Friends of Lansdowne Inc. v. Ottawa (City)

Friends of Lansdowne Inc. v. Ottawa (City) Collection Decisions of the Court of Appeal Date 2012-04-30 Neutral citation 2012 ONCA 273 Docket numbers C54206 Judges Winkler, Warren Keith; Blair, Robert Ashley; Lang, Susan Elizabeth Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273 DATE: 20120430 DOCKET: C54206 Winkler C.J.O., Blair and Lang JJ.A. BETWEEN Friends of Lansdowne Inc. Applicant (Appellant) and City of Ottawa (Respondent) Respondent and Ottawa Sports and Entertainment Group Intervener Steven Shrybman and Steven Barrett, for the appellant Peter K. Doody and Katherine Humphries, for the respondent K. Scott McLean, for the intervener Heard: November 28, 2011 On appeal from the judgment of Regional Senior Judge Charles T. Hackland of the Superior Court of Justice, dated July 28, 2011, with reasons reported at 2011 ONSC 4402, 107 O.R. (3d) 104. Lang J.A.: A. INTRODUCTION [1] The respondent, City of Ottawa, proposed to redevelop its important landmark, Lansdowne Park, by way of a public private partnership between the City and the Ottawa Sports and Entertainment Group (OSEG), a consortium of developers. After two-and-a-half years of discussion and consultation, City Council passed a by-law in June 2010 advancing the development. Friends of Lansdowne Inc., which formed to oppose the development, applied to quash the by-law. Its application was dismissed. [2] Friends appeals arguing that the application judge erred on three main points. First, it argues that the approved development provides financial “assistance” in the nature of a “bonus” to OSEG, contrary to s. 106(1) of the Municipal Act, 2001, S.O. 2001, c. 25 (Act). Second, Friends argues that the by-law that approved the development did so in breach of the City’s own procurement by-laws. Finally, Friends argues that the City acted in bad faith in approving the proposed development. [3] For the reasons that follow, I would dismiss the appeal. In my view, the application judge, Hackland R.S.J., correctly interpreted and applied the provisions of the Act. He appropriately and comprehensively considered Council’s decision in light of his legal conclusions, including the financial ramifications and mutual obligations contained in the proposed development plan. His reasons support his conclusion that the by-law did not provide an illegal bonus or procurement as well as his conclusion that the by-law was not passed in bad faith. Accordingly, I would dismiss the appeal. B. bACKGROUND [4] Beginning in 1967, Lansdowne Park housed both a 20,172-seat football stadium and a 9,261-seat hockey arena. Until the Canadian Football League suspended the franchise in 2006, the stadium was the home field first for the Ottawa Rough Riders and later for the Ottawa Renegades. The arena has also been the long-term home ice for the Ottawa 67’s of the Ontario Hockey League. The Park also provides a home for important heritage buildings. The balance of the Park is generally covered in asphalt and used for parking. [5] By 2007, the Park was in serious need of redevelopment. Council considered holding a design competition. However, in 2008, Council tabled that proposal before it received final approval and chose instead to consider the unsolicited proposal it received from OSEG. [6] In 2009, the City Manager filed a Report to Council concerning OSEG’s proposal. Council authorized staff teams and outside consultants to enter into the negotiation of a public private partnership with OSEG for the Park’s development. As the application judge noted, the City initially authorized negotiations with two objectives: the revenue neutral objective “of not increasing the overall costs to the taxpayer” and the sports teams objective of not using revenues from the revitalized Park “to subsidize any professional sports teams.” [7] The proposed partnership is envisioned as a joint commitment by the City and OSEG to develop five components of the property, the first of which is the renovation of the arena and stadium for the hockey and football teams. The second and related component is the acquisition of the two sports franchises, one of which currently operates at the site. The third involves the construction of over 330,000 square feet of office, retail and residential space and the fourth, the provision of extensive underground and surface parking. Finally, the property will include an urban park, which will involve relocation of the heritage buildings within the site. [8] In September 2009, Council considered what became known as the Lansdowne Park Plan (Plan), which initially consisted of a formal Memorandum of Understanding and a Redevelopment Plan that contained the fundamental elements of the proposed financial arrangements for the development. PricewaterhouseCoopers issued a report. Other reports came in. Negotiations continued. Changes were made. The City engaged in lengthy broad-based consultation with experts and the public and commissioned a report from its own Auditor General. The City sought outside legal advice, including on the question of bonus. The consultation included detailed consideration of the cost and revenue implications of the Plan. [9] In 2010, based on a record of comprehensive consultation, and in conformity with the advice of its Auditor General, Council conditionally passed the impugned by-law. [10] Friends launched its application challenging the by-law. This resulted in a comprehensive record for the application judge, including lengthy affidavits and detailed cross-examinations. During those cross-examinations, it became apparent that particular financial information before Council at the time it passed the by-law was in error. However, that error does not affect the decision in this case because, as the application judge observed, Council will have another opportunity to reconsider the development with the corrected data before providing its final approval.[1] C. ISSUES [11] Friends argues that the application judge erred in determining: (i) the appropriate standard of review of the City’s by-law; and (ii) whether the by-law was passed without jurisdiction because: (a) the development Plan provided an illegal bonus for the purpose of assisting OSEG contrary to the Municipal Act; (b) the development Plan failed to conform with the City’s procurement requirements; and (c) the City acted in bad faith in passing the by-law. D. analysis (1) Standard of Review [12] Since municipalities are creatures of statute, their jurisdiction is limited to the powers provided by the legislature. Accordingly, a city does not have jurisdiction to pass a by-law that authorizes acts prohibited by its governing legislation. Since a city has no particular expertise in jurisdictional issues, a court will review the legality of a municipal by-law on the standard of correctness: see London (City) v. RSJ Holdings Inc., 2007 SCC 29, [2007] 2 S.C.R. 588, at para. 37. Section 273(1) of the Act gives the Superior Court the discretion to “quash a by-law … for illegality.” [13] Absent illegality, municipal by-laws are well insulated from judicial review. Section 272 of the Act prohibits a review of a by-law passed in good faith “in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law.” Thus, a court cannot interfere with a by-law that is unreasonable, but a court may quash one that is illegal. [14] In reviewing a decision quashing or refusing to quash a by-law for illegality, an appellate court must give a high degree of deference to the judge’s findings of fact and the inferences drawn from those facts. While generally the appropriate standard of review on questions of law is correctness, courts are cautioned in cases involving municipal challenges to require “clear demonstration” before concluding that a municipality’s decision is made without jurisdiction: see Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342, at para. 36, citing Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231, at p. 244. [15] Courts reviewing decisions made within jurisdiction must apply a deferential standard: see Nanaimo, at para. 35. As the application judge explained, provided they act with jurisdiction, municipalities are accountable to their constituents, and not to the courts. [16] Counsel do not take issue with this standard of review, but part company on whether the reviewing judge properly applied it to the issues in this case. This is best addressed by looking at the individual questions that were before the application judge. (2) Jurisdictional Challenges (a) Did the development agreement provide an illegal bonus to OSEG? [17] I turn first to the question of whether Council lacked jurisdiction to pass the by-law because it effectively provided an illegal bonus to OSEG. [18] An illegal bonus is addressed in s. 106(1) of the Act, which prohibits a municipality from granting a bonus for the purpose of assisting certain entities, including any commercial enterprise in these words: Despite any Act, a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose. [Emphasis added.] [19] Section 106(2) sets out certain types of prohibited assistance, including (a) “giving or lending any property of the municipality” and (c) “leasing or selling any property of the municipality at below fair market value.” In this case, as the application judge explained, Friends takes the position that the City was granting OSEG a bonus because the terms of the Plan included provision for the lease of the sports facilities and the commercial properties for a nominal rent for the first thirty years of the development. In addition, Friends argues that the Plan offends the prohibition against bonuses by providing subsidization of the sport franchises through cash payments to OSEG under the “waterfall distribution of revenues”, a term I will explain briefly later in these reasons. Finally, Friends challenges the City’s $35 million undertaking to build the urban park, which it argues provides a “bonus” to the commercial development aspect of the project. [20] In response, the City and OSEG argue that, when considered as a whole, the Plan represents a negotiated balancing of risks and obligations that does not provide OSEG with a bonus. [21] With that background in mind, I approach the question this way: (i) What is the proper approach to the interpretation of the statutory restrictions placed on the municipality’s powers? (ii) Should the impugned terms be considered in isolation or in the context of the terms of the Plan as a whole? and, (iii) Do the terms of the Plan, properly interpreted, provide OSEG with an illegal bonus? (i) The approach to interpretation [22] The modern rule of statutory interpretation requires that “the words of an Act ... be read in their entire 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”: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26, citing Elmer A. Driedger, Construction of Statutes, 2d ed. (Toronto: Butterworths, 1983), at p. 87. [23] Thus, the objective of the legislation informs the interpretation of its provisions. In this case, s. 2 provides that the purpose of the Act is to create municipalities as “responsible and accountable governments with respect to matters within their jurisdiction” and to give municipalities “powers and duties … for the purpose of providing good government.” To ensure municipalities can fulfill that purpose, the Act specifies in s. 8(1) that municipal powers are to be “interpreted broadly so as to confer broad authority … to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality’s ability to respond to municipal issues.” Thus, the province intends municipalities to have expansive powers to self-govern in relation to matters within their jurisdiction. [24] In Croplife Canada v. Toronto (City) (2005), 75 O.R. (3d) 357, at para. 34, this court explained that the Act was amended “to give municipalities in Ontario ‘the tools they need to tackle the challenges of governing in the 21st century’” and, at para. 37, that generally 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.” [25] This approach was also discussed in Fourth Generation Realty Corp. v. Ottawa (City) (2005), 254 D.L.R. (4th) 315 (Ont. C.A.), at para. 29, where Gillese J.A. observed that municipalities have enhanced responsibilities arising from the download of services to them by the federal and provincial governments. Cognizant of these increased governing responsibilities, Gillese J.A. described the modern approach to interpretation that gives a “liberal and benevolent interpretation” to municipal powers and confines findings that municipal by-laws are ultra vires to “the clearest of cases”: see para. 36. [26] The broad powers given to municipalities are restricted by s. 106, which, among other things, prohibits a municipality from granting a bonus to a commercial enterprise. Restrictions on a statutory power are generally construed narrowly in order to give effect to the purpose of the power conferred. Ruth Sullivan, in Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis Canada Inc., 2008) explains at p. 484, given the current focus on the purpose of legislation, that “modern courts are particularly concerned that exceptions and exemptions be interpreted in light of their underlying rationale and not be used to undermine the broad purpose of the legislation.” As LaForest J. stated in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, at p. 1207, an exception “should not be construed more widely than necessary to fulfil the values which support it.” (i) Whether the impugned provision should be interpreted in context [27] Friends argues that the application judge erred in failing to test each individual provision of the Plan to see whether it complied with the requirements of s. 106, while the City argues that the application judge took the correct approach by considering the Plan as a whole. [28] In my view, the application judge was correct in rejecting Friends’ provision-by-provision argument. Such a parsing of the Plan would be contrary to the seminal rule that provides for a contextual approach to the interpretation of terms in a contract: see Geoff R. Hall in Canadian Contractual Interpretation Law, 1st ed. (Canada: LexisNexis, 2007) at para. 2.2.1; Canadian Newspapers Co. v. Kansa General Insurance Co. (1997), 30 O.R. (3d) 257 (C.A.), at p. 270, leave to appeal to S.C.C. refused, [1990] S.C.C.A. No. 553; and Toronto Dominion Bank v. Leigh Instruments Ltd. (2000), 45 O.R. (3d) 417 (C.A.), at para. 9. Accordingly, an isolated provision cannot be interpreted as a prohibited bonus if that interpretation is not available upon a reading of the contract as a whole. [29] The purpose of a contextual approach to interpretation is highlighted in this case where the benefits and obligations of the Plan are complex and interdependent and the impugned terms are but components of a much larger picture. The interdependence of the terms is apparent from the Plan’s “waterfall distribution of revenues.” The application judge reviews this structure in his reasons. Overall, he describes it as an intertwining or pooling of “all revenues and losses from the sports teams and athletic facilities as well as the commercial and retail components of the LPP” for the first thirty years of the life of the Plan: see para. 46. It is in the context of this structure that Friends challenges the components concerning leases, the sports franchises and the urban park. [30] I agree with the application judge that the impugned terms of the waterfall distribution cannot be isolated from the other terms. Rather, the components of the waterfall structure in the context of the Plan as a whole must be considered to see whether there is an illegal bonus. [31] Accordingly, I see no error in the application judge’s conclusion that the challenged provisions must be interpreted in the context of the broad purpose of the Act and the interdependent nature of the terms of the Plan. I turn to the core question of whether the Plan provides an illegal bonus. (ii) Did the Plan provide an illegal bonus? [32] To determine whether the Plan provides an illegal bonus to OSEG, it is helpful to consider first the parameters of Ontario’s prohibition on bonuses in light of its legislative history. [33] Early legislation specifically empowered municipalities to pass by-laws to provide aid, apparently in order to attract certain industries to a particular municipality. For example, the Municipal Institutions Act, S.C. 1866, c. 51, was amended in 1871, 1873 and 1877 to allow by-laws to provide bonuses to railways and manufacturing businesses. [34] In 1900, the legislature provided a lengthy definition of “bonus” by providing examples, such as granting money, issuing guarantees, and gifts of land: see Municipal Amendment Act, S.O. 1900, c. 33, s. 10. The Consolidated Municipal Act, S.O. 1903, c. 19 in s. 591a continued the definition of bonus, but introduced controls such as requirements for electoral consent and a cap on permitted amounts: see s. 591(12). [35] The 1914 Municipal Institutions Act, R.S.O. 1914, c. 192, s. 396 permitted the “granting [of] a bonus for the promotion of manufactures in the municipality, or for the promotion of iron works, rolling mills, works for refining or smelting ore, or the establishment of grain elevators, or aiding a beet sugar factory ...”. This version of the Act added additional controls on bonus by-laws, such as a prohibition against the granting of bonuses to the branch of an industry of a similar nature to one already established in the community. [36] The legislature refined the definition of bonus in 1922, then enacted a separate statute entitled the Bonus Limitation Act, 1924, S.O. 1924, c. 56. This Act also permitted bonuses, but with restrictions. The Act was repealed and its provisions subsumed into An Act to Amend the Municipal Act, S.O. 1950, c. 46, s. 23. [37] Bonuses “in aid of any manufacturing business or other industrial or commercial enterprise” were first prohibited in 1961 in An Act to Amend the Municipal Act, S.O. 1961-62, c. 86, s. 36. The 1961 prohibition continued through various iterations of the Municipal Act until 1986, when specific examples of prohibited assistance were added, including the “giving or lending of any property of the municipality, including money” as well as the “leasing or selling any property of the municipality at below fair market value”: see An Act to Amend the Municipal Act, S.O. 1986, c. 24, s. 112. These prohibitions are similar to those at issue in this case. [38] When the 1986 amendments were introduced, it was explained that they were intended to clarify what constituted a bonus and to level the playing field between municipalities, making “it clearer to municipalities that they can be competitive but also that they have limitations”: see Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 70 (16 December 1985) and No. S-19 (26 June 1986) (Hon. Mr. Grandmaître). [39] In 1989, the statutory examples of a prohibited bonus were slightly modified, and the provision similar to today’s s. 106 appeared as s. 111 in the consolidated statutes of 1990. The amendments since then do not further inform the interpretation of the provision, although the parliamentary debates at the time of certain of those amendments confirm the purpose of the prohibition. [40] When the 2001 Act was debated, the discussion again centred on the objective of ensuring a level playing field so that municipalities were prohibited from offering financial incentives to an industry or business to locate in that particular municipality and to prevent municipalities from “giving all kinds of grants and money to companies” to attract them to a particular location: see Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 60B (31 October 2001), at 2120 (James J. Bradley). That said, it is of note that the s. 106 prohibition is located under the section of the Act entitled “Economic Development Services”. After setting out the prohibition against bonuses in s. 106, the remaining provisions set out a municipality’s jurisdiction to provide assistance in the nature of grants and loans. [41] I turn from the legislative history of the provision to the ordinary meaning of the chosen word “bonus” as reflected in dictionary definitions. The Shorter Oxford English Dictionary, 3d ed., defines “bonus” as “a boon or gift over and above what is normally due.” Similarly, Black’s Law Dictionary, 8th ed., defines “bonus” as “bounty”, which in turn, is defined as “a premium or benefit offered or given, especially by government, to induce someone to take action or perform a service.” [42] The rationale for the bonus prohibition is canvassed in Ian MacFee Rogers, The Law of Canadian Municipal Corporations, 2d ed., looseleaf (Toronto: Thomson Reuters Canada Ltd., 2009) at s. 146.2 where the author describes the prohibition as one against “the giving of aid in some form or other to induce some undertaking to establish and maintain itself in the municipality.” Stephen Auerback and John Mascarin in The Annotated Municipal Act, 2d ed., looseleaf (Toronto: Carswell, 2009) at p. MA3-252.1, describe s. 106 as “a longstanding provision which is designed to prevent municipal corporations from giving an unfair advantage to private parties in the commercial market place.” [43] I turn to consider this review of the meaning of “bonus” in the context of the argument before the application judge in this case. [44] The Plan is said not to involve a bonus in the sense reflected in the legislative debates of granting an unfair advantage or windfall to OSEG in preference over another competitor or of inducing OSEG to develop in Ottawa as opposed to in another municipality. Thus, the challenged Plan does not reflect the specific problem that s. 106 and its predecessors were seemingly enacted to address. However, Friends argues that the Plan, or more tellingly, particular features of the Plan, nonetheless constitute an illegal bonus within the plain meaning of s. 106 in the sense that they constitute an inducement or windfall to OSEG at the expense of the City. Friends frames this as an allegation of illegal bonus, while the City responds that Friends is actually challenging the merits of the financial deal, a challenge that all acknowledge is not available as long as the transaction is found to be within the City’s jurisdiction. [45] The resolution of this argument requires two steps. The first step asks the legal question of what constitutes an illegal bonus. The second step involves an application of the legal test to the terms of the Plan. The appellant argues that the application judge conflated these two steps by dealing with the appellant’s challenge to the legality of the By-law as a complaint about the merits of the Plan. I do not agree. [46] In concluding the Plan did not grant an illegal bonus, Hackland R.S.J. first examined the legal question. He adopted the approach taken by McEwan J. in Kendrick v. Nelson (City) (1997), 31 B.C.L.R. (3d) 134 (S.C.), another case involving a public private partnership for municipal development. He interpreted s. 292(d) of the British Columbia Municipal Act, R.S.B.C. 1979, c. 290 which does not use the word “bonus”, but rather prohibits the granting of “assistance”, including the “granting as a gift property owned by the municipality.” At para. 65, McEwan J. concludes that “assistance”, within the context of the B.C. legislation, means the “conferring of an obvious advantage.” In answering whether the development plan before him conferred an obvious advantage to the developer, McEwan J., at para. 56, concluded that the development plan did not demonstrate that the developer received “something for nothing”. In addition, in his view, the “complicated matrix of covenants, viewed as a whole, do not clearly confer a benefit on [the developer] unsupported by any concomitant obligation benefitting the City”: see para. 65. In other words, McEwan J. found a balance between the benefits and the obligations of the development plan. [47] 1085459 Ontario Ltd. v. Prince Edward County (Municipality) (2006), 77 O.R. (3d) 144 (S.C.J.) similarly involved an allegation of illegal bonus in the context of a public private municipal joint venture, this time in Ontario. In that case, Hackland R.S.J. (also the application judge in this case) agreed with McEwan J.’s reasoning in Kendrick. Hackland R.S.J. concluded that “assistance” in the B.C. legislation and “bonus” in Ontario’s Act should both be interpreted to mean the conferring of an “obvious advantage”. In his analysis, he observed the growth of municipal reliance on public private joint partnerships and the “increasing importance [of those partnerships] in the establishment of municipal facilities”. He also noted that such partnerships by their nature involve an inherently “complex exchange of benefits, assets and services” to facilitate the proposed development: see para. 13. [48] Hackland R.S.J. applied the legal principle of “obvious advantage” from Kendrick and Prince Edward County to this case. [49] The parties do not dispute the correctness of that principle, only its application. Nonetheless, it is worth observing that the concept of an obvious advantage or undue benefit makes sense. All municipal contracts confer an advantage or benefit of some kind because, in the normal course, they inevitably provide assistance or an advantage by providing work and consequent profit to the contractor. However, that advantage simply reflects fair compensation for work undertaken. Interpreting “bonus” to prohibit ordinary contracts, or specific provisions of a contract, would clearly lead to an absurd result. Thus, the granting of an advantage is to be anticipated; the granting of an obviously undue advantage is prohibited. This interpretation is supported by the legislative choice of the word “bonus”, which suggests that the advantage prohibited is one that is undue; that is, on the spectrum of benefits, it falls closer to providing a party with an unmerited windfall. [50] The application judge correctly applied this test to the impugned provisions, cognizant of their importance as components, albeit essential components, of a complex public private partnership. At this step of the process, the question is not whether the City made a good deal but whether the Plan provided OSEG with an undue advantage. Expert opinion was necessary to understand the complex provisions of the Plan, including the waterfall revenue distribution. [51] In addition to other reports it received, Council commissioned a report from its Auditor General pursuant to s. 223.19(1) of the Act. When such a report is commissioned, the Auditor General is required to provide advice “in an independent manner” so that Council can properly hold itself “accountable for the quality of stewardship over public funds and for achievement of value for money in municipal operations”: see s. 223.19(1.1). [52] After an exhaustive review of the terms of the Plan, the Auditor General concluded that the waterfall revenue distribution achieved an appropriate balance between the parties based on assumptions he found to be reasonable. He gave the opinion that “there is an appropriate amount of risk for each party.” As well, he concluded that after examining “all of the assumptions for the various structures”, the distribution scheme appeared to be “reasonable and fair to both parties.” [53] The application judge adopted the opinion of the Auditor General and was “not persuaded that OSEG has received any obvious advantage in the [Plan]”: see para. 84. This step of the process was largely fact-driven, although elements of policy were involved, including recognition of the importance of bringing the sports franchises to the Park. [54] As McEwan J. explained in Kendrick, at para. 65, where a municipality otherwise properly exercises its powers “within the realm of public policy, I do not think [a statutory prohibition against ‘assistance’] is an available mechanism to obtain a review of the contract, weighing the tangible and inchoate benefits, to determine if the municipality has made a good deal or not.” [55] The Auditor General’s opinion was not successfully challenged by opinions to the contrary provided by Friends or by any of the more than 100 presenters during the City’s lengthy public hearings. [56] On the basis of the correct application of the law and findings concerning the terms of the Plan, the application judge was entitled to conclude that the City had jurisdiction to pass the by-law because it did not grant the alleged illegal bonus. [57] Given this conclusion, s. 272 of the Act prohibits a review of the merits of the Plan on any argument of “unreasonableness”. [58] I see no basis to interfere with his decision. (b) Was the by-law outside the City’s jurisdiction because the underlying agreement breached the City’s procurement requirements? [59] Section 270 of the Act requires a municipality to “adopt and maintain policies,” including for the “procurement of goods and services.” Procurement policies are designed to ensure the integrity and transparency of a municipality’s procurement system. [60] In this case, Ottawa passed a Purchasing By-law that explains its objective in s. 2(1) as aiming to obtain the best value for “purchasing goods, construction and services for the City while treating all suppliers equitably.” To achieve this goal, s. 2(2) provides the guiding principle “that purchases be made using a competitive process that is open, transparent and fair to all suppliers.” [61] Section 22(1)(d), which was also in force when the proposal was first received, provides for the waiver of competitive bidding and its replacement by negotiations where “there is an absence of competition for technical or other reasons and the goods, services or construction can only be supplied by a particular supplier and no alternative exists.” [62] Section 25(2) requires that any unsolicited bid from private sector parties must comply with the Purchasing By-law and with the Ottawa Option Policy that it references. [63] One version of the Option Policy was in force when Ottawa first received OSEG’s bid in 2008 and a different version when the City approved the Plan in 2010. The 2009 Policy set out a detailed process to be followed upon receipt of an unsolicited bid for offers involving “improved services, reduced cost, costs avoidance, or [providing] other benefits.” The process was intended to eliminate any “perception of bias, and [ensure] transparency, fairness and best value for the City.” The Policy provided that, after evaluation, the City could reject the bid, request amendments, or seek approval if the bid met certain criteria, including that it was acceptable under “section 22 of the Purchasing By-law dealing with the issue of Non Competitive Purchases.” The Option Policy also required consideration of independent oversight: see the 2009 Option Policy, Part II Evaluation, at para. 2(c). [64] As the application judge concluded, the City and members of Council were of the view that the Option Policy did not apply because the OSEG proposal was for land development rather than for the purchase of goods, services, or construction. When the City Manager reported on the OSEG proposal in September 2009, he advised Council that negotiation was an acceptable replacement for competition because s. 22(1)(d) of the Purchasing By-law provided for negotiation rather than competition where OSEG was the only entity that could bring the sports franchises to the table. [65] After careful consideration, the application judge arrived at three conclusions. First, he accepted that the City proceeded with the OSEG negotiation in a manner that it believed complied with its procurement requirements. Accordingly, there was no issue of bad faith. Second, he concluded that, in any event, the detailed negotiation and evaluation of the OSEG proposal “essentially [met] the process required under the Ottawa Option Policy.” In other words, any technical failure on the part of the City to invoke the Option Policy was addressed in substance by the detailed consultation process the City undertook before approving the Plan. Finally, the application judge determined that the exemption to the competitive bid requirement in s. 22(1)(d) of the Purchasing By-law was applicable because OSEG was the only available supplier. On these bases, he dismissed Friends’ procurement argument. [66] On appeal, the appellant argues that the City was precluded from receiving OSEG’s proposal when the earlier proposal for a design competition was outstanding. [67] This argument is based on the 2002 Option Policy in place in 2008 that the appellant argues did not allow for the receipt of an unsolicited bid when a competitive procurement process had been “initiated or is planned to be initiated.” The appellant takes the position that, since the City could not receive the OSEG proposal, all future approvals of the development by the City were void or illegal. [68] The appellant’s position fails for one main reason. The City’s decision to proceed with the OSEG proposal rather than the design proposal was implicit in the subsequent approvals given by Council to the development in 2008 as well as through 2009 and 2010. Any contravention upon the initial receipt of the OSEG proposal would have been merely technical and could not invalidate the by-law considered and passed in 2010. Moreover, as observed by the application judge, the finding of compliance with procurement policies was supported both by the opinion of the Auditor General, who specifically considered the matter at the time, as well as by an outside legal opinion commissioned by Council. [69] These opinions were before Council when it passed the by-law approving the Plan in 2010. Council was also well aware of the importance of the procurement principles of transparency and accountability. The process it adopted in fact replaced competition with negotiation and enabled interested persons to make comprehensive submissions regarding the merits and shortcomings of the Plan. Indeed as the application judge concluded, the process undertaken effectively complied with the provisions of the Purchasing By-law and the Ottawa Option Policy. [70] Assuming the absence of bad faith, any technical failure on the part of the municipality to adhere to its internal rules and procedures is an irregularity that does not vitiate the challenged decision. This was not a case where the City transgressed against statutorily-mandated requirements. [71] Citing Blyth v. Northumberland (County) (1991), 75 O.R. (2d) 576, at p. 582, the application judge concluded that the by-law ought not to be quashed because any technical non-compliance with the Option Policy did not contravene any statutorily-mandated requirements. [72] Rogers at s. 48.22 discusses technical objections of the type raised by Friends: The procedure adopted by a council in passing by-laws or in transacting any other business within its jurisdiction, in the absence of express statutory requirements, is a matter wholly of domestic concern and internal regulation. The courts will accordingly not give effect to objections based upon the failure of council to observe its established procedure, unless there is clear evidence of bad faith or fraudulent intent(s). … The rule permitting councils to depart from their internal regulations is not applicable, however, where the council, in disregarding provisions of its own procedural rules, has also disregarded provisions of some statutory requirement. In such case, the by-law passed in contravention thereof may be quashed. … But simply because procedural regulations are passed pursuant to statute they are not statutory in the sense that the council, by reason of having enacted a procedural by-law, has lost control of its proceedings. [73] The court’s discretion to quash a by-law was also discussed by the Supreme Court of Canada in London, which set out the relevant factors that inform the court’s exercise of discretion including, “the nature of the by-law in question, the seriousness of the illegality committed, its consequences, delay, and mootness”: see para. 39. There can be no doubt that any breach of the City’s procurement provisions in this case was merely technical in nature. The objectives of those provisions, integrity and transparency, were more than met by the process undertaken by the City. In my view, the application judge made no error in refusing to quash the by-law. I would not give effect to this ground of appeal. [74] I deal briefly with two other arguments raised by the appellant on the subject of the 2002 Option Policy. The first one deals with the wording of the Policy. The appellant argues the Policy prohibits “an unsolicited proposal where a competitive procurement process had been ‘initiated or is planned to be initiated’.” However, this is not what the Policy provides. Rather, the Policy simply describes a “fair and practical” process that begins with the bidder submitting a proposal for a project that “was not initiated or is not planned to be initiated by the City.” The guidelines to help a bidder do not impose a mandatory requirement on the City restricting the bids that it may consider. I would not give effect to this argument. [75] Second and in any event, the appellant’s argument ignores the evidence referred to by the application judge that, on November 12, 2008, the “motion to restart the design competition was tabled pending the evaluation of the OSEG proposal.” Moreover, the evidence discloses that the proposed design competition was never approved and the report that may have resulted in approval was put on hold in May 2008 for reasons related to the stadium’s structure, as well as to suggestions that an unsolicited bid might be forthcoming. When the OSEG proposal was advanced, a motion to re-start the design competition was tabled. The design competition was not in play. [76] For these reasons, I would not give effect to this ground of appeal. (c) Did the City negotiate and approve the by-law in bad faith? [77] A by-law may be quashed for unreasonableness if passed in bad faith: see s. 272 of the Act. [78] At this court, Friends argues that the application judge erred in identifying and applying the test for bad faith. In particular, Friends argues that the application judge failed to consider the cumulative effect of the allegations of bad faith, the Plan’s failure to meet Council’s initial objectives, the erroneous information provided to Council and Friends’ expert evidence. [79] Before considering Friends’ argument on appeal, I observe that the application judge properly identified the heavy burden on the appellant to establish bad faith and to do so on the part of the majority of the members of Council. The application judge quoted Laskin J.A. in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 35 O.R. (3d) 321 (C.A.), explaining that bad faith by a municipality “connotes a lack of candour, frankness and impartiality” and “includes arbitrary or unfair conduct and the exercise of power to serve private purposes at the expense of the public interest.” [80] In his reasons, the application judge explained the appellant’s submissions about bad faith at para. 22. He observed that Friends did not allege any improper motive on the part of any member of Council or against the City Manager or any member of the City’s staff. Rather, Friends argued a lack of candour and impartiality that resulted in a “one sided deal favouring one private interest” and a failure “to distinguish between public and private interests with the result that the [proposal] was not presented to City Council and to the public in a candid transparent manner”, including with “no adequate discussion of the pro’s and con’s.” [81] Based on his thorough consideration of legal principles, and after carefully reviewing the City’s process for obtaining approval, the application judge individually considered Friends’ numerous factual allegations of bad faith. Those allegations included challenges to the City’s consultation process, missing minutes of meetings with OSEG in mid-2008, an alleged failure to distribute a particular report, an overriding of its initial objectives, and its overall decision to proceed with the sole source partnership. The application judge acknowledged that there were shortcomings in the process in some instances and not in others. For example, he found that the failure to retain minutes or documentation of the 2008 meetings, was unfortunate, but “not bad faith conduct.” He explained his conclusion that any shortcomings in relation to these issues were either inadvertent or immaterial. [82] Friends argues that, although the application judge considered the bad faith allegations separately, he failed to consider “whether taken together, the City’s actions” amounted to bad faith. A reading of the application judge’s reasons demonstrates that to the contrary, he did consider the allegations of bad faith cumulatively. He specifically decided that “even if [Friends’ allegations were] correct factually or as matters of reasonable opinion, [they] do not individually or taken together, amount to bad faith” (at para. 17, emphasis added). The application judge again recognized that Friends relied on the “totality of circumstances” and a “pattern of conduct” to support its argument of bad faith: see para. 22. Finally, the application judge concluded his analysis by expressly referring to his earlier reasoning at para. 17, in which he had stated that even “taken together”, Friends failed to prove bad faith. Accordingly, I do not accept Friends’ argument on this point. [83] Friends also argues that the Plan did not meet Council’s initial objectives regarding revenue neutrality and sports subsidization. This argument is largely subsumed in the issue of “bonus” and the question of whether the Plan represented a good deal for the City. In addition, if not explicit, it is implicit in the voluminous record that Council was comprehensively informed about these issues and was alive to the changing nature of its objectives as the Plan evolved. Council was entitled to approve a Plan that emphasized different objectives than its initial ones, as long as the approved Plan was based on the relevant information and was passed within the City’s jurisdiction. The application judge specifically turned his mind to this. He observed at para. 46 that, “Council is entitled [in the exercise of its own wisdom] to depart from its initial negotiating objectives” provided it does so with full disclosure of the relevant information. [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. The application judge aptly characterized Friends’ bad faith argument as “largely an attempt to reargue [its] position that the [Plan] is a poor deal for the City from a financial perspective.” This position had been aired extensively before Council. It does not support a finding of bad faith. [85] The application judge was also alert to the erroneous financial data provided to Council. He acknowledged the difficulties the City experienced in presenting accurately all the intricacies of the complicated public private agreement to Council. He concluded that the erroneous information was supplied inadvertently and not in bad faith. Further, he observed that corrected information would be provided before Council was asked to give final approval to the Plan. [86] As a final point, the appellant argues that the application judge erred in concluding that certain expert reports tendered by Friends on the issue of bad faith were irrelevant or were entitled to little weight. The application judge explained in his reasons why the challenged expert reports tendered by Friends did not assist him in deciding the issue. Primarily, they addressed the authors’ personal opinions on what best policy practices should be. I see no error in the application judge’s conclusions with respect to these reports. [87] I would not give effect to this ground of appeal. E. RESULT [88] For these reasons, I would dismiss the appeal. [89] Neither Friends nor Ottawa seek costs. I understand the issue of costs of the intervener before the application judge remains under reserve. I would make no order for the intervener’s costs for the appeal. Released: Apr. 30, 2012 “Susan E. Lang J.A.” “WW” “I agree W. Winkler C.J.O.” “I agree R.A. Blair J.A.” [1] The application judge was alert to the potential that the application before him was premature since Council’s approval was not final. However, he explained his reasons for proceeding with the parties’ request to determine the issues in light of their public importance and the need for timeliness. His decision to do so was not challenged on appeal.