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SCC narrowly rules Federal Court should not overstep a ‘limited role’

Thursday, December 22, 2016 @ 7:00 PM | By Cristin Schmitz

The Supreme Court has taken a narrow view of the Federal Court’s concurrent jurisdiction with the provincial superior courts in a 5-4 judgment hailed by Canadian municipalities as enabling local governments to use local courts to enforce municipal bylaws against federal undertakings and other federal entities.

On Dec. 8, the top court allowed the appeal of the City of Windsor in a preliminary jurisdictional battle with the respondent Canadian Transit Company (CTC), the owner of the Canadian half of the Ambassador Bridge from Windsor to Detroit: Windsor (City) v. Canadian Transit Co. 2016 SCC 54.

Five judges of the Supreme Court held that the Federal Court lacks the requisite statutory grant of jurisdiction from Parliament to decide whether the federally incorporated CTC must comply with a city bylaw, and repair orders, for more than 100 unoccupied residential properties the CTC owns near the bridge. The majority agreed with the city that the constitutional question whether the CTC must comply with the municipal bylaw/orders must be determined in the context of ongoing appeals of the repair orders in Ontario Superior Court in Windsor — not in Federal Court.

The majority’s decision, written by Justice Andromache Karakatsanis, takes a restrictive view of the Federal Court’s jurisdiction, emphasizing that the statutory court without inherent jurisdiction, must “not overstep this limited role.” The dissenters led by Justices Michael Moldaver and Russell Brown, argued the Federal Court’s jurisdiction must be “construed broadly,” given its role and purposes as a national trial court for Canadians and Parliament’s intention.

The minority also warned the majority’s interpretive approach will spark jurisdictional litigation in future cases, while the majority disagreed, predicting its approach requiring that the right to seek relief “arise directly from federal law” gives litigants more certainty and clarity about the scope of the court’s concurrent jurisdiction and will thus minimize future jurisdictional disputes.

The city’s counsel, Christopher Williams of Toronto’s Aird & Berlis, said the majority’s ruling enables municipalities to access justice locally when they want to enforce bylaws against federal undertakings, such as bridges, airports, pipelines, or other infrastructure that crosses provincial boundaries or the U.S.-Canada border, or against other entities under federal jurisdiction or control.

“It’s an important decision for people that practise in municipal law in that it very clearly establishes the superior courts of the provinces as the court system that has the authority to decide the constitutional validity and constitutional applicability of municipal bylaws when they are relating to, or dealing with, federal undertakings,” Williams said. “So when you’re dealing with who is going to be the referee, this court decision clearly says it’s going to be the superior courts, not the Federal Court.”

Williams suggested the judgment is also of note to administrative law practitioners, litigators and corporate counsel. “It seems to be a restatement that the jurisdiction of the Federal Court system is prescribed by statute, and it’s constrained by statute, so it maybe somewhat narrows the jurisdiction of the Federal Courts.”

The extra-provincial Ambassador Bridge is a federal undertaking, under the Constitution, and the CTC applied to the Federal Court for declarations that the company’s rights under its enabling legislation, the federal CTC Act, constitutionally supersede — and thus effectively immunize it from — the city’s bylaw and repair orders.

The CTC’s notice of application for the declarations was struck at first instance by Federal Court Justice Michel Shore, who held that his court did not have jurisdiction because the requisite statutory grant of jurisdiction was absent. The Supreme Court’s majority agreed and restored his order to strike — reversing the Federal Court of Appeal which ruled unanimously last year that the Federal Court does have the relevant grant of jurisdiction under s. 23(c) of the Federal Courts Act — a conclusion also endorsed by the Supreme Court’s four-judge minority.

Notably, the majority and minority disagreed about how to interpret and apply the three-decade-old test for Federal Court jurisdiction set out in ITO-International Terminal Operators Ltd. v. Miida Electronics Inc. [1986] 1 S.C.R. 752. The minority argued that the majority’s addition of a preliminary step to determine “the essential nature or character” of a claim is not necessary or helpful. The three-pronged ITO test — i.e. whether there is a statutory grant of jurisdiction; whether federal law is essential to the case’s disposition; and whether the law is validly federal — “already provides a comprehensive framework of analysis for determining whether the Federal Court has jurisdiction,” Justices Moldaver and Brown argued.

The intervener Federation of Canadian Municipalities (FCM) applauded the ruling. “As stated by the court, resolving federal-municipal jurisdictional questions in superior courts is not only in keeping with the Constitution, but it guarantees greater access to justice for municipalities and community groups across the country by ensuring that such cases are heard locally,” the federation said in a statement.

FCM counsel Stéphane Émard-Chabot of Ottawa told The Lawyers Weekly via e-mail “the majority brings needed certainty to the breadth of the Federal Court’s jurisdiction: the claimant’s cause of action must flow from federal law. In this case, the CTC was clearly seeking relief under constitutional doctrines, not under any federal rule.”

The CTC’s counsel, John B. Laskin of Toronto’s Torys, did not comment.

Administrative law professor Paul Daly of Cambridge University in England said by e-mail the majority’s decision will spark litigation and “sweeps more broadly than it needed to.”

“The restrictive approach to Federal Court jurisdiction will likely inspire litigants to argue for a similarly narrow approach in other cases,” Daly predicted.

He called the majority’s conclusion that the Federal Court does not have jurisdiction to hear the company’s application for a declaration as to the operability of the bylaws “implausible” for the reasons given by Justices Moldaver and Brown that “this case involves a federal company, created under a specially enacted federal statute, whose sole function under the statute is to operate a federal undertaking and whose claim for declaratory relief focuses exclusively on its right to carry out its statutory mandate free from unconstitutional constraints imposed by municipal bylaws.”

Justice Karakatsanis “characterized the Federal Court as a mere statutory court which might not even have the ability to issue binding declarations of invalidity,” Daly remarked. “I fear that future litigants will, based on her comments, perceive plenty of opportunity for jurisdictional mischief.”

Section 23(c) of the Federal Courts Act grants the Federal Court jurisdiction concurrent with provincial superior courts when a claim for relief, or remedy has been sought, “under an act of Parliament or otherwise” (i.e. under federal law) in relation to “works and undertakings connecting a province with any other province or extending beyond the limits of a province.”

Justice Karakatsanis concluded that s. 23(c) does not grant the Federal Court jurisdiction because the company’s cause of action or right to seek relief was not created or recognized by any federal law — whether a statute, regulation or common law. “A person cannot seek relief under s. 23 itself. It does not create any right of action,” she explained. “It merely confers on the Federal Court jurisdiction to provide relief that a person can otherwise seek ‘under an act of Parliament or otherwise.’ ”

The CTC asked the Federal Court for a declaration that the municipal bylaw and repair orders, in relation to the Windsor properties the company holds pursuant to its federal enabling legislation, are constitutionally inapplicable by virtue of the doctrine of interjurisdictional immunity, or are inoperative by virtue of the doctrine of paramountcy.

However a party seeking relief under constitutional law is not seeking relief “under an act of Parliament or otherwise,” within the meaning of s. 23, reasoned Justice Karakatsanis, endorsing the stance of the city, and supporting interveners, that constitutional law and doctrines do not qualify as federal law for the purposes of s. 23. She held that in the absence of a statutory grant of jurisdiction, the Federal Court lacked jurisdiction, having stumbled at the first part of the three-part test for Federal Court jurisdiction set out in ITO.

The majority also comprised Chief Justice Beverley McLachlin and Justices Thomas Cromwell, Richard Wagner and Clément Gascon.

Justices Moldaver and Brown argued for the minority (Justice Rosalie Abella wrote separately) that a claim is made “under an Act of Parliament” for the purpose of s. 23 when that statute is the law which, assuming the claim to be well-founded, would be the source of the plaintiff’s right. “It is sufficient if the relief sought is intimately related to rights and obligations conferred by an act of Parliament, even if the relief ultimately flows from a different legal source,” they reasoned. “As such, if the claim for relief is related to a federal work or undertaking and the rights that the claimant seeks to enforce arise from an act of Parliament, then s. 23(c) confers a statutory grant of jurisdiction on the Federal Court.”

The minority said that while the ultimate source of the company’s right to a declaration that municipal bylaws are inapplicable to its properties would be the constitutional doctrine of interjurisdictional immunity, the right to the relief claimed is equally tied to the CTC Act and the federal International Bridges and Tunnels Act. “These provisions are the statutory source of the company’s right to claim relief from the alleged unconstitutional application of municipal bylaws to its properties.”