2211266 Ontario Inc. v. Brantford (City), 2012 ONSC 5830

COURT FILE NO.: CV-12-70

DATE: October 16, 2012

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2211266 Ontario Inc., o/a Gentlemen’s Club

Applicant

– and –

The Corporation of the City of Brantford

Respondent

Myron W. Shulgan, for the Applicant

Kimberly Farrington, for the Respondent

HEARD: August 15, 2012

The Honourable Madam Justice D. Chappel

JUDGMENT

I. INTRODUCTION

[1] The Applicant, which operates under the name of “the Gentlemen’s Club” (“the Applicant”) has brought this proceeding to challenge portions of the Respondent’s by-law relating to adult live entertainment parlours. The by-law is found in Chapter 329 of the Respondent’s Municipal Code, and is hereinafter referred to as “by-law 329.” Specifically, the Applicant is seeking a declaration that the provisions of by-law 329 requiring “operators” of adult live entertainment parlours (“operators”) and “entertainers” working in these establishments (“entertainers”) to obtain licences are invalid. It also seeks an order striking the provisions of Schedule B to Chapter 326 of the Respondent’s Municipal Code (hereinafter referred to as “by-law 326”) which sets out the licensing fees that apply to operators and entertainers.

[2] The issues to be determined in this proceeding are:

a. Should the entertainer and operator licensing provisions of by-law 329 be declared invalid on the basis that they are ultra vires of the Respondent’s general licensing authority under the Municipal Act, 2001[^1] (“the Act”)?

b. Should the licensing provisions of by-law 329 be declared invalid on the basis that they are discriminatory on the basis of sex? and

c. Should the licensing fee provisions set out in Schedule “B” of by-law 326 relating to operators and entertainers be struck, or in the alternative declared invalid, on the basis that the fees do not reflect the reasonable costs incurred by the Respondent relating to the administration and enforcement of by-law 329, and are excessive?

[3] For the reasons that follow, I have determined that the entertainer and operator licensing provisions of by-law 329 are not ultra vires of the Respondent’s general licensing authority under the Act. However, I have concluded that section 329.l.3(c) of by-law 329 is invalid on the basis that it discriminates on the basis of sex. I have also determined that the licensing fees that apply to operators and entertainers are not excessive, and I therefore decline to strike them or declare them invalid.

II. BACKGROUND AND RELEVANT BY-LAW PROVISIONS

[4] I make the following findings relating to the background of this matter:

[5] The Applicant is the operator of an adult live entertainment parlour which operates under the name of the Gentlemen’s Club in Brantford, Ontario. The Respondent has enacted by-laws imposing licensing requirements on adult live entertainment parlours since 1994. In 1999, the Council of the Respondent passed a Resolution that the Respondent begin to license “exotic dancers” in adult live entertainment parlours and implement a photo identification card system for them. The Resolution identified the purpose of the proposed licensing and photo identification system as being to ensure that exotic dancers operating in these establishments are of legal age, and to facilitate the enforcement of the licensing requirements.

[6] On July 1, 2000, the Respondent’s by-law 107-2000 came into effect. This by-law amended by-law 329 by establishing licensing requirements for entertainers at adult live entertainment parlours. The most recent amendments to by-law 329 were enacted on September 25, 2006.

[7] The preamble to by-law 329 sets out the basis upon which the Respondent exercised its authority to require licensing of adult live entertainment parlours and entertainers. Specifically, the preamble referenced the authority set out in section 150 of the Act for municipalities to license, regulate and govern any business wholly or partly carried out within the municipality, and identified that the by-law was enacted to promote health, safety and nuisance control and for consumer protection.

[8] By-law 329.1.1 defines “adult live entertainment parlour” as “any premises in which or in part of which, in pursuance of a trade, calling, business or occupation, a live performance of an adult nature is provided.” The definition of “live performance of an adult nature” is set out in by-law 329.1.2, as follows:

329.1.2 Live performance of an adult nature - defined

“live performance of an adult nature” means any performance, exhibition

or activity designed to appeal to erotic or sexual appetites or inclinations.

For purposes of this definition: “performance, exhibition, or activity designed to appeal to erotic or sexual appetites or inclinations” means a live performance, exhibition, or activity of which a principal feature or characteristic is the nudity or partial nudity of any person.

[9] The term “partial nudity” referred to in by-law 329.1.2 is defined in by-law 329.1.3 as follows:

329.1.3 Partial nudity - defined

“partial nudity” means less than completely and opaquely covered:

(a) human genitals or human pubic region;

(b) human buttock; or

(c) the human female breast below the point immediately above the top of the areola.

[10] By-law 329.4.1 stipulates that no person shall operate, engage in or carry on the occupation or business of an adult live entertainment parlour unless they first obtain a licence permitting them to do so. The licensing requirement for “entertainers” is found in by-law 329.4.9, which provides:

329.4.9 Entertainer - licence - required

No person shall perform as an entertainer unless he or she obtains a licence under this Chapter to do so.

[11] The term “entertainer” is defined in by-law 329.1.6 as follows:

329.1.6 Entertainer - defined

“entertainer” means a person who performs a live performance of an adult nature within an adult entertainment parlour.

[12] By-law 329.4.7 prohibits entertainers from performing in an adult live entertainment parlour that has not been licensed under by-law 329.

[13] The Respondent established licensing fees for adult entertainment parlours and entertainers in 2006, pursuant to its by-law 134-2006. The fees for licences issued pursuant to by-law 329 are set out in Schedule “B” to the Respondent’s by-law 326. The current annual fees for operators are $1,851.00 for a new licence and $1,754.00 for a licence renewal. The applicable annual fees for adult entertainers are $330.00 for a new licence and $215.00 for a renewal.

[14] By-law 329 includes a number of additional regulatory provisions respecting adult live entertainment parlours. For instance, by-law 329.4.3 stipulates that no owner or operator shall permit a person under the age of 18 years to enter or remain in the establishment, and that entertainers must produce proof of their age upon request by any Provincial Offences Officer. In addition, there are provisions prohibiting physical contact with entertainers, requiring that performances by entertainers occur within public view, providing for identification cards for entertainers and requiring operators or owners to maintain log books recording the names of all entertainers.

III. ISSUE # 1: ARE THE LICENSING PROVISIONS OF BY-LAW 329 ULTRA VIRES OF THE RESPONDENT’S GENERAL LICENSING AUTHORITY UNDER THE MUNICIPAL ACT, 2001?

A. Positions of the Parties

[15] The Applicant argues that the licensing provisions of by-law 329 are invalid because the purpose of the provisions is not one which is permitted pursuant to the licensing authority granted to municipalities under the Act. It states that by virtue of section 154 of the Act, municipalities are authorized to license, regulate and govern various types of “businesses,” a term which is defined in the Act as including “trades” and “occupations.” According to the Applicant, the licensing by-laws are ultra vires of the Respondent’s licensing power, since they do not purport to regulate any particular “trade” or “occupation,” but rather seek to regulate the clothing which one may wear while at an adult live entertainment parlour. The Applicant states that the definitions of “live performance of an adult nature” and “entertainer” are cast so broadly that they require any person who is either nude or partially nude while present at an adult live entertainment parlour to be licensed as an “entertainer,” and require any establishment where any such person is situated to obtain an operator’s licence under by-law 329. Its position is that the purpose of the licensing provisions is “to impose a regulated dress code to which employees who perform certain types of work must adhere,” and that there is nothing in the Act which permits municipalities to regulate in this manner.

[16] The Respondent denies that it has acted outside the parameters of its licensing authority in enacting the licensing provisions in question. It submits that a municipality’s powers pursuant to the Act must be interpreted broadly, so as to allow the municipality to govern its affairs appropriately and respond effectively to municipal issues. It rejects the Applicant’s narrow interpretation of a municipality’s licensing authority under the Act, and states that this authority extends far beyond simply regulating businesses. The Respondent’s position is that municipalities have a very broad power under the Act to establish systems of licences with respect to any activity, matter or thing for which they are entitled to enact by-laws. It notes that section 10(2) of the Act establishes an expansive scope of authority for enacting by-laws. This authority includes the power to pass by-laws respecting “health, safety and well-being of persons” and “protection of persons and property, including consumer protection,” and the Respondent submits that the licensing provisions of by-law 329 were validly enacted pursuant to its licensing authority in relation to these matters.

[17] The Respondent argues that the licensing provisions of by-law 329 are also valid exercises of its authority to license and regulate “businesses” including “trades and occupations” under section 151 of the Act. It invited the court to consider the definition of “entertainer” in conjunction with other provisions of by-law 329, and argued that this leads to the conclusion that the term “entertainer” means a live performer who carries out their performances in either a completely or partially nude state. It submitted that this interpretation of “entertainer” does in fact delineate a specific “occupation,” and that the licensing provisions are a valid exercise of its power to license and regulate this occupation pursuant to section 151 of the Act.

B. Analysis

[18] I have concluded that the licensing provisions of by-law 329 are not ultra vires of the Respondent’s licensing authority under the Act. I disagree with the Applicant’s position that the licensing authority under the Act is restricted to the licensing of “businesses” including “trades and occupations,” and conclude that its authority extends more broadly to all matters in relation to which it has jurisdiction to enact by-laws. Alternatively, even if the Respondent’s licensing authority were limited to licensing “businesses,” including trades and occupations, I conclude that the operator and licensing provisions fall within the purview of this authority.

[19] I have approached the question of whether the licensing provisions in question are within the Respondent’s jurisdiction with an eye to the general principles which the Supreme Court of Canada has established regarding the scope of judicial review of municipal authority. The court has held that the standard of review in considering the legality of a municipal by-law is correctness.[^2] However, it has also held that the courts must respect the responsibility of elected municipal bodies, and should exercise considerable caution before overriding the views of municipal councils about what is appropriate for the citizens who they represent. Having regard for these principles, it has concluded that judicial review of municipal decisions is confined to clear cases, and that the courts should adopt a broad, purposive and benevolent construction in interpreting the scope of municipal authority.[^3] Accordingly, where the municipality’s governing legislation does not expressly confer powers, but the powers may be implied, the court must consider conferring the powers by reasonable implication.[^4] As McLachlin, J. stated in Shell Canada Products Ltd. v. Vancouver (City):

It may be that, as jurisprudence accumulates, a threshold test for judicial intervention in municipal decisions will develop. For the purposes of the present case, however, I find it sufficient to suggest that judicial review of municipal decisions should be confined to clear cases. The elected members of council are discharging a statutory duty. The right to exercise that duty freely and in accordance with the perceived wishes of the people they represent is vital to local democracy. Consequently, courts should be reluctant to interfere with the decisions of municipal councils. Judicial intervention is warranted only where a municipality’s exercise of its powers is clearly ultra vires, or where council has fun afoul of one of the other accepted limits on municipal power.[^5]

[20] The principle that municipal powers should be interpreted in a broad and purposive fashion is also articulated in section 8(1) of the Act, which provides as follows:

Scope of powers

8. (1) The powers of a municipality under this or any other Act shall be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality’s ability to respond to municipal issues.

[21] With this principle in mind, I turn to the provisions of the Act which are relevant to the licensing authority of the Respondent. Section 8(3) of the Act grants municipalities broad licensing powers. It provides that a by-law respecting any matter over which a municipality has by-law making authority pursuant to sections 10 and 11 of the Act may “provide for a system of licences respecting the matter.” The matters over which the Respondent municipality has by-law making authority are delineated in section 10(2) of the Act, which stipulates as follows:

By-laws

10(2) A single-tier municipality may pass by-laws respecting the following matters:

1. Governance structure of the municipality and its local boards.

2. Accountability and transparency of the municipality and its operations and of its local boards and their operations.

3. Financial management of the municipality and its local boards.

4. Public assets of the municipality acquired for the purpose of exercising its authority under this or any other Act.

5. Economic, social and environmental well-being of the municipality.

6. Health, safety and well-being of persons.

7. Services and things that the municipality is authorized to provide under subsection (1).

8. Protection of persons and property, including consumer protection.

9. Animals.

10. Structures, including fences and signs.

11. Business licensing.

[22] Although section 10(2)(11) specifically refers to “business licensing,” a municipality’s licensing power is not restricted to licensing business enterprises and undertakings. This is apparent when the broad licensing authority referred to in section 8(3) is read in conjunction with section 10(3) of the Act. Section 10(3) provides that the power to pass a by-law respecting a matter set out in a subparagraph of section 10(2) is not limited or restricted by the power to pass a by-law respecting a matter set out in another subparagraph of that section. Thus, the reference to “business licensing” in subsection 10(2)(11) should not be construed as limiting in any way a municipality’s broad licensing authority under section 8(3) of the Act to provide for a system of licences respecting any matter referred to in section 10(2).

[23] With respect to the authority of municipalities in relation to business licensing, Section 151 of the Act elaborates upon this authority as follows:

Powers re licences

151. (1) Without limiting sections 9, 10 and 11, a municipality may provide for a system of licences with respect to a business and may,

(a) prohibit the carrying on or engaging in the business without a licence;

(b) refuse to grant a licence or to revoke or suspend a licence;

(c) impose conditions as a requirement of obtaining, continuing to hold or renewing a licence;

(d) impose special conditions on a business in a class that have not been imposed on all of the businesses in that class in order to obtain, continue to hold or renew a licence;

(e) impose conditions, including special conditions, as a requirement of continuing to hold a licence at any time during the term of the licence;

(f) license, regulate or govern real and personal property used for the business and the persons carrying it on or engaged in it; and

(g) require a person, subject to such conditions as the municipality considers appropriate, to pay an administrative penalty if the municipality is satisfied that the person has failed to comply with any part of a system of licences established by the municipality.

[24] Section 150 defines “business” in the following terms:

150. In this Part,

“business” means any business wholly or partly carried on within a municipality even if the business is being carried on from a location outside the municipality and includes,

(a) trades and occupations,

(b) exhibitions, concerts, festivals and other organized public amusements held for profit or otherwise,

(c) the sale or hire of goods or services on an intermittent or one-time basis and the activities of a transient trader,

(d) the display of samples, patterns or specimens of goods for the purpose of sale or hire.

[25] Again, although there are specific terms in the Act elaborating upon a municipality’s business licensing authority, it is clear in reading the Act as a whole that a municipality’s licensing powers extend beyond simply business licensing. This point becomes abundantly clear upon reviewing section 151 of the Act. Sections 151(1) to (4) set out in detail a municipality’s powers in relation to business licensing. Section 151(5) provides that those sections relating to business licensing apply “with necessary modifications to a system of licences with respect to any activity, matter or thing for which a by-law may be passed under sections 9, 10 and 11 as if it were a system of licences with respect to a business.”

[26] I agree with the Respondent’s position that the licensing provisions of by-law 329 are a valid exercise of its jurisdiction established by sections 8(3) and 10(2)(6) of the Act to implement a system of licensing in connection with matters relating to hhealth, safety and well-being of persons in the municipality. The preamble of the by-law outlines the primary purpose of the by-law as being the protection of health and safety, and nuisance control. A perusal of the provisions of the by-law indicates that they do in fact promote these purposes. I find that one of the main purposes of the by-law was to safeguard minors by precluding them from entering the premises of adult live entertainment parlours and from becoming entertainers in these enterprises. The by-law includes provisions which are aimed at achieving these objectives. The requirement that owners and operators keep log books setting out the names of all entertainers, and providing for identification cards for all entertainers, establish the mechanisms by which the municipality can monitor whether any minors are working as entertainers at the adult live entertainment parlours. The provisions referred to above prohibiting physical contact with and by entertainers and requiring that all live performances of an adult nature occur in public view are other examples of how the by-law promotes the purpose of protecting the health and safety of entertainers and consumers within the municipality.

[27] The decision of the Ontario Court of Appeal in Adult Entertainment Association v. Ottawa (City)[^6] is of assistance in determining whether the licensing provisions in this case fall within the purview of the Respondent’s authority to regulate and impose licensing systems in the area of health, safety and well-being of persons. In that case, the court concluded that various by-law provisions regulating adult entertainment parlours were a valid exercise of the Respondent municipality’s jurisdiction in this area. Of particular importance to the case at hand is the court’s endorsement of the general principle which the Divisional Court articulated in Ontario Adult Entertainment Bar Assn. v. Metropolitan Toronto (Municipality) that "[i]t is not for the court to measure [the] risks to health and safety and consumer protection based on the information the municipality has - that was for the council."[^7]

[28] I conclude that the licensing provisions of by-law 329 also fall within the purview of the Respondent’s business licensing authority under section 151(1) of the Act. The term “business” is broadly defined in section 150 of the Act, and the business licensing authority of municipalities must be construed in a liberal and benevolent manner. Subsections 150(a) to (d) outline various examples of what constitutes a “business” that can be subjected to licensing, but this list is not exhaustive. Those subsections focus on types of commercial activities, and modes by which those activities are pursued. However, the term “business” also extends to an entity or enterprise that pursues commercial activities. The Merriam-Webster dictionary defines “business” as including the following:

3 a : a usually commercial or mercantile activity engaged in as a means of livelihood : trade, line b : a commercial or sometimes an industrial enterprise; also : such enterprises

[29] As noted above, the Applicant’s argument is that the operator and entertainer licensing provisions of by-law 329 are ultra vires since they purport to regulate a “dress code” rather than regulating a particular business, trade or occupation. It relies on the case of 679619 Ontario Ltd. v. Windsor (City) (“Windsor”)[^8] in support of its argument that the licensing provisions must relate to a particular category of business, trade or occupation in order to be a valid exercise of a municipality’s business licensing authority. However, the applicable legislative provisions and the issues to be decided in that case were very different than in the case at hand. The issue in Windsor was whether by-law provisions which required employees who performed their duties in the nude or partially nude to pay licensing fees, and which did not extend to employees who performed the same duties while fully clothed, constituted discrimination which was permitted under the applicable provisions of the Act in force at that time. Sections 10(1) and (2) of the Act as of that time provided that municipalities could only license “businesses” (which included “trades and occupations”) differently if they constituted different “classes.” The court therefore had to determine whether the individuals who were required to obtain licences under the impugned licensing scheme formed part of a specific trade or occupation, or part of a particular class within a trade or occupation. Since the licensing requirements extended to individuals carrying out a wide variety of different employment duties, rather than to those working in particular trades or occupations or classes thereof, the court concluded that they imposed differential licensing requirements in a manner that was not permitted by the Act.

[30] The analysis which the court adopted in Windsor is not relevant to the issues to be decided in this case. The provisions in the former version of the Act which limited a municipality’s right to apply differential licensing requirements to different businesses or classes of businesses are no longer in effect. As will be discussed in further depth below, sections 10(1) and (2) of the previous Act have been replaced with section 8(4) of the current Act, which stipulates that except as otherwise provided, a by-law may be general or specific in its application and may differentiate in any way and on any basis a municipality considers appropriate. Under the current Act, there is no requirement that a particular licensing scheme apply to a specific type or category of business, trade or occupation in order to be intra vires the municipality’s business licensing authority. Rather, the question is whether the licensing system applies to a business in general or in a general sense to trades and occupations.

[31] Dealing first with the licensing provisions relating to “operators” in by-law 329, I find that they fall within the scope of the Respondent’s business licensing power. They impose a system of licences that apply to corporations and other business entities where live performances of an adult nature are provided. Furthermore, I do not accept the Applicant’s submission that the operator licensing provisions are invalid on the basis that they extend to activities that go beyond those of a “business” nature within the meaning of section 150 of the Act. Counsel for the Applicant argued that the licensing provisions are so broad that they would extend to any business entities where any individuals are engaged in any activity while nude or partially nude as that term is defined in by-law 329. I disagree. The definition of “adult live entertainment parlour” set out in by-law 329.1.1 makes it clear that the operator licensing provisions only come into play where a live performance of an adult nature occurs on the premises “in pursuance of a trade, calling, business or occupation” (emphasis added). The activity in question must therefore constitute part of a commercial activity occurring at the enterprise for the operator licensing provisions to come into play.

[32] The licensing provisions relating to “entertainers” likewise fall within the business licensing authority of municipalities under the Act. For the reasons outlined above, I reject the Applicant’s argument that the validity of these provisions turns on whether they apply to a specific type or category of trade or occupation. The question that must be determined is whether they apply in more general terms to individuals engaged in business, trades or occupations within adult entertainment parlours. I conclude that they do. The definition of “entertainer” in by-law 329.1.6 specifically refers to a person who performs a live performance of an adult nature “within an adult entertainment parlour” (emphasis added). This definition is therefore directly linked with the definition of “adult live entertainment parlour” in by-law 329.1.1, which as noted above includes as a key element that the live performance of an adult nature be provided in pursuance of a trade, calling or occupation. When these two definitions are read together, the logical conclusion which emerges is that the term “entertainer” does not extend to anyone who performs a live performance of an adult nature at an adult live entertainment parlour, but only to those individuals who do so in pursuance of a trade, calling, business or occupation.

[33] Alternatively, even if the validity of the entertainer licensing provisions turns on a finding that they apply to a particular category of trade or occupation, I conclude that they do. The definitions of “adult live entertainment parlour,” “entertainer” and “live performance of an adult nature” are all linked and must be considered together in order to properly interpret and understand the scope of the licensing requirements. With respect to the definition of “live performance of an adult nature,” the Respondent has argued that although the definition refers to types of activities other than “performances” in the strict sense as that term is typically understood, a key element of the definition is that it involves some type of entertainment performance. Its argument is that the references to “exhibition” and “activity” in this definition are included to expand the type of “performances” that are covered by the “live performance of an adult nature. The Respondent emphasized the use of the word “performs” in the definition of “entertainer.” It urged me to find that the term “entertainer” is limited to live entertainment performers who carry out their trade in the nude or partially nude, and to find that both the operator and entertainer licensing requirements apply only to those performers and establishments where they perform.

[34] The difficulty with this argument is that by-law 329.1.1, which sets out the definition of “adult live entertainment parlour,” refers to a live performance of an adult nature being provided, whereas by-law 329.1.6 defining “entertainer” refers to a live performance of an adult nature being “performed.” A number of other provisions in by-law 329 relating to entertainers also specifically use the term “perform” and variations on that term rather than “provide.”[^9] The term “provided” is defined broadly in section 329.1.5 to include “furnishing, soliciting, giving, or making available.” Taking all of these points into consideration, I conclude that the term “live performance of an adult nature” has a broader meaning for the purposes of the operator licensing provisions than in relation to the entertainer licensing provisions. Specifically, the entertainer licensing provisions apply only to those individuals who are performing live in the nude or partially nude in pursuance of a trade, calling, business or occupation, and not to those engaged in a broader range of endeavors that would fall within the terms “exhibition” or “activity” referred to in by-law 329.1.2 or that would fall within the broad scope of being “provided” as that term is defined in section 329.1.5. Thus, in my view, the entertainer licensing scheme does apply to a specific trade or occupation- that of live entertainment performers who carry out their work in the nude or partially nude. For the purposes of the operator licensing provisions, however, the definition of “live performance of an adult nature” extends beyond the concept of a live entertainment performance as that term is generally understood, and includes any type of “exhibition” or “activity” that is provided by an individual in pursuance of a trade, calling, business or occupation, while nude or partially nude, where a principal feature or characteristic of same is the nudity or partial nudity of the person. The requirement that the nudity or partial nudity be a principal feature is a key element to determining the type of performance, exhibition or activity that would fall within the scope of the operator licensing provisions.

IV. ISSUE # 2: ARE THE LICENSING PROVISIONS OF BY-LAW 329 INVALID ON THE GROUND THAT THEY DISCRIMINATE ON THE BASIS OF SEX?

A. Positions of the Parties

[35] The Applicant requests a declaration that the licensing provisions of by-law 329 are invalid on the basis that they are discriminatory. It argues that the definition of “partial nudity” set out in section 329.1.3, when read in conjunction with the definition of “live performance of an adult nature” in section 329.1.2 and the entertainer licensing requirement in section 329.4.9, result in different licensing for male entertainers who perform topless and female entertainers who do so. Specifically, female entertainers who perform topless are required to pay for and obtain a licence, whereas male entertainers who perform topless are not required to do so. The Applicant argues that although the Act permits municipalities to pass by-laws that differentiate in any way and on any basis that they consider appropriate, this authority is subject to the limitation that by-laws cannot conflict with provincial or federal legislation or regulations. Its position is that the licensing provisions are invalid in that they frustrate the purpose of section 5(1) of the Ontario Human Rights Code[^10] by discriminating on the basis of sex.

[36] The Respondent acknowledges that the entertainer licensing provisions of by-law 329 create a distinction between male and female entertainers who perform topless. However, it argues that a finding of discrimination on the basis of sex involves more than determining that a distinction exists that is based on gender. It submits that discrimination is only established if it is shown that the distinction creates a disadvantage by perpetuating prejudice, pre-existing disadvantage or stereotyping. Its position is that the distinction in this case does not do so, but simply recognizes the reality that men and women have physical differences which justify different regulatory approaches.

B. Analysis of the Discrimination Issue

[37] For the reasons set out below, I agree with the Applicant that the licensing scheme relating to entertainers in its current form unlawfully discriminates on the basis of sex. However, I do not accept the Applicant’s argument that the only available remedy is to strike the entire licensing scheme relating to operators and entertainers on this basis. I also reject the Respondent’s position that the appropriate remedy is to strike the word “female” from section 329.1.3(c). The proper remedy is to declare section 329.1.3(c) of the by-law invalid in its entirety.

[38] The starting point for determining the discrimination issue is the fundamental principle of municipal law that municipalities may only exercise those powers expressly conferred on them by statute, those which can be necessarily or fairly implied by the terms of the statute, and those which are considered essential to carrying out the municipality’s functions and purposes.[^11] A rule has emerged from this principle that a municipality may not pass a by-law that discriminates so as to show favoritism towards one or more classes of citizens, unless the enabling legislation authorizes such discriminatory treatment.[^12] If a municipality enacts a discriminatory by-law without legislative authority, the by-law is illegal and therefore ultra vires the municipality’s powers.

[39] The Act allows municipalities to differentiate in any way and on any basis which they see fit. The relevant provision of the Act is section 8(4), which provides as follows:

Scope of by-laws generally

8(4) Without limiting the generality of subsections (1), (2) and (3) and except as otherwise provided, a by-law under this Act may be general or specific in its application and may differentiate in any way and on any basis a municipality considers appropriate.

[40] Section 8(4) must be read in conjunction with section 14(1) of the Act, which stipulates that a by-law is without effect to the extent of any conflict with a federal or provincial Act or a regulation made under any such Act, or any instrument of a legislative nature.

[41] As noted above, the Respondent acknowledges that the entertainer licensing provisions of by-law 329 create a distinction between male and female entertainers who perform topless. The issue is whether this differentiation conflicts with the right set out in section 5(1) of the Human Rights Code to equal treatment with respect to employment without discrimination on the basis of, inter alia, sex. Section 14(2) of the Act clarifies that the test for determining whether a by-law is inconsistent with an Act, regulation or instrument is whether it frustrates the purpose of same. In applying this test, the court must keep in mind the general principle of statutory construction which the Ontario Court of Appeal has endorsed that the court should if at all possible attempt to interpret two potentially conflicting pieces of legislation in a way that avoids conflict.[^13] The following two-pronged test applies for determining whether a by-law is inconsistent with any Act, regulation or legislative instrument:

a) Is it impossible to comply simultaneously with the impugned by-law provisions and with the legislative provisions in question?

b) Does the by-law frustrate the purpose of Parliament or the Ontario Legislature in enacting the allegedly conflicting laws?

[42] If the answer to both questions is “no,” the by-law is valid.[^14]

[43] In order to determine whether the licensing provisions of by-law 329 are inconsistent with section 5(1) of the Human Rights Code, an understanding of the meaning of “discrimination” within the context of that section is necessary. The Ontario Court of Appeal has held in Ontario (Director of Disability Support Program) v. Tranchemontagne (“Tranchemontagne”)[^15] that the meaning of “discrimination” under the Human Rights Code has the same meaning as that which has been ascribed to the term in the context of section 15 of the Canadian Charter of Rights and Freedoms[^16] (“the Charter”). The Supreme Court of Canada outlined the purposes underlying the equality guarantee in section 15 of the Charter, and the framework within which section 15 claims should be addressed, in R v. Kapp.[^17] It reiterated the principle established in Andrews v. Law Society (British Columbia)[^18] that section 15 is concerned with substantive equality rather than the formal “like treatment” model of discrimination, which may ultimately in fact lead to inequality. It cited with approval the following comments of McIntyre, J. in Andrews regarding the fundamental goals and objectives of the equality guarantee:

To approach the ideal of full equality before and under the law — and in human affairs an approach is all that can be expected — the main consideration must be the impact of the law on the individual or the group concerned. Recognizing that there will always be an infinite variety of personal characteristics, capacities, entitlements and merits among those subject to a law, there must be accorded, as nearly as may be possible, an equality of benefit and protection and no more of the restrictions, penalties or burdens imposed upon one than another. In other words, the admittedly unattainable ideal should be that a law expressed to bind all should not because of irrelevant personal differences have a more burdensome or less beneficial impact on one than another.[^19]

[44] At the heart of the concept of discrimination is the presence of arbitrariness to the distinctions that are being challenged. As the Supreme Court of Canada stated in Syndicat des Employés de l’Hopital General de Montréal c. Sexton,[^20] “the essence of the discrimination is in the arbitrariness of its negative impact, that is, the arbitrariness of the barriers imposed, whether intentionally or unwittingly.”[^21] In order to prove discrimination, it is necessary to show that there is “a link between the group membership and the arbitrariness of the disadvantaging criterion or conduct, either on its face or in its impact.”[^22] In Andrews, the element of arbitrariness was captured in McIntyre, J.’s reference in the citation quoted above to distinctions which are based on personal differences that are “irrelevant.”

[45] In Kapp, the Supreme Court of Canada reiterated the following two-pronged test which it had previously articulated in Andrews for establishing discrimination:

a. Does the law create a distinction based on an enumerated ground? and

b. Does the distinction have the effect of perpetuating disadvantage and prejudice or imposing disadvantage on the basis of stereotyping?[^23]

[46] In addressing the first issue, the court must determine whether there are reasonable grounds to infer that the enumerated/protected ground or characteristic truly played a role in creating the disadvantage. In other words, the court must be satisfied that there is a nexus between the protected characteristic and the adverse treatment.[^24] With respect to the second branch of the test, the Supreme Court explained in Andrews that the term “disadvantage” refers to a distinction based on one or more personal characteristics which has the effect of “imposing burdens, obligations or disadvantages in such individual or groups not imposed on others, or which withholds or limits access to opportunities, benefits or advantages available to other members of Society.”[^25]

[47] In Tranchemontagne, the Ontario Court of Appeal emphasized that the onus of proving discrimination rests on the party making the discrimination claim throughout the proceeding. It noted, however, that in most human rights cases, a prima facie case of discrimination will be established if the claimant adduces evidence showing a distinction based on a prohibited ground that creates a disadvantage. It held that in the face of such evidence, the court will usually draw an inference of stereotyping, perpetuating disadvantage or prejudice. The court cautioned, however, that in some cases, “a more nuanced inquiry may be necessary to properly assess whether a distinction based on an enumerated ground that creates a disadvantage actually engages the right to equal treatment under the Human Rights Code in a substantive sense.”

[48] Applying these principles to the facts of this case, the distinction which the entertainer licensing provisions create between male entertainers who perform topless and female entertainers who do so is clearly a distinction based on sex, which is an enumerated ground in section 5(1) of the Human Rights Code. Female topless performers are disadvantaged by the licensing scheme in that they must pay a licensing fee whereas their male counterparts do not. In addition, by virtue of section 329.4.7, they may only perform in an adult live entertainment parlour that has been licensed under by-law 329, whereas their male counterparts do not fall within that restriction. Considering the issue of disadvantage from the male perspective, male performers who perform topless do not fall within the definition of “entertainers” as that term is defined in by-law 329.1.6, and therefore they do not benefit from the various protections which by-law 329 establishes for entertainers. Male topless performers are therefore denied the equal protection of the law under the terms of by-law 329. I am satisfied that the sex of the entertainers is the sole factor from which these disadvantages arise. There is no evident basis upon which the fee is imposed on topless female entertainers other than the fact that they have female breasts which they choose to expose.

[49] Having determined that the entertainer licensing provisions create a distinction based on sex, I must determine whether this distinction is discriminatory. I conclude that it is, and that this is a case in which an inference of stereotyping or of perpetuating prejudice arises, without the need for additional evidence on this point. In determining this issue, I have considered the Court of Appeal’s decision in R. v. Jacob,[^26] and some of the general principles which the court established in that case. The accused in Jacob was charged with committing an indecent act after walking through the town of Guelph and then sitting on a front porch of a home with her breasts exposed, on a hot summer day. A number of men who were walking through the town topless at the same time were not charged. The case did not raise the issue of discrimination. However, in determining whether the actions of the accused constituted an indecent act within the meaning of section 173(1)(a) of the Criminal Code, the court had to address head-on issues about societal attitudes towards the exposure of female breasts. As in the case at hand, the Court of Appeal in Jacob was met with the argument that exposure of female breasts in the circumstances under consideration was simply “different” in terms of societal tolerance than exposure of the male chest. The Court disagreed with this argument, and concluded that the conduct of the accused did not constitute an indecent act.

[50] The Court’s conclusion in Jacob provides a framework within which to begin the analysis of whether the distinction between male and female topless entertainers in this case is problematic from a discrimination standpoint. The Court in Jacob dismantled traditional stereotypical views about the exposure of female breasts in public, and concluded that in certain circumstances, this act is not indecent at all applying the yardstick of what the contemporary national community would tolerate.

[51] As previously noted, the Respondent argues that the distinction as between female and male topless entertainers created by the licensing provisions in this case is not discriminatory, because it simply recognizes that the female breast is “different” than the male chest. This position is based on stereotypical perceptions about male and female anatomy that cannot survive the scrutiny of the discrimination analysis. One of the fundamental notions underlying the distinction in this case is that the female breast is a part of the human anatomy that is a significant subject of sexual attraction and desire, whereas the male chest is less so. The assumptions which flow from this notion are that public exposure of the female breast is more inappropriate than public exposure of the male chest, and that women therefore need to be regulated regarding this type of exposure while men’s behaviour in this regard need not be regulated. This line of thinking is untenable, however, because the fundamental notion referred to above is flawed. The manner in which the human torso, whether male or female, is perceived from a sexual standpoint is not gender specific; it is entirely dependent on the individuals involved in the human interaction that is occurring at the relevant time. The distinction which the entertainer licensing scheme creates based on the female breast ignores the intricate dynamics and complexities involved in human relations and sexual attraction and desire. It reinforces and perpetuates stereotypical views in our culture about women and men which label women’s breasts primarily as objects of sexual attraction and desire while at the same time devaluing the sexual attractiveness and desirability of the male chest. The distinction has the hallmark of arbitrariness that is at the heart of the concept of discrimination.

[52] The singling out of the female breast, to the exclusion of the male chest, for regulation is problematic on a general level. However, the arbitrariness of this regulation in the context in which it arises in this case is particularly glaring. In the setting of an adult live entertainment parlour, the purpose of a woman performing topless is one and the same as the purpose of a man performing topless: the entertainment and sexual arousal of the viewer for commercial profit. The distinction created by the entertainer licensing provisions attempts unsuccessfully to camouflage this reality.

[53] I conclude that the distinction created by the entertainer licensing provisions between male topless performers and female topless performers is inconsistent with the prohibition in section 5(1) of the Human Rights Code against discrimination on the basis of sex. It is not possible to comply with these licensing provisions and the guarantee of equal treatment without discrimination on the basis of sex which section 5(1) creates. In my view, the distinction created by the entertainer licensing provisions frustrates the fundamental purpose of the Human Rights Code, which is to “recognize the dignity and worth of every person and to provide for equal rights and opportunities without discrimination that is contrary to law.”[^27] The Human Rights Tribunal concluded in Ballantyne v. Molly “N” Me Tavern[^28] that the imposition of more onerous requirements respecting the dress of employees of one gender than that of the other gender amounts to discrimination on the basis of sex under the Human Rights Code. In that case, the employer’s requirement that female employees work topless, when male employees were not required to do so, was found to be discriminatory. While the facts in this case are distinguishable, the same principles apply. In the context of an adult live entertainment parlour, to impose a licensing fee on only females who wish to perform topless leads to the same objectionable result as in Ballantyne: the imposition of more burdensome requirements respecting the dress of females than males.

C. The Appropriate Remedy

[54] As noted in Part II of these Reasons for Judgment, the provisions of by-law 329 which require operators and entertainers to obtain licences are set out in sections 329.4.1, 329.4.2, 329.4.7 and 329.4.9. However, those provisions include terms which are defined in other sections of by-law 329, including “adult live entertainment parlour” which is defined in section 329.1.1, “operator” which is defined in section 329.1.4, and “entertainer” which is defined in section 329.1.6. The term “adult live entertainment parlour” includes the phrase “live performance of an adult nature,” which is defined in section 329.1.2, which in turn relies on the definition of “partial nudity” in section 329.1.3. All of these provisions are linked and form part of the licensing scheme.

[55] As previously stated, the Applicant’s position is that if the entertainer licensing provisions in by-law 329 are found to be discriminatory on the basis of sex within the meaning of the Human Rights Code, the entire licensing scheme relating to both entertainers and operators must be declared invalid. The basis for this argument is that the licensing provisions are all inextricably intertwined as a result of the overlap and interplay between the terms used in those provisions and the definitions of those terms.

[56] The Respondent’s position is that the remedy suggested by the Applicant is unnecessarily far reaching. It argues that if the unlawful discrimination arises as a result of a portion of a by-law, the court can sever that portion of the by-law from the rest by declaring that portion alone invalid, provided that the intention of the municipal council can be maintained. Counsel for the Respondent argued that if the court found the entertainer licensing provisions of by-law 329 to be discriminatory, the appropriate remedy would be for the court to sever the word “female” from section 329.1.3(c) of the by-law. The result would be that both female and male topless performers would fall within the definition of “entertainer,” would require licences, and would also benefit from the protections afforded to entertainers under the by-law.

[57] I conclude that neither of the remedies proposed by the parties is appropriate in this case. The Applicant’s position that all of the licensing provisions in by-law 329 must be declared invalid is too over-reaching, and the Respondent’s proposal is not appropriate because it would lead to a result that the municipal council clearly did not intend. I have determined that the appropriate remedy is to declare only section 329.1.3(c) of by-law 329 invalid. However, I have suspended the operation of this judgment for a period of six months, to give the Respondent an opportunity to address the discrimination problem by enacting an amendment to by-law 329.1.3(c) to remove the word “female,” as it has requested I do, or by any other means.

[58] In response to the Applicant’s position on the remedy issue, the court has the power to sever a portion of a by-law that is invalid if the illegal part can be separated from the lawful part, and the severance does not result in an outcome that the municipal council would never have intended.[^29] This principle was described in the early case of Clay v. Victoria (City)in the following terms:

A by-law may be good in part and bad in part, and if it be possible to separate the good from the bad, it should be so separated and the validity of the by-law maintained; but the parts so separated must not be connected with or essential to each other. Each must be whole and complete to stand per se.[^30]

[59] A more modern day articulation of the rule is found in The Law of Canadian Municipal Corporations, where Ian Rogers states that “the parts upheld must form, independently of the invalid portion, a complete law in some reasonable aspect so that it may fairly be concluded that the council would have enacted it without the invalid part.”[^31] In the case of Mississauga Hydro-Electric Commission v. Mississauga (City),[^32] which the Respondent relied on in relation to the severability argument, the Ontario Superior Court of Justice described the task of the judge in deciding the severability issue as determining “whether what remains is substantially what was proposed.”[^33]

[60] Applying these principles to the facts of this case, the Respondent’s request that I consider severing the word “female” from subsection 329.1.3(c) would result in male topless performers in adult live entertainment parlours falling within the definition of “entertainer” for the purposes of by-law 329. This would bring them into the fold of the entertainer licensing requirements as well as the numerous protections afforded to entertainers under the by-law. Such an outcome would address the discrimination problem respecting the entertainer licensing provisions which I have addressed in this case, but it would lead to outcomes which the Respondent municipality clearly did not intend. To accept the remedy proposed by the Respondent would therefore result in this court improperly usurping the law-making role of the municipal council.[^34] The more appropriate approach is for the Respondent municipality to take the necessary steps itself to amend subsection 329.1.3(c) by removing the word “female” from the provision, or to resolve the discrimination issue in any other lawful manner.

[61] On the other hand, the remedy suggested by the Applicant is far too over-reaching. It is not necessary to declare all of the licensing provisions of by-law 329 invalid in order to address the discrimination problem that has been identified. The provision of the by-law from which the discrimination problem stems is subsection 329.1.3(c), which defines partial nudity as including “the female breast below the point immediately above the top of the areola.” It is possible to declare this one subsection invalid without leaving a legislative scheme that includes outcomes that the municipality did not intend. Declaring section 329.1.3(c) invalid releases topless female performers in adult live entertainment parlours from the licensing requirement of subsection 329.4. It maintains the licensing requirement for both female and male entertainers who perform while exposing their human genitals, pubic area or buttocks, which was an outcome that the Respondent’s governing council clearly intended when it enacted by-law 329. Accordingly, I conclude that subsection 329.1.3(c) is severable, and that the appropriate remedy is to declare that subsection in its entirety to be invalid.

[62] Unfortunately, the effect of declaring subsection 329.1.3(c) invalid is to remove female performers in adult live entertainment parlours whose buttocks, genitals and pubic area are covered but who perform topless from the operation of many protections which by-law 329 creates for entertainers. Male entertainers in the same position already fall outside of the scope of these protections, since they do not qualify as “entertainers.” The protections include safeguards against physical contact, and against entertainers being forced to perform in private settings away from public view. These are very important aspects of by-law 329, and their removal raises concern that the Respondent’s responsibilities for promoting the health and safety of its citizens, controlling nuisance and promoting consumer protection will be significantly impaired.

[63] Having regard for the significant implications of declaring section 329.1.3(c) invalid, I have considered whether the declaration of invalidity should be suspended for a period of time to allow the Respondent municipality an opportunity to amend the section to resolve the discrimination problem. I have concluded that this is an appropriate case in which to exercise this discretion.

[64] The Supreme Court of Canada clarified the principles which apply in deciding whether a delayed declaration of invalidity is appropriate in Schachter v. Canada.[^35] It held that a court may suspend the effect of a declaration until the lawmaker has had an opportunity to address the problem which the court has found with the legislation or legislative provision. Situations in which the court considered that this approach would be appropriate include those where the declaration could pose a potential danger to the public or otherwise threaten the rule of law, or where it could deprive deserving persons of benefits. The court cited as an example of the latter category of situations cases where the legislation is not in and of itself problematic, but where the difficulty lies in its under-inclusiveness, so that an immediately effective declaration would deprive deserving individuals of benefits. The court clarified that these were just some examples of when a delayed declaration may be appropriate.

[65] I am satisfied that if the effect of the declaration is immediate, this could place female performers who perform topless at risk by removing them from the scope of the various protections which by-law 329 creates for entertainers. It is clear that the provisions which establish these protections are intended to safeguard performers from situations which could pose potential danger to their physical and emotional safety. Accordingly, I am suspending the operation of this declaration for a period of six months to allow the Respondent an opportunity to correct the discrimination problem by removing the word “female” from section 329.1.3(c) as it has requested that I do, or by some other means.

V. ISSUE #4: SHOULD THE LICENSING FEE PROVISIONS RELATING TO OPERATORS AND ENTERTAINERS BE STRUCK, OR IN THE ALTERNATIVE DECLARED INVALID, ON THE BASIS THAT THE FEES ARE EXCESSIVE?

A. Positions of the Parties

[66] The Applicant requests that licensing fee provisions relating to operators and entertainers as set out in Schedule “B” of by-law 326 be struck, or in the alternative declared invalid, on the basis that these fees are excessive. Its position in this regard is based on the following three arguments:

a. The Applicant takes issue with the amount of $117.00 which it states is included as a component of the operator licensing fees and the entertainer licensing fees on account of “Prosecution and Court Proceedings”. It states that this amount is excessive because it does not reasonably reflect the prosecution costs associated specifically with by-law 329. Counsel for the Applicant argued that this amount was derived by taking the total cost of prosecuting offences for breaches of all licences issued by the municipality, and dividing that total amount by the total number of all licences which were issued. The Applicant’s position is that this approach results in an inequitable share of the Respondent’s prosecution expenses in relation to licensing breaches being unloaded onto operators and entertainers.

b. The Applicant challenges the amount of $500.00 included in the entertainer licensing fee calculation on account of enforcement, and the amount of $1,200.00 for this item in the operator licensing fee. It alleges that this amount is improper, since it relates to the provision of police enforcement services which the Respondent does not actually pay for.

c. The Applicant alleges that quite apart from the above noted issues, the operator and entertainer licensing fees charged are excessive.

[67] In response to the Applicant’s request to strike out the fee provisions relating to entertainers and operators, the Respondent argues that this request is tantamount to a request to quash the fee provisions, which is barred by the one year limitation period set out in section 273(5) of the Act. With respect to the argument that the fees are invalid on the basis that they are excessive, the Respondent argues that the Applicant’s position is framed around the wording of sections 150(9) and (10) of the Act as it stood in 2005. That provision stipulated that the total amount of fees charged for licensing a class of business “shall not exceed the costs directly related to the administration and enforcement of the by-law or portion of the by-law of the licensing municipality.” The Respondent’s position is that the scope of a municipality’s discretion to set fees pursuant to section 391.3 of the current Act is much broader. It states that the fees in question do not exceed the parameters of that discretion, and that the amounts fixed are fair and reasonable.

B. Evidentiary Findings Relating to the Formulation and Calculation of the Licensing Fees

[68] I make the findings set out below respecting the formulation and calculation of the operator and entertainer licensing fees.

[69] The Respondent has imposed licensing requirements on adult entertainment parlours since 1994, and has licensed adult entertainers since 2000. The by-law requiring licences for entertainers, by-law 107-2000, came into effect on July 1, 2011. At that time, a licensing fee for an entertainer was $100.00 per year.

[70] On January 1, 2003, amendments to the Act came into effect which made changes to the former business licensing framework.[^36] Among the changes introduced was section 150(9) of the Act, which provided that “the total amount of fees to be charged for licensing a class of business shall not exceed the costs directly related to the administration and enforcement of the by-law or portion of the by-law of the municipality licensing that class of business.” In response to these amendments, the Respondent began a review of all municipal business licensing chapters in January 2004.

[71] On July 26, 2006, the Manager of Licensing and Administration Services of the Respondent at the time, Ms. Julia Jacobson, submitted a report to the Respondent’s Finance Committee regarding a proposed licensing fee schedule aimed at achieving full cost recovery of the Respondent’s business licensing activities, and which in her view complied with the new business licensing provisions of the Act. Ms. Jacobson noted in her report that one of the objectives of the Respondent’s review of municipal business licensing was to ensure that licence fees for each individual licence class did not exceed the direct costs of administration and enforcement related to that particular class. She indicated at page 3 of her report that this review was necessary, since municipalities had previously been required to only consider the overall costs of licensing administration and enforcement in setting licensing fees, whereas the new licensing provisions were “more prescriptive in that licence fees may not exceed the directs costs of the administration and enforcement of the by-law.” In her report, Ms. Jacobson recommended a revision of the licensing fee structure to recover the full costs of the licensing fee activities over a phase-in period of three years. On August 14, 2006, the Council carried a motion that the licensing fee structure recommended be accepted, but that the phase-in period be five years rather than the three years that Ms. Jacobson had proposed.

[72] Further to the Council’s resolution, the Respondent implemented the five year phased-in adjustments to business licensing fees commencing in 2007. The fees for adult entertainment parlours and adult entertainers were enacted in 2006, pursuant to by-law 134-2006, and were incorporated into Schedule “B” to by-law 326 relating to licences. As a result of these changes, the licensing fees for a new licence for adult live entertainment parlours increased from $1,523.00 in 2007 to $1,851.00 in 2011, and for renewal of licences the fee increased from $1,443.00 in 2007 to $1,754.00 in 2011. For adult entertainers, the fee for a new licence increased from $176.00 in 2007 to $330.00 in 2011, and for renewal of licences the fee increased from $161.00 in 2007 to $215.00 in 2011. The applicable fees for 2012 are the same as those for 2011.

[73] Staff employed by the Respondent completed detailed Business Licensing Licence Fee Cost Calculation Worksheets (“licence fee worksheets”) to assist in determining the appropriate fees for each licence. These licence fee worksheets outlined the work involved to provide the licensing services related to each business activity class. Separate licence fee worksheets were prepared for adult live entertainment parlours and adult entertainers. These are found at Exhibit “H” to the Affidavit of Ms. Jacobson sworn May 14, 2012.

[74] As noted above, the Applicant takes issue with the components of the operator and entertainer fees set out in these licence fee worksheets relating to “Enforcement” and “Prosecution and Court Proceedings.” With respect to “Enforcement,” the amount of $500.00 was set as a component of the licensing fee calculation for adult entertainers, and the amount of $1,200.00 was set as a component of the calculation of the fee for adult live entertainment parlours. The amount of $500.00 for entertainers was based on the estimated cost of having at least two police officers attend at the premises of an adult live entertainment parlour at least twice or three times a year to check on the licensing status of the entertainers. The licence fee worksheet relating to adult live entertainment parlours indicates that the amount of $1,200.00 for enforcement was based on the estimated cost of having at least two police officers carry out licensing enforcement duties for a total of twelve hours each per year, at the rate of $100.00 per hour. Counsel for the Applicant questioned Ms. Jacobson in her Examination for Discovery which occurred on June 6, 2012 as to whether the Respondent actually paid the $500.00 expense relating to adult entertainers to the Police Department, to which Ms. Jacobson responded “Not directly, no.”[^37]

[75] With respect to the item “Prosecution and Court Proceedings,” the amount of $117.00 is included in the worksheets for both adult live entertainment parlours and entertainers as a component of the calculation of the licensing cost for both. According to Ms. Jacobson, the Respondent reached this figure based on consultations with the Prosecutor’s Office regarding the average time which that office felt would be required to deal with a situation if a charge were laid under these particular categories or under any of the licensing categories. Counsel for the Applicant questioned Ms. Jacobson as to whether the amount of $117.00 was reached taking the total cost of all business by-law prosecutions and dividing that total sum by the total number of business licences issued. Ms. Jacobson’s response was that the sum of $117.00 was the average “that was given to us for all of them, yes.”[^38] This evidence must be considered in conjunction with the detailed evidence which she gave earlier in her Examination for Discovery[^39] and the information set out in the licence fee calculation worksheets. Based on that evidence, I find that the amount of $117.00 was reached based on the Prosecution Office’s information upon conducting a general review of all licensing prosecution costs that its office devotes an average of three hours prosecuting a licensing violation charge, at an hourly rate of $39.00 for the Prosecutor. The reasoning behind including $117.00 as a component of the licensing fee expenses was that there is always a possibility that a charge will be laid in relation to a licence.

[76] The fees established for renewal of licences for adult live entertainment parlours and entertainers were calculated by backing out the costs associated only with the initial licensing process, and which are not part of the yearly renewal procedure. The increases to the fees over the five year period from 2007 to 2011 were established based on cost of living adjustments over that period of time.

[77] The Respondent has not actually achieved full cost recovery in many functions as a result of the fee review process, because the Respondent felt that it would have been too onerous financially to hit some businesses, trades and occupations with a complete full recovery cost approach. For instance, with respect to entertainers, the total actual cost of licensing is not completely captured by the licensing fee. A document entitled “Business Licensing Calculation Worksheet –License Fees Summary Chart” found at Exhibit I to the Affidavit of Ms. Jacobson sworn May 14, 2012 sets out the actual costs associated with an adult entertainer licence as of January 2005 to be $761.44, whereas the licence fee for a new licence is only $330.00 and for a renewal is only $215.00

C. Analysis

[78] For the reasons that follow, I do not accept the Applicant’s position that the licensing fees established for adult live entertainment parlours and entertainers are excessive. I conclude based on the evidence relating to the calculation of these fees that the amounts are within the Respondent’s authority under the Act to impose fees or charges, and that the amounts are fair and reasonable in the circumstances.

[79] The starting point for determining the validity of the operator and entertainer fees is Part XII of the Act, relating to Fees and Charges. The general authority of a municipality to impose fees or charges is set out in section 391(1), which provides as follows;

By-laws re: fees and charges

391. (1) Without limiting sections 9, 10 and 11, those sections authorize a municipality to impose fees or charges on persons,

(a) for services or activities provided or done by or on behalf of it;

(b) for costs payable by it for services or activities provided or done by or on behalf of any other municipality or any local board; and

(c) for the use of its property including property under its control.

[80] Section 391(3) clarifies that fees or charges imposed by a municipality can include costs relating to administration and enforcement, and expenses relating to capital assets:

Costs related to administration, etc.

391(3) The costs included in a fee or charge may include costs incurred by the municipality or local board related to administration, enforcement and the establishment, acquisition and replacement of capital assets.

[81] Section 391(4) of the Act clarifies that a fee or charge may be imposed “whether or not it is mandatory for the municipality or local board imposing the fee or charge to provide or do the service or activity, pay the costs or allow the use of its property.” Section 394(1) of the Act sets out the following additional general restrictions respecting the imposition of fees and charges:

Restriction, fees and charges

394. (1) No fee or charge by-law shall impose a fee or charge that is based on, is in respect of or is computed by reference to,

(a) the income of a person, however it is earned or received, except that a municipality or local board may exempt, in whole or in part, any class of persons from all or part of a fee or charge on the basis of inability to pay;

(b) the use, purchase or consumption by a person of property other than property belonging to or under the control of the municipality or local board that passes the by-law;

(c) the use, consumption or purchase by a person of a service other than a service provided or performed by or on behalf of or paid for by the municipality or local board that passes the by-law;

(d) the benefit received by a person from a service other than a service provided or performed by or on behalf of or paid for by the municipality or local board that passes the by-law; or

(e) the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources.

[82] I turn first to the Applicant’s argument that the operator and entertainer licensing fees are excessive due to the sum of $117.00 noted in the licence fee worksheets on account of Prosecutions and Court Proceedings. As discussed above, the basis of this argument is that this expense is not restricted to direct costs associated with the administration and enforcement of the Respondent’s by-law relating specifically to adult live entertainment parlours and entertainers. Based on my findings of fact as set out above, I agree with the Applicant’s conclusion that the figure of $117.00 is not based on costs related solely and directly to the prosecution of by-law violations involving operators and entertainers; this figure was based on the average cost of prosecuting violations of all business licensing by-laws. I disagree, however, with the Applicant’s argument that the fees are excessive and inappropriate on this basis.

[83] With respect to the licensing fee for entertainers, there is a fundamental flaw in the Applicant’s reasoning from a factual standpoint. The Applicant’s position is based on the assumption that the full $117.00 identified as the licensing expense related to Prosecutions and Court Proceedings has actually been fully incorporated into the entertainer licence fee. This is the case with respect to the operator licence fee. However, there is no evidence before me that this is the case in relation to the entertainer licence fee. I reiterate the finding which I made earlier in these Reasons that the Respondent has not achieved full cost recovery with respect to the licensing of entertainers. The full expense associated with licensing for an entertainer as of January 2005 was $761.44, whereas the cost of a new licence is only $330.00 and of a renewal is only $215.00. As noted previously, the evidence of Ms. Jacobson in her Examination for Discovery was that in the areas where full cost recovery has not been achieved, this is because the Respondent felt it would be too onerous financially to hit the relevant individuals and businesses with a full cost recovery approach. There is no evidence as to what proportion, if any, of the $117.00 Prosecutions and Court Proceedings expense identified was actually incorporated into the final entertainer fees that were established.

[84] Even if I were to accept that the full sum of $117.00 was intended to be recovered by way of the entertainer licensing fees, I do not accept the Applicant’s argument that this renders the fees excessive. I have reached the same conclusion on this issue with respect to the operator licence fees. The Applicant relies on the Windsor case in support of its argument that spreading out the overall, average by-law prosecution cost across the various types of businesses is improper. I conclude that Windsor is distinguishable from the case at hand. In Windsor, the Ontario Court of Appeal concluded that an annual licensing fee which the City of Windsor imposed for “dancers” as defined in the city’s licensing by-law respecting adult entertainment parlours was improper and invalid. It reached this conclusion on the basis that the component of the fee that was attributed to “policing” was actually derived from a calculation of the general costs of maintaining a police presence in the downtown area of the city, rather than from a calculation of the specific costs related directly to administering or enforcing the particular licensing by-law that was being challenged. However, in that case, the Court was called upon to interpret the scope of the former licensing fee provisions of the Act, which closely circumscribed the costs which a municipality could consider when calculating and fixing such fees. The relevant provisions were sections 150(9) and (10) of the Act, which stipulated as follows:

Licence fees

150(9) The total amount of fees to be charged for licensing a class of business shall not exceed the costs directly related to the administration and enforcement of the by-law or portion of the by-law of the municipality licensing that class of business.

Types of allowable costs

150(10) Without limiting subsection (9), costs directly related to the administration and enforcement of the by-law may include costs related to,

(a) the preparation of the by-law;

(b) inspections related to the by-law;

(c) the enforcement of the by-law against a person operating a business without a licence;

(d) prosecution and court proceedings; and

(e) a reciprocal licensing arrangement under section 156.

[85] These provisions have been repealed, and as noted previously in these Reasons, a municipality’s authority to impose fees and charges is now addressed in Part XII of the Act. The restriction set out in former section 150(9) providing that a licensing fee relating to a class of business may not exceed the costs directly related to the administration and enforcement of the licensing by-law relating to that class of business has been abandoned. Section 391(3) of the current Act, which allows a licensing fee to include amounts for “administration” and “enforcement,” does not require that these amounts be directly related only to the particular by-law governing the business in question. Rather, the section refers to administration and enforcement costs in a general sense. I conclude that this change in wording frees municipalities from the onerous task of calculating the precise administration and enforcement costs associated with each separate class of business, and allows it to consider allocating the overall cost of administering and enforcing all business licensing by-laws across the various classes of business which the municipality regulates. This is precisely what the Respondent did in fixing the prosecution and court proceeding expenses that it rolled into the operator and entertainer licensing fees.

[86] The comments of Juriansz, J.A. in his dissent in Windsor relating to the calculation of the dancer licensing fee in that case are instructive in determining the appropriate scope of a municipality’s licensing fee authority and discretion under the new provisions of the Act. Juriansz, J.A. cautioned against placing and “unworkable auditing burden on municipalities”[^40] in regard to the calculation and fixing of licensing fees. He concluded that it may be appropriate to consider some costs to be common costs relating to several classes, and to divide the total amount of those costs among the several classes. He emphasized that any method of allocating licensing fee costs could have some element of arbitrariness, and held that section 150(9) of the Act requires the municipality to simply “act in good faith to allocate direct costs among licensed classes in a reasonably equitable manner.”[^41]

[87] In my view, the new licensing fee provisions set out in Part XII of the Act alleviate the concerns raised by Juriansz, J.A. about imposing an overly burdensome task on municipalities in calculating and formulating licensing fees. They allow for the possibility of municipalities averaging out gross administration and enforcement expenses which may relate to the maintenance of a general licensing infrastructure across different categories of licences. In delineating the parameters of a municipality’s ability to do so, I conclude that the applicable test is that which Juriansz, J.A. applied in the context of section 150(9) of the former Act. Accordingly, a municipality may allocate total costs across various categories of licences in this manner provided that it does so in good faith and in a reasonably equitable manner.

[88] I am satisfied that the Respondent has met this test in the case at hand. It took reasonable steps to obtain an accurate estimate of the average cost of a prosecution. It would be impossible for the Respondent to accurately predict how many prosecutions to expect in any given year in every licensing class. The Respondent applied the same approach across all licensing categories based on the operating principle that a charge could be laid in relation to a licence at any time. There is no evidence before me that this approach has led to the Respondent collecting more revenue on account of this component of licensing fees than is reasonably required in order to cover the annual costs associated with licensing prosecutions.

[89] I turn now to the Applicant’s challenge to the amount of $500.00, which is identified in the licence fee worksheets as the expense associated with enforcement in relation to entertainers, and the amount of $1,200.00 for this item identified in the licence fee worksheets relating to operators. As noted above, the Applicant alleges that this amount is improper, since it relates to the provision of police enforcement services which the Respondent does not actually pay for. I do not accept this position. The evidence of Ms. Jacobson was that the municipality did not pay for these expenses “directly.” Applicant’s counsel did not explore with her whether the Respondent pays for these expenses indirectly. I accept the submission of counsel for the Respondent that the Respondent does in fact pays for these expenses indirectly. Section 4(1) of the Police Services Act[^42] imposes on the Respondent municipality an obligation to provide adequate and effective police services in accordance with its needs. There is nothing in the Act that limits the right of a municipality to incorporate into licence fees amounts which the municipality bills and pays directly to service providers that act on their behalf. As noted above, section 391(1) (b) of the Act simply provides that a municipality may impose fees or charges on persons for “services or activities provided or done by or on behalf of it.” Similarly, the terms of section 394(1)(c) of the Act make it clear that a municipality can include in the calculation of licence fees the cost of services performed on behalf of or paid for by the municipality.

[90] The Applicant’s last argument relating to licensing fees is that quite apart from the components discussed above, the fees are so high that they should be struck. I do not agree. There is a general discretion on the part of the court to strike a licence fee on the basis that the amount of the fee has the effect of indirectly prohibiting a business, trade or calling. [^43] The determination of this issue is essentially a question of fact. In order to establish that a fee is prohibitive in this way, there must be evidence showing that the municipal council imposed the fee with the objective of prohibiting the enterprise or activity in question rather than with the goal of simply setting a reasonable licence fee.[^44] There is no such evidence in this case in relation to either the operator or the entertainer licence fees.

[91] Having rejected the Applicant’s argument that the licence fees are excessive, there is no need for me to address the issue of whether its request that I strike the fees is statute barred by virtue of section 273(5) of the Act.

VI. TERMS OF ORDER TO ISSUE

[92] Based on the foregoing, an order shall issue as follows:

1. Section 329.1.3(c) of Chapter 329 of the City of Brantford Municipal Code is declared invalid. The operation of this declaration is suspended for a period of six months, until April 16, 2013.

2. If either party wishes to pursue a claim for costs in connection with this matter, they shall serve and file written submissions, relevant case-law and a detailed Bill of Costs by November 12, 2012. Reply submissions shall be served and filed by November 19, 2012. If any party does not deliver written submissions, relevant case-law and a Bill of Costs by November 12, 2012, there shall be no order for costs in favour of that party.

3. The balance of the Application herein is dismissed.

___________________________________ The Honourable Madam Justice D. Chappel

Released: October 16, 2012

[^1]: Municipal Act, S.O. 2001, c. 25. [^2]: R.S.J. Holdings Inc. v. London (City), 2007 SCC 29, [2007] 2 S.C.R. 588 (S.C.C.). [^3]: Shell Canada Products Ltd. v. Vancouver (City), 1994 CanLII 115 (SCC), [1994] 1 S.C.R. 231 (S.C.C.). [^4]: Ibid., at p. 244. [^5]: Ibid, at p. 248. See also Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342 (S.C.C.); United Taxi Drivers’ Fellowship of Southern Alberta v. Calgary (City), 2004 SCC 19, [2004] 1 S.C.R. 485 (S.C.C.); 114957 Canada Ltée. (Spray-Tech, Société d’Arrosage) v. Hudson (Town), 2001 SCC 40, [2001] 2 S.C.R. 241 (S.C.C.); Croplife Canada v. Toronto (City), 2005 CarswellOnt 1877 (C.A.), leave to appeal refused 2005 CarswellOnt 6587 (S.C.C.). [^6]: Adult Entertainment Association v. Ottawa (City ), 2007 ONCA 389, 2007 O.J. No. 2021 (C.A.). [^7]: Ontario Adult Entertainment Bar Assn. v. Metropolitan Toronto (Municipality) (1995), 1995 CanLII 10668 (ON SC), 26 O.R. (3d) 257 (Div. Ct.); affirmed as Ontario Adult Entertainment Bar Assn. v. Toronto (Metropolitan) (1997), 1997 CanLII 14486 (ON CA), 35 O.R. (3d) 161 (C.A.). [^8]: 679619 Ontario Ltd. v. Windsor (City), 2007 CarswellOnt 43, 31 M.P.L.R. (4th) 1, 210 O.A.C. 37 (C.A.). [^9]: For instance: a. Section 329.4.5 states that no entertainer shall, while performing a live performance of an adult nature, touch, or have physical contact with another person. b. Section 329.4.6 stipulates that no entertainer shall perform a live performance of an adult nature unless it is performed within the clear and unobstructed view of all patrons. c. Section 329.4.7 directs that no entertainer shall perform in an adult live entertainment parlour which has not been licensed under By-law 329. [^10]: Human Rights Code, R.S.O. 1990, c. H-19, as amended. [^11]: Regina v. Sharma, 1993 CarswellOnt 79, [1993] 1 S.C.R. (S.C.C.); Fountainhead Fun Centre Ltd. v. Montreal (Ville), sub nom Montreal (Ville) v. Arcade Amusements Inc.; Montreal (Ville) v. Fountainhead Fun Centres Ltd., Montreal (Ville) v. Arcade Amusements Inc., 1985 CanLII 97 (SCC), [1985] 1 S.C.R. 368 (S.C.C.). [^12]: Ibid. [^13]: Brantford (City) Public Utilities Commission v. Brantford (City) (1998), 1998 CanLII 1912 (ON CA), 36 O.R. (3d) 419 (C.A.). [^14]: Rothmans, Benson & Hedges Inc. v. Saskatchewan, 2005 SCC 13, 2005 CarswellSask 162, 2005 CarswellSask 163 (S.C.C.); Croplife Canada v. Toronto (City), 2005 CarswellOnt 1877 (C.A.); London Property Management Association v. London (City), 2011 CarswellOnt 11699 (S.C.J.). [^15]: Ontario (Director of Disability Support Program) v. Tranchemontagne (2010), 2010 ONCA 593, 102 O.R. (3d) 97 (C.A.). [^16]: Constitution Act, 1982, 1982 c. 11 (U.K.), Schedule B. [^17]: R v. Kapp, 2008 SCC 41, [2008] 2 S.C.R. 483 (S.C.C.). [^18]: Andrews v. Law Society (British Columbia), 1989 CanLII 2 (SCC), [1989] 1 S.C.R. 143 (S.C.C.). [^19]: Andrews, at p. 165. [^20]: Syndicat des employés de l’hopital general de Montréal c. Sexton, 2007 SCC 4, [2007] 1 S.C.R. 161 (S.C.C.). [^21]: Ibid., para. 48. [^22]: Ibid., para. 49. [^23]: Kapp, Supra., paras. 24 and 25. [^24]: Tranchemontagne, Supra.; Armstrong v. British Columbia (Ministry of Health) 2010 BCCA 56, 2010, 283 B.C.A.C. 167 (B.C.C.A.), leave to appeal refused, [2010] S.C.C.A. No. 128 (S.C.C.). [^25]: Andrews, Supra., at p. 174. [^26]: R. v. Jacob (1996), 1996 CanLII 1119 (ON CA), 31 O.R. (3d) 350 (C.A.). [^27]: Human Rights Code, Supra., preamble. [^28]: Ballantyne v. Molly “N” Me Tavern (1982), 1982 CanLII 4881 (ON HRT), 4 C.H.R.R. D/1191). [^29]: R. v. Knapman, [1953] O.W.N. 103 (C.A.); Riches v. Richmond, 1933 CanLII 300 (BC CA), [1933] 3 D.L.R. 437 (B.C.C.A.); Allard Contractors Ltd. v. Coquitlam (1988), 31 B.C.L.R. (3d) 319 (S.C.), additional reasons to 1988 CanLII 3169 (BC SC), 40 M.P.L.R. 96 (S.C.). [^30]: Clay v. Victoria (City), 1886 CarswellBC 11 (S.C.), para. 16 [^31]: Ian Rogers, Q.C., (2009), The Law of Canadian Municipal Corporations (Second Edition). Toronto: Thomson Reuters Canada Ltd., para. 195.7, p. 1034.8. See also Outremont v. Protestant School Board Trustees of Outremont, 1952 CanLII 57 (SCC), [1952] 2 S.C.R. 506 (S.C.C.); Clay v. Victoria (City), Ibid.; Attorney-General for Alberta v. Attorney-General for Canada, 1947 CanLII 347 (UK JCPC), [1947] A.C. 503, at p. 518; Schachter v. Canada, [1992] 2 S.C.R. (S.C.C.). [^32]: Mississauga Hydro-Electric Commission v. Mississauga (City), 1975 CarswellOnt 874 (S.C.J.). [^33]: Ibid., para. 40, p. 11. [^34]: See Clay v. Victoria (City), Supra. [^35]: Schachter v. Canada, Supra. [^36]: Municipal Act, S.O. 2001, c. 25. [^37]: Transcript of Examination for Discovery of Julia Jacobson on June 6, 2012, Question 97. [^38]: Ibid., Question 94. [^39]: Ibid., Question 93. [^40]: Windsor, Supra., at para. 63. [^41]: Ibid., at para. 66. [^42]: Police Services Act, R.S.O. 1990, c. P-15, as amended. [^43]: Re Foster and Raleigh (1910), 22 O.L.R. 26; affirmed at p. 34 (C.A.); Re McCormick and Toronto, 1948 CanLII 312 (ON SC), [1948] O.W.N. 425 (H.C.). [^44]: Ian Rogers, The Law of Canadian Municipal Corporations, Supra., p. 745; Re Slater and Kelly Ltd., [1938] O.W.N. 353 (H.C.).