December 19, 2014

Jono Developments Ltd v North End Community Health Assn – Case Comment

Related Services

In this recent case, the Court of Appeal protects a municipality’s right to choose its own procedures as long as they are consistent, predictable, and offer outside groups a fair opportunity to participate. The Court gives deference to municipalities’ choices as governments.

In March, 2008 the Halifax Regional School Board declared St. Patrick’s Alexandra Elementary School to be surplus and closed the school at the end of the 2011 school year.

The Halifax Regional Municipality (HRM) issued a Request for Proposals (RFP) for the purchase and redevelopment of the school property.  Jono Developments Ltd. (the Appellant, “Jono”), the North End Community Health Association, the Richard Preston Centre for Excellence Society, and the Micmac Native Friendship Society (the Respondents, collectively the “Community Groups”) all participated in the RFP. After evaluating all the proposals, HRM Council approved HRM staff’s recommendation to sell the property to Jono for $3 million.

Around this time the Community Groups learned of an HRM policy passed in 2000 that outlined the procedures to be used when HRM disposed of surplus school properties (the “Procedure”).  Despite the fact that a number of surplus schools had been disposed of since 2000, the Procedure had never been followed.

When HRM Council became aware of the Procedure it rescinded its decision to sell the property to Jono, rescinded the Procedure, and sold the property to Jono again. The Community Groups sought judicial review of the sale. They claimed that not only had HRM breached its duty of fairness to them by not following the Procedure, but that HRM’s own Charter only allowed it to sell the property for less than market value to not-for-profit bidders. Based on the fact that Jono had been willing to pay up to $4.3 million for the property if there were other bidders, the Community Groups claimed this was the proper market value, and that therefore HRM should not have been allowed to sell the property to Jono for less than that amount.

A municipal council owes a degree of fairness to outside groups when making a decision that is both administrative and affects the rights, privileges, or interests of an individual. On September 24, 2012, Justice David MacAdam (the “Judge”) set aside the sale on the basis that HRM had breached its duty of fairness to the Community Groups by not following the Procedure, and further that it breached the HRM Charter by selling the property below market value. Jono appealed the Judge’s decision.

The Court of Appeal considered two substantive issues:

  1. Did the Judge err in finding HRM breached its duty of fairness to the Community Groups by failing to follow the Procedure?
  2. Did the Judge err in determining that HRM’s interpretation of “market value” was unreasonable?

Issue 1: Did the Judge err in finding HRM breached its duty of fairness to the Community Groups by failing to follow the Procedure?

On the first issue, the Court found HRM owed a duty of fairness to the Community Groups in deciding to sell the property. This is both because the decision was administrative in nature (as opposed to legislative), and because the Community Groups had a “public interest” in the sale.

The Court then looked at several factors to determine how much fairness was owed.

While HRM’s Charter was silent on the procedure for disposing of schools and allowed HRM significant flexibility, HRM had already exercised its decision-making power by passing the Procedure itself.  Adopting the Procedure indicated a high level of fairness was intended. And, fairness was owed because programming offered by the Community Groups was important to the community as a whole.

The Court also looked at the Community Groups’ “legitimate expectations” in dealing with HRM. “Legitimate expectations” ensure government actions in dealing with the public are fair, predictable, and not arbitrary. In this case, the Procedure gave the Community Groups a legitimate expectation that they would be able to participate in the decision to sell the property, even though they were not aware of it at the time the decision was made. This attracted a higher duty of fairness.

However, the legitimate expectations of the Community Groups were not determinative of what process HRM had to follow: because the process HRM actually followed met the substance of the Procedure, HRM was not in breach of its duty of fairness to the Community Groups. The process HRM actually used allowed the Community Groups to participate in the RFP in substantially the same way that they would have been able to participate under the Procedure:

Issue 2: Did the Judge err in determining that HRM’s interpretation of “market value” was unreasonable?

Jono’s opening bid, assuming no competing bids, was $3 million. The Court found that this was more accurate evidence of what a buyer would pay for the property, because no competing bids were made.

Giving deference to HRM’s estimation of market value, the Court found that HRM’s valuation was within the reasonable range, considering the risks involved with different development proposals, conditions of sale, and levels of experience for managing the development. “Market value” should not be limited to the highest bid.

Ultimately, the Court of Appeal overturned the Judge’s decision and upheld the sale of the property to Jono as approved by HRM Council.

Note: one Court of Appeal judge in dissent found that the Community Groups were owed a significant degree of fairness, which included a meaningful right to participation. He concluded that the criteria for evaluating the RFPs was weighted too heavily in favour of for-profit bidders, and would have found that HRM breached its duty to the Community Groups.

The Community Groups are now trying to convince the Supreme Court of Canada to hear an appeal of this decision. If they are allowed to appeal, the Supreme Court will have to decide just what power municipalities have to control their own processes. They may agree with this decision, agree with the dissent, or give a different analysis.

If the Supreme Court will not hear the appeal, it is a strong endorsement of municipalities’ power to use whatever processes they want as long as they are consistent, predictable, and allow for fair participation. This could extend beyond selling schools to other municipal activities like awarding contracts, providing services, or setting policies generally.

Kevin Latimer, Q.C. of Cox & Palmer, counsel to UNSM, practices in the areas of municipal and planning law, administrative and public law litigation and can be contacted at (902) 491-4212 or email at coxandpalmer.com.

cover

Get a PDF version of this article

Jono Developments Ltd v North End Community Health Assn – Case Comment

Download PDF


Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.