Note: this article was updated July 2009

The B.C. Supreme Court decision, March 18, 2005

As every land developer knows, the City of Vancouver has the power to impose or stipulate conditions when issuing a development permit. In Imperial Oil Ltd. v. Vancouver (City) 2005 BCSC 387, the Supreme Court of British Columbia considered the ambit and limitations of that power. The decision will be especially helpful to those developing contaminated sites or who face other proposed terms and conditions that do not directly pertain to the development in question.

Imperial Oil owns the service station property at Fraser Street and E. 25th in Vancouver. In 2000, aware of hydrocarbon contamination, they decommissioned the existing service station, removed the pump islands and underground tanks, and applied to the City for a development permit to construct a new split island service station with accessory retail store.

The City made known its concerns about the environmental contamination from the site onto adjacent City property (i.e. the adjacent streets, owned by the City). The City was concerned about the effect of contamination on utility lines and on the health of people working in the utility corridors, and any costs to City taxpayers that could be associated with the contamination.

By May 2002, the City had approved the development permit application on conditions which included the following:

[that] clearance shall be received from the [City’s] Office of Environmental Protection upon approval of soil related items by the Ministry of Environment, Lands & Parks [now Water, Land & Air Protection]

Approval in principle was obtained under the Waste Management Act (Waste Management Act RSBC 1996 c. 482, repealed July 8, 2004. Now, the Environmental Management Act SBC 2003 c. 53) in December 2003.

The City’s Office of Environmental Protection required that Imperial Oil execute an Off-Site Soils Agreement or OSA before it would give the clearance stipulated. Imperial Oil argued that the OSA would impose on Imperial Oil indeterminate liabilities to the City and third parties greatly exceeding the liabilities otherwise imposed by law in relation to contamination from the site. In its submissions, Imperial Oil summarized the effect of the OSA as follows:

The OSA requires [Imperial Oil] to agree that it is the “responsible person” for the contamination in question (s. 2.1), and obliges the oil company to remediate the contamination to “Acceptable Contamination Levels” that do not exceed the “City Standard” which may be unilaterally prescribed by the City (s. 1) and to monitor as required by the City’s engineer (s. 2.3). It allows the City to remediate the contamination and charge the cost to the oil company in certain circumstances (s. 3.9) and it requires the oil company to post a letter of credit to secure its obligations under the remediation plan (s. 8.1) which may be offset by the City against any “claims” and must be replenished by the oil company (s. 8.6, s. 1).

The key issue in this case was whether the City had jurisdiction to require this OSA as a condition to granting a development permit. The Court held that the City did not. Following are key excerpts from the Court’s reasons:

I do not agree with the City that s. 565A [of the Vancouver Charter SBC 1953 c. 55] either expressly or by implication grants an unlimited authority to refuse development permits or impose conditions. I conclude that s. 565A contemplates that the powers in relation to development permits, including conditions to be attached to them, will be exercised only for reasons connected to the appropriateness and impact of the proposed development.

… The City notes that the OSA essentially ensures that the costs of environmental remediation are borne by the party responsible for the contamination, and not by the taxpayers of the City. However, municipal authority to require an OSA cannot derive solely from a municipal purpose, however compelling that purpose may be. Otherwise, the City could use its power in relation to development permits to compel the resolution of any issue it has with a developer. Imperial Oil submitted that this could allow even for expropriation without compensation, which, like the OSA condition here, could be described as for a municipal purpose and to the benefit of the City and its taxpayers.

Essentially, the Court held that the City could not leverage its position as regulatory approving body to advance its position as property owner (i.e. owner of the City streets) by forcing Imperial Oil to enter the OSA and to thereby take on liability relative to the contamination that would be above and beyond the liability Imperial Oil would otherwise have at law.

The City does not have a carte blanche power to impose any requirement it considers to be in the public interest. What might appear at first blush to be an open-ended discretion always has to be examined in the context of the purpose of the power.

This decision obviously will be helpful for developers and is of particular interest for redevelopment of brownfield sites. But there are limits on the impact of the decision – it might not assist for example where a rezoning is required, because courts will not compel a rezoning. And it must be appreciated that local governments and other regulatory approving bodies tend to be resolute in such matters, and if they can’t get what they want one way, they might be able to get it another way. In the Imperial Oil case, the OSA was the last outstanding condition for the development permit. If broad discretionary approvals were outstanding, then the applicant might be waiting a long while for approval if it took issue with the stipulation for an OSA. The scenario referred to above about “expropriation without compensation” in practice often occurs. Any developer who has given up a part of their property, without compensation, for a street widening or a “corner cut” understands this. But this case is important in establishing the ground rules.

B.C. Court of Appeal decision, August 4, 2005 – (Imperial Oil Ltd. v. Vancouver (City) 2005 BCCA 402 )

On August 4, 2005 the Court of Appeal affirmed the judgement of the B.C. Supreme Court. Following are key excerpts from the Court of Appeal reasons:

… In my view, it cannot be said that it is necessarily or fairly to be implied that s. 565A authorizes the City to impose a condition requiring the remediation of environmental contamination elsewhere [i.e. off-site] when exercising its authority to regulate the development of a particular parcel of land. The legislative intention in enacting s. 565A to authorize the City to regulate development cannot have been to authorize it to exercise authority beyond the scope of the general authority given.

… The authority given under Part XXVII of the Charter is to regulate development; it is not an authority for the remediation of environmental contamination per se. As is evident in the circumstances of this case, under the governing environmental legislation, that general authority falls within the purview of the office of the Minister of the Environment (formerly the Ministry of Water, Land and Air Protection) …

… To limit the word “conditions” in s. 565A(b) to conditions that bear upon the development in question, is not to stray from its ordinary and grammatical meaning. Rather, it is to give to that word the only reasonable meaning the context in which it is used permits. To broaden the term to allow the City to regulate the clean-up of off-site contamination would create disharmony within the Act as a whole and with the intention of the Legislature.

Supreme Court of Canada

Leave to appeal to the Supreme Court of Canada was denied in February, 2006. The B.C. Court of Appeal decision stands.