O.K. Industries Ltd. v. District of Highlands (“Highlands”)[1] marks the first time[2] a court applied the correctness standard of review to a question falling outside the categorical exceptions established by the Supreme Court of Canada (“SCC”) in Canada (Minister of Citizenship and Immigration) v. Vavilov (“Vavilov”).[3] The Court of Appeal for British Columbia (“BCCA”) found that the rule of law in general required a departure from the presumption of reasonableness in circumstances involving a complex question of statutory interpretation that had significant legal consequences on provincial and municipal governments purporting to regulate mining resources. The BCCA’s reasoning provides interesting commentary on the SCC’s categorical exceptions to the reasonableness standard and sets an interesting example for potential future exceptions.

Background Information

The Standard of Review

Vavilov was a “game changer” in Canadian administrative law.[4] Please see our previous post for a discussion of Vavilov and the standard of review analysis. As discussed therein, all administrative decisions are presumptively reviewed on the deferential reasonableness standard, unless either legislative intent or the rule of law indicate otherwise. The SCC explained three circumstances where the rule of law requires a correctness review, namely, where the impugned decision raises: (a) a constitutional question; (b) a general question of law of central importance to the legal system as a whole; or (c) a question related to the jurisdictional boundaries between administrative bodies.[5] These are the categorical exceptions to a reasonableness review.  

The Supreme Court, however, did not foreclose the possibility that another categorical exception to a reasonableness review could be recognized in exceptional circumstances: 

However, we would not definitively foreclose the possibility that another category could be recognized as requiring a derogation from the presumption of reasonableness review in a future case. […] [T]he recognition of any new basis for correctness review would be exceptional and would need to be consistent with the framework and overarching principles set out in these reasons. In other words, […] on the basis of legislative intent […] [or] on the rule of law [emphasis added].[6]

The Facts

Briefly, Highlands involved a dispute between O.K Industries Ltd. (“OKI”), a quarrying and road paving company, and the District of Highlands (“District”), a municipal corporation created under the Community Charter (“CC”).[7] The issue was whether OKI had to comply with the District’s bylaws before undertaking its provincially approved mining operations.

In 2015, OKI purchased raw land in the District from the Province of British Columbia (“Province”) to establish a rock quarry. The District later refused OKI’s application to re-zone the land to allow for the rock quarry. In 2020, the Ministry of Mines (“MoM”) granted OKI a permit under the Mines Act (“MA”)[8] to operate the rock quarry and complete specific activities. Despite the permit, the District argued that OKI was required to comply with its bylaws, which required OKI to re-zone the land and acquire permits for certain surface activities. OKI proceeded with the authorized activities without complying with the bylaws, and the District issued a cease work order. OKI petitioned for judicial review, requesting the Supreme Court for British Columbia (“BCSC”) to quash the cease work order and declare the bylaws inapplicable to OKI’s authorized activities.

The BCSC’s Decision

Hinkson C.J. described the nature of the dispute as one of competing jurisdictions, namely, whether the District interpreted its jurisdiction over lands within its municipal boundaries under the CC and Local Government Act (“LGA”)[9] in a manner that was incompatible with the Province’s jurisdiction over mines and minerals under the MA.[10] While the BCSC found the dispute raised a jurisdictional question requiring a correctness review,[11] it is also important to note that the BCSC applied a reasonableness review as well and came to the same conclusion.[12] The SCC in Vavilov described the rationale and parameters of the jurisdictional exception:

[T]he rule of law requires that the correctness standard be applied in order to resolve questions regarding the jurisdictional boundaries between two or more administrative bodies.

[Where administrative decisions are challenged on this basis], the rule of law requires courts to intervene where one administrative body has interpreted the scope of its authority in a manner that is incompatible with the jurisdiction of another. The rationale for this category of question is simple: the rule of law cannot tolerate conflicting orders and proceedings where they result in a true operational conflict between two administrative bodies, pulling a party in two different directions [emphasis added].[13]

Pursuant to the CC and the SCC’s decision in 114957 Canada Ltée v. Hudson (Town) (“Spraytech”),[14] Hinkson C.J. employed the “impossibility of dual compliance” test to determine whether the MA and CC could co-exist.[15] He concluded they could not because the Province enjoyed exclusive jurisdiction over the mining activities authorized by the permit, citing the BCCA’s decision in Cowichan Valley (Regional District) v. Cobble Hill Holdings Ltd. (“Cobble Hill”)[16] in support.[17] As a result, the District lacked subject matter jurisdiction, and the BCSC granted OKI’s sought-after relief.[18] The District appealed to the BCCA.

The BCCA Finds “Exceptional” Statutory Scheme Requires a Correctness Review

At the Court of Appeal, Fisher J.A., writing for a unanimous Court, found the situation warranted a correctness review, but on different bases, and ultimately upheld the BCSC’s decision.[19] The BCCA found that the rule of law in general rebutted the presumption of reasonableness:

[T]he question in this case does not fit comfortably into the categories described by the Court in Vavilov as exceptions to the reasonableness standard. It does not fit well as a question regarding the jurisdictional boundaries between two or more administrative tribunals, as it involves one administrative decision maker (the mines inspector exercising delegated authority under the Mines Act) and a legislative body (the District exercising delegated authority under the Community Charter). While the mines inspector, in issuing the quarry permit, did not purport to limit the general application of District bylaws, it is not his role to make any such determination. Moreover, it is not simply a jurisdictional question or a question of the interpretation of an enabling statute. The vires of the District’s bylaws is not in issue […]. Rather, the issue is whether the bylaws apply to a quarry, in light of the interplay among the numerous provincial statutes governing the regulation of mines and mining activities and the regulatory authority of local governments. […] I agree with the Attorney General’s submission that the question plausibly relates to the overarching concept of a question for which the rule of law requires consistency and a final and determinate answer. It is a question with significant legal consequences to the institutions of the provincial and municipal governments that purport to regulate mining resources in British Columbia [emphasis added].[20]

According to the BCCA, the rule of law required a correctness review to finally answer the question of whether municipal bylaws apply to a quarry in circumstances where: (a) there was a complex set of provincial statutes vesting powers of decision in delegates; (b) there was no provision in the enabling statutes, nor any other statute, authorizing the delegates – the District and the MoM – to interpret one another’s home statutes (nor did either delegate purport to do so); (c) there was uncertainty at common law regarding the interplay between provincial and municipal authority over mines and minerals; and (d) the answer to the question had significant legal consequences to the regulation of mining resources. As discussed below, the decision provides analysis of the SCC’s categorical exceptions to reasonableness, and provides an example of the circumstances in which an appellate court considers the rule of law to necessitate a correctness review.

The Case Did Not Raise a Jurisdictional Boundaries Question

In overturning the BCSC’s finding on the jurisdictional exception, the Court of Appeal reinforced an important change made by the SCC to the standard of review analysis in Vavilov, namely, that the jurisdictional exception applies in narrow circumstances.

The SCC in Vavilov reformulated the jurisdictional exception. It is triggered only where there is a question “regarding the jurisdictional boundaries between two or more administrative bodies [emphasis added]”, which will only arise where “one administrative body interprets the scope of its authority in a manner that is incompatible with the jurisdiction of another”.[21] This is a departure from the former standard of review analysis, in which “true questions of jurisdiction or vires” (where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter) also attracted a correctness review.[22] Post-Vavilov, such questions are resolved through a reasonableness review.[23] As a result, the modern jurisdictional exception is confined to rare situations;[24] situations such as, for example, the jurisdiction of a labour arbitrator to consider matters of police discipline and dismissal that are otherwise within the purview of another legislative scheme and administrative decision-maker.[25]

With this background in mind, the Court of Appeal disagreed with the BCSC’s characterization of the issue in Highlands as jurisdictional. While this issue may have attracted a correctness review prior to Vavilov, the jurisdictional exception is, post-Vavilov, confined to a question impugning jurisdictional boundaries, which was absent in this case. In particular, the MA did not task the MoM with interpreting the CC or the LGA and administering their schemes; conversely, neither the CC nor the LGA tasked the District with interpreting the MA and administering its scheme. In other words, there were no overlapping jurisdictional boundaries that the Court of Appeal needed to redraw, so no such question arose. A unique nuance of this case worth noting, and which separates it from other comparable cases, is that neither the MoM nor the District purported to interpret one another’s statutes in issuing their respective permit and cease work order.[26]

The Court of Appeal began its analysis by interpreting the applicable statutes, finding that there was a possible jurisdictional boundaries issue between the MA and the CC.[27] This issue had been canvassed in two previous BCCA decisions that were cited by OKI and the District in support of their respective positions. On the one hand, the District relied on Squamish (District) v. Great Pacific Pumice Inc. (“Pumice”),[28] contending municipal bylaws could apply to surface-related mining activities. The Court of Appeal rejected this argument, finding municipalities could regulate off-site surface “mining activities”, not surface operations generally.[29] On the other hand, OKI relied on the more recent Cobble Hill, contending its permit-authorized activities were immune from the District’s bylaws because they were ancillary to the excavation. The Court of Appeal agreed, finding municipal bylaws apply unless they touch core or ancillary activities authorized by a permit issued under the MA, and only “re-engage” upon completion of those activities.[30] This reconciliation of Pumice and Cobble Hill was supported by the history of the applicable statutes, which suggested the Province had a significant interest in mines and minerals and had, over the years, increasingly carved essential mining activities out from municipal jurisdiction.[31]

In sum, the Province’s authority over mines and minerals was not premised on the concept of exclusivity but, rather, was a conclusion arising from an interpretation of the statutory regime.[32]

The Case Did Not Raise a General Question of Central Importance

In Vavilov, the Supreme Court stated that general questions of central importance must be answered correctly because of their “fundamental importance and broad applicability” to the legal system as a whole, including the “significant legal consequences [they may have on] other institutions of government [emphasis in original]”.[33] The SCC provided examples, such as res judicata, abuse of process, and limits on solicitor-client privilege, but cautioned that “it is not sufficient that a dispute is simply ‘of wider public concern’ or touches on an important issue when framed in a general or abstract sense”.[34] In considering this exception to the reasonableness standard, the BCCA found that the issue before the Court did not raise a general question of central importance, but provided little analysis to support this finding.

In our view, this is a narrow interpretation of this categorical exception, particularly in light of the Court of Appeal’s own statements regarding the importance of the issue before the Court:

In this circumstance, I agree with the Attorney General’s submission that the question plausibly relates to the overarching concept of a question for which the rule of law requires consistency and a final and determinate answer. It is a question with significant legal consequences to the institutions of the provincial and municipal governments that purport to regulate mining resources in British Columbia [emphasis added].[35]

Further, this finding is arguably consistent with the SCC’s description of this categorical exception, in that it bears the hallmarks of such questions, namely, that they:

[…] ‘require uniform and consistent answers’ as a result of ‘their impact on the administration of justice as a whole’…. [or are of] ‘fundamental importance and broad applicability’, [including] significant legal consequences… for other institutions of government [or] legal implications for a wide variety of other statutes [citations omitted] [emphasis added].[36]

As a result, it is difficult to reconcile the BCCA’s dismissal of this categorical exception with its findings. The only conclusion to be drawn is that the Court of Appeal considered this exception to apply in circumstances that were fundamentally important to the legal system as a whole, and not that segment of the legal system regulating mines and minerals, including disputes between different levels of government in relation thereto.

Further Considerations

As set out above, there were a number of circumstances that, considered together, led the BCCA to apply a standard of correctness to answer the question of whether municipal bylaws apply to a provincially authorized quarry operation. Although the BCCA did not create a new categorical exception per se, the application of the decision in Highlands will be one to watch. It will be interesting to see whether lower courts find similar questions of complex statutory interpretation that raise broader jurisdictional questions of import to necessitate a correctness review, such as, for example, in other industries whose participants are often subject to a competing, though not conflicting, layer cake of government regulation.

Case Information

O.K. Industries Ltd. v. District of Highlands, 2022 BCCA 12.

DOCKET: CA47271

DATE: January 13, 2022

 

Kara L. Smyth is a partner and Mark J. Risebrough is an associate in McCarthy Tétrault’s Litigation Group.

 

[1] 2022 BCCA 12 [Highlands, BCCA].

[2] See the discussion, not the holding, of Stratas J.A. in Environmental Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2020 FCA 100 at paras. 14-21.

[3] 2019 SCC 65 [Vavilov].

[4] Paul Daly, “Canadian Labour Law after Vavilov” (7 December 2020) at 11.

[5] Vavilov at paras. 33-36 and 53-64.

[6] Vavilov at para. 70.

[7] SBC 2003, c. 26.

[8] RSBC 1996, c. 293.

[9] RSBC 2015, c. 1.

[10] 2021 BCSC 81 at paras. 140, 181-187, and 191 [Highlands, BCSC].

[11] Highlands, BCSC at para. 192.

[12] Highlands, BCSC at para. 192 and 209.

[13] Vavilov at paras. 63-64.

[14] 114957 Canada Ltée (Spraytech, Société d’arrosage) v. Hudson (Town), 2001 SCC 40 at para. 34.

[15] Highlands, BCSC at paras. 142-150 and 156-175.

[16] 2016 BCCA 432.

[17] Highlands, BCSC at paras. 169-175.

[18] Highlands, BCSC at paras. 255-256.

[19] Highlands, BCCA at para. 141.

[20] Highlands, BCCA at para. 53.

[21] Vavilov at paras. 63-65. See also Northern Regional Health Authority v. Horrocks, 2021 SCC 42 at paras. 5-61; TransAlta Corporation v. Alberta (Utilities Commission), 2022 ABCA 37 at paras. 22-38; Manitoba Government and General Employees’ Union v. The Minister of Finance for the Government, 2021 MBCA 36 at paras. 19-31; Ball v McAulay, 2020 ONCA 481 at paras. 34-53.

[22] Dunsmuir v. New Brunswick, 2008 SCC 9 at paras. 50 and 59.

[23] Vavilov at para 65-66; 1120732 B.C. Ltd. v. Whistler (Resort Municipality), 2020 BCCA 101 at para. 35.

[24] Vavilov at paras. 63-64.

[25] Regina Police Assn. Inc. v. Regina Board of Police Commissioners, 2000 SCC 14.

[26] Highlands, BCCA at para. 53.

[27] Highlands, BCCA at paras. 12-26.

[28] 2003 BCCA 404.

[29] Highlands, BCCA at para. 90.

[30] Highlands, BCCA at para. 77.

[31] Highlands, BCCA at paras. 91-129.

[32] Highlands, BCCA at para. 59.

[33] Highlands, BCCA at para. 49.

[34] Highlands, BCCA at para. 50, citing Vavilov at para. 61.

[35] Highlands, BCCA at para. 53.

[36] Vavilov at para. 59.