An inquiry into the decision by the City of Victoria to refuse to disclose a letter of commitment and two draft agreements concerning the proposed Multiplex arena to Monday Magazine

ISSN 1198-6182

Office of the Information and Privacy Commissioner
Province of British Columbia
Order No. 284-1998
December 21, 1998

INQUIRY RE: An inquiry into the decision by the City of Victoria to refuse to disclose a letter of commitment and two draft agreements concerning the proposed Multiplex arena to Monday Magazine

Fourth Floor
1675 Douglas Street
Victoria, B.C. V8V 1X4
Telephone: 250-387-5629
Facsimile: 250-387-1696
Web Site: http://www.oipc.bc.ca

1. Description of the review

As Information and Privacy Commissioner, I conducted a written inquiry at the Office of the Information and Privacy Commissioner (the Office) on October 19, 1998 under Section 56 of the Freedom of Information and Protection of Privacy Act (the Act). This inquiry arose out of a request by Russ Francis on behalf of Monday Magazine for a review of the decision by the City of Victoria to refuse access to the letter of commitment and two draft agreements concerning the proposed Multiplex arena and the Victoria Sports/Entertainment Associates.

2. Documentation of the inquiry process

On May 7, 1998, the applicant, a reporter for Monday Magazine, made a request to the City of Victoria for the "letter of commitment from the banks concerning the financing for the Multiplex project, the ground lease agreements for the Multiplex and the ice rental agreement."

The City refused access to the records on May 28, 1998 under sections 12(3), 14, 17(1)(d) and (e), and 21 of the Act. Monday Magazine requested a review of this decision on June 9, 1998.

Notices of Inquiry were sent to the City of Victoria and Monday Magazine as well as to the third party, Victoria Sports/Entertainment Associates, on August 19, 1998. Initial submissions were due on October 1, 1998. At the request of the third party, this deadline was extended to October 9, 1998.

3. Issue under review and the burden of proof

The issue under review is the City's use of sections 12(3), 14, 17(1)(d) and (e), and 21 to withhold the records in dispute. Another issue under review is whether the records must be released under Section 25 of the Act. The relevant sections of the Act are as follows:

Cabinet and local public body confidences

12(3) The head of a local public body may refuse to disclose to an applicant information that would reveal

(a) a draft of a resolution, bylaw or other legal instrument by which the local public body acts or a draft of a private Bill, or

Legal advice

14. The head of a public body may refuse to disclose to an applicant information that is subject to solicitor client privilege.

Disclosure harmful to the financial or economic interests of a public body

17(1) The head of a public body may refuse to disclose to an applicant information the disclosure of which could reasonably be expected to harm the financial or economic interests of a public body or the government of British Columbia or the ability of that government to manage the economy, including the following information:

...
(d) information the disclosure of which could reasonably be expected to result in the premature disclosure of a proposal or project or in undue financial loss or gain to a third party;

(e) information about negotiations carried on by or for a public body or the government of British Columbia.

Disclosure harmful to business interests of a third party

21(1) The head of a public body must refuse to disclose to an applicant information

(a) that would reveal

(i) trade secrets of a third party, or

(ii) commercial, financial, labour relations, scientific or technical information of a third party,
(b) that is supplied, implicitly or explicitly, in confidence, and

(c) the disclosure of which could reasonably be expected to

(i) harm significantly the competitive position or interfere significantly with the negotiating position of the third party,

(ii) result in similar information no longer being supplied to the public body when it is in the public interest that similar information continue to be supplied,

(iii) result in undue financial loss or gain to any person or organization, or

(iv) reveal information supplied to, or the report of, an arbitrator, mediator, labour relations officer or other person or body appointed to resolve or inquire into a labour relations dispute.
(2) The head of a public body must refuse to disclose to an applicant information that was obtained on a tax return or gathered for the purpose of determining tax liability or collecting a tax.

(3) Subsections (1) and (2) do not apply if

(a) the third party consents to the disclosure, or

(b) the information is in a record that is in the custody or control of the British Columbia Archives and Records Service or the archives of a public body and that has been in existence for 50 or more years.

Information must be disclosed if in the public interest

25(1) Whether or not a request for access is made, the head of a public body must, without delay, disclose to the public, to an affected group of people or to an applicant, information

(a) about a risk of significant harm to the environment or to the health or safety of the public or a group of people, or

(b) the disclosure of which is, for any other reason, clearly in the public interest.

(2) Subsection (1) applies despite any other provision of this Act.
....

Section 57 is silent with respect to a request for review of the failure of a public body to apply Section 25 of the Act. As previously decided, I find that the burden is on the applicant in such circumstances. (See Order No. 162-1997, May 9, 1997, p. 2)

4. The records in dispute

There are three records in dispute. The first is the letter of commitment from two banks to Victoria Sports/Entertainment Associates concerning the financing for the proposed multiplex arena. The second and third records are the ice rental and the ground lease agreements between Victoria Sports/Entertainment Associates and the City of Victoria.

5. Monday Magazine's case

The applicant states that the essence of its application rests upon Section 25 of the Act. I have discussed below its submissions on the application of this section.

The applicant's submission is that it is essential for understanding the risks of the City's involvement in the arena project to review the condition in the letter of commitment from the banks, the ground lease agreement, and the ice rental agreement. Throughout, the applicant wishes to know the extent of possible financial involvement of the City, including any "sweeteners" in the form of "additional funds respectively controlled by the city or which are the result of city license fees," in the event of the collapse or failure of the arena project. His argument is that there must be full disclosure of the records in dispute to the taxpayers, especially since the latter two records are reputed to be essentially complete.

6. The City of Victoria's case

I have presented below the City's submissions on the applicability of various sections of the Act to the records in dispute.

7. The Submission of Victoria Sports/Entertainment Associates as a third party

The third party relies on sections 12(3), 13, 14, 17(1)(d) and (e), and 21(1)(a)(ii), (b), and (c)(i), (ii), and (iii) of the Act to prevent disclosure of the records in dispute. It submits that the City "has been provided with this information on the conditions of strictest confidence in order to protect the interests of the Third Party." The detailed submissions of the third party are reinforced by the affidavit of Harry M. Stokes, the president of Victoria Sports/Entertainment Associates. I have not reproduced these arguments here, because they so closely reflect the submissions of the City, which are presented below in more detail.

8. Discussion

In this particular inquiry, I have found it most practical to discuss the application of various sections of the act to each of the three records in dispute. I will deal first with the application of Section 12(3), 14, 17, and 21 to the records and then turn to a consideration of Section 25.

Review of the Records in Dispute

The applicant filed a letter from Councillor Bob Friedland in support of his application for access to the commitment letter, the ground lease agreement, and the ice rental agreement. The councillor, who has evidently seen the disputed records in full, disclosed certain information that is relevant to the applicant's argument for disclosure:

Since May, 1998, there has been much public discussion regarding the form of "Provincial Involvement" required by the banks. A cursory review of the commitment letter will show that the precise form of Provincial Involvement required by the banks has been known by City Council from the outset, but not by the public.

In addition, there is, in the letter of commitment, critical information regarding the nature of the promoter equity. The public has a right to know, and needs to know what assets the promoter is committing in order to evaluate this project.

Last week, the City of Victoria voted to use public tax funds to provide what amounts to an operating loss guarantee in the amount of $4 million. That decision should not have been made without informed public debate. The public did not have the information it needed.

I am, of course, aware that these matters have been debated by the public and interest groups to this point in time, without them knowing the precise contents of these records.

The letter of commitment from the banks to Victoria Sports/Entertainment Associates

The City submits that the third party submitted this record explicitly in confidence to it and, in addition, required City officials to execute a confidentiality agreement. The City contends that this record meets the three-part test under Section 21(1) of the Act in that it would reveal financial and commercial information of the third party, that it was supplied in confidence to the City, and its disclosure could reasonably be expected to interfere significantly with the negotiating position of the third party and/or result in undue financial loss to the third party. (Submission of the City, pp. 1-2, pp. 6-9) I agree. See Order No. 193-1997, October 7, 1997.

Based on the information provided by the City and the third party, there is no question that the record contains commercial or financial information for the purposes of Section 21(1)(a)(ii). The evidence also establishes that the information was supplied in confidence and that disclosure could reasonably be expected to interfere significantly with the negotiating position of the third party and/or result in undue financial loss to the third party under sections 21(1)(b) and 21(1)(c)(i) and (iii) of the Act.

The City further submits, on the basis of Section 17(1), that disclosure of the letter of commitment "could reasonably be expected to harm the financial or economic interests of the City," since it includes "information the disclosure of which could reasonably be expected to result in the premature disclosure of a proposal or project or in undue financial loss or gain to a third party." Again, I agree that the City has met its evidentiary burden under Section 17(1) and that the third party is entitled to what it calls "commercial confidentiality." (Submission of the City, pp. 2-3, 6-7)

The Ground Lease and Ice Rental Agreements

The applicant submits that the ground lease agreements and ice rental agreement are essentially complete, since both the City and Victoria Sports/Entertainment Associates have signed them off. In support of this submission, the applicant filed an extract from a memorandum written by the city manager to the mayor and members of the Council indicating that the agreements have been signed. (Submission of the Applicant, Appendix 4; Reply Submission of the Applicant, p. 4)
The City submits that the applicant's request is premature as there are no "legal agreements in existence." At present only solicitor's drafts of these two records exist. (Submission of the City, pp. 3, 9-10) Although the applicant also seeks drafts of these agreements if they have not yet been finalized, the City refuses to disclose these records on the basis of sections 12(3)(a) and 14 of the Act.

Section 12(3) of the Act confers discretion on the City to refuse to "disclose to an applicant information that would reveal (a) a draft of a resolution, bylaw or other legal instrument by which the local body acts...." The City points out that these agreements will be released to the public after review and finalization by the third party's lenders and after presentation to the City Council.

In the alternative, the City invokes Section 14 of the Act to prevent disclosure of these two records, since they are the product of in-house counsel for the City. For the purposes of this inquiry, there is no need to determine whether these draft agreements constitute "legal instruments" within the meaning of Section 12(3)(a), as they clearly fall within the scope of solicitor client privilege under Section 14 of the Act. I agree with the city "that these documents are properly privileged until the client is satisfied that they meet its requirements and they are therefore executed and released to the public." (Submission of the City, p. 10)

Section 25: Public Interest Paramount

Section 25(1) of the Act provides that, "whether or not a request for access is made, the head of a public body must, without delay, disclose information (a) about a risk of significant harm to the environment or to the health or safety of the public or group of people, or (b) the disclosure of which is, for any other reason, clearly in the public interest." Subsection (2) provides that Section 25(1) applies despite any other provision of this Act.

The applicant submits, on the basis of previous Orders, that in order for an appeal to Section 25 of the Act to be successful, it must involve a matter of public interest, in the true sense, and there must be an element of urgency and vital communication. See Order No. 146-1997, January 28, 1997; Order No. 162-1997, p. 9. In support of this argument, the applicant relies on a letter from Councillor Friedland, which indicates that the taxpayers of Victoria face significant risk should the arena project fail either during or after construction. Councillor Friedland suggests that the ultimate exposure is in the area of $500 million, an amount which the applicant points out is five times the annual budget of the City. The applicant submits that "(o)n this account, should things go wrong, the City of Victoria is facing the possibility of nothing less than the collapse of its entire operation." The applicant contends that the issue is plainly one of sufficiently broad public interest.

With respect to the issue of urgency, the applicant submits that the records in dispute need to be released now, since "if the critics are right, by the time construction begins, the City will already face a significant financial obligation.... The earlier the records are released, the more opportunity there would be for the public to properly debate the issue." The applicant points out that Victoria Sports/Entertainment Associates is 80 percent owned by Arachnid Hockey Canada ULC, which is owned by Jill and David Pasant of California. They are the owners of the San Francisco Spiders, a hockey team, which in 1996 sought bankruptcy protection from its creditors in its first and only year of operation.

In summary, the applicant contends as follows:

Regardless of the import of the City's claim that release of the letter of commitment meets tests for harming a third party, because of the overriding value to the public in obtaining fundamental information about a proposal which has a significant impact on the city's financial future, it is clearly in the public interest that the letter of commitment should be released. Hence, under Section 25(1)(b) the letter should be disclosed. (Reply Submission of the Applicant, p. 3)

The City submits that Order No. 142-1997, January 15, 1997, p. 12, which deals with this same project, is determinative of the Section 25 issue. In that Order I accepted that only a public body can invoke Section 25 and that I cannot order disclosure on its basis. In the alternative, the City invokes Order No. 165-1997, May 21, 1997, p. 7, where I found that "I have jurisdiction to investigate a public body's decision in relation to its duty under Section 25." (Reply Submission of the City, p. 1)

The City put forward the following submission:

A duty to disclose under Section 25 only exists in the clearest and most serious of situations where the public interest is unmistakably clear and is of an urgent and compelling nature. The City submits that this is not such a situation. The public's need to know does not outweigh the harms to or the protected interests of the City or the Third Party if the records in question were to be released. (Reply Submission of the City, p. 1)

The City itself decided, as evidenced by an affidavit of Mark Johnston, that the public interest does not require disclosure under Section 25, and it urges me to defer to that decision. (Reply Submission of the City, pp. 2-3)

Media reports also indicate that the taxpayers of Victoria are increasingly aware of the risk to their financial interests that this project poses. Nevertheless, enthusiasm for the project continues in other quarters. I am also aware that the issues raised by this applicant are already in the public domain, even if these records in dispute have not been released to the public or the media.

Based on the material before me, I conclude that the issue of whether to release the records in dispute relating to the building of this arena is not one that rises to the standards for disclosure set out in Section 25(1)(b). I reached the same conclusion in Order No. 142-1997, p. 6. I agree with the City's view that the applicant's request for the commitment letter and two agreements does not give rise to such a clear and urgent public interest as to require disclosure without delay under Section 25(1)(b).

9. Order

I find that the City of Victoria was authorized under sections 14 and 17 of the Act to refuse to give the applicant information in the records in dispute. Under Section 58(2)(b), I confirm the decision of the City of Victoria to refuse access to the applicant.

I find that the City of Victoria was required under Section 21 of the Act to refuse to give the applicant information in the records in dispute. Under Section 58(2)(c), I require the City of Victoria to refuse access to the applicant.

David H. Flaherty
Commissioner

December 21, 1998