) ) HKSC DEVELOPMENTS L.P. Applicant – v. –, 2013 ONSC 6776

CITATION : HKSC Developments L.P. v. Infrastructure Ontario and Information and Privacy Commissioner of Ontario, 2013 ONSC 6776 DIVISIONAL COURT FILE NO.: 263/12 DATE: 20131128 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT C. McKINNON, HIMEL AND WILTON-SIEGEL BETWEEN: ) ) HKSC DEVELOPMENTS L.P.

Applicant – and – INFRASTRUCTURE ONTARIO AND INFORMATION AND PRIVACY COMMISSIONER OF ONTARIO Respondents )) )) )) )) )) Robert Wisner and Adrienne Boudreau , for the Applicant Lawren Murray , for the Respondent Information and Privacy Commissioner of Ontario No one appearing for Infrastructure Ontario ) ) HEARD at Toronto: October 15, 2013 Himel J.: [ 1 ] HKSC Developments L.P. (“HKSC”) applies for judicial review of Order PO-3011 of Assistant Information and Privacy Commissioner Brian Beamish (the “IPC adjudicator”), and of a reconsideration order, Order PO-3072-R, also made by him.

The orders required Infrastructure Ontario to disclose information contained in schedules to a project agreement between the Province of Ontario and HKSC. The agreement concerned the redevelopment and operation of 23 service stations along Highways 400 and 401 (the “Project”). [ 2 ] The issue before the IPC adjudicator was whether the records ordered disclosed were exempt from disclosure under the third party information exemption found in

section 17 of the Freedom of Information and Protection of Privacy Act , R.S.O. 1990, c. F-31 (the “Act”). This application is in the nature of certiorari , seeking that those parts of the orders that require Infrastructure Ontario to disclose the disputed information be quashed or set aside. Background [ 3 ] Infrastructure Ontario is the Crown agency responsible for delivering public infrastructure improvements to Ontario.

It uses a model called “Alternative Financing and Procurement” in which the public sector determines the purpose and scope of a project while a private sector partner, usually taking the form of a consortium, finances and builds the projects. After a two year procurement process, HKSC was the successful bidder for a project commissioned by the Ministry of Transportation and Infrastructure Ontario to develop, design, construct and partially finance highway service centres on Highways 400 and 401 and to operate and maintain the service centre portfolio under a long term concession agreement.

As part of the confidential tender process in the bidding phase of the project, HKSC was required to provide the information to Infrastructure Ontario. [ 4 ] In June 2010, an individual (the “requester”) submitted an access to information request for a copy of the “Alternative Financing and Procurement” contract between the Province of Ontario and HKSC (the “Agreement’). Infrastructure Ontario responded that a copy of the Agreement was published on the Infrastructure Ontario website. The requester appealed to the Commissioner and took the position that a large portion of the Agreement was redacted.

Infrastructure Ontario refused to provide the redacted portions of the Agreement on the basis that they fell within the exemptions in sections 17 (third party information) and 18 (valuable government information; economic and other interests) of the Act . [ 5 ] The requester continued with the matter and the parties proceeded to mediation. During mediation, the request was

narrowed to focus on the provisions in Schedules 13, 14, 16, 29, 30 and 31 of the Agreement. Both Infrastructure Ontario and HKSCopposed the release of the information in the schedules. During mediation, Infrastructure Ontario advised that it was relying only onportions of

section 18. HKSC maintained its position and continued to rely on

section 17. The matter proceeded to adjudication beforethe Commissioner and the parties made written representations. The First IPC Order (PO-3011) [6] As noted above, Infrastructure Ontario and HKSC took the position that the information sought was exempt from disclosureunder the Act. HKSC sought to rely on the exemption in s. 17(1), paragraphs (

a) and (c) (third party information). InfrastructureOntario sought to rely on the exemptions in s. 18 (valuable government information; economic and other interests). [7]

Section 17 of the Act provides: 17.

(1) A head shall refuse to disclose a record that reveals a trade secret or scientific, technical, commercial, financial or labour relationsinformation, supplied in confidence implicitly or explicitly, where the disclosure could reasonably be expected to, (

a) prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of a person, groupof persons, or organization; …[or] (

c) result in undue loss or gain to any person, group, committee or financial institution or agency; [8] The IPC adjudicator delivered a 23 page order. He noted at paragraphs 18-19 of IPC Order PO-3011 that “Section 17(1) isdesigned to protect the confidential ‘informational’ assets’ of businesses or other organizations that provide information to governmentinstitutions”.

He further commented that, while a central purpose of the Act is “to shed light on the operations of government, section17(1) serves to limit disclosure of confidential information of third parties that could be exploited by a competitor in the marketplace.” The IPC adjudicator then outlined the three-part test approved by the Ontario Court of Appeal in Ontario (Workers’ CompensationBoard) v.

Ontario (Assistant Information and Privacy Commissioner) (1998), (ON CA), 41 O.R. (3d) 464 (C.A.), atpara. 22, for determining whether the exemption in s. 17(1) applied: 1. the record must reveal information that is a trade secret or scientific, technical, commercial, financial or labour relationsinformation; 2. the information must have been supplied to the institution in confidence, either implicitly or explicitly; and 3. the prospect of disclosure of the record must give rise to a reasonable expectation that one of the harms specified in paragraph (a),(b), (

c) and/or (

d) of section 17(1) will occur. [9] The adjudicator noted that HKSC must satisfy each part of the test and that the onus is on the affected party to prove that theexemption in s. 17(1) applies to the records at issue. He then went on to describe, at para. 29, two exceptions that may apply even if theaffected party does not make out the second part of the test – the requirement that the information be supplied in confidence: There are two exceptions to this general rule which are described as the “inferred disclosure” and “immutability” exceptions.

The“inferred disclosure” exception applies where disclosure of the information in a contract would permit accurate inferences to be madewith respect to underlying non-negotiated confidential information supplied by the affected party to the institution. The “immutability”exception applies to information that is immutable or is not susceptible of change, such as the operating philosophy of a business, or asample of its products. In addition, the onus is on the party resisting disclosure to show immutability. [10] The relevant schedules of the Agreement were described by Infrastructure Ontario as follows: -

Schedule 13: sets out the capital and concessionary and rent payments between the affected party and the Province pertaining to theProject; -

Schedule 14: sets out the pricing of various products serviced at the highway service centre locations; -

Section 16: sets out any compensation payments to the parties based on certain termination events that may occur; -

Schedule 29: sets out the various payments to be made between the parties with respect to the Project; -

Schedule 30: is the closing financial model submitted by the affected party during the bid process and which Infrastructure Ontario’sevaluation of pricing during the procurement process is based on; and -

Schedule 31: sets out the payment details regarding any refinancing that may occur with respect to the Project. [11] The IPC adjudicator concluded the following:

(1) That all of the information met the first part of the test under s. 17(1) as the schedules to the Agreement contained “commercial andfinancial information”;

(2) That some information in the schedules was “supplied” by HKSC, as it disclosed “fixed, underlying costs, agreements struck between the affected party and other third parties and/or were not negotiated….” For this information HKSC (the supplier) had a reasonable expectation of confidentiality, implicit or explicit at the time the information was provided. There was a reasonable basis for the expectation of confidentiality given the sensitive financial nature of the information.

On the issue of harm, he noted that the affected party must provide “detailed and convincing” evidence to establish a “reasonable expectation of harm”. The adjudicator was satisfied that disclosure of the information supplied in confidence could reasonably be expected to prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of the affected party, resulting in undue loss to the affected party and gain to other competitors;

(3) However, he found that the remainder of the information in the schedules was not “supplied” by HKSC and did not fall under the exemption. Rather, it was mutually generated information created through the process of negotiation and that “[the schedules] constitute the agreed, negotiated terms of the agreement”. [ 12 ] In

summary, the IPC orders upheld Infrastructure Ontario’s decision to withhold certain portions of the Agreement pursuant to the third party exemption in s. 17(1) of the Act but the remainder of the Agreement was ordered to be disclosed. The materials held to have been “supplied” by HSKC and therefore eligible for the exemption under s. 17(1) were: -

Schedule 13 : HKSC’s rate of return as a percentage (s. 1.1(d)); -

Schedule 29 : The amount of the construction loan between HKSC and non-parties to the contract (s. 1.5), HKSC’s cost of financing (s. 1.7), and HKSC’s initial equity investment in the Project (sections 1.16 and 3.7(5)); -

Schedule 30 : HKSC’s closing financial model for the project; and -

Schedule 31 : HKSC’s threshold equity internal rate of return (s. 1.1(i)) and HSKC’s lending arrangements with third parties (Appendix A). [ 13 ] The Commissioner ordered the balance of the information disclosed.

The Second IPC Order (PO 3072-R) [ 14 ] HKSC requested the IPC adjudicator reconsider his decision concerning certain information ordered to be disclosed on the basis that: (1) he fettered his discretion by applying past Information and Privacy Commission (“IPC”) precedents without regard to the specific circumstances of the case; and (2) he failed to state reasons for dismissing HKSC’s submission that the information not directly supplied to Infrastructure Ontario was still exempt by way of the “inferred disclosure” exception.

Section 18 of the IPC’s Code of Procedure sets out the grounds for reconsideration. [ 15 ] After the parties were given an opportunity to make representations, the IPC released a second order dated April 20, 2012. The adjudicator determined that his consideration of past IPC decisions on the matter of whether information was “supplied” did not constitute a fettering of his discretion. He did not consider himself bound by these decisions and applied the reasoning in the decisions to the circumstances of the case.

On the submission that he failed to state reasons for dismissing the affected party’s submission that the “inferred disclosure” exception applies to the records at issue, he, however, agreed that he failed to fully consider the inferred disclosure exception to the second part of the section 17(1) test and that this constitutes a fundamental defect in the adjudication process mentioned in

section 18.01(

a) of the IPC’s Code of Procedure . He therefore revisited the issue. [ 16 ] The adjudicator then reapplied the second part of the three part test which looks to whether the records were “supplied in confidence” and whether the “inferred disclosure” or “immutability” exceptions apply. The IPC adjudicator reversed the previous order in respect of certain information, finding that this information was “supplied” under the s. 17(1) test and that there is a reasonable basis for the expectation of confidentiality.

He held that disclosure of the information in those records could reasonably be expected to prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of the affected party resulting in undue loss to the affected party and gain to other competitors. Therefore, he ordered these records exempt from disclosure pursuant to s. 17(1). [ 17 ] Following this analysis, the Commissioner reviewed again the remaining portions of the schedules that he had ordered disclosed in the previous order. He found that the redacted information contained in

Schedule 13

section 1.1(

d) and

Schedule 31

section 1.1(

i) can be considered to have been “supplied” under the section 17(1) test. However, he also concluded that the information in these provisions would permit an accurate inference to be drawn regarding the HSKC’s rate of return and threshold equity rate of return, respectively, for the Project. Accordingly, he concluded that disclosure of such information would permit accurate inferences to be drawn regarding underlying non negotiated confidential information supplied by HSKC. [ 18 ] The adjudicator then reviewed the remaining schedules that he ordered disclosed in his first order.

He held that these schedules were not “supplied” as per s. 17(1) of the Act because they were the end product of a negotiation process and set out mutually agreed upon terms that the parties chose to incorporate into the Agreement. He was not satisfied that the proposed disclosures would allow inferences to be drawn about various components of HKSC’s business model. The reversal of the decision was therefore limited to the information contained in

Schedule 13

section 1.1(

d) and

Schedule 31

section 1.1(i). The previous decision concerning all other information at issue was upheld and Infrastructure Ontario was ordered to disclose the information within set timelines. [ 19 ] Accordingly, the records in

Schedule 13, except

section 1.1(d),

Schedule 14,

Schedule 16,

Schedule 29, except sections 1.5, 1.7, 1.16 and 3.7(5) and

Schedule 31, except Appendix A and

section 1.1(

i) were ordered disclosed. HKSC’s application focuses only on the remaining information that the IPC ordered disclosed as it was not covered by the s. 17(1) exemption. Positions of the Parties on this Application

[20] The parties agree that the appropriate standard of review is reasonableness. The IPC adjudicator interpreted the Act, theCommission’s home statute. The interpretive exercise did not engage any of the categories of questions that mandate a correctnessreview: see Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654 atpara. 30. [21] However, HKSC submits that: (1) the decisions deserve limited deference given the absence of a privative clause: seeDunsmuir v.

New Brunswick, 2008 SCC 9, [2008] 1 S.C.R.190 at para. 160; (2) materials submitted to the IPC which were not subject toexamination or cross-examination under oath are entitled to less deference: see Ontario (Workers’ Compensation Board), at para. 18; and(3) the IPC’s task of interpreting and applying the s. 17(1) exemption is simple statutory

interpretation which does not require thedecision maker to engage in policy making, suggesting that decisions of the IPC were not intended to be final.

As such, they attract lessdeference from a reviewing court. [22] The IPC responds that HKSC’s argument for limited deference within the reasonableness standard is based on a decision fromthe Ontario Court of Appeal that was rendered 15 years ago and conflicts with more recent jurisprudence such as Dunsmuir and Mills v.Ontario (Workplace Safety and Insurance Appeals Tribunal), 2008 ONCA 436, 237 O.A.C. 71, at para. 18. [23] HKSC argues that the IPC adjudicator’s decision that the disputed information was not “supplied” by HKSC wasunreasonable.

It argues that the reasoning was internally inconsistent, that the adjudicator fettered his discretion by following IPCprecedents without regard to the specific and unique circumstances of the case, and that the disputed information cannot have beennegotiated with Infrastructure Ontario as it was a bid in response to a Request for Proposal and must have been “directly supplied” byHKSC. Further, HKSC takes the position that the decision does not explain with reasons why the IPC adjudicator concluded that theSchedules are the product of the negotiation process and not supplied.

To order the disclosure of the schedules would, it argues, result indisclosure of their business formula, the rate of return on the project, and their proprietary business strategy. [24] The IPC submits that the adjudicator’s decision was reasonable, that the adjudicator did not feel bound to follow previous IPCcases and, that there is nothing wrong with considering past decisions and applying them to the circumstances of the case. It furtherargues that negotiations took place between the date of the bid and the award of the contract.

The IPC takes the position that when afreedom of information request is made for a copy of a contract, the Commissioner will assume that the agreement is the result ofnegotiations unless there is evidence that it was not. This presumption is in keeping with the legislation which provides that informationshould be made available to the public. As there was no reviewable error, the application should be dismissed. [25] Infrastructure Ontario had supported the applicant before the Assistant Commissioner but did not appear at the hearing of thisjudicial review application and filed no materials.

Standard of Review [26] The standard of review of the Commissioner’s

interpretation and application of the Act has been held to be reasonableness:see Ontario (Workers’ Compensation Board), at paras. 16-18 (C.A.); Canadian Medical Protective Association v. Loukidelis (2008), (ON SCDC), 298 D.L.R. (4th) 134 (Ont. S.C. - Div. Ct.), at para. 39. The reasonableness standard was outlined inDunsmuir at para. 47: A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the processof articulating the reasons and to outcomes.

In judicial review, reasonableness is concerned mostly with the existence of justification,transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within arange of possible, acceptable outcomes which are defensible in respect of the facts and law. [27] In Mills, at para. 18, the Ontario Court of Appeal held: I understand the majority in Dunsmuir to be referring now to only two degrees of deference, correctness, where no deference is accorded,and reasonableness, where deference is accorded.

It is not necessary or appropriate to then assess the degree of deference within thereasonableness standard. [28] The decision maker is entitled to deference in findings of fact and weighing of evidence. It is for the party seeking review toshow positively that the decision is unreasonable: see Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, atpara. 48. Decision [29] This application for judicial review concerns the

interpretation of the third party exemption in

section 17 of the Act. In orderfor the exemption to apply, the applicant has the onus of providing evidence to satisfy each part of the three part test set out above. Theadjudicator considered the test and made the order and the reconsideration order which held that some portions of the contract betweenHKSC and Infrastructure Ontario were exempt from disclosure under the s. 17 exemption. In total, the information at issue includedfixed underlying costs of HKSC and agreements between HKSC and third parties.

The information ordered disclosed includedinformation which the IPC concluded was generated through the negotiation process and cannot be said to have been “supplied” byHKSC under s. 17 of the Act. [30] HKSC argues that orders PO-3011 and PO-3072-R should be quashed on the basis that the Commissioner’s decision thatcertain information did not satisfy the exemption under s. 17 was unreasonable.

The IPC submits that the Commissioner’s decision is inall respects reasonable and discloses no reviewable error. [31] It should be noted that HSKC knew from the outset that the Act applied to these transactions with government and that theProvince must comply with its provisions. The standard of review of the

interpretation and application by the Commissioner of themeaning of the word “supplied” in s. 17 is reasonableness. In our view, the IPC’s decision that the third party exemption does not applyto the information ordered disclosed was done after a careful analysis of s. 17(1) and the three part test endorsed by the Court of Appeal

in Ontario (Worker’s Compensation Board). The Commissioner’s approach in this case was consistent with the approach taken in othercases interpreting s. 17(1) and approved of in Boeing Co. v. Ontario (2005), 200 O.A.C. 134, (Ont. S.C. - Div. Ct.)at paras. 18-20. Those cases have found that information in a contract is typically the product of a negotiation process between theparties. The content of a negotiated contract involving a government institution and another party will not normally qualify as havingbeen “supplied”: Boeing, at para. 18; Kitchener (City) v.

Ontario (Information and Privacy Commissioner), 2012 ONSC 3496 (Div. Ct.),at para. 10. [32] In this case, HKSC concedes that it negotiated the final terms of the Agreement with Infrastructure Ontario over a period ofseven months after it was awarded the contract in a tender process in August 2009. Moreover, while it describes the Agreement asunique and distinguishable from the other circumstances in which courts have found that the content of a negotiated contract is notsupplied, it was unable to point to more than the complexity and length of the Agreement.

This is a quantitative but not a qualitativedistinction. It does not support HKSC’s contention that the principle applied in Boeing is inapplicable in the present circumstances. [33] The IPC adjudicator’s conclusion that a detailed agreement like the one in this case was the result of negotiations was areasonable one. HKSC bears the onus in this case of discharging the presumption that information forming part of a contractualagreement constitutes part of its negotiated terms even where it originated with a third party. The applicant has not met that onus.

TheIPC adjudicator reasonably concluded that the agreement was the result of negotiations and that the records do not reveal information ofthe applicant actually supplied to the Ministry. He applied the appropriate test consistent with past decisions to the records before him.

In no way did he fetter his discretion by considering those earlier decisions of the IPC. [34] The IPC adjudicator’s conclusion that the HKSC has failed to provide a sufficient explanation as to how the informationrequired to be disclosed would permit inferences to be drawn regarding various components of its business model is also reasonable. TheIPC adjudicator described HKSC’s representations as “unsupported assertions’’ and “sweeping generalities”.

On this hearing, counselfor HKSC has been unable to demonstrate how the chart provided by HKSC regarding the disputed information would actually permitinferences to be drawn regarding important elements of its closing financial model, as set out in

Schedule 30. We note that the disputedinformation in Schedules 16 (compensation on termination) and 31 (refinancing) does not appear to be be included in the financialmodel. Counsel advised that the most sensitive information was contained in

Schedule 14. However, HKSC cannot demonstrate howknowledge of the detail in this

Schedule will permit inferences of revenues and profits without the addition of considerably moreinformation in the financial model that is not being disclosed. It is not correct to suggest that such information reveals HKSC’s pricingstrategy, even if it discloses certain caps on its pricing. Similarly, we do not see how any such inferences can be drawn from the penaltyprovisions in

Schedule 16. [35] The reasons satisfy the requirements of “justification, transparency and intelligibility within the decision-making process” ofthe IPC adjudicator. While the reasons in the order and reconsideration order may not be perfect, so long as they adequately explain thebases of the decision, they are sufficient to permit review: see Newfoundland and Labrador Nurses Union v. Newfoundland andLabrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708, at para. 18 citing Canada Post Corp. v. Public Service Alliance ofCanada, 2010 FCA 56, [2011] 2 F.C.R. 221, upheld 2011 SCC 57, [2011] 3 S.C.R. 572.

In particular, the applicant has failed todemonstrate how the Commissioner’s decision is internally inconsistent. The protected information disclosed comprises HKSC’sbusiness model and fixed underlying costs with third parties, and related agreements, and the initial equity investment. This informationis qualitatively different from the information ordered to be disclosed, which includes numerous operational details with InfrastructureOntario including the split of proceeds of any future sale or refinancing. The decision is also consistent with the policy of the Act.

Thedecision on the third party exemption is not outside a range of possible acceptable outcomes defensible in respect of the facts and thelaw. [36] Accordingly, the IPC adjudicator’s conclusion that the information ordered disclosed did not qualify for the exemption unders. 17(1) for the reasons outlined by him was reasonable. Therefore, the application for judicial review is dismissed.

The documentspreviously sealed and those in the compendium filed which were ordered by the IPC adjudicator not to be disclosed shall remain sealed.The balance of the documents ordered disclosed shall not be sealed unless there is a further order of the court. [37] As the parties agree that neither party will seek costs, there shall be no order as to costs. C. McKINNON J. HIMEL J. WILTON-SIEGEL J. Released: November , 2013 CITATION: HKSC Developments L.P. v. Infrastructure Ontario and Information and Privacy Commissioner of Ontario, 2013 ONSC6776

DIVISIONAL COURT FILE NO.: 263/12 DATE: 20131128 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT C. McKINNON, HIMEL AND WILTON-SIEGEL BETWEEN: HKSC DEVELOPMENTS L.P. Applicant – and – INFRASTRUCTURE ONTARIIO AND INFORMATION AND PRIVACY COMMISSIONER OF ONTARIO Respondents REASONS FOR JUDGMENT Himel J. Released: November 28, 2013