Date: 20080814
Docket: T-1688-06
Citation: 2008 FC 940
Ottawa, Ontario, August 14, 2008
PRESENT: The Honourable Mr. Justice Mosley
BETWEEN:
JOHNSTON
CANYON CO. LTD.
Applicant
and
THE
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
This is an application
for judicial review pursuant to section 18.1 of the Federal Courts Act
of a decision by Parks Canada, in a letter dated August 17, 2006, to require
certain terms for a new lease of Crown land to the applicant. The applicant
seeks a series of remedies including a declaration that it is entitled to the
grant of a 42 year lease at a method of rent calculation of its choice. For the
reasons that follow the application is dismissed.
Background:
[2]
The applicant, Johnston
Canyon Co. Ltd., operates a seasonal (April 1 to October 31) accommodation
facility in Banff National Park, 25 kms west of the town of Banff and close to
the popular Johnston Canyon trailhead. The facility, consisting largely of
rustic bungalows, has operated on leased Crown land since 1927. The bungalows
are classified by Parks Canada as Outlying Commercial Accommodation (OCA).
[3]
In 1963, the applicant
and the Crown signed a lease for 42 years, expiring December 31, 2004, with a
right of renewal for a further 21 years “at a rent to be determined by the
Minister”.
[4]
In 1988 the Minister of
Canadian Heritage, the minister responsible for Parks Canada, imposed a
moratorium on OCA development in the mountain national parks and appointed a
panel to review the issue. The OCA panel’s report was made public in April 2000
followed by the report of a separate panel on maintenance of the parks’ ecological
integrity. These reports served as the basis for the development of Parks
Canada policy respecting OCAs.
[5]
By letter dated May 30,
2001 the Chief Executive of Parks Canada advised the applicant that the agency
did not accept certain of the OCA panel’s recommendations respecting the Johnston Canyon resort because of ecological concerns and that redevelopment and
expansion of the facility would be subject to new guidelines which were set out
in the letter.
[6]
The two parties began
negotiations for a mutually acceptable redevelopment plan and new lease in
2001. Issues in contention included extension of the operating season to
include the winter months, redevelopment, expansion and partial relocation of
the site and the rent regimes available to the applicant on a new lease. Parks
Canada officials advised the applicant that the agency was open to its
redevelopment proposals so long as they were “environmentally advantageous”. Expansion
would be permitted if an ecological benefit could be shown.
[7]
On May 21, 2004, Parks
Canada adopted a Revised Policy Directive for Commercial Rent Setting, which
was to be applied to all commercial leases and land occupation licences. For
replacement leases negotiated thereafter, an agreed-upon percentage of gross
revenue would be the only available basis for calculating the rent. Where
‘substantive negotiations’ had been completed between Parks Canada and a lessee
on the terms of surrender and replacement of a lease by May 20, 2004, the
lessee would be permitted to select a rent option from those set out in
subsection 6(1) of the National Parks of Canada Lease and Licence of
Occupation Regulations, SOR/92-25 (the Regulations). The Minister
has since taken steps to amend the Regulations to reflect the Revised
Policy but those changes were not in place at the time the policy was adopted
and applied in this case.
[8]
Over
the course of the negotiations, the parties were in regular communication in
writing and through telephone calls and face to face meetings between Parks
Canada officials and the applicant’s directors. The applicant submitted
proposals in April and September 2004 which were refused primarily on the
ground that they did not demonstrate sufficient environmental advantages. By
letter dated October 21, 2004 to the applicant, a Parks Canada official advised
that proposed changes to the surveyed lease area and to the nature of the
operations would require a new lease. No agreement on the issues was reached
prior to the expiry of the original lease on December 31, 2004.
[9]
A letter from the
applicant dated February 26, 2005 was read by Parks Canada officials as
withdrawing Johnston Canyon’s redevelopment proposal and ending
the request for a new 42 year lease. Correspondence from Parks Canada in March
and May 2005 confirmed that a new lease was no longer under consideration and
that the 21 year renewal remained on the table under which the applicant could
choose one of the rental options outlined in the Regulations. There was
some dispute over the appraised value of the facility but ultimately, the
applicant executed the renewal agreement in June 2005 essentially on the same
terms as the 1963 lease with an expiry date of December 31, 2025.
[10]
On October 25, 2006 the
applicant submitted a revised redevelopment proposal within the guidelines
fixed by Parks Canada based upon a 42 year term with rent to be determined
according to the options set out in the Regulations. Further meetings
and correspondence ensued between the parties. By letters dated February 3,
2006 and August 17, 2006 Parks Canada reiterated its position that the only
rent regime available for a new lease was the percentage of gross revenue
approach.
[11]
The August 17, 2006
letter was taken by the applicant to be the decision which forms the basis of
this application for judicial review. If successful, the applicant seeks:
a)
a declaration that it must be permitted to
choose one of the applicable rent provisions from the Regulations in the
grant of a lease to it;
b)
a declaration that Parks Canada has no
jurisdiction to impose a specific rent option on it;
c)
a declaration that Parks Canada has a duty to
exercise its discretion fairly and equally between similarly situated lessees;
d)
a declaration that Parks Canada has not fairly,
equitably and consistently exercised its discretion;
e)
a declaration that it had a legitimate
expectation that it would be granted a 42 year lease on the rent option of its
choice;
f)
an order of certiorari setting aside the
impugned decision;
g)
a declaration that it is entitled to a new 42
year lease consistent with the statutory requirements and its legitimate
expectation; and
h) its costs.
The
Regulations
[12]
The
regulatory provisions governing the lease of land in national parks pertaining
to this case at the relevant times include the following sections:
|
3. (1) Subject to subsection (2) and sections 4 and 19, the
Minister may, for any term not exceeding 42 years and on such terms and
conditions as the Minister thinks fit, grant leases of public lands […]
|
3. (1)
Sous réserve du paragraphe (2) et des articles 4 et 19, le ministre peut
octroyer des baux d’une durée d’au plus 42 ans, selon les modalités qu’il
juge indiquées, à l’égard des terres domaniales […]
|
|
6. (1) At the time a lease is granted, the lessee shall choose a
rental rate set out in section 7, 8, 11, 13 or 14 that is applicable to the
location, use and conditions of occupancy of the leased public lands and the
purpose for which the lease is granted, and that rental rate shall be a term
of the lease.
|
6. (1) À
l’octroi du bail, le preneur doit choisir, parmi les taux prévus aux articles
7, 8, 11, 13 et 14, le loyer qui est exigible d’après l’emplacement, l’usage
et les conditions d’occupation des terres domaniales louées, ainsi que les
fins auxquelles le bail est octroyé; ce loyer est indiqué dans le bail.
|
|
11. (1) The rental rate for a lease of public lands in the Town of
Jasper or a visitor centre that is granted for the purpose of trade, tourism
or places of recreation or entertainment, for a lease of public lands in the
Town of Banff that are to be used for that purpose and for a lease of public
lands outside the Town of Banff or the Town of Jasper, visitor centres and
resort subdivisions that is granted for the purposes of tourism, service
stations or places for the accommodation, recreation or entertainment of
visitors to the parks shall be
(a) subject to
subsection 12(1), 6.0 per cent per annum of the appraised value;
(b) subject to
subsection 12(2), 4.0 per cent per annum of the appraised value;
(c) subject to
subsection 12(3)
(i) 4.0% per
annum of the appraised value, or
(ii) in respect
of those leases for which the rental rate was set in 2000 in accordance with
subsection 6(2) or (3), the greater of 4% per annum of the appraised value
and the 1999 rental rate;
or
(d) when the
leased public lands have been used for commercial purposes during the
previous five years and the financial records relating to that use are
available to the lessee, or the leased public lands have been used for
commercial purposes for less than five years and the gross revenue can be
reasonably estimated, the greater of
(i) a per cent
per annum that is agreed to by the Minister and the lessee of the annual
gross revenue from business conducted on or from the leased public lands by
the lessee and any sublessee, sublicensee or concessionaire, and
(ii) a percent
per annum that is agreed to by the Minister and the lessee
(A) of the
average annual gross revenue from business conducted on or from those leased
public lands by the lessee and any sublessee, sublicensee or concessionaire
during the previous five year period, or
(B) if
financial records of gross revenue for that period are not available to the
lessee, of estimated annual gross revenue for the first year of the term of
the lease.
(e) [Repealed,
SOR/2002-237, s. 12]
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11. (1) Le
loyer afférent au bail octroyé à l’égard de terres domaniales situées dans la
ville de Jasper ou un centre d’accueil aux fins de commerce, de tourisme ou
de lieux de divertissement ou de récréation, au bail octroyé à l’égard de
terres domaniales situées dans le périmètre urbain de Banff pour utilisation
à l’une de ces fins, ou au bail octroyé à l’égard de terres domaniales
situées à l’extérieur du périmètre urbain de Banff, de la ville de Jasper,
des centres d’accueil et des centres de villégiature, aux fins de tourisme,
de stations-service, de logement ou de lieux de divertissement ou de
récréation pour les visiteurs des parcs, est l’un des suivants :
a) 6,0 pour cent l’an de la valeur
estimative, sous réserve du paragraphe 12(1);
b) 4,0 pour cent l’an de la valeur
estimative, sous réserve du paragraphe 12(2);
c)sous réserve du paragraphe 12(3):
(i) 4 pour cent
l’an de la valeur estimative,
(ii) en ce qui
concerne les baux dont le loyer a été fixé en 2000 conformément aux
paragraphes 6(2) ou (3), 4 pour cent l’an de la valeur estimative ou le loyer
de 1999, selon le plus élevé des deux montants.
d) lorsque les terres domaniales louées
ont été utilisées à des fins commerciales durant les cinq années précédentes
et que les livres comptables y afférents sont à la disposition du preneur, ou
lorsque les terres domaniales louées ont été utilisées à des fins
commerciales pendant moins de cinq ans et que les recettes brutes peuvent
être raisonnablement estimées, le plus élevé des pourcentages suivants :
(i) le
pourcentage annuel, convenu par le ministre et le preneur, des recettes
brutes annuelles tirées du commerce exploité par le preneur et tout
sous-preneur ou concessionnaire sur les terres domaniales louées ou à partir
de celles-ci,
(ii) le
pourcentage annuel, convenu par le ministre et le preneur, de l’un des
montants suivants :
(A) la moyenne
des recettes brutes annuelles des cinq années précédentes tirées du commerce
exploité par le preneur et par tout sous-preneur ou concessionnaire sur les
terres domaniales louées ou à partir de celles-ci,
(B) si le
preneur n’a pas à sa disposition les livres comptables y afférents, les
recettes brutes estimatives de la première année du bail.
e) [Abrogé, DORS/2002-237, art. 12]
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Issues
[13]
The
applicant raises the following issues:
1.
What is the appropriate standard of review?
2.
Was the August 17, 2006 decision not made in
accordance with the National Parks Act, S.C. 2000, c. 32 (the Act)
and its associated Regulations and was therefore beyond the jurisdiction
of Parks Canada?
3. Does the refusal to grant a 42 year lease constitute an abuse of
discretion by discriminating between holders of OCA leases?
4. Did the decision prematurely terminate discussions on negotiating a
new lease and thereby violate the applicant’s legitimate expectations?
[14]
The
respondent counters that the second issue is not whether Parks Canada had
jurisdiction, which it clearly did, but whether the decision not to grant the
applicant a new lease on the terms of its choosing was reasonable.
Standard of
review
[15]
Following
Dunsmuir v. New Brunswick, 2008 SCC 9, [2008]
S.C.J. No. 9, the decisions of tribunals and other administrative bodies are to
be reviewed on one of two standards: reasonableness or correctness. It is not
necessary to undertake an analysis of the appropriate standard of review where
such standard is settled by prior jurisprudence.
[16]
Questions
of jurisdiction, in the sense of whether the decision maker had the authority
to decide, are specifically noted in Dunsmuir to be subject to a
correctness standard. Both abuse of discretion and breach of legitimate
expectations are issues of procedural fairness and would be cause to vacate the
decision if found to have occurred. The decision not to grant the lease on the
terms proposed by the applicant is discretionary and therefore attracts
significant deference. It will be quashed only if unreasonable.
Jurisdiction
/ reasonableness of decision
[17]
The
applicant argues that the respondent cannot rely on its Revised Policy
Directive of May 21, 2004 as it is incompatible with section 6 of the Regulations.
While it agrees that policies may inform the interpretation of statutory
instruments, the applicant contends that section 6 clearly gives the choice of
rental regime to the lessee at the time the lease is granted and can only be
waived by the lessee, which was never done in this case. The reliance of Parks
Canada on its Directive in refusing to grant the new lease under the
applicant’s preferred rental terms was an abuse of its discretion under section
3 of the Regulations. The applicant asserts that the proposed amendments to the Regulations
(exhibit A to the supplementary affidavit of Geordie Nokes) appear to reflect a
recognition that the Regulations must be altered to permit Parks Canada
to insist that percentage of gross revenue be the basis of negotiations.
[18]
Johnston Canyon submits in
the alternative that its situation falls within the ‘substantive negotiations’
provision of the Directive, as it
has unwaveringly sought a 42 year lease since the outset of the negotiations. In
the further alternative, it contends that the Policy applies only where an
existing lease is expiring or where the Minister may grant a renewal lease for
such term as he may consider advisable. It argues that it is not voluntarily
requesting a new lease but is required to do so in order to pursue its
redevelopment plans.
[19]
The
respondent counters that the Minister has a broad discretion pursuant to
section 3 of the Regulations to accept the surrender of a lease or to
grant a new lease. He asserts that Johnston Canyon has no entitlement to a 42 year lease under the
rent regime of its choice. The Minister has no obligation to accept the
surrender of the current lease or to grant a new one. The focus on the rent
regime is misguided. The parties failed to reach an agreement through
negotiations and the Minister decided in his discretion not to grant a new
lease to Johnston Canyon.
[20]
The Attorney General
further submits that the Revised Policy Directive is a guideline to be used
when a new lease is to be granted. It is not at issue in the case at bar, as
the lease was not to be granted. Furthermore, the long history of negotiations
between Johnston Canyon and Parks Canada is not indicative of ‘substantive
negotiations’ as provided for in the Directive, but rather shows that the
parties were not close to agreement on the substantive parts of a new lease by
the relevant date of May 2004.
[21]
There
is merit to the submissions of both parties. I agree with the applicant that the
Revised Policy Directive cannot override the choice of rent regime granted the
lessee in section 6 of the Regulations. A policy statement or guideline
may assist in interpreting a statutory instrument but cannot be used to
contradict its plain meaning. It is clear that section 6 provides the lessee
with the right to choose the rent regime from the options provided upon the
grant of a lease. Accordingly, the Minister would have exceeded her
jurisdiction under the Regulations had she decided to grant the lease
and had then unilaterally imposed a rent regime which the applicant had not
chosen from one of the four options.
[22]
However,
that does not mean that the applicant is entitled to the remedy that it seeks
in these proceedings. It was open to the Minister, pursuant to section 3 of the
Regulations, to decline to grant a new 42 year lease on the terms sought
by the applicant including redevelopment plans that Parks Canada was not
prepared to accept.
[23]
It
might be helpful to envision the process as occurring in two steps. The
Minister makes a discretionary decision under section 3 to grant a lease of
public lands under terms and conditions which she considers appropriate up to a
maximum term of 42 years. This discretion is fettered only by subsection 3(2)
and sections 4 and 19. Having made the decision to grant a lease, the choice
then passes to the lessee for the selection of a rental regime pursuant to
section 6. In coming to this understanding of the relevant passages, I noted
the plain meaning of the language of section 6, which reads “[a]t the time a
lease is granted, the lessee shall choose a rental rate […] that is applicable
to the location, use and conditions of occupancy of the leased public lands and
the purpose for which the lease is granted, and that rental rate shall be a
term of the lease”.
[24]
As
noted by the applicant, the proposed amendments to the Regulations appear to reflect a recognition on the part
of the Minister that the Regulations must be altered to permit Parks
Canada to insist that percentage of gross revenue be the basis of negotiations. Unfortunately
for the applicant, this does not further its cause towards the relief it seeks.
[25]
Accepting
the surrender of a pre-existing lease or granting a new lease remains at the
discretion of the Minister and she decided not to do so in this case. In
returning to the two-step analogy, it would be fair to say that the first step
was decided in the negative and the second step, about which the applicant
takes issue, never came into play.
[26]
As
for the final submission of the applicant on the question of jurisdiction, I agree with the respondent that, despite
the evidence of lengthy negotiations, there is no evidence that a new lease was
substantially negotiated by May 2004. In fact, the failure of the parties to
reach an agreement after at least three years of negotiating demonstrates a
lack of substantive agreement on the terms of a new lease.
Abuse of
discretion
[27]
The
applicant alleges that Parks
Canada is not being even-handed in continuing to demand that the applicant accept
a percentage of gross revenue as the basis of its negotiations as other
similarly situated OCAs have negotiated 42 year leases based on rental amounts
under other rental regimes. The decision to limit negotiations to the one
rental regime in the case of Johnston
Canyon was made in the
absence of any statutory authority to discriminate or public policy
justification for discrimination. The applicant contends that it is placed at a
competitive disadvantage by the arbitrary decision of the Minister and her
delegates.
[28]
The respondent counters
that OCAs are not a homogenous group and that the Minister has the right to
negotiate leases with each OCA on different terms. The broad authority to make
regulations regarding the determination of fees includes the ability to make
distinctions between classes of fee payers: Parks Canada v. Sunshine Village
Corp., 2004 FCA 166, [2004] 3 F.C.R. 600. There is no requirement for
explicit statutory authority to distinguish between classes and kinds of
business, indeed the Courts have looked for statutory language prohibiting such
distinctions before finding that such differentiation was not permitted.
[29]
As was noted by the Federal
Court of Appeal in Sunshine Village, the Governor in Council has a very broad discretion when setting fees. Indeed,
he has the authority to set different fees in different circumstances “regardless
of whether doing so is discriminatory in the administrative law sense”(at
paragraph 19).
[30]
Similarly, it has been
held by the Court of Appeal that discrimination by the Governor in Council on the
exercise of broad powers is permissible unless contrary to public policy: Moresby
Explorers Ltd. v. Canada (Attorney General), 2007 FCA 273, 284 D.L.R. (4th) 708, at
paragraphs 29-30. The public policy referred to by Parks Canada in this case is
the environmental impact of visitors to the national parks it manages.
[31]
Parks Canada’s refusal
to grant a 42 year lease was based primarily on the failure of the applicant to
submit a suitably ‘environmentally advantageous’ development plan acceptable to
the Minister. Moreover, the evidence does not clearly establish that the
applicant was discriminated against with respect to Parks Canada’s treatment of
similarly situated facilities. A review of the lease agreements for other
facilities filed as exhibits indicate that there are significant differences
between them. In any event, I need not determine whether discrimination did in
fact occur as the decision of the Minister was within the scope of her
authority and not contrary to public policy.
[32]
I conclude that the
decision of Parks Canada to limit the basis of its negotiation to the single
rent regime of percentage of gross revenue was not an abuse of discretion.
Legitimate
expectations
[33]
Next,
the applicant contends that Parks Canada breached its duty to fulfill
legitimate expectations when it prematurely terminated lease negotiations by applying the terms of the
Revised Policy Directive midway through the negotiations. The applicant asserts
that it was encouraged to submit a serious of proposals and was led to believe
that there was no deadline for submissions. It was verbally assured in January
2001 and February 2004 that the replacement lease would be subject to the rent
provisions in the Regulations.
[34]
The
applicant further submits that it relied on the assurances of Parks Canada officials that entering into the
renewal lease would not harm its ability to obtain a new lease of 42 years with
the legislated rent options. It claims that it was ‘blindsided’ by the new and
unexpected rent regime. The decision to apply the policy is a breach of
legitimate expectations, the argument goes, that arose from representations and
substantive promises made by Parks Canada staff to Johnston Canyon directors.
[35]
The respondent submits
that the applicant is attempting to recast negotiations as unilateral
representations where no agreement was reached on the essential terms of the
lease. Johnston Canyon had ample time to make representations when it
learned of the policy change prior to the making of the purported decision.
[36]
The doctrine of
legitimate expectation arises when a party affected by the decision of a public
official has no opportunity to make representations: Old St. Boniface
Residents’ Association v. Winnipeg (City), [1990] 3 S.C.R. 1170, 75 D.L.R. (4th) 385.
In such circumstances, legitimate expectations give rise to procedural
protection rather than substantive rights. As correctly asserted by the
respondent, the opportunity to provide further representations will defeat a
claim of a breach of the doctrine.
[37]
The
applicant’s directors appear to have relied upon statements which were made to
them by Parks Canada employees. This included a comment by one employee, not
directly involved in the negotiations, to the effect that the regulations would
have to be amended before the new rent regime could be imposed. However, this
statement did not entitle the applicant to the grant of a new lease. As
discussed above, that would have required agreement on the redevelopment
proposals and the exercise of the Minister’s discretion. I do not read any of the so-called
representations of Parks Canada officials in the record as being anything other
than comments or offers made in the context of ultimately unsuccessful
negotiations.
[38]
The applicant was
provided with a variety of opportunities to respond to Parks Canada’s assertion
that a new rental regime was the only one on offer. The case it cites as
authority for its position, Schwartz
Hospitality Group Ltd. v. Canada (Minister
of Canadian Heritage),
2001 FCT 112, 201 F.T.R. 85, involved a conditionally approved plan for an altered lease. In the
instant case, the negotiations simply had not proceeded to an equivalent point.
Conclusion:
[39]
Upon
the expiry of the 1963 lease, the applicant was entitled to a renewal for a
term of 21 years subject to its choice of the applicable rent regimes as set
out in section 6 of the Regulations. A renewal under those terms was
executed in 2005 for the remaining twenty years. It was open then and remains
open to the parties to reach agreement on a new lease for a maximum term of 42
years.
[40]
I
agree with the applicant that, under the Regulations in force at the
time of the impugned decision, had a new 42 year lease been granted to it
following the expiry of the 1963 lease the applicant would have been entitled
to choose one of the
applicable rent options from the Regulations and that the Minister
had no jurisdiction to impose an alternative rent regime.
[41]
The
applicant’s directors sought approval of their redevelopment proposals and a
new lease under the reasonably held belief that when the lease was granted they
could choose their preferred rental option from those set out in the Regulations.
I accept the applicant’s evidence that this belief was encouraged by statements
made by Parks Canada officials to the effect that the Regulations would
have to be amended before the new rent regime in the Revised Policy Directive
could be imposed. That said, an agreement was not reached and the applicant cannot
now insist on the exercise of the Minister’s discretion to grant a new lease on
the terms it found most favourable.
[42]
In
the circumstances, I will exercise my discretion not to award costs in favour
of the respondent.
JUDGMENT
IT IS THE JUDGMENT OF
THIS COURT that the application is
dismissed. The parties shall bear their own costs.
“Richard
G. Mosley”
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