Report: Updating the Ethical Infrastructure

Transcription

report of the mississauga judicial inquiry
Updating the Ethical Infrastructure
The Honourable J. Douglas Cunningham
Commissioner
Updating the Ethical
Infrastructure
report of the mississauga
judicial inquiry
Updating the Ethical Infrastructure
The Honourable J. Douglas Cunningham
Commissioner
Copyright © 2011 City of Mississauga
library and archives canada cataloguing in publication
Mississauga Judicial Inquiry (Ont.)
Updating the ethical infrastructure.
J. Douglas Cunningham, commissioner.
Report of the Mississauga Judicial Inquiry.
Available also on the Internet.
Includes bibliographical references.
isbn 978-0-9878012-0-3
1. Mississauga Judicial Injury (Ont.). 2. Conflict of interests – Ontario –
Mississauga. 3. Governmental investigations – Ontario – Mississauga. 4. Municipal
government – Ontario –Mississauga. I. Cunningham, J. Douglas II. Title.
jl269.5 c6 m57 2011 353.4'6309713 c2011-909052-x
Copies of this publication are available at the
Office of the City Clerk
City of Mississauga
300 City Centre Drive
Mississauga, on l5b 3c1
and online at www.mississaugainquiry.ca
CONTENTS
Abbreviations and Acronyms / xv
I NTRODUCTION
Overview / 1
The Principles of the Inquiry Process / 3
Setting Up the Inquiry / 3
Public Inquiries / 4
Background to This Inquiry / 4
The Inquiry Process / 5
Appointment of Commission Counsel / 5
Communications and Media Relations Officer / 5
Document Management / 6
Document Management Software / 6
Signature / 6
Signature Court / 7
Transcend / 8
Confidentiality Undertakings / 8
Infrastructure / 8
viii Contents
Hearing Room / 8
Offices / 9
Mississauga Judicial Inquiry Website / 9
Terms of Reference and Rules of Procedure / 9
Standing and Funding / 10
Applications for Standing and Funding / 10
Decisions on Standing and Funding / 10
Investigation / 11
Document Production / 11
Witness Interviews / 11
Notices of Alleged Misconduct / 12
Hearings / 13
Documentary Evidence / 13
Oral Evidence / 13
Expert Panel / 14
Cross-Examination / 15
Mayor Hazel McCallion’s Evidence / 15
Questions from the Commissioner / 15
Submissions / 16
Addendum / 16
PHASE I – THE E N ERSOURCE TRANSACTION
1 Change to Energy Structure in Mississauga / 17
Energy Structure in Ontario / 17
Electricity Act, 1998 / 19
Request for Proposals / 20
Key Participants for the City / 20
Procedure / 20
Proposals Received and Considered / 20
Recommendation to Accept the Borealis Proposal / 22
2 Negotiation with Borealis / 23
Pre–March 29, 2000, Negotiations / 24
Contents ix
The “Put” / 24
Corporate Governance / 27
Post–March 29, 2000, Negotiations and Authority to Instruct Solicitors / 29
Strategic Alliance Agreement / 30
April Press Release / 30
Strategic Alliance Amending Agreement / 31
Further Change to Energy Structure / 32
Final Negotiations / 33
David O’Brien Appointed President of Enersource / 33
Council Approval, November 29, 2000 / 34
Instructions from omers, December 3, 2000 / 35
Communication Changes, December 4, 2000 / 37
Reasons for the Borealis Veto and Its Importance to omers / 38
Should Council Have Been Advised of the Change? / 40
Could Council Have Been Advised of the Change? / 41
Was Council Advised of the Borealis Veto? / 42
Execution of Deal, December 6, 2000 / 44
Post–December 6, 2000 / 45
3 Problem, Investigation, and Proposed Changes / 46
The Penny Drops: Borealis’s Veto Discovered by Council / 46
City Council’s Investigation / 47
Contact with Mr. Houston / 47
Contact with Mr. Lever / 49
Council Meeting, October 24, 2007 / 50
The Jeffrey Singer Investigation / 51
Correspondence in December 2008 / 51
Proposed Changes to the Shareholders’ Agreement / 52
4 Governance Issues Raised by the Enersource Transaction / 54
Analysis / 54
Duty to Advise Council / 54
Mr. O’Brien’s Two Roles / 56
Summary of Key Findings / 56
x Contents
Recommendations for Phase I / 57
Informal Meetings of Council / 57
Minutes of In Camera Meetings / 57
Importance of Involvement of City Solicitor / 59
Certification of Personal Familiarity / 59
PHASE II – CITY CE NTRE L AN D AN D WORLD CL ASS
DEVELOPME NTS
5 Factual Background / 61
City Council’s Goal of a Five-Star Hotel / 62
The Mayor’s Vision / 63
Complementary Use Important to City Centre Land Owners / 64
World Class Developments / 66
Corporate History of wcd / 67
Peter McCallion’s Interest in wcd / 68
Leo Couprie’s Role / 74
Declaration of Trust / 76
omers’ and aim’s Understanding of Peter McCallion’s Interest
in wcd / 78
6 The Mayor’s Role in the wcd Project / 82
Introduction / 82
Steps Taken, October 2005 Onward / 83
Steps Taken to Secure the Land / 83
Impact of the Mayor’s Intervention on the Relationship between
the Co-owners / 85
The Mayor’s Knowledge of Peter McCallion’s Interest in wcd / 90
Witnessing the Signing of the Declaration of Trust and the Loan
Agreement / 92
Understanding of the Nature and Extent of Peter McCallion’s Interest / 94
7 Development of a Four- or Five-Star Hotel / 96
Agreement of Purchase and Sale / 96
Contents xi
Hotel Conditions in the aps / 96
Amending Agreement – Extension Rights / 99
Planning Approvals and the City / 103
Site Plan Approval / 103
Dealings of City Staff with wcd / 105
Increase in Development Charges / 105
wcd and Application Fees / 106
Actions of City Staff / 107
Failure to Lift the H Designation / 107
The Mayor and City Staff / 108
wcd’s Financial and Other Difficulties / 108
Tony DeCicco and wcd / 109
Meeting the Hotel Conditions / 109
8 The Mayor’s Involvement in Negotiations between wcd and the
Vendors / 113
The Mayor and the Conditional Period in the Agreement of Purchase
and Sale / 114
The Amending Agreement / 114
The Mayor’s Involvement in the Extensions / 119
The Practical Effect of the Mayor’s Role / 129
9
The Optics of Peter McCallion’s Interest in wcd / 132
Senior Managers of omers / Oxford / 132
Actions of omers / Oxford in Response to Pressure from the Mayor / 133
omers’ / Oxford’s Knowledge of Peter McCallion’s Role in wcd / 134
aim’s Knowledge of Peter McCallion’s Role in wcd / 134
10 Other Matters / 134
Declaration of Conflict of Interest at Council / 134
City Council Meeting, April 23, 2008 / 135
City Council Meeting, May 21, 2008 / 135
The Mayor’s Involvement in wcd’s Internal Affairs / 136
xii Contents
11 Termination of the Agreement of Purchase and Sale / 138
Sheridan College’s Interest in the City Centre Land / 139
Peter McCallion’s Interest in wcd Revealed / 140
The Settlement / 142
David O’Brien as Emissary of the Mayor / 142
David O’Brien as Emissary of omers / 143
Phase II – Analysis
12 Conflict of Interest / 146
The Common Law Framework / 146
Did the Mayor Face a Conflict of Interest? / 149
The Mayor’s Knowledge of Peter McCallion’s Interest in wcd / 149
The Mayor’s Approach to a Conflict of Interest / 150
13
Appropriate Action Given Conflict of Interest / 151
The Mayor and Due Diligence / 151
The Mayor and Council / 152
The Mayor and the Vendors / 153
The Mayor and World Class Developments / 154
14 David O’Brien, City Officials, and Conflict of Interest / 154
David O’Brien’s Many Hats / 154
Appropriate Action in the Circumstances / 155
City Staff and Conflict of Interest / 155
Appropriate Action for City Officials / 156
Impact of the Conflicts of Interest / 156
Impact on the Vendors / 156
Necessity for the Inquiry / 157
Recommendations for Phase II / 157
Existing Framework of Accountability / 158
The Municipal Act, 2001 / 158
The Municipal Conflict of Interest Act / 158
Municipal Codes of Conduct / 159
Contents xiii
The Mississauga Code of Conduct / 160
Integrity Commissioner / 162
Lobbyist Registry / 164
Recommended Amendments to the Municipal Act, 2001 / 165
Recommended Amendments to the Municipal Conflict of Interest Act / 166
Create a Preamble / 166
Clarify Scope of Act / 167
Remoteness / 167
Knowledge of the Elected Officials / 169
Clarify Who Is Captured by the mcia / 169
Beyond Pecuniary Interests / 170
Clarify Types of Meetings Captured by the mcia / 171
The Need for Lesser Sanctions / 171
Standing to Pursue Claims / 172
The mcia and the Integrity Commissioner / 173
Coordination with Municipal Codes of Conduct / 173
The Mississauga Code of Conduct / 174
Preamble / 174
Changes to the Conflict Rules / 174
Integrity Commissioner / 176
Improper Use of Influence, Gifts, and Benefits / 177
Lobbyists / 178
Procedural Fairness / 178
Sanctions / 179
Office of the Integrity Commissioner / 179
Lobbyists / 182
Additional Considerations / 182
Publication of All Known Conflicts of Interest / 182
Comfort Letters / 183
The Municipal Councillor’s Guide / 183
xiv Contents
Effect of Such Reforms in This Case / 184
On the Mayor / 184
On David O’Brien / 184
On City Staff / 185
On City Council / 185
On the Vendors / 185
CONCLUSION / 187
Endnotes / 189
ADDE N DUM – THE MAYOR’ S BE N EVOLE NT ACTIVITIES / 215
Agreed Statement of Facts / 216
The Mayor’s Gala / 216
The Hazel McCallion Fund for Arts, Culture and Heritage / 217
The Hazel McCallion Foundation for the Arts, Culture and Heritage / 220
The Hazel McCallion Charitable Fund / 220
Appendix 1 / 222
Appendix 2 / 230
APPE N DICES
A Terms of Reference / 233
B Rules of Procedure / 237
C Commissioner’s Ruling on Standing, December 14, 2009 / 243
D List of Exhibits / 247
E Commissioner’s Opening Remarks, December 14, 2009 / 307
F Witnesses and Other Key Individuals and Organizations / 311
G Enersource Shareholders’ Agreement (Exhibit 50) / 317
H Oxford’s Mississauga City Centre Land Holdings (Exhibit 96) / 340
I Agreement of Purchase and Sale, Blocks 9 and 29 (Exhibit 97) / 341
J Ruling on Conflict of Interest, July 8, 2010 / 372
Acknowledgements / 383
ABBREVIATIONS AND ACRONYMS
aim
Alberta Investment Management Corporation
aps
agreement of purchase and sale
h designation term used to signify a holding on land
hmc Hydro Mississauga Corporation
isf infrastructure stimulus fund
mcia
Municipal Conflict of Interest Act
meus
municipal electric utilities
obcaOntario Business Corporations Act
oeb
Ontario Energy Board
omb
Ontario Municipal Board
omers
Ontario Municipal Employees Retirement System
rfp
request for proposal
wcd
World Class Developments
xv
INTRODUCTION
Overview
On November 11, 2009, Mississauga City Council adopted a resolution requesting that the Chief Justice of the Superior Court of Justice appoint a judge to
conduct an inquiry pursuant to section 274 of the Municipal Act, 2001. Chief
Justice Heather Forster Smith named me to assume the role of Commissioner.
The Inquiry was asked to look into two broad areas: the first concerned
issues in connection with the December 2000 Enersource Hydro Mississauga
(Enersource) shareholders’ agreement to which the city was a party. In 2000,
Hydro Mississauga was newly incorporated and commercially restructured to
become Enersource Hydro Mississauga, the second largest electricity supplier
in Ontario. The second area involved the acquisition by the City of Mississauga
of approximately 8.5 acres of land in the city centre (the City Centre Land).
Commission counsel and I determined that, for efficiency, we would examine
the Enersource questions in Phase I of the Inquiry, and the City Centre Land
questions in Phase II.
In the course of their work, Commission counsel and our investigators
interviewed nearly 100 people and collected about 35,000 documents. In the
end 35 witnesses testified over 38 days of evidence.
I have found that errors were made in relation to the Enersource transaction. The city manager, David O’Brien, for example, failed to discharge his
duty to communicate a significant change in the terms of the city’s transaction
1
2 Updating the Ethical Infrastructure
with Borealis Energy Corporation to Mayor Hazel McCallion and members
of city council. I believe some limited changes to the city’s practices need to be
made, but I do not find it necessary to make extensive recommendations in
relation to the good governance of Mississauga.
The actions of the mayor in relation to the City Centre Land and the
proposed hotel and convention centre project raise significant concerns and
require substantial recommendations. I have made these findings with a measure of regret. I acknowledge the mayor’s unique history of public service to
Mississauga and indeed to Canada. I believe that, to some extent, these issues
have their beginnings in Mississauga’s rapid growth from its origins as an amalgamation of several small towns led since 1978 by the same dynamic mayor.
From what I have seen, the city’s amenities and certainly its public service are
first-rate.
What might be referred to as Mississauga’s ethical infrastructure requires
modernizing. The city and the mayor had for some time identified the construction of an upscale hotel and convention centre as an important public
project for Mississauga. To achieve this end, Mayor McCallion caused negotiations to begin between the co-owners of the City Centre Land and her
“preferred group” of purchasers, the corporation World Class Developments
(wcd), in the fall of 2005. She was instrumental in attracting an experienced
developer to join wcd. After the co-owners had closed their deal with wcd
and economic conditions had softened, she exerted pressure on the co-owners
to relax certain conditions. When a new investor became involved in wcd, she
vouched for him and advanced positions on his behalf.
The mayor’s son, Peter McCallion, was a participant in the wcd transaction from the outset. On any view of the evidence, he stood to gain substantially (with a potential upside of tens of millions of dollars) on the successful
completion of the hotel and condominium project. The mayor knew at the
very least that he was the real estate agent for the purchaser, a role that
would, in one fell swoop, have earned her son more money than he would
otherwise have earned over the course of many years. I have found that the
mayor knew her son had a financial role which extended beyond acting as the
purchaser’s agent.
Notwithstanding Ms. McCallion’s knowledge of her son’s involvement, she
promoted wcd at every step of the transaction. At one point she contacted the
chief executive officer of one of the co-owners to orchestrate a meeting that she
Introduction 3
attended with a senior officer of the co-owner and Mr. McCallion.
When the co-owners terminated the wcd transaction and litigation ensued,
the mayor became involved once again. She dispatched David O’Brien, a former city manager, to seek a resolution of the litigation, notwithstanding that
doing so placed him in an intractable conflict of interest. Mr. O’Brien was also
acting as an emissary of one of the co-owners. For reasons that remain opaque
to me, the ceo of one of the co-owners then settled the litigation without the
knowledge of the other on terms that were quite advantageous to wcd.
None of the mayor’s private actions on behalf of wcd was known to members of council, to municipal officials, or to the public at the material time.
Given her son’s pecuniary interest in the transaction, it was improper for
the mayor to repeatedly use her public office on behalf of wcd, from the perspective both of the common law and of common sense. The mayor ought to
have given the wcd project a wide berth. A member of council cannot promote the financial interests of family members and must avoid any appearance
of impropriety. Citizens have a right to expect that a mayor will act impartially
and without favour, as the oath of office requires. It is no answer to say that a
public office holder may advantage a relative to the extent that it is in the furtherance of the greater good. To sanction this principle could, over time, lead
only to the erosion of public trust in municipal government.
I have found that substantive legislative reforms are necessary at the provincial level. I have also proposed changes to the Mississauga Code of Conduct
and attempted to define a role for an integrity commissioner in Mississauga.
The Principles of the Inquiry Process
Setting Up the Inquiry
The design and operation of the inquiry process pose several unique challenges.
The Terms of Reference, which define issues to be investigated and reported
on, cannot be expected to advise on how to begin. I was fortunate in that I
could look to my colleagues who have spearheaded other public inquiries for
guidance.
To assist me in designing our approach, I considered the processes established in other inquiries. I am especially grateful for the clear and concise procedures outlined by Justice Stephen Goudge in his 2008 Inquiry into Pediatric
Forensic Pathology in Ontario Report. Justice Goudge recognized the importance of designing a process that best achieved “a fair, efficient, and transparent
inquiry.”1 He detailed his process in the anticipation that many of his ideas
might be useful to subsequent public inquiries. For that I am most appreciative. I received considerable guidance, as well, from the inquiries conducted
pursuant to the Municipal Act by my former colleagues the Honourable Ron
Sills (Waterloo Judicial Inquiry – rim Park Financing Agreements) and the
Honourable Denise Bellamy (Toronto Computer Leasing Inquiry / Toronto
External Contracts Inquiry).
Public Inquiries
A public inquiry in Canada is an official review ordered by government of specific events or actions. Its dual purpose is to establish the facts and the causes
of the subject matter of the inquiry and to make recommendations that might
prevent a recurrence of unfavourable features. A public inquiry is not a civil
or criminal court of law, and the role of a commissioner is not to reach conclusions regarding the civil or criminal liability of any person involved in the
subject matter of the inquiry.
By its very nature, a public inquiry is investigative in its approach. It encourages an open and public process. Every public inquiry is unique, shaped by its
mandate, and while prior inquiries do provide guidance, each commissioner
must design his or her own rules and procedures. That is a daunting task. Most
commissioners of recent public inquiries have looked to three fundamental
principles to guide the inquiry process: fairness, efficiency, and transparency.
Commission counsel and I adopted these same principles and applied them at
each stage of the Mississauga Judicial Inquiry process.
Background to This Inquiry
This Inquiry was conducted in two phases. Phase I focused on the Enersource
transaction, and Phase II on the City Centre Land deal. My Report follows the
same structure, and my analysis and findings for each phase of the Inquiry are
reflected within the body of the Report.
Introduction 5
The Inquiry Process
Appointment of Commission Counsel
One of the most important decisions I undertook at the outset of the Inquiry
was to appoint capable and qualified Commission counsel to work closely with
me through every stage of the process. As noted by Associate Chief Justice
Dennis O’Connor, “[t]he commissioner appoints his or her counsel and it is
often said, aptly I think, that a commission counsel becomes the alter ego of
the commissioner.”2
I am privileged to have been able to appoint William McDowell of Lenczner
Slaght Royce Smith Griffin llp (Lenczner Slaght) as lead Commission
counsel to represent the public’s interest at this Inquiry. Mr. McDowell’s
considerable experience as a senior public servant in the design as well as the
conduct of public inquiries made him a superior choice as Commission counsel. I am grateful for his advice and candour, as well as his insights, professionalism, and sensitivity. His marvellous sense of humour made our days in
Mississauga a delight.
I was also fortunate to have two talented and dedicated counsel assisting
Mr. McDowell. Naomi Loewith, also of Lenczner Slaght, acted as associate
Commission counsel, ably assisting Mr. McDowell in leading evidence at the
Inquiry. Yashoda Ranganathan, also of Lenczner Slaght, acted as associate
Commission counsel. I am most grateful to them both.
Communications and Media Relations Officer
Peter Rehak was retained as the Commission’s communications and media
relations officer. His wealth of experience with public inquiries and excellent
media contacts made him an exceptional choice. His duties included drafting
press releases, coordinating with the media regarding their attendance during
the Inquiry, and responding to the media regarding the inquiry process. In
addition, Mr. Rehak was responsible for overseeing the design and operation
of the Inquiry’s media room and for designing and maintaining the Inquiry’s
website. He also provided assistance to citizen journalists who sought participatory rights in the Inquiry.
Document Management
The Commission retained the services of Potter Farrelly & Associates (Potter
Farrelly). Kearren Bailey acted as consultant and project manager for Potter
Farrelly. Together with the it team from Lenzner Slaght, Ms. Bailey and
Potter Farrelly provided invaluable assistance to the Inquiry from its inception, through the public hearing phase, and afterwards during my preparation
of this Report.
The Mississauga Judicial Inquiry is the first fully electronic public inquiry
in Canada.* Ninety-eight per cent of all documents used during this Inquiry
were created, stored, and exchanged electronically. At the hearing phase,
evidence management was conducted in real time. The benefits of this process were evident in the speed and efficiency with which documents were
found and presented electronically – a maximum of five seconds to display
a requested document to the entire hearing room. In addition, the public
gallery and the press were able to view the documents put to witnesses and
tendered into evidence. This presentation was facilitated by Elizabeth Miller
and Alex Parkes, who acted as e-court directors for the Inquiry, and by Jovana
Velimirovic, e-court operator.
Parties granted standing were required to produce all relevant documents
in their possession, as well as those having a semblance of relevance to the subject matter of this Inquiry. As a result, the Commission received a considerable
volume of materials almost from the outset. In total, 6,373 records formed the
Court Book, selected from approximately 35,000 documents submitted by the
parties.
Document Management Software
Three applications were used for this Inquiry: Systematics Signature, Signature
Court, and Transcend.
Signature
Signature is a case management and document review application. All documents delivered to the Commission by the parties with standing were entered
into the Signature system and formed the Inquiry database. Members of the
Commission team and the forensic consultants were provided with secure
* Other public inquiries have run electronically in the preparation stage but used paper for the hearing phase.
Introduction 7
access to the database. This access allowed them to review, tag, and highlight
relevant portions of the evidence and to collect documents used in the interviewing of witnesses and preparation of final witness statements. Signature
was used to review all documents delivered to the Commission and to determine their relevance. Audit and statistical reporting was provided to show the
review team’s progress (the number of documents reviewed versus the number
unreviewed or found irrelevant), as well as to indicate why documents had
been coded by the review team in a particular fashion.
The Signature system was also used to create a detailed chronology of
events, including the evolution of the Enersource agreement for Phase I of
the Inquiry.
Once the Inquiry database was established, the Commission team identified and tagged all documents for import into the Court Book for the oral
hearings for Phases I and II of the Inquiry. All transcripts, witness statements,
and closing submission briefs were imported into the Court Book as well.
Signature’s reporting feature allowed full statistical reporting regarding
the documents delivered by each party, the number of records included in
the Court Book, and the number of records tendered as exhibits during the
hearing.
Signature Court
Signature Court is the title given to the court presentation and evidence management module of Signature. Fully secure and private access to the Court
Book was provided to counsel for all parties with standing.
Signature Court has a number of useful features. It allowed for the display
of evidence to the Commissioner, witnesses, all participating counsel, the public gallery, and the press room. An audit report of the displayed documents,
noting the witness, time, and date, was generated. Full and contemporaneous
evidence management allowed for exhibit numbers to be added to documents,
as well as the witness, tendering counsel, and date. In addition, Signature Court
became a repository for cited cases, Inquiry Rules and Procedures, participant
details, the Inquiry calendar, and the Inquiry’s email address. The system also
allowed for the integrated import of additional hardcopy evidence as presented
in the hearing room for immediate upload and display. This facility provided
Commission counsel and me with great assistance during the hearing phase.
Transcend
Transcend is a transcript management application. Secure and private access
was provided to counsel for all participating parties. Transcend was also used
by the Commission team in reviewing all transcripts and in importing references for inclusion in the final Report. Transcend allowed members of the
Inquiry team to see annotations made by other team members. It also allowed
for annotations and coding of the evidence by issue. Through Transcend, the
transcript of evidence provided hyperlinks to the exhibits.
Confidentiality Undertakings
All documents received by the Commission were treated as confidential, unless
and until they became part of the public record as exhibits.
All summaries of the witnesses’ anticipated evidence prepared for the
Commission were also subject to confidentiality undertakings. The parties
with standing were required to sign undertakings that they would use each
witness summary for the purposes of the Inquiry only.
Infrastructure
Hearing Room
Hearings were conducted at 950 Burnhamthorpe Road West in the City of
Mississauga (Burnhamthorpe site). The hearing room provided a large public
gallery. There was also a separate media room adjacent to the hearing room,
where those from the media were able to listen to the testimony and view the
proceedings and documents via live video feed. As a result, they were able to
observe the proceedings while speaking with each other or their offices, without disturbing the hearings.
The hearing room was able to accommodate approximately 18 counsel.
Each counsel table had three electronic monitors that displayed the documents which were before a witness. I wish to reiterate my appreciation to the
document managers for their assistance in this regard.
Transcripts were prepared daily by Wendy Warnock of TScript. The court
reporter was Sue Kranz. The transcripts were posted on the Inquiry’s website
within an hour or two of each hearing date. I am indebted to them both.
The proceedings were televised live by Rogers Television. A live-stream feed
was available on the Internet through the Inquiry’s website. I would also like to
Introduction 9
extend my appreciation to Rogers and its manager Jake Dheer for setting up a
process by which interested members of the public who were unable to attend
the Inquiry in person were able to watch on their televisions or computers.
Rogers Television covered the entire Inquiry at virtually no cost to taxpayers.
This availability in my view truly reflected Rogers’ desire to serve as a community television network.
Offices
The Commission’s working offices were located within the offices of Lenczner
Slaght at 130 Adelaide Street West, Suite 2600, Toronto, Ontario. Contact
information regarding the Commission’s offices was posted on the Inquiry
website.
The Commissioner and Commission counsel also had dedicated offices at
the Burnamthorpe site, together with a large meeting room. These rooms provided an excellent working space for meetings among counsel and for witness
preparation.
Mississauga Judicial Inquiry Website
It is my hope that the Mississauga Judicial Inquiry website will remain live for
five years from the release date of the Report. Although my Report is intended
to be comprehensive, the intrepid reader wishing to understand the breadth
of matters under discussion, see everything a witness said on a subject, or read
the technical wording of a particular document under discussion will find it all
on the website that was created, maintained, and hosted by Djordje Sredojevic
of Autcon.
Provision was made for those interested to watch the proceedings live on
Rogers Television through the Commission’s website. In addition, video of the
proceedings was archived on the Rogers website and transcripts were posted
on the Inquiry’s website.
Terms of Reference and Rules of Procedure
On November 11, 2009, the Mississauga City Council adopted specific terms
of reference as set out in Resolution 0271-2009. Following my appointment as
Commissioner of this Inquiry, and following my appointment of Commission
counsel, we established Rules of Procedure to guide this Inquiry’s process. In
the main, many of our rules were collected from other inquiries.
The Terms of Reference are reproduced at Appendix A, and the Rules
of Procedure at Appendix B to this Report. They can also be found on the
Inquiry’s website.
Standing and Funding
Those persons, groups, corporations, or organizations who wished to participate in this Inquiry were encouraged to seek standing before the Inquiry.
Requests for funding were made before me at the hearing on standing.
Applications for Standing and Funding
Our Rules of Procedure (Rules) required those wishing to apply for standing
and funding to provide written submissions explaining the reasons for their
request and to present their submissions to Commission counsel by Thursday,
December 10, 2009. The Rules also ensured that I was able to exercise my discretion in considering subsequent applications. Each application was reviewed
for confidentiality issues, following which it was posted on the Commission’s
website.
In addition to written submissions, all who applied for standing and funding were provided with an opportunity to appear in person before me to explain
the reasons for their request. Oral submissions on the applications for standing
and funding* were heard on December 14, 2009, at the Burnhamthorpe site.
Decisions on Standing and Funding
I delivered my Ruling on Standing on December 14, 2009, and it is attached as
Appendix C to this Report. I granted standing to six of the nine parties who
applied on the basis that those six had a substantial and direct interest in the
subject matter of the Inquiry.
Pursuant to the Terms of Reference, I did not have the jurisdiction to order
the City of Mississauga to provide funding for legal counsel. However, I felt
it was my duty to make recommendations to the city regarding the issue of
funding for certain individuals whose participation at this Inquiry was integral
to my mandate.
The issue of funding in relation to one party, first requested on March 2,
2010, was raised again in a subsequent application on December 1, 2010. My
* Requests for funding were made before me at the hearing on standing.
Introduction 11
rulings on both applications, delivered March 4 and December 3, 2010, respectively, were released and posted on the Inquiry’s website.
Investigation
Document Production
Commission counsel strove to provide to both witnesses and parties with
standing all documents that were likely to be referred to during examination
of a witness at least five days in advance of that witness’s testimony. In addition,
with the assistance of the document managers, the documents were displayed
via monitors at the counsel tables.
Before receiving any documents to be used during the Inquiry, witnesses
and parties with standing were required to sign undertakings that they would
use the documents for the purposes of the Inquiry only.
All exhibits filed at the Inquiry were posted on the Inquiry’s website to
provide the public with access to all aspects of the proceedings.
Witness Interviews
Commission counsel, as well as staff lawyers designated by Commission
counsel, undertook to interview all persons appearing to have information
or documents bearing on the subject matter of this Inquiry. Legal counsel
for those interviewed were entitled, but not required, to be present during
the interview process. To make the process more efficient and to remove any
room for disagreement about what was said, interviews were transcribed
with the consent of the witness. Almost all the witnesses consented. Copies
of transcripts were maintained in confidence by the Commission, with a
copy going to the witness and his or her counsel. I found this process to be
an effective way of marshalling evidence about complicated matters in preparation of live testimony.
Following each interview, Commission counsel, or the staff lawyer to
whom the task was delegated, prepared a summary of the witness’s anticipated evidence. The witness (or counsel, where the witness was represented)
received a copy of the summary for review and comment, following which it
was shared with the other parties with standing at least five days before the
witness’s testimony.
A great number of people were interviewed by the Commission’s investigators but were ultimately not interviewed by Commission counsel. In some
instances the matters of concern to those involved lay outside the Terms of
Reference. In others, Commission counsel, after meeting with investigative
staff, determined that the information did not advance the purposes of the
Inquiry. I met with Commission counsel regularly during the investigative
phase.
Notices of Alleged Misconduct
The Terms of Reference and the Canadian jurisprudence about inquiries do
not allow me to make any findings of misconduct on the part of any person
unless that person had received reasonable notice of the substance of the
alleged misconduct and had been provided with an opportunity during the
Inquiry to be heard in person or through counsel. My counsel issued a number
of notices on a confidential basis.
The Public Inquiries Act3 was amended in 2009 to provide the following:
34(6)No finding of misconduct on the part of any person shall be made against
the person in any report of a person or body conducting the inquiry after
the inquiry unless that person had reasonable notice of the substance
of the alleged misconduct and was allowed full opportunity during the
inquiry to be heard in person or by counsel.4
This provision, as well as the balance of the Public Inquiries Act, has been in
force only since June 1, 2011.
The Commission, nevertheless, followed this principle, given that such
notices are issued by commissions of inquiry in order to conform to the common law principles of natural justice.5 These principles were incorporated into
Rules 40 and 41 of the Inquiry and stipulated that notices would be issued on
a confidential basis. During the course of the Inquiry, I directed that a number
of notices be issued to witnesses coming before the Inquiry. Each notice was
accompanied by a letter explaining the basis on which the notice was being
issued. The recipient was assured that the delivery of the notice in no way
signalled that any finding would be made against the witness. The witness
was invited to respond by retaining counsel (most witnesses in any event had
appeared with counsel). The notice recipient was also entitled to call further
evidence or make submissions.
Commission counsel made every effort to issue notices of alleged misconduct
Introduction 13
well before the recipient testified. I believe the process of providing notices
worked well in this Inquiry.
Hearings
Documentary Evidence
The Inquiry collected approximately 35,000 documents and relied on a large
number of them during the hearings. The document managers were present in
the hearing room every day and were able to upload documents in a way that
immediately enabled counsel to view them. In the course of the Inquiry, 726
documents were filed as exhibits. A List of Exhibits is attached as Appendix D
to this Report.
Oral Evidence
All hearings were open to the public. I retained the discretion to hold hearings in the absence of the public where there were matters that might involve
public security issues, intimate financial or personal details, or other matters
where the desirability of avoiding public disclosure outweighed the desirability of an open hearing.* However, we did not encounter any situations where
we felt it necessary to hold any portion of the hearings in the absence of the
public. I directed in the standing and funding portion of the Inquiry that
Peter McCallion be permitted to file a confidential affidavit concerning his
resources and that he be cross-examined in private on this evidence. At the
same time, Commission counsel was permitted to file any of this evidence
that was relevant to the matters set out in the Terms of Reference.
As previously noted, the hearings were held at the Burnhamthorpe site.
My opening remarks are attached as Appendix E to this Report. Scheduled
hearing dates were set Monday through Thursday from 10 a.m. to 4:30 p.m.
I would like to thank all participants for their commitment to our schedule.
Those testifying provided their evidence under oath or affirmation. Each
witness was entitled to have his or her own counsel present while testifying, and
this counsel was granted standing for the purpose of that witness’s testimony.
Given that this Inquiry was conducted in two different phases, some witnesses
were required to testify more than once.
* As per the Rules of Procedure, any party with standing requesting that any part of the hearing be held in
the absence of the public was required to make the request in writing at the earliest opportunity.
Generally, the process involved Commission counsel calling and questioning the witnesses who testified at the Inquiry. The following order of examination was, in the main, followed by all parties:
1 Commission counsel led the evidence of each witness and was entitled to
ask both leading and non-leading questions.
2 Parties with standing then had an opportunity to cross-examine the witness. The order of cross-examination was determined on the basis of the
examining party’s interest in the particular witness’s testimony. In other
words, the examining party with the greatest interest was permitted to
question the witness later than other less-interested examining parties.
3 Counsel for a witness examined the witness last, unless he or she questioned the witness in chief, in which case there was a right to re-examine.
4 Commission counsel retained the right to re-examine last.
Counsel for a witness was entitled to apply to lead his or her client’s evidence-in-chief. I granted the right to lead their evidence-in-chief to Mayor
McCallion’s counsel and to Peter McCallion’s counsel. Michael Nobrega, ceo
of omers, was examined in chief by omers’ counsel, and Tony DeCicco was
examined in chief by counsel to wcd. In these instances Commission counsel
cross-examined with a view to challenging but also clarifying the evidence of
the witness in important areas.
The expert witnesses provided their evidence as a panel, as discussed below.
In total, 35 witnesses were called and provided oral evidence at this Inquiry.
Some witnesses testified during both Phase I and Phase II. Specifically, 10 witnesses were called during Phase I, and 25 during Phase II. All efforts were
made to ensure that the transcripts and evidence were made available as soon
as possible for public viewing and were posted on the website accordingly. A
list of witnesses is found in Appendix F to this Report.
Expert Panel
The Commission was fortunate to have the assistance of three experts in
ethics, municipal governance, and administrative law. Commission counsel
recommended that we call our expert witnesses as a panel. Although not
sworn, they provided their evidence together at the conclusion of the oral
hearings. Having the experts provide their evidence in this way enabled us to
Introduction 15
focus and elicit opinions on the main issues that needed to be addressed for
the City of Mississauga. Much of their evidence provided important insight
for my recommendations.
The panel was composed of Professor David Mullan, Dean Lorne Sossin,
and Dr. Greg Levine. They testified on December 15 and 16, 2010. All three
gentlemen are scholars with extensive experience in municipal government,
notably as integrity commissioners.
Commission counsel questioned the panel as a whole, asking each witness
in turn to comment on specific issues. Each party’s counsel then had the opportunity to pose questions to the panel in general or to individual panellists. All
counsel posed thoughtful questions in a non-partisan exploration of the issues.
Pursuant to the Rules of Procedure, a copy of any expert witness report was
required to be served on all parties at least 14 days before the appearance of the
expert at the public hearings. Professor David Mullan prepared a report, which
was served on all parties in accordance with the Rules, was marked as Exhibit
A in the Inquiry, and was made available on the Inquiry website. I am deeply
grateful to our three experts for their insight, resourcefulness, and guidance.
Cross-Examination
Where documents were to be used in cross-examination (or otherwise),
parties were advised in advance. The documents were then provided to
Commission counsel, the witness, and parties with standing.
Mayor Hazel McCallion’s Evidence
We recognized at the outset that Mayor McCallion’s evidence had to be presented fairly and with as little inconvenience to her as a hands-on sitting mayor
in a busy metropolis. We were able to accommodate the mayor’s schedule, and
her evidence was heard toward the end of each phase of the Inquiry.
Questions from the Commissioner
I did not hesitate to ask questions of witnesses and counsel to help clarify the
testimony or submissions. I believed that seeking clarification, where needed,
would help to focus the parties and counsel on the issues in which I was
particularly interested.
Submissions
The parties with standing delivered written submissions based on a list of
questions provided by Commission counsel, and a total of five days of the
hearings were devoted to oral submissions, which were delivered at the end of
Phase I and again at the end of Phase II. I sought further submissions from all
parties concerning the mayor’s gala and related events. That was done in the
spring of 2011 through the production of further documents from the city and
the development of an agreed statement of facts.
Addendum
The release of this Report was to some extent delayed in order to enable the
Commission to consider an issue relating to the mayor’s gala. As a result of
concerns first raised by the media, it became evident to the Commission that
evidence given at the Inquiry regarding the mayor’s gala might have been
inaccurate or incomplete. I therefore felt obliged to comment. Ultimately, an
agreed statement of facts was entered into among the parties. That statement
is attached as an Addendum to this Report.
PHASE I
The Enersource Transaction
1 Change to Energy Structure in Mississauga
Energy Structure in Ontario
In 1906 the Ontario government created Ontario Hydro as a provincial institution to deliver power at cost. After almost a century of doing so, in late 1995
the Ontario government authorized the appointment of an advisory committee to study the province’s energy structure and to assess options for phasing
competition into Ontario’s electricity system.
At the time the committee was struck, municipal utilities were publicly
owned, not-for-profit organizations established by the local governments.
There were 307 municipal electric utilities (meus) in 1995, differing in composition, size, customer mix, geographic profile, and commercial sophistication.1
The committee, chaired by the Honourable Donald S. Macdonald, released
its conclusions in May 1996 in a report entitled A Framework for Competition:
The Report of the Advisory Committee on Competition in Ontario’s Electricity
System (Macdonald Report).2 The committee noted that, although electricity
transmission is a natural monopoly, electricity generation is not. In the committee’s view, economic and technological changes since 1906 meant it was
possible to have competition among electrical suppliers. The committee further advised that most customers supported increased choice and flexibility
in products and services. The right to choose the company or supplier with
17
whom to do business was becoming a more frequent demand.
As a result, the committee contemplated a system in which transmission
of electricity would remain a monopoly, but its generation would become
competitive. This concept was particularly timely, since Ontario’s rates seemed
out of step. Lower-cost electricity was available in the United States and also,
under certain circumstances, from Quebec.3
The Macdonald Committee therefore concluded that a new approach, one
that adopted new institutions, regulations, and behaviours, was required. In
particular, a more competitive electricity-generating sector would allow electricity suppliers in Ontario to compete in an open, integrated power market.
To accomplish the goals set out in the Macdonald Report, the committee
recommended that the generating assets be separated and established as distinct, competing, operating entities under the Ontario Business Corporations
Act (obca).4 Each municipality would decide if it wished to keep its assets
or sell shares to investors. Municipalities could also seek out partners in the
private sector.
As Ontario Hydro was dismantled, there would be a complementary
restructuring of the distribution system, and meus would be given all the
powers of corporate bodies under the obca. The Ontario Energy Board (oeb)
would be responsible for regulating the electrical industry.
In the committee’s view, these changes would generate commercial pressure, which would in turn reduce the rates paid to electricity generators and,
ultimately, the rates paid by consumers. As well, private ownership would prevent political factors from determining prices and investment decisions, since
managers would make better decisions when accountable to shareholders.5
The committee hoped the 307 meus would consolidate to allow for the
benefits of economies of scale and scope, as well as related operational efficiencies and cost savings.6 The committee recognized that some meus would do
well, while others would fail, but it felt this consolidation would yield benefits
for the Ontario public. The correct number of utilities was estimated to be
between seven and ten.7
The Macdonald Report ultimately recommended restructuring the energy
distribution sector along the following three principles:
1 Ontario Hydro retail should be absorbed into the local distribution system.
2 There should be fewer distribution utilities.
Phase I – The Enersource Transaction 19
3 Each distribution utility was to keep separate its monopolistic wire business from its competitive electricity sale and service business.8
The Macdonald Report was widely reviewed and accepted, and it set out the
road map for the restructuring of Ontario’s energy sector.
Electricity Act, 1998
In light of the changing energy structure and the Macdonald Report’s
recommendations, Ontario passed the Electricity Act, 1998. This legislation
required municipalities to transfer their municipal electrical utilities to obca
corporations.
At the time, the City of Mississauga operated a model utility. Although it
was not the largest in Ontario, it “was considered probably the most efficiently
run and preeminent utility in all of Ontario.”9 Mississauga, as with all other
Ontario municipalities, began considering its options in accordance with the
mandate to restructure. To do so, it undertook a public request for proposals (rfp) process to solicit bids from those interested in acquiring, leasing, or
partnering with Hydro Mississauga.
Ultimately, Mississauga decided to enter into a sophisticated partnership
transaction with Borealis Energy Corporation (Borealis), a subsidiary of the
Ontario Municipal Employees Retirement System (omers). Mississauga and
omers / Borealis would together form a merged company (ultimately named
Enersource), with Mississauga holding the majority of shares. This portion of
the Report examines the means by which the omers / Borealis veto emerged
late in the process of negotiations of the shareholder approval provisions in the
agreement negotiated between solicitors acting on behalf of omers / Borealis
and the City of Mississauga, respectively. As I will review, the precise terms
of the shareholder approval provisions, and the veto itself, evolved over time.
Unfortunately, the city was unaware that the veto existed until many years
after the Enersource transaction had been concluded.
Request for Proposals
Key Participants for the City
The rfp process was a significant endeavour requiring the efforts of a wide
range of principals and experts. David O’Brien was the city manager for
Mississauga at the time. The city manager is essentially the chief administrator
for the municipality. Mr. O’Brien had occupied the position since 1995, having
previously served as city manager for Sudbury, Gloucester, and Ottawa.10
td Securities was retained, through a competitive process, to bring the
financial sophistication to the rfp process that the city would not otherwise
have had. Jonathan Toll, managing director of mergers and acquisitions for td
Securities, was responsible for managing the rfp procedure. In conducting
this process, td recommended that Hydro Mississauga be recapitalized and
corporatized. Recapitalizing would change the way the city invested in Hydro
Mississauga, since the city could then be permitted to convert to 60 per cent
debt and 40 per cent equity. Corporatizing Hydro Mississauga would make it
(or its new entity) an Ontario business corporation.
Also through a competitive process, the city retained the law firm of Fraser
Milner llp (Fraser Milner).* Completing the transaction required numerous
ancillary agreements. William Houston of Fraser Milner oversaw this legal
work, and other Fraser Milner lawyers were involved.
Procedure
The rfp procedure followed two steps. The first was to reach out to a worldwide group of approximately 50 companies with information about Hydro
Mississauga, and invite those companies to review specific information and
submit a proposal. The second step was to take some of the preliminary bids
to a further round, where the submitting companies would be given additional
confidential information and asked to make a binding proposal. td Securities
was responsible for reviewing each proposal in detail, liaising with each proponent to obtain clarifications and answers, and reporting to city council.
Proposals Received and Considered
As part of step one, confidentiality agreements and “teaser” letters were sent to
fifteen potential Canadian bidders, twenty-five in the us, and nine potential
* The name was later changed to Fraser Milner Casgrain llp.
international bidders. Of these, nine Canadian bidders, twelve us bidders, and
four international bidders requested detailed information to enable them to
submit bids.11 Ultimately, td narrowed the proposals received down to four
which, in its view, required detailed consideration by city council.
Bidder 1 proposed purchasing Hydro Mississauga outright, such that the
city would leave the electricity business and could invest in other opportunities.* Bidder 1 proposed two options: (1) a straight sale of the business for $560
million; or (2) a 22-year lease, with an estimated value of $560 million.12
Bidder 2, as well, offered to purchase Hydro Mississauga outright, although
it was also willing to consider a lease, a minority purchase with a put (the option
to purchase the balance of shares), and the sale of a share interest in Bidder 2
equal to the cash proceeds of the sale. The total value of Bidder 2’s proposal
was $475 million.13 Bidder 2’s proposal also included a guaranteed price freeze
on electricity rates for three years, which Bidder 2 valued at $110 million.
Bidder 3 suggested merging with Hydro Mississauga. The city would receive
a 23 per cent share of the new company and a proportionate share on the new
board of directors.
omers / Borealis† submitted the fourth bid.14 At the time bids were
sought, omers was looking for opportunities to become more involved in private equity, real estate, and infrastructure investments. Borealis was created
for the purpose of infrastructure investments in particular, and at the time it
submitted its proposal to the City of Mississauga it had made three previous
attempts to become involved in this field. Borealis wanted to invest in large,
regulated businesses that were able to generate stable long-term cash flows
to fund the ongoing obligations of the funds.15 A team from the legal firm
McCarthy Tétrault llp (McCarthy Tétrault), led by David Lever, provided
Borealis with legal advice regarding the preparation of this bid.16
Borealis’s proposal was to create a strategic alliance with the City of
Mississauga which would bring together other municipal electric utilities
in the 905 region‡ and ultimately create a large utility owned by a number
of municipalities.17 Michael Nobrega, the ceo of Borealis at the time, testified that, on its own, Hydro Mississauga was not large enough to be seen as
* For confidentiality purposes, the identities of the three unsuccessful bidders have been redacted in the
relevant exhibits, and they will be referred to in this Report as Bidder 1, Bidder 2, and Bidder 3.
† The terms omers and Borealis have been used interchangeably in relation to the transaction.
‡ For the purposes of this Report, the “905 region” refers to a municipality within the 905 telephone area
code in southern Ontario.
a viable investment for Borealis. However, when combined with other 905
utilities from Burlington to Clarington, a merged utility would have between
600,000 and 700,000 customers, which was an appropriate scale for a Borealis
investment.18
Borealis proposed to purchase a 10 per cent interest in Hydro Mississauga
and to refinance Hydro Mississauga’s debt.19 As consideration for the 10 per
cent stake in Hydro Mississauga Borealis would receive, it would provide the
city with $18 million. Mr. Nobrega explained that Borealis did not intend to
own more than 10 per cent of Hydro Mississauga, because municipalities are
exempt under the Income Tax Act as long as they retain at least 90 per cent
ownership of the entity.20
The Borealis bid further contemplated merging Hydro Mississauga with
other 905 meus. Each utility merged would receive its proportionate share in
the new company based on the oeb-calculated book value. As new municipalities joined, Borealis would continue to make equity contributions such that it
would always maintain a 10 per cent stake. The total value of this bid, including
the put (or sell) option described in detail below, was $545 million.21
At the time it submitted its proposal, Borealis delivered a cheque to the city in
the amount of $430 million. Jonathan Toll of td Securities had never seen a proponent make this gesture before, but believed it was done to show the proposal
was being made in good faith.22 Mr. Lever described the cheque as an attempt
by Borealis to show its bona fides and to demonstrate that it had the wherewithal
and strength to take on such a transaction. Since Borealis was a relatively new
entity and omers had not previously been active in the infrastructure area, the
cheque was intended to present Borealis as a serious proponent.23
Recommendation to Accept the Borealis Proposal
David O’Brien prepared a report for city council setting out the details of
each proposal and the analysis of td Securities and city staff with respect to
the bids received.24 In addition, td Securities made a presentation to council
about the four principal bids.25 Mr. O’Brien and Mr. Toll then presented their
views at an in camera session of council on March 29, 2000.
After analyzing each bid, Mr. O’Brien and Mr. Toll recommended the acceptance of Borealis’s proposal.26 This opinion reflected the views of all staff members who had participated in the process, and it was presented by Mr. O’Brien
as the senior public servant of Mississauga.27 In their view, Borealis provided
a strategic partner with financial strength and offered significant potential to
both the city and the entire 905 region. It opened the door for 905 utilities to
work together and grow as a business while retaining public accountability for
energy. In addition, they believed the new entity would have the size, stability,
name recognition, and public support to compete effectively in the retail market. Mr. O’Brien and Mr. Toll therefore concluded that the Borealis proposal
provided the highest ongoing value to the city.28
One of the attractions of this proposal was that the City of Mississauga
would retain ownership of the utility. During the bidding process, the city held
a public meeting regarding the future of Hydro Mississauga, at which residents expressed an overwhelming public preference in favour of Mississauga’s
retaining ownership.29
Mr. O’Brien told the Inquiry that he believed the public favoured retaining
ownership for two reasons.30 First, electricity is considered a “sacred service,”
and thus the public is reluctant to have a private ownership. Second, the public preferred to keep the utility as a long-term source of income, rather than
receive a one-time cash payment.
The Borealis proposal, according to the mayor, was also attractive from a
practical perspective because it would help reduce the number of utilities in
Ontario and thus reduce costs through saved administrative fees and other
expenses. She was glad to have the backing of one of the largest pension plans
in Canada when going to the bond market.31
At the March 29, 2000, meeting, Mr. O’Brien recommended that the mayor
and clerk be authorized to enter into a strategic alliance with Borealis and that
staff be authorized to work with Borealis to achieve a merger. Staff would
negotiate the form of the city’s equity participation in the new company and
report back to council.32
City council passed Resolution 0091-2000, which authorized staff to proceed as recommended. The city moved forward with a deal with Borealis.
2 Negotiation with Borealis
The city entered into comprehensive negotiations with Borealis, the salient
elements of which are addressed below. To appreciate the significance of some
of the highlighted negotiations, however, it is important to understand the
steps leading to the form of the proposal reviewed and accepted by city council
on March 29, 2000.
Pre–March 29, 2000, Negotiations
The “Put”
When Borealis submitted its proposal on February 25, 2000, to create a strategic
partnership with the City of Mississauga, it expected the proposal would form
a starting point for further discussions with the city.33 The company’s intention
was to acquire up to a 10 per cent equity interest in Hydro Mississauga.
As noted above, the Borealis proposal offered a structured refinancing plan
for Hydro Mississauga that brought with it a number of attractive benefits to
the city, including the maintenance of public ownership, the continued monitoring of the quality of services by the city, and the reduction of the financial
exposure of the city to the business risks of energy deregulation.34
The proposed capital restructuring would be effected by Hydro Mississauga
repurchasing some of the shares in the capital of Hydro Mississauga held by
the city.35 Hydro Mississauga in turn was to pay for these shares by issuing to
the city $257,499,000 in senior debt and $85,833,000 in subordinated debt.36
On recapitalization, the following transactions were to occur:
• omers would purchase from the city the Subordinated Debt issued by
Hydro Mississauga, and omers would pay one dollar for each dollar of
indebtedness it purchased.
• Within 30 business days after completion of recapitalization, Hydro
Mississauga would sell long-term debt in the public long-term debt markets.
• omers would subscribe (by December 31, 2000) for such number of common shares of Hydro Mississauga as would result in omers having up to
10 per cent interest in Hydro Mississauga. The subscription price was to
be based on a multiple of the deemed book equity to be negotiated and
determined on the subscription date.
As noted, omers / Borealis submitted its cheque in the sum of $430 million together with this proposal.
As one might expect, before the submission of Borealis’s proposal to city
council on March 29, 2000, td and Borealis exchanged correspondence regarding certain details in the proposal.
One of these issues was the possibility of a “put.” A put is a right to sell an
asset at a fixed price for a fixed period. Although Borealis proposed purchasing only 10 per cent of Hydro Mississauga, a put would have entitled the city
to require Borealis to purchase the remaining 90 per cent of shares before a
set deadline, if the city so desired. This arrangement would protect the city
against a declining market for municipal utilities, without raising any immediate political issues by selling.37
Borealis’s February 25, 2000, proposal had not included a put.38 Mr. Lever
testified that, at some point shortly thereafter, td indicated it would like
Borealis to provide the city with a put. Mr. Lever understood other proponents
had offered to purchase all of Hydro Mississauga from the city, and the city
wanted to keep that door open. Mr. Lever also believed the city was looking for
a potential way out of the strategic alliance if it did not work out.39
On February 29, 2000, Michael Nobrega wrote to Mr. Toll with respect
to the idea of a put.40 Mr. Nobrega informed him that the senior officers at
omers believed a put would be contrary to what Borealis was trying to achieve
by way of consolidation with Hydro Mississauga. As Mr. Lever explained, the
strategy was to work with other municipalities to create a large amalgamation of their utilities, and, if one municipality had a put, it would change the
dynamic of the group.41 Accordingly, if Mississauga were granted a put, Mr.
Nobrega believed omers / Borealis would have to treat the owners of other
meus equally and provide a similar option to them. In Mr. Nobrega’s estimation, omers / Borealis would be required to set aside more than $1.2 billion
for this contingency.
On March 3, 2000, Mr. Nobrega wrote again to Mr. Toll, telling him that
omers / Borealis had carefully considered the idea of granting the City of
Mississauga a put.42 He said that omers / Borealis was now willing to provide
the city with a put option whereby the city could put all (or a portion) of its
shares in the new corporation to omers during a six-month period beginning
July 1, 2004. If the city exercised this option, omers would pay a price equal to
two times Hydro Mississauga’s deemed book equity as at December 31, 1999.
Mr. Nobrega noted that he expected other 905 meus joining the new corporation to request similar rights.43 To keep a level playing field, omers /
Borealis adjusted the recapitalization structure it had originally proposed so
that it would be able to finance the exit strategies for other 905 meus wishing to pursue that option. Apparently, $750 million was taken out of the
recapitalization money and dedicated to the puts.
Under this proposal, the city, Hydro Mississauga, and omers / Borealis
would form an “alliance” that would act as the catalyst for the consolidation
of the 905 meus. The city and omers / Borealis would together incorporate a new corporation (known as “Mergeco”) to effect the consolidation. On
March 27, 2000, omers / Borealis provided the city with its final proposal
to create a strategic alliance with the City of Mississauga.44 The proposed
arrangements were quite complex. It will suffice for these purposes to observe
the following:
1 Hydro Mississauga would reorganize and recapitalize its shares to
Mergeco by means of the city incorporating a new wholly owned subsidiary
(Mississauga Holdco).
2 Mississauga Holdco would acquire all the Hydro Mississauga shares held
by the city for consideration of 40 common shares in Mississauga Holdco.
3 Mississauga Holdco and Hydro Mississauga Corporation (hmc) were
to amalgamate into Mississauga Wiresco, at which time shares in Hydro
Mississauga were to be cancelled.
4 Once Mississauga Wiresco became a subsidiary of Mergeco, omers /
Borealis would contribute to Mergeco a contribution to capital equal to 10
per cent of the sum of the regulated base equity in Hydro Mississauga.
5 Within 30 business days of closing, Mergeco was to repay the promissory
note referred to above out of funds raised in the long-term public debt
markets, or by drawing on the senior secured bridge debt facility omers /
Borealis agreed to provide.
6 omers / Borealis was to enter into a put agreement with the city where
the city might put its shares in Mergeco to omers / Borealis at any time
from July 1, 2004, to December 31, 2004, at a price of two dollars per Class
A share and one dollar per Class B share (in the aggregate, the value of the
put option was $360 million).
7 The city, omers / Borealis, and Mergeco were to enter into a shareholders’
agreement.
This offer was to provide the city with approximately $725 million in financial benefits.
Mr. Lever told the Inquiry he believed Mr. Toll was very convincing in his
discussions with Mr. Nobrega regarding the put.45 Mr. Nobrega testified that
Borealis changed its mind and agreed to offer a put as part of the “poker game”
of the negotiations with the city. He regarded the city as “sophisticated” and a
“formidable foe” during the negotiations. He also speculated that, by virtue of
having presented the cheque for $430 million, omers / Borealis sent the message that it had the wherewithal and could therefore offer a put. In addition,
Mississauga was playing the different bids against each other, and omers /
Borealis wanted to remain in the running.46
The proposal considered by council on March 29, 2000, therefore included
the option to enter into a put agreement.47
Corporate Governance
Mr. Toll also requested further information from Borealis about certain
governance issues for the new corporation, even though the decision of whether to
accept governance suggestions was up to the city, and not td Securities. Mr. Toll
noted that he does not usually get involved in governance questions, since most
of the transactions he handles involve a complete change of ownership.48
On March 7, 2000, Gerard McGrath, the chief financial officer and secretary of Borealis, responded to Mr. Toll’s request for additional information about some of the governance issues.49 Mr. McGrath explained that the
board of directors would initially consist of six representatives from the City
of Mississauga and two representatives from omers / Borealis. A quorum of
the board would consist of seven members, two of whom were required to be
omers / Borealis representatives. All major operating decisions would require
the approval of more than 75 per cent of the board members present at a duly
constituted meeting. These included, among other things, major capital investments, dividend payments, and debt issuances.50
By requiring five city representatives and two omers / Borealis representatives to satisfy quorum, neither the City of Mississauga nor omers / Borealis
could make a major decision on its own without the consent of the other.*
Both the city and omers / Borealis would have a veto.51
* If all eight directors attended a meeting, “more than 75 per cent” would require the vote of at least seven
members. If only seven directors were in attendance, the “more than 75 per cent” rule would require the vote of
at least six directors – and because a quorum required both omers representatives to be present, at least one
omers representative would be voting in favour of the decision. If, however, the board were expanded to its
maximum of twelve directors, omers’ power would depend on how many directors attended each meeting.
Under all configurations, the city would have had a veto over all major operating decisions.
Going forward, if and when other 905 meus joined the corporation, any
other 905 municipality holding at least 10 per cent of the Class A shares would
be entitled to appoint one representative to the board for each 10 per cent interest it held. The number of directors would be increased to accommodate those
representatives, but in no event could the total number of directors exceed
twelve. Mr. McGrath explained that all major operating decisions would
continue to require the approval of more than 75 per cent of the board and a
quorum would remain at seven members, two of whom had to be omers /
Borealis representatives.52
Once other 905 utilities joined the strategic alliance (by contributing at least
10 per cent to the value of the company, giving them seats on the board), the
city would have a veto, but omers / Borealis would not. Mr. Lever explained
that, by then, the deal would no longer be a bilateral arrangement, and the
existence of a third party at the table would help ensure that only appropriate
risks were being taken.53
Mr. Nobrega told the Inquiry that, at the time of the March 7 letter from
Mr. McGrath, Borealis still envisaged the deal as multilateral.54 He expected
there would be no more than one day before the initial bilateral board became
multilateral. At the time, Borealis did not consider even the possibility that no
other meu would join the strategic alliance.55
Thus, in its formal proposal considered by city council on March 29,
omers / Borealis confirmed that the board would initially consist of eight
directors, six of whom would be nominated by the city and two by omers /
Borealis. As other 905 meus joined the corporation, the board would be
expanded to a maximum of twelve directors.56 That number was consistent
with the correspondence previously noted.57
However, the omers / Borealis proposal also stated that “all material decisions of Mergeco will require the approval of 75 per cent of the board which
will effectively provide the city with a veto over Mergeco’s major decisions.”58 In
other words, the requirement that there be two omers / Borealis members in
a quorum was dropped. Accordingly, the city would have a veto, but omers /
Borealis would not. Mr. Toll did not have an explanation as to why this term
was changed from the letter of March 7, 2000.59 Mr. Nobrega testified the
change did not worry him, since he did not expect the board to have eight
people for long, as it was always intended to be a multilateral deal with twelve
directors.60 As a multilateral deal, Mississauga councillors could not force a
change on their own.
Post–March 29, 2000, Negotiations and Authority to Instruct Solicitors
On March 29, 2000, city council instructed negotiations to proceed to finalize
a strategic alliance agreement with Borealis in accordance with its proposal.61
I find the chain of command in the negotiations that followed, and in the process of closing the deal, to be somewhat unclear. Once the city decided to enter
into an agreement with Borealis, City Manager David O’Brien was to be the
“point person” who would provide instructions to develop the strategic alliance
agreement that would be the foundation for the new corporation.62 Mr. O’Brien
testified that the discussions to bring the deal to fruition were basically between
him and Mr. Nobrega.63 In effect, Mr. O’Brien was both the city manager and
the project manager for the development of the strategic alliance agreement.
Mr. Toll explained that, once the financial terms of an agreement have been
structured, the lawyers then deal with “papering” the transaction. Mr. Toll
would become involved only if a financial matter arose requiring his guidance.64 Mr. Houston acted for the city in the negotiation of the strategic alliance agreement. He negotiated principally with Borealis’s solicitors, McCarthy
Tétrault, as to the form of agreements. Neither he nor anyone else from his
firm ever attended a meeting with Borealis’s ceo, Mr. Nobrega, to directly
negotiate the terms of the agreement.*
Mr. Houston testified that for high-level matters he received instructions
from Mr. O’Brien. Instructions on other matters would come from other individuals within the city. Mr. Houston did not report directly to the mayor, but
met with her and Mr. O’Brien on some occasions regarding “big picture” issues.65
Throughout the process, Mr. O’Brien explained, he kept the mayor and
council apprised of developments in two ways. First, there would be formal in camera meetings. Second, there would be “briefing sessions,” which
Mr. O’Brien described as “gatherings of Council to just talk about issues as they
move[d] forward.” Mr. O’Brien stated that these briefing sessions were very
common in the municipal world at the time, although they are less common
now. Often these meetings would take place “at the edges of a council meeting”;
* It was McCarthy Tétrault that was drafting the various versions of the agreement between omers / Borealis and the city, based on the negotiations. Testimony of W. Houston, Transcript, May 26, 2010, pp. 228–29.
that is, Mr. O’Brien would brief the councillors before or after a formal council
meeting. If and when it was necessary to advise council on an urgent matter,
Mr. O’Brien would ask his assistant or the city clerk to arrange for the councillors to attend at a convenient time, often 9:00 a.m. or 4:00 p.m.66
Strategic Alliance Agreement
On April 12, 2000, city council instructed the mayor and clerk to execute the strategic alliance agreement on behalf of the city and to execute a shareholder resolution directing Hydro Mississauga to sign the strategic alliance agreement.67 The
strategic alliance agreement set out the parameters of the new corporation and
the principal agreement. Further details were still to be negotiated. McCarthy
Tétrault had prepared the agreement on behalf of omers / Borealis.
Mr. Lever explained that the strategic alliance agreement was made up of
three principal elements. First, the City of Mississauga and Borealis would
work together to facilitate the consolidation of municipal electric utilities.
Second, they would recapitalize and reorganize Hydro Mississauga to create
indebtedness between Hydro Mississauga and the city so that the city could
take some of its equity out of the company. Third, Borealis would make a number of financial commitments: (1) a $1.25 billion senior loan facility so that, as
municipalities joined the alliance, they would have their utilities refinanced and
omers would stand behind that financing; (2) a $750 million equity acquisition facility, with respect to the put; and (3) a $200 million equity contribution
facility directed to the consolidated municipal electric utility.68
With respect to the governance of the new corporation, the shareholders’
agreement attached to the strategic alliance agreement provided that a quorum
required 75 per cent of the total directors, provided at least two of those present were appointees of Borealis. Major decisions required the approval of at
least 75 per cent of the directors at a properly constituted meeting.69
April Press Release
At some point in the month of April 2000, the city issued a press release setting out the key features of the deal. With respect to control, the press release
stated: “Major corporate decisions will require a vote by at least 75 per cent of
the members, providing Mississauga with a veto and control over the company’s
decisionmaking.”70 This press release was sent to Mississauga residents to keep
them updated about Hydro Mississauga developments.
Strategic Alliance Amending Agreement
After the execution of the strategic alliance agreement, negotiations continued
in an effort to finalize the details of the agreement. In addition, Borealis held
meetings with other 905 utilities to discuss a merged 905 utility. Mr. O’Brien
had sole authority from the city to negotiate the deal with omers / Borealis,
and he continued to be assisted by Fraser Milner. Fraser Milner provided legal
and structural advice, but not business advice.71
On October 31, 2000, the city and omers / Borealis entered into a strategic alliance amending agreement, which set out the parties’ agreement about a
number of issues negotiated over the preceding months. The closing date was
extended to December 6, 2000, “or such earlier or later date as may be agreed
upon by the parties.”72 The strategic alliance agreement had to be closed, however, by December 31, 2000. This date was set both because the relevant parties
operated on a December 31 year end, and because the deal had to be completed
by that date to avoid transfer tax.73
In light of the anticipated difficulty of obtaining signatures from eight
directors at closing,74 the following amendment was made with respect to the
structure of the board:
The Articles of the Corporation shall provide for the Board to have a minimum
of three (3) directors and a maximum of twelve (12) directors. Initially the Board
shall consist of three (3) directors. The City of Mississauga shall be entitled to
nominate two (2) persons and Borealis shall be entitled to nominate one (1) person. The first Board shall be as follows: (i) Hazel McCallion and David O’Brien
as nominees of the City of Mississauga; and (ii) Michael Nobrega, as nominee
of Borealis.75
Under the amending agreement, at a time to be determined by the city,
the board of directors, while initially consisting of three directors, would be
increased to eight people, six of whom would be nominated by the city and
two by omers / Borealis. As noted, the board would be further increased
when another 905 municipality joined to become a wholly owned subsidiary of the corporation. That 905 municipality would then be entitled to
nominate one person for each $125 million of regulated rate base, and the
number of such nominees would be limited to four directors from all such
905 meus.76
A further amendment to the agreement modified the definition of quorum
and, in doing so, gave more control to omers / Borealis. Article 2.13(iv) of the
amending agreement stipulated:
Prior to such time as the City of Mississauga has determined … that the Board
of Directors be increased to (8) persons, a quorum for a meeting of the Board
shall consist of two directors, provided at least one director must be a nominee
of the City of Mississauga and the other a nominee of Borealis. Thereafter, a
quorum for a meeting of the Board shall consist of such number of directors
as is 75% of the total number of directors … provided at least two (2) of which
must be appointees of Borealis.77
Consequently, although the amendment modified the definition of quorum,
the requirement that at least 75 per cent of those present approve a major decision did not change. The result was when the board consisted of three directors, Borealis held a veto over all major decisions.78 When the board expanded
to eight directors or more, the city retained a veto, but Borealis did not.
In his evidence, Mr. Houston testified that the overriding strategic objective
– in reviewing the drafts and the standing instruction given to Fraser Milner
– was to ensure the city had a veto over all major decisions. However, Mr.
Houston did not think city councillors ever turned their minds to the question
of whether Borealis would have a veto as well.79
Further Change to Energy Structure
During the course of the negotiations, significant developments took place in
the energy sector in Ontario. On June 7, 2000, the minister of energy, science
and technology issued a directive to the Ontario Energy Board, which was
responsible for setting rates. Under the Ontario Energy Board Act the Energy
Board is to set “just and reasonable rates,” and the minister’s directive advised
that the first thing to be considered in determining just and reasonable rates
was the price effect on the consumer. Mr. Lever explained that this directive
was in response to rate applications submitted by municipalities in the spring
of 2000, all requesting increases. This development was clearly of concern to
the government.80
A subsequent and important development occurred on June 20, 2000,
when the government introduced Bill 100 in the legislature. Bill 100 had two
principal features: first, if a municipality withheld some assets rather than
transferring them all into the obca corporation, the municipality could not
apply for the rate increase that might otherwise have been available.81
Second, and most importantly, Bill 100 stated that, in setting distribution rates, the municipality could not pass on costs arising out of interest
payments or dividend payments on the capital structure, through to the
ratepayer. Because a fundamental aspect of the strategic alliance agreement
had been a recapitalization of Hydro Mississauga, this restriction significantly undermined the vision of the strategic alliance between Borealis and
the city.82 Mississauga would not be able to pass any transitional costs on to
consumers.
The introduction of Bill 100 had a chilling effect throughout the industry.
No longer was it attractive for the other 905 municipalities to join the strategic
alliance. Mayor McCallion told the Inquiry that, as a result of Bill 100, the city
was also worried the strategic alliance with Borealis would not close.83
Ultimately, Bill 100 languished in the legislature and eventually disappeared, but the changes introduced through the minister’s directive were
sufficient to have the impact the government sought. In particular, the oeb had
to put primacy on consumers’ costs, and the restrictions on rate increases over
time significantly reduced the earning potential under the strategic alliance.
Final Negotiations
The transaction was scheduled to close on December 6, 2000. As is common
before a large transaction closes, significant activity took place in the final
days. Unfortunately, during these final stages, there was no city solicitor in
Mississauga to provide direction. The city solicitor had left her position in
November 2000, and a replacement had not yet been appointed. As a result,
no lawyer at the city had overall responsibility for this matter.84
David O’Brien Appointed President of Enersource
On November 27, 2000, Mr. O’Brien was appointed president of Enersource.
Angus MacDonald took over as acting city manager, but Mr. O’Brien continued to provide instructions to Mr. Houston with respect to the closing of
the transaction. Mr. O’Brien also continued to be involved with other issues,
among them the 905 amalgamation and the creation of the Greater Toronto
Services Board.85
Neither Mr. O’Brien nor Mr. Houston believed Mr. O’Brien’s new role
should preclude him from giving instructions about the closing of the strategic
alliance. In this regard, Mr. Houston testified that “it would have been very,
very difficult to get anybody else up to speed in the last week before closing”
and “it would have been unfair to such a person to impose an obligation to give
instructions with respect to closing of this transaction without them having
lived the transaction for the previous year.” Mr. Houston also believed there
was no legal impediment to receiving instructions from Mr. O’Brien because,
at the time Mr. O’Brien was providing instructions, Enersource was still a 100
per cent–owned subsidiary of the city.86
Council Approval, November 29, 2000
The last city council meeting before the Enersource transaction closed was
held on November 29, 2000. At this meeting, Mr. Houston reviewed drafts of
the agreements with city council. He told the Inquiry that his review was fairly
substantial, and he recalled having “a huge pile of documents in front of me.”
Mr. Houston did not, however, recall any discussion about the shareholder
approval provision at this meeting. He did not think there would have been
any reason for such a discussion because, at that point, there had not been any
change made to the provision.87
Mr. Houston also testified that members of council should have been aware
that further changes were to be made to the agreements since, as he stated,
“they had no basis to assume that the documents were all execution-ready.”88
In particular, there were a number of unsatisfied conditions precedent as of
November 29, 2000.89 The mayor, however, testified that she understood the
agreements before council on November 29 were the final versions, and if there
were to be changes they would come back to council.90
At the November 29, 2000, meeting, city council passed By-law 0600-2000,
which authorized the mayor and clerk to execute all documents necessary to
effect the closing of the strategic alliance agreement. This by-law did not give
the mayor any specific authority or management responsibility to negotiate
the transaction, but simply authorized her to affix the city’s seal to close the
transaction.91
Mr. Houston told the Inquiry the wording of the November 29 closing
by-law was broad enough to include non-fundamental changes that might be
made after November 29 and that might be necessary to close the transaction
in accordance with the overriding direction from city council.92 It would have
been fully apparent to city council that the closing documents had not been
finalized and that additional changes might be made before closing. In his view,
it would have been absurd to give the closing by-law a narrow interpretation
such that the mayor could only sign the documents if they remained identical
to those presented to council on November 29.93
Mr. Houston agreed, during cross-examination, that it is usual for boards
of directors to approve a transaction in principle and then delegate the details
of changes to management to settle in the final days of a transaction.94
Instructions from omers, December 3, 2000
David Lever testified that, on December 2, 2000, he and Mr. Nobrega agreed
they would take some time to review carefully each draft agreement, and they
set aside time on December 3 to share their thoughts. Mr. Lever made handwritten notes on the shareholders’ agreement which reflected his thoughts, and
he added to those notes when he and Mr. Nobrega spoke on December 3. As
a result of their review, Mr. Lever recorded three changes to the shareholders’
agreement.95
First, to achieve a quorum, rather than both Borealis nominees being present, only one Borealis nominee would be required.96 His notes in the margin
suggest he and Mr. Nobrega agreed in this.97
The second change involved article 2.12, which was changed to reduce the
chair’s annual remuneration from $50,000 to $20,000.98 Mr. Lever’s note suggests that Mr. Nobrega believed $50,000 was too high, since the chair would no
longer have to manage the integration of different municipalities.99 Mr. Lever’s
note also confirms that Mr. Nobrega said he would speak to Mr. O’Brien about
this point. Mr. O’Brien had no recollection of speaking with Mr. Nobrega
about this issue.100
The third and most important change related to the approval for major
changes – that is, the veto. Mr. Lever’s notes state that the 75 per cent approval
must include one of the Borealis directors.101 Mr. Lever explained that the less
onerous requirement of “at least 75 per cent” approval allowed the city to make
major decisions on its own without Borealis’s approval. As no other municipalities would be joining the corporation, and since omers had significant exposure
pursuant to the put agreement, both Mr. Lever and Mr. Nobrega felt omers
bore all the risk of owning Hydro Mississauga. The amount omers would be
required to pay if the put were exercised would far exceed the value of the business at the time in light of the minister’s directive.102 As a result, omers wanted
the protection of the veto to prevent harmful decisions from being made.
According to Michael Nobrega, the requirement for the approval of at
least one Borealis director resulted from what he had learned about municipal politics over the course of the negotiations. Since it was not clear where
the transaction might go, and whether the deal would ever become multilateral, Mr. Nobrega felt Borealis needed some say in the major decisions of the
merged corporation. Under the circumstances, he did not think it was “a big
ask.” Mr. Nobrega told the Inquiry that, although the idea of a Borealis veto
over major changes had existed as of March 7, 2000, and had subsequently
been removed, there was no tactical plan to bring the requirement back a few
days before the closing. Instead, he said it was “a genuine attempt by omers”
to protect its members.103
Mr. Nobrega had a specific recollection of his December 3 conversation with
Mr. O’Brien. Mr. Nobrega said he told Mr. O’Brien he had discussed the changes
with his superiors and that they were important changes. This conversation lasted
about half an hour. Mr. Nobrega explained the changes to Mr. O’Brien very carefully. Mr. Nobrega had no opinion about whether city council was involved. In
his view, it was up to Mr. O’Brien to “manage his stakeholders.”104
Mr. Nobrega said Mr. O’Brien told him to have Mr. Lever put the changes
into the agreement and have it sent over to Fraser Milner. Mr. O’Brien said
he would handle it from there.105 A copy of the shareholders’ agreement that
reflects these changes is attached to this Report as Appendix G. Mr. O’Brien,
in his evidence, recalled that Mr. Nobrega discussed this change with him,
although he could not recall if the discussion was in person or over the phone.
Mr. O’Brien did not recall the precise sequence of events, but he believed
he would have discussed the changes with Mr. Nobrega and then have told
Mr. Houston the proposal had been received from omers and asked if
Mr. Houston saw anything wrong from a legal perspective.106
Mr. Lever told the Inquiry that he believes Mr. Nobrega and Mr. O’Brien
spoke about these changes on the evening of December 3. He said Mr. Nobrega
called him back later in the evening of December 3 and instructed him to make
the three changes set out in the agreement and to provide a blacklined copy of
the agreement to Fraser Milner.107 Mr. Nobrega had the same recollection of
this phone call.108
Mr. Lever said that, after speaking with Mr. Nobrega that evening, he
brought the marked-up version of the agreement to Iain Morton of McCarthy
Tétrault, walked through the changes with him, and asked him to circulate a
revised and blacklined draft to the other lawyers at McCarthy Tétrault involved
and to Borealis and Fraser Milner.109
Mr. Lever did not recall thinking about the Borealis veto as a “deal breaker,”
although he conceded it was an important change omers required to protect
its interests. Mr. Lever testified that, because Mr. Nobrega and Mr. O’Brien
were able to reach agreement on these points, no one had to use the term “deal
breaker.”110
Communication Changes, December 4, 2000
On the morning of December 4, 2000, Iain Morton of McCarthy Tétrault sent
an email to John Rhude at Fraser Milner which noted the changed composition of the board to three members and the reduced annual remuneration for
the chair to $20,000.111
Later that day, Mr. Morton sent a letter to Mr. Houston, Jill Leonard, and
John Rhude at Fraser Milner.112 The letter attached blacklined copies of the
put agreement, the financing agreement, and the shareholders’ agreement,
all of which were schedules to the strategic alliance agreement. The changes
reflected in the blacklining to the shareholders’ agreement were those made by
Mr. Lever on December 3.*
Mr. Houston also recalled discussing the changes with Mr. Lever before he
received the letter. He said Mr. Lever told him Mr. Nobrega and Mr. O’Brien
had negotiated some changes, which were reflected in the blacklining. Although
Mr. Houston did not recall the exact words of his discussion with Mr. Lever,
he said he believed Mr. Lever had told him about the substantive changes he
could expect to find in the blacklined agreement.113 Mr. Lever recalled substantially the same conversation.114
On receiving the blacklined copies, Mr. Houston said he spoke with
Mr. O’Brien, who confirmed he had reached an agreement with Mr. Nobrega
about the changes contained in the shareholders’ agreement. Mr. Houston told
* Blacklining is a common commercial practice whereby lawyers highlight proposed changes to an agreement. Mr. Houston candidly confirmed that he would not have expected the cover letter to detail the changes
because he would be expected to review the documents and highlighted changes. Testimony of W. Houston,
Transcript, May 26, 2010, pp. 212–13.
the Inquiry he did not believe there was any bad faith on the part of Borealis
in raising this point (the requirement of the approval of at least one Borealis
director for major changes) at such a late stage.115
Also on December 4, 2000, city council held its inaugural meeting for the
new council. The new councillors were sworn in, but no business was conducted. This was principally a ceremonial, formal evening for the family and
friends of the new council members.116
Reasons for the Borealis Veto and Its Importance to omers
Both Mr. Houston and Mr. O’Brien told the Inquiry there were sound business reasons for the Borealis veto. First, given the value of the put and the
ease with which the city could have required Borealis to purchase the remaining shares for $360 million, it was reasonable to ensure that the city could
not make decisions without the approval of at least one Borealis director. For
example, without the veto the city could sell off Enersource’s assets or property
before triggering Borealis’s put commitment – and Borealis would not be able
to prevent the sale. In addition, Borealis was committing to purchase all of
Hydro Mississauga’s debt, while the city was benefiting substantially from the
money Borealis was investing.117
Mr. Toll testified that it was unusual for a 10 per cent owner to have effective
control over major decisions, but “everything is specific to the circumstances
surrounding the particular deal.” omers was making a significant financial
contribution to the new company, and the put constituted a significant economic risk. Mr. Toll testified that, in his professional opinion, when a company
takes on the type of risk that omers did, it is not unreasonable to want a fair
degree of control.118
I accept that the inclusion of the Borealis veto made good sense once it
became clear the deal would only involve two parties. All the lawyers who testified, and in particular Mr. Houston and Mr. Lever, provided great assistance
to the Inquiry in relation to these complex commercial matters. But even if the
veto made commercial sense, I am required to reach a conclusion as to how
such a fundamental change came to form part of the deal without being drawn
to the attention of council, as it should have been. As I will elaborate, these
were hard-nosed and complex commercial negotiations. I find, however, that
Mr. O’Brien failed in his obligation to draw the veto to the attention of the
mayor and council.
Mr. O’Brien testified that the Borealis veto should have expired when the
put expired. In his view, the failure of the veto and the put to expire at the same
time was an oversight and indeed, as he was city manager, it was his oversight.119
According to Mr. Houston, although the put was part of the justification for
the veto, omers also had liability with respect to the financing agreement and
its obligation to arrange for the placement of the bonds.120
With respect to the expiry of the veto, Mr. Nobrega told the Inquiry that
omers fully expected the put to be exercised, and thus he did not think about
limiting the veto to the timing of the put.121 Because he fully expected the city
to act on the put, there would have been no post-put time during which corporate governance would be relevant.
Mr. Houston understood the Borealis veto to be “a dealbreaking matter
from the Borealis side.” He also thought Mr. O’Brien believed the veto was a
deal breaker, although he did not think the term was used when they spoke on
December 4.122
Mr. O’Brien testified that he did not recall Mr. Nobrega ever using the term
“deal breaker,” although he had the impression from Mr. Nobrega that this
matter was urgent and that he was under some pressure from his board to
make the change. Regardless of what term was used, Mr. O’Brien was left with
the impression that the veto was indeed a deal breaker for Mr. Nobrega and
omers.123 Mr. Nobrega confirmed to the Inquiry that, although he would not
have used the words “deal breaker,” he would not have closed the transaction
without the protection of the Borealis veto.124
Although Mr. Nobrega believed the veto was essential to the deal, my
impression is that he very much wanted to close the transaction. It was a
good deal from the omers / Borealis perspective. Mr. Nobrega impressed
me as a sophisticated businessman who was, and is, assiduous in protecting
the interests of his pension plan members. I have no doubt about his skills
as a negotiator.
I find that Mr. Nobrega raised the veto late in the negotiations because
strategically it was more likely to be accepted by Mississauga at that time, when
agreement had been reached on virtually all other points. So that I am not
misunderstood, let me emphasize this – I do not believe that proceeding in
this way was an unfair move in commercial negotiations between sophisticated
parties. As Mr. Nobrega said, both he and Mr. O’Brien were “big boys.”125 Even
Mr. Houston said it was not unusual to have important matters raised late in
negotiations. As he said, in an ideal world all changes to an agreement would
be debated by a panel of lawyers on each side, “but in the real world that is not
how transactions close. The expression ‘if it weren’t for the last minute a lot of
things would never be done,’ is [as] true in commercial law as [it is] in life.”126
Should Council Have Been Advised of the Change?
I find city council should have been advised of the Borealis veto and I accept
Mayor McCallion’s characterization of the veto as a major change that should
have been discussed with the assistance of the solicitors acting for Mississauga
at a special meeting called for that purpose.
Mr. Houston and Mr. O’Brien both recognized the Borealis veto as being
important to omers. At the same time, Mr. Houston testified, Mr. O’Brien
felt it was important to get the deal done and did not ask for his advice on the
business terms affected by the blacklining. Instead, he asked Mr. Houston to
do a normal legal review. Mr. Houston explained that the message he received
from Mr. O’Brien was that unless his legal review found something objectionable, the blacklining reflected the deal he had negotiated in order to get the
transaction done.127
Mr. Houston told the Inquiry there were no discussions with Mr. O’Brien
about going back to council to address these changes. Moreover, Mr. Houston
had never advised Mr. O’Brien about when to communicate with city council
and had no reason to believe Mr. O’Brien was not communicating with the
mayor and council. In his view, Mr. O’Brien had always kept council and the
mayor well informed.128
Mr. Houston further explained that he had never gone directly to city
councillors, and to do so without Mr. O’Brien’s instructions would have been
“a breach of the chain of command.” The only time he attended city council
meetings was when Mr. O’Brien invited him to answer specific questions.
Moreover, and perhaps more importantly, Mr. Houston did not believe a
further council meeting was legally necessary to close the transaction. In
Mr. Houston’s view, the necessary municipal corporate authority was contained within the closing by-law. He told the Inquiry the November 29,
2000, by-law was broadly drafted and the change effected by the Borealis
veto did not displace that authority.129
As Mr. Houston explained:
I made the decision to accept Mr. O’Brien’s instructions. To have rejected them
would have risked disaster and huge economic loss for the City, and perhaps
serious legal trouble for myself and the firm as a result of having given advice
not to accept what is – what I viewed as the normal give and take in the circumstances of this matter of negotiations just prior to closing.130
Although there would not have been sufficient time for city council to pass
a resolution regarding the veto, this did not mean city council could not have
been informed, Mr. Houston testified. Subject to the exigencies of the situation, the mayor and any councillors who could have been reached easily should
have been made aware of the changes.131
Mr. O’Brien also testified that the mayor and council should have been made
aware of these changes. He was not, however, able to say it was “more likely
than not” that he advised any councillors of the change. His practice was to
speak with the mayor much more frequently than with the other councillors.132
In her evidence, the mayor said she would have trusted Mr. O’Brien to
recognize the importance of the Borealis veto and to bring it to council’s
attention.133 Similarly, Mary Ellen Bench, the city solicitor, told the Inquiry
the changes reflected in the December 4, 2000, blacklined agreement should
have come back to council for approval.134 In her view, these were substantive
changes that only council could authorize.
Could Council Have Been Advised of the Change?
Council could have been advised of the change, but it seems that the negotiations had reached a certain momentum. Some thought the December 6 deadline could not be extended.
Although the change giving Borealis a veto was “important,” Mr. Houston
testified his overriding instructions were to get the deal done. This change was
received with one business day left before closing. In his view, there wasn’t time
for council to consider the new veto provision in a meeting and approve it
by resolution. As a result, if he had insisted that a special council meeting be
called to discuss the change, it would have jeopardized the closing since there
was no possibility of convening a council meeting before the December 6 deadline. The city did not have the right to extend the closing, he said. In addition,
the city did not have the ability to compel closing since there were still several
closing conditions and city covenants outstanding. To conclude the transaction, it needed a willing buyer.135
I accept that Mr. Houston felt a sense of urgency acting for the city at
the time, which was reinforced by the instructions he had received from Mr.
O’Brien. At the same time, a number of witnesses cast doubt on this evidence,
no doubt with the benefit of hindsight. Ms. Bench told the Inquiry it would
have been possible to add the changes to the agenda of the December 6 meeting, the sole purpose of which was to pass the city’s interim tax levy by-law.
A special meeting of council could also have been scheduled on 48 hours’
notice.136
In addition, Mr. Lever testified that if, on reading the changes set out in the
blacklined agreement sent over on December 4, Mr. Houston had called back
and said he needed more time to consult with city council, there would have
been no reason why the December 6 deadline could not have been extended.137
Mr. Lever would have had to discuss that request with Borealis, but he told the
Inquiry he did not see why that request would not have been granted.
Similarly, Mr. Nobrega testified that it is common for closing dates to be
extended as new matters arose. When he is completing a transaction which
“looks out” over 50 or 60 years, Mr. Nobrega said, an extension of a few days or
a week would not matter. The goal is to provide flexibility to allow the transaction to be properly structured and completed. From omers’ perspective, there
was no particular reason why the deal had to be closed by December 6.138 It
seems to me that this might be easy for Mr. Nobrega to say at the time of
the Inquiry, but I am not convinced he felt the same way leading up to the
December 6 closing date.
Was Council Advised of the Borealis Veto?
I find that no member of council, including the mayor, was advised of the
Borealis veto. The weight of the evidence precludes any other finding. The
mayor testified she was never advised of the veto, and that she was not at any
meeting where council was told of this change.139 Although she may have spoken with Mr. O’Brien about the closing of the deal in general terms during
those final days, the mayor said Mr. O’Brien did not advise her of the Borealis
veto. Ms. Bench told the Inquiry that the mayor has consistently said she had
no knowledge of the veto.140
The mayor further testified that, had she been told about the veto, she
would have insisted council be informed of it, since it was a major change.
She said she would have asked Mr. Houston to take council through the pros
and cons of the amendment. Had the reasons for the veto been explained to
council, she said, “I really believe council would have gone for it.”141 I accept
from this evidence that the mayor was not advised of the veto insertion. She
gave her evidence about what she would have done had she been advised with
the assurance of many years’ experience.
As to Mr. O’Brien, he had no specific recollection of when he spoke with
council, although he told the Inquiry it was “very probable” he spoke with the
mayor about the changes. He also believed he made council aware of them at
some point on December 6.142
Mr. Houston provided no evidence to the Inquiry as to whether council
was or was not advised of the December 4, 2000, change. Although he had a
vague recollection of an in camera meeting just before the December 6, 2000,
meeting, Ms. Bench told him that such a meeting did not take place, and
Mr. Houston accepted that.143 Ms. Bench also explained to the Inquiry that a
city by-law prohibits council from meeting to transact business or make decisions without following the appropriate procedures for calling meetings.144
Councillors George Carlson, Carmen Corbasson, Nando Iannicca, Patricia
Mullin, and Maya Prentice swore affidavits in which they stated they did not
recall any meeting or briefing on or around December 6, 2000, at which the
shareholders’ agreement was discussed.145 Councillor Iannicca, however, stated
in his affidavit that he did recall a meeting with Mr. O’Brien and council members, in the caucus room, where the put option and veto clause were discussed.
Councillor Iannicca said he was certain this meeting did not occur before the
shareholders’ agreement was signed on December 6, 2000.146
Councillor Katie Mahoney recalled a meeting in the caucus room where
Mr. O’Brien outlined the veto and explained to the councillors that there was
“one addition to the agreement we’ve agreed to.” A short discussion followed
Mr. O’Brien’s statement. Mr. O’Brien did not refer to any documents and did
not give a formal presentation. Councillors asked a few clarification questions,
but there were no objections. Councillor Mahoney told the Inquiry that Mr.
O’Brien sat in the chair traditionally used by the mayor, which suggests the
mayor was not in attendance. Although she believes this meeting was held
before the December 6 closing of the deal, Councillor Mahoney could not
assist the Inquiry in determining exactly when the meeting was held.147
The evidence before me is overwhelming that council was not advised
of the Borealis veto before the execution of the agreement. The mayor and
Councillors Carlson, Corbasson, Iannicca, Mullin, and Prentice were certain
they were never advised. Mr. O’Brien said he believed he informed council,
but in answer to my question, could not say that it was “more likely than not”
he did so. Councillor Mahoney was alone in her recollection that council was
told of the veto in advance of the deal closing. I am grateful to her for her
genuine efforts to assist the Inquiry in reconstructing events from nearly 10
years in the past.
Ultimately, Mr. O’Brien and the mayor both recognize that the Borealis
veto was an important change which should have been brought to council
for approval. Mr. Houston, however, believed he was not obliged to draw the
changes to council’s attention, and that there was not enough time to do so.
Ms. Bench told the Inquiry that an emergency meeting could have been scheduled. Mr. Lever and Mr. Nobrega both testified that they would have allowed
an extension of the December 6 closing, if requested.
Execution of Deal, December 6, 2000
Early on December 6, a very short city council meeting was held.148 The meeting began at 9:08 a.m. and was adjourned at 9:11 a.m. The sole issue discussed,
as already noted, was the interim tax levy for 2001. There was no record of any
meeting of councillors before or after the tax levy meeting. Neither Mr. O’Brien
nor Mr. Houston is listed as being present at the December 6, 2000, meeting.
Mr. O’Brien confirmed that, after he was seconded to Enersource, he would
not have attended meetings. The closing documents were executed later on
December 6, 2000. Mr. Lever believed the closing was scheduled for later in
the day in order to give Mr. Houston time to meet with his clients.149
The mayor and city clerk signed the agreements closing the Enersource
transaction. Under the Municipal Act, the mayor has the same authority as
other members of council. She cannot bind the city without a proper by-law
or resolution of council.150
As the mayor explained to the Inquiry, she does not read every clause of
every agreement she signs. Given the significant number of complex agreements she is tasked with signing, she relies on qualified staff, including the city
manager, outside consultants, the legal department, and outside legal counsel
to vet agreements to ensure they accord with council’s direction.151 The mayor
also executed a certificate wherein she stated she was familiar with the provisions of the strategic alliance agreement of April 12, 2000, and the amending
agreement of October 31, 2000.152 This was the only time she could recall having signed such a document.
According to Mr. Houston, in executing the documents on December 6,
Mayor McCallion was exercising her authority to sign the documents and was
entitled to assume they were in order.153 He assumed that “whatever communication with the mayor and council was necessary had been done … consistent
with all prior experience.”154
Post–December 6, 2000
A number of agreements were not settled by December 6, and were concluded
in the weeks following the closing. Although they were technically preconditions to the closing, the parties agreed to waive those conditions and give extra
time to resolve them.155 These agreements included the pole attachment agreement and the street-lighting agreement.
On December 19, 2000, approximately two weeks after the Enersource deal
closed, Mr. Houston briefed the directors of the new corporation, distributing
a document entitled “Brief for Directors.”156 In this document, the overview of
the shareholders’ agreement noted that fundamental changes would require
the approval of 75 per cent of the directors at a properly constituted meeting
(or the consent in writing of all directors).157 The document did not mention
that the 75 per cent had to include at least one Borealis nominee (the Borealis
veto).
The purpose of this document, Mr. Houston stated, was to provide an overview of the details of the various agreements. It was not intended to explain
every provision. Mr. Houston acknowledged his summary of the governance
structure was incomplete. However, he said the full texts of the agreements
were attached, and that the directors included Mr. O’Brien and Mr. Nobrega,
both of whom had detailed knowledge of the agreements. There are no notes
or records from the December 19, 2000, meeting, and Mr. Houston could not
recall if anyone raised an issue about the Borealis veto at that meeting.158
I am left with some lingering concerns about the briefing and materials provided to new directors. Both Mr. O’Brien and Mr. Houston were well aware by
December 19, 2000, that Borealis enjoyed a veto. One or both of them should
have drawn this change to the attention of the board members. Whether Mr.
O’Brien or Mr. Houston intended to keep council or the Enersource board in
the dark about the changed provision, I cannot say. It certainly is suspicious.
Mr. Houston believed he would have followed his usual practice of going
through the terms of the agreement and the material provisions during his
briefing for the directors.159
The Enersource deal progressed well in the following months and years.
Enersource has developed into a very efficient and productive utility, and the
board has operated smoothly.
3 Problem, Investigation, and Proposed Changes
The Penny Drops: Borealis’s Veto Discovered by Council
In the spring of 2007, an issue arose with respect to the remuneration of the
directors of Enersource. City council did some research into remuneration
for boards in other municipalities and raised concerns that the payments
for Enersource were too high.160 At the time, it was the practice of omers’
representatives to remit their compensation to omers.161 For their part, city
councillors kept their payments.162
Before the spring of 2007, the Enersource board itself had engaged an
outside expert consultant to give an opinion about appropriate and competitive compensation. The board would then have to decide whether to amend
or accept the recommendation. If the recommendation was approved by the
board, it would then go to the shareholders (the City of Mississauga and
omers) for approval.163
On the basis of the information it obtained through its research, city council passed a resolution to cut the remuneration paid to Enersource directors.
Borealis was not consulted before the passage of this resolution.164 Borealis
subsequently advised the city it could not take this step unilaterally, since it
required the approval of at least one Borealis board appointee.165 This, according to the mayor, was the first time that the city learned Borealis’s approval was
required for major decisions.166
In the summer of 2007, City Solicitor Mary Ellen Bench contacted Jeffrey
Singer, a lawyer at Stikeman Elliott llp, who was acting as outside counsel
to the City of Mississauga. Ms. Bench advised Mr. Singer that the city and
Borealis were unable to reach an agreement on director remuneration, and
asked what the shareholders’ agreement provided as a process to resolve this
sort of dispute.167 By then, Ms. Bench believed omers and the city had reached
an impasse.168
Mr. Singer and his team reviewed the shareholders’ agreement and advised
Ms. Bench that, pursuant to the agreement, compensation must be approved
by the board, either unanimously in writing or at a properly constituted meeting where at least 75 per cent of the board, including at least one of the Borealis
nominees, voted in favour of the proposition. In addition, at least 50.1 per cent
of the shareholders would have to approve the compensation. Mr. Singer also
explained there was no protocol for dealing with a stalemate – for example, an
arbitration clause or other dispute resolution mechanism.169
Janice Baker, the city manager, told Mr. Singer she had always believed,
and advised council, that the members of council had the final say in board
compensation.170 Mr. Singer’s information alerted the city that this was not
the case. As a result, Ms. Bench contacted Mr. Houston to ask for assistance in
understanding how the provision, which gave Borealis a veto over major issues
including board compensation, came to be. In particular, she wanted to know
how the shareholders’ agreement had been changed between the one presented
to council in April 2000 and the one ultimately signed on December 6, 2000.171
City Council’s Investigation
Contact with Mr. Houston
On October 3, 2007, Ms. Bench sent an email to Mr. Houston outlining
the question that had arisen. She left him a voicemail message as well.172
Mr. Houston received Ms. Bench’s phone message on October 4 and returned
the call immediately, before reading her October 3, 2007, email.173
Close to seven years had passed between the conclusion of the Enersource
transaction and Ms. Bench’s telephone conversation with Mr. Houston. By
that time, Mr. Houston was no longer practising at Fraser Milner. Perhaps
unwisely, he attempted to answer Ms. Bench’s questions about the origins of
the Borealis veto as soon as they spoke and without the benefit of his files
from Fraser Milner. I have no doubt he was eager to assist Ms. Bench, just as
his candid and expert testimony has been of great assistance to the Inquiry.
Regrettably, Mr. Houston’s haste in his dealings with Ms. Bench led the city
solicitor down something of a rabbit hole.
At the time of their October 4, 2007, conversation, Mr. Houston believed
Ms. Bench was talking about an amendment made to the shareholders’ agreement after it was executed. Such a change would indeed have been extraordinary. Mr. Houston did not appreciate that Ms. Bench was talking about a
drafting change contained in the final agreement as executed on December 6,
2000. Accordingly, Mr. Houston advised Ms. Bench it would be a question of
law as to whether the subsequent amendment would be effective.174
Similarly, believing that Ms. Bench was talking about a subsequent agreement, Mr. Houston told Ms. Bench he did not “even know if he saw” the
Borealis veto clause as it could have “possibly [been] a last minute deal between
David [O’Brien] and Michael [Nobrega].”175 Mr. Houston told Ms. Bench that
“if he had seen this he would have objected” because this “minor amendment
tends to savage the entire agreement.”176
Mr. Houston told the Inquiry that, in retrospect, it would have been better
to ask for time to collect his files from Fraser Milner and to review the documents before responding so quickly to Ms. Bench’s questions. However, he
understood from Ms. Bench that she had reviewed her own files and needed a
response on an urgent basis.177
On October 12, 2007, Mr. Houston sent Ms. Bench a follow-up email.178
He advised her he had looked in Fraser Milner’s record book and could not
find a shareholders’ agreement amendment. Mr. Houston asked Ms. Bench
to provide him with a copy of the amendment so he could respond more
fully to her questions. At this time, Mr. Houston was still under the impression that Ms. Bench was asking about a separate agreement, executed after
December 6, 2000.
Ms. Bench asked Mr. Houston to attend the next city council meeting in
order to provide background information and answer questions regarding
the veto.179 Mr. Houston agreed to do so. Before the meeting, Mr. Houston
obtained a copy of the shareholders’ agreement from Ms. Bench and sent clarification with respect to his earlier misunderstanding. In an email to Ms. Bench
dated October 17, 2007, Mr. Houston explained that he now understood council was concerned about the content of section 2.15 (the provision which added
the Borealis veto) as it was included in the signed shareholders’ agreement, and
not any subsequent agreement.180 Mr. Houston acknowledged that he still did
not have access to all the relevant files, but suggested where further information could be obtained.
Mr. Houston also provided Ms. Bench with context for the Borealis veto.
He emphasized that, because omers had given the city a put, it was important
that the assets it was committing to buy did not deteriorate in value before the
put expired. Thus, although a veto in favour of a 10 per cent minority shareholder might have been unusual at first impression, Borealis had exposure well
beyond that of a typical minority shareholder. In other words, Mr. Houston
agreed omers’ risk was higher than that of a regular 10 per cent owner because
there was a contingent risk of owning the entire business if the city chose to
exercise the put, as well as actual risk as a lender and financier of the business.181
For that reason, Mr. Houston regarded the veto provision as reasonable.
Mr. Houston also noted that the oeb’s directive had significantly reduced the
potential rate of return available to Enersource, thereby devaluing Enersource’s
main asset. Mr. Houston pointed out that Borealis did not attempt to use this
development against the city or to renegotiate the terms of the put, or indeed
to withdraw from the transaction.
Ms. Bench responded to Mr. Houston’s email of October 17, 2007, and
expressed gratitude for his assistance. She confirmed that Mr. Houston could
contact anyone involved in the matter to reacquaint himself with the issues,
and also invited him to review the city files before attending the October 24,
2007, meeting.182
Contact with Mr. Lever
At approximately the same time as she initially contacted Mr. Houston, Ms.
Bench also sent an email to David Lever requesting information. Unfortunately,
the email was addressed to [email protected] and should have been sent to
[email protected] In any event, Mr. Lever did not receive it. On October
22, 2007, Mr. Nobrega advised Mr. Lever that Ms. Bench had been trying to get
in touch with him and they spoke soon thereafter.184
On the basis of their conversation, Mr. Lever understood an issue had
arisen regarding section 2.15 and that Ms. Bench was interested in knowing
how the Borealis veto had been inserted. Mr. Lever reviewed the McCarthy
Tétrault files in relation to this matter, and in doing so found a copy of the
December 4, 2000, cover letter enclosing a blacklined copy of the shareholders’
agreement.185 It was included in a number of separate McCarthy Tétrault files
because various lawyers had received copies of the blacklined agreement.186
Council Meeting, October 24, 2007
On October 24, 2007, before Mr. Lever found the December 4, 2000, letter, Mr. Houston attended an in camera session of Mississauga City Council
regarding the Enersource shareholders’ agreement. Mr. Houston attended on
his own behalf, and not on behalf of Fraser Milner.187 Minutes of that meeting
were not kept, but Ms. Bench took detailed notes,188 as did Aaron Platt, who
was assisting outside counsel, Jeffrey Singer.189 At this meeting, Mr. Houston
clarified his earlier misunderstanding; the Borealis veto was not an amendment to the shareholders’ agreement but rather had been included in the agreement before closing.
Mr. Houston hypothesized that the change arose in the last two weeks
before the closing, at a time when hundreds of changes were being made to the
seven or eight agreements under active negotiation. Mr. Houston told council
he believed the change would have been reflected in one of the documents
presented to council on November 29, 2000. Mr. Houston also pointed out
that the April 17, 2001, prospectus listed the Borealis veto in the shareholders’
agreement “as an important part of protection to bond buyers.”190 Mr. Houston
explained to city council his understanding that without the Borealis veto,
bonds would have been harder to sell or would have demanded a higher rate
owing to the risk of political interference.
At this meeting, Mr. Houston told city council the change was not significant since the city still benefited as the 90 per cent owner and had received the
money as part of this transaction. Accordingly, the city and Enersource were
not adverse parties.191 Finally, Mr. Houston explained that it was important to
close the transaction by the end of December 2000, since the exemption for
transfer taxes for municipal electric utilities expired on December 31.192
During this council meeting, the mayor expressed concern that, although
Mr. Houston outlined why the Borealis veto was justified, he was not able to
explain how it came to be inserted into the shareholders’ agreement. Thus,
although there was consensus that there had been a valid reason for including
it, council was not satisfied it had received an answer as to how it became part
of the agreement.193
At the conclusion of the meeting, council asked its outside lawyer, Jeffrey
Singer, to conduct a further investigation into how the veto became part of
the shareholders’ agreement.194 This made sense, since by then Mr. Singer was
dealing with a number of Enersource issues for Mississauga.
The Jeffrey Singer Investigation
Later on October 24, 2007, Mr. Singer contacted Mr. Lever and explained
that the city had retained him to investigate the Borealis veto.195 That evening, Mr. Lever found the December 4, 2000, letter enclosing the blacklined
shareholders’ agreement, and confirmed with Mr. Nobrega that he could send
the letter to Mr. Singer.196 On October 25, 2007, Mr. Lever called Mr. Singer
and told him about the December 4 letter and sent him a copy. Mr. Lever also
sent an email to Ms. Bench, letting her know he had found the documents
and that he had provided them to Mr. Singer. Mr. Singer then forwarded the
December 4 letter to Ms. Bench and summarized the information he had
learned from Mr. Lever.197
Mr. Singer reported his findings to Ms. Bench in a November 13, 2007,
memorandum. The veto, he explained, had been proposed during the course of
negotiations, and Mr. Lever was instructed to add the changes by Mr. Nobrega,
who advised that the addition had been “cleared” with Mr. O’Brien. The letter had then been sent with the blacklined agreement by McCarthy Tétrault,
counsel to Borealis, to Fraser Milner, counsel to the city.198 Mr. Singer confirmed with Chris Pennington of Fraser Milner that Fraser Milner had indeed
received the December 4 letter attaching the agreement.199
Mr. Singer concluded and so advised Ms. Bench that “it would appear that
there was no impropriety as to process in connection with the matter.”200 Mr.
Singer did not express any opinion about what steps should then have been
taken to advise council of the changes to the shareholders’ agreement. During
his testimony before the Inquiry, however, Mr. Singer said the changes reflected
in the blacklined agreement were the type counsel should have discussed with
the client.201
I agree with Mr. Singer’s conclusion.
Correspondence in December 2008
There was little further discussion about the veto after Mr. Singer submitted
his findings. However, Ms. Bench and Mr. Houston exchanged correspondence
about this subject again in December 2008. By email dated December 22, 2008,
Mr. Houston told Ms. Bench he believed he had attended an in camera meeting
of council with Mr. O’Brien on December 5, 2000, and that he had all draft
closing documents with him at the time. These documents would have included
the final version of the shareholders’ agreement with the Borealis veto. He did
not recollect that provision being controversial.202
In response to Mr. Houston, Ms. Bench clarified that there was no council
meeting on December 5, 2000.203 Although his memory about the date was not
precise, Mr. Houston said he “definitely remember[ed] attending an in camera
meeting, not in the main council chambers.”204 I believe that Mr. Houston, like
other witnesses, was doing his best to recall past events. However, in spite of
the seriously conflicting evidence, I reiterate my earlier finding. The evidence
before me is not persuasive that such a meeting occurred.
Proposed Changes to the Shareholders’ Agreement
On December 10, 2008, city council resolved to purchase omers’ interest in
Enersource.205 In fact, the city did not have any right to purchase omers’
shares at its demand.
At the time the resolution was passed, the put was still operative, since it
had been extended from December 31, 2004, to December 31, 2005, and subsequently to December 31, 2008.206 After the put expired at the end of 2008,
Mr. Nobrega wrote to the city outlining Borealis’s position with respect to the
city’s desire to purchase its share in Enersource.207 Mr. Nobrega confirmed
that omers was under no contractual obligation to sell its equity interest. He
did state, however, that, since omers’ obligations under the financing agreement – including the put – had now expired, omers was open to discussing
revisions to the shareholders’ agreement with the city.208 In particular, omers
was willing to drop the Borealis veto.
City council organized a public meeting to discuss Enersource. At that
meeting, there was a strong public preference for keeping Borealis as a 10 per
cent shareholder of Enersource.209 On learning this information, on January
28, 2009, the city created a committee to negotiate amendments to the shareholders’ agreement.210 The committee retained Mr. Singer to negotiate changes
on behalf of the city with Mr. Lever.
At the same time, Mr. O’Brien was asked to reconstruct from memory
the sequence of events regarding the origin of the Borealis veto. In a January
2009 email, Mr. O’Brien advised Carol Horvat, executive assistant to Mayor
McCallion, that he was “certain that there would have been an ‘in camera’ meeting on [November 29, 2000] where the final details of all agreements would
have been discussed, including the changes to the original draft agreements.”211
Mr. O’Brien recognized that the actual changes to the shareholders’ agreement
were made after November 29, but he believed that council was briefed on
those changes at the November 29 meeting.
During his testimony at the Inquiry, however, Mr. O’Brien clarified that
the changes to the shareholders’ agreement were raised only in December; thus,
they could not have been discussed at the November 29 meeting. Mr. O’Brien
also told the Inquiry there was likely an in camera informal meeting of council on December 6, when council was meeting to pass the tax levy by-law.
Mr. O’Brien could not recall the meeting, but stated “my standard practice,
my normal way of doing business with city council was to keep them fully
apprised. And I have every confidence I would have briefed them on this.”212
In his January 2009 email, Mr. O’Brien also stated it was the job of the
legal department and outside counsel to ensure that what was being signed
was consistent with what council had approved.213 In his testimony, however,
Mr. O’Brien stated he had drafted the email in haste. He testified that it was
his responsibility as “the person in charge on behalf of the city” to ensure that
the agreements were consistent with what council had approved. As the senior
public servant for the city, he was the one in charge and it was his responsibility.214 I am grateful to Mr. O’Brien for his candour.
On April 15, 2009, Mr. Nobrega attended an in camera city council meeting
with Mr. Lever. Because the put had expired and omers no longer had a $360
million exposure, he told council it was prepared to change the governance
structure of Enersource to eliminate the veto.215 Mr. Nobrega’s presentation
stated:
Borealis will have no veto rights. This change is appropriate, given that omers
has reduced its exposure to Enersource from $2.2 billion to its 10% equity investment in Enersource.216
Mr. Nobrega gave a detailed presentation to city council, including a proposal about a new way of appointing directors to the Enersource board.217
By early October 2009, omers and the negotiating committee were close
to agreement about a document they were prepared to recommend.218 The
new agreement would have eliminated the Borealis veto, changed the procedure for appointing directors, and established a formula for setting director
compensation. However, in its wisdom, city council passed a resolution calling
for a judicial inquiry before any approval of the newly negotiated agreement.
Mr. Nobrega explained he did not think it would be appropriate to sign the
new agreement until the Inquiry was completed.219 Accordingly, no new deal
has been reached.
At least this portion of the Inquiry could have been avoided, had council
chosen to agree with the negotiating committee’s recommendation.
4 Governance Issues Raised by the Enersource Transaction
Analysis
The Terms of Reference require me to inquire into the issue of the Borealis
veto becoming part of the shareholders’ agreement as it relates to the good
government of the City of Mississauga and to make any recommendations I
deem appropriate and in the public interest as a result of that investigation.
Having found that council was not advised of the change to the shareholders’
agreement before the strategic alliance agreement was executed, I interpret the
Terms of Reference as requiring me to make findings on the following issues
in relation to Phase I:
1 Should council have been advised of changes to the shareholders’ agreement
between November 29 and December 6, 2009? If so, whose responsibility
was it to inform council?
2 Should Mr. O’Brien have continued to instruct Mr. Houston and to make
decisions for the city after being seconded to Enersource?
Duty to Advise Council
Should council have been advised of changes to the shareholders’ agreement
between November 29 and December 6, 2009? If so, whose responsibility was it to
inform council? I concur with Mr. O’Brien’s concession that it was his duty as
city manager with carriage of the negotiations to ensure that he understood
the full import of major changes to the deal. He made this admission in
his evidence during a discussion about the duration of the put. Given the
fact that Mr. O’Brien had carriage of the negotiations on behalf of the city,
I conclude it was his duty to ensure that council and the mayor were fully
briefed about the major change after November 29. I find this duty existed
even though Mr. O’Brien was by then acting as the ceo of Enersource.
It is clear to me that the difficulties associated with communications and
approvals were exacerbated both by Mr. O’Brien’s dual responsibilities while
Enersource started operations, and by the failure of the city to appoint a city
solicitor to oversee the legal work in relation to what was the largest transaction ever entered into by the city.
Mr. Houston agreed that the change from a provision requiring 75 per cent
approval to a change requiring 75 per cent approval including the approval of a
Borealis director was an important change. However, Mr. Houston stated that,
if he had been dealing with a corporation and this type of change came about,
he would not have brought the change back to the directors of the corporation.
Mr. O’Brien was managing this project on behalf of the city, and he had advised
Mr. Houston he had reached an agreement on this term with Mr. Nobrega.220
Mr. Houston believed Mr. O’Brien had authority to comply with the overriding directions from council, which were “to get this deal done and bring in a
huge amount of money to the City coffers.” Accordingly, Mr. Houston believed
Mr. O’Brien’s authority included the governance provision. Mr. Houston testified that Mr. O’Brien must also have believed he had this authority; otherwise,
he would not have negotiated the change without returning to city council.221
Mr. Houston agreed that the change was negotiated to get the deal done,
and his understanding at the time was that, if the change had not been negotiated, “there was a substantial risk that the deal would not close and the city
would be out a very, very large amount of money.” Mr. Houston also testified
that, once Bill 100 died, the province found a different way to achieve the same
result. The province issued a directive to the Ontario Energy Board limiting
the return on equity of municipally owned electric utilities. This change made
the deal with Mississauga far less attractive to Borealis. From the city’s perspective at that point, he said, Mississauga was lucky to “get this deal done.”222
Ms. Bench testified that city council now has a procedure in place whereby
the legal department stamps agreements “approved as to form” before the mayor
and clerk sign them, so that the mayor and clerk know the documents have
been vetted through the appropriate channels. Ms. Bench told the Inquiry that
the current procedure would have ensured that the version of the agreement
with the blacklined changes would not have been signed without council’s
approval.223
Mr. Houston also pointed out that it would have been easier to assist city
council when Ms. Bench contacted him with questions, and to respond, if
minutes had been kept of in camera sessions of council. I note that the mayor
also agreed that it would “solve a lot of problems” if minutes were kept of in
camera meetings.224
Mr. O’Brien’s Two Roles
Should Mr. O’Brien have continued to instruct Mr. Houston and to make decisions
after being seconded to Enersource? Mr. O’Brien ought not to have occupied the
Enersource ceo position by secondment until he had completed the Borealis
transaction. Occupying these two roles caused no impropriety; however, it
placed significant strain on Mr. O’Brien and can only have made it more difficult for him to focus on his duties in relation to the closing. It also placed Mr.
O’Brien in a position where he was instructing lawyers on behalf of the city
when in his new role he had to be mindful of the interests of Borealis.
Summary of Key Findings
The evidence throughout the Inquiry was consistent that the alliance
between the City of Mississauga and Borealis was helpful to both and has
been productive for the city. Indeed, as Mr. O’Brien pointed out, the city got
a bond issue at good rates, was able to take some cash and property out of
the company, and has received healthy dividends. The utility is regarded as
a model of efficiency according to Mr. O’Brien, who offered the view that
Enersource continues to be “spotlighted as an extraordinarily well run utility,
an extraordinarily successful utility.” In his view, Enersource has benefited
from the relationship with Borealis and omers, particularly because it
exposed Enersource to business opportunities, consulting work, and advice,
making it a top-notch leader in the field.225
I find that council should have been advised that the Borealis veto had been
inserted into the agreement before it was signed by the mayor. I find that no
member of council, including the mayor, was so advised. The veto was a major
change that should have been explained to council by the solicitors acting for
the city, at a special meeting called for that purpose.
I find that Mr. Nobrega raised the veto late in the negotiations because
strategically it was by then more likely to be accepted by the city. However,
this tactic was not unusual or in any way untoward in a transaction involving
commercially sophisticated parties, as was the case here. I accept that Mr.
Houston felt there was urgency in getting the deal done and this urgency was
driven by Mr. O’Brien’s instructions. However, I find that informing council
was sufficiently important and that some step should have been taken to do
so, even if that meant negotiating an extension of the closing date or calling an
emergency meeting of council.
Recommendations for Phase I
Informal Meetings of Council
I recognize that in any legislative body there will always be informal meetings
among smaller groups of legislators. In his evidence, Mr. O’Brien described
scenarios in which councillors might receive briefings on substantial and confidential matters outside the council chamber and its protections. This practice
should be discouraged. This kind of informality can only lead to difficulty, and
it is evident that in this instance it led to confusion surrounding who (if anyone) was advised of the Borealis veto, and in what setting. I note that informal
meetings are not permitted under the Municipal Act, 2001.
recommendation 1
I recommend that no informal meetings of city council be allowed. For clarity,
I do not think it appropriate for city business, including briefings from officials
that would otherwise be discussed at a council meeting, to be discussed in an
informal setting.
v
Minutes of In Camera Meetings
I recognize there are practical issues with the keeping of in camera minutes,
and that from the standpoint of confidentiality it may be preferable that no
minutes survive. Federal cabinet departments keep detailed minutes and memoranda of their confidential discussions. The reason for such documentation,
of course, is not just to permit historical examination many years later, but to
ensure that positions taken by various participants are clearly recorded, and
that the substance and rationale for decisions are understood.
In the evidence before me, intelligent and well-meaning witnesses could not
agree as to what had been discussed at in camera meetings. I cannot help but
feel that much of the cost of this part of the Inquiry could have been saved,
had minutes been kept. Although minutes should be kept, distribution of the
minutes should be controlled to protect confidentiality.
recommendation 2
I recommend that minutes be kept of any in camera meetings. Distribution
of those minutes should be controlled to protect confidentiality. The minutes should be kept in paper form only. Distribution of in camera minutes
should be controlled through bar coding or numbered copies to protect
confidentiality.
v
Importance of Involvement of City Solicitor
In my view, it is imperative for a large municipality to have a city solicitor
involved in major transactions on an ongoing basis. The city solicitor should
have sufficient information to brief the mayor and city manager at regular
intervals and when there are major developments in a transaction. Although
the city manager may well be the point of contact with outside counsel in such
transactions, it is important that the city solicitor be kept informed of these
discussions to ensure that members of council, including the mayor, are able to
receive timely internal legal advice about the transaction.
I have considerable sympathy for William Houston’s predicament in this
instance. As he testified, he was uncomfortable with the notion that he might
somehow have been expected to have alerted council to the change in the agreement. I agree with him. This was not his job as the city’s outside counsel, and a
proper chain of command would likely have ensured that the information was
properly shared with city council.
In executing the documents on December 6, 2000, the mayor was required
to certify she was familiar with all its terms.226 The mayor advised the Inquiry
that this was the only time in her tenure as mayor she was asked to sign such
a document.227 Requiring the mayor to certify personal familiarity when she,
quite understandably, relied on her staff to review the provisions of the agreement in detail, was not reasonable.
Quite simply, the mayor’s certification must be taken to mean something.
I would not expect her to review the shareholders’ agreement dealing with
the shareholdings, governance, and all their complexities. At the same time, I
would expect her to decline to certify her familiarity unless she had taken the
time to conduct such a review.
recommendation 3
I recommend that the city solicitor be involved in negotiations between the
city and third parties from the outset, and that he or she be kept informed at
all stages.
v
Certification of Personal Familiarity
recommendation 4
I recommend that public officials not certify personal familiarity with any
document unless that statement is true in all respects.
v
PHASE II
City Centre Land and World Class Developments
5 Factual Background
Mississauga is one of Canada’s great urban success stories. The city is an
amalgamation of several smaller villages and municipalities: Port Credit,
Streetsville, Lakeview, Cooksville, Lorne Park, Clarkson, Erindale, Sheridan,
Summerville, Dixie, Meadowvale Village, and Malton, as well as the Township
of Toronto Gore and Trafalgar. The modern City of Mississauga was created
by provincial statute in 1974. Mississauga has grown at a rapid rate compared
with most Canadian municipalities, from a population of 250,017 in 1976 to
734,000 in 2010.
Mississauga hosts a thriving economy. More than 60 Fortune 500 companies
have a significant presence in the city. Its tax rates have been kept stable, and it
has worked hard with the development industry to allow efficient deployment
of industrial spaces. The city is also home to Pearson International Airport,
which provides it with an important advantage.
The City of Mississauga grew out of farmers’ fields. As a merger of smaller
towns, Mississauga has had something of a void at its present core and has
seemed to lack a centre or a soul. It now has a striking city centre building, featuring a soaring atrium, which was completed in 1987. I take judicial notice that,
61
in the summer of 2011, Mayor Hazel McCallion formally opened Celebration
Square, which will allow thousands of members of the public to listen to concerts, watch films, and skate during the winter season. But for much of its
history, an enormous shopping mall, Square One, has, by default, provided
Mississauga with its city centre.
The location and importance of Square One provide context for this phase
of the Inquiry. First, the mayor emphasized in her evidence that Mississauga
required more than a shopping mall for its city core. Businesspeople who travel
to Mississauga should be able to hold meetings and stay at first-class hotels in
the city rather than spend their nights in Toronto. Groups of all kinds should
be able to hold annual general meetings and conventions in Mississauga.
Equally important, citizens of Mississauga should not have to drive to downtown Toronto for an evening of entertainment.
Second, Square One and its associated landholdings have been a significant constraint on Mississauga’s ability to carry out long-term land-use planning. Quite simply, Mississauga City Council and public servants must have an
excellent working relationship with the owners of Square One as development
continues in the city centre. The opposite is also true. For the owners of Square
One to maximize its value, they must cultivate relationships throughout the
city and understand its processes.
The successive owners of Square One have had the benefit of stability in the
leadership of Mississauga. Mayor McCallion has been in office since 1978. She
is a hands-on, sophisticated politician who understands business.
City Council’s Goal of a Five-Star Hotel
In 1977, the first City Hall was built by a private developer on land next to
Square One. Since then, there have been many plans to develop the city core.
To effect that change, the City of Mississauga must either purchase land or
convince private owners to develop the land in accordance with the city’s vision.1
Like many other postwar North American cities, Mississauga was planned
and built with the car in mind. It remained an automobile-oriented environment until 2001, when the city looked to transform the nature of the core
and identified the land around Square One as suitable for a more traditional
downtown.2
Phase II – City Centre Land and World Class Developments 63
The city’s current Official Plan* envisages a robust, traditional downtown
with mixed-use development consisting of offices, retail development, and
housing for a vibrant, pedestrian-friendly city core.3 To achieve this vision,
City Hall, the central library, the central ymca, the Civic Centre, and the
Living Arts Centre are all located in the city core.4 Edward (Ed) Sajecki, the
commissioner of planning and development for the City of Mississauga, testified that, since the early 1990s, the city had hoped for a hotel and convention
centre connected to the Living Arts Centre,† which would support the city’s
long-term vision of a mixed-use, active downtown.5 It would bring tourists to
the core, meet the needs of the business community, make the city an attractive
locale for conferences and conventions, and generate substantial property tax
revenue for the city.6
The Official Plan recognizes a hotel and convention centre as an approved
use in the downtown core, a goal that the city has not yet been able to achieve.7
In June 2005, the city’s Economic Development Office solicited more than 30
developers and hoteliers to build an upscale hotel and convention centre adjacent to the Living Arts Centre, to no avail.8 The World Class Developments
(wcd) project on city centre land, the subject of this phase of the Inquiry, was
the only proposal for development of a four- or five-star hotel in the city core
in keeping with the city’s vision.9
The Mayor’s Vision
The mayor’s interest in a four- or five-star hotel was, and is, integral to her
vision of enriching the city with a convention centre in the core. Although she
would welcome a four- or five-star hotel anywhere in the city core, she envisaged a high-quality hotel connected to the multifaceted Living Arts Centre.
The hotel and the Living Arts Centre, connected either underground or
overhead and combined with the facilities of the Civic Centre and the central
library, could create a medium-sized convention centre in the downtown core
to attract conventions to Mississauga.10
In the mayor’s opinion, the quality of the hotel was important if the city
hoped to attract foreign investment and corporate headquarters to the core.
* The Official Plan is a document prepared under Ontario’s Planning Act, rso 1990, c P.13, which determines
land-use planning matters for the whole city. Mississauga’s present Official Plan came into force in 2003.
Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1410, 1419, 1422.
† It appears that the Living Arts Centre was designed originally to have a hotel connected to it by a pedestrian bridge.
Although Mississauga is home to hundreds of companies, including many
Fortune 500 companies, their executives are often accommodated in four- or
five-star hotels located elsewhere when they arrive in the city for business.11
The mayor has, for a long time, tried to encourage hoteliers to build in the
city core, and has attempted to encourage investors from abroad to support
this initiative. The mayor informed the Commission that no one ever told her
that a four- or five-star hotel was not economically viable in the city centre,
but the lack of response to the city’s and her efforts indicated that the concept
was not readily viable.12 Despite this fact, she maintained her view that such
a development was feasible because Mississauga has continued to grow even
during the post-2007 economic downturn.*13
Complementary Use Important to City Centre Land Owners
A significant amount of land in the city centre, including the lands adjacent to
Square One and the Living Arts Centre (the City Centre Land), is owned jointly
by two Canadian pension giants: Ontario Municipal Employees Retirement
System (omers),† and Alberta Investment Management Corporation (aim).‡
omers and aim were equal partners and co-tenants of the City Centre Land.
Oxford Properties (Oxford), the real estate investment division of omers, was
responsible for the day-to-day property and development management of this
land for both omers and aim. A map of Oxford’s Mississauga City Centre
Land Holdings was marked as Exhibit 96 in the Inquiry and is attached to this
Report as Appendix H.
aim is a Crown corporation that manages pension and endowment assets
for the Province of Alberta.14 Similarly, omers is a large pension plan that
deals with investment activities and provides pension services to plan members and employees.15 Both corporations seek to make prudent commercial
investments to benefit their capital pools.16 Together, omers and aim manage approximately $120 billion in assets. omers manages approximately $50
* The mayor testified that the city continued to issue building permits for office and commercial use during
the period of economic downturn. Testimony of H. McCallion, Transcript, September 20, 2010, p. 4824.
† omers has four major investment divisions: Borealis Infrastructure, omers Capital Markets, omers
Capital Partners, and Oxford Properties.
‡ 156 Square One Limited is an Ontario numbered corporation that is a subsidiary company of aim and is
managed by private investment managers in Ontario (Hawthorne and Stonecap). For ease of reference in this
Report, “aim” is used to refer to the representatives of aim: 156 Square One Ltd., Hawthorne, and Stonecap.
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1428, 1430; Testimony of M. Dal Bello, Transcript, July
29, 2010, p. 2341; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4307.
billion in assets and must make approximately $4 billion annually to cover its
pension obligations,17 while aim manages approximately $70 billion in assets.18
omers and aim (the co-owners) were aware that the city wanted to
develop a traditional downtown core, as opposed to a suburban environment,
and knew that the City Centre Land was integral to that development.19 They
understood that it was in their interests to foster and maintain good relations
with the mayor and city staff, given the amount of property and assets they
owned in Mississauga. They regarded it as “good business” to assist the mayor
and the city to achieve their development goals.20 Not surprisingly, however,
they acted primarily to pursue their own commercial interest at all times.21
The city knew it had to work closely with the co-owners to achieve its vision
for the downtown core.22 To this end, the mayor had been actively involved in
discussions with the co-owners over the years regarding the development of
the city core, and the city had formed numerous committees to consider problems and issues associated with its development.*
In 2005, Peter McCallion, Mayor Hazel McCallion’s son, approached
omers as a real estate agent about the possibility of purchasing three parcels
of the City Centre Land. The proposal contemplated the development of an
upscale hotel and condominiums on the land. The co-owners were aware that
a hotel of this kind, next to the Living Arts Centre, was an important goal
for the mayor and the city.† For example, the present ceo of omers, Michael
Nobrega, testified that he had been aware since 2001 that building a hotel in
the downtown core was important to the mayor and part of the city’s vision for
the city centre.23
According to the co-owners, the primary consideration regarding the
potential sale of the City Centre Land involved the “use” to be made of these
lands, with sale price being of secondary importance. The co-owners were
only prepared to consider “complementary use” projects with the potential to
enhance the long-term value of Square One.24 For that reason, the co-owners
considered it to be in their commercial interests to develop the City Centre
Land, rather than leave that land vacant – but only to enhance the value of
Square One.25
* Two main problems associated with the city core included cost of the land and road patterns. Testimony of
H. McCallion, Transcript, September 20, 2010, pp. 4814, 4815, 4817.
† Testimony of H. McCallion, Transcript, September 20, 2010, p. 4851; Testimony of A. Costin, Transcript,
July 8, 2010, pp. 1503–4; Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2277. Exhibit 591, p. 1, references the fact that the mayor told Paul Haggis of omers it was her “dream” for a good hotel to be built there.
Michael Latimer, the ceo of Oxford, testified that, in his opinion, a proposal for a hotel combined with condominiums would provide an excellent
use of the City Centre Land owing to the increased value if hotel guests and
condominium residents shopped at Square One.* The offer presented by wcd
was attractive because it meant someone else was taking the capital risk for a
complementary use to their investment.26
The co-owners considered the concept of a hotel / convention centre as
a stand-alone project to be an uneconomic, high-risk endeavour. To render
it economically feasible, they understood the need to have condominiums to
subsidize or offset the cost of the hotel.† Condominiums are much easier to
finance through presales, generating cash flow immediately as they are sold.27
The co-owners were willing to sell the land to wcd as long as the use, price,
and other terms were right. The co-owners were aware that no other developers had expressed interest in the land, and they were not pursuing potential
buyers.28 The wcd project was a complementary use, but it also met one of
the city’s major development goals. Participation in the development would
assist the co-owners in dealing with the city on other outstanding and future
projects.29 There was value in the good will that would be earned by assisting
the city to realize its planning objectives for the downtown core.30
There is no question that, for good reasons, both co-owners wanted to
pursue good relations with the mayor. Nevertheless, I find that the overriding
consideration of both co-owners regarding the sale of the land was, not surprisingly, to enhance their primary investment, Square One.
World Class Developments
Peter McCallion testified that he has been an active registered real estate agent
in the Mississauga area since the mid-1980s and that in recent years he has
focused on commercial real estate.‡ Mr. McCallion had no prior experience in
* Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201. Mr. Latimer is currently the executive vicepresident and chief investment officer of omers, but at the relevant time was the president and ceo of
Oxford; see also Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1705–7, and Testimony of L. de Bever,
Transcript, September 13, 2010, p. 4305.
† The property owners appreciated that establishing a four-star hotel without condominiums in this location
would have been difficult economically for a number of reasons, including the fact that hotels have a maturation period during which the initial return on investment would have been nominal. Testimony of A. Costin,
Transcript, July 8, 2010, pp. 1518–19.
‡ Mr. McCallion acknowledged that his real estate licence has been suspended on two occasions since that
date: in 2007, for not having completed the necessary continuing education; and in 2009, for non-payment of
putting together a development project. His experience was strictly as a real
estate agent, and he therefore needed to bring other individuals with development experience into the project.31
Mr. McCallion’s interest in developing a hotel / condominium project in the
city core dated back to an unsuccessful attempt to secure financing from investors from China for such a deal in 2002.*32 He testified that approximately two
to three years later he was approached by someone who knew investors from
Korea who were looking to invest in Canada. Mr. McCallion took his idea to
a couple of developers, and one of them put together a package for the potential investors. The Korean investors were not impressed with the package but
told Mr. McCallion that they would finance a development team, should he
assemble one.33
In late 2004, Mr. McCallion approached developer and family friend
Murray Cook about the possibility of becoming involved in his hotel / condominium project in the Mississauga city centre.34 Mr. McCallion knew that
Mr. Cook was experienced in development projects, including hotels, and that
he had many contacts in the business. Mr. McCallion wanted to bring in Mr.
Cook to lend credibility to the project and to negotiate the agreement of purchase and sale (aps) of the City Centre Land with the co-owners. He felt that
Mr. Cook would be the ideal person to deal with the co-owners.35
At some point in 2005, Mr. Cook made an initial presentation to Oxford
representatives regarding the proposal, following which he attended a number
of meetings and presented the proposed project to the city. In Mr. Cook’s opinion, the hotel was a key factor for everyone throughout the entire process.36
Corporate History of wcd
On February 22, 2005, Peter McCallion instructed solicitors to form World
Class Developments Incorporated.37 D. Jared Brown, the incorporating solicitor, and his colleague Joseph Caprara were named as the president and vicepresident of World Class Developments Incorporated, respectively, and both
were named as directors and officers.38 Messrs. Brown and Caprara are solicitors with the firm Caprara Brown llp (Caprara Brown).
By 2006, Mr. McCallion was aware that his potential investors were not
insurance. Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1793–94.
* Mr. McCallion testified that, before 2002, he had no interest in developing land in the city centre for a
hotel. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1798.
prepared to invest in this project until he could confirm he had secured the
City Centre Land. Mr. McCallion approached his friend Leo Couprie, an
experienced businessman operating a food import / export business, about
the project and explained that he was looking for an investor to provide the
deposit money for the purchase of the land. Mr. Couprie’s understanding was
that once the land was secured, Mr. McCallion would find a large developer to
take over the project.39
Mr. McCallion testified that, by July 2006, it was clear that Mr. Couprie
would be investing in World Class Developments Incorporated and, as a result,
would replace the solicitors as the sole officer and director of the company. On
Mr. McCallion’s instruction, Mr. Couprie directed Caprara Brown by email on
August 3, 2006, stating that, until World Class Developments Incorporated
firmed up a deal with omers, the corporation was to remain in his name only,
because he was providing the deposit money. He also requested that the corporate address be changed to the one he provided. By email the following day, Mr.
Brown confirmed receipt of Mr. Couprie’s instructions and assured him that
“all existing directors and shareholders (Caprara and myself ) will be scrubbed
and replaced with you.”40
On August 9, 2006, to address a printing error on letterhead and business cards, the lawyers changed the name from “World Class Developments
Incorporated” to “World Class Developments Limited” and incorporated the
changes referred to above.41
Although it is odd that the printing error led to the reorganization of
the company, Messrs. McCallion and Couprie formally created World Class
Developments Limited (wcd) in November 2006. In a letter to Mr. Couprie
dated November 20, 2006, Mr. Brown confirmed that, based on Mr. Couprie’s
and Mr. McCallion’s instructions, the corporation had been reorganized
through the filing of articles of amendment.42 Mr. McCallion told his lawyers that the company was Mr. Couprie’s company since Mr. Couprie was the
person with the money. He and Mr. Couprie instructed the lawyers to change
the directors, officers, and shareholders of wcd to reflect Mr. Couprie as the
principal of the corporation, a fact confirmed by letter.43
Peter McCallion’s Interest in wcd
The Terms of Reference require me to make findings as to the relationship
among the mayor and various participants in the wcd transaction. I must con-
sequently review in some detail the evidence relating to the nature and extent
of Peter McCallion’s involvement in wcd. Mr. McCallion held himself out as
simply a real estate agent through most of the time period 2005–2009. For
the reasons that follow, I find that he was, and knew that he was, a principal
of wcd.
According to Mr. McCallion, when he began to promote his proposal for
the hotel / condominium development, he was aware he needed both financing
and someone to negotiate the agreement.44 For his efforts, he hoped to receive
a commission on the sale of the land.* He also expected to be the listing agent
for the sale of approximately 2,500 condominium units on which he anticipated his gross commission to be approximately $10 or $12 million.45
Despite having incorporated wcd and having assembled the initial management “team” (Murray Cook, Leo Couprie, and himself ), Mr. McCallion maintained that his involvement with wcd was “strictly [as] a real estate agent.”46
He testified that he was never an officer or director of wcd. He did acknowledge to the Commission, however, that, by the time he gave his testimony, he
understood that he owned 16 per cent of the equity in wcd.47
I do not accept Peter McCallion’s testimony. I believe that Mr. McCallion
understood at all material times that he had a significant ownership interest in
wcd but may not, at all times, have had a precise understanding of the nature
of that interest. In his testimony, Mr. McCallion minimized his role. However,
a review of Mr. McCallion’s association with and conduct on behalf of wcd
reveals that he was responsible for a number of important decisions made on
behalf of wcd and that he took a number of active steps to further the wcd
project. The following facts provide insight into Mr. McCallion’s role in wcd.
As noted, Mr. McCallion incorporated wcd. Acting as an agent on behalf
of wcd, he presented an offer to omers dated March 21, 2005, to purchase the
City Centre Land for the development of a hotel.48 Mr. McCallion acknowledged he was aware of the contents of the offer and had provided instructions
with respect to the purchase price offered. The offer was signed by Mr. Brown,
the lawyer who had incorporated wcd.49
When the potential offshore investors with whom Mr. McCallion had been
in contact about this project suggested to him that he put together a team for
* Mr. McCallion testified that he had expected to be paid the usual agent’s fee if the transaction proceeded
to closing; however, it became apparent that the co-owners were not willing to pay him a commission on the
sale of the land. Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1806–7, 1876, 1919–22.
the project, he turned to Murray Cook, a family friend. Mr. Cook was given
responsibility for dealing with the co-owners, the approval process, and the
process of hiring and working with experts. Mr. McCallion understood that
Mr. Cook brought credibility and experience to the project.50 For his part, Mr.
Cook understood that his role was to “run the deal” according to the shareholders’ agreement, which gave him control of wcd even though he was a minority
shareholder.51
Mr. Cook testified that when Mr. McCallion approached him about the
project he (Mr. McCallion) informed him that he represented a group of offshore investors who were willing to invest the total equity required for the
project. According to Mr. Cook, having an investor group was a huge starting point, especially for hotel projects. Once they started working together,
he advised Mr. McCallion regularly on the status of the negotiations with the
c0-owners so that Mr. McCallion could, in turn, advise his investor group.
Mr. Cook testified that his understanding throughout was that Mr. McCallion
would receive a fee from the investor group he represented; he always assumed
that Mr. McCallion did not have a financial stake in the deal. He learned much
later on that Mr. McCallion expected to become the agent for the eventual
condominium sales. However, he also clarified that it would have been difficult
to bring in other investors if Mr. McCallion was already the predetermined
real estate agent for the condominium sales and that it would be unrealistic for
such a listing agent to expect more than approximately half a per cent commission on each condominium sale.52
Once consultants on land-use issues were hired, Mr. McCallion made a
request (unique in Mr. Cook’s experience) to attend the consultants’ meetings
because he wanted to understand how big projects were put together.53 For that
reason, Mr. McCallion attended virtually all the meetings of the various consultants and was even involved in the selection of the architectural team.* Mr.
Cook made it clear to everybody, including the co-owners, that Mr. McCallion
was present merely as an agent representing the financial backers and that he
would be compensated by them.54
Mr. McCallion testified that he spoke with Mr. Cook on a regular basis,
* According to Mr. McCallion, he attended consultants’ meetings to represent Leo Couprie’s interest once
Mr. Couprie became an investor in wcd. He would pass on information pertaining to wcd to Mr. Couprie.
Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1818–19; Testimony of M. Cook, Transcript, September 15, 2010, p. 4447.
but was not involved in any of the negotiations regarding the aps. Mr. Cook
provided him with a copy of the aps, executed on January 31, 2007, in early
February 2007.55
In 2006, Mr. McCallion encouraged Mr. Couprie to invest in the project. He
explained to Mr. Couprie that he had an investor in Korea who would develop
the project once the land was secured. Mr. McCallion asked Mr. Couprie
to lend him $750,000, and offered Mr. Couprie an additional $750,000 as a
return on his investment.56 A loan agreement between wcd and Leo Couprie,
guaranteed by Peter McCallion, was executed on January 29, 2007.57
A shareholders’ agreement signed February 28, 2007, among wcd, Murray
Cook, and Leo Couprie, reflected the fact that Mr. Couprie held 80 per cent
of the shares of the corporation and Mr. Cook the remaining 20 per cent of
the shares.58 Mr. McCallion explained that Mr. Cook received a 20 per cent
stake in wcd as compensation for his role in negotiating the deal and lending his credibility to the project, and Mr. Couprie held the remaining shares
because he had put up the money for the project.59 As I shall discuss, the 80
per cent interest in wcd held by Mr. Couprie was held for the benefit of Peter
McCallion pursuant to a declaration of trust.60 Certainly by the time that Mr.
McCallion signed the declaration of trust on January 29, 2007, he understood
that he had a significant interest in wcd and that his interest was disguised, as
it was held in trust by Mr. Couprie.
Mr. McCallion testified that he had no involvement in the negotiation of
the shareholders’ agreement between Mr. Couprie and Mr. Cook.61
Mr. McCallion effectively decided who would control wcd, by replacing
Mr. Cook with an investor, Tony DeCicco, who assumed day-to-day control
over the company. By the summer of 2007, Mr. McCallion believed that Mr.
Cook was trying to squeeze Mr. Couprie out of wcd. Mr. McCallion was worried that, if Mr. Cook was successful, he would no longer be the selling agent
for the condominiums because Mr. Cook’s potential partners would bring their
own in-house salespeople. Put another way, Mr. McCallion felt that his ability
to earn the commissions he anticipated receiving on the sale of the condominiums would be adversely affected if Mr. Cook brought in new investors.62
From Mr. Cook’s perspective, it became apparent that Mr. McCallion’s
original investors were unable or unwilling to invest in the project, and he
asked Mr. McCallion to allow him to put together a group of investors. When
he learned that Mr. McCallion intended to become the selling agent for the
condominiums, he advised Mr. McCallion that it would be difficult to find an
investor if the selling agent had been predetermined, because most investors
and developers had teams in place with whom they preferred to work. These
firms proposed sophisticated sales strategies. Mr. Cook made it plain to Mr.
McCallion that making a project work with a predetermined real estate agent
was a non-starter. Mr. Cook testified that he and Mr. McCallion disagreed on
this point and that, in the summer of 2007, Mr. McCallion brought his friend
Tony DeCicco into wcd.63
Tony DeCicco is a businessman experienced in residential subdivision and
condominium development. He had no prior experience with a project of this
sort or highrise development. I find that the question of who would sell the
condominium units became a source of disagreement between Mr. McCallion
and Mr. Cook, leading ultimately to Mr. McCallion’s decision to replace Mr.
Cook with Mr. DeCicco.
Mr. McCallion testified that he had kept Mr. DeCicco informed about
what was happening with the wcd project because Mr. DeCicco had considerable means and might ultimately invest in wcd. wcd was not meeting its
financial obligations in the hands of Mr. Cook. Mr. McCallion believed that
Mr. DeCicco had both the resources to finance the project and the experience
to bring it to fruition. Therefore, Mr. McCallion asked Mr. DeCicco to take
over the lead and manage wcd – to deal with the co-owners, the consultants,
and the city. He testified that he never read the agreement between Landplex
(Mr. DeCicco’s company) and Mr. Couprie; however, he understood that Mr.
Couprie remained a part of wcd. Mr. Couprie’s involvement was important to
Mr. McCallion because he believed Mr. Couprie would make sure he became
the real estate agent for the entire condominium project.64
Mr. McCallion demonstrated financial commitment to the project as well.
He acknowledged that he lent money to wcd to meet its financial obligations
to keep the deal alive, and, on occasion, he received money from wcd for his
personal living expenses. wcd’s financial records demonstrate a number of
occasions when Mr. McCallion put money into, and received money from,
the company.*65 As he admitted, these were unusual steps for a real estate
agent to take.
Mr. McCallion borrowed $50,000 from tacc Group Inc., a construction
* Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1807–8, 1839, 1844; Mr. McCallion testified that
he had previously loaned money for a deposit in a real estate transaction.
company, which he deposited into wcd to cover the site plan application fee
by the July 31, 2007, deadline. He personally guaranteed this loan on behalf
of wcd by signing a promissory note “aso” (“as signing officer”) on July 27,
2007, and testified that he was aware he had signed the document as such.*
He admitted that he did not have the authority to sign on behalf of wcd;
however, he signed the promissory note in this fashion because wcd needed
the money.66 He knew he did not have the financial means to personally guarantee wcd’s debt,67 but he thought that, by the time the note came due on
November 1, 2007, the wcd group would have a financial partner,68 given his
knowledge that Mr. DeCicco was involved in discussions with Mr. Couprie
about investing in wcd.69
Mr. McCallion testified that, although he remained confident wcd would
be able to complete the hotel component of the development project once Mr.
DeCicco came on board, he and Mr. DeCicco had concerns about the economy
and the timing of construction and knew the hotel could not be completed
by the dates specified in the aps. Mr. DeCicco was trying to extend the timing for the construction of the hotel. Mr. McCallion added that he personally
approached Michael Kitt of Oxford to request additional time to meet the
condition dates imposed under the aps, although he maintained that he was
not involved in negotiating the terms of the amending agreement.70
In June 2008, a document prepared by Ernst & Young was circulated to
market an investment opportunity in wcd’s hotel / condominium project.71
Emilio Bisceglia, a lawyer who had been retained by Mr. DeCicco to act on
behalf of wcd (and whom Mr. DeCicco described in testimony as his “partner”
in the project),72 gave direction to Ernst & Young with respect to the circular.
The document specifically advertised that three individuals – Tony DeCicco,
Peter McCallion, and Murray Cook – were the owners of wcd.73 Mr. Bisceglia
said that Mr. McCallion was described as an owner because, to his knowledge,
that was the truth.74 Mr. McCallion testified that he had not seen this document prior to the Inquiry.75 I do not accept that.
In sum, Peter McCallion’s own actions confirm his ownership interest
in wcd and his exercise of influence over the company consistent with that
interest.
* Exhibit 196. He signed as co-signer as well.
Leo Couprie’s Role
Leo Couprie’s role in these events is significant. In testimony he described
the precise nature of the relationship among wcd, Mr. McCallion, and Mr.
DeCicco. His evidence reinforces that Mr. McCallion had an ownership interest in wcd. Importantly for the Commission, Mr. Couprie also provided it
with an executed declaration of trust, which was witnessed by the mayor and
which I will review below.
Leo Couprie first met the mayor and Mr. McCallion on a business trip to
China in 2002. Mr. Couprie was there for his own business purposes, while
Mr. McCallion was meeting with prospective Chinese investors about building
a hotel in the Mississauga city centre.76
Mr. McCallion had incorporated wcd before Mr. Couprie became involved
in the company. Mr. McCallion approached him about investing in wcd in
the summer of 2006 on the basis that an investor group in Korea was prepared to develop the project if Mr. McCallion could assure the investors they
would gain title to the property. He understood that Mr. McCallion was looking to him only for deposit money for the property. As noted, Mr. McCallion
asked Mr. Couprie to “invest” $750,000, and offered a return of an additional
$750,000 on his original investment.77
Mr. Couprie was prepared to put up the money as long as it was secured
and fully refundable. After receiving verbal legal advice, he gave Mr. McCallion
$600,000 of his own money and borrowed an additional $150,000 from
friends, for the requested total of $750,000.78
The deal was attractive to Mr. Couprie in that it permitted him to double
his money, although he knew it would take some time to receive the $1.5 million he was due.79 The successful completion of the project depended on: (1)
closing the deal with omers; (2) the developer then building the condominiums and engaging Peter McCallion as the listing agent; and, finally, (3) actually
selling the condominiums.80
Mr. Couprie explained that he came into the project as a lender, not as a
shareholder, and he requested that he be entitled to hold shares as collateral for
his money.81 As already noted, on August 3, 2006, Mr. Couprie instructed the
lawyers at Caprara Brown to change the corporate documents to reflect Mr.
Couprie as the principal and sole shareholder / director of wcd.82
Mr. Couprie testified that he had no experience in land development and
did not get involved in the day-to-day business of wcd.83 He understood that
Mr. McCallion’s role was to be his representative in putting the deal together.
He further understood that, if the deal came together, Mr. McCallion would
try to be appointed the agent for the condominium sales.84
On January 29, 2007, a loan agreement between wcd and Leo Couprie was
executed wherein Mr. Couprie agreed to lend wcd $750,000 to be used as
a down payment, on the provision that he would double his money once a
financial partner was found. The loan agreement bore Peter McCallion’s signature as guarantor, promising “prompt and full payment of all amounts” to Mr.
Couprie.85 Mr. Couprie knew that Mr. McCallion did not have $1.5 million
at the time he guaranteed the loan.86 The purpose of obtaining the guarantee
from Mr. McCallion was to ensure that someone would ultimately pay Mr.
Couprie. If the future developer refused to pay Mr. Couprie, Mr. McCallion
would pay him from his anticipated commission from the sale of the condominiums. According to Mr. Couprie’s understanding of the loan agreement, he
was entitled to the total repayment once the company found a financial partner
to develop the land.87
Mr. McCallion explained that, at the time the loan agreement was signed,
Mr. Couprie was given 100 per cent of the shares in wcd because no one other
than Mr. Couprie had invested in wcd. For this reason, Mr. Couprie had control of wcd’s bank account from January until August 2007, when Landplex (a
company controlled by Mr. DeCicco) took it over.88
On August 1, 2007, Leo Couprie and Tony DeCicco signed a “Declaration
of Trust and Shareholders’ Agreement” (the Landplex agreement).89 The
Landplex agreement reflected the fact that Mr. Couprie was the beneficial
owner of 80 common shares. He was, however, holding 80 per cent of those
shares (64 shares) in trust for Landplex. He held the remaining 20 per cent
(16 shares) himself.90 As I will explain, he held these shares in trust for Peter
McCallion.
Murray Cook remained a shareholder with 20 per cent of the shares
in wcd.91 According to Mr. Couprie, the Landplex agreement reflected
Mr. DeCicco’s involvement and investment in wcd. He testified that Mr.
DeCicco was to be an interim partner who would fund the corporation until
the wcd group found a developer.92
According to Mr. McCallion, Mr. Couprie’s interest in the project after
signing the agreement was limited to ensuring that he was repaid for his
investment.* He testified that he was not involved in Mr. Couprie’s decision
to enter into the Landplex agreement; however, he agreed it was best for the
corporation.93 According to Mr. Couprie, Mr. McCallion consented to Mr.
Couprie’s transfer of 80 per cent of his interest to Landplex.94
Mr. Couprie understood that Mr. McCallion’s objective in putting the whole
deal together was to be the listing agent for the sale of the 2,500 condominium
units. It was to be the “crowning glory” of Mr. McCallion’s real estate career.
Mr. Couprie acknowledged in his testimony that he believed he continued to
hold 16 shares in wcd for the benefit of Peter McCallion, and he was prepared
to continue to do so until he received his $1.5 million. Oddly, Mr. Couprie testified that he did not hold these shares “in trust” for Peter McCallion but rather
held them for him,95 a difference that is not apparent to the Commission.
Declaration of Trust
On January 29, 2007, Mayor Hazel McCallion, Peter McCallion, and Leo
Couprie dined together at Pier 4 Storehouse Restaurant in Toronto. At Mr.
McCallion’s request, the mayor witnessed the signing of two documents by
Mr. Couprie and Mr. McCallion: the loan agreement (referred to above), and
a declaration of trust.96 Mr. McCallion signed the declaration of trust as the
beneficiary, and Mr. Couprie signed it as the trustee.97
The purpose of executing the declaration of trust was to ensure that the
financial arrangement involving Mr. Couprie’s holding of shares in wcd in
trust for Mr. McCallion was documented and understood. As I will elaborate
upon, I do not accept the evidence of Mr. Couprie or Mr. McCallion in which
they sought to persuade me otherwise. In the final analysis, Mr. McCallion had
a beneficial interest in the shares of wcd. It is clear from the very title of the
loan agreement that Leo Couprie was lending money to Mr. McCallion – it
was Mr. McCallion who was the real investor in wcd. No other conclusion is
available on the evidence.
Mr. Couprie understood the declaration of trust to indicate that he was the
trustee and that he held 80 per cent of the shares of wcd for the benefit of Mr.
McCallion.98 As trustee, he promised the following:
* Mr. Couprie’s deposit money, $750,000, was repaid. Testimony of P. McCallion, Transcript, July 27, 2010,
p. 1917; Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3436–37.
1 that he would not deal with the property in any way except to transfer it to
Peter McCallion;
2 that he would account to Peter McCallion for any money he received in
connection with holding the property; and
3 that Peter McCallion was to pay him double the amount he had advanced.99
Mr. Couprie testified that the declaration of trust represented an accurate
statement of this business relationship, although both he and Mr. McCallion
took the improbable position that it was prepared for estate purposes should
one or both perish on a planned trip to Asia. Mr. Couprie said that when he
returned from this trip he simply forgot about the agreement.100 Mr. McCallion
discarded his copy of the agreement.101
I accept Mr. Couprie’s evidence with respect to his understanding of the
content of the document and the fact that it reflected the state of their relationship. I do not accept Mr. Couprie’s testimony that the document existed
simply for the time frame of the Couprie / McCallion trip to Asia in January–
February 2007. If that had been the case, he would not have forgotten about
its existence on his return. Mr. Couprie is a reasonably sophisticated businessman who operates a successful company in Canada and abroad. If the
trust relationship no longer existed, Mr. Couprie would have taken steps
to document and protect his interest in some way. I find that it was always
contemplated and understood by Peter McCallion that he was the beneficial
owner of shares in wcd.
It is clear from reading the document that Mr. Couprie was holding his
shares of wcd in trust and had agreed that he would not dispose of the shares
except to transfer them to Mr. McCallion.102 Mr. McCallion explained that,
by the time of the Inquiry, he understood the document created a relationship
between him and wcd that went beyond his being a real estate agent, a fact
he claimed he did not appreciate at the time. Similarly, Mr. McCallion testified
that, until this Inquiry, he did not understand he had guaranteed $1.5 million
and had become the beneficial shareholder of most of wcd’s shares.103 This is
very difficult to accept.
Mr. Couprie’s testimony does not support the conclusion that Mr. McCallion
was unaware of his interest in wcd. Mr. Couprie testified that he believed the
declaration of trust, which reflected the arrangement wherein he held 80 per
cent of the shares for the benefit of Mr. McCallion, was replaced with the new
agreement he signed with Landplex on August 1, 2007. No mention was made
of the previous declaration of trust at the time the Landplex agreement was
signed, and Mr. Couprie was not aware of any other document that revoked
the declaration of trust. Although the Landplex agreement said nothing about
an interest being held for Mr. McCallion, Mr. Couprie testified that he and Mr.
McCallion had an understanding that Mr. Couprie would give Mr. McCallion
his shares once he received his $1.5 million.104
omers’ and aim’s Understanding of Peter McCallion’s Interest in wcd
It is clear that those involved in this deal on behalf of omers / Oxford* and
aim were aware from the outset that Peter McCallion was connected to wcd.
However, a review of the evidence suggests that, during the negotiations and
before the signing of the aps, the co-owners believed Mr. McCallion was merely
an agent acting on behalf of wcd, based on the materials and information
provided to them.
Mr. McCallion knew Michael Nobrega and approached him in early 2005
with his concept of the hotel and convention centre.105 At that time, Mr.
Nobrega was the president and ceo of Borealis Infrastructure, omers’ infrastructure investing arm. Mr. Nobrega testified that Mr. McCallion was known
around town as an agent, and he referred him to Oxford (omers’ real estate
development group).106 Shortly thereafter, Mr. McCallion, acting as an agent
for wcd, presented an offer to omers signed by Mr. Brown to purchase three
parcels of land adjacent to Square One dated March 21, 2005.† World Class
Developments Incorporated was a private corporation and unknown to the
co-owners.107 That offer was not accepted.
It appears that on October 3, 2005, the issue of the potential sale of the City
Centre Land came to the attention of Paul Haggis, then president and ceo of
omers, when Mayor McCallion called to express her displeasure to him that
omers was not selling the land to her “preferred group.”108 Mr. Haggis suggested that Michael Latimer of Oxford “arrange further meetings with Hazel
and her developer.”109 Mr. Latimer responded on October 4, 2005, by reporting that he was attempting to contact Murray Cook.110 There was no reference
to Mr. McCallion as part of the “preferred group” or as developer, although, as
* “omers / Oxford” is used to refer collectively to representatives of both omers and Oxford.
† Exhibit 148. D. Jared Brown was the lawyer who had incorporated World Class Developments Incorporated the month before.
I have found, Mr. McCallion was involved by that time as a principal of the
company.
Mr. Latimer testified that he first learned Mr. McCallion was involved with
wcd as its real estate agent in late 2005 or early 2006. He was not concerned
about Mr. McCallion having that role. He stated that he received this information primarily from the senior vice-president of Oxford, Ron Peddicord.111
Mr. Latimer explained that part of the process at omers / Oxford involved a
review of potential projects by its executive committee. In this case, it reviewed
the entire agreement of purchase and sale, including Mr. McCallion’s role and
whether any commission was payable to Mr. McCallion.* Mr. Latimer testified
that omers / Oxford was not aware that Mr. McCallion was a shareholder.
He said that, if those involved at omers / Oxford had appreciated the fact
that Mr. McCallion was a shareholder, they would have taken a different view
of his involvement.†
On January 18, 2006, Ken Lusk was informed by Oxford that the proposed
purchaser was Murray Cook, an individual known to him. At that time, Mr. Lusk
was an officer and director of Hawthorne Realty Advisors Inc. (Hawthorne),
a Toronto-based asset management firm responsible for managing aim’s real
estate interests in the Greater Toronto Area.‡ Mr. Lusk testified that Mr. Cook
told him Mr. McCallion was involved in the project as a real estate agent. Mr.
Lusk had no particular concern about Mr. McCallion’s involvement in this
deal as an agent and therefore did not seek any further information about his
involvement. He was aware that Mr. McCallion would receive a fee on the
successful completion of the transaction, and this fact did not cause him to
hesitate in his dealings with the mayor regarding the deal.112 He was unaware
of Mr. McCallion’s financial arrangements. In any event, the co-owners were
not responsible for any commission to be paid to Mr. McCallion.
Ken Lusk passed on the information that Mr. McCallion had presented the
original offer to omers in an email to Michael Dal Bello, senior vice-president
* Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2196, 2237–38. He testified that the result in this
case was that the aps made specific reference to the fact that the property owners would not pay out any
commission.
† Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2196–97, 2238–40. Mr. Latimer agreed that the fact
that Mr. McCallion had an interest in wcd would not have prevented omers / Oxford from entering into
the transaction, but said they would have wanted absolute clarity on his role.
‡ Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1657, 1662–64. Mr. Coleman took over Mr. Lusk’s
role at Hawthorne in May 2007, and from May to December 2007 Mr. Lusk continued as a consultant for
Hawthorne.
of real estate at aim, in March 2006.113 According to what he had been told,
Mr. McCallion’s interest in the wcd project was limited to acting as an agent
for wcd; he was not made aware of any other interests that Mr. McCallion
had in the project.114 In 2008, Mr. Lusk’s successor, Craig Coleman, required
information about the due diligence performed on wcd at the time the original agreement was signed ( January 2007). Mr. Lusk responded in an email as
follows:
Oxford did most of the due diligence because they did not know Murray Cook.
I met with Murray and he told me that he owned wcd. He also told me that
he would be putting up his own funds for the planning work, legals and the
deposits but he would need an investor to pull the deal off. He told me who the
possible investors were. Michael was aware of these discussions. I spoke to the
Mayor about whether Murray could pull this deal off and she said she thought
he could.115
Leo de Bever, the chief executive officer of aim, testified that at the time of
the transaction between the co-owners and wcd, he knew of Mr. McCallion’s
involvement as a real estate agent only. Part of aim’s due diligence was to make
inquiries about the shareholders in a given transaction.* Mr. de Bever believed
that inquiries were made prior to January 2007 about the specific involvement
of the mayor’s son in wcd, and aim was told he was not involved as an owner.116
Mr. Dal Bello understood Mr. McCallion was an agent and that he was
to be compensated by the purchaser. Had he known that Mr. McCallion was
a shareholder in wcd, it was likely the deal would have been a “non-starter”
because the “potential perception of conflicts and issues would have been
pretty apparent to [them].”117
Murray Cook testified that, from early on in his negotiations with the coowners, he consistently made it clear that Peter McCallion was the agent for
the purchasers, was to be compensated by the purchasers, and was present at
meetings in this capacity.118
Michael Kitt testified that, when he joined Oxford on November 1, 2007,
the aps had already been signed.119 From the outset of his involvement with
* Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4282, 4297, 4300. Mr. de Bever testified that
aim first learns who the shareholders are in a given deal, and then makes a judgment call as to what connections they may have to related parties or related institutions.
this file, he quickly understood there was “some fuzziness” associated with it
– he was informed that the mayor was a strong supporter of the hotel development and that her son was “around the file.”120 He never understood Mr.
McCallion’s actual role in this transaction. Mr. Kitt testified that he spoke
to others at Oxford seeking clarification. Although no one confirmed Mr.
McCallion’s role as an agent in the transaction, they all agreed that they were
not paying him a commission. He pointed out that there would have been
inquiries into the people behind the scenes at wcd at the time of the original
transaction because, in a deal as complicated as this one, the nature and identity of the purchaser were very important considerations.121
Michael Nobrega was appointed ceo of omers on March 12, 2007.*122 As
of March 2008, he was not aware of Mr. McCallion’s true role in the hotel
project and he did not know the identity of the principals behind wcd.123
It appears that Mr. McCallion was described to the co-owners as an agent
in the transaction. Both co-owners accepted that Mr. McCallion was the real
estate agent representing wcd in the transaction, and it appears that discussions about his role in wcd at this stage touched only on the fact that his fees
would not be the vendors’ responsibility.† In the eyes of the co-owners, Mr.
McCallion was not a person of influence, and he was not involved in dictating
or negotiating the aps.124
I find that the only information disclosed to the co-owners about Peter
McCallion’s role in wcd was that he was its real estate agent. I find that the
co-owners understood from Mr. Cook that he (Murray Cook) was the only
principal of wcd before the execution of the aps. Mr. Cook was known to
aim. Given that Mr. Lusk gave assurances to omers / Oxford about Mr.
Cook, the co-owners did not see the need to look further. The co-owners did
not seek clarification or question Mr. McCallion’s involvement in wcd leading
up to the signing of the aps.
* Prior to this date, Mr. Nobrega was president and ceo of Borealis, and therefore was not involved with this
transaction at its outset. Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3102.
† Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4014–15; Exhibit 97, aps article 6.6(a), specifically
states that the vendors will not pay any commission fees.
6 The Mayor’s Role in the wcd Project
Introduction
According to Mayor McCallion, she understood from the outset that her son
Peter was to receive a commission for his work on the wcd project if the vendors agreed to sell the land to wcd.125 Both her son and Murray Cook, she
testified, knew from the outset that, if wcd’s site plan application came before
city council, she would have to declare a conflict of interest. She made it clear
to them she would not get involved in anything to do with the city or in any
discussions with city staff with respect to the wcd project.126
The mayor testified that she took this position based on her understanding of the Municipal Conflict of Interest Act (mcia).127 If an application for
which a member of a councillor’s family is involved “comes before a committee
of council or a council meeting … you must declare a conflict and indicate
what your conflict is … [and] once it comes to council, you must not influence
in any way.”128
The mayor acknowledged that her son’s pecuniary interest in the transaction put her in a position of conflict with the wcd project.129 In her opinion,
the mcia was “very straightforward” – it did not preclude her from advocating
for the wcd project but required only that she declare a conflict when the
matter came before a committee of council or a council meeting. The mayor
testified she understood the only constraints on her behaviour were those contained in the mcia.130
As a result, the mayor believed she was entitled to intervene on behalf of
wcd on the basis that the project was in the city’s interests and that she was
fulfilling her role as mayor by promoting the desire of city staff. She was reluctant to accept that her son’s interest in wcd put her in a real, or even perceived,
position of conflict when intervening on behalf of wcd to lend credibility to,
to promote, and to support the project.131
The following section reviews the mayor’s involvement in the negotiations
that led up to the execution of the aps on January 31, 2007. A review of the
mayor’s involvement and her influence over the vendors regarding amendments to the aps and extensions of the condition dates is set out below, in
section 8 of this Report.
Steps Taken, October 2005 Onward
The mayor acknowledged that she became involved in the negotiations between
wcd and the co-owners first to secure the land, then to reach a final agreement,
and finally with respect to extensions to allow wcd more time to try to find an
acceptable hotel for the city centre site. She explained that her ambition was
to achieve her goal of a vibrant city core, and to that end she involved herself
in the negotiations on behalf of the city in order to advance the public interest.
The mayor made her concern very clear in her testimony – if the investor was
unable to purchase the land and secure it with conditions, the hotel project
could not move forward and succeed.132
Steps Taken to Secure the Land
The mayor was “excited” when she learned an investor was prepared to purchase the land and start the project, although she knew it would be up to “the
efforts they would make” and the “contacts they had” if they were to deliver
a hotel next to the Living Arts Centre.133 Given her passion for the project,
she intervened on behalf of the purchaser wcd with each of the co-owners,
but principally with omers / Oxford, during the negotiations leading up to
the signing of the aps.134 From the outset, the mayor was aware her son was
spearheading the project and that he stood to gain financially from its successful completion.
The mayor had met with her son and Murray Cook about wcd at least as
early as May 18, 2005, at which time she was aware that Mr. Cook was going
to head up wcd.135 The mayor understood that her son had hired Mr. Cook
as a qualified individual who could handle this project.136 She made it very
clear to Mr. McCallion and Mr. Cook that, when the wcd site plan application came before either a committee of council or a council meeting, she
would declare a conflict of interest and would not involve herself in any discussions with staff regarding the application. According to the mayor, if wcd
was unable to enter into a purchase agreement with omers / Oxford, the
hotel would not be built.137 When she was advised by either Mr. Cook or Mr.
McCallion that there was a “delay” – omers / Oxford had not responded to
the wcd offer – the mayor contacted omers to follow up on this issue.138 On
October 3, 2005, the mayor spoke with Paul Haggis, then president and ceo
of omers, to discuss selling the Square One lands to wcd for the hotel project.139 In an email written by Mr. Haggis the day after his conversation with
the mayor, he described her displeasure that omers was not selling the land to
“her preferred group.” Mr. Haggis did not testify, but his email records that the
mayor yelled and threatened that she was “going to the media unless [omers]
did what she wanted.”140 When asked about this email from Mr. Haggis, the
mayor acknowledged the “spirited conversation” but observed that wcd was
the only group which had come forward and that development of the city core
had been a challenge over the years.141
The mayor’s intervention resulted in Mr. Haggis encouraging Mr. Latimer
of Oxford to meet with the mayor and “her developer.”142 Mr. Latimer immediately responded that he was attempting to contact Mr. Cook and would follow
up with the mayor after he had done so.143
On March 9, 2006, Ken Lusk of Hawthorne updated Mr. Dal Bello of aim
by email after he learned that Paul Brundage (omers) was pressuring Mr. Dal
Bello to agree to sell the City Centre Land. Mr. Lusk informed Mr. Dal Bello
that the mayor had been interested in an upscale hotel and convention centre
next to the Living Arts Centre for some time, and that an offer to purchase the
hotel site plus two adjacent parcels of land from an unidentified purchaser had
been presented by the mayor’s son, a real estate agent.144
In this email Mr. Lusk stated that, as early as January 2006, the mayor had
“stepped up the pressure on omers to sell the land” and had met with Mr.
Haggis, following which Mr. Haggis “undoubtedly put pressure on Oxford.”
Shortly thereafter, Mr. Lusk was asked to meet with Ron Peddicord and other
representatives of Oxford to discuss the situation.145 At that meeting, Mr.
Lusk informed the Oxford people that aim might consider selling a portion
but not all the City Centre Land for an upscale hotel. In his opinion, an upscale
hotel was not viable in that location and would need to be supported by more
profitable residential developments on the adjacent land. He knew that Mr.
Cook was “representing the purchaser on this deal and [that he was] very close
to the mayor.”146
Mr. Lusk advised Mr. Dal Bello that he had asked Oxford to obtain from
Mr. Cook the purchaser’s identity, a letter of interest from the hotel company,
and a concept drawing of the proposed hotel development. He added that he
intended to meet with Mr. Cook, whom he knew, and that he needed this
information before making any recommendations to Mr. Dal Bello. He commented that he thought Oxford, too, would be interested in receiving this
information before deciding on the sale of the land.147
In March 2006, the mayor had lunch with Mr. Lusk. He and the mayor
discussed “who aim was” – namely, the pension arm of the Alberta government. They also discussed the mayor’s desire for development around Square
One and her concern about the lack of progress. It appeared to Mr. Lusk that
the mayor was aware aim had an interest in the City Centre Land. Mr. Lusk
testified that he asked the mayor whether she thought Mr. Cook could pull
off the hotel project. The mayor endorsed Mr. Cook. She responded that she
believed he had the capability to complete the project.*148
The mayor testified that she did not know the details of the negotiations
between wcd and Oxford, other than that the deal was not moving as expeditiously as it should and that time was running out. She recalled that Mr.
Cook was frustrated and that he suggested she meet with Mr. Lusk to express
concern over the delay in concluding the land deal.149
Some months later, on October 20, 2006, the mayor called Mr. Lusk.
She was upset the transaction was taking so long to complete. She told Mr.
Lusk another developer had approached the city about building a hotel in
the vicinity, and she was concerned that this possibility could jeopardize the
future of a hotel adjacent to the Living Arts Centre.150 The mayor testified
that she impressed upon Mr. Lusk that the sale of the land was taking too
long and was delaying the efforts to acquire a hotel. For her part, the mayor
did not recall another developer approaching the city about building a hotel
in the vicinity, but did recall indicating to both omers and Mr. Lusk that
development was starting to slow down in Mississauga because of the economic downturn.151
Negotiations regarding the aps occurred between May 1, 2006, and the end
of January 2007.152 The aps was signed on January 31, 2007.153
Impact of the Mayor’s Intervention on the Relationship between the Co-owners
The mayor acknowledged throughout her testimony that she intervened in
this transaction to enable the sale of the City Centre Land to wcd. Counsel
on behalf of the mayor fairly noted that her interventions were directed to
sophisticated institutional investors and involved attempts to persuade them
to sell the land in a way which would have assisted the development of the
city. The mayor acknowledged that from time to time she has “worked over”
* He added that his opinion of Mr. Cook was not based simply on the fact that the mayor had vouched for
Mr. Cook. Testimony of K. Lusk, Transcript, July 26, 2010, p. 1720.
companies doing business in Mississauga to advance the city’s interests.154 This
tenacity is part of what has made her an exceptional mayor.
The mayor was familiar with some senior officials at omers, most notably
ceo Michael Nobrega, and she sought out those she knew to assist with the
deal.155 When she learned of aim’s ownership interest, she sought out Ken
Lusk and others at aim to communicate her concerns.156 The evidence establishes that the mayor convinced the co-owners to negotiate with wcd regarding the sale of their land despite their concerns regarding the viability of the
proposed transaction. Once the deal was in place and the aps had been signed,
the mayor continued to involve herself by advancing wcd’s requests that the
hotel conditions be relaxed and that wcd be given more time to meet its obligations under the aps.
Both co-owners wished to accommodate the mayor by granting the concessions she sought. However, the length of the negotiations and the “back
and forth” regarding the terms to secure the hotel became, as described by one
counsel, sources of irritation between the co-owners.
The mayor had a much closer relationship with those at omers / Oxford
than she did with those at aim.157 It appears that aim’s representatives were
not initially in favour of selling the City Centre Land. However, they were
convinced by Oxford, and by May 2006 had agreed to sell, albeit reluctantly,
with appropriate conditions in place.158
From that point on, the mayor was not only in contact with those at
omers in relation to the wcd project but also initiated her contact with Ken
Lusk.159 Protracted negotiations regarding the sale extended into January 2007
when the aps was executed. According to an email sent by Mr. Lusk to Ron
Peddicord of Oxford on October 12, 2006, aim representatives had become
frustrated with the fact that the negotiations were being held up by the executives at Oxford. He wrote:
We are now prepared to proceed with the deal but Oxford is not. You should
know that, since we are prepared to proceed with the sale on the basis that
Murray has agreed to, if the Mayor calls we have no intention of taking a bullet
for Oxford. If Oxford is prepared to build the hotel which you suggest as being
a possibility in your October 2nd email, we would be prepared to listen to your
proposal in this regard.160
In March 2008, the mayor reported to omers / Oxford executives that
Tony DeCicco had taken over the project from Murray Cook. Just as she had
previously vouched for Murray Cook as someone she believed could pull off
the project,161 she now vouched for Mr. DeCicco as having the resources to pull
it off.162
From that time on, wcd attempted to have the hotel conditions in the
aps relaxed, if not removed entirely. Removing the hotel conditions was not
acceptable to the co-owners, who believed the hotel was critical to the sale of
the land. However, they agreed to amend the aps to assist wcd regarding its
concerns over the hotel component, given the worsening economic conditions
at the time.
On July 9, 2008, during discussions about the amending agreement, aim representatives requested that Oxford write a letter to the city and to wcd to make
it clear they were “very firm on the 4-star hotel requirement” and would not proceed with the transaction without it. John Filipetti, a senior executive at Oxford,
understood they wanted this “to be on record to mitigate the mayor / council /
press blow-back if [the co-owners] have to terminate the deal.”163 It was apparent
that aim representatives anticipated the project might not come to fruition and
were concerned about the mayor’s perception of them as a result.
Craig Coleman took over from Ken Lusk at Hawthorne in April 2007.* He
testified that, in October 2008, he learned from John Filipetti of Oxford that
Mr. McCallion twice proposed a straight sale of the land.164 On the second
occasion, Mr. McCallion presented a wcd business card identifying him as a
principal of wcd165 and said he had spoken to “key people” at the city who were
comfortable with a clean sale.166 Those at aim inferred from Mr. McCallion’s
statement that the “key people” meant the mayor, and they decided to wait for
confirmation of her position on this issue. Grant Charles of Hawthorne stated
in an email to Oxford executives: “[W]e’ll wait until you’ve spoken to ‘the key
people / person / mom’ at the city.”† aim’s consultants had become exasperated by the somewhat opaque nature of the dealings with wcd and the mayor.
Mr. Coleman testified that, up to this point, he had not been aware of Peter
McCallion’s involvement in the wcd project.167
* Testimony of C. Coleman, Transcript, August 11, 2010, p. 2819. Mr. Lusk remained involved as a consultant
until the end of 2007.
† Exhibit 247. Peter McCallion testified that the “key people” did not mean his mother, but Ed Sajecki. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1945.
Mr. Coleman had two concerns. First, he learned that “Peter McCallion
had a wcd business card and purported to be a principal of wcd,”168 which
troubled him given that the mayor was applying ongoing pressure. Second, he
understood that Oxford might have been willing to consider Mr. McCallion’s
proposal for a straight sale of the land. According to Mr. Coleman, this proposal
was a “non-starter” for aim – the hotel requirement was the critical component
of the deal from his perspective.169 aim representatives wished to maintain a
positive relationship with the mayor and had no issue with her promoting the
city’s vision “as long as that [did] not require [them] to make economic concessions.”170 The deal proposed by wcd at this stage was an economic concession
that aim was not prepared to make. However, Mr. Coleman did not register
his concerns with the people at omers / Oxford at that time.
By November–December 2008, it was fairly evident to the co-owners
that wcd would not be able to satisfy the aps conditions. It is clear from the
evidence that those at Oxford, notably Mr. Kitt and Mr. Filipetti,* felt pressured to satisfy the mayor, who had become increasingly involved. By then she
had gone over their heads to request concessions for wcd directly from Mr.
Nobrega. He stated that he had been “the one on the forefront of receiving all
the calls from the Mayor … on these issues,” and indicated that by this time he
was prepared to involve Leo de Bever, the ceo of aim, directly to understand
the “ambience of the environment.”171
According to internal correspondence at omers / Oxford, the mayor
called and said she would like the co-owners to “co-operate” with wcd in these
difficult economic times. Consequently, omers / Oxford began to consider
wcd’s requests regarding a straight sale of the land absent the hotel conditions.172 The mayor testified that, although she did encourage omers / Oxford
to assist wcd, she was not aware that wcd was seeking waiver of the hotel
conditions.173
When the mayor sensed that her contacts at omers / Oxford either were
not agreeing to the concessions she sought or were unable to persuade the coowner to agree, she had no hesitation in calling aim directly.174 Mr. Kitt believed
the mayor inferred a division in opinion between those at omers / Oxford
and those at aim by October–November 2008. The mayor had been asking
him “very direct” questions regarding his and Mr. Nobrega’s personal positions,
* John Filipetti did not testify at the Inquiry; however, his emails between October and December 2008
attest to this fact.
Oxford’s corporate position, and its co-owner’s position. Mr. Kitt believed that
because he did not answer these questions the mayor went directly to the coowners. This appears to have been unhelpful. Mr. Kitt recalled that he did not
like the divide and conquer approach and anticipated that the mayor probably
picked up that aim was more concerned about a straight sale.
Mr. Coleman testified that, by December 2, 2008, the mayor had become
increasingly involved on behalf of wcd at the same time as Peter McCallion
was advancing positions on behalf of the company. This juxtaposition of
events made him uncomfortable. He realized that he and those at aim were
not clear about Mr. McCallion’s role and they “didn’t like the way things were
shaping up.”175 He clarified his thoughts on the issue: “[I]f we’re getting calls
or – indirect pressure from the mayor to relax certain requirements in our
agreement with – when her son’s on the other side of the table, the optics are
not very good.”176
On December 11, 2008, Mr. Filipetti informed Mr. Coleman of yet another
request for an extension. Mr. Coleman’s position was that “a deal is a deal,”
and he did not want to extend it any further.177 According to Mr. Filipetti’s
email update to Mr. Kitt, he understood from Mr. Coleman that those at aim
“might” extend for one week, “but [they] think this will just provide one more
week for the mayor to pressure [aim].”178
Mr. Coleman’s clients at aim shared his concern over the optics of the deal
once they appreciated that Mr. McCallion was a principal in wcd and not just
an agent. For Mr. Dal Bello, the possibility that Mr. McCallion might have
had a different role in the company made him uncomfortable. He knew there
was a difference between being paid a fee and having an equity position in the
project, and at that point he believed “[they] were starting to get into a conflict
of interest situation.”179
Mr. de Bever believed the nature of the interest, not the receipt of a financial benefit alone, raised the issue of a potential conflict. Mr. de Bever maintained that, had he known Peter McCallion had an equity interest in wcd, he
would not have been prepared to consider the mayor’s requests for concessions
because of the apparent conflict created by those circumstances. In his opinion,
the fact that Mr. McCallion’s interest was not disclosed was a serious omission
of fact that made it difficult for him to assess the involvement of various players in this transaction.180
Those involved on behalf of Oxford felt direct pressure from the mayor,
and they in turn pressured those at aim to consider a sale of the land without
the hotel conditions. aim representatives were not prepared to accommodate
either wcd or its co-owner in this regard, given their position that the hotel
provision in the aps was integral to the sale of the land. They understood
that the mayor had stepped up the pressure on the co-owners to “co-operate”
with wcd, a company in which the mayor’s son Peter had recently represented
himself as a principal. They were aware that Peter McCallion had (1) suggested
a straight sale of the land; (2) presented Tony DeCicco’s letter requesting a
straight sale; and (3) indicated approval from “key people” at the city for the
straight sale.
I concur with Mr. Coleman’s view that the optics were not good. As I will
discuss in this Report, poor optics can be destructive of public trust in municipal institutions. Indeed, the mayor herself acknowledged there may have been
a perception she was attempting to influence the co-owners for the wrong
reasons.181
The Mayor’s Knowledge of Peter McCallion’s Interest in wcd
I find, for the reasons that follow, that Mayor McCallion knew Peter McCallion
had an interest in the wcd project beyond acting as a mere real estate agent.
Peter McCallion has a close relationship with his mother. He lives a few
minutes’ walk from her residence, sees her approximately five to six times a
week, and drives her to many functions. He told the Inquiry that his relationship with her was such that they spoke regularly, albeit in a general way,
about his work projects. Mr. McCallion testified that his mother knew he was
involved in the wcd project in some way, but that she did not consider him as
anything other than a real estate agent until the Inquiry.182
Although his recollection was imprecise, Mr. McCallion believed he would
have informed his mother about the potential hotel project at the time he travelled with her to China in 2002. The mayor introduced Peter to potential investors in China during that trip. He admitted that he would have mentioned it
to her again when he was in touch with potential investors from Korea a few
years later.183 The mayor knew that Murray Cook was going to head up the
project by mid-May 2005, when the three of them met in relation to wcd.184
Mr. McCallion also acknowledged that he may have discussed the wcd project
with the mayor five or six times in 2006, leading up to the signing of the aps.185
The mayor could not recall exactly when she learned her son was involved
in the project,186 but very early on she understood he had formed wcd.187 She
contended that he, along with everyone else in Mississauga, was aware of her
desire to see a hotel and convention centre built next to the Living Arts Centre
and she thought that he might have felt he could help fulfill her wish, given his
involvement in Mississauga real estate.188
The mayor testified that, at some point before bringing in Mr. Cook to
manage the project, Mr. McCallion told her he had presented an offer to
purchase the lands on behalf of an investor, whom she understood to be Leo
Couprie.189 She acknowledged that Mr. McCallion had a financial interest,
given his involvement as a real estate agent, and she knew from the outset that
he would benefit financially if the land deal was consummated.190 She testified she was aware that he had brought Mr. Cook in to manage the project.
She acknowledged that between May 2005 and September 2006 she attended
meetings with her son and Mr. Cook about the wcd project.191
The mayor testified she knew from the outset that Mr. Couprie was the
investor who put up the money for the project.192 As she recalled, “finally
[Peter] said that he had convinced an investor, Leo Couprie, to invest the
money in purchasing the land to proceed with the development of a hotel next
to the Living Arts Centre.”193
Based on the information Peter had given her, the mayor understood him
to be a real estate agent representing the investor. She testified she was aware
of his role in the project in the following way: she was aware it was his idea
to involve Mr. Couprie in the project, although she did not know whether it
was Mr. Couprie alone or together with a group of investors. Peter had also
told her that he and Mr. Couprie had engaged Mr. Cook to handle the project,
which was a good choice in her opinion.*
Mayor McCallion was firm in saying that this was the limit of her knowledge of the matter. She testified that she was never advised by Mr. McCallion
or anyone else that he had an equity interest in wcd at any time.194 He never
spoke to her about the specific financial arrangements within wcd, or about
wcd’s ownership structure.†195 She made the assumption, given that he was a
* Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4828–29, 4831–32, 4837; September 23,
2010, pp. 5274, 5440–41. The mayor testified that she knew Mr. Couprie as a friend of Peter’s who socialized
with him.
† Testimony of H. McCallion, Transcript, September 23, 2010, p. 5441. Murray Cook testified that he never
discussed with the mayor the financial arrangements he had with Peter McCallion regarding wcd or how
Peter was to be compensated. Testimony of M. Cook, Transcript, September 15, 2010, pp. 4493–94.
real estate agent, that he was acting for Mr. Couprie on the deal. She apparently did not ask him anything further about his role. She testified that her
understanding of his role did not change between 2006 and 2008. She simply
assumed that Mr. McCallion would be entitled to a commission for his efforts
when the deal closed.196
Leo Couprie agreed that he never had a discussion with the mayor about
his role in wcd, nor did he inform her that he was holding shares in trust
for her son Peter or that he expected a total return of $1.5 million from his
$750,000 loan. He believed the mayor knew he was involved with the project
when, at Pier 4 Restaurant, she witnessed their signatures on the declaration
of trust and loan agreement. He reiterated that he had not discussed this fact
with her. He presumed that Mr. McCallion had informed his mother of the
nature of his involvement.197
Peter McCallion testified that he did not discuss the aps negotiations with
the mayor, and, if he mentioned anything about them to her, it would have
been in relation to how long it was taking to negotiate the agreement.*198 He
testified that he was not aware of her involvement in any discussions with
omers about the project.199 I do not accept this. In my view, Peter McCallion
leaned on his mother whenever he needed assistance.
Witnessing the Signing of the Declaration of Trust and the Loan Agreement
According to Peter McCallion’s recollection, the mayor agreed to witness his
and Leo Couprie’s signatures on two documents, the loan agreement200 and
the declaration of trust,201 on January 29, 2007, while they were dining together
in Toronto.† Mr. McCallion testified that he did not review those documents
with the mayor and she did not appear to read them before she signed them as
a witness in his presence.202 Mr. McCallion acknowledged that had his mother
read the documents, she would have understood he was potentially making a
substantial financial commitment to the company and that he was effectively a
shareholder of wcd.203
* Mayor McCallion testified that she never saw or read the aps, although she had been advised it was finalized on January 31, 2007, probably by Murray Cook; she could not recall whether she had discussions with
Peter about it. Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4885–86.
† Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1910–11; Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3411–12, 3412–13. According to Mr. Couprie, the occasion was a delayed Christmas dinner.
According to Mr. McCallion, the restaurant tended to be dark. Mr. McCallion also testified that Leo Couprie’s wife was present, but neither Mr. Couprie nor the mayor recalled Mr. Couprie’s wife being at this dinner.
According to the mayor, Mr. McCallion and Mr. Couprie invited her to this
dinner because they were leaving for Asia and were interested in any suggestions she might have regarding potential investors and what hotels they should
see. She testified she was asked to witness their signatures on two documents
and that she did not look at the contents or read the documents, but rather
looked at the bottom line and simply witnessed their signatures.204
The mayor understood that Mr. McCallion and Mr. Couprie had entered
into the trust declaration to protect their interests in the event something
happened to them while they were travelling together.205 She acknowledged,
however, that had she read the documents she would have questioned Peter’s
claim to be Mr. Couprie’s agent.206 She accepted that, had she read even the
first two lines of the document entitled “declaration of trust,” she would have
seen that Mr. Couprie was a trustee and Peter was a beneficiary. She testified,
however, that she did not even read the document to that minimal extent.207
She testified that neither Mr. McCallion nor Mr. Couprie spoke to her about
the declaration of trust after it was signed in January 2007.208
Mr. Couprie recalled that Mr. McCallion presented the documents to the
mayor by explaining they were prepared for estate purposes, since they were
travelling together the following day and that they wanted to document “an
understanding of the transactions” in case something happened to the airplane. Mr. McCallion did not have any further discussion with his mother
about the documents. He simply informed her that they had been prepared
for the protection of each of their estates. Mr. Couprie recalled that the mayor
paused briefly and either asked him or looked at him to see if it was okay for
her to sign the documents, and Mr. Couprie responded that he thought it was
fine. He stated that there was no discussion with the mayor about the contents
of the documents and he did not know what she knew about them.209
Mr. Couprie testified that the mayor signed the two documents within
about 30 seconds of each other.210 By his account the mayor neither looked
at nor read the documents prior to signing them, but simply signed them “like
an autograph.”211 He testified that he signed as the trustee, Peter McCallion
signed as the beneficiary, and the mayor as the witness. Mr. Couprie added that
he wrote her name in block capitals below her signature on the trust declaration to make the identity of the witness clear. The mayor did not take copies of
the documents with her.212
Understanding of the Nature and Extent of Peter McCallion’s Interest
The mayor testified that she did not understand how the nature of her son’s
involvement in wcd – whether as principal and shareholder or as agent for
wcd – made any difference to the co-owners because either way he would
benefit financially. The mayor always assumed that he would receive a commission for his efforts to which he would be entitled when the deal closed. She had
declared a conflict of interest at council, given his financial interest. Having
said that, she testified that Mr. McCallion did not advise her of the arrangement he made with Mr. Couprie, nor did he advise her that neither the vendor
nor the purchaser had agreed to pay him a commission. Peter did not advise
her, nor was she otherwise aware, that he hoped to be the listing agent on the
subsequent sales of the condominiums.213
Peter McCallion testified he told the mayor he was the agent and representative of Mr. Couprie.214 He did not tell her details such as:
1 the fact that wcd was having difficulty meeting its payment obligations
either to the city or to omers and that he had made a loan to wcd of
$103,500 in the spring of 2007;215
2 that he arranged a $50,000 loan through the tacc Group in July 2007 and
signed a promissory note to secure the loan;216 and
3 that he was receiving money from wcd for his living expenses.217
Mr. McCallion was content to let the mayor believe Mr. Couprie was the
investor throughout and he did not advise her otherwise. He did not tell her
how Mr. Cook was going to be compensated or that Mr. Couprie had agreed
to transfer 20 per cent of his shares to Mr. Cook. He did not discuss with her
the financial arrangements between Mr. DeCicco and wcd.218
In her testimony, the mayor told the Inquiry that her son “certainly misinformed” her about his role in wcd, but she did not believe he had done so
intentionally.219 She was never advised by anyone that her son had an equity
interest in wcd, and she added that he always told her Mr. Couprie owned 100
per cent of the shares.220
I appreciate the mayor’s forthrightness in saying that she would have intervened for wcd even if she had known of her son’s equity interest in the wcd
project. I am nevertheless troubled by the evidence of all parties concerning
the meeting at Pier 4 Restaurant, where the mayor witnessed signatures on
the documents setting out the nature of the ownership interests of Peter
McCallion and Leo Couprie. At the time of this meeting on January 29, 2007,
wcd and its principals had access to lawyers and accountants. Any number of
people could have witnessed the signatures on these documents. In my view, it
is unfortunate that the mayor was instead chosen to perform this function. I
do not accept that the mayor simply signed the documents “like an autograph.”
Her hesitation while she was looking at the documents and her request of
assurance from Mr. Couprie suggest otherwise.
I find that, however brief her review of the documents may have been, Mayor
McCallion must have known that her son was involved in the wcd transaction in some substantial way. She had to know he was acting as more than a
real estate agent. She knew that the documents she was being asked to sign
were business documents (one, Exhibit 190/274, was headed “declaration
of trust”) and that they bore the signature of her son and Mr. Couprie.*
She also knew that Mr. McCallion had formed wcd, and been involved in the
wcd transaction for some time, and that Mr. Couprie was an investor in wcd.
Given her intention to advocate for the wcd project, she ought to have asked
more questions before, or even after, witnessing these signatures.
At the same time, I accept that the mayor was not aware of the precise
business arrangement between Peter McCallion and Leo Couprie. She has
impressed me as an experienced businesswoman. As she said in her evidence,
it was clear Peter did not have the resources to promise Mr. Couprie he would
double his money given the amounts at stake. Had she analyzed the contents
of the wcd documents closely, I have no doubt the mayor would have voiced
concern.
The mayor explained her sheer ignorance of the contents of the trust and
corporate documents by saying that people frequently ask her to witness signatures and it is her habit to oblige, given that she had once been a commissioner
of oaths.221 It would not have been a good use of the Commission’s time to
explore this issue further, but if the mayor routinely follows this practice, it
is unwise. Public office holders can be drawn into mischief by placing their
signatures on documents without being aware of their contents.
* In fact, the typed reference under Peter McCallion’s signature reads: “Peter McCallion ‘the beneficiary.’”
7 Development of a Four- or Five-Star Hotel
Agreement of Purchase and Sale
As I have noted, the mayor advocated for wcd after it initially signed its agreement with the co-owners. The contractual relationship between the parties
was fairly complex, and it is necessary to have an understanding of it in order
to place the mayor’s interventions in their proper context.
The co-owners were not interested initially in selling the land. They were
influenced in their decision to sell the land, in part, because they wanted to
satisfy the city’s desire for an upscale hotel in the city centre. As I have found,
the co-owners viewed a hotel as a complementary use for the City Centre Land
in relation to Square One. Given that the hotel was the reason for the transaction from their perspective, they needed assurances that it would be built. This
resulted in specific conditions in the aps to address their concerns.222
The negotiations regarding the aps were protracted. Although there were
discussions with respect to extensions of the condition dates and changes to
the site plan over time, the sticking points revolved around the conditions
required for the transaction to close – assurances that the hotel would be built
and that various zoning approvals would be granted.223 Ultimately, the coowners’ concerns were addressed in the aps by a number of conditions
intended to ensure that an appropriate four-star hotel was built which would
enhance Square One.
Hotel Conditions in the aps
Abraham (Bram) Costin of McCarthy Tétrault llp* was responsible for
drafting the aps. Mr. Costin assisted the Inquiry greatly by explaining the
purpose of the various conditions in the aps from the co-owners’ perspective.
He drafted a number of specific conditions in the aps to ensure that the right
type of hotel would be built, and he included specific terms regarding the
ultimate use of the property. The aps was marked as Exhibit 97 in the Inquiry
and a copy is attached to this Report as Appendix I.
wcd as purchaser had to meet a number of conditions by specific dates
in order to keep the deal alive. The definition of “deposit” referred collectively
to the first, second, and any additional deposit to be paid at various times
* Abraham (Bram) Costin is a partner at McCarthy Tétrault llp in the Real Property and Planning Group.
Testimony of A. Costin, Transcript, July 8, 2010, p. 1427.
associated with certain dates. The first deposit was to be paid one business
day after execution of the agreement, and the due date of the second deposit
was the due diligence date, which was 60 days after the date of the agreement.
The first condition date was to be the 120th day after the due diligence date,
and by that time there was to be a formal application for site plan approval for
the lands, among other things. The second condition date referred to the 180th
day after satisfaction of the conditions required on the first condition date.224
Article 4.2(e) specified the conditions required by the second condition
date:
1 site plan approval;
2 lifting of the H designation;*
3 evidence that the purchaser had entered into a management agreement for
the hotel with a four-star or better operator; and
4 severance obtained.225
Under article 4.3, the agreement would be terminated and of no further
effect whatever if the conditions were not satisfied. Article 4.3 also allowed for
extensions of time to satisfy the conditions relating to site plan approval and
the H designation, for unavoidable delays including delays caused by referrals
to the Ontario Municipal Board (omb), and for any related court applications.
The condition requiring evidence of a hotel management agreement was not
subject to an extension.†226
Mr. Costin explained that a number of the conditions for the purchaser and
the vendor mirrored each other so that, if these conditions were not met, either
party could walk away from the agreement. For example, articles 5.1 and 5.2
referred to the vendor’s and the purchaser’s closing documents and contained a
number of reciprocal documents to be delivered by both on closing.227 Article
6.6(a) required the purchaser to be responsible for any commissions owing to
any third party.‡228 Article 6.6(b) stipulated that the purchaser agreed to enter
* The “H” designation is a term used to signify a holding on land. The holding is to ensure that certain
requirements are met before the land is developed, and it must be “lifted” before development takes place.
† There was no extension to the condition regarding evidence of a hotel management agreement because
an omb appeal or other court action was irrelevant to whether wcd had obtained the required agreement.
Either wcd could demonstrate that it had such an agreement or it could not.
‡ This condition spells out what Mr. McCallion already knew – that omers was not going to pay him any
commission regarding this transaction. Testimony of P. McCallion, Transcript, July 27, 2010, p. 1921.
into a binding agreement, on closing, that prohibited various retail uses of the
land. Mr. Costin explained that the purpose of this last clause was to ensure
generally that the lands would not be used to compete with Square One. The
agreement offered protection for the co-owners after closing.229
The conditions regarding hotel specifications and the hotel’s construction
were found in articles 4 and 6. Article 4.1(e)(iii) stipulated that the purchaser
was to provide evidence to the vendors that “the Purchaser has entered into a
management agreement for the Hotel with a four-star or better operator.”230
Mr. Costin explained that the purpose of this condition was to satisfy the vendors by the second condition date that the purchaser had actually entered into
a hotel agreement and, therefore, that the necessary initial step toward developing a hotel on the site had been completed.231
Article 6.6(b)(iv) incorporated the vendors’ description of the type of hotel
they wanted on the land:232
a four star hotel having convention facilities and having no fewer than 200 rooms
and to be operated by an international hotel brand and having full service guest
amenities including a full service restaurant, a fitness facility and room service on
the Hotel Site (the “Hotel”) of a type and in a manner to satisfy the conceptual
233
requirements of the City of Mississauga for the city centre area.
Before drafting this clause, Mr. Costin consulted with colleagues at McCarthy
Tétrault about the requirements that brand a four-star hotel.234 He learned
there was some subjectivity in the definition. However, it appeared that certain
features, such as room service, distinguished four-star from lower-level hotels.*
It was necessary to stipulate an international hotel brand to ensure that the
hotel would be well known and recognized as a four-star hotel.235
The vendors wanted the building of the hotel to be under way before construction began on the condominiums (article 6.6(b)(iv)).236 Residential condominium construction on Block 29 could not begin until 90 days after the
bona fide start of the hotel construction, and it could not begin on Block 9 prior
to substantial performance of the hotel construction.237 Construction of the
* Murray Cook testified that star ratings for hotels do not really apply in North America, as the star rating
system refers to the Michelin Guide in Europe. However, there are general guidelines for better-rated hotels,
such as 24-hour service or the size of the rooms. Testimony of M. Cook, Transcript, September 15, 2010,
pp. 4447–48; Testimony of A. Costin, Transcript, July 8, 2010, pp. 1434–35, 1436.
hotel was to begin within 18 months of closing, and the hotel was to be completed no later than 30 months after the commencement of construction.238
If hotel construction did not begin within 18 months of closing, the vendors could buy back both blocks of land at the purchase price plus 2 per cent
per annum.239 If the hotel had not been substantially constructed within 30
months from the commencement of its construction, the co-owners had the
right to cash a letter of credit;240 and if the hotel was not substantially constructed within 48 months of closing, the co-owners had the right to buy back
the hotel site from wcd for $10.241
Mr. Costin explained that the rationale for these terms was that a half-built
building often is worth much less than the cost of its construction because of
the need to find a purchaser prepared to complete construction in the face of
numerous construction liens. A vacant site or completed building, he said, is
much more attractive than a half-built project shell.242
Following the execution of the aps on January 31, 2007, Mr. Costin believed
that wcd was working to satisfy the conditions in the ordinary course. The coowners obtained board approval for the transaction, and, following some title
requisitions and other discussions with the purchaser, the due diligence condition was satisfied. The purchaser submitted a site plan to the city, satisfying
another condition. Mr. Costin testified that he was not involved in the site plan
approval process, but understood the purchaser was working with the vendors
to finalize the site plan and other required municipal approvals.243
Amending Agreement – Extension Rights
Article 4.5 of the original aps set out the extension rights, some of which wcd
had to pay for in order to exercise.*244 The purchaser was entitled, on two
separate occasions, to extend the first condition date for 30 days with notice
and a $50,000 extension fee, on each occasion. The extension fees would not
be applied to the purchase price on closing. In addition to the above, the purchaser was entitled to one extension of the second condition date by 120 days
for a fee of $300,000.245
Following the retention of new solicitors in January 2008, wcd exercised its
contractual right to the 120-day extension of the first condition date. Shortly
thereafter, in February 2008, wcd approached the co-owners, stating that it
* Mr. Costin testified that extension provisions for which the purchaser has to pay are not uncommon.
found the hotel provisions in the aps too onerous.246 This objection resulted in
further extensive negotiations between the vendors and wcd between March
and July 31, 2008, over possible amendments to the aps, following which the
parties executed an amending agreement.247
The negotiations were triggered by a memorandum prepared by wcd’s
solicitor (and investor) Emilio Bisceglia. Mr. Nobrega of omers received the
memorandum dated February 28, 2008. It set out wcd’s proposed changes to
the aps. In the Bisceglia memorandum, wcd requested the following changes:
1 the opportunity to build on Block 29 prior to commencing construction on
the hotel;
2 the opportunity to build on the balance of Block 9 prior to completion of
the hotel on Block 9;
3 deletion of the time frame to commence construction of the hotel within 18
months of closing and completion of the hotel within 30 months of commencing construction;
4 deletion of the vendors’ option to repurchase the property for the purchase
price plus interest if the hotel was not commenced within 18 months of
closing;
5 deletion of the right of first refusal that gave the vendors the right to buy
back the lands if the purchaser attempted to sell them before commencing
the hotel; and
6 deletion of the $10 buy-back of the hotel site.248
In essence, wcd wanted to remove all conditions relating to the hotel, including the remedies in favour of the vendors ensuring that either the hotel
would be built or that they would receive their land back in the event of
non-compliance.249
By April 2008, global economic conditions had begun to deteriorate, and
they continued to decline into the summer. The parties were aware it was more
difficult to finance hotels than other types of real estate, and the prevailing economic conditions made it difficult to secure financing for any type of project
at that time. It was against this backdrop that Oxford entered into negotiations with wcd to modify the aps. Mr. Costin was instructed by his clients
to prepare a draft amending agreement based on correspondence between the
parties.250 The following is a summary of the correspondence:
1 On April 1, 2008, wcd proposed that both the hotel site and the residential
component of Block 9 proceed together, which was not an issue for the
property owners.251
2 On April 23, 2008, Oxford responded by proposing the removal of one of
the blocks of land from the deal, concurrent construction of the hotel and
condominiums on Block 9, delivery of the letter of credit in the amount
of $2.5 million on closing (instead of when hotel construction began) to
be held until substantial performance of the hotel, and removal of the $10
repurchase.252
3 wcd responded on April 29, 2008, requesting that the time frames relating
to the commencement and completion of the hotel be replaced with a positive restrictive covenant; and that all other timing requirements, the delivery of a hotel management agreement, and the rights of first refusal and
the buy-back provisions be deleted.253 These requests were not acceptable
to the vendors since a restrictive covenant could not ensure that the hotel
was built. A restrictive covenant must be negative (restricting potential
use) rather than positive (requiring that the land be devoted to a particular
use).254
4 On May 8, 2008, Oxford responded to wcd with proposed amendments to
section 6.6(b) of the aps dealing with the retail uses and hotel conditions.*
On July 14, 2008, Mr. Costin sent wcd’s lawyers a revised amending agreement. He informed them that the vendors were prepared to give the purchaser
further extensions if the purchaser agreed with the proposed changes and was
prepared to provide the vendors with “written evidence of the hotel investigations and efforts” to secure a four-star hotel operator satisfactory to the
vendors.255 The vendors proposed amending section 4.5 to add three 60-day
extensions for $125,000 each. Each extension required proof of progress in
obtaining an operator for the hotel. Therefore, at the time of the amending
agreement, the vendors still contemplated that the hotel operator condition
would be met by the second condition date.256
The parties signed the amending agreement on July 31, 2008, which provided for extensions regarding the commencement and completion of hotel
* Testimony of A. Costin, Transcript, July 8, 2010, pp. 1453–55; Exhibit 103. One condition not addressed in
the aps was a “no change of control” clause to offer protection to the co-owners should there be a change in
control on the purchaser’s side. Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2345.
construction, as well as extensions for wcd to complete the H designation
removal process.257
The amended aps now imposed the following requirements on wcd:
1 The time frame for starting construction of the hotel was extended from 18
months to 24 months from the closing date.
2 The vendors were entitled to buy back Block 29 at the purchase price plus
2 per cent, instead of buying back all the land, if hotel construction did not
commence within 24 months of the closing date.
3 Construction could not begin on Block 29 until the hotel was completed in
all material respects.
4 The restrictions on the start of construction on the non-hotel portion of
Block 9 were removed.
5 The building of the hotel and condominiums could proceed in tandem.
6 The $2.5 million letter of credit, originally due at the start of the hotel construction, was now due on closing.
7 The $2.5 million would be forfeited if the hotel was not substantially completed within 55 months, instead of within 30 months, after construction
began.
8 The buy-back of the non-hotel portion of Block 9 for $10 was deleted.
9 The purchaser was given, as of July 31, 2008, three additional extensions of
60 days each to the second condition date, each with a payment of $125,000.
wcd exercised the first extension on signing the amending agreement on
July 31, 2008, paid the $125,000, and delivered a cursory note purporting to be
a “hotel update.”258
On September 24, 2008, Mr. Costin received a letter from wcd’s lawyers
informing the co-owners that wcd wished to exercise its right to extend the
second condition date in accordance with the amending agreement.259 On
September 29, 2008, Mr. Costin responded to wcd’s lawyers that the vendors
were concerned with the materials submitted regarding the quality of hotel.
They were, however, prepared to proceed with the latest extension request and
sought confirmation that wcd would keep them informed and would pursue
the quality of hotel specified in the aps.260
By letter dated October 17, 2008, wcd sought further amendments to the
aps owing to what they described as the “economic chaos” and requested that
the co-owners waive the condition requiring evidence of a management agreement with a hotel operator, as well as relief from the purchaser’s other covenants including the requirement to provide a $2.5 million letter of credit.261
On December 2, 2008, wcd contacted Mr. Kitt of Oxford to inform him
that it was unlikely wcd could meet the condition to deliver the hotel and
requested the vendors waive the hotel conditions entirely and simply sell the
land to wcd.262
On November 28, 2008, Mr. Costin informed wcd’s lawyers that the vendors were prepared to extend the second condition date to December 12, 2008,
on the basis that there was some confusion on wcd’s part over which extensions had been granted by the vendors. Mr. Costin added that the vendors
were not prepared to extend the time for exercising the final 60-day extension
of the second condition date beyond December 12, 2008, and expected a more
complete report regarding the hotel.263
By letter dated January 9, 2009, the vendors advised the purchaser that
the aps had been terminated.264 In total, nine extensions had been granted
to wcd, two of which were allowed on the basis of a payment of a $125,000
extension fee each.265
Planning Approvals and the City
Site Plan Approval
By the end of January 2008, wcd’s plans for the City Centre Land were
being scaled back significantly. Mr. DeCicco contacted the city’s Planning and
Building Department (planning department) to advise that, owing to costs,
the anticipated above-ground pedestrian bridge connecting the hotel to the
Living Arts Centre was being scrapped and that the size of the convention
centre was being changed from 19,000 to 6,000 square feet.266
It was clear from wcd’s site plan resubmission dated February 26, 2008,
that wcd had greatly reduced the scope of its plans for the City Centre Land.
Staff in the planning department were concerned about the reduced scope of
the project. The city had anticipated a development that would create synergy
with the Living Arts Centre. The planning department questioned whether
that was possible with a smaller, unconnected facility.267
On February 28, 2008, Marilyn Ball, director of the development and
design division in the city’s planning department, set out the department’s
concerns regarding the resubmission in a letter to Barry Lyon (of the
consulting company heading the land approvals efforts on behalf of wcd).268
Specifically, Ms. Ball pointed out that the convention centre was a key component of the proposal and any removal or reduction in size of that component would cause serious concerns for the city. The letter closed with a
reminder that the site plan application fee would have to be paid before the
site plan was recirculated.269
Site plan application fees are intended to cover the operating costs the
city incurs in dealing with the site plan application.270 They are set out on an
annual basis through a very broad fees and charges by-law that covers many
sets of fees across the city. The amount of the fee is dependent on whether the
development is residential or non-residential and on the size of the property in
question.271 The site plan for the City Centre Land began as a master site plan,
a general plan providing a context for evaluating the more-detailed site plans
or phases of development that follow. A detailed site plan is required for the
city building official to issue a conditional building permit.272
The wcd project was a complex one involving eight or nine buildings. A
hotel was to be constructed initially, followed by eight condominiums. The
project covered a large portion of downtown Mississauga,273 and therefore a
master site plan was initially perceived to be appropriate. Application fees were
not typically charged on master site plan applications.274
Although there was no formal mechanism to recoup money for the efforts
invested by city staff before the approval of the detailed site plans, it was
thought, given the scale of the wcd project, that some initial fees should be
charged. Commissioner of Planning and Development Ed Sajecki, Marilyn
Ball, and Ben Phillips, a development planner, discussed what would be appropriate in the circumstances. They decided that 10 per cent of the overall application fee would be reasonable. Accordingly, when wcd submitted its master
site plan application on July 31, 2007, it paid $52,000 toward the site plan application fee and $3,250 for the lifting of the H designation.275
As discussed below, this initial fee was the only payment wcd made toward
the site plan application fee, notwithstanding the considerable work undertaken by city staff to make the wcd project ready to meet various deadlines.
Dealings of City Staff with wcd
Increase in Development Charges
Regional development charges are fees levied by municipal governments to
support infrastructure (such as water supply facilities, water treatment plants,
regional roads, and police services). Under the Development Charges Act, 1997,
development charges by-laws expire every five years, at which point they must
be reviewed.276 In 2007, a review of the development charges for the Region of
Peel resulted in an increase.277 On September 14, 2007, Mr. Sajecki received a
letter from the Region of Peel advising that new regional development charges
were being instituted and asking for a list of all site plan applications in progress at the time.278
Regional development charges are due at the time the building permit is
issued. In the past, the new development charges by-laws would have immediate application to any site plan applications for which development charges
were due after the passing of the new by-law. However, in 2007, the Region of
Peel was considering the cost of adding transition provisions to the development charges by-laws. The transition provisions would allow existing applications to be grandfathered into the old regime so that the lower development
charges would apply.279
In a letter to the Region of Peel dated September 19, 2007, Mr. Sajecki
advised that, under the Official Plan, the City of Mississauga included an
urban growth centre. On that basis, development projects in that centre should
be eligible for grandfathering. The wcd project was specifically referred to in
Mr. Sajecki’s letter as one of the site plan applications for the urban growth
centre.280
For an application to be grandfathered into the old regime:
1 the site plan application had to have been submitted before October 4,
2007;
2 the building permit application had to have been submitted by February 1,
2008; and
3 the building permit had to have been issued under the application by May 1,
2008.
The Region of Peel inquired whether the wcd site plan application would
likely qualify to be grandfathered into the old regime. Ms. Ball responded that,
since wcd would not be submitting a detailed site plan until the spring of
2008, the master site plan submitted by wcd would not be sufficient for a
building permit to be issued. It was, therefore, unlikely to fulfill the conditions.281 A question then arose as to whether wcd’s site plan application was
eligible for the transition provisions of the development charges by-law. If
so, wcd would be eligible for the earlier development charges at a savings of
roughly $9 million.282
In January 2008, John Zingaro, who was at the time an assistant city solicitor
for the City of Mississauga, was asked to advise whether wcd’s site plan application qualified for the transition provisions. At that time, only the October
4, 2007, deadline had passed. Mr. Zingaro concluded that wcd’s application
would qualify, provided it could be considered a site plan application under
the Planning Act,283 since it had been submitted before October 4, 2007. After
meeting with staff and lawyers in the planning department, Mr. Zingaro concluded that wcd’s site plan application was detailed enough to qualify as a site
plan under the Planning Act. Consequently, wcd’s site plan application was
eligible for the transition provisions of the development charges by-law.284
wcd and Application Fees
Mr. Zingaro’s conclusion meant that wcd was entitled to pay the lesser Peel
development charges, but it also meant that wcd’s site plan application fee was
due and payable.285 As noted above, by February 28, 2008, wcd had not made
any payment on the application fee other than the 10 per cent payment made
at the time it submitted its initial site plan application.
In a letter dated March 25, 2008, Barry Lyon advised city staff that a “first
installment” of the site plan application fee (in the amount of $220,335.42)
would be provided to the city “in the near future.”286 Scott Walker, of N. Barry
Lyon Consultants Ltd., testified that this letter would have been approved by
wcd before being sent. Although Mr. Walker testified this letter was sent to
provide comfort to the city that the fee would be paid, to his knowledge the site
plan application fee was never paid. He never received a response from wcd as
to why it had not been paid.287
Mr. DeCicco admitted that he had no intention of paying the fee. He did
not convey this to wcd’s consultants.288
Actions of City Staff
One of the subsidiary issues in this Inquiry is why and how it came about
that city staff continued to work on the wcd project, notwithstanding the
fact that wcd’s site plan application fee was never paid. For the reasons that
follow, I find that the decision to continue work on the wcd project was an
independent decision of the city staff and was not the result of influence by
Peter McCallion or the mayor, nor was it taken because staff felt influenced by
Mr. McCallion’s relationship with wcd.
Ed Sajecki testified that there were three reasons why the city continued to
work on the wcd project despite the fact that the application fee had not been
paid. First, the city had been given assurances by wcd’s well-regarded consultants, N. Barry Lyon Consultants Ltd., that the fees would be paid. Second,
the city was under a tight timeline to meet the April city council date for lifting
of the H designation. Third, because the Region of Peel development charges
were increasing so significantly, the city expected that a great volume of applications would try to make it under the deadline to be grandfathered into the
old regime.289
Ms. Ball testified that she made the decision in consultation with Mr. Sajecki
and Mr. Phillips to recirculate wcd’s site plan application despite the fact that
the application fee had not been paid.290 She testified, as did Mr. Sajecki, that
her reason for doing so was to ensure that city staff were not scrambling at the
eleventh hour to prepare the application for the lifting of the H designation
that was scheduled to be before council on April 23, 2008.291
The testimony of Ms. Ball and Mr. Sajecki has persuaded me that the decision to continue work on the wcd project was not the result of the exercise
of influence by the mayor or Mr. McCallion. It was a decision made out of
concern for the interests of the city.292 However, the fact that wcd did not
pay the application fee put city staff in a difficult position, given the mayor’s
promotion of the project. It is obvious that Mr. DeCicco took advantage of
the good faith of city staff. I find it was most unfortunate that he relied on the
excellent reputation of Mr. Lyon and the trust of city staff to avoid paying fees.
Failure to Lift the H Designation
The H designation, a term used to signify a holding on land, must be “lifted”
before development takes place. For the H to be lifted, a development agreement and servicing agreement with the city must be executed. The matter then
proceeds to the Planning and Development Committee of council and, finally,
to city council for the actual lifting of the H designation. Council must approve
the development and servicing agreement and must authorize the lifting of the
H before development may proceed on the site.293
The wcd project was put on the council agenda for lifting of the H designation on April 23 and again on April 30, 2008. It was removed from the
agenda at the last minute on both occasions owing to wcd’s failure to pay
various outstanding fees, which included the site plan application fees. As well,
wcd had failed to execute the necessary agreements.294
On April 29, when it became evident that wcd was not going to meet the
requirements for lifting the H for the second time, Mary Ellen Bench, the city
solicitor, wrote a letter to wcd’s then solicitors setting out the city’s position
and identifying the various outstanding issues that would likely prevent the
lifting of the H the next day.295 After the end of April 2008, the wcd project
remained dormant. wcd never succeeded in having the H designation lifted.
The Mayor and City Staff
I find there is no evidence that the mayor interacted with city staff about the
wcd project before the termination of the agreement of purchase and sale.
Ms. Ball contacted the mayor’s office in the early days of the project to propose
a briefing, but the mayor declined the offer without providing any reason.296
There was no evidence before me that the mayor had any involvement with
city staff with respect to wcd’s site plan application fees, or with the planning
department’s decision to process the application notwithstanding the nonpayment of fees. As noted, this decision was made by Mr. Sajecki and Ms. Ball
to avoid having city staff rush to prepare the application to lift the H designation in April 2008.
wcd’s Financial and Other Difficulties
Throughout the project, wcd struggled to meet its financial obligations. By
the time the deal unravelled, wcd was indebted to various lawyers, consultants, and contractors. Many invoices remained outstanding at the time of the
Inquiry.
Tony DeCicco and wcd
Approximately 10 years before the events relevant to this Inquiry, Tony DeCicco
met Peter McCallion through Mr. McCallion’s involvement as a real estate
agent and the two men had become friends. Mr. DeCicco became acquainted
with the mayor independently through his generous contributions to charity
galas and his participation in golf tournaments.*
In the spring of 2007, Mr. McCallion called Mr. DeCicco and told him he
was looking for investors for a building project in the city centre of Mississauga.
Mr. McCallion told Mr. DeCicco that Murray Cook was involved. Mr.
DeCicco subsequently attended a lunch with Mr. McCallion and Mr. Cook
in Woodbridge, along with Emilio Bisceglia. He was told wcd was looking
for investors who would not be involved in the day-to-day operation of the
project. Mr. DeCicco said he would consider the proposition and get back to
them, but ultimately decided that he did not want to invest in the wcd project
unless he could have a hand in its management.297
In late July 2007, Mr. DeCicco met with Mr. McCallion at Mr. DeCicco’s
driving range. Mr. McCallion told him that there were problems with funding
for the wcd project. In these circumstances, he would accept Mr. DeCicco’s
involvement in the day-to-day management if Mr. Cook was content with that
arrangement. Mr. DeCicco asked to review the paperwork and to meet with
Murray Cook.298
The decision to bring Mr. DeCicco into the wcd project came as a total
surprise to Mr. Cook. The project was going well at the time in Mr. Cook’s
view. Mr. Cook had completed successful highrise developments and he had
access to potential investors. From the day that Mr. DeCicco joined the project,
Mr. Cook felt he was no longer the one making the decisions. Mr. DeCicco
immediately began making changes to the project.299 Mr. Cook did not feel
comfortable with Mr. DeCicco.300
Meeting the Hotel Conditions
As I have found, the co-owners and the mayor shared the goal of having a hotel
and convention centre at the city core. For the mayor, it represented a major
step toward a cohesive downtown.301 For the co-owners, it was a complementary use to Square One.302 I accept that the mayor thought the wcd project
* Not all these events were organized by charitable organizations.
was in the public interest. She was steadfast in her desire to see the project
proceed. She intervened repeatedly with the co-owners to seek relief from the
requirements of the aps, including suspension of the hotel requirement in circumstances when her son also stood to benefit.
The aps was drafted with specific conditions involving the building of the
hotel to ensure that wcd could not buy the land without building a hotel. It
will be recalled that article 6.6(b)(iv) of the aps defined “hotel” as a four-star
hotel having convention facilities and having no fewer than 200 rooms operated by an international hotel brand with full-service guest amenities, a fullservice restaurant, a fitness facility, and room service.303
Meeting the hotel requirement was not so easy. As Mr. Cook testified, hotel
deals are inherently difficult and require long-term investors. A hotel study
conducted at the beginning of the wcd project revealed that a five-star hotel
was not tenable at the site, but that a four-star hotel might be possible.304
However, Mr. DeCicco learned through his many meetings with various individuals in the hotel industry that no one was interested in running even a fourstar hotel on the Mississauga City Centre Land.305
Mr. DeCicco’s testimony regarding the difficulty of building a four-star
hotel at the city centre site was corroborated by the testimony of Suresh (Steve)
Gupta.306 Mr. Gupta is ceo of Easton’s Group of Hotels, a company that
develops and manages hotels. He has been in the hotel management business
for 22 years.307 Mr. DeCicco approached Mr. Gupta in January 2008 about
developing a four-star hotel on the Mississauga city centre site.308 However,
Mr. Gupta did not believe a four-star hotel was viable in that location.309
In Mr. Gupta’s view, a four-star hotel required 24-hour room and concierge
service, as well as a large lobby. Mr. Gupta testified that the $270–$300 per
night room rates required to sustain such a facility could not, in his opinion,
be achieved, given the less expensive hotels in the vicinity and the proximity of other four-star hotels both near the airport and in downtown Toronto.
However, Mr. Gupta suggested to Mr. DeCicco that a hotel which offered
most of the four-star amenities, but did not include breakfast room service and
24-hour concierge service, might be viable at the city centre site. Mr. Gupta
proposed this option to Mr. DeCicco as one that was “second best” or “threeand-a-half stars.”310
Mr. DeCicco approached Mr. Gupta twice to determine whether Easton’s
might purchase and develop the land for the hotel. Mr. Gupta believed the
purchase price proposed by Mr. DeCicco for the severed land was too high
and declined both offers.311 Nevertheless, Mr. DeCicco and Mr. Gupta continued to discuss the possibility of Mr. Gupta managing a hotel built by Mr.
DeCicco on the site.312 Mr. DeCicco arranged a tour of one of Mr. Gupta’s
hotels, which took place on March 19, 2008.313 Peter McCallion, Ed Sajecki,
Marilyn Ball, and the mayor toured the Marriott Residence Inn on Wellington
Street West in downtown Toronto. Mr. Gupta believed this hotel represented
a good example of the level of hotel which would be viable on the City Centre
Land.314
Although the mayor seemed happy with the hotel at the conclusion of the
tour, Mr. Gupta learned from Mr. DeCicco a few days later that she had hoped
for something more elegant and upscale for the city centre.315 The mayor confirmed that the hotel showcased by Mr. Gupta on March 19, 2008 “in no way
met what [she] had envisioned for a hotel in the city core.”316
Mr. DeCicco’s efforts to get a hotel on the City Centre Land were at a
standstill and he sought to have the hotel conditions waived. The vendors
were, understandably, not keen to do so. Nevertheless, John Filipetti of Oxford
consulted with Mr. Sajecki regarding what the city’s reaction would be if the
hotel conditions were removed. Mr. Sajecki advised that, if the hotel conditions were removed, the city would seek an amendment to the Official Plan to
require a hotel at the site.317
Although the vendors provided wcd a number of extensions with respect
to the hotel conditions, they ultimately required some written evidence of
wcd’s efforts to secure a four-star or better hotel operator for the site before
any further extensions would be granted.318 It was in this context that Mr.
DeCicco asked Mr. Gupta for a letter confirming that he had been involved
in negotiations to manage a hotel for wcd. Mr. Gupta and Mr. DeCicco ultimately signed three documents on December 15, 2008. First, they signed a
letter confirming negotiations between wcd and Easton’s Group as follows:
We confirm that our companies have entered a Management Agreement for a four
star hotel having convention facilities and having no fewer than 200 rooms and to
be operated by an international hotel brand and having full service guest amenities
including a full service restaurant, a fitness facility and room service on the Hotel
319
Site (the “Hotel”).
Second, Mr. Gupta and Mr. DeCicco executed a management agreement which Mr. Gupta described as containing the usual industry terms.320
However, given that there was no assurance of when or if the hotel would be
built, Mr. Gupta asked that a provision be added to allow for termination of
the agreement on seven days’ notice.321 A third document (the “side letter”) was
therefore drafted by wcd’s lawyer, Mr. Bisceglia, which read as follows:
Further to our discussions and negotiation over the last year, we confirm the
following:
1.The parties are not obligated to take any steps with respect to the terms and
conditions of the Management Agreement executed between ourselves dated
December 15, 2008 until the transaction between World Class Developments
Limited and Omers Realty Management Corp. closes, or such further and
other date as the parties may agree in writing.
2.Either party shall have the option to terminate the Management Agreement
by providing one week’s written notice. Upon delivery of the Notice of
Termination, both parties will be released of all of their obligations under
the Management Agreement.322
The first letter, confirming negotiations between wcd and Easton’s Group,
was provided to the vendors, but the management agreement and side letter
were not. The vendors understandably regarded the letter confirming negotiations between wcd and Easton’s Group as amounting to weak evidence and
asked for better written evidence by January 9, 2009, as to the international
hotel brand. They also sought evidence that the operator was a four-star or better operator. Finally, the vendors requested a signed management agreement.323
In response to this request, wcd obtained a further letter from Mr. Gupta
advising that he had spoken with Marriott and that the company had agreed
to allow Easton’s Group to apply for a franchise to carry a Marriott flag at the
city centre site.324
wcd, through its solicitors, advised that there was no requirement in the
aps that it provide a signed management agreement. The vendors were not
satisfied with this response and ultimately terminated the aps on January 9,
2009.325
It is of note that the side letter was never produced to the vendors, and
its existence was not known to anyone other than Mr. Gupta and wcd until
considerable evidence had been given in this Inquiry.
As I will review below, there was litigation between wcd and omers after
the aps was terminated in January 2009. Although the management agreement was produced as part of each of Mr. DeCicco’s and Mr. Gupta’s affidavits in wcd’s counter-application against the vendors, the side letter was not
attached to either affidavit. Mr. DeCicco and Mr. Bisceglia testified that the
failure to include the side letter as part of Mr. Gupta’s and Mr. DeCicco’s affidavits was simply an oversight. The side letter ought to have been produced in
the previous litigation. It clearly undermined the strength of the management
agreement, which effectively became meaningless. Had the vendors been made
aware of the side letter it is likely that the aps would have been terminated
on December 15, 2008. Furthermore, had the side letter formed a part of Mr.
DeCicco’s or Mr. Gupta’s affidavits, the litigation settlement would likely have
been quite different.
8 The Mayor’s Involvement in Negotiations between wcd
and the Vendors
The evidence relating to the mayor’s direct involvement in encouraging the coowners to sell the land to wcd has been covered above, in section 6. This section considers the mayor’s involvement on behalf of wcd in the negotiations
that led first to amendments to the aps, followed by additional extensions
regarding the condition dates, up to January 9, 2009, when she acknowledged
and accepted the fact that the deal had terminated.
It is clear from the evidence that the mayor played an active role in requesting and securing extensions on behalf of wcd regarding the hotel conditions
set out in the aps. In fact, the evidence reveals that it was the mayor, and
not wcd, who almost single-handedly promoted the project and kept the deal
alive through 2008. As the evidence indicates, the vendors were prepared to
acquiesce to her requests until it became apparent that wcd was unable, or
unwilling, to fulfill the hotel conditions.
The Mayor and the Conditional Period in the Agreement
of Purchase and Sale
The Amending Agreement
The mayor acknowledged that, up to the signing of the amending agreement
in 2008, she intervened several times on wcd’s behalf to request extensions to
allow wcd more time to secure a hotel. She testified that these interventions
were always at the request of Mr. Cook or Mr. DeCicco, and never at her son
Peter’s request.326 As I have observed, this evidence is difficult to accept.
On March 27, 2008, the mayor met with Michael Nobrega, John Filipetti,
and Michael Kitt at omers’ offices to discuss the wcd project. From Mr.
Nobrega’s perspective, the purpose of the meeting was to introduce the mayor
to the “team,” especially to Mr. Kitt, who was new to Oxford and the file.* Mr.
Nobrega testified that, given his position as ceo of omers, he was too busy
to deal with the wcd transaction. Mr. Kitt became primarily responsible for
it in the spring of 2008.327 Mr. Nobrega testified that whenever the mayor
contacted him about the wcd transaction he directed the question to Mr. Kitt
and asked him to follow up with the mayor.328
Among other things discussed at the March 27, 2008, meeting, the mayor
conveyed the message that she believed a four- or five-star hotel, along with the
amenities of a convention centre, were fundamental key assets to the city centre,
and she wanted to see the development happen.329 Mr. Filipetti attended the
meeting, and, in an email to his colleague Ron Peddicord, he reported that the
mayor informed them that Tony DeCicco was now part of wcd. Mr. Filipetti
wrote that they had not heard from Mr. DeCicco directly, “[o]nly through the
Mayor,” and the mayor indicated that she believed Mr. DeCicco had significant
financial resources.330 Mr. Filipetti stated that he explained to the mayor “the
importance of the clauses relative to the city’s goal of a hotel,” and confirmed
to Mr. Peddicord that omers “did not give on any of [the hotel provisions].”331
Mr. Kitt understood from the mayor’s comments at the March 27, 2008,
meeting that she “vouched” for Mr. DeCicco. He was new to the file and questioned the others about how there could be a new principal 14 months into the
transaction. He testified that there was “embarrassment and concern” among
the co-owners because the aps, as originally executed, did not have a clause
* Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3101. This was Mr. Kitt’s first meeting with
Mayor McCallion. Testimony of M. Kitt, Transcript, August 19, 2010, p. 4002.
requiring consent when a new owner took control of wcd as purchaser. wcd
remained the purchasing company throughout, but the introduction of Tony
DeCicco represented a change of control.*332
In Mr. Kitt’s opinion, the people at wcd took advantage of this fact and
maintained throughout that they were not required to divulge the identity of
the principals of wcd.
Mr. Kitt testified that he found it odd to deal with a purchaser in this way
and characterized the negotiations as “very distant,” with wcd materializing
more as a corporate entity, almost a shell, rather than as a group of individuals.
He would have expected regular meetings, face-to-face interaction, and direct
negotiations with a principal on a deal this complicated. In fact, he met with
Mr. DeCicco only twice over the course of the year.333
Mr. Kitt received a copy of the February 28, 2008, Bisceglia memo, and he
and Mr. Filipetti compared it with the original aps.334 As noted, the memo
described proposed amendments to the aps which contemplated the removal
of many, if not all, of the conditions relating to the purchaser’s obligations to
satisfy the hotel conditions.335
Mr. Kitt spoke with Mr. DeCicco on March 31, 2008. Mr. DeCicco reiterated
his concerns regarding timing and the structure of the aps.†336 Mr. Kitt was
uncomfortable with the nature of their meeting because he had just come from
a meeting with the mayor, who had stressed the importance of the hotel. Mr.
DeCicco, a new principal of wcd not known to anyone at omers / Oxford,
was now asking for significant changes to the aps. Mr. Kitt knew that the
mayor wanted a hotel and had vouched for Mr. DeCicco’s ability to bring the
hotel project to fruition. Mr. DeCicco, however, was now expressing a desire to
remove the conditions relating to the hotel entirely.‡337
In his email to Craig Coleman of Hawthorne on April 1, 2008, Mr. Filipetti
provided an update following the March 27, 2008, meeting with the mayor.
He informed Mr. Coleman that Mr. Cook’s role had been taken over by Mr.
DeCicco, who was “apparently” known to the mayor. The mayor believed
he had the resources to complete the project. Mr. Filipetti wrote that their
first contact with the new principal came “indirectly via the City” in the form
* Mr. Kitt testified that a change in the key person was unusual and went beyond a corporate change in
control.
† This meeting was the first time Mr. Kitt met with Mr. DeCicco. Their second meeting occurred in December 2008, when Mr. Kitt advised Mr. DeCicco that the deal had terminated.
‡ See Exhibit 99 (Mr. DeCicco’s follow-up letter to Mr. Kitt regarding his proposed changes to the aps).
of a memo stating that virtually all the aps conditions regarding the hotel
were making the project difficult to finance.338 He indicated that Oxford
had responded to wcd, also “via the City,” that the conditions represented
the essence of the deal and that they would not be changed. He went on
to say that, after this meeting, Mr. Kitt spoke with Mr. DeCicco, following
which Mr. DeCicco sent a letter proposing more modest amendments to the
(aps). Mr. Filipetti reported that legal counsel were reviewing the proposed
amendments, and he hoped to discuss the proposal with Mr. Coleman before
responding to Mr. DeCicco.339
The mayor acted as the conduit to deliver information regarding the change
of key personnel. It is also apparent from the references in Mr. Filipetti’s emails
that the mayor had requested concessions regarding the hotel conditions on
behalf of wcd at this meeting.340 Mr. Filipetti’s references to receiving the
memo “via the City” and to not giving in on any of the hotel provisions lead
me to the conclusion that the negotiating demands within the Bisceglia memo
were advanced by the mayor at the meeting on March 27, 2008. I find that the
mayor sought to negotiate amendments to the aps on behalf of wcd at this
meeting and subsequently.
Mr. Kitt reported to Mr. Nobrega in an email dated April 29, 2008, that he
had informed the mayor of their “compromise position.” The vendors would
allow the hotel and condominiums to be developed at the same time on the
south site and would keep the north site in the deal. The mayor seemed pleased
with this position.*341 Mr. Kitt testified that he did not usually report to Mr.
Nobrega; however, in this situation he informed Mr. Nobrega of his exchange
with the mayor for the following reasons: (1) the process leading to the vendors’ compromise position had been initiated in Mr. Nobrega’s office at the
March 27, 2008, meeting; (2) Mr. Nobrega and the mayor enjoyed a very good
relationship; and (3) Mr. Nobrega had asked Mr. Kitt to keep him apprised of
the situation.342
On April 30, 2008, Mr. Nobrega thanked Mr. Kitt, as the mayor had
informed him that Mr. Kitt had been very helpful the previous day. Mr. Kitt
responded by informing Mr. Nobrega that he too had spoken with the mayor
again and agreed to meet with Peter McCallion at her request.343 Mr. Kitt
testified that the mayor set up the meeting and advised Mr. Kitt where and
* Some of the changes contemplated by the vendor came out of Mr. DeCicco’s April 1, 2008, letter (Exhibit
99).
when to attend.*344 Her involvement made some sense because Mr. Kitt
had no existing relationship with Mr. McCallion. On May 13, 2008, he met
with the mayor. They were joined by Mr. McCallion halfway through the
meeting.345
Although his email on the subject (discussed below) suggests otherwise,
Mr. Kitt testified that he did not regard the May 13, 2008, meeting as a negotiating session. He informed the mayor, and Mr. McCallion once he arrived, of
the terms that had been offered to the purchaser previously, which included
a six-month extension regarding the hotel. The mayor reiterated her position
on the importance of a hotel. Nevertheless, when Mr. McCallion arrived he
requested, and was denied, even more time to complete the conditions in the
aps. It is significant that Mr. McCallion made his request in the presence of
his mother.346 Following this meeting, Mr. Kitt reported in an email to Mr.
Filipetti that they had reached an agreement: “[b]asically, our letter plus an
additional six months to start and finish the hotel.”347 It is also significant
that Mr. Kitt described the meeting as coming to a resolution, rather than one
that simply allowed for information sharing. Indeed, if that was all that was
required, a meeting would not have been necessary.
On May 20, 2008, Mr. Kitt reported to Mr. Nobrega that they were in good
shape with respect to the hotel project. He had met with the mayor the previous week “and resolved the final issues.” Mr. Nobrega responded that he had
seen the mayor recently, and she reiterated how “very pleased she was with how
you [Mr. Kitt] were handling things with her.”348
Mr. Kitt testified that, on July 4, 2008, the mayor spoke to him and requested
six additional months for wcd to satisfy the various conditions in the aps.
This concession extended the time for satisfaction of the hotel conditions, the
site plan approval, and the lifting of the H designation.349
In an email dated July 9, 2008, to Michael Latimer, the ceo of Oxford, Mr.
Kitt noted that the call from the mayor had come “via Michael Nobrega.”350
By this he meant that “Michael [Nobrega] had the mayor on the line” and had
transferred the call to him. This elevated the priority of the discussion in Mr.
Kitt’s mind.351 Mr. Kitt informed Mr. Latimer that the co-owners were onside
with the extension, and he proposed to offer wcd three 60-day extensions at
a $125,000 non-refundable fee per extension, subject to satisfactory evidence
* Mr. Kitt testified that he had no prior contact with Peter McCallion.
of hotel investigations to date. He concluded that he would recommend the
extension, and would like to inform the mayor “today.”352
Mr. Kitt commented in his email that “the actual developer did not call.”353
He testified that, although it was unusual to receive a request from the mayor
instead of from Mr. DeCicco or Mr. McCallion, he was not surprised in this
case. It was consistent with what had been occurring since March 27, 2008. He
concluded that “Tony DeCicco and wcd were using the mayor as an effective
communication tool to … advance negotiation positions.”354
In an email dated July 8, 2008, Mr. Nobrega thanked Mr. Kitt for following
up with the mayor:
[T]hanks for responding to Hazel while on your vacation; she appreciates it
and I suspect that she will add you to her very small group of people whom she
would turn to for advice …355
The mayor acknowledged that Mr. DeCicco and wcd had asked for her
involvement to get this extension, which was no small concession. She testified
she went to Mr. Nobrega to request the extension because he was the head of
omers. As well, they sat together on the Enersource board.*356
The mayor contended that her purpose in intervening on behalf of wcd
was to pursue the city’s interests and that, because of economic conditions, her
focus was to provide wcd with a little more time to secure a hotel deal. She
acknowledged she pushed the co-owners to give wcd the extension, while at
the same time she made it clear to Mr. DeCicco that, if he were to receive the
extension, he needed to supply “real evidence” that there was hope of securing
a hotel.357
Mr. Kitt was scheduled to speak with the mayor again on July 11, 2008. In
preparation for their conversation, Mr. Kitt asked Mr. Filipetti when they had
last heard anything regarding the hotel, to which Mr. Filipetti reported there
had been “zero communication.”358 He reported that city staff had not heard
from wcd or their consultants for months, and that wcd had not paid the
substantial municipal charges and fees relating to the site plan.359
In his evidence, Mr. Kitt noted that the credibility of the purchaser was of
serious concern to the co-owners at this point. They were concerned about the
* She testified, however, that there was no connection between the fact that they both sat on the same board
and her decision to approach him in relation to the extensions.
lack of communication on a number of fronts, about the city process slowing
down, and about the purchaser’s ability to satisfy the hotel conditions in the
aps.360 After many internal discussions at omers / Oxford, and discussions
with aim, the co-owners agreed to give wcd three additional 60-day extensions that would cost wcd a non-refundable extension fee of $125,000 for each
one, with the extensions subject to satisfactory evidence of hotel investigations
performed to date.*361 Although the extension fees were substantial, Mr. Kitt
explained this was necessary to convey to wcd that it had to present a viable
project. When Mr. Kitt spoke with the mayor on July 11, 2008, he defended the
co-owners’ position and pointed out their concerns regarding the lack of communication and the persistent questions surrounding the ability of wcd to
deliver a hotel. Nevertheless, he conceded that the economy was in turmoil.362
Negotiations between the co-owners and wcd resulted in an amending
agreement to the aps, signed on July 31, 2008.363
The Mayor’s Involvement in the Extensions
The mayor agreed that she “definitely” intervened with the co-owners on behalf
of wcd in the fall of 2008 to request that the agreement be extended to allow
wcd more time to find a hotel operator.364 Mr. DeCicco acknowledged that
he spoke to the mayor 17 times during November 2008 because he thought
she could help him gain more time to fulfill the aps conditions.365 Mr. Kitt
confirmed that the mayor involved herself “numerous times” to request that the
co-owners be fair and reasonable, and to impress on them that, although it was
a difficult economy, the vision for the hotel remained sound and she wanted it
to happen.366
On October 17, 2008, Mr. DeCicco wrote to Mr. Kitt at Oxford to request
further amendments. Mr. DeCicco requested that the co-owners waive the
hotel conditions in the aps, including evidence of a hotel management agreement and any restrictive covenants regarding the use of the land.367 The mayor
testified that Mr. DeCicco never informed her of this request, and she was not
aware that wcd had proposed a straight sale of the land.†368
On October 24, 2008, Mr. Filipetti of omers / Oxford wrote to Grant
* Mr. Kitt explained that, because of their concerns, they focused on three extensions of 60 days each as
referred to above, instead of one six-month extension period.
† She testified that she was not aware of this letter. Mr. DeCicco testified that he never discussed his proposal of a clean sale with the mayor because her agenda was the achievement of the hotel, and he acknowledged
that he may have misled her by the lack of information he provided to her.
Charles and Craig Coleman of Hawthorne confirming that he and others from
Oxford had met with Mr. McCallion the previous day and that Mr. McCallion
had provided them with a letter from Mr. DeCicco outlining wcd’s request
to drop the hotel conditions from the aps.*369 Mr. Filipetti advised that Mr.
McCallion told them he had spoken to “key people” at the city who were
“apparently ok” with the restrictions being removed. Mr. Filipetti indicated
that omers / Oxford would pursue a straight sale if the co-owners agreed on
the change of position.370 As I have noted, this entreaty was not well received
on the aim side of the table.371
That same day, Mr. Filipetti emailed Mr. Kitt to report on his discussion
with Mr. Charles regarding aim’s perspective on wcd’s request to drop the
hotel conditions. Given that aim wanted Oxford to talk to the city to understand the city’s view, Mr. Filipetti enquired whether he should contact Mr.
Sajecki or whether Mr. Kitt would prefer to speak with the mayor.372 Mr.
Kitt replied that Mr. Filipetti should inform wcd of aim’s position, as well as
call Mr. Sajecki. Mr. Kitt intended to follow up with the mayor the following
week.†373 On October 27, 2008, Mr. Charles of Hawthorne wrote to colleague
Dean Hansen about this issue, stating that “[n]o one at Oxford has yet spoken
to the city to take the pulse of the mayor or the planning staff.”374
Mr. Nobrega wrote to Mr. Kitt on November 16, 2008, to confirm that he
had spoken to the mayor approximately two weeks earlier and that she had
mentioned a “land transaction with the City” that required the co-owners
to sign off, but that aim was raising objections. According to Mr. Nobrega,
the mayor informed him she was prepared to speak to the chair of aim. She
intended to “pressure aim” to take a “second but considered look at the City’s
request” to relax the hotel conditions temporarily.375 Mr. Nobrega advised the
mayor that he wished to speak with Mr. Kitt before she called the chair of
aim. On November 17, 2008, Mr. Kitt responded by informing Mr. Nobrega
that he had “just finished a nice conversation” with the mayor and that she and
Mr. Kitt agreed to let the land deal run its course through to January 2009. He
reminded Mr. Nobrega that the land deal referred to was the revised wcd deal.
* This was Mr. McCallion’s second request directly to Mr. Kitt and others at omers / Oxford. On October 9, 2008, Mr. McCallion came into Oxford’s offices and asked Mr. Kitt and Mr. Filipetti to consider a
straight sale of the land, removing all the hotel conditions. Testimony of M. Kitt, Transcript, August 19, 2010,
p. 4032.
† Mr. Kitt testified that he could not recall whether he called the mayor as he suggested. Testimony of M.
Kitt, Transcript, August 19, 2010, p. 4040.
He explained that, if necessary, they would revisit the transaction in January
2009.376
On November 20, 2008, at approximately 10:30 p.m., Mr. Nobrega informed
Mr. Kitt that the mayor had made a plea to “give Tony (?) some slack on some
deposit due [that day]. Could you provide a week until you and I get a chance
to talk.” Mr. Kitt responded at approximately 1:15 a.m. on November 21, 2008:
“We are good on our side. We’ll need to talk to our co-owner. Consider it
done.”377 Mr. Nobrega left a message for the mayor first thing that morning
indicating he had received her message from the previous evening, and that she
was to “consider it done … Not a problem.”378
wcd decided not to exercise the extension on November 21, 2008. From Mr.
Kitt’s perspective, instead of paying for the extension, wcd was trying to plead
that times were tough. The company could not find a hotel, and it wanted to
change the deal to a straight sale of the land in any event.379 omers / Oxford
granted wcd an additional three weeks’ extension from the original exercise
date of November 21, 2008, to December 12, 2008, without any further extension fee. At that time the aps would expire if wcd had not fulfilled the conditions required by the aps.380
On November 28, 2008, Bram Costin of McCarthy Tétrault wrote to wcd’s
lawyer and advised that the vendors had agreed to the extension of the second
condition date to December 12, 2008.381 Mr. Filipetti, who was copied on Mr.
Costin’s email, wrote to Mr. Kitt to say he had not been made aware they had
agreed to a further one-week extension, and he requested that Mr. Kitt inform
him of “any further contact between wcd / the mayor / Nobrega” of which he
was aware. Mr. Kitt responded that he was not aware of the extension, but was
aware that the mayor and Mr. Nobrega had spoken over the weekend.382
It appeared to those at aim that Mr. Filipetti had agreed to a further oneweek extension without their approval.* Grant Charles advised that the aim
representatives should have been consulted, and he questioned wcd’s rationale.383 According to Mr. Coleman, the deal was coming to an end because wcd
could not live up to the hotel requirements, and aim did not want to see it
dragged out. Therefore, aim executives were concerned when the lawyers acting for the co-owners granted the extension without informing them.384
I have heard the testimony of the mayor and Mr. Nobrega, each of whom
* Exhibit 364. This appears to be an extension agreed to between the mayor and Michael Nobrega. See
Exhibit 470.
described the mayor’s role simply as a conduit for information between the
parties. I do not accept that her role was so limited. The mayor engaged in
negotiations on behalf of wcd with Mr. Nobrega. It appears that she turned
to Mr. Nobrega first when she wanted concessions on behalf of wcd. The
contemporaneous evidence from the emails and phone calls alone supports
this. Mr. Nobrega requested that he be kept informed about the project, and
throughout 2008 he attempted to appease the mayor, who was advocating for
wcd. According to his evidence, he had been at the forefront of receiving all
the calls from the mayor on these issues to the extent that, by early December
2008, he was prepared to involve Leo de Bever of aim to understand the “ambiance of the environment.”385 Although he had delegated the day-to-day details
of the transaction to Mr. Kitt and others at Oxford, I find that Mr. Nobrega
was directly involved with important decisions made in this transaction.
In his update email to Mr. Nobrega on December 2, 2008, Mr. Kitt advised
Mr. Nobrega that the purchasers had contacted him and advised that “[t]hey
do not feel they can meet a key condition of the sale, that being the delivery of a
hotel. They would like us to waive this condition and simply sell them the land.
Hazel would like us to co-operate.”386 He forwarded the email to Mr. Filipetti,
who responded that the mayor had spoken to him to express her fear that they
would terminate the deal in “difficult economic conditions that make it impossible to live up to the hotel timelines.”387 He reported that the mayor said she
was aware she could not obtain a quality hotel at this time, but that she wanted
a deal in place to enable the hotel development to go forward when conditions improved. She queried whether aim was holding things up, to which Mr.
Filipetti replied that the co-owners made decisions on a consensus basis. He
advised the mayor that they “had Tony’s request and were having urgent discussions with [their] co-owners.”388 He concluded his update by reporting that
the mayor wanted a meeting with Mr. Nobrega, Mr. Kitt, and Mr. DeCicco
“as soon as possible,” and, if not possible, she wanted them to extend the hotel
condition date again.389
Mr. Kitt suggested that the co-owners provide another week’s extension to
Mr. DeCicco, which would give the co-owners time to determine their position. He asked Mr. Filipetti to let the mayor know they were doing their best
under the circumstances, and advised that he would call the mayor himself as
well.390 Mr. Filipetti responded that he had sent aim an update about his call
with the mayor wherein he proposed the one-week extension. He stated that
he was “pushing the clean sale with [aim].”391 Mr. Kitt told Mr. Filipetti that he
had updated Mr. Nobrega by telephone earlier that afternoon.392
Later on December 2, 2008, Mr. Filipetti reported in an email to Mr.
Charles and Mr. Coleman at Hawthorne that the mayor would be calling
and that she would be looking for the co-owners to relax the aps conditions
owing to “economic conditions.”393 He suggested that the mayor “may try to
‘divide and conquer’ and she surely [knew] people on both [their] boards.”394
Mr. Filipetti added that Mr. Kitt supported selling the land outright for
the original purchase price plus an additional $2.5 million, and asked aim
to consider this proposal.395 The mayor called again on the afternoon of
December 2, 2008, to reiterate her position that the hotel conditions be
relaxed temporarily.396
I find that Mr. Filipetti felt pressured to acquiesce to the mayor’s requests
to relax the conditions in the aps, and felt compelled to persuade aim to agree
to do the same.
The following morning, December 3, 2008, Mr. Filipetti informed Mr. Kitt
that aim had agreed to the one-week extension.397 When Mr. Filipetti suggested a meeting with the mayor to discuss the request for temporary relaxation of the hotel conditions, Mr. Kitt responded that it wasn’t necessary to
meet with her until they heard from aim. If aim agreed to the straight sale of
the land being proposed, the sale process would begin, and, if not, the mayor
would “get involved.”398 Following this exchange with Mr. Filipetti, Mr. Kitt
returned the mayor’s call and left a message stating that the one-week extension had been granted.399
Mr. Coleman responded to Mr. Filipetti’s update by seeking clarification
of the nature of Mr. McCallion’s interest in the transaction.400 He testified
that his clients were not clear about Mr. McCallion’s role. They heard that Mr.
McCallion had “[popped] up as a principal in the project” around the end of
October, and now that the mayor was involved they did not like the way things
were shaping up.401 Mr. Coleman was clearly concerned. If Mr. McCallion was
a principal and not an agent, and the mayor was, at the same time, applying
pressure on them to relax certain requirements in the agreement, “the optics
[were] not very good.”402
Michael Dal Bello testified that he and Mr. Coleman spoke about Mr.
McCallion’s interest in the project, given the fact that Mr. McCallion appeared
to be increasingly involved in discussions. He testified that Mr. Coleman was
uncomfortable about what Mr. McCallion’s role might be, and he asked Mr.
Coleman to seek clarification.403
On December 11, 2008, John Filipetti informed Mr. Kitt that Mr. DeCicco
had called, and when Mr. Filipetti reiterated the position of the co-owners, Mr.
DeCicco stated he did not understand why they wanted him to fail. He said he
had $2–$3 million invested and could not walk away.404 Mr. Filipetti replied
that Mr. DeCicco could exercise the extension on December 12, 2008, if the
three conditions required by that date were met.*405 Mr. Kitt set up a meeting
with the mayor for the following week because it was important to him, and
in the best interest of the co-owners, that they tell the mayor they were not
moving forward with the transaction.406
Mr. Filipetti prepared an “update memo” for Mr. Kitt, Mr. Nobrega, and
Mr. Latimer on December 11, 2008, regarding the sale of the City Centre Land
and the current positions of the parties. The memo reviewed the facts to date:
1 December 12, 2008, was the conditional date by which wcd was to have fulfilled three specific conditions as per the aps.
2 This date had been extended from the November 21, 2008, conditional date
by three weeks with no fee, and could be extended by another 60 days with
payment of a $125,000 non-refundable extension fee and report detailing
wcd’s negotiations to secure a hotel.
3 The aps would expire on December 12, 2008, without payment and a report
by wcd at that time.
4 As of December 11, 2008, it appeared that wcd had not fulfilled any of the
three required conditions.
5 There were discussions with wcd about a possible further no-fee extension;
however, co-owner aim did not agree and no further extension had been
granted.
6 The 60-day extension period referred to above was the third 60-day extension period added to the aps via the amending agreement on July 31, 2008,
which also extended the deadline to commence hotel construction following
closing by six months.407
* Mr. DeCicco did not reply to Mr. Filipetti’s suggestion, and wcd did not exercise its final extension.
Mr. Filipetti went on to say: “At the request of the mayor and wcd as represented by Mr. DeCicco, we undertook to persuade our co-owner, aim, that a
‘clean sale’ could be orchestrated to Square One’s advantage.”408
When questioned at the Inquiry about this statement, the mayor testified
that it was “incorrect” and “absolutely false.” She “did not at any time to anybody” request the owners waive the hotel conditions.409 The mayor testified
that, had she known of the proposal for a clean sale of the land, she would
have been very upset because her condition for the sale of the land was a fouror five-star hotel, a fact known from the outset by omers, Tony DeCicco,
Murray Cook, and her son Peter. At the same time, the mayor wanted at all
costs to ensure that the land was preserved for a hotel.410 I conclude that the
mayor might have supported a clean sale provided the requirement to build a
hotel on the land in the future was preserved. As I have noted, this could not
be achieved by a restrictive covenant, or, as the mayor acknowledged in her
evidence, by an Official Plan amendment.
Mr. DeCicco testified that he may have misled the mayor by not informing
her that he was seeking a straight sale on behalf of wcd.411 Mr. Coleman testified that the mayor’s position on the straight sale was “a bit grey” – there were
emails in which she acknowledged that she couldn’t get the hotel, but others
suggested that she was prepared to wait for the hotel to be built – “it was a bit
of both but it wasn’t very clear.”412
Mr. Kitt understood from the mayor after speaking with her on December
11, 2008, that she intended to contact Mr. Dal Bello of aim directly to explain
why she wanted the deal to proceed.413 Mr. Filipetti emailed Mr. Coleman of
Hawthorne later that day to inform him that “[the mayor] [was] calling everyone” and that Mr. Coleman might want to advise Mr. Dal Bello.414 Mr. Coleman
responded that calling Mr. Dal Bello would not be a great idea, to which Mr.
Filipetti replied, “[T]here’s no telling what she will do.”415 Mr. Coleman alerted
Mr. Dal Bello that the mayor might call. Thereafter, the mayor left four telephone messages.416
On December 12, 2008, Mr. Kitt acknowledged in an email to Mr. Nobrega
and Mr. Latimer that the deal to sell the City Centre Land to wcd would likely
“lapse” by the following week and said that he did not agree with this outcome.417
In Mr. Kitt’s opinion, the only way to save the deal was to waive certain conditions. The co-owners were not agreeable to this position. For his part, Mr. Kitt
was not convinced the purchaser had the funds to close the deal.418
Although Mr. Kitt had reservations about the purchasers, he wrote in an
email that he had nevertheless hoped to extend the current deal to January 31,
2009. He had hoped, he said, to achieve a resolution which, although a straight
sale, would lead to future hotel construction.419 However, aim was not
onside.420 I note that Mr. Kitt appears to have been unaware of the limitations
on the city’s ability to require the building of a hotel.
Mr. Kitt kept Mr. Nobrega apprised of the issues relating to the deal at this
stage because he wanted him to be aware that the deal had reached a critical
phase, and that, although this fact would not come as a surprise to the mayor,
she would not be happy with the outcome.421 He agreed that the general message he attempted to convey to Mr. Nobrega concerned “damage control.” He
wanted Mr. Nobrega to know that he was working on this issue as it related to
the mayor.422
In his response to Mr. Kitt, on December 14, 2008, Mr. Nobrega offered to
call Leo de Bever, ceo of aim, to request another 60 days to continue negotiations with wcd and the city.423 I regard Mr. Kitt’s email reply to Mr. Nobrega
as significant. In my view it reflects omers’ / Oxford’s recognition of the need
to “play ball” with the mayor. Mr. Kitt noted that he was having lunch with the
mayor the next day and added the following in his email:
The important thing is to maintain our relationship with the City and we have
done this to date. I don’t trust the buyer, and there is no doubt they are using
Hazel in this process, but it is difficult to tell her that, especially with her son
involved.424
Mr. Kitt testified that the reference to his lack of trust regarding the buyer
was based on “a series of decisions and behaviours” by the purchaser over the
course of the entire year that caused him to lose faith in the principals of
wcd.425 Ultimately, he did not believe that wcd was going to close.426 At the
Inquiry he testified that his reference to “using” the mayor was based on his
perception that the purchaser was using the mayor as a “negotiating tool” to
put pressure on the vendors to accommodate wcd’s negotiating position.427 In
Mr. Kitt’s view, the mayor’s involvement in the transaction went beyond making it clear that she wanted a hotel. It went “more directly to wcd being the
people that could pull this off.”428 I understand Mr. Kitt’s email in its ordinary
sense: Mr. DeCicco and wcd had used the mayor and her office for their own
personal ends. As Mr. DeCicco conceded, this put the mayor in an awkward
position.
Mr. Dal Bello spoke with the mayor on December 15, 2008. She expressed
her frustration that aim’s representatives were not prepared to allow the deal
to move forward.429 He testified that the mayor referred to aim’s representatives as “not being good corporate citizens, not working to build the City.” He
reminded her that aim had agreed to sell the land on the basis that a hotel
would be built. They were not now looking to make changes to the agreement.430 The mayor wanted to meet the people from aim, and a meeting was
arranged for early January.431
Later on that day, December 15, 2008, Mr. Kitt met with the mayor and
Mr. DeCicco at the Old Barber House Restaurant in Mississauga for what
he characterized as a “good faith meeting” to inform them both that the deal
was going to end, despite the fact that wcd had until December 19, 2008, to
fulfill the conditions.432 When Mr. DeCicco asked why the vendors were not
prepared to proceed with the deal, Mr. Kitt explained that the principal reason
was that wcd was not moving along with the hotel conditions.433
Mr. Kitt did not expect wcd to meet the hotel conditions, among other
conditions, and he interpreted wcd’s decision not to exercise the final extension as support for this conclusion.*434 Mr. Kitt testified, however, that early in
the meeting Mr. DeCicco produced a letter dated December 15, 2008. He presented it as proof that wcd had entered into a hotel management agreement
with Easton’s Management Group.435 Mr. Kitt testified that the letter did not
reassure him. He questioned why Mr. DeCicco had not shared the letter with
the co-owners, and he found the date to be somewhat “convenient.”436
Mr. Kitt had promised aim he would ask the mayor to ensure that her son
was no longer involved in this transaction. He testified that, at this point, the
nature of Peter McCallion’s involvement was aim’s concern, not his concern,
because he was focused on the termination of the transaction. As far as he was
aware, Mr. McCallion had not been involved after October 23, 2008.437 He
could not remember precisely what he asked the mayor, but recalled her “animated” response that Peter was “off the file,” a fact which he relayed to aim the
following day.438 Mr. DeCicco maintained that this issue was discussed with
him when the mayor was out of the room.439 However, Mr. Kitt reiterated that
* Mr. Kitt testified that he understood why they would not want to put up another $125,000 if they knew
they were unable to satisfy the condition.
he tried to express to the mayor that it would be best if Mr. McCallion was not
involved in this deal anymore, a comment that led the mayor to provide her
assurance that Peter was “off the file.”440
The mayor testified that she remembered attending this meeting with Mr.
DeCicco at the request of Mr. Kitt. Mr. Kitt made it clear to Mr. DeCicco that
the deal was going to die because Mr. DeCicco had not provided any concrete
evidence that he had been able to secure a hotel.441 However, she had no recollection of any discussion regarding her son’s involvement in wcd.442 She testified that Michael Kitt never raised this issue with her, and he was emphatic
she never told him Peter was “off the file,” an expression she claimed not to
understand.443
The mayor testified that she did not recall Peter’s name coming up during
this discussion, nor did she recall any expression of concern from Mr. Kitt at
any time with respect to Mr. McCallion’s involvement.444 She testified that
had the issue of Peter’s involvement been raised at this juncture, it would have
been “kind of late” given that the vendors were aware he was involved from the
outset.445
I accept Mr. Kitt’s recollection of his conversation with the mayor regarding
Peter McCallion’s involvement and her reply that Peter was “off the file,” as it
was recorded in the notes of Dean Hansen of aim.446 These notes recorded
what was said in a conference call almost immediately after Mr. Kitt’s meeting
with the mayor, and they persuade me that his version of the conversation
should be preferred.
Mr. Kitt testified that the mayor wanted an opportunity to discuss the coowners’ decision with aim directly. For that reason, the co-owners agreed to
one further extension to January 9, 2009, to get through the holiday period.
However, this further extension did not reflect a change in the co-owners’ position.447 The mayor asked for a meeting with the co-owners because she could
see the deal was going to die. She had learned that omers / Oxford needed
aim’s approval for any transaction in relation to the City Centre Land.448 The
mayor testified that at the meeting, which occurred on January 12, 2009, after
the deal with wcd had terminated, she expressed her desire that the co-owners
preserve that land for a hotel regardless of who the developer might be.449
The Practical Effect of the Mayor’s Role
I conclude that, but for the mayor’s involvement, the co-owners would never
have granted as many extensions to the conditions in the aps as they did.
These extensions were significant commercial concessions.
Mr. Kitt testified that he tried to minimize his conversations with the
mayor because he was uncomfortable with the “overall dynamic” of the negotiations. He explained that he “prefer[red] the arena of a purchaser / vendor
direct discussion versus different dynamics that [he] didn’t quite understand”
when dealing with the specific terms of an agreement, without “having different points of ... entry into the discussions.”450
Mr. Kitt acknowledged that by October 2008, when Peter McCallion
appeared at Oxford’s offices to request that the co-owners consider a straight
sale and forgo all the hotel conditions, he was not surprised since “at this stage
nothing was surprising about this transaction, everything was curious.”451 He
testified that, in his view, regardless of the precise role Mr. McCallion played,
as an agent or as a principal, his involvement made Mr. Kitt uncomfortable.452
Mr. Kitt was candid about the pressure he felt regarding a one-week extension he recommended to the co-owners on November 21, 2008. The recommendation was made at the request of the mayor through Mr. Nobrega.* He
testified that “at that point” he “was in trying-to-keep-the-peace mode.” The
deadline for wcd to put up additional money to extend the deal was approaching, and he “could feel the ... pressure directly and indirectly increasing on the
mayor’s side.” She was becoming more involved again through Mr. Nobrega,
who had, in an email dated November 20, 2008, sought a concession in favour
of “Tony.”453 It was clear to Mr. Kitt that Mr. DeCicco again used the mayor as
an advocate to buy him some time, with the result that both the mayor and Mr.
Nobrega became involved.454 At this juncture there were “significant external
people to deal with.” He had as well to be mindful of the co-owners’ interests
and needed to make the right decision.455
By December 2008, the mayor’s interventions had become a real irritant for
aim. When wcd sought yet another extension, Mr. Filipetti wrote in an email
that aim might agree to extend for one week, “but they think this will just
provide one more week for the mayor to pressure us.”456 Mr. Filipetti wrote a
memo dated December 11, 2008, regarding the status of the sale of the land. He
* The mayor’s request concerned the deposit money due on November 21, 2008.
summarized aim’s decision not to proceed with a clean sale of the land saying,
“aim [does] not want to tie any concessions from the City to this deals [sic]
because of the potential unfavorable optics in their view. They are also uncomfortable with the involvement of Peter McCallion as an apparent principal of
wcd.”457
Mr. Coleman explained aim had first become concerned about the nature
of Mr. McCallion’s interest on October 8, 2008. He learned at that time that
Mr. McCallion had requested a meeting with Mr. Filipetti the following day.458
Up to that point Mr. Coleman had not been aware of Mr. McCallion’s involvement in the wcd project.459 He was advised on October 24, 2008, that Mr.
McCallion had met with Mr. Filipetti a second time. At that meeting, Mr.
McCallion suggested that wcd might agree to an increased purchase price for
the land if the hotel conditions were dropped entirely. For Mr. Coleman, these
meetings raised two concerns: (1) he had been advised by Mr. Filipetti “that
Peter McCallion had a wcd business card and purported to be a principal of
wcd”;460 and (2) he understood that Oxford was willing to consider a straight
sale, which was in his view a “non-starter” because the hotel requirement was
the critical component of the deal.461
This situation made Mr. Coleman uncomfortable. He realized that he and
his colleagues at aim did not understand Mr. McCallion’s role and they did
“not like the way things were shaping up.”462 He clarified his thoughts on the
issue: “[I]f we’re getting calls or – indirect pressure from the mayor to relax
certain requirements in our agreement with – when her son’s on the other side
of the table, the optics are not very good.”463
It is likely that the wcd transaction would not have seen the light of day
had Mr. McCallion been transparent about his ownership interest from the
outset. At the Inquiry, Mr. McCallion admitted that he was a principal of
wcd. Leo de Bever, the ceo of aim, stated that had he known that the mayor
was promoting wcd and seeking concessions from the co-owners when her
son was an owner of the company, he would have been concerned.464 At the
very least, “conflicting objectives” might be at play. He added it was a matter of
“good corporate governance that when there are overlapping interests that you
start digging a little deeper and start making sure that there is no conflict.”465
Mr. de Bever explained that Mr. McCallion’s involvement might not have
precluded aim from entering into the aps. It would, however, have prompted
those at aim to take a much harder look at the project and his involvement to
determine whether the city’s interests were aligned with wcd’s interests to the
extent that the project could stand on its own.*466
Mr. de Bever maintained that had he known Peter McCallion had an equity
interest, he would not have been prepared to consider the mayor’s requests for concessions because of the apparent conflict created. The fact that Mr. McCallion’s
interest was not disclosed from the outset was a serious omission that made it
difficult for him to assess the involvement of various players in this transaction.467
The mayor involved herself in the wcd transaction throughout. She encouraged the co-owners to enter the deal with wcd. She provided assurances regarding Tony DeCicco’s capabilities. She negotiated extensions. She worked with
Michael Kitt of Oxford to achieve the extensions she required, and, when she
wanted something to be done immediately, she went directly to Michael Nobrega,
ceo of omers, with her request. When it became apparent to all parties that
Mr. DeCicco could not fulfill the conditions in the aps concerning a four-star
hotel, the mayor applied pressure on the co-owners to provide extensions, to
relax or waive conditions, and ultimately to close the transaction in the absence
of those requirements.
Based on the testimony and exhibits consisting of emails, telephone calls, and
notes, it is clear that, when the mayor requested a concession in the agreement,
omers and Oxford representatives were prepared to grant it. Understandably,
they did not share with aim each and every contact they had with the mayor.
However, I find that omers and Oxford representatives acceded to the pressure the mayor put on them by virtue of her constant communication regarding wcd, and they went out of their way to acquiesce to her requests. aim was
not subject to direct pressure from the mayor to the same extent and therefore
was, at times, at a loss to understand omers’ / Oxford’s recommendations
regarding concessions.
I find that the mayor knowingly used her relationship with omers and her
public office to influence the co-owners to agree to concessions throughout
this period. She knew that her son Peter stood to gain financially if the deal
succeeded, and, although his interests alone may not have prompted her intervention with the co-owners, the exercise of this influence put her in a position
of conflict, both real and apparent.
* He testified that he had interpreted “a lot of the pressure that was coming [their] way” to be the result of
the mayor’s long-standing desire for an upscale hotel near the Living Arts Centre. Testimony of L. de Bever,
Transcript, September 13, 2010, p. 4305.
The co-owners were aware at the outset that the mayor’s son stood to gain
financially, but understood him to be acting as agent. Both co-owners were
content that Peter McCallion act as agent, to be compensated by the purchaser.
I have taken note of the business reality that the co-owners needed to have an
excellent relationship with the mayor given the extent of their other interests
in Mississauga. The evidence reveals that no one from omers / Oxford or
aim wanted to confront the mayor directly about issues surrounding Peter
McCallion’s role in wcd.
It is clear, from the documented exchanges between the co-owners, that the
fact the mayor was advocating for concessions was a significant factor influencing their consideration of each concession. It also became a source of tension
between the co-owners.
9 The Optics of Peter McCallion’s Interest in wcd
Senior Managers of omers / Oxford
As I have noted earlier in this Report, the mayor intervened repeatedly
throughout the wcd project.468 Indeed, as I will review, she indirectly exerted
pressure on omers to settle the outstanding litigation with wcd in 2009.469
The mayor expected major pension funds such as omers to have business policies governing their interactions with elected officials, and she did “not
think a call from any mayor or any member of council or from anybody would
deter them from fulfilling a business transaction based on their policy.”470
She assumed “the pension fund would not make a bad decision on [its own]
behalf.”471 This contention ignores the strength of the mayor’s personality and
the extent of her influence. The mayor’s intervention on behalf of wcd placed
senior managers at omers / Oxford and aim in an uncomfortable position472
where they could not easily discuss Peter McCallion’s involvement in wcd
directly with her.473
As I have noted, Mr. DeCicco freely admitted in his evidence that his own
repeated interventions with the mayor had put her in an awkward position.474
I was struck by the unwillingness of Mr. Nobrega to make any similar concessions in his evidence.
Neither of the vendors ever advised the mayor that they were uncomfortable with her involvement in negotiations concerning wcd,475 and the mayor
expected they would have done so if such a concern existed.476 However, it
would have been difficult for these senior managers to voice their uneasiness
with the mayor directly.477 It is also unclear what effect, if any, an expression of
concern would have had. It would appear that the mayor is unshakable in her
pursuit of the public good as she perceives it.
Unfortunately, there was no effective alternative mechanism by which the
senior managers could have raised their concerns. Ideally, senior omers /
Oxford managers might have advised the mayor of their discomfort about her
requests for concessions for wcd. However, the mayor is a powerful personality, and these would not have been easy conversations. Raising the issue with
the mayor would not, in any event, have ameliorated her conflict of interest.
Actions of omers / Oxford in Response to Pressure from the Mayor
In her testimony, the mayor acknowledged that she was involved in negotiations between wcd and the co-owners regarding the final aps and then in
obtaining concessions to allow more time for wcd to find an acceptable hotel
for the site.478 The mayor stated that she “encouraged omers to extend the
agreement to give … wcd the opportunity to seek a hotel …”479
I find that the mayor should not have requested a meeting between her son
and Oxford in May 2008. Doing so was inconsistent with the requirements
of her public office. The fact that the mayor injected herself into negotiations
by attending the meeting in person and discussing the terms of a concession
in favour of wcd only made the situation worse. Under the circumstances,
Oxford felt compelled to negotiate with Mr. McCallion to maintain good relations with the mayor. Significant concessions were given to wcd as a result of
the mayor’s actions.
There was nothing unlawful about an executive attending a meeting convened by the mayor for her son. However, as discussed previously, the ceo of
omers facilitated the May 2008 meeting with the mayor and Mr. McCallion
when he knew that the latter had a pecuniary interest in the wcd transaction. With the benefit of hindsight, it might have been better had Mr. Nobrega
declined to orchestrate this meeting.
omers’ / Oxford’s Knowledge of Peter McCallion’s Role in wcd
Information sharing between the co-owners left much to be desired, and aim
was often unaware of the activities of omers / Oxford. In particular, there was
a notable delay before omers / Oxford notified aim of wcd’s original offer to
buy the City Centre Land, and later aim was not told that omers had settled
the litigation with wcd in 2009.480 Nor, as I will review, was aim consulted on
the final amount of the litigation settlement in 2009.
Although the Terms of Reference do not require me to do so, I find that
those at omers / Oxford did not intentionally obscure Mr. McCallion’s true
role in wcd. They were unaware of his true role until very late in the piece.
In the circumstances, it is unlikely aim would have learned much earlier of
Mr. McCallion’s role in wcd even if information had been shared in a timely
fashion by those at omers / Oxford.
aim’s Knowledge of Peter McCallion’s Role in wcd
aim initially believed that Peter McCallion was an agent working for wcd.481
The evidence reveals that, when it seemed apparent that Mr. McCallion was
more than an agent, in October 2008,482 aim representatives began to discuss their unease over the wcd transaction among themselves. Given their
consistent position, originally shared by their co-owner – that a quality hotel
was a necessary condition of the aps – they began to question why their coowner was repeatedly pressing them to agree to remove the hotel requirement.
It appears that they felt pressured to consent to wcd’s requests to appease the
mayor, and their discomfort grew once their perception of Mr. McCallion’s
involvement changed.483
10 Other Matters
There are two subsidiary matters which I find it convenient to address at this
point in the Report.
Declaration of Conflict of Interest at Council
Prior to this Inquiry, it came to light that the minutes of the May 21, 2008,
city council meeting reflected that Mayor McCallion had declared a conflict
that day with respect to wcd, when in fact a review of the video footage of the
meeting revealed that no such declaration was made.484 The reason for this
discrepancy became an issue in this Inquiry.
City Council Meeting, April 23, 2008
On April 23, 2008, wcd’s application for the removal of the H designation over
the City Centre Land was scheduled to be addressed by city council.485 wcd’s
application was listed as Corporate Report R-7. The April 23, 2008, minutes
state that “Mayor Hazel McCallion declared Conflict of Interest with respect
to Corporate Report R-7 by virtue of her son being involved with the World
Class Developments application.”486 wcd’s application at the April 23, 2008,
meeting was deferred to a subsequent council meeting, scheduled for May 21,
2008, because the company did not have all the agreements in place to support
its application.487
City Council Meeting, May 21, 2008
On May 21, 2008, wcd’s application for the removal of the H designation was
scheduled to be addressed by city council once again. The minutes from the
May 21, 2008, council meeting state that “Mayor Hazel McCallion declared
Conflict of Interest with respect to the above Corporate Report by virtue of
her son being involved with the World Class Developments application.”488
The matter was not addressed by council that day. Mr. Sajecki advised council
that wcd was still working on its application and requested that it again be
deferred to a later date.489
The video recording of the May 21, 2008, council meeting showed that
Mayor McCallion did not in fact declare a conflict with respect to wcd’s application for the removal of the H designation.490 Shalini Alleluia, who was the
city’s legislative coordinator at the time, did not recall why the May 21, 2008,
meeting minutes recorded that the mayor had declared a conflict regarding the
wcd matter when in fact she did not. Ms. Alleluia provided a number of possible explanations for the error in the minutes:
1 the mayor’s written comments in her agenda may have been copied into the
minutes;
2 Ms. Alleluia may have copied the declaration from her own notes;
3 the mayor may have mentioned it to Ms. Alleluia before the council meeting; or
4 Ms. Alleluia may have simply recorded the declaration because she expected
the mayor to make it.491
In September 2009, Ms. Alleluia was approached by her supervisors, including
the city clerk, Crystal Greer, when it was discovered that the mayor had not
declared a conflict as recorded in the May 21, 2008, minutes.492
The city clerk’s office conducted an investigation into the matter. On
September 28, 2009, Brenda Breault, the city commissioner of corporate
services and treasurer, issued a corporate report recommending that council amend the minutes by removing the reference to the mayor’s declaration
of conflict of interest.493 In the wake of this discovery, a new procedure was
established requiring the city clerk or deputy clerk to review the draft minutes
to ensure that declarations of conflict of interest had been properly recorded,
and that declarations of conflict of interest were recorded at the point in the
minutes where they were declared in addition to the beginning of the minutes.
It is not clear whether the city clerk or deputy clerk now reviews the video
recordings of council meetings to verify that declarations of conflict of interest
are recorded correctly in the minutes.494
That corporate report also advised that the Office of the City Clerk would
conduct a comprehensive review of its minute-taking practices.495
I accept the evidence of Ms. Alleluia that she was never asked by the mayor
or any councillor to either insert or delete anything from council minutes.496
The mayor had declared a conflict of interest on a prior occasion, and I accept
that she simply forgot to do so on May 21, 2008, when the matter was deferred
and was only briefly before council.
The Mayor’s Involvement in wcd’s Internal Affairs
It was common ground in the evidence before me that, in addition to her interactions with the co-owners regarding the wcd project, the mayor met at various times with Murray Cook and Tony DeCicco. At the outset of the wcd
project, the mayor met with Mr. Cook on two occasions to express to him the
importance of the hotel to the city and her frustration at the slow rate at which
the co-owners were proceeding with a land purchase agreement.497
Her involvement continued throughout the life of the wcd project.
Numerous documents entered as exhibits reflect the mayor’s involvement in
resolving matters between Mr. DeCicco and Mr. Cook after Mr. DeCicco joined
the wcd project. Mr. DeCicco was concerned that Mr. Cook had the ability,
through the put and call agreement, to exit wcd at any time. Mr. DeCicco
wanted the put and call agreement terminated, and the following evidence suggests that he used the mayor to assist him in negotiating with Mr. Cook:
1 On October 26, 2007, Mr. DeCicco left a voicemail message for the mayor
advising that “Emilio [Bisceglia] will fax that agreement to your home
today by 3:00 p.m.” and asking the mayor to set up a meeting with Murray
Cook.498 Mr. DeCicco and Mr. Cook testified that a meeting did take place
at which the mayor attempted to mediate the dispute.499
2 Subsequent to the meeting, Mr. DeCicco left the mayor a further message
asking whether she had “considered getting Murray to sign …”500 (referring to the termination of the put and call).501 Mr. DeCicco testified that
he believed the mayor had some moral suasion with Mr. Cook and could
therefore get him to sign the agreement.502
Mr. DeCicco maintained that he involved the mayor because of her
effectiveness as a negotiator and not because of her son’s involvement in the
deal.503 Although Mr. DeCicco testified that the mayor’s involvement did not
go beyond the one meeting she arranged at which she attempted to mediate
between them, numerous other telephone messages from Mr. DeCicco suggest
he kept the mayor apprised of every development in regard to the dispute with
Mr. Cook. On December 21, 2007, Mr. DeCicco left a message for the mayor,
asking her to call him at her earliest convenience:
I’d like to speak with you regarding Murray Cook. We received a letter from his
lawyer stating that we haven’t got the authority to do things. I suggested to Peter
that it would be good if we meet tomorrow.504
On May 22, 2008, Mr. DeCicco appeared to be returning a call from the
mayor:
I’m sorry I didn’t get back to you sooner. I was in a meeting all morning and we
just finished. I’m going into a 1:30 meeting now. I got your message. I think we
should get together. There’s a lot happening with Murray that we need to speak
about. We can get together tonight anytime at your convenience. I’ll be busy
over the next few days, but I’ll obviously make time for you. Let me know if
you’re available tonight. I’m giving Peter a call to see what his schedule is like.505
At one point Mr. DeCicco requested that the mayor arrange a meeting to
resolve the differences between him and Mr. Cook. The purpose of the meeting, which occurred at the mayor’s house, was, according to him, to try to find
a way forward.506 Ultimately, Mr. Cook was not comfortable working with Mr.
DeCicco and he suspected that Mr. DeCicco was equally uncomfortable with
him.507 Mr. DeCicco thought that Mr. Cook had not contributed financially.
However, Mr. Cook had secured the put and call agreement,508 an arrangement that was quite advantageous to him.509
11 Termination of the Agreement of Purchase and Sale
On July 9, 2009, the co-owners commenced an application in the Ontario
Superior Court of Justice (Commercial List) to confirm that the agreement of
purchase and sale (aps) with wcd had been terminated on January 9, 2009,
and that wcd had no further rights pursuant to that agreement.510
On August 28, 2009, wcd filed a counter-application against the vendors
seeking, among other things, a declaration that the aps between the vendors and wcd remained in effect.511 In its counter-application, wcd sought
only monetary relief and did not seek anything that would tie up the City
Centre Land, such as an injunction to prevent title from being transferred or
a certificate of pending litigation. In support of the counter-application, Tony
DeCicco, Steve Gupta, and Peter McCallion swore affidavits.512
As discussed below, the litigation was ultimately settled for a payment of
$4 million by the vendors in September 2009.513 aim was not consulted by
the omers group before the latter agreed to settle the litigation with wcd for
$4 million.514 On September 11, 2009, aim learned through its consultants
that Mr. McCallion was in fact still involved in wcd at the time of the settlement.515 I find that aim’s earlier suspicions about Mr. McCallion’s actual role
in wcd were not confirmed until after a settlement was concluded in litigation
between wcd and omers and aim.
Sheridan College’s Interest in the City Centre Land
The mayor had advocated for some time for another post-secondary
institution in the city.516 Sheridan College (Sheridan) had proposed a
Mississauga campus a few years earlier, and nothing had come of it.517 In 2009
Sheridan requested significant financial support from the city in exchange
for a Mississauga campus. Instead of providing the requested funds, the
city decided to purchase the now-vacant City Centre Land and lease it to
Sheridan at a nominal rate.518
On July 20, 2009, an agreement of purchase and sale was signed between the
co-owners as vendors and the city as purchaser.519 The terms of the agreement
of purchase and sale provided for the city to pay a sum of roughly $14 million
in exchange for the City Centre Land, with a closing date of September 17,
2009. The agreement of purchase and sale between the vendors and the city
was conditional on the city being satisfied by September 17, 2009, that wcd
had no claim for title to the land.520
Out of concern for potential claims arising from the terminated agreement with wcd, the city and Sheridan College entered into an indemnification and hold harmless agreement (the indemnification agreement) with the
co-owners.521 The indemnification agreement provided that the co-owners
would assume all responsibility for defending any action brought by wcd,
and, in the event that the city or Sheridan chose to retain independent counsel
in that regard, the co-owners would reimburse the city or Sheridan, or both,
for all reasonable legal costs incurred up to a maximum aggregate amount of
$500,000.522
As further protection, the city entered into a release agreement with
Sheridan whereby Sheridan acknowledged the potential of a claim by wcd
and released the city, including elected officials and staff, from any and all
claims including damages, losses, costs, fees, disbursements, loss of revenue
or profits, and loss of infrastructure stimulus fund (isf) monies as a result.523
On September 8, 2009, City Solicitor Mary Ellen Bench recommended to
city council that the city proceed to close the transaction with the co-owners
on September 17, 2009.524 Ms. Bench testified that her recommendation was
based on the “sufficiently strong indemnity” combined with the fact that, in her
opinion, wcd “was after cash; they weren’t after the property.”*525
* Exhibit 327, p. 4, sets out in greater detail why Ms. Bench recommended proceeding with the transaction
In her Report to Council of September 8, 2009, recommending that the
city proceed with the aps with the co-owners, the city solicitor referred to the
outstanding litigation between the co-owners and wcd in relation to the same
land and noted that, in support of its counter-application, wcd relied on the
following:
evidence provided through affidavits of two of its principals, namely Peter
McCallion and Tony DeCicco, as well as an affidavit from Steve Gupta, of the
Easton’s Group of Hotels Inc. These affidavits reference meetings with City staff
and Mayor McCallion to discuss the hotel. Again, there are no allegations or
suggestions of impropriety on the part of the City, its staff or elected officials, in
the materials filed by wcd.526
This report was likely the first time that most members of city council became
aware of Peter McCallion’s interest in wcd. Indeed, the city solicitor became
aware of Mr. McCallion’s interest only when she personally reviewed his affidavit on the counter-application.527
Peter McCallion’s Interest in wcd Revealed
The affidavit of Peter McCallion sworn August 24, 2009 (the August 24 affidavit) is, in many ways, the seed that sprouted this Inquiry.528 In paragraph 1, Mr.
McCallion states: “I am one of the principals of World Class Developments.”
The August 24 affidavit was initially drafted by the legal firm of Paliare Roland
Rosenberg Rothstein llp (Paliare Roland) on Mr. McCallion’s behalf.529
However, Emilio Bisceglia reviewed the draft with Mr. McCallion and made
changes at his request.530 I find that Mr. McCallion was chosen as an affiant
because his evidence would put pressure on the co-owners (or at least omers)
to resolve the litigation, particularly given the inclusion of paragraphs in other
affidavits describing meetings with the mayor.
Mr. McCallion requested several revisions to the first draft of the August
24 affidavit, none of which dealt with the statement that he was a principal
of wcd.531 When Mr. Bisceglia asked Mr. McCallion to come to his office to
swear the affidavit, Mr. McCallion advised by email:
to purchase the land from the co-owners.
I will be in Monday after Tony and My Mother have a chance to discuss it.532
In his evidence, Mr. McCallion testified that he mentioned to the mayor that
he was swearing an affidavit, but did not discuss the contents of the affidavit
with her before swearing it.533
In the context of negotiations between the city and the co-owners with
respect to the Sheridan deal, the materials underlying the counter-application
– including Mr. McCallion’s affidavit – came to the attention of the city solicitor. Ms. Bench was surprised that Mr. McCallion had an ownership interest
in wcd and thought it her duty to bring this information to the attention of
council.534 In her Report to Council, dated September 8, 2009, Ms. Bench
revealed Mr. McCallion’s interest in wcd.535
Peter McCallion told the Inquiry that, sometime after the September 8,
2009, Report to Council, the mayor called him to ask why he had referred to
himself as a “principal.”536 Mr. McCallion claimed he did not believe he was a
principal of wcd and had simply overlooked this statement in his affidavit.537
Mr. McCallion advised Mr. Bisceglia’s office that the statement in the affidavit needed to be changed.538 Mr. Bisceglia was concerned about the requested
change. He instructed his staff not to commission the affidavit because he knew
that Mr. McCallion was indeed a principal of wcd.539 It will be recalled that
Mr. Bisceglia was not only the company lawyer, but also an investor in wcd.
It appears the second affidavit, which purported to “delete” the statement in
Mr. McCallion’s previous affidavit that he was a principal of wcd, was drafted
by Mr. Bisceglia’s staff prior to his instructions that such an affidavit should
not be commissioned.540 Mr. McCallion ultimately took the second affidavit
to the mayor’s personal solicitors, the firm of Danson Schwarz Recht llp. It
was to be sworn on September 11, 2009.541
Sometime thereafter, Ms. Bench received Mr. McCallion’s second affidavit,
which deleted the statement that he was a principal of wcd. The affidavit was
sent to her by fax, without a covering letter or any explanation.542
A third affidavit was sworn on September 15, 2009.543 This affidavit stated
that Peter McCallion was not a principal of wcd. Mr. McCallion testified that
he swore the third affidavit on the advice of his mother, who felt the second
affidavit was not sufficiently clear.544 By contrast, Mayor McCallion testified
she had never seen or heard about the third affidavit.545
I have found that Peter McCallion was a principal in wcd. I have also found
that he knew he was a principal in wcd. I further find that he ought not to
have sworn his second and third affidavits, which suggested otherwise. I accept
Mr. McCallion’s evidence that he swore the third affidavit at the instance of his
mother. Although I do not believe that Mayor McCallion knew of the precise
interest Mr. McCallion held in wcd, it is unfortunate that she urged him to
change his sworn testimony without ensuring that all the facts were available.
The Settlement
David O’Brien as Emissary of the Mayor
The aps was terminated on January 9, 2009. On April 30, 2009, Michael Kitt,
on behalf of omers / Oxford, sent a letter to Mr. DeCicco indicating that the
co-owners were in negotiation with another potential purchaser for the City
Centre Land.546 In July 2009, Mr. DeCicco received a call from Mr. McCallion
indicating that David O’Brien wanted to meet with him to discuss the possibility of a settlement.547
Peter McCallion made this telephone call after the tacc (Developments)
golf tournament in July 2009. At the tournament dinner, the mayor raised with
Mr. O’Brien her concerns about difficulties in closing the Sheridan deal.548
Her main concern, according to Mr. O’Brien, related to contamination that
had been found on the City Centre Land. She also was worried that the outstanding litigation between wcd and the co-owners might have an impact on
the deal.549 The mayor suggested that Mr. O’Brien become familiar with the
issues.550 Later that same evening, Mr. O’Brien suggested to Mr. McCallion
that they meet so that Mr. McCallion could explain “the issues that were going
on vis-à-vis wcd and Oxford.”551
Mr. O’Brien insisted in his testimony that the mayor had not explicitly
asked him to become involved in the resolution of the wcd litigation.552 Not
much turns on this position. The mayor and Mr. O’Brien had worked closely
together over a number of years. I find that whatever the mayor said at the golf
tournament dinner, Mr. O’Brien understood that he was to do what he could
to resolve the litigation, and thereafter began to do so.553
Mayor McCallion denied asking Mr. O’Brien to negotiate a settlement with
wcd.554 For his part, Mr. DeCicco testified that he was advised by the mayor in
July that it was important the wcd matter be settled so that the Sheridan deal
could move forward.555 In any event, on July 16, 2009, Mr. O’Brien met with
Mr. DeCicco and Mr. McCallion at a Sunset Grill in Mississauga to discuss
settlement of wcd’s litigation with omers.*556 Mr. O’Brien told Mr. DeCicco
that wcd had no case, but Mr. DeCicco was adamant that wcd held a legitimate interest in the land and declined to discuss settlement.557 Mr. O’Brien
later told Mary Ellen Bench, the city solicitor, that this meeting was at the
mayor’s request.558
David O’Brien as Emissary of omers
On September 7, 2009, Michael Nobrega met with Mr. O’Brien before a meeting of the omers investment committee.559 Mr. Nobrega asked Mr. O’Brien
to explore with Mr. DeCicco a range for possible settlement with wcd.560 Mr.
Nobrega testified that he had concerns regarding omers’ liability pursuant to
the indemnification agreement with the city.561
Although it is not central to the task of the Inquiry, I have difficulty accepting that this concern was the reason for Mr. Nobrega’s intervention in the wcd
litigation. Mr. Nobrega explained his intention in the following way. He said
he thought the Sheridan / wcd issue had the potential to harm omers’ reputation, and for that reason he had to become involved.562 He elaborated that
omers had ongoing relationships with the principal infrastructure players
(namely, the federal and provincial governments) and that in these circumstances he “had a duty of care” to report that, by terminating the wcd deal, the
co-owners had “double-sold” the land – namely, to wcd and to the city.563 On
his review of the agreements, he concluded that the indemnification agreement
which the co-owners had executed in favour of the city resulted in open-ended
liability for the co-owners in favour of the city and Sheridan.564
I appreciate that Mr. Nobrega is not legally trained. He is a chartered
accountant.565 On my review of the agreements, I conclude that the indemnity
exposed the co-owners to no such liability beyond the damages being sought
by wcd. It is significant that Michael Kitt accepted this interpretation when
asked about it during his testimony.566 Mr. Nobrega went on to explain that,
if there was litigation that prompted a claim under the indemnification agreement, the public servants involved in infrastructure funding – if advised of
the “double sale” issue – might cut off funding.567 In those circumstances, as
envisaged by Mr. Nobrega, omers could be liable.
It appears that none of the lawyers involved in the situation (Borden Ladner
* According to Mr. DeCicco, Mr. O’Brien informed him that he sat on the omers board and he wanted to
talk about the possibility of settling the litigation.
Gervais llp acting on behalf of Sheridan; Thornton Grout Finnigan llp on
behalf of omers; or City Solicitor Ms. Bench) thought there was any legal risk
arising from the indemnification agreement.568 One assumes any lawyer consulted by Infrastructure Ontario would have reached a similar conclusion. Mr.
Nobrega believed there was, nevertheless, a business risk which was apparently
completely divorced from any notion of legal risk.569 I find that Mr. Nobrega
was quite aware of the political dimensions of the wcd counterclaim.
On August 27, 2009, Mr. O’Brien emailed Michael Nobrega the following
message:
Can we talk sometime today. Hazel called me concerning the Oxford issue with
Mississauga. She is quite concerned. Could be political issues.570
By this point, Mr. O’Brien had seen the affidavit sworn by Mr. McCallion
where he described himself as a principal of wcd.571
Mr. Nobrega contended that the “political issues” Mr. O’Brien was referring to centred on the ability to preserve the Sheridan deal in light of the
contamination issue.572 I am satisfied, based on my review of Mr. O’Brien’s
evidence, that his email related to the wcd litigation. Mr. O’Brien quite
accurately anticipated that the exposure of Peter McCallion as a principal of
wcd would raise political issues. In my view, Mr. Nobrega also recognized
that, whatever legal risks there might have been, the wcd litigation had the
potential of becoming much messier once Mr. McCallion’s interest in wcd
had been disclosed. Mr. Nobrega testified that, based on prior experience,
he was “not a great friend of litigation,”573 and I can well understand that he
would have wanted to extract the co-owners from a prospectively messy piece
of commercial litigation. Of course, by resolving the wcd litigation quickly,
there was also a good chance that the mayor’s position would be protected,
and that she would not be criticized.
Although I do not accept his evidence in every respect, Mr. O’Brien did
impress me as having a deft ability to resolve complex and difficult issues.
Mayor McCallion deployed him to sort out the wcd litigation. Mr. Nobrega
employed him for the same reason, and it seems likely he was aware of Mr.
O’Brien’s retainer on behalf of the mayor. I do not accept Mr. Nobrega’s evidence that he was unaware Mr. O’Brien had previously acted as an emissary
of the mayor in relation to wcd,574 although I appreciate that Mr. Nobrega
was not focused on this aspect of the matter. In any event, a second meeting took place involving Mr. O’Brien, Mr. DeCicco, and Mr. McCallion on
September 10, 2009, at the Delta Meadowvale Hotel in Mississauga.575
According to Mr. O’Brien, Mr. DeCicco’s first offer to settle at this meeting
was $10 million, at which point Mr. O’Brien feigned leaving the meeting since
it appeared to him that Mr. DeCicco would not present a “serious” position.576
Mr. DeCicco periodically left the meeting to consult with a partner, whom I
am satisfied was Emilio Bisceglia.577 By all accounts, Mr. McCallion was silent
throughout the meeting.578
After a couple of hours’ negotiation, the meeting ended without resolution.*579 About half an hour later, Mr. DeCicco called Mr. O’Brien to suggest
that an offer of $5 million would be acceptable.580 Mr. O’Brien said he had
$3 million in his mind, the amount originally expended by wcd for the project.
After brief further negotiations they agreed on $4 million.581 Mr. O’Brien then
advised Mr. Nobrega that $4 million was the best he could do.582 Although
Mr. DeCicco’s testimony differed as to how the negotiations proceeded, both
sides agree the ultimate settlement was $4 million. Mr. Bisceglia served a formal offer to settle on behalf of wcd on September 11, 2009, for $4 million.583
The evidence was clear that Peter McCallion did not receive any of the
$4 million settlement.584 He was not, however, the only investor who was not
repaid. John Di Poce, a prominent businessman and at the time a friend of
Tony DeCicco, invested $992,753 in wcd,585 which included a payment of
$392,753.71 for wcd’s outstanding bills when he exited the deal at the end
of April 2008.586 Apparently, Mr. Di Poce has received nothing for this investment.587 It is indeed curious that Mr. Di Poce was required to pay such a
substantial sum, in addition to his initial investment, in order to withdraw
from wcd as an investor, and unfortunate that he did not receive any of the
$4 million settlement from Mr. DeCicco.
In fact, all the equity partners except Mr. McCallion and Mr. Di Poce
were repaid.588 Mr. Bisceglia received his and his family’s entire investment
($61,000).589 Mr. DeCicco and his companies received approximately $2.2 million.590 Mr. Couprie was repaid his initial $750,000 investment in three installments.591 Mr. Couprie did not receive the additional $750,000 he was to receive
when wcd found a developer.592
* According to Mr. DeCicco, they agreed on $4 million at this settlement meeting, contingent on Mr. O’Brien
receiving final approval. Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3913–14.
Phase II – Analysis
12 Conflict of Interest
The Common Law Framework
As I found in my July 8, 2010, ruling on the meaning of “conflict of interest”
(see Appendix J), the Municipal Conflict of Interest Act (mcia)593 does not constitute a complete codification of the law governing conflicts of interest for
members of municipal councils. The common law also applies. The mcia is
restricted to the pecuniary interests of members of council in the deliberative
and legislative contexts, but the common law is much broader and recognizes
conflicts of interest involving non-pecuniary interests.
The mcia provides members of municipal council only with the following
guidance for avoiding conflicts of interest:
5(1) Where a member, either on his or her own behalf or while acting for, by,
with or through another, has any pecuniary interest, direct or indirect, in any
matter and is present at a meeting of the council or local board at which the
matter is the subject of consideration, the member,
a) shall, prior to any consideration of the matter at the meeting, disclose the
interest and the general nature thereof;
b) shall not take part in the discussion of, or vote on any question in respect of
the matter; and
c) shall not attempt in any way whether before, during or after the meeting to
influence the voting on any such question.594
The Inquiry heard from a panel of experts in the field of municipal conflict
of interest, composed of Professor David Mullan, Dr. Greg Levine, and Dean
Lorne Sossin. Their discussion and commentary proved helpful to my consideration of the issues.
Conflicts of interest at common law are not restricted to the personal interests of members of council, and may even extend beyond to the interests of
close family members. Professor Mullan provided the following useful overview of the common law of conflict of interest in his expert report prepared for
this Inquiry:595
596
In Watson, Shaw J. of the British Columbia Supreme Court had reached back
to a 1904 Ontario judgment to support the proposition that, at common law,
conflict of interest was not confined to pecuniary interests: L’Abbé v Blind River
(Village):
There may be a direct monetary interest, or an interest capable of being
measured pecuniarily, and in such case that a bias exists is presumed.
But there may be also substantial interest other than pecuniary, and then
the question arises, on all the circumstances, as to whether there is a real
likelihood of bias – a reasonable probability that the interested person is
likely to be biased with regard to the matter at hand.597
Writing also in the context of bias, Sopinka J., in Old St. Boniface Residents’
Assn. v Winnipeg (City), recognized the existence of a common law conception
of conflict of interest ranging beyond pecuniary interests:
It is not part of the job description that municipal councillors be personally interested in matters that come before them beyond the interest they have in common with other citizens in the municipality. Where
such an interest is found, both at common law and by statute, a member
of Council is disqualified if the interest is so related to the exercise of
public duty that a reasonably well-informed person would conclude that
the interest might influence the exercise of that duty. This is commonly
referred to as conflict of interest [emphasis added].598
Optics are important. It is essential to consider how a reasonable person
would view the actions of the municipal councillor. As Commissioner Jeffrey
Oliphant put it so well in his 2010 Report:
Public office holders ultimately owe their position to the public, whose business
they are conducting. Ensuring they do not prefer their private interests at the
expense of their public duties is a fundamental objective of ethics standards.599
As far back as 1904, in L’Abbé v Blind River (Village), [1904], Boyd J, writing
for the Divisional Court, stated:
The High Court of Parliament was not only a legislative but a judicial body. It
combined legislative capacity and judicial power, and it would seem that the anal-
ogy of cases as to Judges and magistrates strongly applies to the fiduciary conduct
of municipal councillors. The member of a council stands as trustee for the local
community, and he is not so to vote or deal as to gain or appear to gain private
advantage out of matters over which he, as one of the council, has supervision
for the benefit of the public. The councillor should not be able to invoke the political or legislative character of his act to secure immunity from control, if the taint
of personal interest sufficiently appears therein [emphasis added].600
As I explained in my July 8, 2010, Ruling on Conflict of Interest, the most
important words in the above paragraph are “deal,” “gain,” and “or appear to
gain,” and I stressed the importance of optics.601
This broader approach to conflict of interest has also been recognized as
the prevailing standard by previous commissions of inquiry, including those
conducted by Commissioners Denise Bellamy and W.D. Parker.602 As identified in the Parker Commission, there are various manifestations of conflict of
interest. A conflict of interest may be real or apparent.603
A real conflict of interest has three prerequisites: (1) the existence of a private
interest (2) that is known to the public office holder; and (3) that has a nexus
with his or her public duties and responsibilities that is sufficient to influence
the exercise of those duties and responsibilities.604
An apparent conflict of interest arises when a reasonably well-informed person
could reasonably conclude, as a result of the surrounding circumstances, that
the public official must have known about the connection of his or her involvement with a matter of private interest.605
I accept Professor Mullan’s view that
the common law of conflict of interest certainly provides a basis for an examination of whether the specific facts of the Mayor of Mississauga’s engagement
with third parties and officials within the City in relation to a potential contract
in which her son had a pecuniary interest amounted to legally inappropriate
behaviour or involvement.*606
* As Professor Mullan notes, however, there is no free-standing cause of action for violating the common
law conflict of interest standards. The common law deals only with conflicts of interest on the part of elected
officials within the framework of specific causes of action.
The expert panel agreed that it is not the existence of a conflict of interest
which is the issue but, rather, what the official in a position of conflict of interest does in the face of the conflict.607 The following analysis considers whether
Mayor McCallion had a conflict of interest having regard to common law principles of conflict of interest and, if so, whether her conduct in the face of that
conflict of interest was appropriate.
Did the Mayor Face a Conflict of Interest?
I find that Hazel McCallion had a real conflict of interest. Her son Peter
McCallion stood to gain financially from his involvement with wcd. The
mayor knew her son had a financial interest in wcd. In the face of that conflict, the mayor used her influence as mayor to further the interests of wcd.
Regardless of her motivation for doing so, I find that her behaviour was
inappropriate.
The Mayor’s Knowledge of Peter McCallion’s Interest in wcd
In 2005, Peter McCallion first told his mother he had established World Class
Developments. He informed her he was acting for an investor to purchase
lands in the Mississauga city centre on which a hotel would be built.608 He
told her he had submitted a purchase offer to omers.609 Based on the information provided by Mr. McCallion, the mayor believed her son was acting as
a real estate agent for wcd610 and that he was responsible for bringing Murray
Cook into the project.611 In 2006, the mayor learned from Mr. McCallion that
Leo Couprie had invested in wcd.612 At that point she believed Mr. Couprie
owned all the shares of wcd.613 The mayor testified she was not aware then
whether Peter was simply the listing agent for the land deal, the agent for the
condominiums to be developed by wcd, or both.614
On January 29, 2007, at Pier 4 Storehouse Restaurant in Toronto, the mayor
witnessed the signatures of Mr. McCallion and Mr. Couprie on the declaration
of trust and the loan agreement.615 In her testimony at the Inquiry, the mayor
insisted she did not read either document and that they were described to her
as agreements to protect her son’s and Mr. Couprie’s interests in the event that
something happened to them while they were travelling abroad.616 As I have
previously found, even a cursory glance at these documents would have made
it clear to the mayor that Mr. McCallion had a beneficial interest in wcd.*
It is of no moment whether it was only Murray Cook and Tony DeCicco,
rather than Mr. McCallion himself, who asked the mayor to intervene on behalf
of wcd to obtain concessions from the vendors,617 or that Mr. McCallion did
not personally ask the mayor to assist in settling the dispute between wcd and
the co-owners.618 The mayor well knew that, if the wcd deal were concluded,
Mr. McCallion would benefit, even if only as a real estate agent.619 I find that a
real conflict of interest existed as a result of Peter McCallion’s pecuniary interest in wcd, which was known to the mayor from the outset.
I find that Peter McCallion never fully disclosed his equity interest in wcd
to Mayor McCallion.620 However, in her testimony the mayor acknowledged
that she asked the vendors to give special consideration to wcd, a company
in which I have found she knew her son had a pecuniary interest of some
kind.621
The Mayor’s Approach to a Conflict of Interest
In Mayor McCallion’s view, she was required to declare a conflict only if
wcd’s development application ever went before a committee of council or
a council meeting. She also believed she should not discuss the matter with
city staff.622 In her testimony, the mayor explained that, in her opinion, the
mcia “clearly states that you should not get involved after you’ve declared a
conflict in trying to influence staff or councillors.”623 However, the mayor
did not believe that she was precluded from advocating for the wcd project
outside city council because, in doing so, she was simply fulfilling her role as
mayor.624 The project was for the good of the city.625 Accordingly, it caused
her no concern that her son was involved when she sought concessions from
the vendors.626
The mayor simply accepted that Peter McCallion had a pecuniary interest
in relation to wcd,627 whether he was wcd’s real estate agent or a principal.628
To her, the only difference lay in the content of her declaration of conflict at
council.629 Had she been aware of Mr. McCallion’s ownership interest in wcd,
the mayor would simply have specified that fact at city council as the reason for
her declared conflict.630
* Mayor McCallion agreed in her testimony that had she read the documents she would have understood
the extent of her son’s position in the company. Testimony of H. McCallion, Transcript, September 21, 2010,
p. 5121.
The mayor believed she needed to be concerned about the conflict of interest only to the extent that the wcd transaction came before city council.631
She did not believe she was at all restricted in her actions before the matter
was reviewed by council.632 However, she did concede there may have been
a perception that she was attempting to influence the vendors for the wrong
reasons.633
Commission counsel tested the mayor’s opinion by offering a hypothetical
situation in which the mayor herself held an equity interest, asking whether
the mayor could promote her own project.634 In the mayor’s view, as long as
she declared a conflict of interest at city council and did not influence the
municipal legislative process with respect to the development, nothing would
have prevented her from personally investing in a development project and
then using her status as an elected official to promote the development and
obtain concessions from other parties.635
Although the mayor testified that she would never put herself in such
a situation, I confess that I find her initial response revealing. I find Mayor
McCallion’s narrow view of her duties in the face of a conflict of interest
troubling.
The mayor’s position throughout the Inquiry was that her conduct in the
face of the conflict of interest posed by her son’s pecuniary interest in wcd
should be assessed only with regard to the provisions of the Municipal Conflict
of Interest Act.636 I find the mayor was mistaken in this belief. Specifically, I
find that whether the mayor’s conduct was appropriate in the face of the real
conflict of interest must be assessed with regard not only to the mcia, but also
to the common law of conflict of interest.637
13 Appropriate Action Given Conflict of Interest
The Mayor and Due Diligence
Should the mayor have conducted some due diligence concerning wcd? A mayor
or other elected official cannot be expected to know of every pecuniary interest
held by relatives that might create a conflict of interest.* That said, a mayor
* The City of Toronto Code of Conduct for Members of Council, p. 7, and the City of Mississauga Code of
Conduct, p. 9, draw attention to the fact that there may be circumstances in which a friend’s pecuniary interest may be relevant in determining a conflict.
has an obligation to make reasonable inquiries when there is reason to believe
a relative’s involvement may place the mayor in a real or apparent conflict of
interest.
Even accepting Mayor McCallion’s testimony that she did not know of Peter
McCallion’s beneficial interest after witnessing the declaration of trust and the
loan agreement (evidence which I do not accept), she was certainly put on notice
that her son might have an interest in wcd when, in the summer of 2009, she
read his sworn affidavit in which he stated that he was a principal of wcd.638
Sworn evidence must be treated seriously not only in our courts but also in
our other public institutions and in broader society. From that point forward,
a reasonable person would have expected the mayor to have conducted due
diligence to determine the exact nature of her son’s interest in wcd.
In her testimony, the mayor admitted it would not be appropriate for her
to get involved in a business transaction when she did not have a sufficient
understanding of the details of the transaction.639 The mayor was adamant
that her actions were motivated by a desire to advance the city’s interests.640
As the mayor said, she has “worked over” many developers through the years
without asking for personal favours.641 I take note of the mayor’s important
concession that it might have appeared she was seeking concessions on behalf
of her son’s company and not for the City of Mississauga.642 The appearance
that the mayor was acting in the interests of her relative is one of my real concerns in this Inquiry.
I have already found that the mayor knew her son had an interest in wcd.
Even if Mayor McCallion was misled by her son as to the degree of that interest, she knew he stood to benefit financially if the wcd transaction was successfully completed and she should have made further inquiries of her son to
learn the real nature of his interest before advocating on wcd’s behalf.
The Mayor and Council
Should the mayor have advised council of the steps that she was taking? The
development of a hotel and convention centre was a public goal of Mississauga.
In these circumstances I find that the mayor should have been more transparent
about her intervention on behalf of World Class Developments. City council
does not appear to have been aware of the mayor’s private interventions on
wcd’s behalf. The mayor did not believe that wcd’s negotiations for the
purchase of the land had anything to do with city council.643 I appreciate that
there was no formal mechanism in place for the mayor to advise city council
of her conflict of interest in the exercise of her executive decisions at the time.
Nevertheless, I find that the mayor should have identified and disclosed to
council the nature and extent of her son’s interest in wcd.
As discussed below, given her knowledge of her son’s interest, the mayor
should not have intervened as she did on wcd’s behalf. However, having
already intervened on wcd’s behalf, she should, at the very least, have disclosed
the extent of her intervention.
The Mayor and the Vendors
Would the vendors have entered into the agreement of purchase and sale without the
mayor’s intervention? There is considerable evidence that the mayor frequently
intervened with the vendors in relation to wcd.
It is unlikely that the co-owners would have considered selling the land to
wcd at the outset of these events had it not been for the mayor’s involvement.
The mayor intervened as early as October 2005 to encourage omers / Oxford
to meet with Mr. Cook regarding the sale of the city centre site to wcd.644
This was little more than a shell company whose principals were unknown to
the vendors. The mayor pressed for omers to consider wcd’s offer to purchase
the lands before the involvement of its first significant investor, Leo Couprie.
As a first step in its development project, wcd needed to secure the land “to be
able to go out and attract a hotel next to the Living Arts Centre.”645 The mayor
made first contact with omers and introduced Murray Cook on behalf of
wcd – before Mr. Cook had even contacted omers.
In the initial days, Mr. Cook kept the mayor apprised of the project.646 The
mayor acknowledged in her testimony that she “stepped up the pressure on
omers to sell” to wcd in 2006, when the momentum for the deal was lagging.647
Although the mayor testified that it was Mr. McCallion who recruited Mr.
DeCicco to wcd, contemporaneous correspondence between the vendors suggests that the mayor assured the vendors of Mr. DeCicco’s financial resources
and ability to follow through on the deal.648
I accept that the mayor’s interest in the wcd project was driven principally
by her desire for a four- or five-star hotel in Mississauga and not simply by a
desire to assist her son. However, the fact that the mayor may not have acted
primarily to further her son’s pecuniary interests does not end the conflict of
interest analysis, nor does it take into account questions surrounding apparent
conflicts of interest. The mayor should have been more wary of using her influence where her son stood to gain financially from the transaction.
The Mayor and World Class Developments
Should the mayor have declined to be involved in the wcd matter altogether (aside
from declaring a conflict of interest)? In this case, the mayor actively promoted
wcd’s interests at many different stages of the transaction when she knew that
her son had a pecuniary interest in wcd. In pushing for the interests of wcd,
and by extension Peter McCallion, the mayor acted in the face of a clear conflict of interest and used the influence of her office, albeit outside her legislative
role. It is no answer for the mayor to say this was done for the benefit of the
City of Mississauga when her son stood to make millions of dollars if the deal
were concluded.
I find that, once Mayor McCallion learned her son had a pecuniary interest in wcd (which she knew from the outset), she should have refused any
involvement in the project. Given the options available to her, the mayor’s only
actions in relation to wcd should have been:
1 to identify and disclose the nature and extent of her son’s interest in wcd;
2 to declare a conflict of interest before any consideration of the wcd matter
by city council, a committee of council, or a local board; and
3 to take no further role in promoting the wcd project.
14 David O’Brien, City Officials, and Conflict of Interest
David O’Brien’s Many Hats
The Terms of Reference require me to “inquire into whether any existing or former elected or administrative representatives of … the City of Mississauga had
a direct or indirect personal economic interest, or other conflict of interest.”649
David O’Brien was a former administrative representative of the city during
his involvement in events considered in Phase II of the Inquiry. I find that he
faced a conflict of interest while making inquiries on behalf of the mayor and
by negotiating with World Class Developments. Mr. O’Brien was a former
Mississauga city manager and a trustee of the mayor’s family trust.650 He was
also a former member of the board of Sheridan College as well as a current
member of the omers board of directors.651 Mr. O’Brien owed a fiduciary
duty to omers, and also owed fiduciary duties to the mayor’s children, including Peter McCallion. He had owed a fiduciary duty to the city in the past as its
most senior public servant.
Because of her relationship with Mr. O’Brien and the fact that he was on
the omers board, the mayor expected him to resolve any problems she brought
to his attention without him ever reporting back to her.652 When Mr. O’Brien
sought to resolve the outstanding litigation between wcd and the vendors at
the mayor’s instance,653 the city had an indemnity agreement with the vendors
so that it would not be responsible for the payment of any settlement funds to
wcd.654 On the one hand, omers wanted to settle the litigation for as little
money as possible. On the other hand, the mayor and the city wanted the litigation resolved and had no concern about the amount of money paid to wcd.655
The mayor testified that her desire to put an end to the litigation was motivated by her concern that the litigation might have an impact on the Sheridan
College deal.656 I find Mayor McCallion was undoubtedly also concerned
about the “political issues”657 that could arise from litigation involving a company in which her son was a principal. All these competing factors put Mr.
O’Brien in an impossible position.
Appropriate Action in the Circumstances
What should Mr. O’Brien have done in the face of this conflict? Quite simply,
he should have declined to assist the mayor with the wcd matter when she
first raised the issue with him in discussions on July 7, 2009, at the tacc
(Developments) golf tournament.658 It was not appropriate for Mr. O’Brien
to meet with Tony DeCicco and Peter McCallion659 after the mayor requested
that he inform himself of wcd’s concerns660 and the problems the city solicitor, Mary Ellen Bench, was facing in getting clear title to the land for the
Sheridan College deal.661 Further, Mr. O’Brien should not have participated in
the negotiation of the litigation settlement involving wcd.
City Staff and Conflict of Interest
Did city staff face a conflict of interest in dealing with World Class Developments?
Members of city staff had extensive involvement with wcd in determining the
appropriate development charges and site plan application fees. In all of this,
staff exercised a fair degree of discretion. City staff did not act in the presence
of a conflict of interest in any of these matters. City staff did not stand to
benefit financially and provided no preferential treatment to wcd. The decision qualifying wcd’s site plan application for the transition provisions of the
development charges by-law and the decision that work should continue on
the wcd project despite its non-payment of the site plan application fee were
both reached independently for good reasons articulated in evidence before
me. Staff made these decisions free from the mayor’s influence. Similarly, the
lifting of the H designation occurred within the legislative arena, where the
mayor quite properly had refused to get involved.
The conflict of interest faced by the mayor cannot be imputed to city staff.
City staff were unaware of the mayor’s advocacy on behalf of wcd with the
co-owners. Indeed, there was no adequate mechanism in place to alert city staff
that a councillor faced a conflict of interest.
Appropriate Action for City Officials
What should city officials have done in the face of the mayor’s conflict of interest?
The city should establish a standard procedure to follow when a member
of council has a conflict of interest. In the circumstances being examined in
this Inquiry, however, I have found that the members of city staff were not
influenced by the mayor or by Peter McCallion in their conduct. Once city
officials were aware of the mayor’s conflict of interest, whether as a result of
the mayor’s declaration of the conflict at council or otherwise, they should
have taken steps to insulate the mayor from any involvement in the administrative decision-making process relating to wcd. Ms. Bench’s notes of her
call with Mr. O’Brien on September 5, 2009 reflect that she in fact took steps
to achieve this result.662
Impact of the Conflicts of Interest
Impact on the Vendors
I find that Mayor McCallion’s involvement in the wcd project created risk
and uncertainty for the vendors which ultimately led to unnecessary costs.
But for the mayor’s involvement, the agreement of purchase and sale between
the vendors and wcd likely would not have been executed, and the numerous
extensions of time requirements in the aps would not have been provided. I
find it was the mayor’s continued involvement that led to the settlement of the
litigation. Without the mayor’s intervention, on a balance of probabilities, it is
unlikely Mr. Nobrega would have become involved, and, ultimately, the settlement payment would not have been made to wcd.
Going forward, large institutional investors like the co-owners may well
approach development projects promoted by municipalities more cautiously.
They likely will cause increased transaction costs through greater due diligence. Should this outcome occur it would be, on balance, positive.
Necessity for the Inquiry
Given the limited options available to address serious concerns about conflicts
of interest at the municipal level, calling this Inquiry was the only effective
option to examine the facts, short of an individual Mississauga elector bringing an application under the mcia. The cost of this Inquiry to residents of
Mississauga is significant and should not be discounted.
Recommendations for Phase II
An effective municipal accountability regime requires a culture of accountability that pervades municipal government. That culture of accountability cannot
simply be imposed top-down through legislation; it requires strong leadership
from various municipal stakeholders. A balance must be struck that provides
consistency, predictability, coherence, fairness, and transparency, as well as
sufficient flexibility.
In this section I consider the existing framework of accountability for conflict of interest in Mississauga and Ontario and make recommendations regarding amendments to the Municipal Conflict of Interest Act and the Mississauga
Code of Conduct. I also make recommendations in regard to strengthening
the office of the integrity commissioner. Finally, I suggest other measures that
may prevent circumstances such as those arising in this Inquiry. I suggest a
practice of providing comfort letters to aid third parties in negotiating with
the city, the introduction of a lobbyist code of conduct, and amendments to the
Municipal Councillor’s Guide.
Existing Framework of Accountability
The Municipal Act, 2001
The current statutory framework under Part V.1 of the Municipal Act,
2001, so 2001, c 25, allows municipalities to create an accountability regime
responsive to the needs of the community. To meet their needs, municipalities may choose from a range of options available in Part V.1 of the Municipal
Act, 2001.
At one end of the spectrum, municipalities may implement an extensive
accountability regime including a municipal code of conduct, an integrity commissioner, a lobbyist registry, an ombudsman, an auditor general, and an open
meetings commissioner. At the other end of the spectrum, municipalities may
prefer a less complex and less expensive approach to accountability and transparency that does not include any of these options. Although the flexibility
permitted under Part V.1 of the Municipal Act, 2001, recognizes the diversity of
needs in municipalities across the province, it has the potential of establishing
highly divergent standards of accountability and transparency.
The Municipal Conflict of Interest Act
The activities of those in public office should be animated by public purposes.
The municipal accountability regime should take into account all the different hats that can be worn by municipal politicians. The Municipal Conflict of
Interest Act is an integral part of that regime. It is aimed at fostering accountability, transparency, and public confidence in Ontario’s elected municipal officials. However, the municipal accountability regime, which includes the mcia,
has not kept pace with the evolution of the Municipal Act, 2001.663 The mcia,
as it currently exists, is inadequate regarding the kinds of mischief it addresses
and the range of available sanctions. The recommended amendments to the
mcia set out below are aimed at advancing the public interest and the democratic foundations of municipal government.
The mcia has a number of shortcomings. First, it is enforced by a formal application to the Ontario Superior Court of Justice, which requires a
complaint by an “elector.” The costs of such an application can be prohibitive
for a citizen of ordinary means. Second, the sanctions available under the
mcia are severe – loss of office, disqualification from standing for office, and
restitution where the member of council has profited financially from the
conflict. Broadly speaking, the quasi-penal nature of the mcia is outdated
and out of step with the modern municipal accountability regime.664 The
mcia lacks more nuanced remedies.
Third, the mcia is limited in its reach to deliberative and legislative work
where a direct or indirect pecuniary interest exists. Section 5 of the mcia
requires members of council to disclose any direct or indirect pecuniary interest and its general nature. Their obligations are to recuse themselves from any
discussion of or vote in respect of the matter, and to refrain from any attempt
to influence the vote on the matter or any aspect of it.665 However, the mcia
is silent with respect to the executive and administrative functions of members
of council, which consume far more of the time of mayors and members of
executive committees.
As the mayor acknowledged in her testimony, the mcia is a “blunt instrument” that can be used for “all kinds of motives.”666 However, it can also be
an important tool that prevents municipal politicians from using their public
office inappropriately to promote their private economic interests and those of
their close relatives. The expense required for an elector to bring an application in court pursuant to the mcia is unfortunate, but court procedures also
allow for greater procedural safeguards for the member of municipal council.
Judges of the Superior Court of Justice should continue to have responsibility
for removing municipal politicians from office under the mcia.667
Recommended amendments to the mcia are provided below.
Municipal Codes of Conduct
Municipal codes of conduct can help to regulate the conflicts of interest of
members of municipal council in a more targeted and flexible manner than can
provincial statutes such as the mcia. This specificity and flexibility are particularly important given the evolution of municipalities such as Mississauga.
Clear overarching principles should be combined with as many targeted rules
as may be appropriate in the municipality.
The statutory authority for municipalities to adopt codes of conduct for
members of council is found in section 223.2(1) of the Municipal Act, 2001. That
section states that the municipality has the authority to “establish codes of conduct for members of the council of the municipality and of local boards of the
municipality.” Part V.1 of the Municipal Act, 2001, does not explicitly address
the relationship between a municipality’s code of conduct and the provisions
of the mcia. However, the mcia does not occupy the entire legislative field of
conflict of interest, or even that concerning pecuniary interests. Thus, there
is no legal impediment to the inclusion of conflict of interest provisions in a
municipal code of conduct.668
Municipal codes of conduct can allow for enforcement outside the court
system and without the associated costs.669 The sanctions available under
municipal codes of conduct can also be more varied and less severe than under
the mcia.670
Ontario municipalities can adopt codes of conduct covering the same pecuniary conflicts of interest of members of council and local boards as the mcia,
while allowing for more flexible enforcement mechanisms and sanctions.
Municipal codes of conduct can go significantly further than the mcia and be
tailored to the types of relationships and circumstances that reflect the needs
of the municipality.
I find that the Court of Appeal for Ontario’s recent statement at paragraph
14 of Ruffolo v Jackson, [2010] oj No. 2840, 267 oac 381 (ca) – that “[t]he
mcia provides a complete code for dealing with the possibility of conflict of
interest by municipal politicians, including providing full procedural rights”
– should be read as applying only to the remedies available under the mcia.
The Court of Appeal for Ontario did not intend to make a blanket statement
precluding municipal codes of conduct from considering conflicts of interest
as a subject area.671
Regardless of the existence of municipal codes of conduct, however, the
mcia’s complaint process remains, and an integrity commissioner should not
take jurisdiction in a matter already before the court under the mcia.672 An
application to court should not proceed concurrently with an investigation by
the integrity commissioner.
The Mississauga Code of Conduct
On September 20, 2010, Mississauga adopted a draft Code of Conduct (the
Mississauga Code)673 that applies to the mayor and all members of council and
which is aimed at improving the accountability of elected municipal officials.
The Mississauga Code’s effective date is December 1, 2010, and it was reviewed
by council on April 6, 2011, at a General Committee meeting. Ms. Bench, the
city solicitor, advised at the meeting that a further review of the Mississauga
Code would take place after the release of this Report.674
On its face, the Mississauga Code recognizes conflicts of interest which
extend beyond pecuniary interests and the formal legislative arena. The preamble of the Mississauga Code provides:
And whereas ethics and integrity are at the core of public confidence in government and in the political process, and elected officials are expected to perform
their duties in office and arrange their private affairs in a manner that promotes
public confidence, avoids the improper use of influence of their office and conflicts of interests, both apparent and real and the need to uphold both the letter and the spirit of the law including policies adopted by Council [emphasis
added].
Rule No. 1 of the Mississauga Code provides several more detailed prohibitions. Notably, Rule No. 1(b) of the Mississauga Code prohibits both apparent
and real conflicts of interest:
Members of Council should be committed to performing their functions with
integrity and to avoiding the improper use of the influence of their office, and
conflicts of interest, both apparent and real. Members of Council shall not
extend in the discharge of their official duties, preferential treatment to Family
Members, organizations or groups in which they or their Family Members have
a direct or indirect pecuniary interest [emphasis added].
This ban on apparent conflicts of interest with respect to preferential treatment given to family members is commendable and highly relevant to the
issues in this Inquiry. The clear prohibition of both apparent and real conflicts
of interest provides an important mechanism for increasing accountability and
enhancing public perception and confidence in elected officials.
The Mississauga Code clearly applies to members of city council in their
day-to-day official activities, and it explicitly prohibits preferential treatment
being given to family members (Rule No. 1(b)), the improper use of influence (Rule No. 7), and having an interest in a contract with the city (Rule
No. 1(d)).675
Rule No. 1 provides a general prohibition on conflicts of interest, followed
by specific examples. I adopt the interpretation of Professor Mullan that
the inclusion of a general prohibition on conflicts of interest as a prelude to the
specific examples is not to be read as limited by the more specific provisions
that follow. In other words, if the common law would regard certain activities,
involvements or relationships as giving rise to conflict of interest, the general
provision would cover that, even if the later provisions in the Code do not specifically refer to such a conflict.676
As discussed below, I also adopt Professor Mullan’s recommendation that the
Mississauga Code be amended to clarify this point. He writes:
Indeed, there is one reason in particular why it is important to establish that the
general provision with respect to conflict of interest is not limited by the specific
instances that follow in Rule 1. They do not cover the entire spectrum of conduct
and involvements that amounts to problematic conflicts of interest. Thus, for
example, the provision on preferential treatment in para. (b) is restricted to family members or organizations or groups in which family members have a direct
or indirect pecuniary interest. This is potentially under-inclusive in at least two
ways. Giving preferential treatment to close personal friends or business partners may well be equally indefensible, as may giving preferential treatment to not
for profit organizations to which family members, friends and business partners
have a substantial commitment.677
The Mississauga Code covers a wider array of circumstances than the mcia
or the City of Toronto’s Code of Conduct for Members of Council.678 In my view,
the Mississauga Code is a welcome development that helps to clarify matters through examples of prohibited conduct for municipally elected officials.
There are, however, aspects of the Mississauga Code that could be more clearly
drafted.
Specific recommendations for the improvement of the Mississauga Code
are provided in Recommendations 15, 16, and 17.
Integrity Commissioner
The integrity commissioner falls into a specialty ombudsman system as
envisaged in the Municipal Act, 2001.679 The main function of the office
of the integrity commissioner is to bring transparency and consistency to
the municipal accountability regime.680 A municipal integrity commis-
sioner is responsible for receiving, investigating, and reporting to council
on formal and informal complaints about members of council, and for
determining whether there has been a violation of a municipality’s code of
conduct.681 An integrity commissioner can also advise members of council and local boards to help maintain a high standard of ethical behaviour in municipal government and even help teach both the public and
municipal officials about the accountability regime.682 An integrity commissioner may also be required to provide a regular report to city council
or to report on discrete issues as they arise and provide a buffer between
third parties and municipal officials, so that complaints do not need to
be made directly to elected officials. Overall, an integrity commissioner
can provide important oversight of and direction to municipal officials,
particularly when a well-drafted municipal code of conduct is in force.
The statutory authority for municipalities to appoint an integrity commissioner is found in section 223.3(1) of the Municipal Act, 2001. That section
provides that the integrity commissioner is
responsible for performing in an independent manner the functions assigned by
the municipality with respect to, (a) the application of the code of conduct for
members of council and the code of conduct for members of local boards or of
either of them; (b) the application of any procedures, rules and policies of the
municipality and local boards governing the ethical behaviour of members of
council and of local boards or of either of them.
Section 223.4 of the Municipal Act, 2001, also allows the integrity commissioner to convert an investigation into an inquiry, which is an important
middle ground between a regular investigation by the integrity commissioner
and a full judicial inquiry. By converting an investigation into an inquiry, the
integrity commissioner can exercise powers under the Public Inquiries Act to
obtain information.
If an inquiry is conducted and the integrity commissioner finds that a
member of council has contravened the municipal code of conduct, then council may issue a reprimand or suspend the salary of the member for up to 90
days, although the availability of a wider range of sanctions remains unclear.
However, there is no clear source of funding for such an inquiry, so funding
likely would have to be voted on by council or otherwise provided.683 It is
unfortunate that the Ontario legislature did not identify a source of funding
for inquiries conducted pursuant to section 223.4 of the Municipal Act, 2001.
Section 223.5 of the Municipal Act, 2001, provides a statutory duty of confidentiality for the integrity commissioner. Notably, subsection 223.5(3) also
provides a statutory exemption from the application of the Municipal Freedom
of Information and Protection of Privacy Act, rso 1990, c M.56.
The integrity commissioner’s reporting function is codified in section 223.6
of the Municipal Act, 2001, which allows the integrity commissioner to summarize advice provided, but prevents the disclosure of confidential information
that could identify the person concerned. Since it would frustrate the purpose
of integrity commissioners if municipal councils could completely disregard
the reports they table, subsection 223.6(3) of the Municipal Act, 2001, requires
all reports tabled by an integrity commissioner to be made public.684
Section 223.8 of the Municipal Act, 2001, provides that where, during the
course of an investigation, the integrity commissioner determines there are
grounds for believing a contravention of another Act has occurred, the integrity commissioner must “immediately refer the matter to the appropriate
authorities and suspend the inquiry until any resulting police investigation and
charges have been finally disposed of.” The suspension of the integrity commissioner’s investigation must be reported to municipal council. The effect of this
provision should be to prevent an integrity commissioner from dealing with
a conflict of interest complaint that is the subject of court proceedings under
the mcia. However, the lack of an “appropriate authority” causes confusion;
section 223.8 does not create an immediate statutory obligation to suspend
proceedings and does not otherwise regulate the course of any integrity commissioner investigation.685
In 2004, the City of Toronto became the first municipality in Canada to
create the office of integrity commissioner.686 The recent appointment of an
interim integrity commissioner in Mississauga was a useful development, and
one that gives practical effect to the rules contained in the Mississauga Code.
Lobbyist Registry
As with all governance regimes, the dissemination of information plays a critical role in municipalities. The Bellamy Report describes “lobbying as a potentially helpful practice that should be carefully controlled.”687 Municipalities
have the power to establish and maintain a lobbyist registry pursuant to sec-
tion 223.9 of the Municipal Act, 2001. Section 223.11 of the Municipal Act, 2001,
also allows a municipality to appoint a registrar for the lobbyist registry. To
date, no municipality in Ontario has created a lobbyist registry under section
223.9 of the Municipal Act, 2001.*
Given the size of the City of Mississauga and the existence of other measures that can be taken to improve accountability and transparency, the city
should not establish a lobbyist registry at this time. In my opinion, it would be
premature for the city to create a lobbyist registry. My concern is that it would
be a disproportionate response to the issues of accountability and transparency in the circumstances, particularly given the significant costs involved. The
financial cost to the City of Toronto for its lobbyist registry has been significant, with the 2009 budget for the office being just under $1 million.688 The
effectiveness of the City of Toronto’s lobbyist registry is still unclear.
My specific recommendations arising out of Phase II of the Inquiry follow
below.
Recommended Amendments to the Municipal Act, 2001
The wording of section 223.3 of the Municipal Act, 2001, appears to place responsibility for maintaining his or her own impartiality entirely on the integrity
commissioner. This assignment of responsibility is wholly unsatisfactory.689
recommendation 5
I recommend that additional statutory safeguards be added to the office of the
integrity commissioner in the Municipal Act, 2001, including
(a) a minimum term of appointment to provide security of tenure; and
(b) a requirement that municipalities indemnify the integrity commissioner.
v
* The City of Toronto established a lobbyist registry; however, it was done pursuant to a statutory requirement found in section 165 of the City of Toronto Act, so 2006, c 11 Sched. A.
Section 223.8 of the Municipal Act, 2001, should also be amended to prevent
conflict between an investigation by an integrity commissioner and a court.
recommendation 6
I recommend that section 223.8 of the Municipal Act, 2001, be amended to
require explicitly that an integrity commissioner suspend his or her investigation
or proceedings relating to a matter which is the subject of proceedings before
a court of competent jurisdiction. This recommendation mirrors my advice
relating to the content of the Mississauga Code of Conduct.
v
Recommended Amendments to the Municipal Conflict
of Interest Act
The Municipal Conflict of Interest Act (mcia) should be amended to resemble
the Members’ Integrity Act, 1994.690 The amended Act should not displace the
ability of municipalities to create codes of conduct that are flexible and tailored
to their individual needs. Further, it may also be useful to integrate the mcia
with the Municipal Elections Act, 1996.691 The following are my recommendations as to how the mcia could be improved through amendment.
Create a Preamble
Adding a preamble to the Municipal Conflict of Interest Act setting out broad
overarching principles would assist members of council to understand their
role in promoting public confidence in municipal government.
recommendation 7
I recommend that a preamble be added to the Municipal Conflict of Interest Act
setting out broad overarching principles. It would be appropriate to include a
preamble similar to the one found in the Members’ Integrity Act, 1994, which
provides as follows:
It is desirable to provide greater certainty in the reconciliation of the private
interests and public duties of members of the Legislative Assembly, recognizing
the following principles:
1.The Assembly as a whole can represent the people of Ontario most effectively
if its members have experience and knowledge in relation to many aspects of
life in Ontario and if they can continue to be active in their own communities, whether in business, in the practice of a profession or otherwise.
2.Members’ duty to represent their constituents includes broadly representing their constituents’ interests in the Assembly and to the Government of
Ontario.
3.Members are expected to perform their duties of office and arrange their
private affairs in a manner that promotes public confidence in the integrity
of each member, maintains the Assembly’s dignity and justifies the respect in
which society holds the Assembly and its members.
4.Members are expected to act with integrity and impartiality that will bear
the closest scrutiny.
v
Clarify Scope of Act
Remoteness
I agree with Mayor McCallion that the Municipal Conflict of Interest Act should
not go so far as to prevent the relatives of municipal politicians from being
involved in business developments or providing municipal services within the
same municipality.692 That restriction would be a significant disincentive for
individuals to run for municipal office, and it could hinder valuable economic
activity. Amendments to the mcia should not effectively bar the relatives of
municipal politicians from living in, working with, or conducting business in
the same municipality. I hasten to add that I do not regard any of my proposed
recommendations or findings as likely to bring about that result.
Subsection 4(k) of the mcia already recognizes that the pecuniary interests covered under the Act are subject to a remoteness limitation. It provides
that section 5 of the mcia does not apply to a pecuniary interest “which is so
remote or insignificant in its nature that it cannot reasonably be regarded as
likely to influence the member.”
The “de minimis” provision was tested in Lastman v Ontario, [2000] oj
No. 269, 47 or (3d) 177 (scj) [Lastman], where, as a result of a city council
decision in which Toronto Mayor Mel Lastman participated, legal proceedings were initiated against the Toronto Police Association in relation to the
association’s True Blue Campaign.* The Toronto Police Association retained
Goodman Philips and Vineberg llp, the law firm in which the mayor’s son
Dale Lastman was a partner. By virtue of section 5 of the mcia, the mayor had
a deemed pecuniary interest as a result of this fact.
Winkler J (as he then was) applied the test set out by MacKenzie J in
Whiteley v Schurr,693 with respect to subsection 4(k) of the mcia:
Would a reasonable elector, being apprised of all the circumstances, be more
likely than not to regard the interest of the councillor as likely to influence that
councillor’s action and decision on the question? In answering the question set
out in such test, such elector might consider whether there was any present or
prospective financial benefit or detriment financial or otherwise, that could result
depending on the manner in which the member disposed of the subject matter
694
before him or her.
Winkler J concluded that the presumptive pecuniary interest deemed to exist
in section 3 of the mcia was “so remote or insignificant in its nature that it cannot reasonably be regarded as likely to [have] influence[d] Mel Lastman.”695
Thus, the mcia explicitly recognizes that a conflict will not be found where
the benefit to the member’s relative is too remote. For this reason, there is no
rational concern about the ability of close relatives of municipal politicians to
earn a living in the same municipality.
* Mayor Lastman was also a member of the Toronto Police Services Board and participated in the deliberations that resulted in instructions to commence legal proceedings against the association.
Knowledge of the Elected Officials
In her testimony, the mayor suggested it was unfair for the Municipal Conflict
of Interest Act to apply in situations where the elected official has no knowledge
of the situation underlying the conflict of interest.696 However, pursuant to
section 3 of the mcia, “the pecuniary interest, direct or indirect, of a parent
or the spouse or any child of the member shall, if known to the member, be
deemed to be also the pecuniary interest of the member” [emphasis added].
Section 3 of the mcia already provides a clear defence for elected municipal officials where they do not have knowledge of the underlying conflict. The
knowledge aspect of section 3 of the mcia provides fairness, given the severity
of the sanctions required under the mcia, and should remain a fundamental
aspect of the mcia unless the provisions regarding sanctions are significantly
amended.
Clarify Who Is Captured by the mcia
Section 5 of the Municipal Conflict of Interest Act requires a member present
at a council or board meeting where a matter in which the member has any
pecuniary interest is considered, to disclose any direct or indirect pecuniary
interest and its general nature. Accordingly, the member must recuse himself
or herself from any discussion of or vote on the matter and refrain from any
attempt to influence the vote on the matter or any aspect of it.
The current wording of the mcia may be interpreted to mean that only
members and some of their relatives are caught. This interpretation is undesirable because it results in arbitrary line-drawing exercises that do not address
the mischief targeted by the mcia.
recommendation 8
I recommend that a statement be added within the Municipal Conflict of
Interest Act (mcia) to the effect that the interests of spouses, parents, children,
siblings, and other relatives are deemed also to be the interests of the member.
This addition would strengthen the mcia.
v
Beyond Pecuniary Interests
Situations may arise where factors other than a financial interest inappropriately influence an elected official’s participation in a matter.
Much of the problem with respect to conflicts of interest is the appearance
of impropriety. However, the apparent conflict of interest standard would
go too far in the context of the mcia given the serious sanctions that can be
imposed by a judge under that statute. Fairness requires that the member have
knowledge of the interest for the mcia to be engaged. In an ideal conflict of
interest regime, apparent conflicts of interest would be caught and dealt with
under other, more flexible processes (such as members’ codes of conduct or
the functioning of an integrity commissioner). If lesser sanctions, as discussed
below, are introduced into the mcia, adoption of an apparent standard (which
would engage some of the lesser sanctions) should be reconsidered.
recommendation 9
I recommend that the Municipal Conflict of Interest Act (mcia) be extended to
include private interests more broadly. The mcia currently applies only to a
“pecuniary interest.”
(a)Depending on the scope of amendments to the mcia, the wording “pecuniary interest” should be replaced with “private interest,” although such
a change would likely require an explicit materiality threshold, so that
insignificant private interests are not caught.
(b)This extension of what constitutes a conflict of interest should be accomplished through the inclusion of a provision similar to section 5 of the
Members’ Integrity Act, 1994. Section 5 of the Members’ Integrity Act, 1994,
provides that:
This Act does not prohibit the activities in which members of the Assembly
normally engage on behalf of constituents in accordance with Ontario parliamentary convention.
v
Clarify Types of Meetings Captured by the mcia
The mcia should apply to matters beyond the deliberative and legislative
functions of municipal council. Subsection 5(1) of the mcia, which requires a
member of council with a pecuniary interest in a matter raised at a meeting or
for a vote to declare a conflict, should be clarified and amended in this regard.
Clear guidelines are essential in deciding what meetings are caught by the
sweep of the mcia. Also, the mcia should be read as requiring the member
not only to declare a conflict of interest, but to specify the nature and extent
of the interest.
recommendation 10
Although some courts have already found that section 5 of the Municipal
Conflict of Interest Act applies to committee meetings,* the statute should be
amended so that it clearly applies to all meetings attended by members of
council in their official capacities. These would include meetings to promote
developments said to be in the city’s interest.
v
The Need for Lesser Sanctions
Remedies occupying a middle ground between disqualification and a formal
reprimand are needed in the mcia.697 To balance the recommended extension
of conflicts covered by the mcia and municipal codes of conduct, a broader
range of sanctions should be made available.
As it currently stands, the sanctions available under the mcia are draconian. If a judge determines that a member of council has not followed the
proper protocol with respect to a conflict of interest, subsection 10(1) of the
mcia requires that the judge (a) shall declare the seat of the member of council vacant; (b) may disqualify the member from municipal office for several
years; and (c) may require restitution if there has been personal financial gain.
Subsection 10(3) prevents the judge from imposing the less severe penalty
of suspension. The usefulness of the statutory restitutionary remedies available under the mcia should also be considered.698 Civil actions cover most
situations where municipal politicians receive improper financial benefits. The
* Jaffary v Greaves, [2008] oj No 2300 (scj); Sims v Fratesi, [1996] oj No 4488 (Gen Div).
mcia should not be construed as precluding civil actions for restitutionary
recovery.
recommendation 11
I recommend that the existing sanctions in the Municipal Conflict of Interest
Act (mcia) remain in place. However, none should be mandatory, and lesser
sanctions should be made available. More specifically, I recommend that:
(a) Subsection 10(3) be repealed, and the following lesser sanctions be made
available where a judge finds contravention of the mcia:
• suspension of the member for a period of up to 120 days;
• a form of probation of the member, with oversight by the integrity commissioner or auditor;
• removal from membership of a committee of council;
• removal as chair of a committee of council;
• a reprimand publicly administered by the judge; and
• a formal apology by the member.
(b)Section 13 of the mcia dealing with remedies be amended to provide only
for declaring a seat vacant.
v
I observe that should the available sanctions under the Municipal Conflict of
Interest Act be broadened, section 15, which provides that the mcia prevails
over other conflicting statutory provisions, might be repealed.
Standing to Pursue Claims
It would be helpful to simplify the procedure for pursuing a claim under the
mcia. However, it is not advisable to lessen any of the procedural protections
that currently exist under the mcia, such as a hearing in front of an impartial
and independent judge.699
recommendation 12
I recommend that electors continue to be able to bring applications under the
Municipal Conflict of Interest Act (mcia), and that individuals or organizations
demonstrably acting in the public interest be able to bring such applications.
The mischief addressed by the mcia is of such gravity that section 9 should be
amended to allow the Attorney General to bring applications as well.
v
The mcia and the Integrity Commissioner
The powers of integrity commissioners are already recognized in the Municipal
Act, 2001, but not in the Municipal Conflict of Interest Act.
recommendation 13
I recommend that the Municipal Conflict of Interest Act (mcia) be amended to
recognize the role of the integrity commissioner to investigate and to report on
matters covered by the mcia.
v
Coordination with Municipal Codes of Conduct
It is quite apparent to me that careful consideration must be given to how the
Municipal Conflict of Interest Act and any given municipal code of conduct are
going to mesh. I believe it necessary that the mcia be given clear primacy but
that the limits of the Act be specified.
recommendation 14
I recommend that the Municipal Conflict of Interest Act be amended to include
a provision stating explicitly that nothing in the Act prevents a member of
council from making submissions regarding a finding in a report by the integrity commissioner or regarding the imposition of a penalty under a municipal
code of conduct. It is important that members of council be afforded procedural fairness under municipal codes of conduct.
v
The Mississauga Code of Conduct
The circumstances at issue in this Inquiry highlight some of the ways in which
the draft Mississauga Code of Conduct could be strengthened. As it currently
exists, the Mississauga Code is useful for many reasons, not the least of which
is that the vast majority of electors cannot afford to bring an application pursuant to the mcia. The Mississauga Code of Conduct also provides a relatively
flexible common framework for all members of council to follow. They can
turn to the Mississauga Code of Conduct and to the integrity commissioner
for guidance before placing themselves into situations where a real or apparent
conflict of interest arises. These recommendations in regard to the Mississauga
Code of Conduct may have application as a model for other municipalities.
Preamble
The focus of the Mississauga Code should be on the spirit, principles, and goals
underlying its creation, and it is not intended to be strictly interpreted.700
recommendation 15
I recommend that the preamble to the Mississauga Code be revised to clearly
identify the values which underlie it and the mischief the scheme is set up to
address. It may be counterproductive for the city to adopt a strict rules-based
approach to the Code. Instead, the Mississauga Code should set out strong value
statements, followed by a small number of general rules and more detailed commentary about those rules.
v
Changes to the Conflict Rules
The inclusion of the apparent conflict standard in the Mississauga Code is
laudable. I am in favour of including a definition of an “apparent conflict of
interest” and recommend below, with necessary minor revisions, the inclusion
of the following definition found in subsection 2(2) of the British Columbia
Members’ Conflict of Interest Act, rsbc 1996, c 287:701
For the purposes of this Act, a member has an apparent conflict of interest if
there is a reasonable perception, which a reasonably well informed person could
properly have, that the member’s ability to exercise an official power or perform
an official duty or function must have been affected by his or her private interest.
For clarity, under the heading “Framework and Interpretation,” the
Mississauga Code should state that Rule No. 1 is to be treated as a stand-alone
rule under which complaints can be made.702 At present, Rule No. 1(b) of the
draft code states that
integrity and to avoiding the improper use of the influence of their office, and
conflicts of interest, both apparent and real. Members of Council shall not
extend in the discharge of their official duties, preferential treatment to Family
Members, organizations or groups in which they or their Family Members have
a direct or indirect pecuniary interest.
The wording of Rule No. 1(b) should be strengthened. As it stands, the prohibition against real and apparent conflicts of interest in Rule No. 1(b) might be
construed narrowly as having application only with respect to preferential treatment given to family members in relation to pecuniary interests. City council
should amend the Mississauga Code to clarify the status of the ban against both
real and apparent conflicts of interest in a separate stand-alone prohibition and
should also extend the ban beyond pecuniary interests and family members.703
recommendation 16
I recommend that the Mississauga Code be amended by replacing Rule
No. 1(b) with the two following stand-alone rules:
integrity. Members shall avoid the improper use of the influence of their office
and shall avoid conflicts of interest, both apparent and real [emphasis added].
Members of Council shall not extend in the discharge of their official duties
preferential treatment to any individual or organization if a reasonably wellinformed person would conclude that the preferential treatment was advancing a private interest [emphasis added].
v
recommendation 17
I recommend that Mississauga City Council include a commentary following
these two stand-alone rules:
For greater clarity, this Code does not prohibit members of Council from properly using their influence on behalf of constituents.
I adopt the recommendation of Professor David Mullan that, instead
of taking the form of stand-alone rules, Rules No. 1(d), (e), (f ), and (g)
of the Mississauga Code should form a commentary following the new
Rule No. 1(b). That way, they will clearly fall under the statement in the
“Framework and Interpretation” section of the Mississauga Code, which
provides that “[c]ommentary and examples used in this Code of Conduct
are illustrative and not exhaustive.”
v
Integrity Commissioner
The Mississauga Code currently provides in the commentary to Rule No. 1(b)
that
Members of Council are governed by the Municipal Conflict of Interest Act and
the provisions of that statute take precedence over any authority given to the
Integrity Commissioner to receive or investigate complaints regarding alleged
contraventions under the Municipal Conflict of Interest Act.
recommendation 18
I recommend that the Mississauga Code clarify further that the Municipal
Conflict of Interest Act (mcia) takes precedence over the Mississauga Code
only when an actual complaint is made under the mcia involving the very
same matter.
v
recommendation 19
I recommend that the Mississauga Code contain a provision requiring the
integrity commissioner to suspend his or her own investigation or proceedings when a proceeding under the Municipal Conflict of Interest Act (mcia) has
been commenced with respect to the same matter, until the process under the
mcia has been completed.
v
Improper Use of Influence, Gifts, and Benefits
Rule No. 7 of the Mississauga Code is clear and concise. This prohibition on
improper use of influence is particularly important because it goes beyond the
existence of a conflict of interest and it captures what is done in the face of the
conflict. It specifically targets improper actions. However, Rule No. 2 of the
Mississauga Code, which addresses gifts and benefits, is less clear.
recommendation 20
Rule No. 2 of the Mississauga Code, which addresses the permissibility of a
councillor accepting gifts and benefits, contains a fairly detailed list of exceptions. I recommend that, instead of setting out such a list, an overarching
principle be articulated in the Mississauga Code: No inappropriate gifts are
allowed “that would to a reasonable member of the public appear to be in gratitude for influence, to induce influence, or otherwise to go beyond the necessary
and appropriate public functions involved.” The simplicity of such a rule is
attractive, and it could be supplemented with a detailed commentary, as well as
future “cases” decided by the integrity commissioner.
v
recommendation 21
I recommend that the commentary to Rule No. 7 of the Mississauga Code
be expanded to say that members of council cannot make submissions to a
municipal adjudicative body, such as a licensing tribunal, on behalf of a member of their ward.*
v
* Lorne Sossin aptly pointed out that the current wording of the rule is not clear on this point; Transcript of
Expert Panel, December 15, 2010, pp. 5711–12.
Lobbyists
The Mississauga Code, should clearly address lobbying. Although I do not
recommend that Mississauga create a lobbyist registry because of the expense
involved,* the Mississauga Code could be amended to provide guidelines for
how municipal politicians should deal with lobbyists, particularly in the context of development issues. I note that Surrey, British Columbia, has adopted
such an approach.704 This approach would provide a relatively low-cost measure to address concerns about lobbying and commercial development in the
municipality.
recommendation 22
I recommend that the Mississauga Code be amended to include clear guidelines setting out how municipal politicians may deal with lobbyists.
v
Procedural Fairness
As noted in Recommendation 14, the mcia should include a provision which
explicitly states that nothing in the mcia prevents a member of council from
making submissions regarding a finding in a report of the integrity commissioner or regarding the imposition of a penalty under a municipal code of conduct. Members of council should be afforded procedural fairness, particularly
where they are concerned that a report critical of them may be adopted or that a
penalty may be imposed as a matter of political expediency. Specifically, a member of a municipal council should have the opportunity to respond at council to
a damning report or to a recommendation that a penalty be imposed under a
municipal code of conduct.
* D. Mullan, Transcript of Expert Panel, December 16, 2010, p. 5950. The associated compliance costs for the
municipality and the lobbyists should be limited.
recommendation 23
To improve transparency and procedural fairness, I recommend:
(a)that the procedure for making a complaint be set out in the Mississauga
Code. In the interest of independence, complaints made under the
Mississauga Code should be submitted directly to the integrity commissioner instead of through the civic administration; and
(b)that the current Rule No. 18 of the Mississauga Code be revised to recognize explicitly the need to hear from a member before a critical report is
adopted or a penalty is imposed by city council.
v
Sanctions
Municipal codes of conduct primarily enhance accountability through greater
transparency. The inclusion of a range of sanctions in the Mississauga Code
may be appropriate so long as they are used responsibly and only in appropriate cases.705 However, in light of concerns about the adequacy of procedural fairness safeguards and the use of sanctions for an improper purpose,
it may be preferable to remove severe sanctions such as suspension from the
Mississauga Code altogether, and incorporate into the Mississauga Code some
of the lesser sanctions discussed in Recommendation 11 which might be found
in an amended Municipal Conflict of Interest Act.706
Office of the Integrity Commissioner
Even the most well-intentioned municipal code of conduct and legislative
enactments governing elected municipal officials will not be effective without
a proper enforcement regime. An integrity commissioner can play a vital role
in this regard. The creation of a permanent office of integrity commissioner in
Mississauga, responsible for receiving, investigating, and reporting on formal
and informal complaints, would be of great assistance.
The potential for a conflict of interest is inherent in the office of an integrity
commissioner. A conflict of interest may develop as a result of the overlapping
roles of the integrity commissioner in giving advice to councillors, investigating councillors, and recommending sanctions when councillors violate the
municipal code of conduct.707 However, concerns about this potential for a
conflict of interest should not be overstated.
To enhance impartiality, the integrity commissioner should not be an
employee of the municipality. An integrity commissioner should not only be
independent from municipal council but also be seen to be independent. The
appointment process for the integrity commissioner should be fair and transparent. The integrity commissioner’s tenure should also be fixed in length, nonrenewable, and reasonably long.708 A term of five to seven years – arranged on
a part-time or half-time basis, depending on the size of the municipality –
would be appropriate. The remuneration of the integrity commissioner should
also be fixed at a reasonable level to avoid concerns about undue influence.
The office of the integrity commissioner can also direct outreach, provide
education, and perform an important advisory function. One of the most
important roles for a municipal integrity commissioner is to provide advice to
and conduct outreach seminars with elected officials and municipal staff. In
many ways, such advisory and educational functions are more effective than its
complaints function is at shaping commercial practices and the private sector’s
interactions with municipal politicians. Resources permitting, the integrity
commissioner should also conduct educational outreach work with the public
and, in particular, the development industry so that it understands the municipal accountability regime.709
It has been suggested that the integrity commissioner’s advisory role should
be extended to third parties, for example those involved in municipal procurement processes. In my view, it would not be advisable for the integrity commissioner to provide formal advice to third parties because of the heightened risk of
a conflict of interest developing. In addition, third-party commercial developers
might try to download their due diligence onto municipal integrity commissioners710 or might seek legal advice from integrity commissioners rather than
city solicitors.711 The provision of advice to third parties could quickly become
very expensive and effectively set up circumstances for complaints. Third parties
should engage lawyers and other professionals to provide them with advice.
The integrity commissioner should report publicly on complaints received,
as well as advice provided. In the interest of encouraging members of council
and municipal staff to seek advice from the integrity commissioner, the names
of those requesting advice from the integrity commissioner should be removed
from the published version of any such report.712
Mississauga is large enough to have its own integrity commissioner.713
However, as an alternative to the appointment of a separate integrity commissioner in each municipality, it would be helpful, particularly to smaller
municipalities, for there to be a roster of integrity commissioners who can deal
with issues in a region of the province or across the entire province. Mayor
McCallion sensibly suggested that a roster of integrity commissioners should
be engaged by the Association of Municipalities of Ontario and made available
to any municipality in Ontario, as needed.714
I am attracted to the conclusion that, had there been an integrity commissioner acting in Mississauga in this particular case, his or her services
might have been accessed in such a way as to have avoided the necessity for
this Inquiry. First, education and outreach might have made it clear to Mayor
McCallion and others involved that there was a real conflict of interest relating
to the mayor’s involvement on behalf of wcd, and, in the face of that conflict,
she ought not to have acted to further wcd’s interests. Second, the ability of an
integrity commissioner to investigate and report on the conduct of a municipal
official in the face of a conflict of interest, and to advise city staff and the mayor,
might have avoided the need for an Inquiry altogether.
Should Mississauga decide to create the office of integrity commissioner, it
would be incumbent on the mayor and members of council to avail themselves
of its services.
recommendation 24
I recommend that the City of Mississauga create a permanent office of integrity commissioner responsible for receiving, investigating, and reporting on
formal and informal complaints.
v
recommendation 25
I recommend that the Ontario legislature require that, where a municipality
has created the office of integrity commissioner, the municipality be required
to identify a source for funding in the event an inquiry is called by the integrity
commissioner.
v
recommendation 26
I recommend that a roster of potential integrity commissioners be created and
funded through the Association of Municipalities of Ontario. These individuals would be available to provide assistance, on an on-call basis, to municipalities not having an integrity commissioner.
v
Lobbyists
As noted, I do not recommend that Mississauga create a lobbyist registry
because of the expense involved.* However, the creation of a clear and straightforward lobbyist code of conduct could help increase transparency for commercial developers and other third parties that deal with the municipality.715
recommendation 27
I recommend that Mississauga create a concise lobbyist code of conduct, and
that the integrity commissioner be given responsibility for overseeing the
lobbyist code and educating third parties about it.
v
Additional Considerations
In addition to the above recommendations, I make the following observations
about other steps that might be taken to prevent the circumstances giving rise
to this Inquiry.
Publication of All Known Conflicts of Interest
I invite the city clerk’s office to consider the feasibility of creating a searchable database containing a list of all declared or known conflicts of interest,
which could be posted on the city’s website.716 Capturing all declared conflicts of interest so that they are readily accessible by third parties could be an
* D. Mullan, Transcript of Expert Panel, December 16, 2010, p. 5950. The associated compliance costs for the
municipality and the lobbyists should be limited.
extremely useful endeavour so long as it is done in a cost-effective manner. It
would increase transparency and accountability at a relatively minimal cost to
taxpayers. Should this proposal be found to be feasible in Mississauga, it might
be adopted by other municipalities.
Comfort Letters
Third parties should have an efficient mechanism to determine whether a
known conflict of interest exists. Municipalities could issue “comfort letters”*
to third parties in a commercial transaction to enhance municipal accountability and transparency.717 In this scenario, third parties could write to the
municipality and ask if there were any known or declared conflicts of interest
or findings of improper influence made in relation to a transaction. Providing
comfort letters could be implemented as a best practice when the municipality
is a party to a transaction and when there are particular concerns about commercial transactions between private parties.
In the case of Mississauga, comfort letters could be provided by the city
solicitor or the city clerk, and would in some cases involve input from the
integrity commissioner. There might be a concern that, by issuing comfort letters, the city could expose itself to liability,718 but that should be tempered by
the level of investigation undertaken by the municipality and the inclusion of
plain language limitation of liability clauses. Providing comfort letters to private entities would not be an onerous process since it would not require rigorous investigation or due diligence – and it may very well prevent circumstances
such as those which have led to this Inquiry.
The Municipal Councillor’s Guide
The Municipal Councillor’s Guide, published by Ontario’s Ministry of Municipal
Affairs and Housing, contains an unduly restricted view of conflicts of interest
affecting municipal politicians.719 As previously discussed, the mcia is not a
complete code in respect of the conflicts of interest of municipal politicians.
The Municipal Councillor’s Guide should be amended to reflect a broader view
of conflicts of interest, such as that described in this Report.
* A comfort letter in this context refers to a letter written by the city to give assurance to the party involved
in business dealings with it that there are no known conflicts of interest which could call into question the
integrity of the transaction.
Effect of Such Reforms in This Case
The following is a brief analysis of the effects of the suggested reforms in the
circumstances of this case.
On the Mayor
A broader view of conflict of interest and improper use of influence would
have had a great impact. An awareness that conflicts of interest might arise
outside the legislative arena might have led the mayor to be much more cautious in her dealings with wcd and the co-owners.
The mayor’s ability to obtain advice from an integrity commissioner about
her situation and what actions she could take would have been extremely
helpful to her. She might have taken her concerns about Peter McCallion’s
involvement in wcd to an integrity commissioner at the outset – long before
the matter came before municipal council – and thereby defused any criticism of her involvement in the wcd project or its aftermath. Receiving binding advice from the integrity commissioner can be an effective protection for
municipal councillors, since they can respond to criticism by saying they have
already addressed a real or apparent conflict of interest with the integrity
commissioner.720
It is preferable that conflicts and potential conflicts be identified and considered early. However, that desire does not mean municipal politicians must
immediately declare every potential conflict. The timing of such declarations
will turn on the facts and circumstances at issue, and will require members of
council to exercise their best judgment.
The implementation of an enhanced municipal accountability regime in
Mississauga will require an adjustment period. Strong leadership from Mayor
McCallion and other elected officials will be necessary to ensure its success.
On David O’Brien
As with the mayor, a broader view of conflict of interest and improper use of
influence might have had a significant impact on Mr. O’Brien’s actions. For
instance, if the mcia had deemed Mr. O’Brien’s interest also to be that of the
mayor, considering their close relationship, I expect it would have given him
pause and might have prevented altogether his taking action on behalf of the
mayor in July–October 2009.
On City Staff
The creation of a public database of known conflicts of interest would have
enabled all city staff to determine easily whether their actions were somehow
exacerbating the mayor’s conflict of interest. A comprehensive municipal code
of conduct would also have helped them to understand the proper boundaries
of the mayor’s involvement with the wcd project.
On City Council
The availability of a comprehensive municipal code of conduct and an integrity
commissioner would have provided all members of city council with much
needed guidance about their roles and responsibilities.
On the Vendors
The vendors, particularly aim, certainly had concerns at various points
regarding the involvement of the mayor and Peter McCallion in the wcd
project.721 The existence of an integrity commissioner would have provided the
vendors with an effective mechanism to register their concerns confidentially
about the involvement of Mayor McCallion and her son in the wcd project.
The provision of a comfort letter from the city would also have assisted the
vendors in gaining a better understanding of the wcd transaction, as long as
the mayor’s knowledge of the conflict had been passed on to others at the city.
CONCLUSION
In this Report I have answered the questions identified for consideration by
the Terms of Reference. As I said at the outset, the issues related to the 2000
Enersource Hydro Mississauga shareholders’ agreement discussed in Phase I
give rise to fewer concerns than the issues surrounding the City Centre Land
transaction which I reviewed in Phase II. Mississauga was fortunate that
the errors in relation to Enersource and the instances of conflict of interest
in relation to the City Centre Land did not injure the city in a material way.
omers / Borealis never exercised its power of veto. Although the World Class
Developments hotel / convention centre transaction failed to materialize on
the City Centre Land, another opportunity emerged. The city will now enjoy
the benefits of a thriving campus of Sheridan College at the city core.
Whether public confidence in city institutions was damaged is more difficult to measure. A review of the interaction between the mayor and various players in relation to the wcd deal suggests that those who are fortunate
enough to enjoy friendships with the mayor have derived benefits from those
relationships. Although in some communities this situation would garner controversy, this appears not to have been the case in Mississauga. The business
community has had the benefit of many years of stable leadership and a mayor
who understands business. Mayor Hazel McCallion enjoys a considerable
measure of public trust, as demonstrated by her history of electoral success.
187
Nevertheless, it is clear that Mississauga, and indeed all Ontario municipalities, requires a better ethical infrastructure. Members of the public have
the expectation that mayors, other members of council, and public officials will
conform to ethical standards. Amending the Municipal Act, 2001, the Municipal
Conflict of Interest Act, and the Mississauga Code of Conduct will promote
clarity in those standards. It is fundamental that members of the public do
not have to depend only on the personal ethical standards of elected officials. I
have laid out the framework for the changes I believe are required.
I believe as well that adoption of my recommendations will serve to create
greater transparency as to the nature of the public and private interests which
may influence official decisions. Economic transparency will promote public
trust. This transparency will also serve to protect the public interest by removing possibilities for members of council to discharge their public offices in their
pursuit of private interests.
ENDNOTES
Introduction
1Ontario, Inquiry into Pediatric Forensic Pathology Report, Volume 4: Inquiry Process
(Ontario: Ministry of the Attorney General, 2008) (Commissioner Stephen T.
Goudge).
2 Justice Dennis O’Connor, “The Role of Commission Counsel in a Public Inquiry”
(summer 2003) 22(1) Advocates’ Society Journal 9–11.
3
Public Inquiries Act, 2009, so 2009, c 33, Sched. 6.
4
Public Inquiries Act, 2009, so 2009, c 33, Sched. 6, s 34(6).
5
Consortium Developments (Clearwater) Ltd v Sarnia (City), [1998] 3 scr 3 at para 26.
Phase I
1Ontario, A Framework for Competition: The Report of the Advisory Committee on
Competition in Ontario’s Electricity System (Toronto: Queen’s Printer for Ontario, 1996)
(Chair Donald S. Macdonald), Exhibit 5, pp. 14–15 [pp. 34–45 of 186].
2Ibid.
3 Testimony of D.S. Macdonald, Transcript, May 25, 2010, p. 23.
4 Testimony of D.S. Macdonald, Transcript, May 25, 2010, pp. 25–26.
5 Exhibit 5, pp. 65, 111 [p. 85, 131 of 186].
6 Exhibit 5, p. 74 [p. 94 of 186].
7 Evidence of David Lever, May 31, 2010, p. 535.
8 Exhibit 5, p. 76 [p. 96 of 186].
9 Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 432–33.
10 Testimony of D. O’Brien, Transcript, May 27, 2010, p. 411.
11 Exhibit 7, p. 1.
189
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Exhibit 6, p. 5.
Exhibit 6, p. 6.
Exhibit 13, Proposal from Borealis, March 27, 2000.
Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 640, 642, 646.
Testimony of D. Lever, Transcript, May 31, 2010, p. 535.
Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 648–49.
Exhibit 6, p. 8; Exhibit 8, p. 12 [p. 14 of 71].
Testimony of M. Nobrega, Transcript, May 31, 2010, p. 652.
Exhibit 6, p. 8.
Testimony of J. Toll, Transcript, May 25, 2010, p. 74.
Testimony of D. Lever, Transcript, May 31, 2010, pp. 538–39.
Exhibit 6.
Exhibit 9.
Exhibit 6, pp. 9–10.
Testimony of D. O’Brien, Transcript, May 27, 2010, p. 435.
Testimony of J. Toll, Transcript, May 25, 2010, p. 76; Testimony of D. O’Brien,
Transcript, May 27, 2010, pp. 419–20.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 420–21.
Testimony of H. McCallion, Transcript, June 2, 2010, p. 988.
Exhibit 6, p. 12.
Exhibit 8; Testimony of D. Lever, Transcript, May 31, 2010, p. 537.
Exhibit 8, p. 2 [p. 4 of 71].
Exhibit 8, p. 12 [p. 14 of 71].
Exhibit 8, p. 12 [p. 14 of 71].
Testimony of W. Houston, Transcript, May 26, 2010, pp. 287–88.
Exhibit 8.
Exhibit 10.
Exhibit 11.
Exhibit 13.
Exhibit 13, p. 4 [p. 8 of 143].
Testimony of J. Toll, Transcript, May 25, 2010, pp. 107, 142.
Testimony of J. Toll, Transcript, May 25, 2010, p. 106; Exhibit 12.
Testimony of J. Toll, Transcript, May 25, 2010, p. 131; Exhibit 12.
Exhibit 12, p. 1.
Exhibit 13, p. 5 [p. 9 of 143].
Notes to Phase I 191
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
Exhibit 12.
Exhibit 13, p. 5 [p. 9 of 143].
Testimony of J. Toll, Transcript, May 25, 2010, p. 100.
Exhibit 69.
Testimony of W. Houston, Transcript, May 26, 2010, p. 162.
Testimony of J. Toll, Transcript, May 25, 2010, pp. 109–10.
Exhibit 25.
Exhibit 49, clause 2.15, p. 12 [p. 49 of 176].
Exhibit 39, p. 2 [p. 5 of 7].
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 440, 517, 518.
Exhibit 15, article 2.01(i).
Exhibit 15, article 2.13, p. 5 [p. 6 of 26].
Exhibit 15, article 2.13(ii), p. 6 [p. 7 of 26].
Exhibit 15, article 2.13(iv), p. 6 [p. 7 of 26].
Testimony of H. McCallion, Transcript, June 2, 2010, pp. 1026–27.
Testimony of M.E. Bench, Transcript, June 1, 2010, p. 831.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 451, 457, 484.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 198–99, 356.
Exhibit 23; Testimony of W. Houston, Transcript, May 26, 2010, p. 333; Testimony of
M.E. Bench, Transcript, June 1, 2010, p. 867.
Testimony of W. Houston, Transcript, May 26, 2010, p. 321, during cross-examination
by Mr. Barrack (omers).
Exhibit 27, Testimony of D. Lever, Transcript, May 31, 2010, pp. 576–83.
Exhibit 27, article 2.10, p. 10.
Exhibit 27, article 2.12, p. 11.
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
Exhibit 27, p. 13.
Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 712, 745, 750.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 458–59, 460, 500–2.
Exhibit 32.
Exhibit 35.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 208–9, 363–64.
Testimony of J. Toll, Transcript, May 25, 2010, pp. 86, 138–41.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 213–14, 240.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 234, 238, 239, 336.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 235, 241.
Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 871, 900–1.
Testimony of M.E. Bench, Transcript, June 1, 2010, p. 868; Testimony of H. McCallion,
Transcript, June 2, 2010, p. 1000; Exhibit 68, p. 2.
Testimony of H. McCallion, Transcript, June 2, 2010, pp. 999, 1001–2.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 477, 504–5.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 197, 243, 246.
Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 865–67.
Exhibits 75, 76, 77, 78, 79.
Notes to Phase I 193
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
Exhibit 77.
Testimony of K. Mahoney, Transcript, June 15, 2010, pp. 1095–96, 1110–11, 1132.
Exhibit 36.
Exhibit 24.
Exhibit 16.
Exhibit 16, tab 2, p. 2 [p. 58 of 144].
Testimony of W. Houston, Transcript, May 26, 2010, pp. 193, 195.
Exhibit 61, p. 8.
Testimony of J. Singer, Transcript, June 1, 2010, pp. 768–70.
Exhibit 61, p. 1; Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 837–38.
Exhibit 19.
Testimony of W. Houston, Transcript, May 26, 2010, pp. 256–57; Exhibit 20, p. 76.
Exhibit 20 [p. 77 of 133].
Exhibit 21.
Exhibit 33.
Exhibit 33, p. 1.
Exhibit 34.
Exhibit 53.
Exhibit 35.
Exhibit 20, p. 80.
Exhibit 62.
Exhibit 20, p. 80; Testimony of W. Houston, Transcript, May 26, 2010, p. 284.
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
Testimony of M.E. Bench, Transcript, June 1, 2010, pp. 854–56; Exhibit 20, p. 81.
Testimony of J. Singer, Transcript, June 1, 2010, p. 777.
Testimony of J. Singer, Transcript, June 1, 2010, p. 778.
Exhibit 54; Testimony of D. Lever, Transcript, May 31, 2010, pp. 595–96.
Exhibit 55.
Exhibit 64.
Exhibit 63; Testimony of J. Singer, Transcript, June 1, 2010, p. 780.
Exhibit 64.
Testimony of J. Singer, Transcript, June 1, 2010, pp. 802–3.
Exhibit 18, p. 3.
Exhibit 18, p. 2.
Exhibit 18, p. 1.
Exhibit 56.
Exhibit 57.
Exhibit 17.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 464, 465, 466–67.
Exhibit 17.
Testimony of M. Nobrega, Transcript, May 31, 2010, pp. 727, 730.
Exhibit 60, p. 11.
Exhibit 60.
Testimony of D. O’Brien, Transcript, May 27, 2010, pp. 479, 510–11.
Exhibit 24.
Phase II
1 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4807–9, 4812–13.
2 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1385–86; Testimony of H.
McCallion, Transcript, September 20, 2010, p. 4870.
3 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1386, 1390.
4 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4811–12.
5 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2795; Testimony of M. Cook,
Notes to Phase II 195
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
Transcript, September 15, 2010, p. 4449; Testimony of M. Ball, Transcript, August 19,
2010, pp. 4214–15; Testimony of H. McCallion, Transcript, September 20, 2010, pp.
4813, 4819.
Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2800; July 8, 2010, pp. 1423–24;
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4818, 4831.
Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1386–87; August 10, 2010, p. 2795.
Exhibit 182; Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2795–96;
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4822–23.
Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2796.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4813, 4818–20, 4828;
Exhibit 180.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4817, 4878–79.
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2269–70.
Exhibit 258; Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2302–3, 2339–41;
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3351–52; Testimony
of M. Latimer, Transcript, July 28, 2010, p. 2195; Testimony of L. de Bever, Transcript,
September 13, 2010, p. 4342.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3176, 3226.
Testimony of L. de Bever, Transcript, September 13, 2010, p. 4274.
Testimony of M. Latimer, Transcript, July 28, 2010, p. 2223.
Exhibit 258; Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3351–53;
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2301–2, 2303, 2317, 2339–40,
2341–42; Testimony of L. de Bever, Transcript, September 13, 2010, p. 4305.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3199, 3350–51, 3352;
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4305, 4342.
Testimony of M. Latimer, Transcript, July 28, 2010, p. 2223.
Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3351.
Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201; Testimony of K. Lusk,
Transcript, July 26, 2010, p. 1752; Testimony of C. Coleman, Transcript, August 11, 2010,
pp. 2820–21.
Testimony of M. Latimer, Transcript, July 28, 2010, p. 2243; Testimony of K. Lusk,
Transcript, July 26, 2010, pp. 1750–51, 1756–57.
Testimony of M. Latimer, Transcript, July 28, 2010, p. 2201; Testimony of M. Nobrega,
Transcript, August 16, 2010, p. 3352.
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1518–19; Testimony of K. Lusk,
Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2227, 2229–30.
Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1722–23.
Exhibit 258; Testimony of K. Lusk, Transcript, July 26, 2010, p. 1747; Testimony of L.
de Bever, September 13, 2010, p. 4342.
Testimony of P. McCallion, Transcript, July 27, 2010, p. 1806.
Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1803–4.
34 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4439–40.
35 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1819–20, 1822.
37 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1805; July 28, 2010, p. 2024;
Exhibit 187.
38 Exhibit 187, p. 1; Testimony of P. McCallion, Transcript, July 28, 2010, p. 2053; July 27,
2010, p. 1906.
39 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3405–6; Testimony of
P. McCallion, Transcript, July 27, 2010, pp. 1808–9.
40 Exhibit 187, p. 1 [p. 2 of 4]; Testimony of P. McCallion, Transcript, July 28, 2010,
pp. 2058–59.
41 Exhibit 187, p. 1 [p. 2 of 4]; Testimony of P. McCallion, Transcript, July 27, 2010,
pp. 1805–6.
42 Exhibit 291; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2053–55.
43 Exhibit 291, p. 1; Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2053–55.
44 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1901.
45 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1806–7, 1917–19.
46 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1804–6.
47 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1977.
48 Exhibit 146; Exhibit 148.
50 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1819, 1821, 1823, 1922–23.
51 Testimony of M. Cook, Transcript, September 15, 2010, p. 4442; Exhibit 193.
52 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4443–47, 4599–600.
53 Testimony of M. Cook, Transcript, September 15, 2010, p. 4447.
56 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3404–7.
57 Exhibit 189.
58 Testimony of P. McCallion, Transcript, July 27, 2010, p. 1822; Exhibit 193, p. 1.
59 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1821, 1822.
60 Exhibit 190.
62 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1832, 1923–24.
63 Testimony of M. Cook, Transcript, September 15, 2010, pp. 4444–45, 4462, 4463,
4465–66.
64 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1831–34, 1839, 1927, 1933.
65 Exhibit 195.
71 Exhibit 269.
72 Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3809.
73 Exhibit 269, p. 3.
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5513–14, 5568–69.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3402–4.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3407, 3475–76.
Testimony of L. Couprie, Transcript, August 17, 2010, p. 3507.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3408–9; Testimony of
P. McCallion, Transcript, July 28, 2010, pp. 2057–58; Exhibit 187, p. 1 [p. 2 of 4]; Exhibit
291.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3474, 3486; Testimony
of P. McCallion, Transcript, July 27, 2010, pp. 1818–19; Testimony of P. McCallion,
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3409–11; Exhibit 189.
Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1810, 1817, 1916; Testimony of
L. Couprie, Transcript, August 17, 2010, pp. 3487, 3488.
Exhibit 197.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3422–23, 3487–88.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3422–23, 3483.
Testimony of L. Couprie, Transcript, August 17, 2010, p. 3505; Exhibit 197.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3427–28, 3437–38.
Exhibits 189 and 190, respectively; Testimony of L. Couprie, Transcript, August 17,
2010, pp. 3411–12, 3414.
Exhibit 190.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3417, 3419.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3418, 3420–21, 3485.
Testimony of P. McCallion, Transcript, July 27, 2010, p. 1912; Exhibit 190.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3420, 3424–27, 3487–88,
3506.
Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1898–99; Exhibit 212, pp. 2–3.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3245–47, 3385.
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4297–98, 4299.
Exhibit 258, p. 2.
Exhibit 258, p. 2.
Exhibit 258, p. 1.
Testimony of M. Latimer, Transcript, July 28, 2010, pp. 2195–97, 2238.
Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1669, 1707–8, 1720, 1746–47.
113 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1708–9; Exhibit 146.
114 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1669–70.
115 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1666–67; Exhibit 149.
116 Testimony of L. de Bever, Transcript, September 13, 2010, p. 4295.
117 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2277–78.
119 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 3994, 3996.
120 Testimony of M. Kitt, Transcript, August 19, 2010, p. 3999.
121 Testimony of M. Kitt, Transcript, August 19, 2010, pp. 3999, 4014–15, 4059–60.
122 Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3097–98.
125 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829, 4843.
127Municipal Conflict of Interest Act, rso 1990, c M.50
128 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4855.
129 Testimony of H. McCallion, Transcript, September 23, 2010, p. 5447; September 21,
2010, pp. 5059–60.
135 Testimony of P. McCallion, Transcript, July 28, 2010, p. 2043; Exhibit 228, p. 13.
2010, p. 5269.
138 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4861–62; September
23, 2010, pp. 5271–72.
140 Exhibit 258, p. 2.
142 Exhibit 258, p. 1 [p. 2 of 3].
143 Testimony of H. McCallion, Transcript, September 20, 2010, p. 4869; Exhibit 591, p. 2.
144 Exhibit 146.
145 Exhibit 146.
146 Exhibit 146.
147 Exhibit 146.
148 Testimony of K. Lusk, Transcript, July 26, 2010, pp. 1667–68.
149 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4877–78, 4884.
150 Exhibit 162, p. 1.
153 Exhibit 97.
2010, pp. 5371–72, 5374.
155 Testimony of M. Latimer, Transcript, July 28, 2010, p. 2206.
157 Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2273; Testimony of M. Latimer,
Transcript, July 28, 2010, p. 2249; Testimony of C. Coleman, Transcript, August 11,
2010, p. 2832.
160 Exhibit 162.
161 Testimony of K. Lusk, Transcript, July 26, 2010, p. 1668.
162 Exhibit 292.
163 Exhibit 432, p. 2.
164 Exhibit 262; Exhibit 402; Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4032–
35; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829, 2834.
165 Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2829–30.
170 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4306–7.
172 Exhibit 438; Exhibit 628, p. 4.
174 Testimony of C. Coleman, Transcript, August 11, 2010, p. 2832.
177 Exhibit 139.
178 Exhibit 139.
179 Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2310–11, 2376, 2380.
180 Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4285–86, 4292–93.
182 Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1829–30, 1890, 1904.
184 Testimony of P. McCallion, Transcript, July 28, 2010, pp. 2042–43; Exhibit 228, p. 13.
187 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5270–72, 5440.
191 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5269, 5274–75.
196 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829–30; September
23, 2010, pp. 5441–42.
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
Exhibit 189.
Exhibit 190.
Testimony of P. McCallion, Transcript, July 27, 2010, pp. 1813–14; July 28, 2010,
p. 2157.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4887–89; September
21, 2010, pp. 5114–15, 5119–20.
Testimony of H. McCallion, Transcript, September 20, 2010, p. 4892.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3414–15, 3419, 3480–81, 3509.
Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3415–16, 3509.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4829–30, 4958–59.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4843, 4892–93.
Testimony of H. McCallion, September 20, 2010, pp. 4889–90.
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1431–32.
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1575–78; Exhibit 97, p. 4 [p. 5 of
31], article 1.1.
Testimony of A. Costin, Transcript, July 8, 2010, p. 1578; Exhibit 97, p. 10 [p. 11 of 31],
article 4.2(e).
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1520–21, 1577–78, 1583–84.
Exhibit 97, p. 16 [p. 17 of 31], article 6.6(a).
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1508, 1584.
Exhibit 97, p. 9 [p. 10 of 31], article 4.1(e)(iii).
Exhibit 97, p. 18 [p. 19 of 31], article 6.6(b)(iv)(A).
Exhibit 97, p. 18 [p. 19 of 31], article 6.6(iv)(A) and (B).
Exhibit 97, p. 18, [p. 19 of 31], article 6.6(v).
239 Exhibit 97, p. 19 [p. 20 of 31], article 6.6(vii); Testimony of A. Costin, Transcript, July 8,
2010, p. 1509.
240 Exhibit 97, pp. 18–19 [pp. 19–20 of 31], article 6.6(vi); Testimony of A. Costin,
Transcript, July 8, 2010, p. 1438.
241 Exhibit 97, p. 19 [p. 21 of 31], article 6.6(ix); Testimony of A. Costin, Transcript, July 8,
2010, pp. 1438–39.
242 Testimony of A. Costin, Transcript, July 8, 2010, p. 1439.
243 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1439–40.
244 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1442–43; Exhibit 97, p. 11 [p. 12 of
31], article 4.5.
245 Exhibit 97, p. 11 [p. 12 of 31], article 4.5 (a) and (b); Testimony of A. Costin, Transcript,
July 8, 2010, p. 1583.
246 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1440–43; Exhibit 98.
247 Exhibit 105.
250 Testimony of A. Costin, Transcript, July 8, 2010, pp. 1452, 1455.
251 Testimony of A. Costin, Transcript, July 8, 2010, p. 1447; Exhibit 99.
253 Testimony of A. Costin, Transcript, July 8, 2010, p. 1450; Exhibit 101; Exhibit 102.
257 Exhibit 105.
261 Exhibit 245.
262 Exhibit 310, pp. 2–3.
264 Exhibit 117.
266 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4211–15; Exhibit 506.
267 Testimony of M. Ball, Transcript, August 19, 2010, p. 4212.
268 Exhibit 311.
269 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4212–16; Exhibit 311, p. 3.
270 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2763.
271 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1406–7.
272 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4201–2.
273 Testimony of E. Sajecki, Transcript, August 10, 2010, p. 2753.
276Development Charges Act, 1997, so 1997, c 27, s 9.
277 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1761–63.
278 Exhibit 174.
279 Testimony of J. Zingaro, Transcript, July 26, 2010, p. 1764.
280 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1764–65; Exhibit 175, p. 5.
281 Testimony of M. Ball, Transcript, August 19, 2010, pp. 4206–7; Exhibit 176.
282 Exhibit 169, pp. 3–4.
283Planning Act, rso 1990, c P.13.
284 Testimony of J. Zingaro, Transcript, July 26, 2010, pp. 1767–74.
285 Testimony of J. Zingaro, Transcript, July 26, 2010, p. 1773.
286 Exhibit 341, p. 3.
287 Testimony of S. Walker, Transcript, August 9, 2010, pp. 2515–16.
288 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3756–57.
289 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2768–74.
290 Exhibit 203.
292 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2781–83.
293 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2671–72.
294 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2581, 2590,
2671–72.
295 Exhibit 317; Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2581–83.
302 Testimony of E. Sajecki, Transcript, July 8, 2010, pp. 1385–86.
303 Exhibit 97, p. 18 [p. 19 of 31], article 6.6(b)(iv)A.
306 Testimony of S. Gupta, Transcript, September 16, 2010, p. 4710.
308 Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4709–10.
311 Exhibit 626; Exhibit 592; Testimony of S. Gupta, Transcript, September 16, 2010,
pp. 4718, 4720.
312 Exhibit 109; Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4718–21.
317 Testimony of E. Sajecki, Transcript, August 10, 2010, pp. 2774–76; Exhibit 312.
318 Exhibit 106.
319 Exhibit 547.
320 Exhibit 109; Testimony of S. Gupta, Transcript, September 16, 2010, p. 4718.
321 Exhibit 401.
322 Exhibit 401; Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5562;
Testimony of S. Gupta, Transcript, September 16, 2010, pp. 4723–27.
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360
361
362
363
364
365
366
367
Testimony of A. Costin, Transcript, July 8, 2010, pp. 1466–67; Exhibit 114.
Exhibit 115.
Exhibit 117.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3103–5.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4000, 4002.
Exhibit 429, p. 1.
Exhibit 429, p. 2.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4002, 4006, 4060; Testimony of
M. Dal Bello, Transcript, July 29, 2010, pp. 2279–80.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4060–61.
Exhibit 98; Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4003–4.
Exhibit 292.
Exhibit 292.
Exhibit 429.
Exhibit 264.
Exhibit 271, p. 1.
Exhibit 246.
Exhibit 421.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4021–23; Exhibit 284.
Exhibit 285.
Testimony of M. Kitt, Transcript, August 19, 2010, p. 4022.
Exhibit 285, p. 1.
Exhibit 285.
Exhibit 487, p. 2.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4924–25, 4927–28.
Exhibit 432, p. 1.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4028, 4029; Exhibit 432.
Testimony of M. Kitt, Transcript, August 19, 2010, p. 4023; Exhibit 285, p. 1.
Exhibit 105.
Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3732.
Exhibit 245.
368 Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4929–30, 4946–47;
Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3955–58.
370 Exhibit 306.
371 Exhibit 247, p. 1.
372 Exhibit 490.
373 Exhibit 434.
374 Exhibit 306.
375 Exhibit 422, p. 1.
376 Exhibit 422, p. 1.
377 Exhibit 423, p. 1.
378 Exhibit 464.
380 Exhibit 143.
381 Exhibit 470.
382 Exhibit 470, p. 1.
383 Exhibit 364.
387 Exhibit 628, p. 3.
388 Exhibit 628, p. 3.
389 Exhibit 628, p. 3.
390 Exhibit 628, p. 2.
391 Exhibit 628, p. 2.
392 Exhibit 628, p. 2.
393 Exhibit 252, p. 1.
394 Exhibit 252, p. 1.
395 Exhibit 252, p. 1.
396 Exhibit 310, p. 1.
397 Exhibit 628, p. 1.
398 Exhibit 628, p. 1.
399 Exhibit 627.
400 Exhibit 252, p. 1.
404 Exhibit 493, p. 2.
405 Exhibit 493.
407Exhibit 143.
408 Exhibit 143, p. 2.
413
414
415
416
417
418
419
420
421
422
423
424
425
426
427
428
429
430
431
432
433
434
435
436
437
438
439
440
441
442
443
444
445
446
447
448
449
450
451
452
453
454
455
456
457
Exhibit 144.
Exhibit 301, p. 1.
Exhibit 301, p. 1.
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2283–84; Exhibit 300.
Exhibit 144.
Exhibit 144.
Exhibit 144.
Exhibit 144.
Exhibit 144.
Exhibit 144.
Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2287.
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2287–88.
Testimony of M. Dal Bello, Transcript, July 29, 2010, p. 2288.
Testimony of M. Kitt, Transcript, August 19, 2010, p. 4062–63.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4062, 4065; Testimony of
M. Dal Bello, Transcript, July 29, 2010, pp. 2291, 2414.
Exhibit 141; Exhibit 142.
Testimony of M. Kitt, Transcript, August 19, 2010, p. 4066; Exhibit 425.
Exhibit 139.
Exhibit 143.
458
459
460
461
462
463
464
465
466
467
468
469
470
471
472
473
474
475
476
477
478
479
480
481
482
483
484
485
486
487
488
489
490
491
492
493
494
495
Exhibit 361.
Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2828–29.
Testimony of C. Coleman, Transcript, August 11, 2010, p. 2834.
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4282–83, 4296, 4309.
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4308–9.
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4308–9.
Testimony of L. de Bever, Transcript, September 13, 2010, p. 4285–86.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4881–82, 4883–84;
Exhibit 285; Exhibit 420; Exhibit 422; Exhibit 644; Testimony of H. McCallion,
Transcript, September 20, 2010, pp. 4922–26, 4927–28, 4936–41.
Exhibit 296; Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2881–82;
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 3007–8, 3030–31, 3079–81.
Exhibit 143.
Exhibit 144; Testimony of H. McCallion, Transcript, September 20, 2010, p. 4956.
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2295–97; Testimony of L. de
Bever, Transcript, September 13, 2010, pp. 4275–76.
Exhibit 141; Exhibit 142; Exhibit 295; Testimony of M. Dal Bello, Transcript, July 29,
2010, p. 2291; Testimony of D. Hansen, Transcript, July 29, 2010, p. 2414.
Testimony of M. Kitt, Transcript, August 19, 2010, pp. 4031–35; Testimony of
C. Coleman, Transcript, August 11, 2010, pp. 2829–30.
Testimony of M. Dal Bello, Transcript, July 29, 2010, pp. 2286–87; Testimony of L. de
Bever, Transcript, September 13, 2010, p. 4285.
Exhibit 290; Exhibit 281.
Exhibit 278, pp. 12–13 [pp. 13–14 of 55]; Testimony of S. Walker, Transcript, August 9,
2010, pp. 2523–24.
Exhibit 278, p. 13 [p. 14 of 55].
Testimony of S. Walker, Transcript, August 9, 2010, p. 2524.
Exhibit 290, p. 25 [p. 26 of 47].
Exhibit 290, p. 25 [p. 26 of 47].
Exhibit 281.
Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2545, 2557, 2559–61.
Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2562–63.
Exhibit 281.
Testimony of S. Alleluia, Transcript, August 9, 2010, pp. 2564–65.
Exhibit 281, p. 3.
496
497
498
499
500
501
502
503
504
505
506
507
508
509
510
511
512
513
514
515
516
517
518
519
520
521
522
523
524
525
526
527
528
529
530
531
532
533
534
Testimony of S. Alleluia, Transcript, August 9, 2010, p. 2566.
Testimony of M. Cook, Transcript, September 15, 2010, pp. 4460–62.
Exhibit 272.
Testimony of M. Cook, Transcript, September 15, 2010, pp. 4573–74; Testimony of
T. DeCicco, Transcript, August 17, 2010, pp. 3586–87.
Exhibit 236.
Exhibit 194.
Exhibit 238.
Exhibit 239.
Testimony of M. Cook, Transcript, September 15, 2010, pp. 4467–71.
Exhibit 194.
Testimony of T. DeCicco, August 17, 2010, p. 3580.
Exhibit 127.
Exhibit 379.
Exhibit 448 (DeCicco Affidavit), Exhibit 134 (Gupta Affidavit), and Exhibits 212, 206,
207 (McCallion Affidavits).
Testimony of T. DeCicco, Transcript, August 18, 2010, p. 3694; Testimony of M.
Nobrega, Transcript, August 16, 2010, p. 3371; Exhibit 619.
Testimony of L. de Bever, Transcript, September 13, 2010, pp. 4274–75; Testimony of
M. Dal Bello, Transcript, July 29, 2010, pp. 2296–98, 2393.
Testimony of C. Coleman, Transcript, August 11, 2010, pp. 2860, 2879; Testimony of
D. Hansen, July 29, 2010, 2417–18; Exhibit 296.
21, 2010, p. 4988.
Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2592.
Exhibit 128.
Exhibit 128, section 6.1(b), p. 3.
Exhibit 129.
Exhibit 129, section 6, p. 2.
Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2633–34, 2636–37; Exhibit
327, p. 2.
Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2611, 2617; Exhibit 327, p. 1.
Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2636–37.
Exhibit 212.
Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5521; Exhibit 212, p. 1, para 1.
Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5550–51.
Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5524–5525, 5550–51.
Exhibit 700.
Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2611.
535
536
537
538
539
540
541
542
543
544
545
546
547
548
549
550
551
552
553
554
555
556
557
558
559
560
561
562
563
564
565
566
567
568
569
570
571
572
Exhibit 327, p. 3.
Testimony of E. Bisceglia, Transcript, December 14, 2010, pp. 5521–22, 5527.
Exhibit 206; Testimony of P. McCallion, Transcript, July 27, 2010, p. 1866; July 28, 2010,
p. 2185.
Exhibit 207.
Exhibit 120; Testimony of T. DeCicco, Transcript, August 17, 2010, p. 3666.
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2921–24.
Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2922.
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2924–25; Testimony of
P. McCallion, Transcript, July 27, 2010, pp. 1870–71.
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2928–29, 2957.
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2928–29, 2957, 3065–66.
Exhibit 215, p. 1; Testimony of M.E. Bench, Transcript, August 10, 2010, p. 2603.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3168–70; Testimony of
D. O’Brien, Transcript, August 11, 2010, p. 3051.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3154–56, 3165–73.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3145–48, 3166–67.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3223–24, 3156, 3165.
Exhibit 315, pp. 10–12.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3166, 3221–22.
Exhibit 404.
Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2931, 2985.
Testimony of M. Nobrega, Transcript, August 16, 2010, pp. 3142–44, 3305–6. See also
H. McCallion, Transcript, September 21, 2010, pp. 5014–15; Testimony of H.
McCallion, September 23, 2010, pp. 5237–38.
573 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3334.
574 Testimony of M. Nobrega, Transcript, August 16, 2010, p. 3172.
575 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2936–37, 3073; Testimony of
T. DeCicco, Transcript, August 18, 2010, p. 3913.
576 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2948.
577 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2948–49.
578 Testimony of D. O’Brien, Transcript, August 11, 2010, p. 2947; Testimony of T.
DeCicco, Transcript, August 18, 2010, p. 3692; Testimony of P. McCallion, Transcript,
July 27, 2010, pp. 1871–72.
581 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2949–50.
583 Exhibit 619.
584 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3696, 3830; Testimony of
E. Bisceglia, Transcript, December 14, 2010, p. 5560.
585 Testimony of J. Di Poce, Transcript, September 13, 2010, p. 4403.
586 Testimony of J. Di Poce, Transcript, September 13, 2010, pp. 4402–3; Testimony of
T. DeCicco, Transcript, August 18, 2010, pp. 3976–77, 3833; Testimony of E. Bisceglia,
Transcript, December 14, 2010, pp. 5541–43.
587 Testimony of J. Di Poce, September 13, 2010, p. 4404; Testimony of E. Bisceglia,
Transcript, December 14, 2010, pp. 5541–43; Testimony of T. DeCicco, Transcript,
August 18, 2010, p. 3718.
589 Testimony of E. Bisceglia, Transcript, December 14, 2010, p. 5560; Testimony of
590 Testimony of T. DeCicco, Transcript, August 18, 2010, pp. 3826–27, 3829.
591 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3436–37, 3456.
592 Testimony of L. Couprie, Transcript, August 17, 2010, pp. 3456–57.
593Municipal Conflict of Interest Act, rso 1990, c M.50.
594Municipal Conflict of Interest Act, rso 1990, c M.50, s 5(1).
595 Exhibit A, D. Mullan, “Report to Judicial Inquiry into Matters Involving Mayor of City
of Mississauga Appointed under Section 274 of the Municipal Act, 2001,” p. 6 [hereafter
Exhibit A, Mullan Report].
596Watson v Burnaby (City) (1994), 22 mplr (2d) 136.
597 L’Abbé v Blind River (Village), [1904] oj No 130, 7 olr 230 (Div Ct) (ql), at para 17.
598Old St. Boniface Residents’ Assn. v Winnipeg (City), [1990] 3 scr 1170, at para 55
(Sopinka J).
599 Canada, Commission of Inquiry into Certain Allegations Respecting Business and
Financial Dealings Between Karlheinz Schreiber and the Right Honourable Brian
Mulroney, Report (3 vols., Ottawa: Minister of Public Works and Government Services
Canada, 2010) (Commissioner Jeffrey J. Oliphant), vol. 3: 515.
600Re L’Abbé and Corp. of Blind River (Village), [1904] oj No 130, 7 olr 230 (Div Ct) (ql),
at para 16.
601 Appendix J, Ruling on Conflict of Interest, July 8, 2010, p. 9.
602 Exhibit 717, Toronto Computer Leasing Inquiry / Toronto External Contracts Inquiry Report,
603
604
605
606
607
608
609
610
611
612
613
614
615
616
617
618
619
620
621
622
623
624
625
626
627
628
629
630
631
632
633
634
Volume 2: Good Government (4 vols., Toronto, 2005), 38–43 (Commissioner Denise
Bellamy); Canada, Commission of Inquiry into the Facts of Allegations of Conflict
of Interest Concerning the Honourable Sinclair Stevens, Report (Ottawa: Ministry of
Supply and Services, 1987) (Commissioner W.D. Parker), referred to in Exhibit A, Mullan
Report, pp. 8–9.
Exhibit A, Mullan Report, p. 8.
L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5629–30.
23, 2010, pp. 5321, 5440–42.
23, 2010, p. 5441.
20, 2010, pp. 4829–30.
Exhibit 189; Exhibit 190; Testimony of H. McCallion, Transcript, September 20, 2010,
pp. 4886–89; September 21, 2010, pp. 5113–17.
Testimony of H. McCallion, Transcript, September 20, 2010, p. 4889; September 23,
2010, pp. 5444–45.
Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5277, 5309, 5457–59.
Testimony of H. McCallion, Transcript, September 20, 2010, pp. 4844, 4854–56, 4859.
23, 2010, pp. 5332–33.
23, 2010, pp. 5479–80.
2010, pp. 5060–61; September 23, 2010, pp. 5344, 5447.
2010, pp. 4893–94; September 23, 2010, p. 5458.
636 Submissions on conflict of interest, Transcript, July 6, 2010, pp. 1309–10 (on behalf of
Mayor Hazel McCallion), pp. 1276–77 (by Commission counsel); Closing Submissions
of Mayor H. McCallion, Transcript, February 8, 2011, pp. 6473–74.
637 Appendix J, Ruling on Conflict of Interest, July 8, 2010; D. Mullan, Transcript of
Expert Panel, December 15, 2010, pp. 5589–90; Exhibit A, Mullan Report, pp. 1, 3–7.
638 Exhibit 212; Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5451–53.
644 Exhibit 261; Exhibit 258; Exhibit 591; Testimony of H. McCallion, Transcript,
September 20, 2010, pp. 4875–76.
647 Exhibit 146; Exhibit 162; Testimony of H. McCallion, Transcript, September 20, 2010,
pp. 4881–82.
648 Exhibit 546.
649 Appendix A, Terms of Reference, p. 4.
651 Testimony of D. O’Brien, Transcript, August 11, 2010, pp. 2919–21, 3060.
654 Testimony of M.E. Bench, Transcript, August 10, 2010, pp. 2595–96.
657 Exhibit 404, p. 1.
659 Exhibit 215.
660 Testimony of H. McCallion, Transcript, September 23, 2010, pp. 5233–34, 5350;
662 Exhibit 315, p. 31.
662 L. Sossin, Transcript of Expert Panel, December 15, 2010, p. 5689.
664 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5689–90.
665mcia, s 5(1).
667 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5691–92.
668 Exhibit A, Mullan Report, p. 12.
671 D. Mullan, Transcript of Expert Panel, December 16, 2010, pp. 5924–27; L. Sossin,
Transcript of Expert Panel, December 16, 2010, p. 5944.
672 Exhibit A, Mullan Report, pp. 12–13.
674 Minutes of General Committee Meeting of the Corporation of the City of Mississauga
held on April 6, 2011, p. 11.
675 Exhibit A, Mullan Report, p. 16; Exhibit 708.
679 G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5664.
681Municipal Act, 2001, ss 223.3, 223.4, 223.6.
682 L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5633–35; G. Levine,
684 G. Levine, Transcript of Expert Panel, December 16, 2010, pp. 5915–17.
686http://www.toronto.ca/integrity.
687Bellamy Report, Volume 4: Executive Summary, 94, Recommendation 97.
689 G. Levine, Transcript of Expert Panel, December 16, 2010, pp. 5908–9; D. Mullan,
Transcript of Expert Panel, December 16, 2010, pp. 5910–11.
690Members’ Integrity Act, 1994, so 1994, c 38.
691Municipal Elections Act, 1996, so 1996, c 32.
693Whiteley v Schurr, [1999] oj No 2575 at para 10.
694Lastman v Ontario, [2000] oj No 269, 47 or (3d) 177 (scj) [Lastman], at para 14.
695Lastman, at para 18.
699mcia, s 8; L. Sossin, Transcript of Expert Panel, December 15, 2010, pp. 5659–60.
700 Transcript of Expert Panel, December 16, 2010, pp. 6054–57.
701 Exhibit A, Mullan Report, p. 17; D. Mullan, Transcript of Expert Panel, December 15,
2010, pp. 5780–81.
704 G. Levine, Transcript of Expert Panel, December 15, 2010, p. 5641.
709 D. Mullan, Transcript of Expert Panel, December 15, 2010, pp. 5728–29; G. Levine,
715 L. Sossin, Transcript of Expert Panel, December 16, 2010, pp. 5954–55; G. Levine,
719 Exhibit 722.
721 Testimony of A. Costin , Transcript, July 8, 2010, pp. 1569–71; Testimony of L. de Bever,
Transcript, September 13, 2010, p. 4284; Testimony of M. Dal Bello, Transcript, July 29,
2010, pp. 2308–9, 2310–11, 2373–74, 2376, 2380; Testimony of M. Kitt, Transcript,
August 19, 2010, pp. 4106–7; Exhibit 144.
ADDENDUM
The Mayor’s Benevolent Activities
The Terms of Reference directed me to make findings as to the relationship among
the named parties, including the mayor and World Class Developments (wcd).
Accordingly, Commission counsel led evidence about the extent to which wcd, as
well as other parties, had contributed to the mayor’s gala and other benevolent
activities to which the mayor had lent her name. I had understood (or perhaps
assumed) that events such as the mayor’s gala garnered proceeds which were then
administered by registered charities.
Some months after the close of evidence and final submissions, it became apparent from media reports that my understanding was not correct. I believed it to be
important that the record be complete and accurate and directed Commission counsel to conduct some further inquiries and seek production of documents concerning
the way in which the mayor and the city organized and administered the mayor’s
gala and related events.
The mayor and city provided an extensive volume of materials, and I am grateful to them for their assistance. Commission counsel interviewed a number of witnesses, including the mayor. The mayor and city agreed that the record might be
supplemented by the following agreed statement of facts. I believe this statement
provides an important clarification of the record.
I have not made recommendations about the participation of the mayor and city
in charitable events. To do so would have required that I reopen hearings to allow
for contextual and expert evidence concerning an area that is far from central to the
215
work of the Inquiry. Given the importance of these issues, however, city council may
wish to examine them in its process, perhaps with the involvement of the integrity
commissioner.
Agreed Statement of Facts
The Mayor’s Gala
A group of citizens approached the Mayor in 1987 about organizing an annual
evening event to promote Mississauga and allow citizens to enjoy themselves
at a fine dinner featuring excellent entertainment. The event was expected to
promote community spirit, and would raise funds for the Living Arts Centre.
The Mayor agreed to lend her name to the event which became known as
the Mayor’s Gala. The Mississauga business community supported the Gala
generously in the years since 1987, both in the purchase of tables and in the
donation of auction items. It was understood by all those involved that the
purpose of the Gala was the promotion of arts in Mississauga through the
holding of a premier event and through the distribution of profits to the arts
community.
The City was heavily involved in the organization and administration of
the Mayor’s Gala until 2008. At the Mayor’s insistence, the City always recovered any cost associated with municipal resources or staff time employed in
the Gala.
Each year the Gala had an organizing committee which sought out sponsors and donations, selling tickets and arranging for entertainment at the event.
The Organizing Committee consulted with the Mayor on many of the details.
City staff were involved in the administration of the Mayor’s Gala including
the handling of all proceeds and distribution of funds. The City was reimbursed, on a cost-recovery basis, from the proceeds of such Gala for the time
spent by City staff.
The Gala has been consistently profitable. During the time that the Gala
Fund was administered by the City, the Mayor exercised sole authority over
grants from the Gala Fund. Grants were provided to a number of local arts
groups as sustaining funding. Members of Council were aware and accepted
that the Mayor made the final decision on the distribution of funds. Over and
above the funds which had been initially contributed to building the Living
Addendum – The Mayor’s Benevolent Activities 217
Arts Centre, the City administered fund distributed approximately $750,000
to the arts community. By 2007, the fund had accumulated a surplus of some
$2.8 million which was held by the City in an interest-bearing account (“the
Gala Fund”).
From 1987 to 2006, donors to the Gala were given tax receipts by the City,
upon request. Tax receipts for donations to the Gala were not provided by
the City after 2006. The Mayor had no involvement in the issuance of tax
receipts. In 2011, it was determined by the City that the tax receipts provided
to donors to the Gala between 1997 and 2006 did not comply with the Income
Tax Act, rsc 1985 c.1; however, there do not appear to have been any adverse
consequences to donors.
The Hazel McCallion Fund for Arts, Culture and Heritage
In 2005, Mayor McCallion created a Mississauga Arts Review Task Force,
which was to consider ways to improve arts funding in Mississauga. On
December 14, 2005, the Mississauga Arts Review Task Force reported to the
Mayor and City Council. It recommended in part that,
“The Mayor’s Gala Fund be named ‘The Hazel McCallion Endowment for the
Arts’ and investment responsibility be transferred to the Community Foundation
of Mississauga and the interest be allocated annually by the Office of the Arts
based on input by the Mayor.”
On May 24, 2006, the City Manager was directed by City Council to work
with the Mayor to implement this and other recommendations on the terms
and conditions set out in the Task Force report.
Following negotiations between the City and the Community Foundation
of Mississauga, the Community Foundation of Mississauga Donor Advised
Fund Agreement (“the Agreement”) between the Mayor and the Community
Foundation of Mississauga was signed on March 1, 2007.
The Agreement has been designated Exhibit 724.*
Under the terms of the Agreement, Mayor McCallion was described as having “made a gift of $2,340,000 to the Foundation to establish a donor-advised
fund” which was to be known as The Hazel McCallion Fund for Arts, Culture
* See Appendix 1 at the end of this Addendum.
and Heritage (“the Fund”). Given that the Gala Fund had been created by
public and corporate ticket purchases from 1987 to 2007, the Mayor acted as a
trustee in making this donation. The gift was made in perpetuity. The Mayor
did not receive a tax receipt for this donation.
The Mayor and the City Manager of Mississauga were named advisors of
the Fund. The advisors were and are to remain in office until either of them
dies or becomes incapable of managing her affairs, or resigns. Under the terms
of the Agreement Mayor McCallion has ongoing rights regarding the naming
of advisors. (Paragraph 2):
Mayor McCallion shall be entitled to appoint additional individuals as Advisors
of the Fund and replace resigning Advisors and name substituted Advisors in the
event an Advisor ceases to qualify as an Advisor hereunder during her lifetime.
Mayor McCallion shall notify the Foundation in writing of all appointments of
Advisors. In the event Mayor McCallion is unable or unwilling to appoint an
Advisor to fill a vacancy … the then City Manager for the Corporation of the
City of Mississauga shall be entitled to appoint Advisors to the Fund. (Exhibit
724, paragraph 2)
On the face of the document, the advisors, currently the City Manager and
the Mayor, also retained advisory powers over distributions from the Fund:
At paragraph 7 of Exhibit 724, the Agreement, provides that:
Notwithstanding that the Directors of the Foundation retain absolute discretion in making grants from the Fund, the intention shall be for the Foundation
to make grants, at least annually, in accordance with the Foundation’s policy
in effect from time to time, based on recommendations and direction to the
Foundation from the Advisor(s). All such recommendations shall be in writing
to the Foundation for approval by the Board of Directors. [emphasis added]
When distributions are required by the Foundation and when no such recommendations are received by the Foundation, or if made are not acceptable to the
Board of Directors of the Foundation, distributions will be made at the discretion
of the Board of Directors of the Foundation but shall be in keeping with the arts,
culture and heritage purposes for which the Fund was established.
The Policies of the Community Foundation referred to in this language and
appended to the agreement require that:
Grants from a Fund may be issued to Canadian registered charities; a Canada
Revenue Agency approved University, a municipality, etc. Granting may only
occur when the major portion of the donated Funds has been received. The
Foundation is subject to disbursement quota requirements made under the
Income Tax Act (Canada) and the Foundation retains the right at all times to
grant in accordance with these requirements.
The language must also be read in conjunction with the Community
Foundation’s own governing documents (below).
Decisions as to grants from the Fund will ultimately fall to be made by the
Community Foundation of Mississauga. The Community Foundation has certified to the Community Foundations of Canada (its national affiliate body) that:
2.Our Community Foundation acts independently of governments, families/
donors, corporations, associations and other groups. [See Exhibit 725, Criteria
for continuing membership in Community Foundations of Canada (cfc)
(2011)].
The relevant portion of the agreement between the Community Foundation
of Mississauga and the Community Foundation of Canada is attached as
Exhibit 725.*
Given this certification, the Community Foundation takes the view, as it
must, that it has absolute independent authority to make granting decisions.
The Mayor does not disagree with this view.
To the date of this Report, questions about authority to make grants
have been moot. The Hazel McCallion Endowment for the Arts, Culture
and Heritage may make distributions only from investment income, and the
Endowment has had no investment income from which to make grants, given
market conditions, in 2008 and 2009.
* See Appendix 2 at the end of this Addendum.
The Hazel McCallion Foundation for the Arts, Culture and Heritage
Each year the Mayor’s Gala continues to have an organizing committee which is
responsible for seeking out sponsors and donations, selling tickets and arranging for entertainment at the event. The organizing committee continues to consult with the Mayor on many of these details. However, since 2008, the Mayor’s
Gala has been administered by the Hazel McCallion Foundation for the Arts,
Culture and Heritage (“the hmfach”) and has incorporated Gala profits into
its accounts. As well, the hmfach received approximately $325,000 held back
from the Mayor’s “donation” of $2.3-million to the Community Foundation of
Mississauga. This amount has been supplemented by donations and proceeds
from the Mayor’s Gala in 2009 and 2010, so that in its August 31, 2010 financial
statement the hmfach showed operating funds of $982,417.
The hmfach is operated by a volunteer Board of Directors led by its
President, Jim Murray. The secretary-treasurer is Douglas Fowles. Mr. Murray
and Mr. Fowles have long been involved on the organizing committee for the
Mayor’s Gala. The board also includes Duncan Hobbs, David O’Brien, Peter
Smith and Joe Watson. Peter McCallion was a member of the Board of the
hmfach until early 2011, when he tendered his resignation. The hmfach was
incorporated by Letters Patent on June 13, 2008. The Board had established a
grants program for “projects that will raise the pulse of arts culture and heritage in the City of Mississauga, or that showcases the art and ingenuity of
Mississauga citizens to the rest of the world” (website). Mayor McCallion is
not involved in decisions as to grants from the hmfach.
The Hazel McCallion Charitable Fund
Since 1992, Mayor McCallion has agreed to associate her name with a charity golf tournament. More than $2,000,000 has been distributed by the golf
tournament’s Charitable Fund to more than 300 charities in Mississauga with
an emphasis on charities which benefit children and youth in Mississauga. The
Mayor Hazel McCallion Charitable Fund is a registered charity pursuant to
the Income Tax Act, rsc 1985 c.1.
The Charity Golf Tournament is organized annually by the Mayor’s Charity
Golf Committee which includes Ron Lenyk (chair), former City employee
Shalini Alleluia, Doug Fowles (who is also a member of the hmfach), Peter
McCallion, Jim Murray, Michael Parsons, John Rogers, Ron Starr and Gerry
Townsend. The Mayor is ex officio a member of the Charity Golf Committee.
The Golf Tournament is administered by a volunteer Board of Directors
which makes the decisions regarding the distribution of funds based on a publicized grant application process which gives priority to charities with a youth
orientation. The Board includes John Rogers (President), Ron Lenyk (VicePresident), Shalini Alleluia (Secretary), Gerry Townsend (Treasurer), Peter
McCallion, Michael Parsons and Ron Starr. The Mayor is ex officio a member
of the Board of Directors.
The Mayor has the authority to distribute up to $1,000 to applicants in
cases of emergencies. She is also consulted by the Board on grant applications.
The City has no role in the administration or distribution of the funds.
ADDENDUM APPENDIX 1
222
ADDENDUM APPENDIX 2
230
APPENDICES
APPENDIX A
Terms of Reference




















  









             



 
               
               
             







                

              
             
           














               



           
               
           

                


              



            



              


               


              
              



            
                
  






              











Appendix A – Terms of Reference 235





           


            
              
             
             
              

          





               
              
                





             
             

            

             











              
             












                
              








           









              



















 




 










 











 



 



 
















 



















APPENDIX B
CITY OF MISSISSAUGA JUDICIAL INQUIRY
THE HONOURABLE MR. JUSTICE DOUGLAS CUNNINGHAM, COMMISSIONER
RULES OF PROCEDURE
Purpose
1.
The Mississauga Judicial Inquiry is an independent Commission established pursuant to s.
274(1) of the Act pursuant to a majority vote of Council of the Corporation of the City of
Mississauga (“Mississauga City Council”) with specific terms of reference to inquire into
to the matters set out in Resolution 0271-2009 adopted by Mississauga City Council on
November 11, 2009. Following the conclusion of the hearings, the Commissioner will
make any recommendations he deems appropriate and in the public interest.
General
2.
Throughout these Rules, the words “Commission” and “Inquiry” are used interchangeably,
and both refer to the City of Mississauga Judicial Inquiry.
3.
Public hearings will be held at 950 Burnhamthorpe Road West in Mississauga. The
Commissioner will set the dates for the hearings. Hearings will take place on Monday
through Thursday from 10:00 a.m. to 4:30 p.m. each week, unless otherwise directed by the
Commissioner.
4.
The Commission is committed to a process of fairness, including public hearings and
public access to evidence and documents used at the hearings.
5.
The Commissioner encourages anyone who may have information that may be helpful to
the Inquiry, including documents and the names of witnesses, to provide this information to
the Office of Commission Counsel at Lenczner Slaght Royce Smith Griffin LLP, 130
Adelaide Street West, Suite 2600, Toronto, ON, M5H 3P5.
6.
People are advised that the law offers protection to witnesses to encourage them to come
forward and give full and forthright evidence to an inquiry.
Standing
7.
Persons, groups of persons, organizations or corporations (“people”) who wish to
participate may seek standing before the Inquiry.
2
8.
The Commissioner may grant standing to people who satisfy him that they have a
substantial and direct interest in the subject matter of the Inquiry or whose participation
may be helpful to the Commission in fulfilling its mandate. The Commissioner will
determine on what terms standing may be granted.
9.
People who are granted standing are deemed to undertake to follow the Rules of Procedure.
10.
People who apply for standing will first be required to provide written submissions
explaining why they wish standing. Written submissions are to be received at the Office of
Commission Counsel no later than noon on Thursday, December 10, 2009.
11.
People who apply for standing will also be given an opportunity to appear in person before
the Commissioner to explain their reasons for requesting standing. Applications for
standing will be heard starting at 10:00 a.m. on Monday, December 14, 2009 at 950
Burnhamthorpe Road West in Mississauga.
12.
The Commissioner has appointed Commission Counsel to represent his and the public
interest. Commission Counsel will ensure that all matters which bear on the public interest
are brought to the attention of the Commissioner. Commission Counsel will have standing
throughout the Inquiry.
Preparation of Documentary Evidence
13.
As soon as possible following the granting of standing, people with standing will produce
to the Commission all documents in their possession, power or control that have a
semblance of relevance to the subject matter of the inquiry. People are encouraged to
advise Commission Counsel of the names, addresses and telephone numbers of all
witnesses they feel should be heard and, if possible, provide summaries of the information
the witnesses may have.
14.
Within 15 days after the granting of standing, people with standing will provide to the
Commission a plan setting out how they will identify, locate and produce all documents
that have a semblance of relevance to the subject matter of the inquiry.
15.
All documents received by the Commission will be treated by the Commission as
confidential, unless and until they are made part of the public record or the Commissioner
otherwise directs. However, Commission Counsel are permitted to produce such
documents to potential witnesses.
16.
Where possible, Commission Counsel will make best efforts to provide, both to witnesses
and people with standing, those documents that will likely be referred to during a witness’
testimony at least five days before the witness commences his or her testimony, unless the
Commissioner directs otherwise. Before being provided with such documents, witnesses
and people with standing will be required to sign an undertaking that they will use the
documents only for the purposes of the Inquiry.
17.
No document will be used in cross-examination or otherwise unless Commission Counsel
and the parties have been advised in advance and the document has been provided to
Appendix B – Rules of Procedure 239
3
Commission Counsel, the witness, and people with standing, unless the Commissioner
directs otherwise.
Expert Witnesses
18.
A copy of an expert witness’ report shall, at least 14 days before the expert witness’
appearance, be served on the parties.
Witness Interviews
19.
Commission Counsel or others designated by Commission Counsel for that purpose will
interview people who have information or documents which have bearing on the subject
matter of the Inquiry and may be helpful in fulfilling the Commission’s mandate. People
who are interviewed are welcome, but not required, to have legal counsel present.
20.
Witnesses are advised that the Public Inquiries Act provides that no adverse employment
action shall be taken against any employee who, acting in good faith, has given information
to an Inquiry.
21.
Following the interview, Commission Counsel or the person acting as his agent for the
purpose of the interview will prepare a summary of the witness’ anticipated evidence.
Before the witness testifies before the Commission, Commission Counsel will provide a
copy of the summary to the witness for his or her review.
22.
The witness summary, after being provided to the witness, will be shared with people with
standing at least five days before the witness commences his or her testimony, unless the
Commissioner directs otherwise. Before being given a copy of the witness summary,
people with standing will be required to sign an undertaking that they will use the witness
summary only for the purposes of the Inquiry.
23.
Commission Counsel and the witness may prepare a sworn affidavit of the witness’
evidence. At the Commissioner’s discretion, this sworn affidavit can be admitted into
evidence in lieu of part or all of that individual’s viva voce testimony.
Evidence
24.
The Commissioner may receive any evidence that he considers to be helpful in fulfilling
the mandate of the Inquiry. The Commissioner is entitled to receive evidence which might
otherwise be inadmissible in a court of law.
25.
Subject to the Commissioner’s discretion, the Commissioner may, as much as practicable
and appropriate for a fair hearing, refer to and rely upon:
(a) any existing records or reports relevant to the subject matter of the inquiry;
(b) any agreed statement of facts prepared by Commission Counsel;
(c) the testimony of a representative witness of a participant in a public inquiry;
4
(d) any summary of background facts prepared by Commission counsel.
26.
Commission counsel may prepare summaries of background facts and documents relevant
to the subject matter of the inquiry. Commission counsel shall provide each party an
opportunity to review a summary before it is introduced as evidence. A party may submit
written comments and propose witnesses to Commission Counsel for the purpose of
supporting, challenging, commenting upon or supplementing a summary.
27.
Witnesses who testify will give their evidence under oath or upon affirmation. Witnesses
may be called upon to testify in panels.
28.
The Commissioner may set time allocations for the conduct of examinations and crossexaminations. It will be the practice of Commission Counsel to issue and serve a subpoena
(summons to witness) upon every witness before he or she testifies.
29.
Witnesses are entitled to have their own counsel present while they testify. Counsel for a
witness will have standing for the purpose of that witness’ testimony.
30.
Witnesses may be called more than once.
31.
In the ordinary course, Commission Counsel will call and question witnesses who testify at
the Inquiry. Counsel for a witness may apply to the Commissioner to lead a particular
witness’ evidence-in-chief. If counsel is granted the right to do so, examination shall be
confined to the normal rules governing the examination of one’s own witness in court
proceedings, unless otherwise directed by the Commissioner.
32.
The order of examination will be as follows:
(a) Commission Counsel will lead evidence from each witness. Except as otherwise
directed by the Commissioner, Commission Counsel is entitled to ask both leading and
non-leading questions;
(b) People with standing will then have an opportunity to cross-examine the witness the
extent of their interest. The order of cross-examination of each witness will be
determined by the people with standing and, if they are unable to reach agreement, by
the Commissioner;
(c) Counsel for a witness will examine last, unless he or she has questioned the witness-inchief, in which case there will be a right to re-examine the witness; and
(d) Commission Counsel will have the right to re-examine last.
33.
If Commission Counsel elects not to call a witness or to file a document, anyone with
standing may apply to the Commissioner to do so or to direct Commission Counsel to do
so.
Appendix B – Rules of Procedure 241
5
34.
All hearings are open to the public. However, where the Commissioner is of the opinion
that:
(a) matters involving public security may be disclosed at the hearing; or
(b) intimate financial or personal matters, or any other matters may be disclosed at the
hearing that are of such a nature, having regard to the circumstances, that the
desirability of avoiding disclosure in the interest of any person affected or in the public
interest outweighs the desirability of adhering to the principle that hearing be open to
the public,
the Commissioner may hold the hearings concerning any such matters in the absence of the
public on such terms as he may direct
35.
Applications from witnesses or people with standing to hold any part of the hearing in the
absence of the public should be made in writing to the Commissioner at the earliest
possible opportunity.
36.
The transcripts and evidence from the hearing will be made available as soon as possible
for public viewing. If any part of the hearing is held in the absence of the public, the
transcripts and exhibits from that part of the hearing will only be made available for public
viewing on such terms as the Commissioner may direct.
37.
The proceedings are open to the pubic. The use of television cameras or other recording
electronic or photographic equipment in the hearing room will be permitted at the direction
of the Commissioner.
Right to Counsel
38.
Witnesses and people with standing are entitled, but not required, to have counsel present
while Commission Counsel interview them and while they testify.
39.
Counsel will be retained at the expense of the witness and people with standing. The
Terms of Reference do not grant the Commissioner jurisdiction to order the City of
Mississauga to provide funding for legal counsel. However, requests for funding may be
made to the Commissioner at the hearing on standing, and the Commissioner may make
recommendations to the City of Mississauga.
Notices Regarding Misconduct
40.
The Commissioner will not make a finding of misconduct on the part of any person unless
that person has had reasonable notice of the substance of the alleged misconduct and was
allowed full opportunity during the Inquiry to be heard in person or by counsel.
41.
All notices of alleged misconduct will be delivered on a confidential basis to the person to
whom the allegations of misconduct refer.
6
42.
If a notice of alleged misconduct is delivered, the recipient may apply to the Commissioner
for leave to call evidence which he or she believes may be helpful to respond to the alleged
misconduct.
Amendment to the Rules
43.
These Rules may be amended and new Rules may be added if the Commissioner finds it is
helpful to do so to fulfill the Commission’s mandate and to ensure that the process is
thorough and fair.
APPENDIX C
Commissioner’s Ruling on Standing
December 14, 2009
[Facsimile]
In terms of standing, I am prepared to grant standing to the following:
Mayor Hazel McCallion, Peter McCallion, OMERS, 156 Square One
Limited, Enersource and the City of Mississauga. I'll speak to the other
three applicants momentarily.
As to the matter of funding, what I would like to see happen is for
counsel who are seeking funding to prepare and submit a detailed
funding proposal, including rates, including proposed preparation and
attendance time, to Commission Counsel within a week of today's date.
It may be that counsel for the City will be able to agree to some or all of
what is being proposed, but I will leave that to counsel for the City,
Commission Counsel and others to formulate. In the absence of any
2
agreement, then I will formulate my recommendation to the City with
respect to the matter of funding as quickly as possible.
As to the three (3) individuals who spoke to us this morning, standing at
this stage will not be granted. However, I am instructing Commission
Counsel to meet with each of the three (3) applicants, Mr. Sookraj, Mr.
Abdelmessih, and Ms. Bennett, and then have our investigators
interview each of you with a view to determining how you may be of
assistance to me in carrying out my responsibilities as Commissioner.
It may be that at some later date, depending on how matters develop, I
will reconsider the issue of the request for partial standing, but at the
present time what I'm most interested in receiving from each of you is
information, either in the form of statements or in the form of
documentary evidence that will be of assistance to my conduct of this
Inquiry.
Appendix C – Commissioner’s Ruling on Standing 245
3
Unless there's anything else, I thank you all for participating this
morning. And, as I indicated in my earlier remarks, it is my hope that
we can commence this Inquiry no later than March 1st and if we can do
it at an earlier date, we will make every effort to do so.
I want you all to understand, those of you who may wonder why it will
take that long, it's important at the front end of any inquiry to do your
homework and get everything ready for the evidentiary portion of the
Inquiry. So we have, as Mr. McDowell has indicated, engaged
investigators who will be interviewing witnesses, compiling documents,
working with all counsel who've been granted standing, with a view to
collecting the information that will be necessary for us to proceed with
dispatch once we start the evidentiary portion of this Inquiry. It's my
hope that, having done all of that preliminary spade work, that we'll be
able to carry on with this Inquiry in a way that will not waste time, that
will not involve a lot of investigation during the course of the Inquiry,
4
and that we can get right to the evidence and right to the heart of the
matters at issue in a precise and expeditious way.
So I look forward to seeing you all again and thank you very much.
APPENDIX D – List of Exhibits
Appendix D – List of Exhibits 249






































 






















   


 



















 





  




 

 

   

 



APPENDIX E
Commissioner’s Opening Remarks
Speaking Notes for Opening of Mississauga Judicial Inquiry
The Honourable J. Douglas Cunningham, Commissioner
December 14, 2009
Good morning, ladies and gentlemen. I am pleased to welcome you to the first public session of
the Mississauga Judicial Inquiry. My name is Doug Cunningham, and I am the Associate Chief
Justice of the Ontario Superior Court of Justice. I have been appointed by the Chief Justice of
that Court to be the Commissioner for this Judicial Inquiry pursuant to the provisions of the
Municipal Act.
Before we begin hearing from counsel who are here today, I would like to take a few minutes to
discuss the Inquiry. In particular, I’d like to briefly explain the purpose of this Inquiry, how it
will operate, and then address what I consider the criteria to be for decisions about standing and
funding.
Please note that everything I say during the course of the Inquiry, as well as the submissions of
all counsel, will be available on the Inquiry website: www.mississaugainquiry.ca. This website
provides the public with access to all of the information about the Inquiry, and any
announcements about Inquiry matters will be posted on that website. Once the hearings begin,
you will also be able to access each day’s transcripts, hopefully by 9:00 pm or so every night,
and review the schedule for upcoming testimony. The website also includes contact information
for the people who can answer any questions about any aspect of the Inquiry.
Purpose of an Inquiry
Turning then to the purpose of an Inquiry. A judicial inquiry is not a trial. No-one is facing
criminal charges, nor is anyone being sued civilly. A Commission’s goal is to inquire into and
report on matters of public interest surrounding the conduct of business in and by the City of
Mississauga, and to make recommendations for the future, where appropriate. As has been said,
good government depends in part upon good information. I, as Commissioner, and my
Commission Counsel are impartial; our mandate is to conduct an investigation and present
evidence to determine the facts. I then have a duty to report to the public about those facts and to
express my opinion with respect to those facts.
I should point out that this inquiry is quite different than many others that you may have heard
about in recent years. For example, in the inquiries into the Walkerton water system and the Air
India bombing, part of the goal was to determine what caused these tragedies and how those
errors could have been prevented. In each instance there had been horrific events involving loss
of life. In this case, on the other hand, we set out to examine certain transactions and
relationships. These may well be important matters, and they are certainly matters of contention.
I want to emphasize that we do not begin with the presumption that there is established
wrongdoing or negligence.
I have taken note of the fact that City Council believes it appropriate that there be a judicial
inquiry into certain transactions of City business, and the surrounding circumstances. It may
1185408.1
2
interest you to know that Ontario municipalities have been entitled to conduct inquiries such as
this since before Confederation. I hope that our efforts will help Council members and the
public to get that information.
This Inquiry was created by a vote of Mississauga City Council, and the Terms of Reference
were finalized by vote on November 11, 2009. The Terms of Reference can be found on the
Inquiry website. I take my factual summary from those Terms. In particular, we are going to
inquire into:
1. First, the terms of the December 2000 Enersource Shareholders Agreement. The City
was a party to that Agreement and is a 90% owner of Enersource, and City Council has
expressed concern about terms that gave certain powers to the 10% owner. We will have
evidence as to how the terms came to be, who approved them, and what Council knew
about the versions of the Agreement as they were proposed. We will look at the
surrounding circumstances of the Agreement. As an example, we will consider the
changing energy market and the different regulatory regimes which were in place as the
Agreement was negotiated.
2. The second topic is the agreement that the City entered into to purchase 8.5 acres of land
in the City Centre and lease it to the Sheridan Institute of Technology and Advanced
Learning for a new college campus. Another company, World Class Developments, had
previously agreed to purchase this land, and there was a court application about whether
that earlier Agreement of Purchase and Sale remained valid. Peter McCallion, Mayor
McCallion’s son, was involved in the transaction and the subsequent Court action on
behalf of World Class Developments. We will inquire into the context of the deals, the
history of these deals and the conduct of City business with respect to them. We will
examine the settlement of the litigation.
3. An issue has also been raised surrounding whether Mayor McCallion declared a conflict
of interest in the meeting which considered the WCD transaction to which I have referred
above, whether it was properly recorded in the Minutes and so on. I expect that this issue
will not take as long to resolve as the issues which I have covered in my brief review.
This is the inquiry framed by City Council. I am bound by law to follow the Terms of Reference
as I understand them.
How the Inquiry Will Operate
In fulfilling Council’s mandate, we will conduct the hearings with civility and courtesy to all
participants, witnesses and members of the public. The Inquiry is not bound by the rules of
evidence that apply in a court, but they will serve as a guideline. I have developed Rules of
Procedure for this Inquiry, and these draft Rules are available on the Inquiry webpage now.
Commission Counsel have been working hard since appointed to collect documents, identify
relevant people, and acquire the information we need to move forward with the Inquiry. After
today’s hearing, we will know who the parties seeking standing are, and will receive documents
from people with knowledge about the matters to be investigated. This information will
1185408.1
Appendix E – Commissioner’s Opening Remarks 309
3
determine when we can start the Inquiry. Our goal is to start in the first quarter of 2010, and we
will update the public as soon as we set an official start date.
Standing and Funding
In a moment, we will hear from individuals and organizations who would like standing for this
hearing. Parties granted full standing have the opportunity to examine witnesses and make
closing submissions. They will also receive copies of all documents that will be made exhibits,
and copies of witness statements as they are prepared.
I am also prepared to consider granting limited standing to parties who may wish simply to make
written submissions at the conclusion of the evidence.
Parties with standing are obligated to provide Commission Counsel with all documents have any
bearing on the subject matter of the inquiry, and the names, addresses and telephone numbers of
all witnesses they feel should be heard and, if possible, provide summaries of the information the
witnesses may have. Parties must also provide Commission Counsel with a plan setting out how
they will identify, locate and produce all documents that have any bearing on the subject matter
of the inquiry.
Please note that the people requesting standing today are not the only ones with relevant
information. If you have information that would be helpful to the Commission, or if you know
someone who may have helpful information, please contact Commission Counsel. We must
consider all relevant information out there, and are dependent upon the public to assist us in
obtaining that information.
In deciding whether or not to grant standing to those requesting it today, I must consider whether
the individual or corporation has a substantial and direct interest in the subject matter of the
Inquiry, and whether their participation may be helpful to the Commission in fulfilling its
mandate.
Parties can also request funding in order to engage counsel and otherwise participate in the
Inquiry. I do not have the jurisdiction to order that the City assist any party with funding. I can,
however, recommend that the City consider assisting parties with the costs they may incur in
participating in the hearing. I hope and expect that the City will consider my recommendations
as to funding carefully. In making that recommendation, I will bear in mind the following
considerations:
•
What is the nature of the party’s interest and proposed involvement in the hearing?
•
Is the applicant able to participate in the Inquiry without funding?
•
Does the applicant for have a satisfactory proposal as to the use of the funds?
1185408.1
4
If the City elects to provide funding to certain parties, Commission Counsel can appoint a third
party to assess the way that the money is being spent, in order to ensure that it is consistent with
the principles that led the City to provide funding to a party in the first place.
Having made these introductory remarks, I thank you for being here today, and turn the hearing
over to Will McDowell, Commission Counsel.
1185408.1
APPENDIX F
Witnesses and Other Key Individuals and Organizations
Witness Name
Date of
Testimony
Role
The Honourable
May 25, 2010
Donald S. Macdonald
Expert witness regarding
the changes to the regulation of the energy industry
in the late 1990s
Jonathan Toll
May 25, 2010
Managing director of
mergers & acquisitions, td
Securities; retained by the
City of Mississauga to conduct bid process regarding
Hydro Mississauga
William Houston
May 26, 2010
Outside counsel to the
City of Mississauga during Hydro Mississauga /
Enersource negotiations
David O’Brien
May 27, 2010
August 11, 2010
Former city manager and
first president & ceo of
Enersource
David Lever
May 31, 2010
Outside counsel to
Borealis during Hydro
Mississauga / Enersource
negotiations
Witness Name
Date of
Testimony
Role
Michael Nobrega
May 31, 2010
August 16, 2010
President of Borealis during Hydro Mississauga /
Enersource negotiations;
president & ceo of
omers, 2007–present
Jeffrey Singer
June 1, 2010
Outside counsel to the
City of Mississauga
Mary Ellen Bench
June 1, 2010
June 2, 2010
August 10, 2010
Solicitor for the City
of Mississauga
Mayor Hazel
McCallion
June 2, 2010
September 20, 2010
September 21, 2010
September 23, 2010
Mayor of the City of
Mississauga
Katie Mahoney
June 15, 2010
Mississauga city councillor
Edward (Ed) Sajecki
July 8, 2010
August 10, 2010
City commissioner of
planning and building
Abraham (Bram)
Costin
July 8, 2010
Outside counsel to
Oxford / 156 Square
One Ltd.
Ken Lusk
July 26, 2010
Former owner of
50 per cent of Hawthorne
Realty Advisors
John Zingaro
July 26, 2010
Former assistant city
solicitor
Peter McCallion
July 27, 2010
July 28, 2010
Principal and/or agent of
wcd; son of Mayor Hazel
McCallion
Michael Latimer
July 28, 2010
President & ceo of Oxford
Appendix F – Witnesses and Other Key Individuals 313
Witness Name
Date of
Testimony
Michael Dal Bello
July 29, 2010
Senior vice-president, real
estate, aim
Dean Hansen
July 29, 2010
Portfolio manager, real
estate, aim
Barry Lyon
August 9, 2010
Principal of N. Barry Lyon
Consulting Ltd., development consultants to wcd
Scott Walker
August 9, 2010
Associate at N. Barry Lyon
Consulting Ltd., development consultants to wcd
Shalini Alleluia
August 9, 2010
Retired city employee
Craig Coleman
August 11, 2010
President, officer, and
director of 156 Square One
Ltd.; owner of Hawthorne
Realty Advisors and
Stonecap Realty
Leo Couprie
August 17, 2010
Principal of wcd
Tony DeCicco
August 17, 2010
August 18, 2010
Principal of wcd
beginning in 2007
Michael Kitt
August 19, 2010
Executive vice-president,
development, Oxford
Marilyn Ball
August 19, 2010
Director of development
& design division, City
Planning & Building
Department
Leo de Bever
September 13, 2010
ceo of aim
John Di Poce
September 13, 2010
Investor in wcd
Murray Cook
September 15, 2010
Initial principal of wcd
Role
Witness Name
Date of
Testimony
Role
Janice Baker
September 15, 2010
City manager
Suresh (Steve) Gupta
September 16, 2010
President & ceo of
Easton’s Group of
Hotels Inc.
Emilio Bisceglia
December 14, 2010
Counsel to wcd
David Mullan
December 15, 2010
December 16, 2010
A leading Canadian expert
on administrative law
and a former integrity
commissioner for the City
of Toronto
Greg Levine
December 15, 2010
December 16, 2010
An authority and author
on municipal ethics
Lorne Sossin
December 15, 2010
December 16, 2010
Dean of Osgoode Hall
Law School and expert
on administrative law and
public administration
Other Key Individuals and Organizations
Name
Role
156 Square One Ltd.
Subsidiary of aim, co-owner of the
City Centre Land
Alberta Investment Management
Corporation (aim)
Crown corporation that provides
investment management services to
pension and endowment funds
Monica Bianchini
Counsel to wcd during the negotiations to extend condition deadlines
Appendix F – Witnesses and Other Key Individuals 315
Name
Role
D. Jared Brown
Counsel to wcd for the incorporation of the company
Grant Charles
President, officer, & director of
156 Square One Ltd.; owner of
Hawthorne Realty Advisors and
Stonecap Realty
Carmen Corbasson
Mississauga city councillor;
resigned from Enersource board
on November 7, 2007
John Filipetti
Vice-president of development,
Oxford Properties Group
Crystal Greer
City clerk
Paul Haggis
President & ceo of omers until
2007
Hawthorne Realty Advisors
Investment management company
for 156 Square One Ltd.
Carol Horvat
Executive assistant to the mayor
Nando Iannicca
Mississauga city councillor;
resigned from Enersource board
on November 7, 2007
Angus MacDonald
Acting city manager after David
O’Brien
Gerard G. McGrath
Chief financial officer & secretary
of Borealis
Michal Minkowski
Solicitor for the City of Mississauga
Iain Morton
Counsel to Borealis during the
Name
Role
Ontario Municipal Employees
Retirement System (omers)
Pension fund and one of the largest
institutional investors in Canada;
owner of Square One Shopping
Centre and co-owner of City
Centre Land
Oxford Properties (Oxford)
Real estate investment, management,
and development corporation;
wholly owned subsidiary of omers
Ron Peddicord
Former senior vice-president,
development, Oxford
Ben Phillips
Development planner, City
Planning & Building Department
Shelley Pohjola
Solicitor for the City of Mississauga
at the beginning of the Enersource
negotiations; left city before conclusion of the Enersource deal
Wayne Rosenman
Counsel to wcd during the drafting
of agreement of purchase and sale
for the City Centre Land
Susan Rosenthal
Counsel to wcd during the application process to the city for the
removal of the “H” designation
Gawain Smart
Vice-president, legal, Oxford
(May 2008 to present)
John Rhude
Outside counsel to city during the
World Class Developments, Ltd.
(wcd)
Property development company
APPENDIX G
Enersource Shareholders’ Agreement (Exhibit 50)
Appendix G – Enersource Shareholders’ Agreement 319
APPENDIX H
Oxford’s Mississauga City Centre Land Holdings
(Exhibit 96)
APPENDIX I
Agreement of Purchase and Sale, Blocks 9 and 29
(Exhibit 97)
Appendix I – Agreement of Purchase and Sale 343
APPENDIX J
Ruling on Conflict of Interest
July 8, 2010 Pursuant to a resolution dated November 11, 2009, Mississauga City Council, having earlier voted to request a Judicial Inquiry under the Municipal Act, amended earlier Terms of Reference in order to clarify its request for the Inquiry. As a result, as Commissioner, I have been given a mandate as follows: 1. To investigate and inquire into all relevant circumstances pertaining to the various transactions and matters referred to in the recitals to this resolution, including the relevant facts pertaining to the various transactions at the relevant time, the basis of and reasons for making the recommendations for entering into the subject transactions and the basis of the decisions taken in respect of the subject transactions; 2. To investigate and inquire into the relationships, if any, between the existing and former elected and administrative representatives of the City of Mississauga and the existing and former principals and representations of WCD, OMERS and its affiliate companies at all relevant times in the context of the Appendix J – Ruling on Conflict of Interest 373
2 transactions and matters described in the recitals to this resolution; and, 3. To investigate and inquire into whether any existing or former elected or administrative representatives of the Corporation of the City of Mississauga had a direct or indirect personal economic interest, or other conflict of interest or misconduct that might have influenced their actions in any of the subject transactions or matters described in the recitals to this resolution. Counsel for Mayor McCallion, supported by counsel for Peter McCallion, on the eve of having witnesses called on the second phase of the Inquiry, has raised the issue of what standard I am to apply when considering the conduct of the Mayor and as well her son. In other words, asking that procedural fairness be maintained, counsel for the Mayor submits that any reference to the term “conflict of interest” must be gauged in accordance with the only standard in place at the time, namely the Municipal Conflict of Interest Act (MCIA). To do 374 Updating the Ethical Infrastructure
3 otherwise, counsel submits, would be to move the goal posts and apply a standard not in place when the matters at issue occurred. Simply put, she would have to face new rules that would be applied to past conduct. In her very thoughtful submissions, Ms McIntyre says that procedural fairness requires advance notice of the standard of conduct to be applied by me in any consideration of the evidence, and points to a number of authorities in support of her position, including the report of Justice Jeffrey Oliphant in the Mulroney‐Schreiber Inquiry, as well as the comments of O’Keefe J. in Stevens v. Canada (Attorney General) where Commissioner Parker was chastised for drafting and utilizing his own definitions of real and apparent conflict of interest. Ms McIntyre argues that my mandate is much more restrictive than that which governed Justice Oliphant, pointing to the third branch of the Resolution which calls upon me to determine, as she puts it, whether there was a conflict of interest or misconduct. I fully recognize that I have no authority or jurisdiction to make findings of criminal or Appendix J – Ruling on Conflict of Interest 375
4 civil liability. That is not the purpose of this Inquiry, nor, I am persuaded, was it ever the intention of Council. The overarching purpose of this Inquiry is to look not only to the past, but to the future in a broad consideration of the good government of the Municipality. It may be that, after hearing all of the evidence, I will make recommendations having to do with the future conduct of the public business of the Municipality. I may not. That will entirely depend upon how the evidence unfolds. It should be noted, at this point, that the Council, prior to voting to request a judicial inquiry, had the benefit of two legal opinions from two outside law firms. Both opinions, for the most part, found no conflict of interest with respect to either of the transactions at the issue by staff, Council or the Mayor, using the MCIA as the test of a conflict of interest. Ms McIntyre suggests that all this Inquiry is about is to provide a third opinion. I disagree. Not only would this be a terribly expensive way of obtaining yet another opinion, it is not what Council requires of me in carrying out the mandate I have been given. I am not constrained in my considerations of conflict of interest to that which is 376 Updating the Ethical Infrastructure
5 set out in the MCIA. Rather, the Terms of Reference I have been given to conduct this investigation were made deliberately broad, not only to permit me to investigate specifically all relevant circumstances pertaining to the two transactions at issue, but also to investigate and inquire into whether any elected official or staff representative had a direct or personal economic interest, or other conflict of interest or misconduct that might have influenced their actions in the two transactions at issue. Clearly, in my view, very broad Terms of Reference. Needless to say, I am not entitled to draw my own Terms of Reference, nor do I intend to. Much like the Sarnia Inquiry, which was considered by the Supreme Court of Canada in Consortium Developments (Clearwater) Ltd. V. Sarnia (City), [1998] 3 S.C.R. 3, I am to consider, in part, relationships between the existing and former elected and administrative representatives of the City and existing and former principals and representatives of WCD, OMERS and any affiliated companies. In doing so, I intend to fulfill the third prong of the mandate provided to me. If, as I say, at the end of the day, after making my findings of fact, I deem it necessary or helpful, I will make recommendations to the Municipality as to how the good government Appendix J – Ruling on Conflict of Interest 377
6 of the City could be better achieved. If Council had intended that I only measure any issue of conflict of interest against the MCIA, it would have so requested. It did not. What then of conflict of interest and the standard to be applied. Counsel for the City, Mr. Lax, argues that no definition is required, while Commission Counsel suggests I can employ commonly held definitions of conflict of interest. Clearly, there is much in the common law that is of assistance. Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170 is instructive. While Sopinka J. writing for the majority, was alive to the fact that elections may be fought on issues ultimately coming before Council, he distinguishes between partiality by reasons of pre‐judgment on the one hand and by reason of personal interest on the other. As he writes in paragraph 55: It is apparent from the facts of this case, for example, that some degree of pre‐judgment is inherent in the role of a councillor. That is not the case in respect of interest. There is nothing inherent in the hybrid functions, political, legislative or otherwise, of municipal councillors that would make it mandatory or desirable to excuse them from the requirement that they refrain 378 Updating the Ethical Infrastructure
7 from dealing with matters in respect of which they have a personal or other interest. It is not part of the job description that municipal councillors be personally interested in matters that come before them beyond the interest that they have in common with the other citizens in the municipality. Where such an interest is found, both at common law and by statute, a reasonably well‐informed person would conclude that the interest might influence the exercise of that duty. This is commonly referred to as a conflict of interest. [page 197] See Re Blustein and Borough of North York, [1967] 1 O.R. 604 (H.C.); Re Moll and Fisher (1979), 23 O.R. (2d) 609 (Div. Ct.); Committee for Justice and Liberty v. National Energy Board, supra; and Valente v. The Queen, [1985] 2 S.C.R. 673. In Moll v. Fisher et al., [1979] O.J. No. 4113, Robins J. wrote at paragraph 10: This enactment, like all conflict‐of‐interest rules, is based on the moral principle, long embodied by our jurisprudence, that no man can serve two masters. It recognizes the fact that the judgment of even the most well‐meaning men and women may be impaired when their personal financial interests are affected. Public office is a trust conferred by public authority for public purpose. And Appendix J – Ruling on Conflict of Interest 379
8 the Act, by its broad proscription, enjoins holders of public offices within its ambit from any participation in matters in which their economic self‐interest may be in conflict with their public duty. The public’s confidence in its elected representatives demands no less. As long ago as 1904, in L’Abbe v. Blind River (Village) 1904 CarswellOnt. 87, 3 O.W.R. 162 (Div. Ct.), Boyd J., writing for the Divisional Court, stated at paragraph 11: The High Court of Parliament was not only a legislative but a judicial body. It combined legislative capacity and judicial power; and it would seem that the analogy of cases as to judges and magistrates strongly applies to the fiduciary conduct of municipal councillors. The member of a council stands as trustee for the local community, and he is not so to vote or deal as to gain or appear to gain private advantage out of matters over which he, as one of the council, has supervision for the benefit of the public. The councillor should not be able to invoke the political or legislative character of his act to secure immunity from control, if the taint of personal interest sufficiently appears therein. 380 Updating the Ethical Infrastructure
9 The important words I take from that paragraph are “deal”, “gain” and “or “appear to gain”. Members of City Council are entrusted by those who elect them to act in the public interest. Optics are important. In other words, members of a municipal council must conduct themselves in such a way as to avoid any reasonable apprehension that their personal interest could in any way influence their elected responsibility. Suffice it to say that members of Council (and staff) are not to use their office to promote private interests, whether their own or those of relatives or friends. They must be unbiased in the exercise of their duties. That is not only the common law, but the common sense standard by which the conduct of municipal representatives ought to be judged. So for these reasons, I see no need to more precisely define conflict of interest before embarking upon the evidentiary stage. No one at the end of the Inquiry should feel as though a standard any different than that which existed at the relevant times was being imposed. I agree with Ms McIntyre that it would be unfair to use the proposed Mississauga conduct or any other municipal guidelines. There is no reason to do so. As Commissioner Oliphant put it so well: Appendix J – Ruling on Conflict of Interest 381
10 Public office holders ultimately owe their position to the public, whose business they are conducting. Ensuring that they do not prefer their private interests at the expense of their public duties is a fundamental objective of ethics standards. It must always be an objective test: what should a reasonable person have done in similar circumstances? One final note, When Mayor McCallion swore her oath or declaration of office yet again on December 4, 2006, she agreed inter alia to “…truly, faithfully and impartially exercise this office…” She did not simply say she would abide by the Municipal Conflict of Interest Act. ACKNOWLEDGEMENTS
While I had initially hoped this Inquiry would begin much sooner than it did,
I very quickly came to realize the scope of the pre-inquiry investigative work
and the complexity of reviewing, prioritizing, and circulating the evidence as
it came to light. As with any inquiry of this sort, especially one with political
overtones, many leads were forthcoming, some of which bore fruit; others did
not. Nevertheless, in fulfilling my mandate, it was necessary for Commission
counsel to thoroughly investigate, assess, cull, and prepare the evidence before
presentation at the public portion of the Inquiry. All this work allowed the
Inquiry to run smoothly.
Once we got under way, on May 25, 2010, the proceedings moved very efficiently. For that I am deeply grateful to all counsel who appeared. Their civility
and professionalism were remarkable. Needless to say, this co-operation made
my task much easier.
The following counsel appeared before the Inquiry:
Commission Counsel
Will McDowell and Naomi Loewith – Lenczner Slaght Royce Smith Griffin
llp
383
Counsel to the City of Mississauga
Clifford Lax, Tracy Wynne, Daniel Schwartz, and James Renihan – Lax
O’Sullivan Scott Lisus llp
Counsel to Mayor McCallion
Elizabeth McIntyre, Freya Kristjanson, and Adrienne Telford – Cavalluzzo
Hayes Shilton McIntyre & Cornish llp
Counsel to Peter McCallion
Brian Gover and Luisa Ritacca – Stockwoods llp
Counsel to wcd
Linda Rothstein and Jean-Claude Killey – Paliare Roland Rosenberg Rothstein
llp
Counsel to omers
Michael Barrack, John Finnigan, and Deborah Palter – Thornton Grout
Finnigan llp
Counsel to aim
Don Jack and Adam Goodman – Heenan Blaikie llp
Counsel to Enersource
Alan Mark and Kelly Friedman – Ogilvy Renault llp
Counsel to William Houston
Peter Cavanagh – Fraser Milner Casgrain llp
Counsel to Suresh (Steve) Gupta
Bruce Thomas – Thomas Gold Pettingill llp
Counsel to John Di Poce
John Brunner – Brunner and Lundy
Counsel to Emilio Bisceglia
Paul Schabas – Blakes llp
Acknowledgements 385
I am greatly indebted to everyone who assisted in bringing this Report to
fruition. Let me immediately say how grateful I am to the Commission’s lead
counsel, Will McDowell, and his wonderful team: Naomi Loewith, Yashoda
Ranganathan, and Ian MacLeod.
I am indebted as well to George Crossman, the Commission’s commercial
law advisor, and Ava Arbuck, staff lawyer to the Inquiry. Their ongoing advice
greatly assisted me throughout.
May I also express my sincere thanks to the Honourable Donald Macdonald,
Professor David Mullan, Dean Lorne Sossin, and Dr. Greg Levine. These eminent members of the Ontario legal community gave their time to testify before
the Inquiry regarding significant legal issues and legislative background. Their
evidence was of great assistance to the Inquiry and especially to the formulation of the recommendations.
The Commission also benefited from the submissions of Peter Downard and
Ryder Gilliland concerning the openness and transparency of the proceedings.
I am also most grateful to Mary Ellen Bench, Mississauga’s city solicitor,
and her colleagues, all of whom were of enormous assistance at the beginning
of the Inquiry.
Public inquiries are highly complex proceedings that require a diverse team
of dedicated administrators to operate openly and efficiently. The Inquiry staff
worked vigorously and diligently each day, and I am very grateful for all their
efforts.
I would like to thank Anne Bruzuchalski, Wendy Warnock, Sue Kranz,
and Jovana Velimirovic for their thorough command of the courtroom.
In the area of document management, I am similarly grateful to the talented staff at Potter Farrelly & Associates – Kearren Bailey, Elizabeth Miller,
and Alexander Parkes – for their invaluable experience with public inquiries
and their magnificent contribution to this one.
Many thanks to Peter Rehak, the Inquiry’s media relations consultant, who
handled a challenging role with poise and grace.
The editorial team of Shipton McDougall Maude have considerable experience with public inquiries. I am grateful to Dan Liebman, Mary McDougall
Maude, and Rosemary Shipton for their thoughtful work. Deborah Marshall
did a careful job as proofreader.
Laura Brady was responsible for the design and typesetting of the Report,
and I thank her for her fine contribution.
I would also like to extend a warm thank you to the staff and students at
Lenczner Slaght Royce Smith Griffin llp for their tremendous assistance to
Commission counsel and the Inquiry in general: Bahi Thiyagarajah, Ken Bell,
Jason Yetman, and Tracy Fadlalallah (it staff ); Esther Saint Clair, Kimberley
Bowyer, Nafilia Malik, and Erin Judges (legal assistants); and Brianne Bovell,
Susanne Coles, Tim Hudek, Ryan Liss, Brendan Morrison, Sean O’Donnell,
and Andrew Porter (law students).
As well, I wish to thank the members of Rogers Television for their broadcasting coverage of the Inquiry: Jake Dheer, Qaiser Abbas, Gordon MonyPenny, and Frank Bosnjak.
The Inquiry would not have been the accessible proceeding that it was
without the help of Djordje Sredojevic, who maintained the website and kept
it open and running at all times.
The professionals at Froese Forensic were of great assistance in the investigative stage of the Inquiry. For their excellent work, I extend my sincere thanks
to Jeffrey Filliter, Ken Froese, Kevin Lo, Ainsley Vaculik, and Brian Verheul.
I am also deeply indebted to my assistant, Inez Conti, who is always a
delight to work with and was very dedicated to the work of the Inquiry.
It was a great honour and wonderful challenge to act as Commissioner of
this Inquiry, and I am very grateful to have had so many talented and dedicated
people to work with.

Report: Updating the Ethical Infrastructure

Transcription

Similar documents

Improve your lifestyle, keep it on track! - Ville de Deux

KFYI - "The Valley`s Talk Station"

Options may be available Here`s what you need to

new diversity brochure.indd

now - Royal Borough of Windsor and Maidenhead

Mount Pleasant Community Brochure

CPOH Newsletter Winter 2008 - California Aquatic Therapy

Preparing For College

In IMPLEMENTING Successful Summer Jobs

JUL