Drafting bylaws that are effective and enforceable, while trying to maintain some degree of flexibility to deal with changing circumstances, is a challenging task. It is perhaps an understatement to say that elected officials and the public hold a variety views about what sort of regulation is desirable in their communities, and how much. In the absence of the proverbial “crystal ball”, it can be tempting to include provisions in a bylaw that reserve a decision-making discretion, either to staff, or to council or the board, and this can be fatal to a bylaw. Although legislation sometimes permits a degree of discretion to be reserved in a bylaw, this is typically only the case where specific guidelines or criteria are set out in the bylaw to guide the exercise of discretion, so that decisions cannot be made arbitrarily or unfairly. The unlawful reservation of discretion in bylaws is a perennial problem for local governments, as the cases discussed in this article illustrate, and it is critical for those who draft or review bylaws to be aware of the issue.
Where the enabling legislation states that a local government may, by bylaw, regulate a matter, the regulation must be done in the bylaw itself. It is not permissible to leave staff or elected officials with the discretion to decide how a matter should be regulated on a case-by-case basis. This is particularly so in the context of bylaws that enact permitting schemes. Some degree of delegation, typically to staff, is generally acceptable when it comes to issuing permits, as long as the delegated authority is clearly guided by the regulations set out in the bylaw. After all, nobody expects elected officials to review and approve every building permit or business licence application that a local government receives. However, it is essential that members of the public be able to understand, by reading the bylaw, what requirements they will have to meet in order to obtain a permit.
There are many examples in the cases of bylaws that have unlawfully reserved discretion. The leading case is Sun Oil Co. v. Verdun,  1 S.C.R. 222, a judgment of the Supreme Court of Canada. The City of Verdun’s building bylaw contained a clause which stated that once a building permit application was received, and had been vetted by the building inspector, the matter would be placed before council “which may, at its discretion, grant or deny the permission applied for”. On that basis, council had twice rejected a building permit application by the plaintiff, despite the building inspector having given a favourable review.
The Supreme Court of Canada held that the impugned bylaw provision was ultra vires, or “beyond the power” given to the City of Verdun in the enabling legislation. It stated:
“The mere reading of Section 76 is sufficient to conclude that in enacting it, the City did nothing in effect but to leave ultimately to the exclusive discretion of the members of the Council of the City, for the time being in office, what it was authorized…to actually regulate by by-law”
The Court noted that under the common law an owner of land has the right to build upon it as he or she sees fit, and that this right may only be limited by a properly enacted bylaw. Where the City of Verdun had gone wrong was to permit the council of the day to thwart an owners’ common law rights by way of a mere resolution, adopted according to council’s whim.
In the case of New Westminster (City) v. Davis Industries Ltd.,  3. W.W.R. 73, the B.C. Court of Appeal examined a provision in a zoning bylaw that gave council the right to approve or reject the proposed site of certain classes of business, effectively giving council the ability to veto an application for a business licence. The plaintiff was a scrap dealer, which was among the classes of business for which site approval was required. In response to opposition from area residents, council refused to approve the site, and therefore rejected the business licence application. The Court of Appeal struck down the provision, holding that it unlawfully reserved to council the discretion to exercise zoning powers by resolution.
In Barthropp v. West Vancouver (District) (1979), 17 B.C.L.R. 202, a decision of the B.C. Supreme Court, several provisions in a building bylaw were challenged by the plaintiff, who had been denied a building permit. The bylaw contained a number of vaguely worded regulations relating to construction near a watercourse, and the statement that a “structure cannot be altered without a permit from the Director of Operations”. It did not set out criteria to be applied by the Director of Operations in making a determination. Referring to established legal principles, including those enunciated in Sun Oil Co. v. Verdun, the Court held that the provision reserving an unqualified discretion to a staff member – a discretion that council could not lawfully reserve to itself – was invalid.
The Sun Oil Co. v. Verdun case has been followed more recently as well, by the Prince Edward Island Supreme Court in MacArthur v. Charlottetown (City) (2005), 11 M.P.L.R. (4th) 148. In that case, a building permit for an apartment complex was denied on the basis of a bylaw provision that allowed refusal of an application where the development “would, in the opinion of council” have any one of a number of listed results, including that it would “be inferior to the general standard of appearance prevailing or intended to prevail in the area”, or that it would “injure neighbouring properties by reason of architectural disharmony”. The Court took the view that the various criteria listed were lacking in sufficient detail to guide decision-making, and that in any event, the phrase “in the opinion of council” was equivalent to the phrase “at its discretion” in Sun Oil Co. v. Verdun, and therefore an unlawful reservation of discretion.
Although matters such as “architectural disharmony” can, to some extent, be addressed by local governments in British Columbia, pursuant to their development permit powers relating to form and character, this example only serves to illustrate the point. Development permit guidelines must fall within the range of permitted matters under section 919.1 of the Local Government Act, and they must be specified in an official community plan bylaw. Although some degree of flexibility is possible, such flexibility must be well-grounded in objective guidelines, so that developers are able to anticipate with reasonable certainty the requirements they will have to meet. Moreover, so long as a developer satisfies the applicable requirements, council does not have discretion to refuse a development permit, as confirmed by the B.C. Court of Appeal in Westfair Foods Ltd. v. Saanich (District) (1997), 46 M.P.L.R. (2d) 104.
When it comes to the unlawful reservation of discretion, the last word goes to the Quebec Superior Court, in the 1904 case of Corporation du Village de Ste.-Agathe v. Reid, Q.R. 10 R. de J. 334. In the course of invalidating a bylaw that gave council discretion to approve or refuse the location of steam-powered sawmills, the Court stated the following:
“[T]he composition of the council changes from time to time, the conditions might be changed from meeting to meeting, and the council would then have it in its power to permit one person to erect a saw-mill propelled by steam, upon certain conditions, and in a certain locality, and refuse the same rights to others…The permission to erect and conditions would thus be subject to the mere whim of the persons who might form the council of any particular meeting.
Every opportunity is given to the council to discriminate against or in favor of individuals, and instead of the by-law being so as to work always impartially, it opens the door to discrimination and arbitrary, unjust and oppressive interference in particular cases.
It is not really a by-law at all, but a declaration that the council may permit the erections referred to…upon such conditions as it may think proper to make at any particular meeting. The rights of those who may desire to erect such manufactories or machinery are left uncertain, and it appears to me this so-called by-law is drawn contrary to the elementary principles upon which an ordinance of that kind ought to be made.”