Ontario Home Builders' Association v. York Region Board of Education

Ontario Home Builders' Association v. York Region Board of Education
Collection
Supreme Court Judgments
Date
1996-08-22
Report
[1996] 2 SCR 929
Case number
24085
Judges
Lamer, Antonio; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank; Major, John C.
On appeal from
Ontario
Subjects
Constitutional law
Criminal law
Notes
SCC Case Information: 24085
Decision Content
Ontario Home Builders' Association v. York Region Board of Education, [1996] 2 S.C.R. 929
Ontario Home Builders' Association,
Humber Green Estates Ltd.
and Butternut Grove Homes Inc. Appellants
v.
The York Region Board of Education,
the York Region Roman Catholic Separate
School Board
and the Attorney General for Ontario Respondents
and
The Attorney General of Quebec,
the Attorney General of British Columbia,
the Ontario Public School Boards' Association,
the Ontario Separate School Trustees' Association,
Carlota Guzman, Tony Ciccone, Charlotte Pope and
Doris Seto Interveners
Indexed as: Ontario Home Builders' Association v. York Region Board of Education
File No.: 24085.
1995: October 10, 11; 1996: August 22.
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 ontario
Constitutional law ‑‑ Division of powers ‑‑ Charter of Rights ‑‑ Indirect taxation ‑‑ Regulatory scheme affecting land development in order to finance new capital costs for schools necessitated by new development ‑‑ Monies placed in common account and available to public and separate school boards ‑‑ Whether charges an indirect tax ‑‑ Whether charges prejudicially affecting a right or privilege with respect to denominational schools ‑‑ Whether impugned provisions infringing s. 2 (a) Charter right to freedom of religion and s. 15(1) Charter right of equality ‑‑ If so, whether saved under s. 1 -- Act to restore to Roman Catholics in Upper Canada certain rights in respect to Separate Schools, S. Prov. C. 1863, 26 Vict., c. 5 (“Scott Act”), ss. 14 , 20 -- Canadian Charter of Rights and Freedoms, ss. 2 (a), 15(1) -- Constitution Act, 1867, ss. 91(3) , 92(2) , (9) , (13) , (16) , 93(1) -- Development Charges Act, R.S.O. 1990, c. D.9, ss. 30(1), (3), 35 -- Education Act, R.S.O. 1990, c. E.2, s. 122(1) -- Education Development Charges, R.R.O. 1990, Reg. 268, ss. 1, 2, 3, 4, 5.
Trial ‑‑ Standing ‑‑ Application brought by association composed of builders ‑‑ Builders affected by legislation ‑‑ Whether appellants had standing.
By‑laws passed by respondent school boards pursuant to the Development Charges Act required persons seeking building permits to pay an Educational Development Charge ("EDC") as a condition of obtaining the permit. The purpose of the EDC scheme was to permit school boards to raise the local share for the capital costs of new school construction on land undergoing residential and non‑residential development when that development created the need for new schools. The legislation ensured that new land development bore the cost of infrastructure on its own, rather than imposing an additional burden on existing developments. Significantly, capital costs associated with existing schools, or the building of schools for existing pupils currently accommodated in portables or sent by bus to distant schools could not be defrayed through revenues raised by EDCs. The legislation made no distinction between public and separate school boards, or between public and separate school supporters.
The appellants initiated an application in Divisional Court for judicial review of by‑laws passed by the respondent school boards. The Divisional Court found that the scheme created an indirect tax and was therefore ultra vires the province. The Court of Appeal considered the issue of standing and found that appellants indeed had standing. It ultimately found that the legislation, even though it created an indirect tax, did not impinge on the integrity of s. 92(2) (direct taxation within the province) of the Constitution Act, 1867 and that it was ancillary to a regulatory scheme clearly falling within provincial jurisdiction and justifiable under ss. 92(9) (licensing to raise revenue), (13) (property and civil rights) and (16) (matters of a local nature). At issue here was: (1) whether the appellants had standing; (2) whether the provisions of the Development Charges Act authorizing public and separate school boards to impose EDCs were ultra vires the province because (i) they imposed an indirect tax, or (ii) because they prejudicially affected a right or privilege with respect to denominational schools contrary to s. 93(1) of the Constitution Act, 1867 ; and (3) whether the impugned provisions were contrary to ss. 2 (a) (freedom of religion) and 15(1) (the equality rights) of the Canadian Charter of Rights and Freedoms , and if so, whether they were saved under s. 1 .
Held: The appeal should be dismissed.
Per Lamer C.J. and Sopinka, Cory, Iacobucci and Major JJ.: Given the serious and complex nature of the issues, it was assumed, without deciding, that the appellants had standing. The interveners had no standing. This Court takes an unfavourable view of attempts to back up an appellant's lack of standing by way of interveners. Such efforts to bootstrap flawed standing are to be discouraged.
When determining the incidence of a tax, both the context within which the tax operates and its purpose should be considered. Land taxes are generally direct taxes imposed on land against the owner and assessed as a percentage of the value of the land, or as a fixed charge per acre. The tax may be an annual, recurring assessment, or a one‑time charge. It may be enforced through the sale of the land. The desire or ability to pass on the tax or otherwise avoid taxation does not transform the direct nature of the tax into an indirect one. The jurisprudence does not prevent a tax on land by itself from being treated as an indirect tax.
EDCs are a tax on development using land as an instrument to achieve the desired end and involve features of both direct and indirect taxation. An EDC is characteristic of a land tax in that it is imposed on land undergoing residential and commercial development and failure to pay results in the charge's being placed on the tax roll. They are not, however, true land taxes in the traditional sense. Their purpose is not taxation of land, but rather, the defraying of the costs of infrastructure necessitated by new residential development. The "categories approach" (that the framers of the Constitution regarded taxes as divisible into two categories, direct and indirect, and that certain classifications of taxes were well known to the framers and fell into one or other category) was of no application here. Rather, the incidence of the EDCs must be determined according to Mill's formulation (that direct taxes are to be paid by the person taxed and the indirect taxes are not specific as to the ultimate incidence of the tax).
EDCs, since they are imposed in the course of manufacture on the commodity (a new building) to be sold and since most charge-payers intend to trade in the commodity, cling as a burden to new buildings when they are brought to market. They therefore constitute indirect taxation and are ultra vires provincial competence under s. 92(2) .
However, the EDC scheme is ultimately intra vires the province as ancillary to a valid regulatory scheme for the provision of educational facilities as a component of land use planning, pursuant to ss. 92(9) (licences to raise revenue), (13) (property and civil rights) and (16) (matters of a local nature) of the Constitution Act, 1867 . Since the power pursuant to s. 92(9) comprehends indirect taxation, this power is strictly limited to defray the costs of regulation. Significantly, funds can only be withdrawn when a specific project has been approved by the Minister and only in an amount equal to the actual local share of the project. The EDC scheme is appropriately limited in scope and operates only so as to defray the costs of regulation.
The EDCs are part of a comprehensive and integrated regulatory scheme, namely, the entirety of planning, zoning, subdivision and development of land in the province. Funding issues should be addressed through those aspects of the planning framework specifically designed to deal with those issues. While the regulatory scheme, of which EDCs are only a small part, is clearly very complex, the complexity is necessitated by the very scope of the matter regulated ‑‑ urban planning. The number of provincial actors involved in the various phases of the scheme's operation does not invalidate its regulatory nature. An artificial and rigid distinction should not be imposed between the school board and the municipality because such a distinction fails to reflect the true nature of the regulatory framework. The construction of schools is a legitimate and crucial component of modern land use planning. The common theme underlying new development in the province is that it should bear the costs of infrastructure necessitated by it.
The EDC scheme does not prejudicially affect the denominational educational rights embodied in s. 93(1) . Even if EDCs could be characterized as "grants", s. 20 of the Scott Act has never applied to capital grants. This section does not impose an obligation of proportionality in its strict terms. Proportionality is the means to a constitutional end which is equality of educational opportunity. Strict, formalistic proportionality was abandoned because it led to a serious inequality of educational opportunity. The principle in s. 122 of the Education Act, which is legally impressed upon the Development Charges Act, honours the obligation for a fair and non‑discriminatory distribution and subsumes and supersedes any obligation of proportionality that might have been imposed by s. 20 of the Scott Act.
EDCs are a new source of funds, neither a rate nor a grant, that was not contemplated at the time of Confederation. Like other charges used to finance municipal infrastructure, they are a secular source of funds. Those paying EDCs are not identified by school support, and the proceeds are not identified as belonging to one school board or the other. The proceeds are commingled. This secular character is entirely appropriate, as money raised under the by-law of one school board may be used to build schools needed by the coterminous board.
The EDC scheme pursues the constitutionally required objective of providing separate schools with funding that is on par with the funding received by public schools. This form of legislation is required by the provisions of s. 93 of the Constitution Act, 1867 and accordingly is immune from Charter scrutiny.
Per La Forest, L'Heureux‑Dubé, Gonthier and McLachlin JJ.: The EDC scheme relates, in pith and substance, to taxation as contemplated by s. 92(2) of the Constitution Act, 1867 . The legislation itself and the situation it was intended to remedy both support this conclusion. The EDC scheme gave to local school boards the means to raise the revenue taken away through cut backs in provincial grants. It revealed no feature other than the raising of a revenue in order to finance the local share of growth‑related capital while providing for specific ways in which such revenues will be spent by school boards. The scheme cannot be found to be ancillary to a valid regulatory scheme to the point where it does not relate, in pith and substance, to taxation.
Courts have recognized that provinces can enact legislation providing for the imposition of levies which are indirect in their incidence where such levies cannot be characterized as “Taxation ... in order to the raising of a Revenue for Provincial Purposes” as contemplated by s. 92(2) of the Constitution Act, 1867 because they relate, in pith and substance, to another head of power granted exclusively to provincial legislatures by s. 92 . When doing so, provinces are legislating under a different head of power than their s. 92(2) taxing power, and thus outside the scope of the limitation to direct taxation imposed by that provision.
The fact that the legislative scheme specifically provides for the use the school boards will make of the money levied and that the amount that can be levied is carefully limited to that purpose is not, in itself, determinative of the characterization of the matter of the legislation. “Costs of regulation” should not be defined in such a way that the legislation providing for a levy will necessarily relate, in pith and substance, to the matter to which its purpose relates as long as a province specifically provides for the use to be made of the funds levied, for the amount to be levied and for limitations carefully restricting its uses to its purpose. The adoption of such a position would be completely at odds with the structure of the Constitution and with the previous jurisprudence of this Court.
An EDC has all the earmarks of a tax ‑‑ a compulsory levy imposed by-law by a public body for a public purpose. It is, in pith and substance, a tax. It is not aimed at regulating the construction of houses or other buildings. It is not an integral part of the activity in which those engaged are regulated. Rather it is expressly aimed at raising a revenue for another purpose, building schools. Regulatory charges have thus far been tied, as they must constitutionally be, to the regulation of particular activities. The legislative choice of permitting local school boards to impose levies to pay these additional costs for schooling on landowners who construct residences in their area, rather than imposing the costs on taxpayers generally, is perfectly legitimate. And it is equally legitimate that the construction industry (which apparently owns the bulk of the land) should bear its share of the costs since it benefits economically from the development. They are not being regulated; they are being taxed.
Extending the concept of regulatory charges in the manner argued would virtually deprive the distinction between taxation and regulation of all meaning. The constitutional restriction to direct taxation represents an important component of the constitutional arrangements and the underlying policies that support them strongly militate against this Court's permitting provincial legislatures to impose levies that are in their incidence indirect through legislation cloaked as regulatory schemes that constitute in pith and substance taxation.
The EDC scheme is intra vires the province as a direct tax within the meaning of the Constitution Act, 1867 . It is a tax on land, a type of tax that has always been regarded as a quintessential example of a direct tax. It bears all the usual hallmarks of a land tax: it is imposed on the owner and is collectable against the land itself. Land taxes have always been characterized as direct taxes for the purposes of s. 92(2) because they were so perceived by the framers of the Constitution. This tax imposed on a landowner and collectable against the land cannot be construed as an indirect tax simply because of a tendency for the incidence of the tax to be passed on to subsequent purchasers of the property given the fact that the land is taxed only on owners who engage in development of the land and that the majority of them are builders who are building for sale.
The primary, if not only, rationale now underlying the prohibition of indirect taxation imposed on the provinces by s. 92(2) of the Constitution Act, 1867 is that the direct effect of their taxation measures must be confined within their territory. This should be taken into account in considering the validity of a given tax by reference to its incidence. The type of taxes the framers of the Constitution contemplated as direct taxes, land taxes for example, were seen to have predominantly local impact, while those seen as indirect, such as customs and excise, had an obvious tendency to have extraterritorial impact. Moreover, s. 92(2) expressly limited provincial taxes to the province and the limitation to direct taxation has prevented provinces from doing indirectly what they could not do directly. This approach is wholly consistent with the basic structure of the Constitution.
The framers of the Constitution considered that certain well-known categories of taxes would fall into the rubric of either direct or indirect taxes. The Mill’s test, which was seen as being a refinement of the idea underlying the earlier categories approach, where certain taxes were categorized as being either direct or indirect, defined a direct tax as one demanded from the very person who it is intended or desired should pay it and an indirect tax as one demanded from one person in the expectation and intention that that person indemnify him‑ or herself at the expense of another. While never abandoning the “categories approach”, the courts have moved to Mill’s test when dealing with taxes that did not fit comfortably with the few categories specifically adverted to by the framers. Mill’s test was found to permit the courts greater flexibility in accommodating the competing policies of according the provinces ample power to tax ‑‑ necessary to provide provinces with sufficient means to finance their legislative activities, which quickly turned out to be much more expensive than expected in 1867 ‑‑ while restraining them to their territorial scope. Thus, while EDCs might be indirect within the meaning of the definition proposed by Mill, ignoring the fact that they are land taxes ‑‑ the impact of which can only be confined to the territory of Ontario ‑‑ would disregard the important constitutional policies underlying the limitation to direct taxation provided for in s. 92 of the Constitution Act, 1867 .
The use of Mill’s test to transform what in all other respects falls within the category of a land tax is wholly inconsistent with the trend of the jurisprudence and the constitutional policies that underlie it. Clearly, it does not serve the major policy grounds today supporting the limitation of the provinces to direct taxes. There are no significant extraprovincial implications to land taxes. Nor does it serve the policy adopted by the courts of expansively interpreting the ambit of provincial taxing powers to meet the important legislative functions for which they now bear responsibility.
Cases Cited
By Iacobucci J.
Distinguished: Switzman v. Elbling, [1957] S.C.R. 285; Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342; Atlantic Smoke Shops, Ltd. v. Conlon, [1943] A.C. 550; considered: City of Halifax v. Estate of J. P. Fairbanks, [1928] A.C. 117, rev’g [1926] S.C.R. 349; Allard Contractors Ltd. v. Coquitlam (District), [1993] 4 S.C.R. 371; referred to: Reference re Bill 30, An Act to Amend the Education Act (Ont.), [1987] 1 S.C.R. 1148; Attorney General of Quebec v. Greater Hull School Board, [1984] 2 S.C.R. 575; Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 780; Hy and Zel's Inc. v. Ontario (Attorney General), [1993] 3 S.C.R. 675; Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan, [1978] 2 S.C.R. 545; Canadian Pacific Railway Co. v. Attorney General for Saskatchewan, [1952] 2 S.C.R. 231; Minister of Finance of New Brunswick v. Simpsons‑Sears Ltd., [1982] 1 S.C.R. 144; Bank of Toronto v. Lambe (1887), 12 App. Cas. 575; Brewers and Maltsters’ Association of Ontario v. Attorney‑General for Ontario, [1897] A.C. 231; Cairns Construction Ltd. v. Government of Saskatchewan, [1960] S.C.R. 619; City of Montreal v. Attorney‑General for Canada, [1923] A.C. 136; Attorney‑General for British Columbia v. Esquimalt and Nanaimo Railway Co., [1950] A.C. 87; Rattenbury v. Land Settlement Board, [1929] S.C.R. 52; Reference re Validity of Section 31 of the Municipal District Amendment Act, 1941, [1943] S.C.R. 295; Spooner Oils Ltd. v. Turner Valley Gas Conservation Board, [1932] 4 D.L.R. 750; Rural Municipality of Bratts Lake v. Hudson’s Bay Co., [1918] 2 W.W.R. 962; Dufferin‑Peel Roman Catholic Separate School Board v. Mississauga (City), [1994] O.M.B.D. No. 1093; Re Erin Mills Development Corp. and Peel Board of Education (1988), 22 O.M.B.R. 177; Etobicoke Board of Education v. Highbury Developments Ltd., [1958] S.C.R. 196; Greater Montreal Protestant School Board v. Quebec (Attorney General), [1989] 1 S.C.R. 377; Reference re Education Act (Que.), [1993] 2 S.C.R. 511; Re Scott and Ottawa (1856), 13 U.C.Q.B. 346.
By La Forest J.
Considered: Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357; Allard Contractors Ltd. v. Coquitlam (District), [1993] 4 S.C.R. 371; Attorney-General for Quebec v. Reed (1884), 10 App. Cas. 141; Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy, Ltd., [1933] A.C. 168; Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708; Ontario Boys’ Wear Ltd. v. The Advisory Committee, [1944] S.C.R. 349; Reference re Farm Products Marketing Act, [1957] S.C.R. 198; Coquitlam v. LaFarge Concrete Ltd., [1973] 1 W.W.R. 681; Re Exported Natural Gas Tax, [1982] 1 S.C.R. 1004; City of Halifax v. Estate of J. P. Fairbanks, [1928] A.C. 117, rev’g [1926] S.C.R. 349; referred to: Attorney-General for Canada v. Attorney-General for Ontario, [1937] A.C. 355; Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3; Reference re Agricultural Products Marketing Act, [1978] 2 S.C.R. 1198; Attorney-General of British Columbia v. Attorney‑General of Canada, [1924] A.C. 222; Attorney‑General for Canada v. Attorney‑General for British Columbia, [1930] A.C. 111; In re The Insurance Act of Canada, [1932] A.C. 41; Bank of Toronto v. Lambe (1887), 12 App. Cas. 575; R. v. Morgentaler, [1993] 3 S.C.R. 463; Attorney-General for British Columbia v. Esquimalt and Nanaimo Railway Co., [1950] A.C. 87; Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan, [1978] 2 S.C.R. 545; Rattenbury v. Land Settlement Board, [1929] S.C.R. 52; Canadian Pacific Railway Co. v. Attorney General for Saskatchewan, [1952] 2 S.C.R. 231; R. v. Churchill (1972), 29 D.L.R. (3d) 368; Texada Mines Ltd. v. Attorney‑General of British Columbia, [1960] S.C.R. 713; Reference re Quebec Sales Tax, [1994] 2 S.C.R. 715; Attorney‑General for Quebec v. Queen Insurance Co. (1878), 3 A.C. 1090; Cotton v. The King, [1914] A.C. 176; Alleyn v. Barthe, [1922] 1 A.C. 215; Atlantic Smoke Shops, Ltd. v. Conlon, [1943] A.C. 550; Edwards v. Attorney‑General for Canada, [1930] A.C. 124; Law Society of Upper Canada v. Skapinker, [1984] 1 S.C.R. 357; Attorney General of British Columbia v. Canada Trust Co., [1980] 2 S.C.R. 466.
Statutes and Regulations Cited
Act to restore to Roman Catholics in Upper Canada certain rights in respect to Separate Schools, S. Prov. C. 1863, 26 Vict., c. 5 ("Scott Act"), ss. 14, 20.
Building Code Act, R.S.O. 1990, c. B.13.
Canadian Charter of Rights and Freedoms, ss. 2 (a), 15(1) .
Conservation Authorities Act, R.S.O. 1990, c. C.27.
Constitution Act, 1867, ss. 91(3) , 92(2) , (9) , (13) , (14) , (16) , 93(1) .
Development Charges Act, R.S.O. 1990, c. D.9 [en. S.O. 1989, c. 58], ss. 30(1), (3)(a), (b), 35(1)(a), (b), (2), (3), (4), (5).
Education Act, R.S.O. 1990, c. E.2, ss. 11(3), 122(1), 170, paras. 6, 7; s. 171(1), para. 7; s. 195.
Education Development Charges, R.R.O. 1990, Reg. 268, ss. 1 , 2 , 3 , 4 , 5(1) , (2) , (3) , (4) , (6) , (7) .
Environmental Assessment Act, R.S.O. 1990, c. E.18.
Environmental Protection Act, R.S.O. 1990, c. E.19.
Fire Marshals Act, R.S.O. 1990, c. F.17.
General Legislative Grants 1992, O. Reg. 119/92, ss. 6(1), 51.
Municipal Act, R.S.O. 1990, c. M.45.
Ontario Municipal Board Act, R.S.O. 1990, c. O.28.
Ontario Water Resources Act, R.S.O. 1990, c. O.40.
Planning Act, R.S.O. 1990, c. P.13, ss. 2(i) [rep. & sub. S.O. 1994, c. 23, s. 5], 51(24)(a) [idem, s. 30], (j) [idem].
Authors Cited
Concise Oxford Dictionary of Current English, 9th ed. Edited by Della Thompson. Oxford: Clarendon Press, 1995, “commodity”.
Hogg, Peter W. Constitutional Law of Canada, vol. 1, 3rd ed. (Supplemented). Scarborough, Ont.: Carswell, 1992 (loose-leaf updated 1995, release 1).
Jowitt's Dictionary of English Law, vol. 2, 2nd ed. London: Sweet & Maxwell, 1977.
La Forest, Gérard V. The Allocation of Taxing Power Under the Canadian Constitution, 2nd ed. Canadian Tax Paper No. 65. Toronto: Canadian Tax Foundation, 1981.
Laskin, Bora. “Provincial Marketing Levies: Indirect Taxation and Federal Power” (1959), U. of T. L.J. 1.
Magnet, Joseph Eliot. “The Constitutional Distribution of Taxation Powers in Canada” (1978), 10 Ottawa L. Rev. 473.
Mill, John Stuart. Principles of Political Economy with some of Their Applications to Social Philosophy, vol. 2. New York: D. Appleton, 1893.
APPEAL from a judgment of the Ontario Court of Appeal (1994), 17 O.R. (3d) 103, 69 O.A.C. 216, 109 D.L.R. (4th) 289, 19 M.P.L.R. (2d) 1, allowing an appeal from the Ontario Court (Divisional Court) (1993), 13 O.R. (3d) 493, 62 O.A.C. 321, 103 D.L.R. (4th) 55, 15 M.P.L.R. (2d) 1. Appeal dismissed.
Neil Finkelstein and Monica Kowal, for the appellants.
Martha M. Mackinnon, for the respondent the York Region Board of Education.
Peter D. Lauwers, for the respondent the York Region Roman Catholic Separate School Board.
Janet E. Minor and Michel Y. Hélie, for the respondent 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.
Colin L. Campbell, Q.C., and Gordon F. Willcocks, for the intervener the Ontario Public School Boards' Association.
Peter D. Lauwers, for the intervener the Ontario Separate School Trustees' Association.
George Vegh, for the interveners Carlota Guzman and Tony Ciccone.
Jane Thompson and Robert Maxwell, for the interveners Charlotte Pope and Doris Seto.
The judgment of Lamer C.J. and Sopinka, Cory, Iacobucci and Major JJ. was delivered by
1 Iacobucci J. -- This appeal involves a challenge to the constitutional validity of Part III of the Development Charges Act, R.S.O. 1990, c. D.9 (the "Act"), which authorizes Ontario public and separate school boards to impose so-called education development charges ("EDCs") on buildings that result from new development. The major issues involved are threefold: whether the Act is ultra vires the province with respect to s. 92 of the Constitution Act, 1867 ; whether the Act violates the guarantees given to separate school supporters pursuant to s. 93(1) of the Constitution Act, 1867 ; and whether the Act is in violation of ss. 2 (a) and 15(1) of the Canadian Charter of Rights and Freedoms . There is also a question with respect to the standing of several of the interveners.
2 I conclude that the education development charges constitute indirect taxation contrary to s. 92 of the Constitution Act, 1867 . However, it is also my conclusion that Part III of the Act is intra vires the province as ancillary or adhesive to a valid regulatory scheme pursuant to ss. 92(9) , (13) and (16) . Further, in my view, the education development charge scheme is a legitimate component of an educational funding model that is fair and non-discriminatory, consonant with the rights and privileges granted in s. 93(1) of the Constitution Act, 1867 . Finally, the legislation in question, falling as it does within the scope of s. 93(1) , is immune from Charter scrutiny.
I. Background
3 The appellants develop land and build homes in Southern Ontario, including the York Region. In September 1992, the appellants initiated an application in Divisional Court for judicial review of by-laws passed by the respondents, York Region Board of Education and York Region Roman Catholic Separate School Board (the "School Boards"). The by-laws were passed pursuant to Part III of the Act, and require persons seeking building permits to pay an EDC as a condition of obtaining the permit. The purpose of the EDC scheme is to permit school boards to raise the local share for new school construction on land undergoing residential and non-residential development when that development creates the need for new schools.
The EDC scheme
4 Section 30 of the Act provides that if there is residential development that would increase education capital costs in the area of a school board's jurisdiction, that school board may pass by-laws imposing "education development charges" against the land undergoing residential and commercial development in the area. Such by-laws, pursuant to s. 30(3), must designate the categories of residential and commercial development upon which EDCs are to be imposed, and to designate "those uses of land, buildings or structures" upon which EDCs are to be imposed. Section 35 outlines the payment mechanism for the EDCs. The charge is payable to the municipality in which the development takes place on the date that a building permit is issued for a building or other structure to which an EDC applies. Section 35(3) provides that a municipality may withhold a building permit until the EDC has been paid. Section 35(4) states that, with the consent of the Minister of Education, a school board may accept the provision of school facilities from an owner in lieu of the payment of all or any portion of an EDC.
5 The legislation makes no distinction between public and separate school boards, nor between public and separate school supporters. Anyone applying for a building permit for development to which an EDC by-law applies must pay the charge, regardless of their support of the public or the separate school system. It is important to note that EDCs are designed to deal only with education capital costs made necessary by new residential development. Capital costs associated with existing schools, or the building of schools for existing pupils currently accommodated in portables or sent by bus to distant schools cannot be included. The EDC legislation not only permits school boards to raise capital, but also ensures that new land development bears the cost of infrastructure on its own, rather than imposing an additional burden on existing developments.
6 The method for calculating the amount of EDC that is payable is set out in Education Development Charges, R.R.O. 1990, Reg. 268 ("Regulation 268"). The starting point for the calculation of the charge, under s. 3 of Regulation 268, is the estimated number of new dwelling units that will result from the development on the land subject to the EDCs. The number of estimated growth-related new school pupils is then determined, as well as the number of school projects needed to serve the new pupils. The next factor is the cost of site purchase and construction cost for all the required projects. The percentage of the construction cost to be financed by legislative grant under s. 11(3) of the Education Act, R.S.O. 1990, c. E.2, is factored in, in order to determine the net growth-related education capital cost that will flow from development. A certain percentage of this cost will be paid through EDCs in respect of commercial development. The commercial contribution is calculated by dividing the percentage of growth-related cost that is to be covered by commercial EDCs by the declared value of the commercial building permits issued during the term of the EDC by-law, and multiplying the quotient by 100 to express the EDC on commercial development as a percentage of declared value.
7 An EDC scheme established by a particular school board can only operate with the approval of the Minister of Education. Before passing an EDC by-law, a school board must refer its plans for school facilities that constitute an education capital cost to the Minister of Education for approval (Regulation 268, s. 2 ). The construction cost and cost of site figures used in calculating EDC must be approved by the Minister of Education, pursuant to Regulation 268, ss. 1, 3(9). The maximum amount of an EDC is limited by the level of provincial grant that will be made, as EDCs can only be used to fund the local share of education capital costs (Regulation 268, s. 5(7)). As well, a school board cannot withdraw funds from an EDC account for a capital project unless final approval for the project has been given by the Minister of Education making a capital grant under s. 11(3) of the Education Act. In this regard, the Minister is bound by s. 122 of the Education Act. As well, the Minister of Education has a general power to ensure compliance with the Education Act, as well as Part III of the Act, and legislation subordinate thereto.
8 This power flows from s. 6(1) of the General Legislative Grants, 1992 Regulation, O. Reg. 119/92 (the "GLG Regulation"), made pursuant to the Education Act:
6. -- (1) Where a board fails to comply with the Acts administered by the Minister or the Regulations thereunder, the Minister may withhold the whole or any part of a legislative grant payable until the board has taken the action necessary to correct the condition that caused the grant to be withheld.
9 The proceeds generated by an EDC by-law must be deposited in two interest-bearing accounts; the first account is for EDC revenue raised on account of residential development, and the second account is for EDC revenue raised on account of commercial development (Regulation 268, ss. 5(1)-(3)). If two or more coterminous school boards pass EDC by-laws, the proceeds are to be deposited into two commingled bank accounts (Regulation 268, s. 5(4)). Funds from these accounts may only be withdrawn with the signatures of the treasurers of all the coterminous boards on whose accounts the moneys have been deposited (Regulation 268, s. 5(6)).
II. Relevant Constitutional and Statutory Provisions
A. Constitution Act, 1867
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.
. . .
9. Shop, Saloon, Tavern, Auctioneer, and other Licences in order to the raising of a Revenue for Provincial, Local, or Municipal Purposes.
...
13. Property and Civil Rights in the Province.
. . .
16. Generally all Matters of a merely local or private Nature in the Province.
93. In and for each Province the Legislature may exclusively make Laws in relation to Education, subject and according to the following Provisions:--
(1) Nothing in any such Law shall prejudicially affect any Right or Privilege with respect to Denominational Schools which any Class of Persons have by Law in the Province at the Union....
B. Canadian Charter of Rights and Freedoms
2. Everyone has the following fundamental freedoms:
(a) freedom of conscience and religion;
. . .
15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
C. An Act to restore to Roman Catholics in Upper Canada certain rights in respect to Separate Schools, S. Prov. C. 1863, 26 Vict., c. 5 ("Scott Act")
14. Every person paying rates, whether as proprietor or tenant, who, by himself or his agent, on or before the first day of March in any year, gives, or who, on or before the first day of March, of the present year, has given to the Clerk of the Municipality notice in writing that he is a Roman Catholic, and a supporter of a Separate School situated in the said Municipality, or in a Municipality contiguous thereto, shall be exempted from the payment of all rates imposed for the support of Common Schools, and of Common School Libraries, or for the purchase of land or erection of buildings for Common School purposes, within the City, Town, Incorporated Village or section in which he resides, for the then current year, and every subsequent year thereafter, while he continues a supporter of a Separate School; and such notice shall not be required to be renewed annually; and it shall be the duty of the Trustees of every Separate School to transmit to the Clerk of the Municipality or Clerks of Municipalities (as the case may be) on or before the first day of June in each year, a correct list of the names and residences of all persons supporting the Separate Schools under their management; and every ratepayer whose name shall not appear on such list shall be rated for the support of Common Schools.
20. Every Separate School shall be entitled to a share in the fund annually granted by the Legislature of this Province for the support of Common Schools, and shall be entitled also to a share in all other public grants, investments and allotments for Common School purposes now made or hereafter to be made by the Province or the Municipal authorities, according to the average number of pupils attending such school during the twelve next preceding months, or during the number of months which may have elapsed from the establishment of a new Separate School, as compared with the whole average number of pupils attending School in the same City, Town, Village or Township.
D. Education Act, R.S.O. 1990, c. E.2
122. -- (1) Every separate school shall share in the legislative grants in like manner as a public school.
E. Development Charges Act, R.S.O. 1990, c. D.9
30. -- (1) If there is residential development in the area of jurisdiction of a board that would increase education capital costs, the board may pass by-laws for the imposition of education development charges against land undergoing residential and commercial development in that area....
. . .
(3) A by-law passed under subsection (1) shall,
(a) designate the categories of residential development and commercial development upon which an education development charge shall be imposed;
(b) designate those uses of land, buildings or structures upon which an education development charge shall be imposed;
35. -- (1) An education development charge is payable,
(a) to the municipality in which the development takes place on the date a building permit is issued in relation to a building or structure on land to which an education development charge applies; or
(b) if the development takes place in territory without municipal organization, to the board that imposed the education development charge thirty days after the board mails a notice to the owner setting out the amount of the charge.
(2) An education development charge imposed by a board in respect of commercial development is the amount determined in the manner prescribed or calculated using the formula prescribed.
(3) Despite any other Act, a municipality is not required to issue a building permit in relation to a building or structure on land to which an education development charge by-law applies unless the education development charge has been paid.
(4) Despite subsection (1), and subject to subsection (5) and the consent of the Minister of Education, a board may by agreement permit an owner to provide school facilities in lieu of the payment of all or any portion of an education development charge....
(5) If more than one board has jurisdiction in an area and one or more boards are to receive school facilities under subsection (4), all of the boards that have imposed an education development charge in that area are required to be parties to the agreement.
F. Education Development Charges, R.R.O. 1990, Reg. 268
1. ...
"declared value" means the cost on which the building permit fee is calculated;
“elementary rate of grant" means the percentage of the construction cost of an elementary school project or of the cost of site purchase of an elementary school project that may be financed by a legislative grant under subs