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Follow us on TwitterA recent Court of Appeal decision in Friends of Lansdowne v. City of Ottawa et. al. confirms that procedural irregularities are not grounds to overturn a municipal decision.
This case dealt with a redevelopment of Lansdowne Park in Ottawa. The community park is home to a football stadium , a hockey arena and the historic Aberdeen Pavilion exhibition hall. In late 2009 the City approved a redevelopment plan proposed by a private consortium named Ottawa Sports and Entertainment Group which hoped to house a CFL franchise at the redeveloped park. The redevelopment plan would renovate the existing arena and stadium, build 330,000 square feet of office, retail and residential space, add underground parking and a new urban park. Heritage buildings would be relocated. Under the plan, the City would (among other items) contribute $3.8 million per year, pay for some of the costs of the Plan, enter into a 50 year lease for 10.2 acres for an annual rent of $1.00 for the first 30 years, and grant construction and management contracts to the Ottawa Sports and Entertainment Group.
Friends of Lansdowne challenged the 2010 by‑law that allowed the redevelopment to proceed. The Friends of Lansdowne were unsuccessful in court and appealed on three grounds: illegal bonus, failure to conform with procurement requirements and bad faith.
Section 106 of the Municipal Act, 2001 prohibits Ontario municipalities from granting “bonuses” to assist businesses including by lending property or money or leasing property at below fair market value. The Ontario Court of Appeal reviewed the history of section 106 and found that it was intended to prohibit inducements for an enterprise to establish and maintain itself in a municipality. At length, the Ontario Court of Appeal noted the extensive use of public private partnerships and the frequent conferring of advantages in municipal contracts. The Court of Appeal then held that it is not the granting of any advantage that is prohibited by section 106 but only the granting of an “obviously undue” advantage. Noting that the City Auditor found the arrangement and distribution of risk “reasonable” the Court of Appeal dismissed this ground of appeal.
The Court of Appeal also dismissed the other grounds raised by the Friends. It found that there was no evidence of bad faith and that the City’s breaches of its procurement policy were purely technical in nature. At para. 84 the Court of Appeal stated:
[84] It is not for the courts to second-guess or reweigh policy and financial considerations that informed the City’s decision to advance the development…
Although both the application judge and the Court of Appeal acknowledged that erroneous financial data was provided to Council both courts agreed that it was too difficult to expect the City to present accurately “all the intricacies of the complicated public private agreement” to Council.
Friends of Lansdowne decided not to appeal to the Supreme Court of Canada. The Ontario Court of Appeal decision stands. The Appeal decision is disappointing: it constrains s.106 of the Municipal Act, 2001 based largely on policy grounds. The wording of the section could have supported a broader interpretation of “bonuses”. While public private partnerships may have become commonplace, the court should defer to the legislature’s actual wording on what financial relationships are to be allowed. The legislature did not use the wording “obviously undue advantage” adopted by the Court of Appeal, nor did it provide that bonuses determined “reasonable” by an auditor were no longer “bonuses”. In the wake of the Ontario Court of Appeal’s decision, it is no longer clear what s.106 means or if it can any longer have any practical impact on municipal business subsidies.
Following the logic of the Court of Appeal it would seem that as long as the Municipality receives some type of “reasonable” benefit (whether or not fair market) from a P3 relationship it is difficult to challenge. In a similar BC case a scheme that involved granting waterfront land to a developer for a dollar was upheld as in the “public interest”. This BC case was cited with approval this year by an Ontario Court in a failed waterfront development challenge. In the Friends of Lansdowne case, even when the Council didn’t have accurate information about the deal it entered into and there were questions about compliance with the City’s procurement rules, there was no legal remedy for the Friends of Lansdowne.
What should the rules be for municipalities entering into P3 partnerships and what powers should citizens have to bring questionable financial deals before the courts? Should section 106 of the Municipal Act, 2001 be amended to reflect the need for better controls and oversight in P3 relationships? It seems worth asking if allowing complex P3 partnerships that are not scrutinized by council or the public in detail is in the public interest. Whatever your view, it appears that limits that might have been placed on municipal wheeling and dealing by s.106 have been lifted in the wake of Friends of Lansdowne.
