Canada: Factors Examined By The Supreme Court In Determining The Validity Of A Municipal Bylaw

In January the Supreme Court ruled on the factors to be examined in determining the validity of a municipal bylaw. Canada's highest court innovated by introducing the possibility of contesting a municipal bylaw deemed unreasonable in light of the factors considered by the municipal councillors at the time of enactment.

Catalyst Paper Corporation, one of Western Canada's largest producers of specialty paper and newsprint, has a paper mill in the District of North Cowichan on Vancouver Island.

The District provided the ideal environment for Catalyst's production as it was close to the ocean and surrounded by forests. In this context, Catalyst has always paid, without contesting, large portion of the modest property taxes collected by the District.

Over time, residential zones expanded as the population increased. The District began building roads, water mains, schools and hospitals, and developed a full range of municipal services.

Urban development led to a rise in residential property values — but not in the value of Catalyst's facilities. Nevertheless, the District decided to keep residential property taxes at a low level and instead, increase the tax rate applicable to Catalyst's properties. The company thus found itself paying a disproportionately large share of the property taxes without benefiting from the municipal services offered to residents.

Unhappy with its situation, Catalyst led the District to gradually reduce the tax-roll value of its properties. But this was not enough for Catalyst, which finally decided to attack the validity of the bylaw in question.

Was Catalyst justified in its claim that the bylaw should be quashed because it was unreasonable in light of objective factors such as the use of municipal services? That is the issue addressed by the Supreme Court in this ruling.

THE BYLAW IS REASONABLE

Catalyst claimed that the municipal bylaw should be quashed because it did not meet an objective criterion, i.e., the company in no way benefited from municipal services. Catalyst therefore considered itself overtaxed in relation to the benefits provided. However, the Court responded that in the decision-making process leading up to the adoption of the bylaw, the District Council had analyzed a number of subjective factors essential to the prosperity of the ongoing growth of the city.

The legislation authorized the District to enact property tax bylaws distinguishing between the various types of property. Even if the bylaw is ultimately favourable to residential property, it is not unreasonably so, since the purpose of its enactment was based on essential and reasonable factors.

The District Council had reasonably weighed the fact that the property tax rate threatened the very operation of the Catalyst mill, against the impact that a large property tax hike could have on fixed-income residents.

Tribunals would be unjustified in quashing the municipal bylaw solely on the basis that it places a larger tax burden on a targeted category of ratepayers.

DETERMINING THE VALIDITY OF A MUNICIPAL BYLAW

The power exercised by municipal councillors when they adopt bylaws involves a whole set of social, economic and political considerations, since the exercise of this power is liable to have an impact on the community. Municipal bylaws are therefore the result of the exercise of legislative, rather than adjudicative, power.

Historically, courts have always shown great restraint in terms of controlling the exercise of legislative power. To declare a bylaw null and void, the courts had first to conclude that it was illegal, unenforceable or unconstitutional, or that there had been an abuse of power, without having to examine the soundness of the bylaw itself.

The court's position with respect to control of the legislative power remains the same. However, according to the Supreme Court, deference does not apply in the same way to the legislative power delegated to a municipality. In such cases, it is appropriate to question the reasonability of the exercise of power by the public administration. The power delegated to the municipality must be exercised in accordance with the law, first and foremost, and the courts must serve as a check-and-balance in the exercise of this power.

In administrative law, there are a series of rules applicable to judiciary control governing the court's power to intervene. One of these rules is not to intervene unless the decision of the public administration is unreasonable. The Supreme Court, basing itself on this principle, is of opinion that controlling a municipal council decision resulting from the exercise of delegated legislative power must be done using the "reasonableness" standard of review.

Therefore the question to be asked is whether the bylaw is reasonable in light of the process leading to its adoption and whether it is within the range of possible reasonable outcomes based on certain factors.

The "reasonableness" standard implies that the determination of the bylaw's validity must be done with all due respect to the duty of elected officials to act in the citizens' interests. The court's power to quash a municipal bylaw thus remains limited, but the Supreme Court has opened the door to a new basis for contesting the validity of a municipal bylaw.

REASONABILITY

It should be remembered that the "reasonableness" standard is, above all, circumscribed by the legislative scheme that gives municipalities the power to adopt bylaws. Inarguably, the bylaw adoption process must meet the established legislative standards, and delegated power may only be exercised for legitimate purposes.

Subsequently, a contextual analysis of the decision-making process is essential for determining if the municipal council acted reasonably by adopting the bylaw and whether the bylaw is within the range of reasonable outcomes available to the legislator. In addition, the situation must be studied in light of the many factors, both objective and subjective, taken into account during this process. The subjective factors may be of a social, economic or political nature. A court asked to determine the reasonability of a bylaw must do so in light of the wide range of factors which the elected municipal councillors may have legitimately taken into account when they adopted the bylaw. In other words, the soundness of the municipality's decision must be examined.

Were the court to conclude that reasonability should be based solely on objective factors, it would mean that municipalities — which have been given discretionary power to act in the community's interests — could never exercise the power conferred on them by law.

In conclusion, the District bylaw could only have been quashed if the court had concluded that it had not been adopted by a body acting reasonably by taking such factors into account.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.