In Okanagan Land Development Corporation v. City of Vernon 2012 BCCA 332, the Court of Appeal overturned the lower court decision which had held a latecomer bylaw to be invalid on the basis that the municipality was not authorized to impose a per unit charge based on future potential development of the benefiting properties, payable at the time of subdivision.
There were four main issues on appeal, two of which were based on the statutory interpretation of section 939(5)(c) of the Local Government Act (“LGA”); the third dealt with the question of certainty; and the fourth with the issue of discrimination.
Section 939(5) of the LGA deals with the authority of Council to impose latecomer charges for excess or extended services. In this case, the developer had constructed and paid the cost of a new sewermain, approximately six kilometers long; the sewer line passed by a number of undeveloped properties and some properties that had already been developed but with on-site sewage systems. The municipality estimated the development potential of these properties and calculated a per unit latecomer charge by dividing the cost of the sewer line by the number of potential development units.
Questions of Interpretation
The trial judge pointed out a number of difficulties with interpreting the bylaw related to the determination of the latecomer fee. Particularly, the schedules were not incorporated into the bylaw in a clear manner. The trial judge also found that the word “unit” as used in the bylaw, being undefined, was not clearly interchangeable with the use of the word “lot”, as used elsewhere. There were a number of other difficulties the trial judge found in interpreting the meaning of items set out in Schedule “B” of the bylaw, such as the basis for determining potential development.
The trial judge also found that the requirement to pay the latecomer fee at the time of subdivision or upon application of a building permit was beyond the authority contained in section 939. The trial judge found that the charge must be imposed as a “condition of connecting to” or hooking-up to the service, and not as a condition of subdivision.
The Court of Appeal discussed the rules of statutory interpretation and confirmed that the proper approach is the “modern approach” as set out in the Supreme Court of Canada decision in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42. The modern approach requires that the words of the Act be read in their entire context, and in their grammatical and ordinary sense harmoniously with the scheme and the object of the Act and the intention of the drafter of the legislation. This, coupled with the requirement that the powers conferred upon municipalities be interpreted broadly in accordance with section 4 of the Community Charter, led the court to conclude that section 939(5)(c) of the LGA does not require a local government to impose a latecomer charge only on the basis of the total benefit accruing to each benefitting property. The legislation only requires that the charge be “related to” the benefit determined.
The developer’s real objection to the formulation of the latecomer charge was that if the owner of the benefitting property did not develop the property to its maximum development potential, he or she would not have to pay the total latecomer fee: “… a benefitting land owner may, by subdividing the benefitting land into fewer units then calculated by Vernon in determining the total benefit, have the benefit of the sewer line without paying the amount of the total benefit”.
The Court of Appeal examined whether or not the municipality was acting reasonably in the exercise of its discretion to allocate the total benefit among the benefitting properties in the manner it did. The court cited on an earlier decision of the Court of Appeal in 618061 B.C. Ltd. v. Village of Anmore, 2008 BCCA 205 for the proposition that the allocation of the costs of an excess or extended service to benefitting properties is a matter of municipal discretion. The Court of Appeal found that the municipality exercised its discretion in a reasonable manner, applying the test of reasonableness set out in the Supreme Court of Canada case in Dunsmuir v. New Brunswick 2008 SCC 9.
Further, the Court of Appeal found that Section 939 does not prohibit the municipality from imposing the fee at the time of subdivision or at the time of building permit application since the charges may be imposed under s section 929(5)(c) “as a condition of an owner connecting to or using the service”. On a plain reading, there is no requirement that the charge be collected or paid at the time of connection, nor is there anything that would prohibit the collection of the payment before connection: “Collection of the charge at the time of subdivision, application for a building permit, or connection are all consistent with the scheme and purposes of these provisions.”
The court also addressed the issue of whether the bylaw was void for uncertainty. The court referenced the test for uncertainty as articulated in a number of court decisions and confirmed that municipal bylaws are to be interpreted benevolently and are to supported if possible: “What is required is that a reasonably intelligent person be able to determine the meaning of the bylaw and govern his or her actions accordingly”. The court concluded that the fact that the information in the bylaw was organized in a confusing manner did not make it impossible for a reasonably intelligent person to reach a conclusion as to the meaning of the bylaw.
Lastly, the court examined a question not decided by the trial judge but raised at the hearing regarding whether the bylaw was discriminatory. The basis for this allegation was that there were a number of properties in the benefitting area, that were already built upon, that the bylaw exempted from having to pay a latecomer fee.
The court examined a number of cases in which the issue of discrimination was considered. The court concluded that the legislation in those cases did not explicitly authorize discrimination, and the bylaws therefore failed the test established by the courts. The court concluded that section 939 does expressly permit a municipality to draw distinctions; the municipality was given the power to determine “the part of the excess service it considers, in its discretion, will benefit each parcel”. The legislation recognized that the benefit may vary from parcel to parcel. The court concluded that the bylaw did not unlawfully discriminate.