Peel (Municipality) v. Greater Toronto Airports Authority

Peel (Municipality) v. Greater Toronto Airports Authority Collection Decisions of the Court of Appeal Date 2000-02-10 Docket numbers C32919 Judges Abella, Rosalie Silberman; Charron, Louise Vivianne; MacPherson, James C. Subject Civil Decision Content DATE: 20000210 DOCKET: C32919 COURT OF APPEAL FOR ONTARIO ABELLA, CHARRON and MacPHERSON JJ.A. BETWEEN: ) ) THE REGIONAL MUNICIPALITY OF PEEL ) ) Applicant ) Brian G. Morgan and (Respondent in Appeal) ) Frederick L. Myers, ) for the appellant - and - ) ) GREATER TORONTO AIRPORTS AUTHORITY ) Thomas R. Lederer and ) Chris Barnett, Respondent ) for the respondent (Appellant in Appeal) ) ) - and - ) James E. Lewis, ) for the intervener LOUIS PARSONS ) ) Intervener ) Heard: January 11, 2000 (Respondent in Appeal) ) ) On appeal from the decision of Mr. Justice Cullity dated September 24, 1999 CHARRON J.A.: 1. Overview [1] The Board of Directors of the appellant, the Greater Toronto Airports Authority (the “GTAA”), decided that Louis Parsons, a nominee of the respondent Regional Municipality of Peel (“Peel”), was not qualified to be a member and director of the GTAA. Peel brought an application pursuant to Rule 14.05(3)(d), seeking a declaration that the Board’s decision contravened the GTAA’s by- laws. Mr. Parsons was granted leave to intervene on the application. [2] Cullity J. allowed the application. In a judgment, dated September 24, 1999 and reported at (1999), 5 M.P.L.R. (3d) 101 (Ont. S.C.J.), the court declared that the Board’s decision contravened the GTAA’s General Operating By-law (“the By-law”) and that the Board was obligated to appoint Mr. Parsons as a member and director of the GTAA. The GTAA appeals from this judgment. [3] Cullity J. made a thorough review of the facts in his judgment. None of those facts are in issue on this appeal. The parties are divided, rather, on what inferences those facts were capable of supporting. Cullity J. held that the facts could not reasonably support the Board’s decision. I agree with that conclusion. 2. The Facts [4] I will only review those facts that are necessary to understand this appeal. Reference can be made to Cullity J.’s reported judgment for a more complete review. [5] The GTAA is a non-profit corporation that operates Pearson Airport. The persons who serve as its members and directors are nominated by various outside bodies, including the regional municipalities of the Greater Toronto Area and the federal and provincial governments. The nominees are then appointed by the Board of Directors if the Board determines that they meet the qualifications in the By-law. [6] Mr. Parsons was nominated by Peel. At its meeting on May 12, 1998, the Board decided that Mr. Parsons did not meet the conflict of interest requirements of the By-law for appointment as a member and director. This decision was based on the conclusion reached by a majority of the members of the Board that Mr. Parsons, if appointed, would not at all times act in the best interests of the GTAA. The Board therefore did not appoint Mr. Parsons and Peel’s prior nominee, Anne Edgar, remained on the Board pursuant to the By-law. [7] In arriving at the conclusion that Mr. Parsons would not at all times act in the best interests of the GTAA, the Board relied firstly, on reports of what transpired during the course of an interview with Mr. Parsons held on May 4, 1998 before two members of the Board, and, secondly, on the contents of a letter dated May 11, 1998 written by Mr. Parsons and sent to the Chairman of the Board. [8] The two Board members who conducted the interview, Mr. Dimma and Mr. Butt, concluded that Mr. Parsons would not at all times act in the best interests of the GTAA based on the fact that Mr. Parsons, several times during the course of the interview, refused to state unequivocally that he would do so. Rather, in answer to several specific questions, he responded that he would want to know all the facts before stating his position on any issue. [9] Following the interview, Mr. Parsons was informed that a recommendation was being made to the Board that his nomination be rejected on the basis that he would not always act in the best interests of the GTAA and was therefore in a conflict of interest. He was asked to state unequivocally that he intended to exercise his powers and duties as a director with a view to the best interests of the GTAA. Mr. Parsons did so by letter dated May 11, 1998. [10] In his May 11 letter, Mr. Parsons also commented that in his interview “there had been no suggestions of a conflict of interest or any questions raised that would indicate that I would not be in a position to act in the best interests of the GTAA in all matters.” The Board was advised by Mr. Dimma that this latter statement was untrue. The Board therefore reached the conclusion that Mr. Parsons was lying in his letter and that, consequently, his statement that he would always act in the best interests of the GTAA was not credible. 3. The Issues [11] A number of matters are no longer in issue on this appeal. For the purposes of this appeal, the parties do not dispute the following conclusions of fact and law made by the applications judge: 1. the application can be determined on the basis of the material before the court without a trial; 2. under the provisions of the By-law, it was open to the Board to inquire into whether a nominee, if appointed, would act solely in the best interests of the GTAA, and to disqualify a nominee on the basis that he would not; 3. in order to succeed, it was incumbent upon the applicant, Peel, to demonstrate that no Board of Directors, acting reasonably in the exercise of its business judgment, could have made the decision on the basis of the evidence before it; and 4. given the anticipatory nature of the decision to reject a nominee on the basis that he would not act in the best interests of the GTAA, the Board’s decision could only be said to fall within the range of reasonableness if it was based on “clear and not ambiguous evidence.” [12] The evidence demonstrates that the Board purported to act in accordance with this latter stringent test when it made the decision to reject Mr. Parsons’ nomination and that it did so on the advice of its legal counsel. All counsel on the appeal are in agreement that, given the scope of the Board’s limited authority to screen nominees under the By-law and the anticipatory nature of the decision, this test is the appropriate one in the particular circumstances of this case. Given the parties’ agreement as to the narrow scope of the Board’s authority to reject Mr. Parsons’ nomination under the By-law, it is not necessary for this court to decide whether the applications judge was correct in finding that the Board’s decision was entitled to the same degree of deference as it generally would with respect to decisions made in the management of the company’s affairs. See Maple Leaf Foods Inc. v. Schneider Corp. (1998), 42 O.R. (3d) 177 (C.A.) for an application of what has been referred to by the parties as the “business judgment rule”. In this case, it is agreed that any rejection of Mr. Parsons’ nomination that was based on evidence falling short of the “clear and not ambiguous” test would fall beyond the scope of the Board’s authority under the By-law. [13] The applications judge held that the evidentiary basis before the Board could not reasonably support its decision. More specifically, he held that no board of directors acting reasonably in the exercise of its business judgment could have decided that the evidence satisfied the stringent test propounded by counsel. [14] In light of his decision on this issue, the applications judge held that it was not necessary to decide whether the Board breached a duty to observe the requisite standards of procedural fairness in reaching its decision. Nonetheless, he held that, if it were necessary to decide this issue, he would conclude that procedural fairness required that Mr. Parsons be given a reasonable opportunity to be heard and that Mr. Parsons was not given this opportunity. [15] The GTAA contends that the applications judge erred in finding, firstly, that the Board’s decision could not be supported on the evidence and, secondly, that the decision breached the rules of procedural fairness. [16] The first issue to be decided on this appeal is whether the Board could reasonably conclude that it had clear and unambiguous evidence that Mr. Parsons would not act at all times in the best interests of the GTAA. In my view, it could not and the applications judge was correct in so concluding. [17] In light of my decision on this issue, I do not find it necessary to deal with the question of procedural fairness and, consequently, I will make no comment on this second issue. 4. The Evidentiary Basis in Support of the Board’s Decision [18] The applications judge extensively reviewed the evidentiary basis for the Board’s decision at pp.127-32 of his judgment. In dealing firstly with the interview, the applications judge stated that “the thrust of … [the] criticism on the conflict of interest issue was that Mr. Parsons refused to give a direct answer to the question where his loyalties would lie, that he said that it would depend on the circumstances and that he saw a responsibility both to the [GTAA] and to the body that nominated him.” Cullity J. then concluded as follows: Ignoring the references to extraneous matters and, for the moment, the attack that was subsequently made on Mr. Parsons’ credibility, I cannot accept that the criticisms made of his cautious responses to the questions relating to directors’ accountability, responsibility or loyalty could reasonably support a decision that there was a sufficiently high degree of probability that he would not always act in the best interests of the respondent [GTAA] to justify anticipatory revocation or disqualification. [19] In dealing next with the Board’s conclusion that Mr. Parsons’ account in his May 11 letter of what took place at the interview was untruthful, the applications judge held that this conclusion could not “possibly be justified on the basis of the evidence.” The applications judge found “it quite extraordinary, as well as very regrettable” that the Board was prepared to impugn Mr. Parsons’ credibility solely on the basis of the May 11 letter without seeking further clarification. In his view, the Board’s conclusion with respect to Mr. Parsons’ credibility “was unwarranted and unreasonable.” [20] Finally, the applications judge concluded as follows: A decision to set aside the decision of the board does, of course, require more than the Court’s disagreement with it. The applicant must demonstrate that it was not open to the board, acting reasonably, to reach such a decision. The evidence on which the board acted must be so deficient and inadequate as to justify a conclusion that no board of directors acting reasonably in the exercise of its business judgment, could have decided that it satisfied the stringent test propounded by the respondent’s corporate counsel. On the facts of this case, I believe that a conclusion that the decision of the board was not valid is required. [21] The appellant takes the position that the Board could reasonably conclude, based on the interview, that Mr. Parsons would not at all times act in the best interests of the GTAA. Counsel for the appellant conceded, however, that any concerns the Board may have had arising from the interview would have been adequately answered by the May 11 letter, had this letter been accepted by the Board as truthful. Hence, the reasonableness of the Board’s conclusion that the letter was not credible becomes pivotal in the determination of this appeal. [22] The GTAA submits that the applications judge, although correct in his statement of the test, did not in substance apply the test he articulated. The GTAA submits that the applications judge effectively applied a different test, “namely whether the Board’s assessment of the evidence before it was less reasonable than the Court’s alternative assessment of the evidence.” In support of this submission, the appellant relies mainly on the applications judge’s treatment of the May 11 letter. [23] The appellant notes firstly that, at one point in his judgment, Cullity J. stated as follows: An inference that, in his letter to Mr. Butt of May 11, Mr. Parsons intended to deny that the question of his future motivation as a director had been discussed is, in my judgment, far less reasonable than a conclusion that he simply did not relate the allegation of a conflict of interest to that question. The appellant submits that this statement demonstrates that the applications judge was in effect substituting his own view for that of the Board. [24] Secondly, the appellant argues that the applications judge’s conclusion on the meaning of the May 11 letter is inconsistent with Mr. Parsons’ own interpretation of the letter and, consequently, demonstrates that he misapprehended the evidence on this crucial point. The appellant submits that the applications judge focussed on the word “position” in the May 11 letter and concluded that Mr. Parsons was in effect stating in the letter that there was no question at the interview that he would not be in a “position” to act in the best interests of the GTAA. This latter statement would be truthful given the fact that no questions were raised about Mr. Parsons holding any position with Peel that would give rise to a duty that would conflict with his position on the Board, if appointed. However, the appellant states that Mr. Parsons’ explanation of the letter was different. The appellant notes that, in his affidavits and cross- examination, Mr. Parsons stated that there were no “questions raised” that he would not be in a position to act always in the best interest of the GTAA and submits that he thereby inferred that no discussion had taken place about his duty to act in the best interest of the GTAA, a proposition that was incorrect. [25] I see no merit to this argument. It is based on an improper dissecting of the applications judge’s reasons. It is clear from the reasons as a whole that the applications judge applied the test that he articulated. Further, the applications judge’s conclusions on the May 11 letter are not inconsistent with Mr. Parsons’ own evidence as contended. In my view, the appellant’s argument on this point amounts to a distinction without a difference. [26] In my view, the applications judge was correct in finding that the Board’s decision could not be supported by the evidence. Since it is conceded that, absent the finding on the conflict of interest question, there was no basis for rejecting Mr. Parsons’ nomination, the applications judge was also correct in allowing Peel’s application and declaring that the Board’s decision contravened the GTAA By-law. The formal judgment also includes an order that the Board was obliged to appoint Mr. Parsons as a member and director of the GTAA. It would appear from the judgment (at p.134) and from the materials filed by Mr. Parsons that this order was made pursuant to Mr. Parsons’ request. No issue was raised on appeal with respect to Mr. Parsons’ entitlement to seek this relief on his own application. I therefore see no basis to interfere with that part of the order. [27] For these reasons, I would dismiss the appeal with costs. (signed) "Louise Charron J.A." (signed) "I agree R. S. Abella J.A." (signed) "I agree J. C. MacPherson J.A." RELEASED: February 10, 2000