Trot Insider compiled this comprehensive report from Day 2 of the proceedings in regard to the civil lawsuit that a group of Ontario Standardbred breeders have filed against the Province of Ontario and the Ontario Lottery and Gaming Corporation over the cancellation of the former Slots at Racetracks Program.

The civil lawsuit is before the Ontario Superior Court, and commenced on Monday (Sept. 10) in Brampton, Ont.

Morning Session: The morning session saw one of the Plaintiffs’ lawyers, Jonathan C. Lisus, continue to support his clients’ Motion for Summary Judgment.

Lisus focused on the fact that the characterization of the Slots At Racetracks Program as a ‘subsidy’ cannot be found anywhere within official government documents, although the term was openly used by government when characterizing the Slots at Racetracks Program once the decision was made to cancel it. Lisus also stated that while summoning witnesses to take part in the examination process, he asked witnesses to bring with them any documentation that specifically referred to SARP as a government subsidy. Such documentation was not produced.

Lisus took the bulk of the morning session to make a clear argument that there is no official document of the SARP agreement ever being referred to as a subsidy in any government document.

Mid-day session: Proceedings resumed just before noon, and Lisus shifted gears to focus on the proximity and continuity of the breeders’ relationship with the government in regard to SARP, and the assurances that had been conveyed in regard to SARP going forward.

Lisus explained how for 14 years the defendants made direct and specific representations to Ontario breeders to continue to breed and raise racehorses. Based on the history and interactions between the parties throughout the existence of SARP, Lisus stated that an agreement of proximity emerged and that continuity of the agreement occurred as the years went on.

Lisus stated that the Ontario’s former Ontario Racing Commission sent out incentive for breeders to continue breeding every year into what was characterized as a stable provincial industry which, as well as offering lucrative purses, featured breeders’ rewards via the Horse Improvement Program and its subset, the Standardbred Improvement Program. Lisus cited previous testimony from former ORC Chair Rod Seiling, as well as testimony from other Ontario government officials, stating that Ontario was directing breeders to continue to breed racehorses.

Lisus also explained that during SARP, a communication subcommittee had been formed with the purpose of getting SARP’s message out to the industry. The subcommittee featured individuals from the OLG, OHRIA, GSEC (gaming secretary), the Minister’s Office, among others. Key messaging was worked on, as was the promotion of how SARP was beneficial to both Ontario’s agricultural sectors and society, generally. Lisus’ point was that co-ordinated, close and specific representations were made to Ontario’s racehorse breeding sector. Lisus stated that the reality of the five-year breeding cycle of a Standardbred racehorse was known by the Province of Ontario, and government documents show direct collaboration and co-ordination between government and various other parties (via the subcommittee, for example) to promote the breeding of racehorses to make SARP flourish. Lisus cited David Willmot’s examination testimony while stating that there was a co-ordinated, deliberate messaging campaign from the subcommittee to be promoted to the Ontario breeding industry.

Continuing on, Lisus stated that ‘proximity,’ ‘assurances’ and ‘representations’ were abundant as SARP was being promoted to Ontario racehorse breeders. At one point, Lisus directed the court’s attention to a physical copy of an industry advertisement promoting the breeding of racehorses in the province. He also explained how the breakdown of the HIP program and its financial incentives to Ontario racehorse breeders were regularly explained and promoted to the Ontario industry. The message was for breeders to continue breeding.

Lisus explained to the court how some of the plaintiffs — who were in court Tuesday to take in the proceedings — would sit across the table from ORC officials every year to discuss annual revenues from racetrack slots. Projected racetrack slots revenues were also discussed between ORC officials and some of the plaintiffs at the meetings. In turn, breeders utilized the information and financial projections when it came time to again breed into the future or not.

Lisus went on to say that in September of 2011, when a round of these discussions was taking place between the ORC and Standardbred breeders, and financial projections and assurances were being made to Ontario Standardbred breeders, the Ontario Lottery and Gaming Corporation was actively planning and deciding to remove slot machines from racetracks.

Lisus then went on to discuss prominent Ontario breeder Jim Bullock specifically. Bullock had sat down with then Ontario Finance Minister Dwight Duncan in 2009. He was seeking some assurances for Ontario breeders, as SARP’s siteholder agreement deals with Ontario racetracks were to expire in 2010, which would put Ontario breeders in peril. According to Lisus, Minister Duncan stated that the issue would be addressed. The siteholder agreements were ultimately renewed for another five years in 2010, but the Ontario Government would go on to shock the industry and abruptly cancel SARP with no industry consultation in 2012.

Afternoon session:Proceedings continued at 2:15 p.m., and Lisus briefly discussed the 2008 Sadinsky Report, which was a highly-publicized document that contained recommendations for the Ontario racing industry. Among the recommendations, according to Lisus, was that payments to breeders should be maintained, but that there should be a change in the way that the money flows in order to make the framework more beneficial. Lisus also said that Sadinsky recommended that racing industry contracts should all be aligned so they would all come up for renewal at the same time.

Lisus then again touched on the July 20, 2009 meeting between Bullock and Minister Duncan. Records show that Bullock was at the meeting in an official capacity for OHRIA. Lisus explained that Duncan told Bullock that he understood how important the status of SARP and siteholder agreements were to breeders and the Ontario racing industry. Lisus highlighted the fact that Duncan did not inform Bullock during the meeting that the Province of Ontario was considering pulling out of SARP (Lisus stated that Duncan’s non-disclosure during the meeting was of significance, given the eventual announcement of the SARP cancellation). In 2010, the Ontario Government re-upped on the siteholder agreements for another five years.

Lisus’ focus then moved to the province’s 2010 announcement of the Ontario Racing Program (ORP) – an official program developed to create a policy framework for the industry for the Government of Ontario. The ORP was the result of consultation between the government and the Ontario racing industry. Lisus further pointed to testimony from a GSEC official that stated that the provincial Standardbred racing industry was sustained by SARP, that there had been a need for action, and that the ORC had consulted with the industry about race-date allocation, among other things. Lisus outlined that there had been quite a bit of consultation with the Ontario industry in regard to the ORP, and again cited the presence of proximity, continuity and assurances within all of the racing and gaming parties involved.

Lisus further pointed to Ontario’s collaboration, assurances, and communication with the horse racing industry in regard to the creation and announcement of the ORP. In May of 2011, Ontario’s Finance Ministry conveyed to an estimates committee that the new ORP program would be implemented in the fall of 2011. In September of 2011, a release from the Province announced that ‘horse racing was back on track’ with the implementation of the ORP, which, again, was to be applied to the Standardbred industry after consultations with the industry, including Standardbred breeders. Lisus told the court that there were official, direct, distinct assurances to Ontario’s Standardbred breeders to continue breeding.

Lisus then highlighted that in 2010, when Ontario had initially announced the proposed ORP, the Ontario Lottery and Gaming Corporation was in the process of undergoing a year-long consultation process for the ‘modernization’ of gaming, also commonly referred to as ‘OLG Modernization.’ According to Lisus, the consultation process was a strategic business review to improve the efficiency of the OLG’s operations, but not core policy. Lisus stated that this process was significant, but the process did not weigh economic factors. He went on to state that the eventual SARP cancellation was outside of the OLG’s subset of policy decisions, although that is what the OLG did. Lisus then explained that the OLG shouldn’t have been making any policy decisions of that nature (altering a core policy), as those decisions are to be made by a higher level of government.

Citing official documentation, Lisus pointed out that the OLG had chosen to sometimes characterize SARP payments as ‘special interest payments’ or ‘operational payments.’ Lisus referred to OLG determinations that SARP was constraining the OLG’s room to maneuver in terms of modernizing. Lisus then pointed out that in late 2011, as Ontario was announcing the implementation of the ORP, the province was also simultaneously working with the OLG to de-couple slots from horse racing. Breeders were still being encouraged to breed while Ontario and the OLG were in the midst of working to cancel SARP, Lisus said.

Citing testimony from former ORC Chair Rod Seiling, Lisus explained how the ORC wanted to know of the OLG’s plans. Seiling was told by the OLG that the OLG would meet with the ORC prior to going to the OLG Board with any recommendations/future plans. Lisus said that the Finance arm of the Ontario Government was aware of what the OLG was contemplating/working on (a strategic business review). Lisus also pointed out that stakeholders from the Ontario racing industry, including Standardbred breeders via their respective industry organizations, had been consulted during the process.

According to Seiling’s testimony, he had told the OLG that it had to take the racing industry into account when it came to modernization plans. Lisus highlighted that there had been a clear willingness from the OLG to work with the ORC. Lisus pointed out that less than one year later, the OLG had gone back on its word, as it had presented modernization plans to the OLG Board without meeting with the ORC beforehand, and the Province of Ontario’s subsequent announcement that SARP was being cancelled put the Ontario horse racing industry in instant turmoil.

Lisus pointed out that Ontario horse racing groups, including the then-ORC, have gone on the record as saying that they were not consulted on the plans to cancel SARP whatsoever. Lisus also took a chance to point out that revenue from racetrack slot machines had gone to support the HIP (and therefore SIP) program, and the news of the SARP cancellation hindered the ability of the programs to continue due to funding issues.

Citing evidence that has been submitted to the court, Lisus went on to explain that in October of 2011 the OLG, with approval from the OLG Board, submitted recommendations to Ontario’s Ministry of Finance that the OLG relocate slots from racetracks and build new casinos in urban centres, including Toronto. Lisus also highlighted the fact that the OLG recommended to the Ministry of Finance that the slots move from the tracks to urban casinos, but that a revenue stream should be maintained to the provincial horse racing industry, if the Province so desired. Lisus stated that the OLG told the Ministry of Finance that its decision came after significant OLG intelligence/consultation.

Lisus then again referred to ORC Chair Seiling, who had stated after the fact that the ORC would not have encouraged Ontario breeders to breed (trade promotions, industry notices, etc.) if he knew what the OLG’s eventual modernization plan was proposing.

Lisus went on to characterize the situation as the culmination of a significant sequence of events (the OLG’s plan, ORC promoting breeding, and breeders subsequently breeding). Lisus commented that during the process neither the OLG nor the Ontario Government did anything to set the course straight and bring all parties into the loop for the greater good.

Lisus then highlighted the discussions that were going on between Ontario and the OLG in regard to SARP phase-out revenue streams that could be set up for the horse racing industry to experience a bit of a softer landing from the SARP cancellation. According to Lisus, in the fall of 2011, the Ministry of Finance said that it was not willing to give racing anything beyond a five-year phase out. According to Lisus, the Ministry of Finance then stated in December of 2011 that it only wanted a three-year phase out from SARP for the Ontario horse racing industry. Just a few months later, the plan changed again, and it was a drastic change.

Lisus stated that on February 3, 2012, the decision was made by the Ontario Finance Ministry ‘to go to zero’ for horse racing.

Lisus is scheduled to conclude his Motion of Summary Judgment on Wednesday (Sept. 12). Proceedings are scheduled to get back underway at 10:00 a.m.

Case No. CV-14-00000272-00OT, which is also known as ‘Seelster Farms Inc. v Her Majesty The Queen In Right Of Ontario’, has been categorized in the Superior Court of Justice’s daily court list as a Motion for Summary Judgment.