Aurora (Town) v. Her Majesty the Queen in Right of Ontario, 2013 ONSC 6020
CITATION: Aurora (Town) v. Her Majesty the Queen in Right of Ontario, 2013 ONSC 6020
NEWMARKET COURT FILE NO.: CV-12-110891-00
DATE: 21031024
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Corporation of the Town of Aurora
Applicant
– and –
Her Majesty the Queen in Right of Ontario
Respondent
COUNSEL:
Warren Mar and Slawomir Szlapczynski, for the Applicant
No one for the Respondent
HEARD: February 26, 2013
REASONS FOR RULING
H.K. O’Connell, J.
[1] The Corporation of the Town of Aurora (“the Town”) brings this application, pursuant to Rule 14.05 of the Rules of Civil Procedure.
[2] The application was on the list for hearing at Newmarket on November 13, 2012. It was adjourned on that date due to lack of court time to hear the matter. On February 26, 2013 the matter proceeded before me.
[3] As the application seeks determination of rights and obligations that depend on statutory interpretation, the Town of Aurora asks this court to entertain the application.
The Application
[4] The application states:
The applicant makes application for: the determination and declaration of rights and obligations of Town of Aurora councillors that depends on the interpretation of a statute by the court on the following issues:
(a) Does section 2 of the Municipal Conflict of Interest Act, RSO. 1990, c. M50 as amended [the “Act”] apply to deem an indirect pecuniary interest to a councillor of the Town of Aurora who sits as a council-appointed director of a non-share capital corporation when the corporation has a pecuniary interest in a matter being considered by the Town of Aurora council?
(b) If the answer to question (a) is yes, does subsection 4(h) of the Act exempt application of section 5 of the Act by reason of a council member being a director of a corporation as an appointee of the council of the Town of Aurora, even though the corporation was not specifically incorporated for the purpose of carrying on business for and on behalf of the municipality?
(c) If the answer to question (a) is yes, does subsection 4(k) of the Act exempt application of section 5 of the Act by reason of the interest of the councillor of the Town of Aurora being so remote or insignificant in its nature that it could not reasonably be regarded as likely to influence the councillor?
[5] The non-share capital corporation that is the subject of this application is the Church Street School Cultural Center (CSSCC) which provides cultural and heritage services in the Town of Aurora.
[6] On this application, the Town relies upon the affidavit of Mr. Neil Garbe who is the Chief Administrative Officer of the Corporation of the Town of Aurora, and the affidavit of Mr. Geoffrey Daw, the current Mayor of Aurora.[^1]
[7] Although the Crown Law Office, Civil, was served with the application, they provided correspondence dated September 28, 2012 advising that they were not going to respond to the application as the application dealt with “purely local issues and does not engage the interest of the Crown.”[^2]
Threshold Issue: Should the Court hear this Application
[8] Counsel Mr. Mar further argues that without a determination of this application by the court, council members would be faced with the unenviable choice of either risking their political careers by taking actions that might create a risk of subsequent challenge, abstaining from serving on the board in question, or removing themselves from participation at council meetings should a matter about the CSSCC be before the council for consideration.
[9] I agree with counsel for the Town that the court should exercise its jurisdiction to entertain the application on the basis that a determination and a declaration in this instance is a matter of serious practical importance and public interest, which requires the exercise of the court’s jurisdiction pursuant to Rule 14.05(3).
[10] In this regard I adopt the reasoning of Winkler J., as he then was, in Toronto (City) (Mayor) v. Ontario 2000 22330 (ON SC), 47 O.R. (3d) 177. Justice Winkler referenced the Court of Appeal decision in Re: Principal Investments Ltd. and Gibson, 1963 22 (ON CA), [1963] 2 O.R. 507[^3] where Laidlaw J.A. said:
I am quite in accord with the judicial opinion expressed in numerous cases and the general principle that the jurisdiction of the Court to make a declaration on matters that will arise in the future is to be exercised sparingly. However, I am persuaded that determination of the question in issue is not academic. It is of such practical importance and the circumstances are such that the jurisdiction of the Court should be exercised at the present time.
[11] In addition in Ennismore (Township) (Re), [1996] O.J. No. 167 (Ont. Ct. Gen. Div.) Justice LaForme, as he then was, entertained an application brought by the Township based on the consent of the parties before him. LaForme J. stated: “I also agree with this approach since it appears that an action contesting the council member’s participation and voting on the issue of concern would be an inevitable result, were it to occur.”
[12] Although I cannot say that it would be an inevitable result in the case at bar that someone would contest a council member’s participation in voting on the issue of concern on this application, I nonetheless find that it is most certainly an easily foreseeable and more than likely result.
[13] I am fortified in this view utilizing the very recent barometer of municipal conflict of interest issues involving both the Mayors of Toronto[^4] and Mississauga, and the report of Associate Chief Justice Cunningham.[^5] This application should be entertained given the front and centre nature of municipal conflict issues.
The Questions Posed by the Town of Aurora
Question One: Does section 2 of the [Municipal Conflict of Interest Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html) (the Act) apply to deem an indirect pecuniary interest to a council member who sits as a council appointed member of the board of directors of the CSSCC, a non-share capital corporation, when the CSSCC has a pecuniary interest in a matter being considered by the Council?
[14] Section 2 of the Municipal Conflict of Interest Act states:
Indirect Pecuniary Interest
- For the purposes of this Act, a member has an indirect pecuniary interest in any matter in which the council or local board, as the case may be, is concerned if,
(a) the member or his or her nominee,
(i) is a shareholder in, or a director or senior officer of, a corporation that does not offer its securities to the public,
(ii) has a controlling interest in or is a director or senior officer of, a corporation that offers its securities to the public, or
(iii) is a member of a body,
that has a pecuniary interest in the matter; or
(b) the member is a partner of a person or is in the employment of a person or body that has a pecuniary interest in the matter.
[15] In the affidavit of Mr. Garbe, the Chief Administrative Officer of The Corporation of the Town of Aurora, he states that the CSSCC is a non-share, not-for-profit charitable corporation that serves to provide heritage and cultural services in Aurora.[^6]
[16] The CSSCC relies upon the Town for a significant portion of its funding.[^7] Mr. Garbe attests that the Town wishes to have two councillors appointed to sit on the board of directors of the CSSCC. This would allow the Town to provide “the desired level of oversight and participation in the operations of the CSSCC to ensure that Town resources are being applied properly and to facilitate communication between the Town, the Council, and the CSSCC. The board of directors have expressed their agreement with this arrangement.”[^8]
[17] At paragraph 7 of his affidavit, Mr. Garbe states:
Based on the discussions that took place at Council meetings regarding this matter, at which I was present, some of the important reasons for having a member of Council sit on the board of directors of the CSSCC as an appointee would be to monitor the use of Town resources and the progress of the CSSCC in relation to their obligations under its agreements with the Town, and also to serve as a conduit of information between the Town and the CSSCC. The observations of the appointee could then be discussed and used at Council to influence the decisions of Council when matters affecting the CSSCC, such as yearly funding, come up before Council. If the appointee is forced to be excluded from the discussion and unable to influence the decisions of Council relating to pecuniary interests of the CSSCC, the usefulness of an appointment of a Council member as a director of the CSSCC would be severely limited. Town staff members do not want to create a provision or structure in a new agreement with the CSSCC that would undermine the ability of Council members to complete their elected duties during Council meetings or potentially put the appointed Council members into a potential conflict with the MCIA.[^9]
[18] The affidavit of Mr. Dawe, also speaks to the nature of the proposed arrangement and its purpose.[^10]
[19] The Town says that it is not clear whether a non-share capital corporation (NSCC) can be said to fall under paragraph 2(a)(i) of the Act.
[20] However the Town argues that the wording of this section suggests that a corporation must actually have securities to offer in order to trigger the provision, given that the section references a “…corporation that does not offer its securities to the public.”
[21] As the CSSCC is a NSCC which does not have securities to offer, paragraph 2(a)(i) would not apply to the CSSCC. The Town argues that in the absence of a definition of “security” in the MCIA, that the court need reference the Securities Act[^11] for the definition. However reference to the definition of “security” in the Securities Act does not apply to the CSSCC.
Analysis
Sections 2(a)(ii) and 2(b)
[22] It is clear that these sections of the Act cannot apply as the CSSCC does not offer its securities to the public as per section 2(a)(ii) of the MCIA. Section 2(b) does not apply as a councillor on the application at bar would not be in the employ of the CSSCC.
[Section 2](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html)(a)(i) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html)
[23] I agree with the Town that this provision should be read such that a corporation must actually have securities to offer to the public in order for the section to be engaged. The section states that a corporation does not offer its shares to the public. A NSCC cannot, by definition, offer securities or shares to the public, as it has none. On this application, there are no securities that can be given or offered by the CSSCC or its board of directors.
[24] My conclusion on this ground is rooted in both a consideration of the definition of security in the Securities Act as well as the contents of the affidavits of Mr. Garbe and Mr. Dawe.
[25] Statutory construction principles also assist.
[26] In Magder v. Ford[^12] the Divisional Court reminded that:
…the interpretation of the MCIA requires the court to apply the modern approach to statutory interpretation adopted by the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559 at para. 26: the words of the statute are to be read in context and “in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.” The principle that penal statues are to be strictly construed applies only where there is ambiguity about the meaning of a statutory provision ( at para. 28).
[27] As is noted in Sullivan on the Construction of Statutes[^13], “[e]very word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose.”
[28] The language in section 2(a)(i) is clear and unambiguous. It refers specifically to a corporation that does not offer its securities to the public. (emphasis added).
[29] Applying statutory construction principles, I therefore agree with the Town, given the express wording in section 2(a) that a NSCC should not be captured by section 2(a)(i) of the Act.[^14]
Section 2(a)(iii)
[30] Mr. Mar further argues that section 2(a)(iii), which references the term “body” has been judicially interpreted to be something other than a corporation. In Bowers v. Delegarde, [2005] O.J. No. 689 (Sup.Ct.) the court said:
I observe from a reading of the statute that subsections 2(a)(i) and (ii) specifically refer to a “corporation”, while s. 2(a)(iii) uses the term “body” – ie: (is a member of a body). It seems to me that given the structure of the section, “body” must mean something other than a corporation. Bell Canada is of course a corporation. If the term “body” included a corporation, subsection (iii) would make no sense or, alternatively, would negate subsections (i) and (ii).
[31] I agree with counsel that had the legislature intended the sections of the MCIA to cover all types of corporations, it would have done so explicitly. The legislature was careful however to craft sections of the Act that deal with “corporation” and “body”.
[32] As a consequence I agree with the Town that section 2(a)(iii) of the MCIA does not apply to the CSSCC, as it is incorporated.
[33] My determination on this aspect of the application makes the answering of questions 2 and 3 moot, but I think it instructive to comment on those questions, in the event I am wrong on Question 1, and for completeness of this decision given the alternative arguments advanced by the Town.
Question 2: Does Subsection 4(h) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html) exempt application of [section 5](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html) of the Act by reason of the Council member also being a member of the board of directors of the CSSCC as an appointee of Council?
[34] I accept the position of the Town that section 4(h) would apply to exempt a councillor in the fact situation on this Application, assuming for the sake of argument that section 2 of the Act otherwise applies.
[35] I find the ratio in Blyth v. Northumberland (County), 1990 6752 (ON SC), 75 O.R. (2d) 576, (Ont. Ct. Gen. Div.) to be instructive. There the court noted that the appointment of a council member to fulfil a public duty was contemplated by section 4(h) even though an indirect conflict might arise when there was otherwise no actual or personal interest at issue.
[36] As was stated in Blyth, common sense dictates that any indirect conflict created for the appointee should be accepted to allow council members to fulfil their public duty.
[37] I agree with the Town that the appointment of a council member to act on the CSSCC can only be to serve the duties of the municipality and the interests of the ratepayers of Aurora.
Question 3: If the answer to Question 1 is Yes, does [subsection 4](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html)(k) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html) exempt application of [section 5](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m50/latest/rso-1990-c-m50.html) of the Act by reason of the interest of the Council member being so remote or insignificant in its nature that it could not reasonably be regarded as likely to influence the Council member?
[38] In Whitley v. Schnurr[^15], the court set out the following test to assess the interest of a councillor and the influence that might engender. The court said:
Would a reasonable elector, being apprised of all the circumstances, be more likely than not to regard the interest of the councillor as likely to influence that councillor’s action and decision on the question? In answering the question set out in such test, such elector might consider whether there was any present or prospective financial benefit or detriment financial or otherwise, that could result depending on the manner in which the member disposed of the subject matter before him or her.
[39] The councillor(s) who sit(s) on the CSSCC board has no personal interest in the organization. This is not like the scenario in in Smith v. Lapointe, [2001] O.J. No. 1988 (Sup. Ct.) where the council member was also a fee paying member of the curling club that the Town owned.
[40] In the case at bar no compensation direct or indirect would flow to the council member. Nor could any personal benefit be derived from being a member of the board of directors.
[41] I find that any indirect pecuniary interest if there is one, and I cannot see one, would be so remote and/or insignificant that it could not likely or evenly possibly influence the council member who is situate on the CSSCC board. As counsel Mr. Mar notes the most that would likely be involved would be a free coffee proffered at a board meeting of the CSSCC.
Some Concluding Remarks
[42] In arriving at my conclusion of the non-applicability of section 2 of the Act, I am cognizant of the need to ensure that conflicts of interest are broadly construed.
[43] In Orangeville (Town) v. Dufferin (County) 2010 ONCA 83 the court stated:
The courts have held that the MCIA is to be construed broadly and consistently with its purpose. It was enacted to encourage open, accountable and honest municipal government by demanding “high standards of those elected to public office.”: Re:Moll and Fischer et. al. (1979), 1979 2020 (ON SC), 23 O.R. (2d) 609 (Div. Crt.), at 612. In that context, courts have held that what constitutes a pecuniary interest sufficient to trigger the provisions of the MCIA is not to be narrowly confined: Re: Edwards and Wilson et. al.,1980 1583 (ON SC), [1980] O.J. No. 3873 (Div. Crt.), at para. 20. There is no exhaustive guideline for its determination.
[44] Applying the need to construe the MCIA in a broad manner and consistent with its purpose, I am satisfied that council members appointed to serve on the CSSCC board fosters open and accountable governance and reflects the high standards of those elected to public office.
[45] Oversight of the CSSCC is the sine qua non of the presence of two council members on the board of the CSSCC. As Mr. Garbe attests, this provides “the Town with the desired level of oversight and participation in the operations of the CSSCC to ensure that Town resources are being applied properly and to facilitate communication between the Town, the Council, and the CSSCC.”[^16]
[46] Likewise Mr. Dawe notes that the issue of Town oversight was initially brought up in the context of staff concerns and independent audits. Mr. Dawe states:
These concerns, among other things, highlighted the benefits of more transparency on how the Town’s resources and funds are used by the CSSCC, and suggested that the CSSCC permit more oversight by the Town. This would include having the Town take more formalized ownership for such oversight measures, such as better Town monitoring of the objectives of the CSSCC in its delivery of cultural services, and better measurement of key performance indicators for the CSSCC.[^17]
[47] It is worth reminding as well that this is a consensual arrangement. Mr. Garbe attests that the CSSCC and the Town have negotiated in relation to the utility of having council members serve on the Board of the CSSCC and in conjunction with the deliberations of council, this “[has] led the parties to conclude that as part of any new agreement between the Town and the CSSCC, council would be permitted to appoint two (2) Town councillors to sit on the board of directors of the CSSCC.”[^18]
[48] It is readily apparent to me that the hallmarks of good governance by Council are fully manifest in the objectives of the placement of two councillors on the board of directors of the CSSCC.
Conclusion
[49] Having regard to the evolution of the issue on this application, I have considered the rationale of the MCIA, given it broad application, but find that the answer to all questions posed by the Town is ‘no’.
[50] The Town is free to have two council members sit on the board of the CSSCC. This arrangement does not violate section 2 of the MCIA. Even if a non-direct pecuniary interest could be seen to arise, sections 4(h) and 4(K) of the Act would save such a councillor harmless from violation of section 2 of the Act.
Justice H.K. O’Connell
Released: October 24, 2013
CITATION: Aurora (Town) v. Her Majesty the Queen, 2013 ONSC 6020
NEWMARKET COURT FILE No.: CV-12-110891-00
DATE: 21031024
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Corporation of the Town of Aurora
Applicant
-and-
Her Majesty the Queen in Right of Ontario
Respondent
REASONS FOR RULING
Justice H.K. O’Connell
Released: October 24, 2013
[^1]: Amended Application Record , at Tabs 2 and 3. [^2]: Amended Application Record, Tab 4. [^3]: Aff’d: 1964 9 (SCC), [1964] S.C.R. 424. [^4]: Magder v. Ford (2013), 2013 ONSC 263, 113 O.R. (3d) 241 (Div. Ct.) rev’g: Magder v. Ford (2012), 2012 ONSC 5615, 112 O.R. (3d) 401. Leave to Appeal to S.C.C. dismissed June 20, 2013. [^5]: Report of the Mississauga Judicial Inquiry, Released: October 03, 2011. [^6]: Amended Application Record of the Applicant, Tab 2, Affidavit of Mr. Garbe. The CSSCC was created by Letters Patent on April 22, 2009, at the behest of three Aurora residents. The CSSCC was not incorporated by the Town and is therefore not a municipal services corporation pursuant to section 203 of the Municipal Act, 2001, S.O. 2001. [^7]: Amended Application Record of the Applicant, Tab 2, Affidavit of Mr. Garbe. In 2012 the Town provided the CSSCC with $356,900.00 in grant money. [^8]: Amended Application Record of the Applicant, Tab 2, Affidavit of Mr. Garbe. [^9]: Amended Application Record of the Applicant , Tab 2, Affidavit of Mr. Garbe. [^10]: Amended Application Record of the Applicant , Affidavit of Mr. Dawe. [^11]: Securities Act, R.S.O. 1990, c.S.5 [^12]: Supra, footnote 4. [^13]: Construction of Statutes, 5th ed. (Markham, Ont.: Le.xisNexis, 2008) [^14]: Mr. Mar brought to my attention the decision of Schenkler v. Torgrimson [2013] B.C.J. No. 29 (B.C.C.A.) where the court held that the pecuniary interest of the respondents, who were elected trustees, lay in their fulfilment of fiduciary obligations that they had to the societies that benefitted from funding resolutions. I find that this decision does not temper my view in this case, given that in British Columbia there is no definition of indirect pecuniary interest as there is in the Ontario MCIA. [^15]: [1999] O.J. No. 2575 (Sup. Ct.) [^16]: Amended Application Record, Tab 2, Affidavit of Mr. Garbe. [^17]: Amended Application Record, Tab 3, Affidavit of Mr. Dawe. [^18]: Amended Application Record, Tab 2, Affidavit of Mr. Garbe.