



COURT OF APPEAL FOR ONTARIO

CITATION: 2386240 Ontario Inc. v. Mississauga (City), 2019
    ONCA 413

DATE: 20190521

DOCKET: C65592

Simmons, Tulloch and Brown JJ.A.

BETWEEN

2386240 Ontario Inc.,
    o/a Al-Omda Lounge, Habibi Lounge, Fusion Lounge, Saima Rogna Inc., o/a El
    Fishawy, 84921231 Canada Inc., o/a Mazaj Lounge and Shisalicious Café

Applicants (Appellants)

and

The City of Mississauga and
The Regional Municipality of Peel

Respondents (
Respondent
)

Ryan P. Zigler, for the appellants

Barnet H. Kussner and Sylvain R. Rouleau, for the
    respondent

Heard: February 28, 2019

On appeal from the judgment of Regional Senior Judge Peter
    A. Daley of the Superior Court of Justice, dated June 5, 2018, with reasons
    reported at 2018 ONSC 3162, and from the costs order, dated August 9, 2018,
    with reasons reported at 2018 ONSC 4797.

REASONS FOR DECISION

Introduction

[1]

The appellants are the owners of several hookah lounges located within
    the Regional Municipality of Peel. In their lounges, the appellants supply
    waterpipes and smoking products (including herbal shisha, a legal substance) to
    their customers to be consumed on site, while the customers socialize on their
    premises.

[2]

On April 28, 2016, the
Region passed by-law No. 30-2016,
Peel Waterpipe Smoking By-law
(the By-law), which,
    among other things, prohibits smoking waterpipes in
specified places
    that would include the appellants lounges
.

[3]

The appellants applied under s. 273 of the
Municipal Act, 2001
,
    S.O. 2001, c. 25, for a declaration that ss. 2(a), (b), and (c) as well as s. 5
    of the By-law are illegal and should be quashed. Sections 2(a), (b) and (c) prohibit
    waterpipe smoking in
an enclosed public place, an
enclosed
    workplace and a restaurant or a bar patio. Section 5 prohibits a proprietor, an
    employer, or an employee from permitting waterpipe smoking in the locations
    specified in ss. 2(a), (b) and (c).

[4]

The appellants argued that the Region acted outside the scope of its
    powers because the By-law targeted their businesses and would ultimately result
    in closure of their lounges and substantial economic loss. They maintained that
    the Region does not have the power to prohibit a business. Further, they argued
    that the By-law is inconsistent with provincial legislation and that the
    Region, though purportedly acting to protect employees, failed to consult with
    hookah lounge employees, and therefore acted in bad faith.

[5]

The application judge dismissed the appellants
    application. In his view, most of the issues raised had been canvassed in a
    case involving a City of Toronto by-law prohibiting waterpipe smoking in
    premises Toronto had licensed to carry on business. The challenged by-law was
    held valid and that decision was upheld by this court:
2326169
    Ontario Inc. v. Toronto (City)
, 2016 ONSC 6221, 59 MPLR
    (5th) 279, affd 2017 ONCA 484, 67 MPLR (5th) 183 (the City of Toronto case).

[6]

In this case, the application judge found that
    the
Municipal Act 2001
conferred powers on the
    Region resembling the powers conferred on Toronto under the
City of
    Toronto Act
, S.O. 2006, c. 11. Similar to the conclusion
    reached in the City of Toronto case, the application judge found there was
    ample evidence to support the conclusion that the purpose of the By-law was protection
    of public health and safety, which is a purpose specifically authorized by
    section 11(2) subparagraph 6 of the
Municipal Act, 2001
. Further, relying in part on the City of Toronto case, the application
    judge concluded that the By-law did not conflict with the
Occupational
    Health and Safety Act
, R.S.O. 1990, c. O.1 (the
OHSA
), contrary to what the applicants had argued. Finally, he found diligent
    and thorough levels of consultation, research, and inquiry by the Region and no
    evidence of malicious or purposeful conduct in failing to consult the
    appellants employees. He rejected the appellants claim of bad faith.

[7]

The application judge therefore dismissed the
    application with costs to the Region on a partial indemnity basis, totaling
    $86,580.99.

[8]

The appellants raise three issues on appeal and seek
    leave to appeal costs. For the reasons that follow, we dismiss the appeal and
    deny leave to appeal costs.

Discussion

(i)

The application judge did not err in failing to
    find the By-law
ultra vires
the Region

[9]

First, the appellants submit that the
    application judge erred in failing to find the By-law
ultra vires
the Region. They say he erred in law in characterizing the subject
    matter of the By-law as the protection of public health and safety when the
    sole effect of the By-law was to prohibit their businesses. The appellants say
    that, on the record before council, waterpipe smoking was occurring in only 24
    enclosed public places, all of which were waterpipe establishments. On these
    facts, the sole purpose of the By-law could only have been to prohibit the
    appellants businesses. The appellants submit that the
Municipal Act,
    2001
does not grant municipalities the power to prohibit
    businesses and that the By-law was therefore beyond the Regions powers.

[10]

Further, the appellants argue that the
    application judge erred in law in relying on the City of Toronto case for the
    broad proposition set out at para. 84 of his reasons that it was unnecessary to
    consider the ultimate effect of the By-Law on the economic interest of the
    applicants  when determining whether the By-Law was lawfully enacted having
    regard to its purpose.

[11]

The appellants rely on this courts decision in
Canada
    Post Corp. v. Hamilton (City)
, 2016 ONCA 767, 134 O.R.
    (3d) 502, as establishing that it is necessary to consider not only the
    purpose, but also the effects of a by-law to determine if it is
intra vires
.
    They contend that the application judge erred in distinguishing
Canada
    Post Corp.
on the basis that the primary issues in that
    case were constitutional law issues, including conflict between federal and
    provincial legislation as well as the doctrine of paramountcy.

[12]

We do not accept these submissions. The broad
    statutory authority conferred on the Region and the evidentiary record in this
    case amply support the application judges conclusions that the purpose of the
    By-law was to protect public health and safety, a purpose authorized by s.
    11(2)(6) of the
Municipal Act, 2001
, and that
    the By-law is therefore
intra vires
.

[13]

Section 8(1) of the
Municipal Act,
    2001
requires that the powers of a municipality under the
    act be interpreted broadly so as to confer broad authority on the municipality
    to enable the municipality to govern its affairs as it considers appropriate
    and to enhance the municipalitys ability to respond to municipal issues.

[14]

Section 11(2) of the
Municipal Act,
    2001
permits a municipality to pass by-laws respecting
    specified matters. Subparagraph 6 of s. 11(2) specifies one such matter as:
    Health, safety and well-being of persons. Section 8(3)(a) of the
Municipal
    Act, 2001
provides that a by-law under s. 11 respecting a
    matter may regulate or prohibit respecting the matter.

[15]

As in the City of Toronto case, in determining
    the purpose of the By-law, the application judge reviewed the process that led
    to its enactment.

[16]

In particular, the application judge noted that
    concerns had been raised relating to the harmful effects of waterpipe use by
    the Public Health Division of the Regions Health Services Department (Peel
    Public Health) in a 2012 report entitled Burden of Tobacco: the Use and
    Consequences of Tobacco in Peel. Subsequently, in February 2015, Peel Public
    Health issued a further report entitled Health Effects from the Uses of, and
    Exposure to, Tobacco and Non-tobacco Waterpipes. The latter report included
    various recommendations, such as the possible development of a by-law
    prohibiting waterpipe smoking in enclosed public spaces and workplaces,
    including restaurants and bar patios.

[17]

Further, as the result of a November 2015 report
    from the Medical Officer of Health and the Commissioner of Health Services, the
    Region conducted stakeholder consultations with a view to determining how the
    Region could best address public health risks associated with waterpipe smoking
    in public places.

[18]

Following these consultations, in April 2016,
    the Medical Officer of Health and the Commissioner of Health Services submitted
    a report to council concerning the consultations, in which they recommended the
    enactment of a by-law prohibiting waterpipe smoking of both tobacco and
    non-tobacco products in enclosed public places, enclosed workplaces, and
    specified outdoor locations within the Region. After hearing submissions and
    receiving delegations relating to the recommendations in the April 2016 report,
    the Region enacted the By-law at the April 28, 2016 council meeting.

[19]

Based on the evidence concerning this process as
    well as evidence concerning certain testing that had been conducted at
    waterpipe establishments, the application judge concluded that there was no
    evidence to support the submission that the purpose of the By-law was to
    prohibit business. He stated, [i]ts true purpose was to prohibit a specific
    activity, namely smoking with waterpipes on the grounds that it posed a risk to
    public health and safety.

[20]

While cognizant of the appellants evidence of
    the potential economic impact of the By-law on their businesses, the
    application judge concluded that, just as this court held in the City of
    Toronto case, that [potential impact on the operation of the appellants
    businesses] is only an unfortunate incidental result of the By-law and not
    determinative of its purpose.

[21]

The respondent disputes the appellants
    submissions concerning whether
Canada Post Corp.
requires a court to consider the effects of a By-law when assessing
    whether the By-law is
ultra vires
. Like the
    application judge, the respondent relies on the fact that the primary issues in
    the
Canada Post Corp.
case involved questions
    of constitutional law in order to distinguish it.

[22]

We are skeptical of the application judges view
    that this courts discussion of
vires
in
Canada
    Post Corp.
can be distinguished only because, overall,
    that case addressed conflict between federal and provincial law and paramountcy.
    However, it is unnecessary that we determine that question for the purposes of
    this case.

[23]

Assuming the effects of a by-law may be relevant
    to determining its purpose  or the matter of the by-law  we see no error in
    the conclusion that, on the facts of this case, the potential economic impact
    on the appellants businesses is but an unfortunate incidental result of the
    By-law and not determinative of its purpose.

[24]

Contrary to the appellants argument, the sole
    effect of the By-law is not its potential economic impact on the appellants
    businesses. Rather, the overriding effect of the By-law is prophylactic. It
    prevents the harmful effects of waterpipe smoking, both at the time of its
    enactment and into the future, in many specified places within the Region. Under
    s. 2 of the By-law, these places include not only the appellants businesses,
    but also any location that is:

(a)

an Enclosed Public Place;

(b)

an Enclosed Workplace;

(c)

a Restaurant or Bar Patio;

(d)

a Playground;

(e)

a Sporting Area;

(f)

a Spectator Area adjacent to a Sporting Area;

(g)

a School; or

(h)

any area
    under public ownership that is within 20 metres of any point on the perimeter
    of a Playground, Sporting Area or Spectator Area adjacent to a Sporting Area.

[25]

This prophylactic effect of the By-law is
    entirely in keeping with the application judges finding that the true purpose
    of the By-law was to protect public health and safety from the risks posed by
    waterpipe smoking, a purpose authorized under s. 11(2) of the
Municipal
    Act, 2001
. Considering the By-law as a whole, we agree
    with the application judges conclusion that, as in the City of Toronto case,
    while the By-law may have an economic impact on the operation of the
    appellants businesses, that is only an unfortunate incidental result of the
    By-law and not determinative of its purpose.

(ii)

The application judge did not err in failing to
    find the By-law conflicts with the
OHSA

[26]

The appellants second argument is that the
    application judge erred in failing to find that the By-law conflicts with the
OHSA
. They rely on
Control of Exposure to Biological or
    Chemical Agents
, R.R.O. 1990, Reg. 833 (Regulation
    833), which was made under the
OHSA
. The
    appellants contend that Regulation 833 comprehensively addresses the protection
    of Ontario workers from hazardous agents in the workplace, including carbon
    dioxide and particulate matter, the substances identified by the Region as
    posing a danger in this case. They say that, under s. 2(2) of the
OHSA
, Regulation 833 prevails over the By-law and the By-law is
    therefore void.
[1]
In the alternative, they say the By-law is incompatible with the purpose of
    Regulation 833 and is therefore void under s. 14 of the
Municipal
    Act, 2001
.
[2]
Finally, the appellants contend that the application judge erred in relying on
    this courts rejection of a similar argument in the City of Toronto case. That
    is because, say the appellants, the City of Toronto case focused only on the
OHSA

itself and did not address the appellants arguments
    concerning conflict with Regulation 833.

[27]

We reject these submissions. In the City of
    Toronto case, this court noted that the by-law at issue in that case
    protect[ed] the health and safety of patrons as well as employees of
    businesses. Further, this court found the by-law at issue complementary to
    both the purpose and the provisions of the
OHSA
. Importantly, this court concluded, [c]ontrary to the appellants
    submission,
the
OHSA
does not require the City to adopt measures
    short of a prohibition on hookah smoking
in order to protect employment in
    hookah lounges (emphasis added).

[28]

The appellants have identified nothing in
    Regulation 833 that suggests this courts conclusions concerning conflict with
    the
OHSA
are not equally applicable to it.

(iii)

The application judge did not err in failing to
    find the Region acted in bad faith

[29]

The appellants third argument is that the
    application judge erred in failing to find that the Region acted in bad faith
    in enacting the By-law. The appellants contend that bad faith in this context
    does not require wrongdoing or personal advantage to a member of council. All
    that is required is that a municipality act arbitrarily and without the
    required degree of fairness, openness, and impartiality. The appellants submit
    that because their employees economic interests were affected by the By-law,
    the employees were entitled, as a matter of procedural fairness, to be
    consulted concerning its impact. Further, the appellants point to the application
    judges statement in his reasons that [m]ere inadvertence of council to invite
    employees does not make out bad faith. They submit that the reason for a
    denial of procedural fairness is immaterial to the issue of bad faith.

[30]

We do not accept the appellants submissions. As
    we have said, the application judge found that the record disclosed very
    diligent and thorough levels of inquiry, research and consultation by the
    Region prior to the enactment of the subject By-Law. He noted that a public
    meeting was held to allow members of the public and stakeholders to make their
    concerns known to the Regional council. His comment about inadvertence was made
    in the context of observing that it was open to the appellants employees to
    attend the public meeting. In the circumstances, we see no basis on which to
    interfere with the motion judges finding that the appellants failed to meet
    the heavy burden of establishing the presence of bad faith in the enactment of
    the By-law.

(iv)

Leave to appeal costs is denied

[31]

The application judge denied the Regions
    request for substantial indemnity costs. He also reduced its claim for partial
    indemnity costs by $10,000 by eliminating the claimed junior counsel fee,
    resulting in a total costs award of $86,580.99 on a partial indemnity basis.

[32]

We reject the appellants argument that the
    application judge should have followed the lead of the application judge in the
    City of Toronto case and made no order as to costs. The issues raised in this
    case bore substantial similarity to the issues already fully litigated in the
    City of Toronto case. As such, this case did not raise a matter of first
    impression and the appellants had no reason to expect that the Regions
    taxpayers should bear the burden of the appellants legal challenge.

[33]

An order for leave to appeal costs requires
strong
    grounds upon which the appellate court could find that the judge erred in
    exercising his discretion:
Brad-Jay Investments Ltd. v. Szijiarto
(2006), 218 O.A.C. 315, (C.A.), at para. 21. We see no such grounds in this
    case.

(v)

Disposition

[34]

Based on the foregoing reasons, the appeal is
    dismissed and the request for leave to appeal costs is denied. Costs of the
    appeal are to the respondent on a partial indemnity scale fixed in the amount
    of $10,000 inclusive of disbursements and HST.

Janet Simmons J.A.

M. Tulloch J.A.

David Brown J.A.





[1]

This subsection provides that [d]espite anything in any
    general or special Act, the provisions of this Act and the regulations prevail.



[2]

This section provides:

(1) A 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
    regulation.

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


