The Court of Appeal determined that a municipality, passing a set of (heritage) bylaws, the implicit purpose of which is to stop the transformation of a golf course into a residential development, is not bad faith. Bad faith requires more:
- 112 Bad faith was discussed by this court in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 35 O.R. (3d) 321 (C.A.). As Laskin J.A. observed, at p. 340: Bad faith by a municipality connotes a lack of candour, frankness and impartiality. It includes arbitrary or unfair conduct and the exercise of power to serve private purposes at the expense of the public interest.
The Ontario Superior Court struck down Oakville’s designation on the premise that the heritage designation was in fact a bylaw requiring Glen Abbey to provide a golf course (which would be a contravention of the Municipal Act s.11(8)).
The Superior Court found bad faith being directed and enforced against GlenAbbey alone. The conduct amounted to a de facto expropriation. (para 6).
para 54:
The Court of Appeal (Harvison Young) reversed that bad faith finding:
- the bylaws were of general application
- the heritage bylaw did not unfairly target GlenAbbey
Harvison Young made the fine distinction, that it was the ‘conservation plan’ not the ‘bylaw’ which forced GlenAbbey to continue to provide Golf services. So because the bylaw, on its face, is inoffensive (even though we all know its true purpose), and on its face, appears to be of general application. Well that ends the bad faith inquiry.
para 57:
Harvison Young agreed with the applications judge that the ‘conservation plan’ was ultra vires.
Harvison Young goes through the glaringly obvious city-statements in the ‘conservation plan’ which in effect require Glen Abbey to operate a golf course.
Glen Abbey wins, Oakville loses.
Comment:
In 1946 Milton Friedman wrote that the fastest way to destroy a city, next to bombing, was rent control. How naïve Milton was – thinking that city councils would only use rent control to destroy cities.
Oakville has learned the ways of the Heritage Act RSO 1990 c. O18. Oakville tried to do effectively the same thing that rent control has been consistently proven to do: freeze the use of scarce resources (private municipal prime real estate) in low-value use (golf!). (para 2)
Oakville designated Glen Abbey ‘protected heritage lands’. The restriction requires the owner to get city permission for any changes. Obviously not a blade of grass can be altered.
The ClubLink story highlights another theorem of economics: when the use of property is controlled by a political entity – an entity which does not answer to the same price signaling that individual economic agents answer do, that property will ipso facto be mis-allocated. That is, it will not be allocated to its highest and best social use.
City councils will say that they, not economists, determine the highest and best ‘social’ use. They are right. That’s the problem: the actual highest and best social use is determined through the dis-aggregated price system (the most valuable institution in society) which no one controls, but which manages, generally, to allocate scarce resources among millions of people is such a way that all or substantially all advance. City councils allocate in a way that specifically obstructs the price system by saying that it doesn’t matter who owns the golf course, it will not be changed from a golf course. This freezes the land in current use and prohibits sale because the true value is in the transformation (allowing Clublink to transform the past use into future use).
In the heritage case, for the unbelievably frivolous value of having a pretty, man-made set of rolling greens (effectively vacant-land, used by a tiny handful of people), Oakville city council designated this property as ‘heritage’. Frozen in present use – a socially low-value use. Golf is proven to be a low-value use by the fact that the owner would rather have the land used for a higher-value use (residential-commercial).
It is impossible to teach city councils economics. They are spending other people’s money and freezing other people’s land. Why should they think about economics? This is why James Buchanan and Fredrick Hayek won the nobel prize – by highlighting the actual eroding effect of the public direction of resources in contradiction to the price system.
The take-away for the Ontario legislature is to realize that this de facto expropriation was barely reversed. In so freeing Glen Abbey to transform, The Court of Appeal empowered municipalities to further acts of economic inefficiency by specifically refusing to find either ultra vires or bad faith in a case that could have allowed for both findings.
Glen Abbey won this case and the city lost this case only because the city insisted in its conservation plan that conservation meant ‘golf’. A few more lawyer-chosen words in the Oakville ‘conservation plan’ (so that it wasn’t obvious that the city was forcing Glen Abbey to continue as a golf course), and the whole thing would have sailed past Harvison Young and apparently Nordheimer.
It is preferable for courts and particularly the Court of Appeal to decide cases as narrowly as possible. Instead of doing so, the Court of Appeal narrowed ultra vires and narrowed bad faith (by not finding it here).
When a city specifically targets a single individual for attack, as was done here, the circumstance is prima facie bad faith. Where a city carries out a defacto quasi-expropriation, as was done here in forcing the owner to continue as a golf course, that is prima facie bad faith. Nordheimer would apparently require that another person has to receive a private benefit from the state action for a finding of bad faith. That is too high a test to control municipal heavy-handedness in Ontario.
The doctrine of municipal bad faith should be read to include the following:
Where a municipality could have bought the land in the open market for the true value of the land (that being the value of the land developed into commercial-residential) and the city refrains from buying that land for its true (residential-use) price and instead uses its heritage designation to freeze the land and obstruct the transformation, municipal bad faith is established.
