Court of Appeal Rejects Major Industry Tax Challenge

As reported in Fall LoGo 2009, Catalyst Paper Corporation appealed to the British Columbia Court of Appeal from the dismissal by the Supreme Court of British Columbia of Catalyst’s four court challenges to the major industry tax rates in the District of North Cowichan, the City of Campbell River, the City of Port Alberni and the City of Powell River.

On April 22, 2010 the Court of Appeal released its decision in the first of the appeals involving the District of North Cowichan. The Court of Appeal dismissed the appeal by Catalyst and held that the British Columbia Supreme Court had made no errors in its judgment rejecting Catalyst’s challenge to the Tax Rates Bylaw. The Court stated:

[33] I agree … that Bylaw No. 3385 must stand or fail on its own – i.e., that an unreasonable bylaw could not be ‘saved’ by the existence of an explanation, however ‘understandable’, of how it came about. I do not agree, however, that in order to be reasonable, a decision of a municipal council must be founded on a particular set of objective criteria or even a demonstrably “rational” policy. Certainly nothing in the statutory context reviewed above supports such a principle. The only legislative purpose that emerges, in my view, from the provisions of the Community Charter dealing with property taxation is that every municipality must have an annual financial plan for collecting revenue that will enable it to meet its expenditures from year to year. As Voith J. observed, a municipality has virtually unfettered discretion to consider whatever information it deems relevant and to allocate the tax burden among the classes as it sees fit. Nor is a council required to give reasons for adopting bylaws unless the statute so specifies.

[34] This accords with the obviously political – as opposed to administrative or adjudicative – functions of municipal councils. Members of such councils are elected to act in what they believe is in the best interests of the municipality rather than to play an independent role in adjudicating between specific interests. They bring certain views – on the basis of which they are elected – to bear on municipal decisions. These views may include ideologies that may or may not place value on the presence of industrial enterprises in the municipality, even those that employ large numbers of workers. Other members of the same council may have different views. Compromises are often necessary. Council members do not give reasons in any formal sense. Finally, they are ‘accountable’ in a way no court or administrative tribunal is accountable – i.e., at the ballot box. As was noted by Ann McDonald in “In the Public Interest: Judicial Review of Local Government” (1983) 9 Queen’s L.J. 62:

Once elected … the council is entrusted with responsibility for governing, not just in the interest of those who elected them, but in the interest of the community generally, that is, in the public interest. This is a fairly vague and controversial concept, however. It is a generalized judgment of what is best for individuals, as a part of a community. From the perspective of particular individuals and interest groups, the public interest may be conceived differently and, as amongst them, views of the public interest will inevitably conflict. A council making its decision on the public interest will identify and weigh a wide variety of competing considerations: the demands of various interested parties, the advice of its experts, data from its own research resources. And it will undoubtedly be influenced by the preferences expressed by the electorate. The decision is ultimately a matter of choice and what a council decides is necessarily its own collective perception of the public interest.

The voters of a community give their elected council members the final judgment in this controversy. Whether the councillors are right or wrong in their judgment depends on the vantage point of the person making this assessment, but in any event, this is the decision they were elected to make. There may, in fact, be no right or wrong in the matter. Persons displeased with a council’s decision have “a remedy at the polls”. [At 100, quoted by McLachlin C.J.C. in dissent in Shell Canada, supra. at para. 22.]

[35] With respect to judicial authorities on the question of standard of review, it is generally assumed that Dunsmuir applies to the decisions of municipal councils and that therefore the standard of “patent unreasonableness” previously applied in Rascal Trucking has been “collapsed” into one of [un]reasonableness simpliciter – a standard that under the older case law required the decision be “supported by reasons that can bear even a somewhat probing examination”. (See Director of Investigation and Research v. Southam Inc. [1997] 1 S.C.R. 748 at para. 56; Baker v. Canada (Minister of Immigration) [1999] 2 S.C.R. 817 at para. 63; Ryan v. Law Society (New Brunswick) 2003 SCC 20, [2003] 1 S.C.R. 247 at para. 47; and R. v. Owen 2003 SCC 33, [2003] 1 S.C.R. 779.) It is difficult to imagine how a court could carry out a “probing examination” of a council’s decision adopting a bylaw other than by considering the bylaw itself.

[36] Dunsmuir was concerned, of course, with the standard of review to be applied by courts of law to the decisions of administrative tribunals. It made no direct reference to the decisions of municipal councils. The Supreme Court defined “reasonableness” not in terms of the older caselaw but in terms of whether the decision falls within the range of acceptable outcomes that are defensible in respect of the facts in law. (Para. 47.) This led Ryan J.A. for this court in Teamsters’ Local Union 31, supra, to suggest that “if the new reasonableness standard was meant to be indistinguishable from the reasonableness simpliciter standard, reference would have been made to previous definitions of reasonableness simpliciter as a guide to the new standard.” (Para. 83.) In Khosa, supra, it was said that reasonableness is a single standard, but takes “its colour from the context.” Where the decisions of municipal councils are concerned, the factors that led the Court in Rascal Trucking (at paras. 31-2) to choose a standard of patent unreasonableness still form part of that “colour”, in my opinion.

[37] It is a central principle of democratic government that elected decision-makers must be given the highest degree of deference by courts of law, provided those decision-makers remain within constitutional and statutory boundaries. As seen earlier, this deference was famously enunciated in Wednesbury, supra, where Lord Greene observed that the Court’s task when confronted with a municipal decision is not to decide what the Court thinks is reasonable, but to “decide whether what is prima facie within the local authority is a condition which no reasonable authority, acting within the four corners of their jurisdiction could have decided to impose.” (At 233.) I do not read Dunsmuir as departing from this principle where policy-laden or legislative decisions are concerned. While it may be true that ‘something is either rational or is not’, I suggest that a wider range of decisions will be seen as reasonable by a court than might appear to be objectively justifiable according to any particular economic theory or empirical analysis.

This case is very significant and has a broad impact for these reasons:

a) The B.C. Court of Appeal recognizes the political nature of decisions made by local government. There has been great uncertainty regarding the effect of the Supreme Court of Canada’s judgment in Dunsmuir on judicial review of those decisions. The Court of Appeal confirms that Dunsmuir does not change the factors a court must consider, as established by the Supreme Court of Canada in its 2000 decision in City of Nanaimo v. Rascal Trucking Ltd.

b) Courts continue to recognize the political nature of local government decision making and as a result give great deference to those decisions.

c) Local government is not required to give reasons for adopting bylaws unless the enabling legislation specifically requires reasons to be given.

The concerns created by the Supreme Court of Canada in the Lafontaine case do not arise in British Columbia as a result of this decision.