COURT FILE NO.: CV-21-00657448-0000 DATE: 20230501

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: PAY2DAY INC., Applicant AND: CITY OF TORONTO, Respondent

BEFORE: VERMETTE J.

COUNSEL: Michael Donsky, for the Applicant David Gourlay and Matthew Cornett, for the Respondent

HEARD: October 18, 2022

ENDORSEMENT

[1] The Applicant seeks an order quashing By-law 1515-2019, section 1(A) (“Impugned Provision”) enacted by the Respondent, the City of Toronto (“City”), on the basis that it is ultra vires the authority granted to the City by the City of Toronto Act, 2006, S.O. 2006, c. 11, Sched. A (“COTA”). The Impugned Provision sets out one of the conditions that must be met in order for the City to issue a licence to operate a payday loan establishment in Toronto.

[2] The Applicant has been in the payday loan industry for more than 15 years. It has five locations in Toronto and would like to expand its operations in the City. The Applicant says that it cannot do because of the Impugned Provision.

[3] I have concluded that the Impugned Provision is valid. As a result, the Application is dismissed.

A. BACKGROUND

1. Federal and provincial legislation regarding payday loans

[4] In 2007, the Criminal Code, R.S.C. 1985, c. C-46 was amended, and section 347.1 was added into the chapter dealing with criminal interest rate. This section reads as follows:

Definitions

347.1 (1) The following definitions apply in subsection (2).

interest has the same meaning as in subsection 347(2). ( intérêts )

payday loan means an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card. ( prêt sur salaire )

Non-application

(2) Section 347 and section 2 of the Interest Act do not apply to a person, other than a financial institution within the meaning of paragraphs (a) to (d) of the definition financial institution in section 2 of the Bank Act, in respect of a payday loan agreement entered into by the person to receive interest, or in respect of interest received by that person under the agreement, if

(a) the amount of money advanced under the agreement is $1,500 or less and the term of the agreement is 62 days or less;

(b) the person is licensed or otherwise specifically authorized under the laws of a province to enter into the agreement; and

(c) the province is designated under subsection (3).

Designation of province

(3) The Governor in Council shall, by order and at the request of the lieutenant governor in council of a province, designate the province for the purposes of this section if the province has legislative measures that protect recipients of payday loans and that provide for limits on the total cost of borrowing under the agreements.

Revocation

(4) The Governor in Council shall, by order, revoke the designation made under subsection (3) if requested to do so by the lieutenant governor in council of the province or if the legislative measures described in that subsection are no longer in force in that province.

[5] In response to this amendment to the Criminal Code, Ontario adopted the Payday Loans Act, 2008, S.O. 2008, c. 9 (“PLA”). The PLA required persons or entities providing payday loans to obtain a provincial licence to operate and to comply with a number of rules aimed primarily at consumer protection.

[6] O.Reg. 98/09 (“Regulation”) was adopted under the PLA. Section 2 of the Regulation lists information that an applicant for a licence or renewal of a licence has to provide to the Registrar, including “the address of each office that the applicant intends to operate when acting as a licensee” and “the names of the applicant registered under the Business Names Act that the applicant intends to use at any office when licensed and an indication of the address of each office at which the applicant intends to use each of the names when licensed”.

[7] Subsection 4(1) of the Regulation provides that upon issuing a licence or a renewal of a licence, the Registrar shall give the licensee a certificate of licence for the licensee’s main office and a certificate of licence for each of the licensee’s branch offices, if any. Subsection 4(3) states that a certificate of licence shall include certain information, including the address of the office to which the certificate relates.

[8] In 2017, Ontario adopted the Putting Consumers First Act (Consumer Protection Statute Law Amendment), 2017, S.O. 2017, c. 5 (“PCFA”). As a result of the adoption of the PCFA, section 24 of the PLA was amended to provide in subsection 24(3) that “a licensee shall not operate an office at a location if a by-law passed under […] section 92.1 of City of Toronto Act, 2006 prohibits the operation of the office at the location.” Section 24 of the PLA is included in a part of the PLA entitled “Protection of Borrowers”.

[9] The PCFA also amended the COTA by adding section 92.1, which reads as follows:

Restrictions re payday loan establishments

92.1 (1) Despite section 90 and without limiting sections 7 and 8, the City, in a by-law under those sections with respect to payday loan establishments, may define the area of the City in which a payday loan establishment may or may not operate and limit the number of payday loan establishments in any defined area in which they are permitted.

Exception

(2) Despite subsection (1), a by-law described in that subsection shall not prohibit the operation of all payday loan establishments in the City.

Definition

(3) In this section,

“payday loan establishment” means any premises or any part of them in respect of which a licensee within the meaning of the Payday Loans Act, 2008 may operate a business pursuant to a licence issued under that Act.

2. By-laws adopted by the City regarding payday loan establishments

[10] On April 27, 2018, the City of Toronto passed By-law 526-2018 (“First By-Law”) which, among other things, added a new article, Article XLVI – Payday Loan Establishments, to the City of Toronto Municipal Code Chapter 545, Licensing. The preamble of the First By-Law refers to sections 7, 8, 92.1 and 259 of the COTA.

[11] Article XLVI contains a number of provisions. §545-538 sets out the following criteria with respect to the obtention of a licence to operate a payday loan establishment:

A. No person shall act as a lender or loan broker as defined in the Payday Loans Act, 2008 unless they hold a valid licence as a lender or a loan broker under the Payday Loans Act, 2008 and a valid licence under this chapter.

B. No person shall operate a payday loan establishment unless they hold a valid licence as a lender or a loan broker under the Payday Loans Act, 2008 and a valid licence under this chapter.

B. [sic] No person, except a person who holds a valid licence as a lender or a loan broker under the Payday Loans Act, 2008 as of May 1, 2018, may be licensed under this chapter.

C. Every person who holds a valid licence as a lender or a loan broker under the Payday Loans Act, 2008 as of May 1, 2018 shall obtain a licence under this chapter.

[12] §545-540 states that an operator shall “operate only at the location(s) authorized by the licence issued under the Payday Loans Act, 2008.”

[13] §§545-541 and 545-542 provide as follows:

§ 545-541. Number of licences and locations restricted.

A. The number of licences which may be granted by the City under this article shall be limited to the total number of licences issued under the Payday Loans Act, 2008 to persons or entities operating within the City on May 1, 2018.

B. The number of locations where an operator is permitted to operate a payday lending establishment:

(1) is limited to the total number of locations operating within the City on May 1, 2018 which have been permitted by a licence under the Payday Loans Act, 2008; and

(2) in each ward, as each ward exists on the date of enactment of this by-law, is limited to the total number of locations operating within the ward on May 1, 2018 which have been permitted by a licence under the Payday Loans Act, 2008.

§ 545-542. Change of location.

A. Subject to this section, an operator may change locations within the City.

B. The operator shall inform the Executive Director within five business days of any changes to a business address or location address.

C. If an operator changes a location:

(1) the operator shall make a new application to the City for an update to the licence indicating the new location; and

(2) pay the applicable fees in Chapter 441, Fees and Charges on a pro-rated basis.

D. Despite subsection A, no operator may relocate on or within 500 metres of the municipally known address 555 Rexdale Boulevard as of April, 2018, known as the Woodbine Racetrack, measured along the most direct roadway route from the nearest point of 555 Rexdale Boulevard property to the nearest point of the proposed payday loan establishment property.

[14] The validity of the First By-Law has not been challenged.

[15] As of May 1, 2018, there were 212 payday loan establishments licensed by the province in Toronto.

[16] A report prepared by City staff dated August 28, 2019 states that the City’s payday loan licence became available as of August 1, 2018. It also states that as of August 28, 2019, a total of 187 establishments had obtained a payday loan licence from the City.

[17] The following observation is made in the report:

Payday loan licensees are subject to general provisions within Toronto Municipal Code Chapter 545, Licencing, including those prohibiting the transfer or sale of a licence. This means that business licences cannot be traded or sold to other operators. When a business closes, the business licence is cancelled and another will not be issued in its place. As such, the total number of licensed establishments across the City has decreased from 212 to 187, and will continue to decrease over time.

[18] On September 4, 2019, a meeting of the City’s General Government and Licensing Committee was held. At that meeting, one City Councillor, Frances Nunziata, made a statement to the effect that what she was trying to do was to get rid of payday loan establishments altogether.

[19] On October 2, 2019, City Council directed the Executive Director, Municipal Licensing and Standards, to immediately cease issuing new licences to payday loan establishments in the City, notwithstanding the current provisions in the City of Toronto Municipal Code Chapter 545, Licensing.

[20] On October 30, 2019, the City passed By-law 1551-2019, which contains the Impugned Provision. The Impugned Provision is an addition to the criteria set out in §545-538 of the First By-Law (reproduced above) to obtain a licence for a payday loan establishment. The added criterion states the following:

E. No person, except a person who is applying for renewal of a valid licence under this chapter, may be granted a licence under this chapter.

[21] The preamble of By-law 1551-2019 reads as follows:

Whereas the City of Toronto Act, 2006 grants the City of Toronto the authority to enact by-laws respecting the protection of persons and property, including consumer protection under subsection 8(2) of the Act; and

Whereas the City of Toronto Act, 2006 grants the City of Toronto the authority to enact by-laws for the licensing, regulating and governing of businesses wholly or partly carried on in the City of Toronto; and

Whereas the City regulates payday loan establishments, dealers in old gold and other precious metals and jewelry and pawnbrokers under City of Toronto Code Municipal Chapter 545; and

Whereas Council has authorized additional regulations with respect to these business establishments;

[22] The evidence before me shows that, as of November 24, 2021:

a. there were 166 licensed payday loan establishments in Toronto, with at least one establishment located in each municipal ward;

b. all of the payday loan establishment licences in Toronto were held by corporations; and

c. approximately 29 per cent of the payday loan establishment licences in Toronto were held by corporations with less than five per cent market share.

3. Relevant provisions of the COTA

[23] In addition to section 92.1 (reproduce above), the following provisions of the COTA are relevant for the purpose of this Application:

Scope of powers

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

Powers of a natural person

7 The City has the capacity, rights, powers and privileges of a natural person for the purpose of exercising its authority under this or any other Act.

Broad authority

8 (1) The City may provide any service or thing that the City considers necessary or desirable for the public.

City by-laws

(2) The City may pass by-laws respecting the following matters:

5. Economic, social and environmental well-being of the City, including respecting climate change.

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

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

8. Business licensing.

Scope of by-law making power

(3) Without limiting the generality of section 6, a by-law under this section respecting a matter may,

(a) regulate or prohibit respecting the matter;

(b) require persons to do things respecting the matter;

(c) provide for a system of licences respecting the matter.

Conflict with legislation, etc.

11 (1) A city by-law is without effect to the extent of any conflict with,

(a) a provincial or federal Act or a regulation made under such an Act; or

(b) an instrument of a legislative nature, including an order, licence or approval, made or issued under a provincial or federal Act or a provincial or federal regulation.

Same

(2) Without restricting the generality of subsection (1), there is a conflict between a city by-law and an Act, regulation or instrument described in that subsection if the by-law frustrates the purpose of the Act, regulation or instrument.

Restriction re monopolies

14 The City shall not confer on any person the exclusive right to carry on any business, trade or occupation unless the City is specifically authorized to do so under this or any other Act.

Powers re licences

86 (1) Without limiting sections 7 and 8, those sections authorize the City to provide for a system of licences with respect to a business and,

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

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

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

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

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

Restrictions on quashing by-law

213 A by-law of the City or a local board of the City passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law.

Application to quash by-law, etc.

214 (1) Upon the application of any person, the Superior Court of Justice may quash a by-law, order or resolution of the City or a local board of the City in whole or in part for illegality.

B. POSITIONS OF THE PARTIES

1. Position of the Applicant

[24] It is the Applicant’s position that the power to limit payday loan licences to those who already had a payday loan licence is not provided for by the COTA, nor is it necessarily or fairly implied by the expressed power on which the City relies. The Applicant submits that it is not even related to the power that the COTA actually provides the City. The Applicant argues that the City never had the authority it required to enact the Impugned Provision and that, as a result, it is illegal and should be quashed.

[25] The Applicant states that the Impugned Provision is not related to the City’s authority under section 92.1 of the COTA to define the area of the City in which a payday loan establishment may or may not operate. It submits that the Impugned Provision affects who may apply for a licence, but not where the licensee may operate if they get a licence.

[26] Similarly, the Applicant argues that the Impugned Provisions is not related to the City’s authority under section 92.1 of the COTA to limit the number of payday loan establishments in any defined area in which they are permitted. It notes that the Impugned Provision does not even mention a “defined area”, and that the limitation on licensing to persons who already have a valid licence has nothing to do with the number of establishments “in any defined area in which they are permitted”.

[27] The Applicant points out that the number of payday loan establishments is dropping approximately 10% per year. It states that since the Impugned Provision is making any new applications illegal, the only possible result will be, albeit eventually, an effective prohibition on the operation of all payday loan establishments in the City, directly contrary to the requirements of the COTA.

[28] The Applicant notes that municipal discrimination is generally disallowed unless it is specifically provided for by enabling legislation or is necessarily incident to the exercise of the power in question. It submits that the Impugned Provision draws a distinction between existing licensees looking for a City licence and “new” licensees looking for a City licence. The Applicant points out that since both types of licensees have to be qualified under the PLA and licensed by the province, the only distinction is whether one already has a City licence. The Applicant argues that this distinction is not neutral as to the owner or operator of the business, and that the Impugned Provision discriminates on the issue of who owns the business. According to the Applicant, the discrimination in question – between provincially-licenced payday loan operators that already have a City licence and those that do not already have a City licence – is neither provided for by the enabling legislation nor is it necessarily incident to the exercise of the power delegated by the province. As a result, the Applicant argues, the discrimination inherent in the Impugned Provision should be disallowed.

[29] The Applicant submits that the City can only create by-laws regarding all payday loan establishments or none of them, but not a class of such entities. It further submits that the Impugned Provision attempts to subdivide the class of applicants for payday loan licences between those seeking new applications and those seeking renewals, and that there is no power to do so in the COTA.

[30] The Applicant argues that the effect of the Impugned Provision will be to allow the City to do indirectly what it cannot do directly. It states that by causing a gradual reduction in the number of payday loan locations in the City, without the possibility of any new operations, the Impugned Provision will result in local monopolies at first and, ultimately, no payday loan locations. The Applicant submits that by necessary implication, this situation will lead to a violation of subsection 92.1(2) (which provides that the City cannot prohibit the operation of all payday loan establishments in the City) and section 14 of the COTA (which provides that the City cannot confer on any person the exclusive right to carry on any business). Based on the statement made by Councillor Nunziata, the Applicant expresses the view that the City is improperly attempting to get around the statutory prohibition on getting rid of payday loan locations within the City. The Applicant asserts that the Impugned Provision is ultra vires because, as it now stands, the Impugned Provision can only lead to a violation of the COTA and it is intended to lead to a violation of the COTA.

[31] The Applicant also argues that contrary to section 11 of the COTA, the Impugned Provision appears to be in conflict with both the federal and provincial statutes regarding payday loan operations and to frustrate their purposes. It states that contrary to federal law, the effect of the Impugned Provision appears to be ultimately to prohibit the very payday loan operations that the federal law made lawful.

[32] The Applicant submits that the Impugned Provision is also contrary to the intent of the provincial Act as it will lessen competition amongst payday loan operations given that no new entrants are allowed. According to the Applicant, this result is contrary to the stated purpose of the PLA which was, in part, to create a regulatory framework that encourages competition. The Applicant states that the Impugned Provision will eventually drive the payday loan industry out of business because an owner cannot transfer a licence to a new licensee and there can be no new licensee. The Applicant argues that allowing transfers of payday loan businesses through transfer of shares of those businesses functionally amounts to not allowing them at all given the increased costs and risk of a share purchase transaction.

[33] In response to the City’s mootness argument, the Applicant states that the Impugned Provision altered the effect of Chapter 545 of the Toronto Municipal Code. According to the Applicant, it met the criteria for a new licence and could have applied for one prior to the passage of the Impugned Provision, but it could not do so after. The Applicant submits that if it has a location authorized by its provincial licence, and the cap for the ward has not been met, it or anyone else meeting the criteria in the First By-Law should be allowed to apply for a new licence.

2. Position of the Respondent

[34] The Respondent submits that this Application is moot given that the quashing of the Impugned Provision would have no effect and would not affect the Applicant’s rights. The Respondent’s position is that the Impugned Provision did not alter the effect of Chapter 545 of the Toronto Municipal Code because the First By-Law had already capped the total number of payday loan establishments to the locations that existed in each City ward as of May 1, 2018, and limited the persons who could apply for a City licence to those who were licensed by the province as of May 1, 2018. According to the Respondent, all payday loan locations in Toronto that were eligible to obtain a new licence under the First By-Law had either done so or were no longer in business by the time the Impugned Provision was adopted; therefore, there was no pool of applicants other than for renewals. The Respondent argues that the Applicant’s stated wish to open a new location in Toronto would not have been possible under the First By-Law before the Impugned Provision came into force because such a location would not have held a provincial licence as of May 1, 2018.

[35] The Respondent states that while a court may exercise its discretion to hear an otherwise moot case where it may have collateral consequences on a party or it is in the general public interest, it must be mindful of scarce judicial resources. The Respondent’s position is that this Application is not one that this Court should entertain, as it is focused narrowly on one provision in a municipal by-law and would have no impact on the rights of a party, or the general public interest.

[36] In the alternative, the Respondent states that the Impugned Provision is a valid exercise of the City’s broad authority to pass by-laws under the COTA and is not discriminatory or in conflict with the provisions of any statute. The Respondent submits that City Council, in its discretion, enacted the Impugned Provision for the purposes of consumer protection and to protect the economic and social well-being of the City. According to the Respondent, this decision falls squarely within the City’s spheres of jurisdiction and its general by-law making authority, in particular, subsection 8(2)(8) of the COTA which allows the City to pass by-laws respecting consumer protection.

[37] The Respondent points out that section 92.1 of the COTA is permissive and does not prescribe how the City may limit the number of payday loan establishments in Toronto. The Respondent states that by enacting the Impugned Provision, the City clarified that its approach to reducing the number of payday loan establishments was to permit only renewals of existing licences. According to the Respondent, the City adopted a cap of the number of licences that would gradually decline as existing payday loan establishments closed or did not renew their licences.

[38] The Respondent submits that the Applicant’s assertion that the inevitable result of the Impugned Provision is the extermination of the industry is entirely speculative. The Respondent notes that as of November 24, 2021, there were 166 licensed payday loan establishments in Toronto, with at least one location in each City ward, and the licences were held by corporations, which may exist in perpetuity. The Respondent states that it is clear that the Impugned Provision does not entirely prohibit the operation of payday loan establishments in Toronto. The Respondent also states that it is clear that the Impugned Provision does not contravene the restriction on monopolies set out in section 14 of the COTA as, on its face, the Impugned Provision: (a) does not grant an exclusive right to any person to carry on business; and (b) does not create such a monopoly in practice in any sense of the word.

[39] The Respondent argues that if this Court were to accept the Applicant’s argument that the Impugned Provision is ultra vires or that it is discriminatory, this would impair the power of the City to reduce the number of payday loan establishments in Toronto, contrary to the clear intention of the PCFA and the ordinary sense of the wording of section 92.1 of the COTA. The Respondent submits that, in arguing that the Impugned Provision is discriminatory, the Applicant: (a) conflates creating “classes of licencees” (which the City has not done) with the requirement that an applicant held a provincial licence as of May 1, 2018; (b) falsely implies that the Impugned Provision discriminates on the basis of personal characteristics, where, in fact, it reflects the objective criteria of whether or not an applicant held a provincial licence as of May 1, 2018; and (c) ignores that the wording of section 92.1 of the COTA necessarily implies that the City can refuse to issue new payday loan establishment licences to control their number.

[40] The Respondent states that the Applicant has not demonstrated that it is impossible to comply simultaneously with the Impugned Provision and any provincial or federal legislation or regulation. It notes that the Applicant has not pointed to any specific provision of the Criminal Code or the PLA in support of its argument that the Impugned Provision conflicts with a federal or provincial Act.

[41] The Respondent submits that a court cannot determine that a by-law frustrates the purpose of a statute without reference to its specific wording. It argues that excerpts from Hansard cannot be used as an interpretive aid where no relevant statutory provisions have been put before this Court by the Applicant. According to the Respondent, the Applicant’s argument is contrary to the plain and ordinary meaning of section 92.1 of the COTA, enacted as part of the PCFA, which empowers the City to limit the location and number of payday loan establishments in Toronto.

C. DISCUSSION

1. Mootness

[42] The doctrine of mootness is an aspect of a general policy or practice that a court may decline to decide a case which raises merely a hypothetical or abstract question. This doctrine applies when the decision of the court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the court will have no practical effect on such rights, the court will generally decline to decide the case. However, the court may exercise its discretion to depart from the general policy and hear the case. See Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342 at 353.

[43] If the Applicant cannot meet the criteria set out in the First By-Law, then the determination of the issue of the validity of the Impugned Provision will have no practical effect on the Applicant’s rights and the case is moot. If that is the case, consideration would have to be given as to whether this is a matter with respect to which the Court should exercise its discretion to hear the case nevertheless.

[44] The difficulty with the City’s mootness argument is that the Applicant and the City appear to interpret the requirements set out in the First By-Law differently. Their respective positions are based on unstated premises or on premises that have been insufficiently elaborated upon. Since the parties did not address head-on the issue of the correct interpretation of the First By-Law, this injected a lack of clarity and some confusion in the parties’ argument regarding mootness.

[45] The main interpretive difference between the parties appears to relate to the requirement in the First By-Law that a person who applies for a City licence must hold a valid licence under the PLA as of May 1, 2018. The parties seem to have different views as to whether the person applying for a City licence must hold a provincial licence as of May 1, 2018 in respect of the specific location in Toronto for which a City licence is sought or whether the provincial licence held as of May 1, 2018 can be in respect of a different location.

[46] The Applicant has not adduced any evidence that, as of May 1, 2018, it held a valid licence under the PLA which authorized it to operate a payday loan establishment at a specific address in Toronto where it was not already operating. The City’s evidence suggests that no such licence could exist. However, the Applicant’s position seems to be that the only requirement under the First By-Law is that it held a valid licence under the PLA as of May 1, 2018, regardless of the specific location to which the licence relates. Under such an interpretation, the Applicant could obtain a City licence under the First By-Law with respect to a location in Toronto that was authorized by a licence under the PLA issued after May 1, 2018, as long as: (a) the Applicant had a provincial licence for another location as of May 1, 2018; and (b) the cap for the ward where the new location was situated had not been met.

[47] When considering the criteria set out in the First By-Law in their entire context and in light of the scheme and object of the First By-Law and the intention of City Council, [1] it appears unlikely that the Applicant’s interpretation of the First By-Law would be accepted as the correct one. However, based on the wording of the First By-Law, such an interpretation cannot be summarily excluded. Among other things, § 545-542 seems to suggest that a City licence could be obtained for a new location even though such a location was not authorized by a provincial licence as of May 1, 2018. Given the lack of submissions on the issue of the proper interpretation of the First By-Law, I decline to rule on this issue and to find that this Application is moot.

2. Validity of the Impugned Provision

[48] As a general rule, municipal powers are to be interpreted broadly and generously within their context and statutory limits, to achieve the legitimate interests of the municipality and its inhabitants: see Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273 at para. 24 and Croplife Canada v. Toronto (City), 2005 ONCA 15709 at para. 37 (Ont. C.A.) (“Croplife”); application for leave to appeal dismissed: 2005 SCC 44363.

[49] As set out in the preamble of By-law 1551-2019, the Impugned Provision was enacted pursuant to the City’s authority under subsection 8(2) of the COTA, more specifically its authority to pass by-laws respecting the protection of persons and property, including consumer protection (subsection 8(2)(8)). The regulation of payday loan establishments, including limiting the number of such establishments in municipalities, falls within the ambit of consumer protection. The very title of the PCFA, which introduced statutory provisions dealing with municipally-imposed limitations on the number of payday loan establishments, confirms the consumer protection nature of the Impugned Provision.

[50] I note that, by its express terms, section 92.1 of the COTA does not limit the City’s authority under section 8. Section 92.1 is not an independent source of authority to pass by-laws: rather, its wording refers to by-laws passed by the City under sections 7 and 8.

[51] In any event, the Impugned Provision is consistent with section 92.1 of the COTA. I agree with the Respondent that section 92.1 uses permissive language (“may”) and does not prescribe how the City may limit the number of payday loan establishments in Toronto. In my view, the power under section 92.1 of the COTA to “limit the number of payday loan establishments” in the City (which is a “defined area” in the First By-Law: see, e.g., § 545-541(B)(1)) should be broadly interpreted as including not only the power to set an express numerical limit, but also the power to impose conditions that lead to attrition, which is another way to limit the number of payday loan establishments in the City.

[52] Thus, I conclude that the Impugned Provision is a valid exercise of the City’s authority to pass by-laws under subsection 8(2) of the COTA.

[53] I also conclude that the Impugned Provision does not violate subsection 92.1(2) of the COTA. The Impugned Provision, alone or in combination with the other criteria set out in the First By-Law, does not prohibit the operation of all payday loan establishments in the City. No such prohibition can be read or implied, as illustrated by the fact that there are more than 150 licensed payday loan establishments in Toronto.

[54] I do not accept that statements made by Councillor Nunziata reflect the purpose of the Impugned Provision or have any impact on the analysis to be conducted in this Application. As stated by the Supreme Court of Canada in R. v. Sharma, 2022 SCC 39 at para. 89:

Decontextualized statements by members of Parliament can be poor indicators of parliamentary purpose (see, e.g., Canada (Attorney General) v. Whaling, [2014] 1 S.C.R. 392, at paras. 67‑68). What is to be identified is the purpose of Parliament, being that of its collective membership as expressed in its legislative act, and not the purposes of its individual members. As this Court has recognized in R. v. Heywood, [1994] 3 S.C.R. 761, at p. 788, “the intent of particular members of Parliament is not the same as the intent of the Parliament as a whole”. [Emphasis in the original.]

[55] These principles apply equally to City Council.

[56] I note that the Applicant has not alleged that the Impugned Provision was enacted in bad faith. In any event, for a by-law to be set aside on the ground of bad faith, it must be proven that a majority of the members of council acted in bad faith. This is a very onerous test and a court should be slow to find bad faith simply because one or more members of council express strong views on an issue. The Applicant has neither alleged that a majority of councillors were acting in bad faith, nor offered any evidence in support of such an assertion. Anything that Councillor Nunzieta may have said or done in a committee meeting is insufficient to taint the decision made by City Council as a whole. See Langille v. Toronto (City), 2007 ONSC 15245 at paras. 38-39 (Ont. S.C.J.).

[57] I now turn to the Applicant’s arguments regarding discrimination and conflict with federal and provincial statutes.

i. Discrimination in the municipal law sense

[58] In R. v. Sharma, [1993] 1 S.C.R. 650, the Supreme Court of Canada summarized the law with respect to discrimination in the municipal law sense. It stated the following at 667-668:

I agree with Arbour J.A. that this case is governed by the decision of this Court in Montréal (City of) v. Arcade Amusements Inc., supra, with respect to the discrimination in the by-law scheme. In that case, the Court held that the power to pass municipal by-laws does not entail that of enacting discriminatory provisions (i.e., of drawing a distinction) unless in effect the enabling legislation authorizes such discriminatory treatment. See also Rogers, The Law of Canadian Municipal Corporations (2nd ed. 1971), at pp. 406.3-406.4:

It is a fundamental principle of municipal law that by-laws must affect equally all those who come within the ambit of the enabling enactment. Municipal legislation must be impartial in its operation and must not discriminate so as to show favouritism to one or more classes of citizens. Any by-law violating this principle so that all the inhabitants are not placed in the same position regarding matters affected by it is illegal.

The general principle does not apply where the enabling statute clearly specifies that certain persons or things may be excepted from its operation or expressly authorizes some form of discrimination.

The rule against discriminatory by-laws is an outgrowth of the principle that, as statutory bodies, municipalities “may exercise only those powers expressly conferred by statute, those powers necessarily or fairly implied by the expressed power in the statute, and those indispensable powers essential and not merely convenient to the effectuation of the purposes of the corporation" (Makuch, Canadian Municipal and Planning Law (1983), at p. 115).

The Court of Appeal found that free-standing street vendors and owners/occupiers of property abutting sidewalks are in different classes and could reasonably be treated differently in the licensing scheme. However, in Montréal (City of) v. Arcade Amusements Inc., supra, this Court recognized that discrimination in the municipal law sense was no more permissible between than within classes (at pp. 405-6). Further, the general reasonableness or rationality of the distinction is not at issue: discrimination can only occur where the enabling legislation specifically so provides or where the discrimination is a necessary incident to exercising the power delegated by the province (Montréal (City of) v. Arcade Amusements Inc., supra, at pp. 404-6). […]

See also 114957 Canada Ltée (Spraytech, Société d’arrosage) v. Hudson (Town), 2001 SCC 40 at paras. 28-29 (“Spraytech”).

[59] The goal of limiting the number of payday loan establishments in Toronto to protect consumers/borrowers is a permissible goal that is expressly endorsed by section 92.1 of the COTA and subsection 24(3) of the PLA, as amended by the PCFA. The City cannot achieve this goal without drawing distinctions. I note that the First By-Law, which the Applicant does not challenge, also draws distinctions (e.g., holders of provincial licences as of May 1, 2018 vs. holders of provincial licences after May 1, 2018). In my view, any distinction drawn by the Impugned Provision is a necessary incident to the power to limit the number of payday loan establishments in Toronto. See Spraytech at para. 29. I agree with the Respondent that the wording of section 92.1 of the COTA necessarily implies that the City can refuse to issue new payday loan establishment licences to control their number. See also subsection 86(1) of the COTA which, among other things, authorizes the City to impose conditions as a requirement of obtaining, continuing to hold or renewing a licence.

[60] Therefore, I find that there is no discrimination in the municipal law sense. The power to draw the distinction found in the Impugned Provision (i.e., persons who already hold a municipal licence vs. persons who do not hold a municipal licence) is necessarily implied by the expressed powers delegated to the City under the COTA.

ii. Conflict

[61] In order to determine if there is a conflict within the meaning of section 11 of the COTA, the following two questions have to be answered:

a. Is it impossible to comply simultaneously with the municipal by-law and with the federal or provincial Act or regulation? and

b. Does the by-law frustrate the purpose of Parliament or the Ontario legislature in enacting those laws?

If the answer to both questions is negative, then the by-law is effective. See Croplife at para. 63.

[62] With respect to the first question, a finding that a municipal by-law is inconsistent with a statute requires, first, that they both deal with similar subject matters and, second, that obeying one necessarily means disobeying the other: see Spraytech at para. 38 and R. v. Pahal, 2023 ONCA 13 at para. 46.

[63] There is nothing in the record before me that supports the conclusion that complying with the Impugned Provision would necessarily mean disobeying the Criminal Code, the PLA or the COTA. As noted by the Respondent, the Applicant has not pointed to any specific provision of the Criminal Code or the PLA with which the Impugned Provision allegedly conflicts. Further, obeying the Impugned Provision does not necessarily mean disobeying the prohibitions found in section 14 and subsection 92.1(2) of the COTA. In my view, the Applicant’s argument that the application of the Impugned Provision will necessarily lead to monopolies (in contravention of section 14) and, ultimately, no payday loan establishments (in contravention of subsection 92.1(2)) is premature and speculative. Thus, I find that the answer to the first question is negative.

[64] I also find that the answer to the second question is negative in that the Impugned Provision does not frustrate the purpose of Parliament and the Ontario legislature in enacting the relevant laws. With respect to section 347.1 of the Criminal Code, it cannot be concluded that limiting the number of payday loan establishments would be contrary to the purpose of this provision. Section 347.1 created an exception regarding criminal interest rate in favour of payday loans if certain conditions were met, including if the province where the payday loan establishment is located “has legislative measures that protect recipients of payday loan and that provide for limits on the total cost of borrowing”. The purpose of section 347.1 is to allow payday loan agreements as long as borrowers are protected by provincial legislation. Limiting the number of payday loan establishments does not frustrate this purpose, especially in a situation where the provincial legislation authorizes municipalities to limit the number of payday loan establishments.

[65] I similarly reject the Applicant’s submission that: (1) the purpose of the PLA is, in part, to create a regulatory framework that encourages competition; and (2) the Impugned Provision frustrates the purpose of the PLA as it will lessen competition amongst payday loan operations. The Applicant has not identified any specific provision of the PLA that had its purpose frustrated by the Impugned Provision. Instead of focusing on specific statutory provisions, the Applicant’s submissions regarding the frustration of the purpose of the PLA are vague and general.

[66] The Applicant’s general allegation that the purpose of the PLA is to encourage competition is based on various excerpts from Hansard that the Applicant picked and chose. As the Supreme Court of Canada stated in R. v. Sharma, 2022 SCC 39 at paras. 88-90:

[88] The most significant and reliable indicator of legislative purpose would, of course, be a statement of purpose within the subject law. Beyond that, generally, courts seeking to identify legislative purpose look to the text, context, and scheme of the legislation and extrinsic evidence, which can (subject to the caution we offer below) include Hansard, legislative history, government publications and the evolution of the impugned provisions (R. v. Safarzadeh-Markhali, 2014 SCC 42, at para. 31; R. v. Moriarty, 2015 SCC 55, at para. 31; Application under s. 83.28 of the Criminal Code (Re), [2004] 2 S.C.R. 248, at para. 37).

[89] Extrinsic evidence should be used with caution. Statements of purpose in the legislative record may be rhetorical and imprecise (R. v. Safarzadeh-Markhali, 2014 SCC 42, at para. 36; R. Sullivan, The Construction of Statutes (7th ed. 2022), at p. 293). Decontextualized statements by members of Parliament can be poor indicators of parliamentary purpose (see, e.g., Canada (Attorney General) v. Whaling, [2014] 1 S.C.R. 392, at paras. 67‑68). What is to be identified is the purpose of Parliament, being that of its collective membership as expressed in its legislative act, and not the purposes of its individual members. As this Court has recognized in R. v. Heywood, [1994] 3 S.C.R. 761, at p. 788, “the intent of particular members of Parliament is not the same as the intent of the Parliament as a whole”.

[90] Warnings of imprecision aside, legislative history can be useful in determining legislative purpose (R. v. Safarzadeh-Markhali, 2014 SCC 42, at para. 36). Two stages in the legislative process are of particular assistance (and this is true both of Parliament and of provincial legislatures). At second reading, the Minister who introduces the legislation sets out, usually in a formal and structured way, what the legislation is intended to achieve and the means by which it seeks to do so. Second reading is approval in principle. Following such approval, legislation is referred to committee for detailed, clause‑by‑clause consideration. Explanations provided to the legislative committee by the Minister, the Minister’s Parliamentary Secretary or departmental officials can provide further authoritative statements regarding intent. At the federal level, procedures in the Senate parallel those of the House of Commons. Thus, the second reading speech by the Senator who introduces the legislation, as well as the explanations by departmental officials at committee hearings, can also be useful. [Emphasis in the original.]

[67] In light of this guidance from the Supreme Court of Canada and based on the entirety of the evidence before me, I am of the view that the excerpts from Hansard that were selected by the Applicant to establish the purpose of the PLA are not reliable indicators of the legislature’s purpose.

[68] Moreover, the purpose of the PLA cannot be determined without taking into consideration the fact that it was later amended by the PCFA. The PCFA included, among other things, two related amendments: (1) the addition of section 92.1 to the COTA; and (2) the addition of subsection 24(3) to the PLA, which provides that a licensee shall not operate an office at a location if a by-law under section 92.1 of the COTA prohibits the operation of the office at the location. I find that the express reference to section 92.1 of the COTA in the PLA negates any suggestion that limiting the number of payday loan establishments in the City would frustrate the purpose of the PLA. The fact that the only restriction set out in section 92.1 is that the City cannot prohibit the operation of all payday loan establishments in the City completely eradicates, in my view, the possibility that the legislature’s purpose included encouraging competition in the payday loan industry.

[69] The fact that the purpose of the Ontario legislature was not to encourage competition in the payday loan industry is confirmed by the second reading speech of the Minister who introduced the PCFA, the Honourable Marie-France Lalonde. She stated, in part:

The bill, if passed, would also amend the Municipal Act, 2001, and the City of Toronto Act, 2006. The amendments would allow municipalities to regulate the number and location of payday lenders by passing by-laws.

Our government takes the protection of all consumers seriously. As you can see, Mr. Speaker, our government has been working on several fronts to better protect consumers using alternative financial services. The payday loans industry has been growing steadily throughout the past few years as reliance on these loans has increased significantly. Many of the members, me included, live in cities or municipalities where payday loan establishments have, we would say, almost grown like mushrooms in certain neighbourhoods over the years. In some cities, you can walk down the street with many payday loan establishments dotting just a single city block.

The availability of payday loan shops is often directly correlated to the proportion of low-income, vulnerable and at-risk borrowers. If payday loans are more visible for consumers, consumers in need are also more likely to rely on these lenders. As I mentioned earlier, the proposed legislation, if passed, would amend both the Municipal Act and the City of Toronto Act to allow for more local decision-making in the ability and the prevalence of payday loans, especially in higher risk areas.

By being allowed to pass bylaws to establish rules for payday loans, municipalities can take an informed and direct approach to slow or stop the growth of payday loan establishments. If they’re not as abundantly available, some consumers may be less likely to rely on them. Giving municipalities more powers in regard to this issue is a result of listening to their concerns in consultations and meetings.

We know there are many people for whom payday loans are a last resort, and due to the costly nature of these loans, we would like to keep it as such: a last resort. The main issue for most is not the initial loan, but getting trapped in a debt spiral when prior loans are paid off with new loans. These financial instruments have very high interest, and when desperate, borrowers may see past this. [Emphasis added.]

[70] Thus, after considering the text, context and scheme of the PLA, as well as amendments made to it and Hansard, I find that the purpose of the PLA is focused on consumer protection, not on helping the payday loan industry or on encouraging competition or growth in this industry.

[71] In light of the foregoing, I conclude that the Impugned Provision does not frustrate the purpose of Parliament in enacting section 347.1 of the Criminal Code or the purpose of the Ontario legislature in enacting the PLA.

[72] Accordingly, there is no conflict within the meaning of section 11 of the COTA. The Impugned Provision is valid and effective.

D. CONCLUSION

[73] The Application is dismissed.

[74] If costs cannot be agreed upon, the Respondent shall deliver submissions of not more than three pages (double-spaced), excluding the bill of costs, by May 15, 2023. The Applicant shall deliver its responding submissions (with the same page limit) by May 29, 2023. The submissions of all parties shall also be sent to my assistant by e-mail and uploaded onto CaseLines.

Vermette J. Date: May 1, 2023

[1] The modern approach to statutory interpretation applies to municipal by-laws: see Montréal (City) v. 2952-1366 Québec Inc., 2005 SCC 62 at para. 10 and St. Mary’s Cement Inc. v. Clarington, 2011 ONSC 1533 at paras. 15-16.