The appellant, Catalyst Paper Corporation (the “Mill”), sought to have a decision upholding a municipal taxation bylaw, that it claimed was unreasonable, set aside. The Supreme Court of Canada was asked to pronounce on Courts’ power to review municipal taxation bylaws. The Court dismissed the appeal. Notwithstanding that the Mill paid a grossly disproportionate part of the municipal’s property tax levy while obtaining very little in exchange in terms of services, the Court held that the taxation bylaw fell within the reasonable range of outcomes.

Administrative law – Decisions of administrative tribunals – Municipal councils – By-laws – Municipalities – Taxation – Validity – Judicial review – Compliance with legislation – Standard of review – Reasonableness simpliciter

Catalyst Paper Corp. v. North Cowichan (District), [2012] S.C.J. No. 2, 2012 SCC 2, Supreme Court of Canada, January 20, 2012, McLachlin C.J. and LeBel, Deschamps, Fish, Abella, Rothstein and Cromwell JJ.

The Mill is the largest specialty paper and newsprint producer in Western North America located in the District of North Cowichan (the “District”). In recent decades, the population of the District has increased which has caused the value of residential properties to skyrocket. The District was concerned that taxing residential property at a rate that reflected its actual value relative to the value of other classes of property in the District would result in unacceptable tax increases to residents. The District responded to the demographic shift by keeping residential property taxes low and increasing the relative tax rate of the Mill. This resulted in the Mill footing a grossly disproportionate part of the District’s property tax levy while obtaining little in exchange in terms of services (for example, the Mill had its own sewer, water systems and deep sea port). Exacerbating the situation, the Mill’s operation began losing money and thus the Mill had been faced with question of whether it should stay in the District and pay the taxes or whether it should close the Mill. The Mill began pressuring the District to lower its tax assessment since 2003. It had had some, but not enough success. Accordingly, the Mill sought relief from the Courts.

The parties agreed that the reasonableness standard applied. The parties further agreed that the question before the Court was whether the bylaw at issue was reasonable, having regard to process and whether the bylaw fell within a range of possible reasonable outcomes. The parties differed however on what factors the Court should consider in assessing whether the bylaw was reasonable.

The Court held that when reviewing the municipal bylaw for reasonableness, it must approach the task against the backdrop of the wide variety of factors that elected municipal councillors may legitimately consider in enacting bylaws, including social, economic and political issues. The applicable test could be stated as follows: only if the bylaw is one no reasonable body informed by these factors could have taken will the bylaw be set aside. This deferential approach to judicial review of municipal bylaws however is circumscribed by the purview of the legislative scheme that empowers a municipality to pass a bylaw. In this case, the relevant legislation is the Community Charter. Section 197 of the Community Charter provides municipalities a broad and virtually unfettered legislative discretion to establish property tax rates in respect of each of the property classes in the municipality unless limited by regulation. Additionally, the Community Charter does not support the contention that property value taxes ought to be limited by the level of service consumed. In light of these considerations, the Court found that the bylaw fell within a reasonable range of outcomes. Even though the bylaw favoured residential property owners and was harsh on the Mill, the Court held that the adoption of the bylaw did not constitute a decision that no reasonable elected municipal council could have made.

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