The Supreme Court of Canada (the “SCC”), in a unanimous judgment, has dismissed Catalyst Paper Corporation’s appeal in Catalyst Paper Corp. v. North Cowichan (District), 2012 SCC 2 (“Catalyst”), thus putting an end to the tax revolt of 2008 that saw Catalyst bring court challenges to a number of municipal property tax bylaws on the basis that they were unreasonable, because they placed an unfair tax burden on industrial property owners.
At every level of court, from trial, through the B.C. Court of Appeal, to the SCC, Catalyst pressed the argument that tax rates must bear a reasonable relation to the amount of services consumed by the taxpayer. The argument was rejected at all levels.
In Catalyst, the SCC has affirmed that “municipal councils passing bylaws are entitled to consider not merely the objective considerations bearing directly on the matter, but broader social, economic and political issues.” In passing its tax bylaw, North Cowichan took into account the burden placed on Catalyst, but it also took into account the impact that raising residential tax rates would have upon residents, particularly those on fixed incomes. It was entitled to do so, even though the outcome was a bylaw that imposed a tax levy on Catalyst that the SCC characterized as “grossly disproportionate”.
The SCC addressed the question of the appropriate standard for courts to apply when reviewing bylaws, and agreed with the courts below that the appropriate standard is reasonableness. Moreover, what is reasonable depends on the context, and in the context of municipal bylaws, where councils are exercising legislative authority (as opposed to situations where councils are exercising an adjudicative authority), the SCC had this to say:
“It is thus clear that courts reviewing bylaws for reasonableness must approach the task against the backdrop of the wide variety of factors that elected municipal councillors may legitimately consider in enacting bylaws. The applicable test is this: only if the bylaw is one no reasonable body informed by these factors could have taken will the bylaw be set aside. “
The SCC went on to say that “the fact that wide deference is owed to municipal councils does not mean that they have carte blanche”, a cautionary note signaling that the deference of the courts is not limitless. The court will intervene, for example, where bylaws are lacking in legislative authority, or enacted in bad faith. However, in Catalyst, there was ample legislative authority and no allegation of bad faith. The SCC concluded that the tax bylaw fell within the range of reasonable outcomes, and upheld it.
The judgment in Catalyst also confirms that unless required to do so by statute, municipal councils are not obligated to provide formal reasons or explain a rational basis for their bylaws. The SCC put it this way:
“To demand that councillors who have just emerged from a heated debate on the merits of a bylaw get together to produce a coherent set of reasons is to misconceive the nature of the democratic process that prevails in the Council Chamber. The reasons for a municipal bylaw are traditionally deduced from the debate, deliberations and the statements of policy that give rise to them.”
With Catalyst, the court battle over municipal tax rates has come to an end, at least for now. It’s a victory for all local governments, but no doubt the larger conflict will continue on other fronts. For additional background, see the Spring 2010 and Fall 2009 issues of LoGo Notebook.