise Elephant’s Board determined the availability of other Board Members, and on December 10, Wise Elephant proposed December 14 for the teleconference. When asked for an agenda, MOHLTC stated the purpose was “to discuss the FHT operations”, which Wise Elephant states “implied the continuation of [Wise Elephant] operations.”
• On December 14, less than 15 minutes before the teleconference, the MOHLTC sent the notice to terminate. Wise Elephant states that this “was an ambush” and for that reason, Wise Elephant cancelled the teleconference.
• The notice only gave Wise Elephant one week to prepare a wind-down plan, an “unreasonable request” of the volunteer Board in the week before Christmas. Wise Elephant objected to the timing, and the MOHLTC extended the deadline to January 13, 2021, as requested by Wise Elephant.
[57] There is disagreement between the parties about the wind-down plan. The obligations of each party on termination are specified in Article 18.2 of the Agreement. The Article provides that:
• The parties are to jointly assess the state of the health programs and services being provided under the Service Plan as of the time such notice is given.
• The parties shall agree to a plan and a budget that allows for the reasonable and orderly wind-down of the Service Plan until the end of the notice period.
• If such a plan and a budget are not agreed to within 30 business days from the date such notice to terminate is given, the Ministry shall prepare such a plan and a budget and the Recipient agrees to abide by such plan and budget.
• Where the Ministry prepares such a plan and budget, the Ministry will consider the reasonable estimates of the Recipient’s costs to wind-down the Service Plan in an orderly and responsible manner, including any of the Recipient’s obligations pertaining to termination of the Recipient Personnel.
[58] On January 13, 2021, the date for submitting a wind-down plan, Wise Elephant did not submit a plan and budget for wind-down. Wise Elephant instead made a proposal for rebranding that would transition to a new FHT (the “Rebranding Proposal”).
[59] The Rebranding Proposal requested that a new funding agreement, consistent with existing Wise Elephant funding levels, be executed between the Ministry and the rebranded FHT. The Rebranding Proposal did not propose an affiliation with a named and separately funded affiliated physician group (a Family Health Network, Family Health Organization, or Rural and Northern Physician Group) as required by the Agreement and the FHT model agreed to with the Ontario Medical Association. The Rebranding Proposal instead requested that the FHT be approved with service agreements with up to 20 unnamed Brampton physicians.
[60] The Ministry sought to meet with the Corporation on January 20, 2021, to discuss a wind-down plan. By email of January 19, 2021, the Corporation indicated that it was only willing to meet to discuss three key elements of the Rebranding Proposal, (i) funding continuity, (ii) a new funding agreement, and (iii) agreement/approval of the rebranded FHT to enter into service agreements with upwards of 20 Brampton physicians. Wise Elephant stated:
Any wind-down elements to our Rebranding Proposal are simply to wind-down operations as Wise Elephant FHT; and a seamless reopening as Downtown Brampton FHT. The Rebranding [P]roposal you are in receipt of states and clearly explains the reasons to keep the corporate entity of [Wise Elephant]. Essentially, we will be the Wise Elephant Family Health Team operating as Downtown Brampton Family Health Team.
[61] On January 22, 2021, the Ministry wrote to the Corporation indicating that it was not willing to continue to fund the Corporation and that the Rebranding Proposal did not meet the requirements of a wind-down plan. The Ministry advised the Corporation that it had six more days to provide a wind-down plan. Wise Elephant did not submit a wind-down plan other than the Rebranding Proposal.
[62] The Agreement required the Ministry to prepare a wind-down plan if the parties were unable to agree. The Ministry did so. The Ministry’s wind-down plan was delivered on February 5, 2021. The plan included the amounts the Ministry determined would be necessary to continue to provide patient care until March 31, 2021, severance payments for employees, rental wind-down, and other estimated termination costs. The Ministry accepted the Corporation’s estimation of those costs at $562,000, but set out that expenditures would need to be approved before spending.
[63] Since the Corporation owes the Ministry $867,574, the Ministry informed the Corporation it could draw on those monies to fund the wind-down plan, to a maximum of $562,000.
[64] In an e-mail dated February 11, 2021, Ontario’s counsel wrote the following in response to a concern by Wise Elephant’s counsel that funding be continued for the duration of the court proceeding:
As you know, your client has refused to provide a wind down plan or comment on the plan provided by the Ministry. The Ministry’s plan contemplates the quantum required to wind down the operation – which include costs of your clients’ on-going provision of health care – until the end of March, 2021. Those costs have been estimated at $562,000. According to Ontario’s current reconciliation statement, your client owes the Ministry $867,574 for its fiscal years ending March of 2017, 2018, 2019 and 2020. This does not account for any surplus of funds owing to the Ministry from the amounts provided for the 2020-2021 fiscal year.
Your client therefore has more than enough funds to continue to provide care to its patients up to the end of March 2021. To make it clear, up to $562,000 of the residual funds your client has maintained can only be used for the provision of health care services and the other items identified in the Ministry’s wind down plan. After March 31, 2021, the Ministry will perform a new reconciliation and expect full repayment of any monies not spent or related to any unauthorized expenditures.
Issues:
[65] This application raises the following issues:
(a) Is the decision to terminate the Agreement a private law contractual matter and so not subject to judicial review except in exceptional circumstances?
(b) If so, was the decision to terminate the Agreement made in bad faith or for an improper purpose, such that it is an exceptional case and should be subject to judicial review?
Jurisdiction
[66] There is a preliminary issue to be determined. Ontario submits that this court does not have jurisdiction to hear this application for judicial review under s. 2(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”) since the issues relate to a private law contractual matter not amenable to judicial review.
[67] Subsection 2(1) of the JRPA sets out this court’s jurisdiction to hear an application for judicial review:
2 (1) On an application by way of originating notice, which may be styled “Notice of Application for Judicial Review”, the court may ... grant any relief that the applicant would be entitled to in any one or more of the following:
Proceedings by way of application for an order in the nature of mandamus, prohibition or certiorari.
Proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.
[68] Section 1 of the JRPA defines “statutory power” to include a power or right conferred by or under a statute “to exercise a statutory power of decision.” “Statutory power of decision” is defined in s. 1 to mean a power or right conferred by or under a statute to make a decision deciding or prescribing:
(a) the legal rights, powers, privileges, immunities, duties or liabilities of any person or party, or
(b) the eligibility of any person or party to receive, or to the continuation of, a benefit or licence, whether the person or party is legally entitled thereto or not….
[69] Wise Elephant argues that in terminating the Agreement, the Minister of Health was exercising a “statutory power of decision”. The Minister’s power to enter contracts arises pursuant to s. 7 of the Ministry of Health and Long-Term Care Act, R.S.O. 1990, c. M.26 (“MOHLTC Act”) which provides, under the marginal heading “Agreements for provision of health facilities, etc.”:
The Minister, with the approval of the Lieutenant Governor in Council, may on behalf of the Government of Ontario make agreements with municipalities or other persons or corporations respecting the provision of hospitals and health facilities, and services and personnel thereof.
[70] Wise Elephant argues that the duties and functions of the Minister, as set out in s. 6 of the MOHLTC Act, require the Minister to oversee and promote the health of the people of Ontario, develop comprehensive health services, and, pursuant to s. 6(1)4, “enter into agreements for the provision of health services and equipment required therefor and for the payment of remuneration for such health services on a basis other than fee for service.” The Minister, under s. 6(2), in exercising her powers and duties is required to determine the health facilities, services, and personnel required to meet the health needs of the people of Ontario, and to promote and assist in the development of adequate health resources, both human and material. Therefore, in terminating the contract, Wise Elephant argues that the Minister was exercising a statutory power of decision pursuant to ss. 6 and 7 of the MOHLTC Act.
[71] I do not agree that the Minister was exercising a statutory power of decision when terminating the contract. As noted in Paine v. University of Toronto et al. (1981), 1981 1921 (ON CA), 34 O.R. (2d) 770 (C.A.), at p. 722, “it is not enough that the impugned decision be made in the exercise of a power conferred by or under a statute; it … must be a specific power or right to make the very decision in issue”. In this case, while the Minister’s authority to enter contracts is based on ss. 6 and 7 of the MOHLTC Act, the manner of the exercise of the power to contract – including the negotiation of contract terms and the exercise of rights under a contract – are not subject to any constraining statutory requirements. The power to contract is permissive. The MOHLTC Act and its regulations do not dictate how the Minister’s discretion to enter into, negotiate, or terminate contracts is to be exercised.
[72] In any event, jurisdiction to issue an order in the nature of certiorari under s. 2(1)1 of the JRPA is not limited to statutory powers of decision, and not all statutory powers of decision are subject to judicial review. Rather, the issue is whether the decision to terminate is (a) an exercise of state authority, and (b) of sufficiently public character that public law remedies are available.
[73] In Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26, [2018] 1 S.C.R. 750, at para. 14, the Supreme Court explained the limited reach of public law:
Not all decisions are amenable to judicial review under a superior court’s supervisory jurisdiction. Judicial review is only available where there is an exercise of state authority and where that exercise is of a sufficiently public character. Even public bodies make some decisions that are private in nature — such as renting premises and hiring staff — and such decisions are not subject to judicial review: Air Canada v. Toronto Port Authority, 2011 FCA 347, [2013] 3 F.C.R. 605, at para. 52. In making these contractual decisions, the public body is not exercising “a power central to the administrative mandate given to it by Parliament”, but is rather exercising a private power (ibid.). Such decisions do not involve concerns about the rule of law insofar as this refers to the exercise of delegated authority.
The Air Canada Factors
[74] The factors that determine whether a decision by a state actor is a public law decision of sufficient public character so as to be subject to judicial review are set out in Air Canada v. Toronto Port Authority, 2011 FCA 347, [2013] 3 F.C.R. 605, at para. 60: see also Highwood Congregation, at para. 21; Weld v. Ottawa Public Library, 2019 ONSC 5358 (Div. Ct.), at para. 14. The court in Air Canada, at para. 60, also held that “[w]hether or not any one factor or a combination of particular factors tips the balance and makes a matter ‘public’ depends on the facts of the case and the overall impression registered upon the Court.” Applying the relevant Air Canada factors, and weighing the overall impression of the case as discussed below, I conclude that the matter is a contract dispute and that public law remedies are not suitable.
[75] The character of the matter for which review is sought. The matter is a private contract for the funding of services. Wise Elephant argues that the decision will be detrimental to the health of Wise Elephant’s vulnerable patient population, thus engaging public law oversight. Although services are provided to members of the public, this does not alter the contractual nature of the relationship between Ontario and the Corporation. Everything government does affects the people of the province: this does not mean that every contract the government enters is a contract engaging the oversight of the court.
[76] The nature of the decision-maker and its responsibilities. Ontario concedes that the decision-maker (the Minister) is public. The Minister has overall responsibility for the health care portfolio. The matter under review, however, is the exercise of a contractual power of termination of a contract with a private party, one of many contracts entered into by the Minister relating to the private delivery of publicly funded health services. Simply because it secures the provision of a public good does not mean that the exercise of rights under the contract by a government actor is to be governed by public law principles.
[77] The extent to which a decision is founded in and shaped by law as opposed to private discretion. The decision to terminate under Article 18.1 of the Agreement was an exercise of discretion in accordance with the terms of the contract, a private law discretion.
[78] The suitability of public law remedies. Wise Elephant seeks to quash the decision and prevent the wind-down of the clinic. The Minister has no obligation to fund Wise Elephant as a matter of public law. The statute is permissive: it allows the Minister to contract for the provision of health services. There is no obligation on the Minister to fund any particular FHT, or to fund any FHT’s if the Minister determined that other methods of health care funding are preferable. In seeking to restrain the ability of the Minister to terminate a contract, Wise Elephant is essentially seeking mandamus – to compel the Minister to fund a private organization using public funds where there is no statutory duty to fund the organization. The Minister’s discretionary decision on a matter of private contracting is not generally one suitable for public law remedies.
[79] The existence of compulsory power. The Minister has no compulsory power over Wise Elephant or its Board, in the way that a Law Society has compulsory powers over its licensees, for example.
[80] An “exceptional” category of cases where the conduct has attained a serious public dimension. Stratas J.A. in Air Canada described this consideration as follows:
Where a matter has a very serious, exceptional effect on the rights or interests of a broad segment of the public, it may be reviewable: Aga Khan, supra at pages 867 and 873; see also Paul Craig, “Public Law and Control Over Private Power” in Michael Taggart, ed., The Province of Administrative Law (Oxford: Hart Publishing, 1997) 196. This may include cases where the existence of fraud, bribery, corruption or a human rights violation transforms the matter from one of private significance to one of great public moment: Irving Shipbuilding, supra at paragraphs 61-62.
[81] Wise Elephant’s counsel focused on bad faith by Ontario and its civil servants as the reason why the court should judicially review the decision, and why the Minister’s discretion was exercised unreasonably. I turn now to consider whether Wise Elephant’s arguments that the Minister acted in bad faith or for an improper purpose might raise a public law dimension in accordance with the last Air Canada factor, such that the court should judicially review the decision.
Bad Faith/Improper Purpose
[82] Wise Elephant submits that Ontario made the decision to terminate the Agreement on the basis of bad faith, or for an improper purpose. While Wise Elephant took the court to several cases defining bad faith, the decision of Emery J. in Seelster Farms et al. v. Her Majesty the Queen and OLG, 2020 ONSC 4013, at para. 120, broadly summarizes some of the main aspects of bad faith:
Bad faith has been defined as conduct that covers “acts committed deliberately with intent to harm.” It also has been used to characterize acts that are “so markedly inconsistent” with the events in which they are carried out that a court “cannot reasonably conclude that they were performed in good faith.” Descriptions of such conduct found in the jurisprudence include “reckless behavior;” conduct that “implies a fundamental breakdown in the orderly exercise of authority;” conduct that implies a “lack of candour, frankness and impartiality;” and irrational decision-making that is arbitrary, or plainly unreasonable because it fails to consider the appropriate information on which to decide. See Enterprises Sibeca Inc. c. Frelighsburg (Municipalite), 2004 SCC 61 and Grosvenor v. East Luther Grand Valley (Township), 2007 ONCA 55.
[83] In Entreprises Sibeca Inc. v. Frelighsburg (Municipality), 2004 SCC 61, [2004] 3 S.C.R. 304, at para. 26, the Supreme Court described bad faith as “acts that are so markedly inconsistent with the relevant legislative context that a court cannot reasonably conclude that they were performed in good faith” (emphasis added). Wise Elephant also relied extensively on Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121 in oral argument. Roncarelli had his liquor licence cancelled by the Quebec Liquor Commission because he had posted bond for Jehovah’s Witnesses arrested for proselytizing. Premier Duplessis recommended the licence be cancelled forever. Roncarelli is the seminal Canadian case involving judicial review for the abuse of discretion. Rand J. stated at pp. 140-141:
In public regulation of this sort there is no such thing as absolute and untrammelled “discretion”, that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator; no 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. Fraud and corruption in the Commission may not be mentioned in such statutes but they are always implied as exceptions. “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. Could an applicant be refused a permit because he had been born in another province, or because of the colour of his hair? The ordinary language of the legislature cannot be so distorted.
To deny or revoke a permit because a citizen exercises an unchallengeable right totally irrelevant to the sale of liquor in a restaurant is equally beyond the scope of the discretion conferred. There was here not only revocation of the existing permit but a declaration of a future, definitive disqualification of the appellant to obtain one: it was to be “forever”.
[84] Bad faith is a serious allegation. In dealing with acts of public administration, the burden is on the party challenging the acts to establish bad faith on a balance of probabilities. Moreover, innuendo and speculation are not evidence.
Allegations of Bad Faith
[85] Wise Elephant submits that Ontario acted in bad faith to cover up the fraud that had taken place under the Former Board. Wise Elephant submits that Ontario terminated the Agreement to avoid scrutiny of its own negligence in failing to stop the Former Board’s fraud against Ontario under the Agreement.
[86] Wise Elephant submits that Ontario knew the Former Board was misappropriating taxpayer money and did nothing about it. Even though the current Board was not responsible for any of these actions and is in fact taking remedial steps – including suing the former directors in a civil action – Ontario is punishing the current Board. Wise Elephant says it is a whistleblower, in need of this court’s protection, and that Ontario is trying to stop the current Board from airing the consequences of the Ministry’s failed oversight. The shuttering of the FHT will also shield the Former Board from consequences for their wrongdoing, as all civil actions will cease if the FHT is shut down.
[87] Wise Elephant states that Ontario’s bad faith is evident from its actions. It requested a teleconference to discuss “operations” on less than a day’s notice, and then was evasive about the purpose of the meeting. Ontario provided no agenda until 15 minutes before the call, when it provided Wise Elephant with the notice of termination. Ontario gave Wise Elephant only a week to prepare a wind-down plan, even though it was the week before Christmas. Moreover, although Wise Elephant proposed a comprehensive plan that would have maintained continuity of treatment (the Rebranding Proposal), Ontario summarily rejected all proposals. It simply delayed and then imposed its own plan.
[88] As part of the bad faith argument, Wise Elephant submits that the Ministry failed to refer the matter to the OPP Health Fraud Investigation Unit, yet at the same time misled the Peel Regional Police as to the status of the OPP investigation, thereby causing all police investigations to cease. Ontario failed to assist Wise Elephant in finding a new Family Health Organization to partner with and is reckless about the effect of termination on its patients. From this, Wise Elephant argues the court can, and should, infer bad faith on the part of Ontario and its civil servants.
Analysis of Bad Faith Allegations
[89] When cross-examined about the allegations, neither of Wise Elephant’s affiants was able to produce evidence. Ms. Moore, the Chair of Wise Elephant’s Board, claimed in her affidavit that the Ministry was protecting the Former Board from further complaints, investigations, or civil actions. On cross-examination she admitted she had no evidence to support this claim. Mr. Gaskin, Wise Elephant’s Executive Director, alleged in his affidavit that some members of the Ministry were “complicit” in wrongdoing by the Former Board. When asked for evidence to support this serious allegation, he responded that he had no evidence of direct involvement by the Ministry.
[90] The bad faith allegations must be considered in the context of the record as a whole – not just from one party’s perspective - and must be relevant to the issue of whether the Minister abused her discretion or otherwise acted in bad faith in terminating the Agreement in December 2020.
[91] There is no evidence that the termination of the ongoing funding Agreement was designed to cover up the fraud that had taken place under the Former Board, or to avoid scrutiny of Ontario’s negligence in its failure to stop the fraud, as alleged. It is clear from the facts set out above, as reflected in the Audit, that Wise Elephant had significant governance challenges, for many years.
[92] When the MOHLTC demanded repayment of Wise Elephant’s debt of $358,247, Wise Elephant did not repay the funds; Wise Elephant does not have the money in its account. The amount now owing to the MOHLTC – monies advanced for health professional services, but not used to provide those services – is $867,574, continuing to accumulate under the new Board’s direction. Wise Elephant asks the court to draw an inference of bad faith or improper purpose. However, it seems to this court that a decision to stop funding a corporation – one which is not providing the anticipated health professional services, is not complying with the funding contract and is in significant debt – is an example of stewardship of public funds, not bad faith. In other words, this appears to be a decision to stop throwing good money after bad.
[93] There is no evidence that the actions of the MOHLTC were designed to punish the current Board, for an improper purpose, which is the essence of the Wise Elephant arguments comparing the Ministry’s relationship with the Former Board and the current Board, or other FHT’s. The current Board had been in place 23 months when the Minister pulled the plug. In those 23 months, Wise Elephant had not been put on a properly funded basis. The current Board told Ontario that the final audit report would be delivered to the MOHLTC by December 2019; that report has still not been delivered. It was certainly open to Ontario to conclude that it did not wish to continue funding a Corporation which consistently underspent health care dollars. The impugned decision – to terminate an agreement – is expressly authorized by the Agreement itself, is authorized by the general grant of authority given to the Minister under the MOHLTC Act, and is (for the Minister) a matter of routine public administration.
[94] The MOHLTC does not have a duty to refer the case to the OPP Health Fraud Investigation Unit, and certainly did not owe an obligation to Wise Elephant to make the referral. As is evident from both the Audit and the Preliminary Report, while there were questions regarding related party transactions, none of the experts involved in the file had reached conclusions of fraud. A decision to refer is a policy decision that would require balancing the use of resources. In this case, it is evident that the MOHLTC provided the Preliminary Report and met with the OPP Health Fraud Investigation Unit. Ontario stated that it was waiting for a final audit as promised by the Wise Elephant Board. Whatever confusion may exist between the OPP and Peel Regional Police, I see nothing that would support the allegation that the Ministry or its civil servants stymied a police investigation for an improper purpose.
[95] There is no evidence that the Minister terminated the Agreement to silence Wise Elephant as a whistleblower, or stymie investigations and lawsuits. All monies advanced by the Ministry pursuant to the Agreement, and previous agreements, were for health care services. If the Corporation wishes to advance lawsuits against former directors, the Board presumably has already considered or obtained alternative funding sources for the lawsuit. The Corporation continues to exist and may pursue whatever claims or investigations it chooses.
[96] There is no bad faith in the manner in which the decision to terminate the Agreement was communicated; the Ministry gave notice as required pursuant to the terms of the Agreement. There is no super-added duty to give a corporate board a “head’s up” or an agenda item before communicating notice of termination. There is no bad faith in the Ministry’s lack of interest in the Rebranding Proposal and decision to impose a wind-down plan. There was no obligation to consider a Rebranding Proposal that did not wind-down the services offered by the FHT in accordance with the terms of the Agreement. There was no duty on the Minister to continue funding this FHT, and certainly not when the FHT was not affiliated with a Family Health Organization or other recognized physician group.
[97] Wise Elephant argues that it could not affiliate with a Family Health Organization because the MOHLTC failed to assist them in locating another Family Health Organization to affiliate with and denied them access to physician information. Wise Elephant argues that they could not affiliate with another Family Health Organization without the consent of the Minister to amend the Agreement, yet Wise Elephant never came forward with the name of a partner physician group for approval. On cross-examination, Mr. Gaskin admitted that they did not even have a specific list of physicians who were interested in a possible affiliation.
[98] It is not the responsibility of the Minister to locate physician partners for FHT’s. The funding model is a corporate funding model; the Minister contracts with FHT’s that have affiliated with an approved physician’s group. The obligation was on the Board to locate another group of physicians in a Family Health Organization and seek consent of the Minister to substitute that Family Health Organization. There was no statutory or contractual obligation on the Minister, and no bad faith discharge of the Minister’s duties or those of any civil servants.
[99] Wise Elephant also argues that the disproportionate impact of the termination on their vulnerable patients is “reckless”, and thus further evidence of bad faith. Wise Elephant and the FHT have clearly provided a valuable service to the people of Brampton. But in the context of the health care funding portfolio, the Minister is not obligated to continue to fund any FHT. The Agreement between the parties recognizes this. Wise Elephant has a long-standing history of operational, reporting, and contract compliance issues. The reason Wise Elephant owes so much money to Ontario is because funds advanced for health professional services were not spent on delivery of agreed services. Given the remarkable history of this FHT, as set out above, there was nothing “reckless” about the Minister’s decision to terminate the contract and impose a wind-down plan. Wise Elephant was not meeting Ministry requirements as set out in the Agreement.
[100] In this case there are no acts that are “so markedly inconsistent with the relevant legislative context”, or so arbitrary or reckless that the only reasonable conclusion that this court can draw is that they were performed in bad faith. This is a far cry from the “unlimited arbitrary power exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute” set out in Roncarelli v. Duplessis, upon which Wise Elephant relied. There is no factual basis for the serious allegations of bad faith and improper purpose made against Ministry personnel. The Ministry showed remarkable forbearance, attempting to remedy governance failures on the part of Wise Elephant. After the 2018 Audit, it continued to fund and work with Wise Elephant. The remarkable litany of problems presented here does not give any basis for inferring bad faith or improper purpose in terminating Wise Elephant as a transfer payment recipient, and there is no evidence that would support such an inference: only innuendo and speculation.
[101] I conclude that the Minister and civil servants did not act in bad faith or for an improper purpose in terminating the Agreement and imposing the wind-down plan. As a result, there is no additional public law dimension in accordance with the last Air Canada factor that would constitute this as an “exceptional case” in which public law remedies would be appropriate. Having considered all the factors and the overall impression of the case, I conclude that the matter is a contract dispute, and public law remedies are not suitable.
Conclusion
[102] On April 30, 2021, the court released a decision dismissing the application for judicial review without costs, in accordance with agreement of the parties, with reasons to follow. These are the reasons for the decision.
Kristjanson J.
I agree _______________________________
McWatt A.C.J.S.C.
I agree _______________________________
D.L. Corbett J.
Date of Release: June 8, 2021
CITATION: Wise Elephant Family Health Team v. Ontario (Minister of Health), 2021 ONSC 3350
DIVISIONAL COURT FILE NO.: 14/21
DATE: 20210608
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt A.C.J.S.C.J., D.L. Corbett and Kristjanson JJ.
BETWEEN:
Wise Elephant Family Health Team
Applicant
– and –
Her Majesty the Queen in Right of Ontario (Minister of Health)
Respondent
REASONS FOR Decision
Kristjanson J.
Date of Release: June 8, 2021