Newfoundland and Labrador – city lacks authority to impose arbitration unrelated to legislation’s purpose/intent

In St. John’s (City) v. 10718 Nfld. Inc., 2019 NLCA 41, Newfoundland and Labrador’s Court of Appeal upheld a first instance decision declaring that the City of St. John’s (the “City”) cannot require mandatory arbitration in an agreement as a term of approval of development as doing so is acting beyond its beyond its jurisdiction under its enabling legislation. See the earlier Arbitration Matters note “Newfoundland and Labrador court holds that a municipality has authority to agree to arbitration but not to impose it as a condition of regulatory approval

During the course of their dealings regarding development of a complex, multi-year, residential/industrial/commercial area, 10718 Nfld. Inc. (the “Developer”) and the City disputed the latter’s requirement that, as a condition of obtaining regulatory approval, the Developer had to agree to arbitrate disputes. 

The Developer challenged that requirement in the Newfoundland and Labrador Supreme Court and prevailed in Madam Justice Frances J. Knickle’s decision in first instance in 10718 Nfld. Inc. v. St. John’s (City), 2018 NLSC 82.”

The City appealed that decision but unsuccessfully.

The Newfoundland and Labrador Court of Appeal agreed with Knickle J.’s analysis.  The Court did refine one of her observations regarding the Developer’s access to the courts.  While Knickle J. had stated that the Developer did have access in the absence of an arbitration clause, the Court noted that certain provisions of the legislation applicable to municipal works in the City did require parties to undertake an appeal board process.  That process is set out in section 42 of the province’s Urban and Rural Planning Act, 2000, SNL 2000, c U-8 and the City’s Development Regulations, NLR 3/01

Setting aside that particular situation, the Court held that the City’s authority to grant approval is limited to the purposes on the legislation under which that approval is sought.  The Court placed specific reliance on its earlier decision in Sun Life Assurance Company of Canada v. St. John’s (City), 2006 NLCA 62 (CanLII), 261 Nfld. & P.E.I.R. 55.  The Court’s reading of its earlier decision lead it to hold that the City has authority to deny or approve development but that authority is limited to the purpose of the legislation.  Term and conditions must relate to the purpose and intent of the legislation and must be sufficiently connected to that purpose.

[30] The premise underlying the Sun Life decision is that it is beyond the authority of the City to include a provision in a development agreement that imposes a term having the effect of denying an applicant a development agreement where the application is in compliance with the requirements of the Urban and Rural Planning Act, 2000 and the Development Regulations.  The broad authority of the City to determine the terms to be included in a development agreement must be construed in light of the purpose underlying the requirement for a development permit, which is to ensure that land is controlled and used only in accordance with the municipal plan and regulations. 

[31] In the result, the City’s authority to permit or deny development is limited to those terms and conditions that relate to the purpose and general intent of the Act and Regulations which is to provide the structure for the development and implementation of municipal planning controls and uses in accordance with the municipal plan and regulations.  The arbitration clause is not sufficiently connected to that purpose so as to be included within the broad authority granted by the Act and Development Regulations.

urbitral note – The Court of Appeal’s reasoning lends itself to other public authorities granted authority to approve commercial activity covered by legislation.  The reasoning identifies limits to such authority and cautions that attempts to impose terms for dispute resolution. Such attempts must be read in light of the purpose and intent of the legislation and, failing a sufficient connection, will not be a valid exercise of that authority.