The legislature enacted the Speculation and Vacancy Tax Act, SBC 2018, c 46 (“Act”) to address perceived housing unaffordability in British Columbia. Through it, an annual tax is levied in the hopes of discouraging housing speculation and residential vacancy in urban centres. Depending on the value of the property, the tax can be significant for the homeowner and a vast source of revenue for the Province.

The Act provides for several exemptions under which homeowners can avoid the tax consequences imposed pursuant to the Act. If assessed a tax under the Act, a homeowner may invoke the internal review mechanisms provided thereunder, which are ultimately subject to court scrutiny through the judicial review process.

The Act is the subject of an ongoing class-action constitutional challenge. And the Province has just won the first skirmish.

In Bacon v. British Columbia (Minister of Finance), 2020 BCSC 578, the Supreme Court of British Columbia dismissed the petitioners’ application for an interlocutory injunction pending the hearing of their petition. The Court also conveyed a stark message to the petitioners that their constitutional challenge faces high hurdles and is unlikely to be successful unless their arguments and evidentiary record improve.

Injunction Application: Background

The petitioners comprise nine homeowners throughout British Columbia who argue that the Act is unconstitutional on two main grounds: (i) it breaches their rights under ss. 6(2), 7, and 15 of the Charter; and (ii) it seeks to levy an indirect tax and is, therefore, ultra vires the provincial legislature.

In response, the Province’s main position is that the petitioners are seeking protection of property rights contrary to decades of Charter jurisprudence, and that the tax is levied directly from the property owners.

Injunction Application: Outcome

Through their application, the petitioners sought to enjoin the Province from enforcing the Act until their petition was heard and decided. In her 16 April 2020 reasons dismissing the injunction application, Justice Winteringham raised questions about the merits of the petitioners’ underlying claims but ultimately dismissed the application on the bases that the petitioners failed to show irreparable harm would result absent an injunction and that the balance of convenience did not favour them.

Injunction Application: Analysis

Winteringham J. addressed the parties’ arguments under the tripartite test in RJR-MacDonald v. Canada (Attorney General), [1995] 3 SCR 199: serious question to be tried, irreparable damage, and balance of convenience. She noted that the fundamental question was whether the granting of an injunction would be just and equitable in all the circumstances.

a. Serious Question

Winteringham J. found that the petitioners’ Charter analysis was flawed on all grounds advanced, although not fatally flawed. In particular, the petitioners’ submissions could be viewed as a claim for protection of economic rights, which was specifically and intentionally excluded by the Charter. Winteringham J. questioned the strength of the constitutional challenge as framed and based on the evidence tendered, but refused to dismiss the application at this stage of the analysis because (1) the burden was low at this stage of the analysis; and (2) the evidentiary record and legal submissions could change by the time of the hearing.

b. Irreparable Harm

Winteringham J. also appears to have found the petitioner’s arguments premature and evidentially incomplete. On the one hand, submissions were premature because the petitioners had yet to be assessed a tax under the Act. Any one of the petitioners was potentially eligible for one of the exemptions under the Act, as evidenced by the Province’s detailed breakdown of the impact of the Act on each of the petitioners. On the other hand, the petitioners’ affidavit evidence lacked the requisite evidentiary foundation for financial harm, which evidence went no further than the petitioners stating their inability to pay the tax.

Winteringham J. held that the petitioners’ argument of irreparable damage would essentially force her to make the controversial finding that the Act compelled the petitioners to sell or rent out their properties, which would likely be a highly-contested point at the hearing on the merits of the petition. Winteringham J. concluded that the petitioners failed at this stage of the RJR-MacDonald framework. Nevertheless, she addressed the third branch of the test.

c. Balance of Convenience

Winteringham J. assessed the petitioners’ arguments in consideration of the public interest. She noted that the Act was enacted to advance the public good, and the petitioners had the onus of proving a more compelling public interest would result from the granting of an injunction. Ultimately, she concluded that the petitioners’ arguments on harm were largely speculative and based on deficient financial evidence. Additionally, the petitioners’ request to postpone debt enforcement only for themselves did nothing to tip the balance of convenience in their favour. In fact, the precedential effect of granting interlocutory injunctive relief to petitioners could lead other similarly-situated property owners to seek similar relief. Winteringham J. found that the balance of convenience did not favour the petitioners.

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