Present: Lamer C.J. and La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.
on appeal from the court of appeal for british columbia
Constitutional law ‑‑ Statutes ‑‑ Validity ‑‑ Municipal Act purporting to authorize variable fees for soil removal permits ‑‑ Whether provision ultra vires province as authorizing levy in nature of indirect taxation ‑‑ Whether volumetric permit fees ancillary to genuine licensing scheme ‑‑ Municipal Act, R.S.B.C. 1979, c. 290, s. 930(2) ‑‑ Constitution Act, 1867, s. 92(9) .
Municipal law ‑‑ Municipal by‑laws ‑‑ Validity ‑‑ Municipalities adopting soil removal by‑laws incorporating volumetric permit fees ‑‑ By‑laws distinguishing between commercial and non‑commercial use ‑‑ Whether by‑laws discriminatory ‑‑ Whether volumetric permit fees authorized by Municipal Act ‑‑ Municipal Act, R.S.B.C. 1979, c. 290, s. 930(2) ‑‑ Coquitlam By‑law No. 1841, 1988 ‑‑ Maple Ridge By‑law No. 3957‑1987.
Coquitlam passed a by‑law prohibiting the removal of soil and other substances from land within the municipality except as authorized by permit and establishing a flat rate permit fee. It later changed the permit fee from a flat rate to one dependent on the volume of material removed. The natural consequence of this change to a volumetric fee was a great increase in fees paid by commercial extractors. Maple Ridge also passed a by‑law incorporating a volumetric permit fee. Both by‑laws made exceptions for certain persons and usages, including an exception for those removing less than specified volumes of soil. Constitutional challenges were mounted, and the provincial Supreme Court quashed the by‑laws, but these judgments were reversed by the Court of Appeal. On appeal in the Maple Ridge case, the Supreme Court of Canada found that s. 930(d) of the Municipal Act did not authorize the imposition of volumetric fees. In response to that decision, the provincial legislature added s. 930(2), which authorized removal fees which impose "a charge for each volumetric unit . . . removed". Section 930(d) was renumbered s. 930(1)(d). In light of this amendment to the Municipal Act, the two municipalities re‑enacted their by‑laws. The provincial Supreme Court allowed the petitions brought by the appellant gravel pit operators seeking to have the by‑laws quashed. It found that s. 930 authorizes both a flat rate permit fee and a variable rate volumetric removal charge, but that it does not authorize a variable rate volumetric permit fee for removal. The municipalities amended their by‑laws to create separate flat rate permit fees and volumetric removal charges. The provincial Supreme Court upheld the amended by‑laws. On appeal, the Court of Appeal held that these various by‑laws were intra vires the respondent municipalities.
Held: The appeal should be dismissed.
The volumetric fees at issue are indirect in their general tendency, since they can be related to a unit of the gravel commodity or its price. Section 92(9) of the Constitution Act, 1867 , in combination with ss. 92(13) and (16), comprehends a power of regulation through licences which is not confined to the requirement of direct taxation in s. 92(2). In so far as it comprehends indirect taxation, however, the power has been limited such that it can only be used to defray the costs of regulation. The question to be asked is whether the variable fees can be supported as ancillary or adhesive to a valid provincial regulatory scheme.
The permit and removal fees at issue in this case were only intended to offset the costs of the regulatory scheme, including road repair. Section 930(2) of the Municipal Act is related to a system of road and gravel regulation, notwithstanding its statutory location and its lack of express reference to roads. This relationship is also evident in the by‑laws themselves, which constitute a complete and detailed code for the regulation of the gravel and soil extraction and removal trade. The fee provisions are related to these regulatory by‑laws. The purpose of the volumetric fees can be inferred from their statutory and by‑law context, and the extrinsic affidavit evidence presented in this case is merely additional proof that there was an intention to raise sufficient revenue to cover the costs of the regulatory scheme and the building and maintenance of roads over which gravel trucks would pass. While there was some evidence that considerably more moneys would be received from this volumetric levy than the amount actually required, it is not for this Court to undertake a rigorous analysis of a municipality's accounts. A surplus itself is not a problem so long as the municipalities made reasonable attempts to match the fee revenues with the administrative costs of the regulatory scheme, which is what occurred in this case. In so far as the volumetric fee can be considered a form of indirect taxation, it is supportable as ancillary or adhesive to a valid regulatory scheme. Since the volumetric fees are supportable under the licensing power of s. 92(9) viewed in conjunction with other heads of regulatory power in s. 92, particularly ss. 92(13) and (16), it is not necessary to consider arguments relating to s. 92A(4) of the Constitution Act, 1867 , dealing with the taxation of natural resources by the provinces.
The by‑laws are discriminatory in that they distinguish between commercial and non‑commercial use, but the discrimination is authorized by the Municipal Act. While s. 930(2) makes no explicit reference to discrimination based upon the commercial character of removal, authorization may be either express or implied as a necessary incident of powers delegated. Here s. 930(2) clearly authorizes discrimination based on volume, and it is implicit in this authorization that commercial and non‑commercial users will be treated differently. Licensing schemes of this kind generally make two kinds of exceptions as a matter of administration: there are de minimis exceptions implicit in the regulation, and exceptions are made for non‑profitable, incidental, or personal use. The concept of volumetric discrimination is a surrogate for discrimination based upon these considerations.
Finally, s. 930(2), together with s. 930(1)(d), is sufficient to authorize a volumetric permit fee.
Cases Cited
Distinguished: Canadian Pacific Air Lines Ltd. v. British Columbia, [1989] 1 S.C.R. 1133; disapproved: Colpitts Ranches v. Attorney‑General of Alberta, [1954] 3 D.L.R. 121; considered: Coquitlam v. LaFarge Concrete Ltd., [1973] 1 W.W.R. 681 (B.C.C.A.), rev'g [1972] 3 W.W.R. 539 (B.C.S.C.); referred to: Kirkpatrick v. Maple Ridge (Corporation of the District), [1986] 2 S.C.R. 124, rev'g (1983), 49 B.C.L.R. 134 (C.A.), rev'g (1980), 119 D.L.R. (3d) 598 (B.C.S.C.); Lees v. West Vancouver (1979), 15 B.C.L.R. 233; Montréal (City of) v. Arcade Amusements Inc., [1985] 1 S.C.R. 368; Bank of Toronto v. Lambe (1887), 12 A.C. 575; Air Canada v. British Columbia, [1989] 1 S.C.R. 1161; Attorney‑General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934; Canadian Pacific Railway Co. v. Attorney General for Saskatchewan, [1952] 2 S.C.R. 231; Attorney‑General for British Columbia v. Esquimalt and Nanaimo Railway Co., [1950] A.C. 87; Reference re Agricultural Products Marketing Act, [1978] 2 S.C.R. 1198; Reference re Exported Natural Gas Tax, [1982] 1 S.C.R. 1004; Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357; Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708; Reference re Farm Products Marketing Act, [1957] S.C.R. 198; Nelson v. City of Dartmouth (1964), 45 D.L.R. (2d) 183; Re Falardeau and Town of Hinton (1985), 21 D.L.R. (4th) 477; R. v. Greenbaum, [1993] 1 S.C.R. 674; R. v. Sharma, [1993] 1 S.C.R. 650.
Statutes and Regulations Cited
Constitution Act, 1867 , ss. 92(2) , (8) , (9) , (13) , (16) , 92A(4) , (5) , Sixth Schedule.
District of Coquitlam By‑law No. 2041, 1971.
District of Coquitlam Soil Removal Regulation Bylaw No. 1841, 1988, ss. 4, 5, 11.
District of Coquitlam Soil Removal Regulation Bylaw No. 1914, 1988, ss. 3, 4, 5(e), (f), 13(a), 14 to 18, 20, 23.
District of Coquitlam Soil, Sand, Gravel, Rock or Other Substances of Which Land is Composed Removal Bylaw No. 1489, 1967.
Maple Ridge Soil Removal By‑law No. 2681‑1979.
Maple Ridge Soil Removal By‑law No. 3957‑1987, ss. 3, 4, 8, 16, Schedule D.
Maple Ridge Soil Removal By‑law No. 4109‑1988, ss. 2, 3, 4, 6, 7, 8, 15, 17, 18 to 23, 24, 25, 29, 31, 33, 34, Schedule "D", s. 1.
Mines Act, S.B.C. 1980, c. 28.
Municipal Act, S.B.C. 1957, c. 42, s. 873.
Municipal Act, R.S.B.C. 1960, c. 255, s. 868(d) [am. 1962, c. 41, s. 48; am. 1964, c. 33, s. 70].
Municipal Act, R.S.B.C. 1979, c. 290, ss. 528(b), 578(2)(a), 581, 651, 668(1), 669, 930 [am. 1987, c. 38, s. 27; am. 1989, c. 33, s. 9], 930.1 [ad. 1989, c. 33, s. 10].
Municipal Amendment Act (No. 2), 1987, S.B.C. 1987, c. 38, s. 27.
Municipal Amendment Act (No. 2), 1989, S.B.C. 1989, c. 33, ss. 9, 10.
Authors Cited
La Forest, G. V. The Allocation of Taxing Power Under the Canadian Constitution, 2nd ed. Toronto: Canadian Tax Foundation, 1981.
Magnet, Joseph Eliot. "The Constitutional Distribution of Taxation Powers in Canada" (1978), 10 Ottawa L. Rev. 473.
APPEAL from a judgment of the British Columbia Court of Appeal (1991), 61 B.C.L.R. (2d) 299, 5 B.C.A.C. 241, 11 W.A.C. 241, 8 M.P.L.R. (2d) 313, 85 D.L.R. (4th) 729, reversing a decision of Trainor J. (1988), 31 B.C.L.R. (2d) 309, 40 M.P.L.R. 96, additional reasons (1988), 31 B.C.L.R. (2d) 319 quashing certain municipal by‑laws, and affirming decisions of Paris J. (1989), 35 B.C.L.R. (2d) 386, 43 M.P.L.R. 201, and Callaghan J. upholding amended municipal by‑laws. Appeal dismissed.
William S. Berardino, Q.C., Charles F. Willms and Helen H. Low, for the appellants.
Paul T. McGivern, James M. Lepp and Loreen M. Williams, for the respondent the Corporation of the District of Coquitlam.
E. C. Chiasson, Q.C., and S. S. Antle, for the respondent the Corporation of the District of Maple Ridge.
Linda J. Wall, for the intervener the Attorney General of Canada.
Michel Yves Hélie, for the intervener the Attorney General for Ontario.
Monique Rousseau, for the intervener the Attorney General of Quebec.
George H. Copley, for the intervener the Attorney General of British Columbia.
Nolan D. Steed, for the intervener the Attorney General for Alberta.
The judgment of the Court was delivered by
Iacobucci J. -- This appeal is another chapter in the apparently ongoing saga of constitutional litigation concerning sand and gravel excavation. More specifically, this appeal concerns the constitutionality of s. 930(2) of the Municipal Act, R.S.B.C. 1979, c. 290. The principal issue to be addressed is whether s. 930(2), in so far as it purports to authorize variable fees, is ultra vires British Columbia as authorizing a levy in the nature of indirect taxation. Derivatively, the constitutionality of by-laws enacted by the respondent municipalities under the authority of the Municipal Act is at issue. In addition, two other issues relating to the by-laws arise. The first issue is whether the by-laws are discriminatory in the municipal law sense. The second is whether the by-laws, upon a true construction of the Municipal Act, are authorized by that statute.
I.Background
At first glance, the historical development of the statute and by-laws relevant to this appeal appears complex. However, this apparent complexity can be simplified if one realizes that the statute and by-laws have changed a number of times in response to judicial decisions. In order to demonstrate better the interrelationship between the process of amendment and events in the courts, I find it helpful to present an integrated picture of the two.
Although the original ancestor of s. 930(2) was s. 873 of the Municipal Act, S.B.C. 1957, c. 42, it was a later version of that provision which was the subject of the first relevant judicial comment. That later version came in the form of s. 868(d) of the Municipal Act, R.S.B.C. 1960, c. 255 (am. 1962, c. 41, s. 48; am. 1964, c. 33, s. 70), which stated:
868. The Council may by by-law regulate or prohibit
...
(d)the removal of soil, sand, gravel, rock, or other substance of which land is composed from any lands within the municipality, or within any area or areas within the municipality, and require the holding of a permit for such purpose and fix a fee for such permit, and different regulations and prohibitions may be made for different areas.
In 1967, pursuant to this section of the Municipal Act, the respondent Municipal District of Coquitlam (Coquitlam) passed By-law No. 1489, 1967, The District of Coquitlam Soil, Sand, Gravel, Rock or Other Substances of Which Land is Composed Removal Bylaw. That by-law set forth a prohibition against the removal of named substances from land within the Municipality, subject to other provisions of the regulatory code which authorized removal by permit holders. Under that portion of s. 868(d) which authorized Council to "fix a fee" for permits, an initial flat rate permit fee of 50 dollars per year was established.
In 1971, Coquitlam changed the amount of the permit fee from a flat rate to one dependent upon the volume of material removed by the permit holder: Coquitlam amending By-law No. 2041, 1971. The natural consequence of this change to a volumetric fee was a great increase in fees paid by commercial extractors. Not surprisingly, a constitutional challenge to the by-law was mounted. In LaFarge Concrete Ltd. v. Coquitlam, [1972] 3 W.W.R. 539 (B.C.S.C.), Gould J. quashed the by-law on the basis that the volumetric fee was a form of indirect taxation ultra vires the municipality. On appeal, however, in a judgment which will be the subject of further comment below, the decision of Gould J. was reversed and the volumetric fee was upheld: Coquitlam v. LaFarge Concrete Ltd., [1973] 1 W.W.R. 681 (B.C.C.A.).
In 1979, s. 868(d) of the Municipal Act was renumbered as s. 930(d) of the Municipal Act, R.S.B.C. 1979, c. 290 (the Municipal Act), but the subsection was otherwise left unaltered. Soon after, purporting to act under the authority of s. 930(d), the respondent Municipal District of Maple Ridge (Maple Ridge) passed By-law No. 2681-1979, Maple Ridge Soil Removal By-law. Like the Coquitlam by-law which had withstood challenge, the Maple Ridge by-law incorporated a volumetric permit fee.
Despite the similarity between the Maple Ridge by-law and the Coquitlam by-law, Murray J. in Re Kirkpatrick and District of Maple Ridge (1980), 119 D.L.R. (3d) 598 (B.C.S.C.), quashed the former on the basis that it involved a colourable attempt to levy indirect taxes. At the Court of Appeal, however, the finding of colourability was reversed, and Seaton J.A. for the Court refused to overrule the earlier LaFarge decision: Kirkpatrick v. Maple Ridge (1983), 49 B.C.L.R. 134 (C.A.). An appeal proceeded to this Court.
The same constitutional issues which arose in the LaFarge decision thus came before this Court in Kirkpatrick v. Maple Ridge (Corporation of the District), [1986] 2 S.C.R. 124. However, the constitutionality of the volumetric fee did not need to be determined in that case since this Court was of the opinion that s. 930(d) of the Municipal Act did not authorize the imposition of volumetric fees. In the words of La Forest J., this Court upheld the "notion that the power given by s. 930(d) to `fix a fee for the permit' (or licence, which is synonymous) ordinarily refers to a flat fee of some kind, as opposed to an increasing amount based on the measure of activities conducted under the licence" (p. 128).
In response to the decision of this Court in Kirkpatrick, the legislature of British Columbia amended s. 930 of the Municipal Act: Municipal Amendment Act (No. 2), 1987, S.B.C. 1987, c. 38, s. 27. The effect of this amendment was twofold. First, s. 930(d) was renumbered s. 930(1)(d), but was otherwise left intact. Second, s. 930(2) -- the provision which is the principal target of this appeal -- was added. It is important to note here the nature of its response to Kirkpatrick. In part, s. 930(2) set out that "[t]he council may, by bylaw, impose a fee for the removal referred to in subsection (1) (d) ... and the fee may impose a charge for each volumetric unit ... removed". In light of the amendment to the Municipal Act, the two respondent municipalities re-enacted their by-laws: Coquitlam By-law No. 1841, 1988; Maple Ridge By-law No. 3957-1988 (I refer to By-law No. 3957-1988, as did the parties in their pleadings, and as did the order of Trainor J. below, although I recognize that, in an appendix to the pleadings of the petitioner Kirkpatrick, the impugned by-law appears and it may be properly cited as By-law No. 3957-1987).
The re-enacted by-laws very quickly became the subject of petitions by the three appellants, each of whom operates a gravel pit. Thornhill Aggregates Ltd. (Thornhill) and Kirkpatrick Sand & Gravel Co. Ltd. (Kirkpatrick) are commercial extractors which operate in the District of Maple Ridge. Allard Contractors Ltd. (Allard) is a commercial extractor operating in the District of Coquitlam.
The appellants each brought separate petitions before Trainor J. of the British Columbia Supreme Court which sought to have the by-laws quashed. Thornhill and William Kirkpatrick (for whom the appellant Kirkpatrick was later substituted by order) each challenged Maple Ridge By-law No. 3957-1988. Allard challenged Coquitlam By-law No. 1841, 1988. A fourth petitioner, not before this Court, challenged the validity of a by-law passed by the District of Mission (Mission).
Trainor J. disposed of all four petitions in one judgment which will be described more fully below: (1988), 31 B.C.L.R. (2d) 309, 40 M.P.L.R. 96. Although he dealt in the alternative with arguments which are now before this Court, Trainor J. allowed the petitions on the ground that s. 930 of the Municipal Act had failed to respond adequately to the Kirkpatrick decision. Trainor J. stated (at p. 314 B.C.L.R.):
Section 930(2) is remedial legislation. The history of the problems between municipalities and gravel operators and the result of Kirkpatrick v. Maple Ridge were before the legislature. They knew that s. 930(1)(d) authorized only a flat fixed permit fee. I have no doubt that the object of the legislation, what was intended, was to give municipalities the authority to impose a volumetric or variable permit fee. The subsection does not do this expressly. Rather it authorizes imposing a fee for the removal of soil and then goes on to allow a charge for each volumetric unit removed.
In other words, Trainor J. held that s. 930 authorizes both a flat rate permit fee and a variable rate volumetric removal charge, but that it does not authorize a variable rate volumetric permit fee for removal. I will discuss this aspect of his decision near the end of these reasons.
Coquitlam, Maple Ridge and Mission appealed the decision of Trainor J., but the appeal of Mission was later abandoned. The municipalities also amended their by-laws to create separate flat rate permit fees and volumetric removal charges, in order to overcome the drafting flaw perceived by Trainor J. Notably, since the judgment of Trainor J. must now be reviewed by this Court, the unamended by-laws which were before him are reproduced in part below. In commentary, however, reference may be made to the amended versions for convenience. Aside from the narrow interpretive question resulting from the decision of Trainor J., there is no reason to distinguish the amended and unamended versions.
Like Southin J.A. below, I infer that another response to the decision of Trainor J. came in the form of ss. 9 and 10 of the Municipal Amendment Act (No. 2), 1989, S.B.C. 1989, c. 33. Pursuant to those sections, ss. 930(1)(d), (e) and 930(2) of the Municipal Act were repealed and a new provision, s. 930.1, was added. The general import of the new provision is that volumetric permit fees of the type quashed by Trainor J. are now specifically contemplated by the Municipal Act. Obviously, however, s. 930.1 does not resolve the question of whether such a fee is within the province's legislative competence, nor does it obviate the need to examine s. 930(2). In my view, nothing in the present appeal turns on the existence of s. 930.1.
As soon as they were in place, the by-laws enacted by the municipalities in response to the decision of Trainor J. were attacked. Allard brought a petition to quash Coquitlam's By-law No. 1914, 1988. That petition was dismissed by Paris J., for reasons described below: (1989), 35 B.C.L.R. (2d) 386, 43 M.P.L.R. 201. Allard appealed that dismissal. William Kirkpatrick brought a petition against Maple Ridge's By-law No. 4109-1988 which was heard by Callaghan J. Since the prior decision of Paris J. was acknowledged by counsel to govern the facts, Callaghan J. dismissed the petition. That dismissal was also appealed.
In the result, the Court of Appeal below faced five appeals, each of which raised substantially the same issues. Three of these were appeals from the decision of Trainor J., which decision had struck down both Coquitlam By-law No. 1841, 1988 at the instance of Allard, and Maple Ridge By-law No. 3957‑1988 at the instance of Thornhill and William Kirkpatrick. The other two were appeals from the decisions of Paris and Callaghan JJ. which upheld the amended by-laws, Coquitlam By-law No. 1914, 1988 and Maple Ridge By-law No. 4109-1988. The British Columbia Court of Appeal held that these various by-laws were intra vires the respondent municipalities ((1991), 61 B.C.L.R. (2d) 299, 8 M.P.L.R. (2d) 313, 85 D.L.R. (4th) 729, 5 B.C.A.C. 241, 11 W.A.C. 241) and it is an appeal from that result which has proceeded to this Court.
II.Relevant Constitutional, Statutory, and By-law Provisions
A.Constitutional Provisions
Constitution Act, 1867 , ss. 92 and 92A :
92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next herein-after enumerated; that is to say, --
. . .
2. Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.
. . .
8. Municipal Institutions in the Province.
9. Shop, Saloon, Tavern, Auctioneer, and other Licences in order to the raising of a Revenue for Provincial, Local, or Municipal Purposes.
. . .
16. Generally all Matters of a merely local or private Nature in the Province.
92A....
(4) In each province, the legislature may make laws in relation to the raising of money by any mode or system of taxation in respect of
(a) non-renewable natural resources and forestry resources in the province and the primary production therefrom...
. . .
whether or not such production is exported in whole or in part from the province, but such laws may not authorize or provide for taxation that differentiates between production exported to another part of Canada and production not exported from the province.
(5) The expression "primary production" has the meaning assigned by the Sixth Schedule.
. . .
THE SIXTH SCHEDULE
. . .
1. For the purposes of section 92A of this Act,
(a) production from a non-renewable natural resource is primary production therefrom if
(i) it is in the form in which it exists upon its recovery or severance from its natural state . . .
B.Statutory Provisions
Municipal Act, R.S.B.C. 1979, c. 290, s. 930, as amended by the Municipal Amendment Act (No. 2), 1987, S.B.C. 1987, c. 38, s. 27:
930.(1) The council may by bylaw regulate or prohibit
(a) the sale of wild flowers;
(b) sales by auction in a public market;
(c)boxing, wrestling, jujitsu and other professional athletic contests where an athletic commission has not been established;
(d)the removal of soil, sand, gravel, rock or other substance of which land is composed from any land in the municipality, or in any area in the municipality, and require the holding of a permit for the purpose and fix a fee for the permit, and different regulations and prohibitions may be made for different areas;
(e)the deposit of soil, sand, gravel, rock or other material on land in the municipality or in any area in the municipality, and require the holding of a permit for the purpose and fix a fee for the permit, and different regulations and prohibitions may be made for different areas....
. . .
(2) The council may, by bylaw, impose a fee for the removal referred to in subsection (1) (d) or for the deposit referred to in subsection (1) (e) and the fee may impose a charge for each volumetric unit, as provided in the bylaw, of soil, sand, gravel, rock or other substance removed or deposited and the volumetric fee may be different for different areas of the municipality.
C.By-laws
1.Maple Ridge Soil Removal By-law No. 3957-1987, ss. 3, 4, 8, 16 and Schedule D:
3. GENERAL
Soil removal from any lands within the Municipality is prohibited except from a designated area.
4. Soil removal from a designated area is prohibited until a permit for such soil removal is first had and obtained from the Engineer pursuant to the terms of this by-law.
...
8. EXEMPTIONS
Nothing in this by-law shall be construed so as to apply to:
a) Soil removal for other than commercial purposes where the amount thereof does not exceed seventy-five (75) cubic meters from any one parcel of land within the Municipality.
b) Any person lawfully engaged in the development or improvement of land within the Municipality or the construction of buildings on land within the Municipality where soil removal is necessary for such development, improvement or construction and where engineering drawings for such development or improvement have been approved by the Municipality or a building permit has been issued by the Municipality as the case may be.
c) Soil removal from any area within the Municipality by any florist, nurseryman or farmer for use by him on the same parcel of land from which the said soil was removed for the purpose of his bona fide business as a florist, nurseryman or farmer; provided however no soil removal shall be below the established grade of the street which abuts the area from which the soil is removed, or the established roadway from which access is provided from the area.
d) Soil removal required for the installation and maintenance of utilities or the construction of roads or other public works within public rights-of-way or registered easements.
...
16. FEES
The fee for each permit shall be fixed in accordance with Schedule "D" to this by-law and any such fee shall be payable to the Municipality.
SCHEDULE "D"
...
1. The permit fee shall be calculated on the basis of $0.20 for each cubic meter of soil estimated by the applicant to be removed from the designated area during the term of the permit; but in any event, the applicant's estimate of the soil to be removed as aforesaid shall not be less than the volume of soil removed from the designated area during the previous year.
2.District of Coquitlam Soil Removal Regulation Bylaw No. 1841, 1988, ss. 4, 5 and 11:
4. No person shall remove any Soil Substance from lands within the District of Coquitlam unless:
a) the removal of Soil Substance is incidental to building construction or landscaping activities and the quantity of Soil Substance removed in any one year period is less than 300 cubic metres;
b) a valid Conservation Permit or other valid permit is issued by the District of Coquitlam and this permit allows the removal of Soil Substance incidental to preload or other construction activities involving earthworks;
c) a valid Soil Substance Removal Permit has been issued by the District of Coquitlam authorizing the removal of the Soil Substance; or
d) the Soil Substance removal is incidental to construction or other activities carried out by or on behalf of the District of Coquitlam.
5. No Soil Substance Removal Permit shall be issued unless:
a) the Lands are located within the area outlined in Schedule "C" of the Northwest Coquitlam Official Community Plan as depicted in Appendix I and made part of this Bylaw; or
b) the Lands are located within the area outlined in Schedule "D" of the Northwest Coquitlam Official Community Plan as depicted in Appendix II and made part of this Bylaw...
11.a) The fee payable to the District of Coquitlam for each Soil Substance Removal Permit shall be a combination of:
i)an examination fee of One Hundred Dollars ($100.00) for each and every Soil Substance Removal Permit application; and
ii)the sum of Twenty-Six Cents ($.26) for each and every cubic metre of Soil Substance removed from the Lands under each Soil Substance Removal Permit.
III.Judgments Below
A.British Columbia Supreme Court (1988), 31 B.C.L.R. (2d) 309 (Trainor J.)
As already noted, the decision of Trainor J. quashed the challenged municipal by-laws upon the basis that the language in s. 930(2) of the Municipal Act did not authorize a variable volumetric permit fee for removal. Trainor J. came to this result based upon consideration of the rules of statutory interpretation in general, and the decision of this Court in Kirkpatrick v. Maple Ridge, supra, in particular. He dealt with other arguments only in the alternative.
1.The Indirect Taxation Argument
With respect to the argument that the permit fees constituted a form of indirect taxation ultra vires British Columbia, Trainor J. began by describing the decision of the British Columbia Court of Appeal in Coquitlam v. LaFarge Concrete Ltd., supra. He then followed the decision of that court in Kirkpatrick, supra, stating that the incidence of a variable permit fee is indirect. He concluded that since the permit fees were linked to the costs of the regulatory scheme, they were truly ancillary to that scheme. On this point, he stated (at p. 318):
Here the evidence indicates an intention to raise sufficient revenue to cover the costs of the regulatory scheme and the building and maintenance of roads over which gravel trucks would pass. Although there is some evidence that considerably more moneys would be received from this volumetric levy than the amount actually required for those purposes, it is not for me to attempt to measure those amounts with exactitude. My role is to determine whether this is a genuine licensing scheme regulating trade or a mere cloak for raising money for other purposes. The possibility of a surplus would not invalidate a scheme unless it is a colourable device for raising revenue by indirect taxation. There is no need to demonstrate how the moneys were used.
Although Trainor J. nowhere clearly stated his conclusion on this point, he would obviously have upheld the volumetric permit fees as ancillary to a genuine licensing scheme supportable by s. 92(9) of the Constitution Act, 1867 .
2.The Discrimination Argument
It was also argued before Trainor J. that the by-laws in question were discriminatory in the municipal law sense, since gravel operators were singled out from all users of municipal roads and required to pay the permit fees, and since this discriminatory treatment was not authorized by the Municipal Act. In response, Trainor J. indicated that the municipalities had been authorized by statute to regulate gravel deposit and removal, and he noted that the imposition of a permit fee is a recognized method of regulation. He then applied a test for discrimination derived from Lees v. West Vancouver (1979), 15 B.C.L.R. 233 (C.A.), drawing two relevant conclusions. First, he found that the by-laws did not discriminate in fact. Second, he denied that the municipalities had acted with an improper motive or without regard for the public interest.
Thus, although Trainor J. quashed the by-laws based upon his approach to the statutory interpretation issue, on the other issues before him, he would have found in favour of the municipalities.
B.British Columbia Supreme Court (1989), 35 B.C.L.R. (2d) 386 (Paris J.)
1.The Indirect Taxation Argument
The approach of Paris J. to the question of indirect taxation was more directly based upon the decision of the British Columbia Court of Appeal in Coquitlam v. LaFarge Concrete Ltd. than was that of Trainor J. After reviewing the LaFarge case, and quoting from cases cited therein, Paris J. stated (at p. 392):
It seems to me that the effect of those various pronouncements is that even if the levy imposed by a by-law such as the present one can be said to have the quality of an indirect tax, it is nonetheless justified if it is ancillary or adhesive to the scheme licensing and regulating the activity, in this case, the removal of soil and gravel from municipal property.
Therefore, like Trainor J., Paris J. found support for the variable permit fee within s. 92(9) of the Constitution Act, 1867 . Purporting to rely on the decision of this Court in Kirkpatrick, he held that "[a] levy which is a licensing fee may also have the quality of an indirect tax and still be valid by virtue of s. 92(9) so long as it is genuinely ancillary to a licensing or regulatory scheme" (p. 393).
Paris J. found further support for his conclusion on the indirect taxation issue from s. 92A(4) of the Constitution Act, 1867 . With respect to this support, he noted simply that s. 92A(4) specifically grants indirect taxation powers relating to non-renewable natural resources, and pointed out that such resources would include gravel and soil. He concluded, finally, that the power granted by s. 92A(4) was delegable to municipalities.
2.The Discrimination Argument
Paris J. considered that the circumstances before him were "on all fours with the circumstances before Trainor J." (p. 389). He agreed that the by-laws were authorized by s. 930 of the Municipal Act. Further, he found that there was no discrimination in the legal sense because the by-law before him applied equally to all members of the regulated group. Paris J. stated (at p. 389):
The fact that it would generate funds from gravel pit operators which will be partly or mostly used for highway repair and maintenance, but would not charge a levy to other highway users, does not make it discriminatory in the legal sense expounded in the jurisprudence dealing with the validity of municipal by-laws. That is because, as I have said, it applies equally and without discrimination to the members of the group upon which the municipality has been authorized by the enabling provincial legislation to impose a levy, namely, those who remove soil and gravel from municipal land.
Since the interpretive difficulties which faced Trainor J. had been resolved in the amended by-law, Paris J.'s analysis of the indirect taxation and discrimination arguments led him to dismiss the petition to quash that by-law.
C.British Columbia Court of Appeal (1991), 61 B.C.L.R. (2d) 299 (Macdonald, Southin, Taylor, Proudfoot and Hinds JJ.A.)
1.The Indirect Taxation Argument
The Court of Appeal below sat in a panel of five since the petitioners who appealed the decision of Paris J. wished that court to overrule its earlier decision in Coquitlam v. LaFarge Concrete Ltd. Writing for the court, however, Southin J.A. indicated (at p. 301) that it was unnecessary to consider LaFarge since the case had "been overtaken by a constitutional event", namely, the introduction of s. 92A into the Constitution Act, 1867 .
Southin J.A. proceeded to deal with the indirect taxation argument solely under s. 92A of the Constitution Act, 1867 . In construing that provision, Southin J.A. rejected interpretive arguments said to be based upon differences between the French and English versions of s. 92A(4), at pp. 305-7; additional reasons (1991), 5 B.C.A.C. 241, at p. 252. In the result, s. 92A(4) was read to encompass a power of indirect taxation which is delegable to municipalities.
2.The Discrimination Argument
Using language from Montréal (City of) v. Arcade Amusements Inc., [1985] 1 S.C.R. 368 (at p. 405), Southin J.A. considered the relevant discrimination issue to be whether s. 930 authorized by-laws to be "partial and unequal in operation between different classes". As already noted, Southin J.A. was of the opinion that s. 930 established a form of indirect taxation. For this reason, she turned her attention to whether s. 930 authorized municipalities "to impose this taxation on one class of removers; i.e., commercial extractors, and to exempt others" (p. 311). Southin J.A. then concluded that "[h]aving regard to the history of the legislation in question, I am of the opinion that the Legislature not only intended to authorize such imposition and exemption but also has used apt words for the purpose" (p. 311).
3.The Statutory Interpretation Argument
Southin J.A. spent little time determining whether the by-laws before Trainor J. were authorized by the unamended Municipal Act, such that they could validly impose a volumetric permit fee. She first suggested that it was clearly the intention of the Legislature to authorize a volumetric impost. She then simply asked whether the by-laws were authorized to impose such an impost by way of permit fee. On this latter point, she concluded as follows (at p. 310):
On this point of construction, with the greatest respect, I do not agree with the learned judge. In this context, to say that the charge can be imposed but it cannot be imposed as part of the permit fee but only as a separate charge is to make a distinction without a difference.
The Court of Appeal thus reversed Trainor J. on the point of statutory interpretation, rejected the discrimination argument, and upheld s. 930 of the Municipal Act and the municipal by-laws under the indirect taxation power of s. 92A(4) of the Constitution Act, 1867 .
IV.Issues
On November 10, 1992, the Chief Justice stated the following constitutional question:
1. Is s. 930(2) of the Municipal Act, R.S.B.C. 1979, c. 290, beyond the legislative competence of the province to the extent that it authorizes variable fees?
In argument before this Court, the parties addressed four separate issues as follows:
1. Is s. 930(2) of the Municipal Act, to the extent that it authorizes variable fees, within the legislative competence of the Province of British Columbia pursuant to s. 92(9) of the Constitution Act, 1867 ?
2. Is s. 930(2) of the Municipal Act, to the extent that it authorizes variable fees, within the legislative competence of the province by virtue of s. 92A(4) of the Constitution Act, 1867 ?
3. If s. 930(2) of the Municipal Act is within the legislative competence of the province to the extent that it authorizes variable fees, are the by-laws nonetheless discriminatory and therefore illegal?
4. If s. 930(2) of the Municipal Act is within the legislative competence of the province to the extent that it authorizes variable fees, does it, on its true construction, authorize variable permit fees?
At the outset, I should state that because of the conclusion I have reached on the first issue relating to s. 92(9) of the Constitution Act, 1867 , I will find it unnecessary to consider arguments relating to s. 92A(4), which deals with the taxation of natural resources by the provinces.
V.Analysis
A.Is s. 930(2) of the Municipal Act, to the extent that it authorizes variable fees, within the legislative competence of the Province of British Columbia pursuant to s. 92(9) of the Constitution Act, 1867 ?
Later in these reasons, I will conclude that the variable fees at issue in this case are referable to an overall scheme of gravel and road regulation, and that s. 92(9), in conjunction with ss. 92(13) and (16) , of the Constitution Act, 1867 validates those fees to the extent that they comprehend an element of indirect taxation. This final conclusion depends upon several layers of analysis. It rests most directly upon an analysis of whether the Municipal Act and by-laws create a regulatory scheme to which the fees can be related. That regulatory analysis, in turn, presupposes that s. 92(9) can support indirect licence fees as part of a regulatory scheme, in so far as such fees might otherwise be called indirect taxes. Finally, an allegation of indirect taxation is only relevant, and an analysis of s. 92(9) is only necessary, to the extent that the variable fees at issue can be considered indirect in their general tendency. I therefore begin by examining the general tendency of the variable licence fees. I will later proceed to examine case law on s. 92(9), to analyze the Municipal Act and by-laws for evidence of a regulatory scheme which is related to the variable fees, and to conclude in the manner indicated above.
1.The General Tendency of the Permit Fees
By virtue of s. 92(2) of the Constitution Act, 1867 , the provinces are given the power to raise revenue for provincial purposes only by means of direct taxation. The existence of this power means that in the typical case of a flat rate licence fee, very little division of powers analysis is required. This is true because it has been generally accepted, since the classic decision of Bank of Toronto v. Lambe (1887), 12 A.C. 575 (P.C.), that a flat fee constitutes a form of direct taxation.
It is when courts are presented with variable licence fees that the question of indirect taxation can arise. Whereas Lambe, supra, determined that the general tendency of a flat fee is direct, in the case of a variable fee, no automatic conclusion as to general tendency can be drawn. Each case must be examined to determine whether a variable fee calculated according to the number or value of a licensee's transactions is direct or indirect in its general tendency.
On the facts of this case, I have no doubt that the volumetric fees at issue are indirect in their general tendency. Each of the respondent municipalities has created a fee which varies according to the volume of gravel removed by the appellants. For instance, Coquitlam By-law No. 1914, 1988, s. 13(a) establishes a fee of 26 cents per cubic meter of soil removed. That such a variable fee, imposed in relation to a commodity such as gravel which is intended for trade in the market, is legally indirect in its general tendency can be quickly demonstrated.
Although the question of whether a levy is direct or indirect is a legal one, it has been the practice of courts to adopt as their own the classic formulation of John Stuart Mill. As quoted in Lambe, supra, at p. 582, this formulation is the following:
Taxes are either direct or indirect. A direct tax is one which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another....
In some cases, such as where a tax is clearly levied only against an ultimate consumer, this definition is sufficient and complete: see, e.g., Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, at p. 1186. In other cases, however, the one who must pay the tax may be in a position to either pass the tax along directly or recoup an equivalent sum less directly. In these latter circumstances, Mill's definition requires elaboration.
The required elaboration can be noticed as early as Lambe, supra, itself. In holding that a business tax on banks was properly characterized as direct, the Privy Council distinguished the tax from "a tax on any commodity which the bank deals in and can sell at an enhanced price to its customers" (p. 583). This is a sentiment expanded upon in Attorney-General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934. In that case, the Privy Council faced a provincial statute which levied upon a purchaser a tax equal to one-half cent per gallon of fuel-oil purchased. The tax was to apply to the initial sale of fuel-oil following its manufacture or importation into the province, but the Council struck it down as indirect. Viscount Haldane stated (at p. 938): "Fuel-oil is a marketable commodity, and those who purchase it, even for their own use, acquire the right to take it into the market. It therefore comes within the general principle which determines that the tax is an indirect one."
Both Lambe, supra, and Attorney-General for British Columbia, supra, therefore appear to recognize that a tax measured with reference to a marketable commodity is usually indirect in its general tendency. It remained for Rand J. in Canadian Pacific Railway Co. v. Attorney General for Saskatchewan, [1952] 2 S.C.R. 231 ("Saskatchewan"), to explain clearly why this might be so. In commenting upon Attorney-General for British Columbia v. Esquimalt and Nanaimo Railway Co., [1950] A.C. 87 (P.C.), Rand J. stated (at pp. 251-52):
Lord Greene in the same case speaks of the "fundamental difference" between the "economic tendency" of an owner to try to shift the incidence of a tax and the "passing on" of the tax regarded as the hallmark of an indirect tax. In relation to commodities in commerce, I take this to lie in the agreed conceptions of economists of charges which fall into the category of accumulating items: and the question is, what taxes, through intention and expectation, are to be included in those items? If the tax is related or relateable, directly or indirectly, to a unit of the commodity or its price, imposed when the commodity is in course of being manufactured or marketed, then the tax tends to cling as a burden to the unit or the transaction presented to the market.
Although other approaches have been suggested (see the discussion in G. V. La Forest, The Allocation of Taxing Power Under the Canadian Constitution (2nd ed. 1981), at pp. 88-92), I am of the opinion that an appropriate test for indirect taxation exists within the above quotation from Rand J., namely: is the tax related or relateable, directly or indirectly, to a unit of the commodity or its price, imposed when the commodity is in the course of being manufactured or marketed?
Notably, however, Maple Ridge argued before this Court to the effect that the volumetric fee could not be related to a unit of the gravel commodity nor to its price. It was suggested that gravel could be removed from the ground by the appellants -- i.e., excavated -- and yet not be of a saleable quality. Maple Ridge argued that the volumetric fee would thus apply to such removal notwithstanding that the low grade gravel might not enter into trade as a commercial commodity. I reject this argument for two reasons.
First, Maple Ridge placed emphasis upon the case of Colpitts Ranches v. Attorney-General of Alberta, [1954] 3 D.L.R. 121 (Alta. S.C.). In that case, a municipal tax was levied upon the plaintiff's fur farming business. The plaintiff raised foxes, and the amount of the tax was calculated with reference to the number of foxes the plaintiff owned. Although the court examined several of the cases which I have mentioned here, including Saskatchewan, supra, it held that the tax was not indirect. Cairns J. noted that not every fox would be sold nor otherwise become an article of commerce, and stated that "[t]he tax in question... is not specifically passed on to the purchaser" (p. 123). The tax was characterized as a cost of the plaintiff's production which could only be passed along like other production expenses.
I do not regard the Colpitts case as persuasive authority for Maple Ridge's position. Indeed, counsel for Maple Ridge conceded that Colpitts is rather extreme in its position. I cannot help but observe that the court in Colpitts seems to suggest that an indirect tax involves a perfect correlation between a tax and the increased cost of a commercial item. I do not believe that the helpful approach of the Saskatchewan case is rendered sterile simply because certain units of a taxed commodity do not reach the market. While the tax imposed with reference to such units may indeed be absorbed into general "production costs", that does not prevent the tax from clinging as a burden to the vast majority of units which end up entering the market. To the extent that Colpitts denies this proposition, I would overrule it.
A second reason for rejecting Maple Ridge's argument is fact-based. Counsel for Maple Ridge outlined the procedure for measuring gravel removal in the by-laws. According to that procedure, the volume of gravel removed from a designated area is calculated through the comparison of before and after aerial photographs. Therefore, in arguing that some gravel may be excavated but not sold, Maple Ridge is drawing too fine a distinction. While gravel may indeed be excavated but not sold, such gravel will not be "removed from the designated area" (Maple Ridge By-law No. 4109-1988, Schedule "D", s. 1). I did not understand counsel for Maple Ridge to say that gravel unsuitable for sale would actually be trucked away from the gravel pits. Since such gravel would never leave the area targeted by the aerial photography, it would never become the subject of the volumetric fee. Upon this basis, the argument based upon Colpitts, such as it is, is without factual foundation.
For these reasons, I believe that it is the clear intention and expectation of s. 930(2) of the Municipal Act and the related by-laws that the volumetric fees are to be indirect in their general tendency. Since the fees are measured with reference to the volume of a commercial commodity headed for the marketplace, they obviously cling "as a burden to the unit or the transaction presented to the market" within the meaning of Saskatchewan, supra, at p. 252.
2.Section 92(9) and Indirect Taxation Arguments
The finding that the variable fees are indirect in their general tendency leads inevitably to the argument that such fees are ultra vires the province as being in relation to indirect taxation. I proceed, therefore, to consider those cases which have examined s. 92(9) and its capacity to embrace the concept of indirect taxation. I note that since I am attempting to determine the scope of s. 92(9) rather than to define "taxation" as such, I will find it unnecessary to consider either Reference re Agricultural Products Marketing Act, [1978] 2 S.C.R. 1198, or Reference re Exported Natural Gas Tax, [1982] 1 S.C.R. 1004, both cited by the appellants, since neither case deals with s. 92(9) of the Constitution Act, 1867 .
Prior to 1930, no case had addressed the question of whether s. 92(9) contemplated a taxation power which might extend beyond the direct taxation power of s. 92(2). In that year, however, this Court decided Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357. Although that case principally held that a provincial marketing scheme was unconstitutional since it regulated trade and commerce, Duff J. first considered the scope of s. 92(9) in relation to s. 92(2), and stated (at pp. 363-64):
Prima facie, it would appear, from inspection of the language of the two several heads, that the taxes contemplated by no. 9 are not confined to taxes of the same character as those authorized by no. 2, and that accordingly imposts which would properly be classed under the general description "indirect taxation" are not for that reason alone excluded from those which may be exacted under head 9.
Upon this basis, Duff J. considered (at p. 364) that certain provincial licensing levies were merely ancillary in nature, having as their object the "creation of a fund to defray the expenses" of the regulatory scheme. In the result, of course, the licences were nonetheless ancillary to an unconstitutional scheme, and they fell on that basis.
While Lawson, supra, gave a reading to s. 92(9) which opened up the possibility for indirect taxation within that section, it did so in the context of language suggesting that the possibility would be limited to the recoupment of regulatory expenses. In the next case to consider the matter, somewhat more expansive language was used. In Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708, the Privy Council was presented with a provincial marketing scheme confined to intraprovincial trade. Under that scheme, marketing boards could be invested with the power to fund expenses through licence fees obtained from persons involved in the producing, packing, transporting, storing, or marketing of the regulated natural products. Such boards could collect the fees yearly, half-yearly, quarterly, or monthly, could classify the licensees into groups, and could fix fees of different amounts for the different groups.
The Privy Council suggested that there were difficulties in classifying these licence fees as direct taxation, but found it unnecessary to consider the point. Sufficient legislative authority was located in other heads of provincial power, although no attempt was made to clarify the relationship between the heads discussed. The Council merely named s. 92(9), the licensing power, s. 92(13), "Property and Civil Rights in the Province", and s. 92(16), "Matters of a merely local or private Nature in the Province". Lord Atkin then discussed these grounds of support in the following terms (at p. 721):
If regulation of trade within the Province has to be held valid, the ordinary method of regulating trade, i.e., by a system of licences, must also be admissible. A licence itself merely involves a permission to trade subject to compliance with specified conditions. A licence fee, though usual, does not appear to be essential. But, if licences are granted, it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to increase the general funds of the Province, or for both purposes. The object would appear to be in such a case to raise a revenue for either local or Provincial purposes.
The breadth of this language might be taken to suggest that indirect taxation had been introduced into s. 92(9) without qualification, a result which would rob s. 92(2) of any independent meaning. However, it is important to underscore "that what was involved here was a regulatory scheme by way of licences otherwise within provincial competence, and that the licence fees were levied for the purpose of supporting the scheme": G. V. La Forest, supra, at p. 158.
The apparent breadth of the Shannon case is also narrowed when it is viewed in the light of Reference re Farm Products Marketing Act, [1957] S.C.R. 198. At issue in the latter case was the validity of another provincial marketing scheme, one aspect of which required peach and vegetable growers to pay licence fees, which fees were calculated with reference to the weight of regulated produce delivered to processors. Notwithstanding the potential for indirect taxation, the fees were upheld as intra vires the province.
It is interesting to note the approaches taken by various members of the Court in Reference re Farm Products. Kerwin C.J. was content simply to cite the Shannon case, supra, as authority for the licence fees. Cartwright J. was of the opinion that the specific terms of the marketing scheme were not properly before the Court, and for this reason, he was unable to reach a conclusion with respect to the licence fees. He noted, however, that had he been able to consider the terms of the scheme, he would have agreed with Rand J. Rand J. held that a licensing scheme would not be disqualified merely because it included an element of indirect taxation, and cited Lawson, supra, to state that fees levied incidental to the regulation of trade by means of licences would be considered without reference to the direct taxation power of s. 92(2). His judgment makes apparent that he considered ss. 92(9), (13), and (16) to collectively establish a power to regulate through licences which "embraces incidental powers necessary to its effective exercise; and the exaction of fees to meet the expenses of such an administration as that of the schemes, regardless of their incidence, is within that necessity" (p. 219, emphasis added). For Fauteux J. (Taschereau and Abbott JJ. concurring), although the fees were principally justifiable as charges for services, the licensing power of the provinces "derived from heads 9, 13 and 16 of s. 92" could be used to "raise money to defray the costs of operation" of a valid regulatory scheme (at pp. 249-50, emphasis added). Finally, for Locke J. (Nolan J. concurring), s. 92(9) could authorize the imposition of a licence, the cost of which would vary with the quantity of regulated substance sold, notwithstanding that the effect of the licence would be to increase the sale price of regulated produce. Locke J. cited Shannon, supra, to suggest that a licence would not be objectionable simply because it both regulates trade and provides revenue. Notably, however, Locke J. operated upon the stated assumption that the licence fees in question were to be used to defray expenses.
In the above cases, decided either by this Court or the Privy Council, one can discern a consistent treatment of the scope of s. 92(9) of the Constitution Act, 1867 . Although somewhat broad language was used by Lord Atkin in Shannon, supra, it appears generally true that s. 92(9), in combination with ss. 92(13) and (16), comprehends a power of regulation through licences. It is a power which is not confined to the requirement of direct taxation in s. 92(2). However, in so far as it comprehends indirect taxation, these cases -- either explicitly or upon their facts -- have limited the power of indirect taxation such that it can only be used to defray the costs of regulation.
Since the time of Reference re Farm Products, supra, several lower courts have also considered the question of indirect taxation and s. 92(9). Particularly worthy of mention is the decision of the British Columbia Court of Appeal in Coquitlam v. LaFarge Concrete Ltd., supra, a case already mentioned in my description of the background to this case. LaFarge involved facts substantially similar to those which now confront this Court, and, in particular, a municipal by-law which set out a volumetric fee for soil removal. The petitioner LaFarge had challenged the by-law upon the basis that it constituted indirect taxation and was therefore ultra vires the municipality and the province.
For Taggart J.A. in LaFarge, the by-law was valid since its real purpose was to "cover the cost incurred and to be incurred by the appellant Municipality in constructing and maintaining roads" associated with the regulatory scheme (at p. 699). Taggart J.A. otherwise agreed with Bull and Branca JJ.A. For Branca J.A., the by-law was intra vires on "the basis that it is a genuine licensing tax which formed a part of a licensing and regulatory scheme" (at p. 698). Branca J.A. did not specifically relate this finding of validity to the costs of the scheme, although elsewhere in his reasons he reviewed evidence which could allow the inference of such a relationship. Finally, Bull J.A. was most explicit in stating that he resolved the question through a pith and substance analysis. The relevant question was stated to be the following (at p. 685):
In my view, the key lies in the question as to what is the primary and real purpose, or pith and substance, of the legislation -- is the levy or tax (whether direct or indirect by nature) merely ancillary, or adhesive, to the licensing scheme of regulating or prohibiting a trade, or is it essentially a fiscal imposition, or taxation, under a form of disguise or a colourable concept?
In answering this question, Bull J.A. had recourse to the facts surrounding the enactment of the by-law, which he noted to include the "prospective outlays of large sums of public funds for road provision and maintenance as well as regulatory expenses" (p. 686). On the whole, then, the volumetric fee provision was upheld as valid provincial licensing, but the court appears to have been influenced by the idea that the revenue raised was required to fund the regulatory scheme, including road repair.
I do not read LaFarge to have substantially altered the interpretation of s. 92(9) which existed following Reference re Farm Products, supra. The three judgments in LaFarge, taken together, suggest to me that the validity of the by-law in question was linked to the costs of regulation by the court, and that the pith and substance analysis was not intended to convey more than this point. Nor do I believe that the interpretation of s. 92(9) has been much affected by several other lower court decisions to which this Court was referred: Nelson v. City of Dartmouth (1964), 45 D.L.R. (2d) 183 (N.S.S.C.); Kirkpatrick v. Maple Ridge (1983), 49 B.C.L.R. 134 (C.A.), and Re Falardeau and Town of Hinton (1985), 21 D.L.R. (4th) 477 (Alta. C.A.). These cases, in my opinion, either fail to advocate clearly that a broader power of indirect taxation exists within s. 92(9), or they do so unnecessarily in light of their facts.
My review of case law thus leads me to suppose that it has yet to be determined whether s. 92(9) comprehends a power to levy indirect taxes in order to raise revenue in excess of regulatory costs. Likewise, the cases reviewed tend generally to consider s. 92(9) in combination with other s. 92 powers. I agree with the following statement made by my colleague La Forest J. in his book on the subject, supra, at p. 159:
A close reading of the cases, therefore, indicates that the courts look upon heads (9), (13) and (16) as together giving the provinces power to regulate intraprovincial trade by means of a licensing scheme and to permit the levy of fees for such licences to support the scheme even if the fees constitute indirect taxation. But they limit indirect taxation by licences to this purpose.
I note that the Attorneys General for Quebec, Ontario and British Columbia argued in favour of an interpretation for s. 92(9) which makes the licensing power clearly independent of other s. 92 heads: see also J. E. Magnet, "The Constitutional Distribution of Taxation Powers in Canada" (1978), 10 Ottawa L. Rev. 473, at pp. 522-27. In particular, it was said that the power to raise money to support a regulatory scheme through indirect taxation already resides in the heads of power noted by La Forest J., and that if licences are limited in this respect, s. 92(9) will be redundant. I am pressed, however, to mention that a power of indirect taxation in s. 92(9) extending substantially beyond regulatory costs could have the more serious consequence of rendering s. 92(2) meaningless. And, in any event, the facts of this case do not demand a final resolution of the point.
In my opinion, therefore, it is unnecessary to examine further the jurisprudence associated with s. 92(9). The authorities establish to my satisfaction that the following question frames the relevant inquiry: can the variable fees be supported as ancillary or adhesive to a valid provincial regulatory scheme? Bearing this question in mind, I will now consider several specific arguments of the appellants.
3.Can the Variable Fees be Supported as Ancillary or Adhesive to a Valid Provincial Regulatory Scheme?
The appellants make three related arguments which all purport to deny that the variable fees are associated with a regulatory scheme. First, they argue that the fees are not authorized by the Municipal Act in a way which connects them to the statutory regulation of road usage. Second, they point to the fact that there is no express requirement in the statute or by-laws for the funds raised to be used in road repair, and they argue that the absence of such a requirement is fatal. Finally, they argue that there is nothing in the statute or by-laws to limit the sums raised through licensing to the actual costs of an overall scheme; in other words, they argue that there is a potential for surplus funds which divorces the fees from a regulatory purpose. I will address each argument in turn.
The appellants' first argument invites this Court to consider the location of s. 930 within the Municipal Act. It was noted that, whereas other provisions of the Municipal Act deal extensively with roads and the raising of money for roads, s. 930 does not mention roads at all. On this basis, it is argued that the permit and removal fees authorized by that section were not intended by the British Columbia legislature to offset the costs of road repair. We are asked to take a restricted view of such fees in light of the decision of this Court in Kirkpatrick v. Maple Ridge (Corporation of the District), supra.
In my view, neither the Kirkpatrick decision nor the Municipal Act compels such a narrow view. While Kirkpatrick did, indeed, suggest that a restrictive interpretation is to be "given detailed municipal statutes like the one in question here" (p. 128), the approach to interpretation in that case involved an analysis of the statutory context of the impugned provision. An analysis of context in this case suggests that s. 930 can be legitimately related to road costs, since statutory guidance respecting the regulation of roads is not confined to any one part of the Municipal Act.
In Part 13 of the Municipal Act, which is entitled "Public Works", Division (2) contains provisions relating to "Highways". For example, s. 578(2)(a) is a provision granting to municipalities the power to "lay out, construct, maintain and improve highways". Another very basic provision is s. 581, where municipal councils are empowered to "regulate extraordinary traffic". Other important provisions related to roads, however, are located in Part 16 of the Municipal Act, which is entitled "Local Improvements". In Division (1) of Part 16, s. 651 authorizes a municipal council to undertake improvement works relating to roads either upon a council's own initiative or following petition. In s. 668(1), municipalities are charged with the responsibility to keep a completed work "in repair by and at the expense of the municipality". In s. 669, provision is made for owners and occupiers to compel municipalities, by way of petition, to undertake required repairs. Finally, interspersed throughout the Municipal Act in divisions not otherwise related to roads are provisions which nonetheless affect road regulation. As an example, in Part 11, Division (4) relates to the "Regulation of Business", but that Part contains s. 528(b), which allows a municipality to "establish and alter routes to be taken by carriers of persons or chattels".
It is within this overall statutory environment that s. 930(2) is located. It is found in the untitled Part 28, and more particularly within Division (5), which is entitled "Sundry Regulations and Provisions". Given that provisions respecting roads and road repair are not localized in one part or division of the Municipal Act, this location does not, by itself, suggest that s. 930(2) is unrelated to roads as the appellants argue. In a statute as complex as the Municipal Act, I do not find it surprising that related provisions may become removed from one another as a matter of statutory organization and drafting preference.
That ss. 930(1)(e) and 930(2) are related to other road provisions in the Municipal Act appears clear to me. The appellants narrowly read these sections to refer only to gravel "removal". However, it is facile to suppose that gravel was intended by the legislature to be "removed" from designated areas of a municipality without use being made of roads. Surely, at least in the case of commercial extractors, such removal can be related both to the regulation of extraordinary traffic (s. 581), and to the municipal responsibility for road repair (s. 668(1)). Even further, accepting that the gravel removal regulated by s. 930(2) contemplates the use of roads, and accepting that such extraordinary use would necessarily cause damage, would it not be somewhat strange for a gravel operator to take advantage of s. 669 on the one hand in order to compel a municipality to undertake repairs, but then to disclaim that the gravel removal fees in s. 930(2) are related to roads on the other? In my view, it would be, given the structure of the Municipal Act. For these reasons, I consider that s. 930(2) is related to a system of road and gravel regulation, notwithstanding its statutory location and its lack of express reference to roads. This relationship is made even more evident by an examination of the by-laws themselves.
Maple Ridge By-law No. 4109-1988 is the clearer example of an overall scheme to regulate both gravel removal and roads. Certain of its provisions address the question of who can remove soil: in s. 3 there is a general prohibition against removal; in s. 4, that prohibition is made subject to removal by permit under s. 4; s. 8 sets out exceptions to the permit requirement. Other provisions incorporate the regulatory regime of another provincial statute: in s. 15, the requirement for a mines permit is found; s. 25 requires the filing of a mine working plan. A number of provisions prescribe certain terms to govern the removal of soil: in s. 6, removal on Sundays and statutory holidays is prohibited, and in s. 7, hours of operation are prescribed; noise level is regulated by s. 29, which can be related to the definition of a "berm" in s. 2 (a soil embankment acting as a noise buffer); drainage requirements are noted in s. 31. The fee provisions are located in s. 17 -- which establishes the volumetric fee -- and ss. 18 to 23, which deal with its calculation. Compliance provisions can also be noted: permit applicants are required by s. 24 to post security for their compliance with the by-law; in s. 33, permit holders are required to repair damage caused to adjacent properties; and, finally, s. 34 establishes an offence for violation.
Although Coquitlam By-law No. 1914, 1988 is less extensive, that it nonetheless provides for a regulatory scheme can be demonstrated by a number of provisions similar to those found in the Maple Ridge by-law. A general prohibition against removal subject to removal by permit is found in s. 4. Section 20 provides for inspection. Section 3 requires the by-law to be interpreted in a manner consistent with the Mines Act, S.B.C. 1980, c. 28, and s. 5(e) and (f) require proof of approved mining systems and reclamation plans. The volumetric fee is set out in s. 13(a) and calculation provisions are located in ss. 14 to 18. Section 23 establishes an offence for violation.
When considering an ancestor to these by-laws in LaFarge, supra, Bull J.A. described that ancestor as constituting "a complete and detailed code for the regulation of the gravel and soil extraction and removal trade" (p. 686). Based on the provisions outlined above, I believe that description can be equally applied to the by-laws now before this Court. I am also satisfied that the fee provisions are related to these regulatory by-laws. Neither by-law can be viewed in isolation from the Municipal Act, and an integrated view links the fees to a regime concerned with roads.
This conclusion essentially answers the second argument of the appellants. According to that argument, neither s. 930(2) nor the impugned by-laws are said to state expressly the purpose of the fees levied. It is argued that, in the absence of a statutory statement relating the fees to the costs of regulation, the fees could be levied for an unconstitutional purpose. As my review of the statute and by-laws demonstrates, however, the fees are impliedly linked to the costs of regulation. Further, at least one express purposive statement may exist. Although the point was not argued, the preamble to the Coquitlam by-law states that one of its purposes is "to encourage the safe orderly and economical exploitation of" soil substances. There is no reason to assume that the word "economical" here refers only to the interests of commercial extractors. In the absence of by-law provisions relating to road repair, such exploitation could hardly be considered economical from the municipal point of view.
Email this Content