Executive Summary: Key Legal and Evidentiary Issues

• Reasonableness of a municipal executive committee’s refusal to conclude a municipal works agreement for an industrial development near a drinking water intake, under the Vavilov standard of review.
• Scope of Ville de Lévis’s discretionary powers under its by-law on agreements for municipal works (including article 7 and related provisions) to decide whether, and when, to support a private development project with public infrastructure.
• Weight to be given to environmental risk assessments and vulnerability analyses regarding the Chaudière River drinking water intake, including the near-absence of reaction time in the event of contamination.
• Impact of existing zoning and permitted uses (zone I-15-54 and related protections for immediate and intermediate protection areas) where the regulatory framework allows proposed uses but does not oblige the municipality to authorize or service a project.
• Application and limits of the precautionary principle in municipal decision-making when there is no complete scientific certainty of serious or irreversible environmental harm, but credible risk remains.
• Allegations of bad faith, abuse of power, pretextual motives and failure to act on provincial recommendations, assessed against the presumption that municipal resolutions are valid, in good faith and in the public interest.

Facts and procedural background

Construction Gély inc. owned several lots along route de la Rive in the Charny sector of Ville de Lévis and sought to develop an industrial project known as “Terrasses Chaudière” on a site located on the banks of the Chaudière River. The site lies within the immediate and intermediate protection areas surrounding Lévis’s drinking water intake on that river, which supplies the Charny water treatment plant and serves about 58,000 residents—approximately 40% of the city’s population. The municipality considered both the intake and the treatment plant to be essential infrastructure. The factual context was marked by the 2013 Lac-Mégantic rail disaster, which caused significant contamination of the Chaudière River and forced Lévis to shut down its intake for 74 days. Following that event, the provincial environment ministry recommended that Lévis interconnect its water treatment plants to reduce vulnerability should one intake be compromised. In 2019, Lévis itself considered acquiring Gély’s site under its industrial development capital program but abandoned the idea after studies led it to conclude that the acquisition was not justified. In April 2021, Lévis received a vulnerability analysis of its drinking water intake on the Chaudière River. That report identified the industrial land east of the intake—including the area Gély wanted to develop—as presenting the highest potential risk, emphasized that locating enterprises capable of discharging contaminants near the intake would significantly endanger the water supply, and stressed that in the event of an incident no effective intervention would be possible because contaminants would reach the intake extremely quickly. Against this backdrop, Gély filed its industrial development proposal with Lévis’s project office in May 2021. The city initially showed interest, opened a project file and involved various internal departments. Throughout 2021 and early 2022, internal analysis proceeded, and Gély was aware that protection of the drinking water intake was a central concern for the city.

Municipal assessments and internal recommendations

On 26 January 2022, the city’s Environment Directorate advised the Urban Planning Directorate that, in light of the difficulty—indeed near impossibility—of authorizing any industrial use that would fully protect the intake in the absence of interconnections between water plants, the site should be kept in its natural state and all industrial and commercial development prohibited within the defined immediate and intermediate protection areas. Despite this strong recommendation, the assistant general manager instructed Urban Planning and the project office to re-examine the file and continue documenting whether some carefully defined uses might be viable from an environmental protection perspective. In March 2022, environmental adviser Élaine Boutin presented to Lévis’s senior management a detailed analysis of potential industrial uses for the site, the risks they posed given the city’s limited capacity to control industrial operations and reaction time in case of a spill, and the implications for the drinking water intake. She recommended not proceeding with Gély’s project for the time being, and instead elaborating formal protection plans for drinking water sources and adopting regulations to limit activities near the intake. Further internal correspondence in April 2022 showed senior risk-management officials seeking strong civil security arguments against the project in order to protect the intake. A second presentation to the city’s project monitoring committee followed in April 2022, in which Boutin again recommended that the site remain in its natural state. The project monitoring committee, which included elected officials, decided to halt planning for the Terrasses Chaudière development and stop work towards a protocol of agreement with Gély, citing the ongoing absence of interconnection works, persistent vulnerability of the water supply, the need to shut down the intake and deprive 40% of the population of water if contamination occurred, and concerns about the project’s financial non-viability for the city given the limited buildable area on the large parcel.

Renewed discussions, expert reports and hydrological concerns

In late April 2022, Lévis formally notified Gély that its project could not proceed and closed the file. Nevertheless, the city later revisited the matter and discussions resumed. In June 2022, Urban Planning and the project office provided Gély with a list of potential uses that might be considered, subject to stormwater management measures designed to reduce the risk of contaminants reaching the intake. In July 2022, Gély responded with its preferred industrial uses and suggested constructing a retention basin to significantly extend the time available to respond to any spill. By August 2022, however, Lévis advised that even with these modified uses and proposed mitigation measures, the project remained incompatible with its obligations to protect the drinking water intake. It further indicated that implementing additional mitigation infrastructures would require substantial investment and that the city was reluctant to commit to such measures. In December 2022, Gély submitted a preliminary hydrogeological study by Groupe ABS, which concluded that a hydrocarbon contaminant could take more than 50 years to travel 100 metres in groundwater. The report nonetheless recommended conducting a more exhaustive study to better understand groundwater flow conditions and reduce uncertainty. Lévis did not alter its position, viewing the report’s preliminary nature, and the acknowledged uncertainty it contained, as insufficient grounds to change course where public drinking water was concerned.

The impugned resolution and regulatory framework

In June 2023, Lévis informed Gély that it did not intend, in the short term, to authorize the opening of a public street or to sign a municipal works agreement for the project. On 15 November 2023, Urban Planning and the project office formally recommended to the executive committee that no agreement be concluded regarding municipal works for Terrasses Chaudière. Their written recommendation cited Lévis’s broad discretion concerning whether to construct or assume responsibility for municipal infrastructure, including its expressly reserved discretion in article 7 of By-law RV-2013-12-39 on agreements relating to municipal works, as well as the project’s location near the Chaudière River intake and largely within the immediate and intermediate protection areas. The recommendation emphasized the public-interest imperative of protecting the drinking water intake, and suggested any reconsideration should await completion of interconnection works between the city’s water treatment plants, which would reduce vulnerability. On 28 November 2023, the executive committee adopted the challenged resolution. Referring back to the reasons set out in the decision sheet, the resolution stated that the city would not, at this stage and for the moment, conclude a municipal works agreement with Gély for the Terrasses Chaudière development on route de la Rive. Gély then sought judicial review in the Superior Court, asking that the resolution be annulled as unreasonable. The regulatory context included zoning By-law RV-2011-11-23, under which Gély’s site fell in zone I-15-54, allowing certain commercial and industrial uses, and the by-law on municipal works agreements, which subjects certain developments to the prior conclusion of such an agreement before a construction or subdivision permit can be issued. Importantly, while the zoning by-law set out permitted uses, it did not oblige the city to authorize every conforming project or to extend municipal infrastructure. The municipal works by-law, through its discretion clause, confirmed that Lévis retained full discretion over the timing and appropriateness of executing or taking charge of municipal works required for private developments.

Arguments raised by Construction Gély inc.

Gély advanced five main grounds to challenge the resolution. First, it argued that Lévis had always expressed a desire to see this sector developed despite the intake’s proximity, and that citing drinking water protection was a late pretext to block the project, revealing an abusive exercise of discretionary power. Second, it contended that the city had never conducted a project-specific scientific or technical assessment of its proposal, and that the assertion of risk to the intake was unsupported and insufficiently reasoned. Third, Gély pointed to the zoning by-law, noting that all proposed industrial uses were permitted within the relevant zone and were not expressly banned by regulations protecting immediate or intermediate protection areas, and therefore maintained that refusing the project was unreasonable. Fourth, it alleged that Lévis improperly invoked the precautionary principle without reliable scientific proof of serious and irreversible risks, and that such a use of the principle, based on mere hypotheses, was inconsistent with environmental law. Finally, Gély argued that although the environment ministry had recommended interconnecting the water treatment plants as early as 2013, the city had taken no effective measures for many years; this delay, in its view, undermined the sincerity of Lévis’s claimed concern for the intake and suggested that the refusal to contract with Gély was a pretext rather than a legitimate public-interest decision.

Legal framework and standard of review

The Superior Court analyzed the case under the modern law of judicial review articulated in Canada (Minister of Citizenship and Immigration) v. Vavilov. The applicable standard for reviewing the substance of a municipal executive committee’s resolution is reasonableness, given that the decision emanates from an administrative body exercising discretionary powers under its enabling legislation and by-laws. None of the recognized exceptions triggering correctness review—constitutional issues, questions of central importance to the legal system, jurisdictional boundary disputes between administrative bodies, or concurrent first-instance jurisdiction on the same legal question—applied. Under the reasonableness standard, the court’s task was to determine whether the decision rested on an internally coherent, rational and intelligible chain of reasoning, and whether it was justified in light of the applicable legal and factual constraints. The court emphasized that municipal councils and their committees enjoy broad discretion that integrates a wide range of public-interest factors, and that judicial deference is particularly high; courts are not to substitute their own view of what is opportune but only to guard against illegality, bad faith, manifest unreasonableness or grossly unjust interference with individual rights. The court recalled that municipal resolutions are presumed valid and to have been adopted in good faith and in the public interest, and that only compelling evidence can justify judicial interference with a municipality’s exercise of discretionary power.

Court’s analysis of Gély’s grounds of review

On the allegation that Lévis’s reliance on drinking water protection was a pretext, the court found that Gély ignored the broader context: the Lac-Mégantic disaster, the recognized vulnerability of the Chaudière River intake, and the city’s steps, including environmental analyses and high-level internal deliberations, which consistently portrayed the intake’s protection as a central and genuine concern. The wording of the resolution (“at this stage” and “for the moment”) also confirmed that the city still contemplated potential future development once its water infrastructure vulnerability was reduced, undermining the claim of hidden motives. The court held there was no evidence of bad faith, discriminatory intent or arbitrary use of power. Regarding the alleged absence of a project-specific study, the court considered the vulnerability analysis of the intake, the internal environmental and risk-management assessments, and the multiple iterations where the city explored possible uses and mitigation measures. Even though there was no bespoke, fully quantified impact assessment tailored to each proposed industrial use, the city had reasonably concluded, based on credible evidence of rapid contaminant propagation and minimal reaction time, that any industrial development near the intake posed unacceptable risk in the absence of interconnection and robust mitigation. The preliminary ABS hydrogeological report submitted by Gély, expressly recommending further study to reduce uncertainty, did not obligate Lévis to accept the project or to comment further; its tentative nature supported the city’s cautious stance. On the argument that zoning permitted the project, the court stressed that zoning by-laws state what uses are allowed in principle but do not compel the municipality to authorize or service any given project, especially where additional instruments—such as the municipal works agreement by-law—reserve full discretion to the city. The court accepted that decisions about constructing or assuming responsibility for municipal infrastructure are intrinsically discretionary and often political, involving security, environmental and financial considerations. The mere fact that Gély’s proposed uses were not prohibited in the zone did not make the refusal to conclude an agreement unreasonable.

Application of the precautionary principle and final outcome

Concerning the precautionary principle, the court examined its role in environmental and municipal law. It held that a municipality must act to protect the environment and cannot use a lack of complete scientific certainty about serious or irreversible harm as a reason to postpone effective preventive measures. At the same time, measures must be effective and proportionate; the principle does not authorize arbitrary or purely speculative restrictions. Even assuming Lévis had explicitly invoked the precautionary principle, the court found no unreasonableness: the city was not refusing to act pending further evidence, but rather was acting—to prevent potential environmental degradation—by declining to support a high-risk industrial project near an essential drinking water intake, while concurrently pursuing costly and complex interconnection works begun in 2017 to reduce systemic vulnerability. On the claim that years of delay in implementing ministry recommendations showed a lack of genuine concern, the court accepted that municipalities must prioritize among numerous projects within budget constraints and that the interconnection project’s complexity and cost explained its gradual implementation. Absent proof of bad faith, discrimination or abuse of power, the delay did not taint the resolution. In conclusion, the Superior Court held that the executive committee’s decision not to enter into a municipal works agreement with Construction Gély inc. for the Terrasses Chaudière project was reasonable, based on a coherent and intelligible rationale anchored in environmental protection, public safety and financial considerations, and firmly grounded in the city’s regulatory discretion. The court therefore dismissed Gély’s application for judicial review and confirmed the resolution. Ville de Lévis was the successful party, and the application was dismissed with costs in its favour; however, the judgment does not specify any concrete dollar amount for those costs or any other monetary award, so the total financial recovery ordered for Lévis cannot be determined from the decision.