“Katz” You Later – Supreme Court of Canada Clarifies Standard of Review for Subordinate Legislation

On Friday, November 8, 2024, the Supreme Court of Canada (the “SCC”) released two unanimous decisions, Auer v. Auer, 2024 SCC 36 (“Auer”) and TransAlta Generation Partnership v. Alberta, 2024 SCC 37 (“TransAlta”) clarifying the standard of review for judicial review of subordinate legislation, including ministerial regulations.

The decisions mark a change in approach by the SCC, following its previous determination of this issue over ten years ago in Katz Group Canada Inc. v. Ontario (Health and Long-Term Care, 2013 SCC 64 (“Katz”). The cases also bring clarity to the role of the courts where it is not an administrative decision, but subordinate legislation that is being challenged via judicial review.

Overview

Auer and TransAlta confirm that subordinate legislation is to be presumptively reviewed on a reasonableness standard, in line with Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”), and that the “identity of the decision maker” (i.e. a Minister, Cabinet, or municipality) does not affect or determine the standard of review. In so holding, the SCC disregarded Katz’ requirement that regulations must be “irrelevant”, “extraneous”, or “completely unrelated” to their statutory purpose for a judicial review to succeed.[1]

This said, the SCC confirmed that four principles from Katz remain good law:

1. Subordinate legislation must be consistent both with specific provisions of the enabling statute and with its overriding purpose or object;
2. Subordinate legislation benefits from a presumption of validity;
3. The challenged subordinate legislation and the enabling statute should be interpreted using a broad and purposive approach to statutory interpretation; and
4. Review of the vires of subordinate legislation does not involve assessing the policy merits of the subordinate legislation to determine whether it is necessary, wise, or effective in practice.[2]

Much like judicial review of municipal bylaws (see Catalyst Paper Corp. v. North Cowichan (District), 2012 SCC 2), the SCC reiterated that a review of regulations can be done in absence of formal reasons for their filing. Reasons can be determined by looking at the context surrounding filing of the regulations, as well as “regulatory impact analysis statements” if they are available.[3]

Facts and Judicial History

Auer regarded a challenge to the validity of the Federal Child Support Guidelines (the “Child Guidelines”) as prescribed under Alberta’s Divorce Act. Among other things, the Child Guidelines, in determination of child support payments, do not consider the income of parents who will be the recipients of such payments. The appellant, Mr. Auer, submitted this was unreasonable when measured against provisions in the Divorce Act, which specified the Guidelines “shall” be based on principles of “joint financial obligation” and the “relative abilities” of the parents to contribute to such obligations.[4]

Mr. Auer’s application was denied at the Court of Queen’s Bench for Alberta, and subsequently at the Alberta Court of Appeal. The Alberta Court of Appeal, upholding Katz, had applied the “irrelevant”, “extraneous”, or “completely unrelated” standard of review, rather than simple reasonableness, and found the Guidelines to be intra vires.

TransAlta regarded a similar challenge to the validity of municipal taxation regulations, known as the Alberta Linear Property Assessment Minister’s Guidelines (2018) (the “Linear Guidelines”), prescribed by the Municipal Government Act. The appellant in that case, TransAlta, owned several coal-fired electric power generation facilities in Alberta and agreed to cease operation in exchange for “transition payments”. The Linear Guidelines came into effect two years following this agreement, and provided that parties to such “off-coal agreements” were ineligible to claim additional depreciation funds to account for the reduced life of their coal fired facilities.

TransAlta submitted that the Linear Guidelines violated the common law rule against administrative discrimination and were also inconsistent with the purpose of the Municipal Government Act. The Court of Queen’s Bench for Alberta, and subsequently the Alberta Court of Appeal, dismissed both arguments, but like Auer, applied the “irrelevant”, “extraneous”, or “completely unrelated” standard of review.[5]

Supreme Court of Canada’s Analysis and Determination

The SCC clarified that Vavilov remains the universal framework for judicial review, regardless of the type of decision. This is because subordinate legislations “derive their validity from the statute which creates the power, and not from the executive body by which they are made”.[6] While noting that subordinate legislation may also be reviewed for correctness where it engages one of the categories of questions outlined in Vavilov, the Court noted that neither Auer or TransAlta engage such categories and proceeded to review on a standard of reasonableness.[7]

Broad Versus Narrow

The distinction between statutory language that is “broad, open ended, or highly qualitative”, versus “precise and narrow” language, plays a large role in the SCC’s analysis.

Using a broad and purposive approach to statutory interpretation, the SCC in Auer, found the language in s. 26.1(1) of the Divorce Act (“without limiting the generality of the foregoing”) which established the Child Guidelines, to be “extremely broad”.[8] While s. 26.1(2) of the Act mandated the Child Guidelines be based on principles of “joint financial obligation” the Court noted that this is itself a very broad term, and did not support Mr. Auer’s claim that the Child Guidelines were themselves unreasonable.[9]

Similarly, in TransAlta the SCC found that the Linear Guidelines, while discriminatory against TransAlta, were allowed to discriminate by necessary implication of the “indisputably broad” language within the Municipal Government Act.[10] In so finding, the SCC pointed to language allowing the Minister to establish regulations “respecting any other matter considered necessary to carry out the intent of this Act”.[11] The presence of a common-law rule did not rebut the presumption of reasonableness as the standard for review.

Vires Versus Policy Considerations

The Supreme court was also deliberate in noting the role of the courts is “to review the legality or validity of the subordinate legislation, not to review whether it is “necessary, wise, or effective in practice”.[12] It further noted that “[r]eviewing the vires of subordinate legislation is fundamentally an exercise of statutory interpretation”.[13] This focus on vires stands somewhat apart from the focus on internal rationality, coherence, and justification highlighted by Vavilov for the review of administrative decisions, as explored below.

Relevance of Decisions to Municipal and Planning Law in Ontario

Auer and TransAlta dealt with ministerial regulations and not municipal bylaws. This said, the SCC framed its findings in terms of ‘subordinate legislation’ which applies to municipal bylaws the same as it does regulations. This has enormous repercussions for those wishing to challenge a municipality’s approval of a by-law, or by-laws, to facilitate planning applications.

In Vavilov, the SCC clarified that unreasonable decisions include instances where a decision maker “fundamentally misapprehended or failed to account for the evidence before it”.[14] In Canada Post Corp. v. Canadian Union of Postal Workers, the Supreme Court of Canada applied Vavilov and confirmed that “recitation [of evidence] is not justification” for a decision.[15]

Following the removal of third party appeals before the Ontario Land Tribunal in Bill 185  some theorized that judicial review could be used to challenge circumstances where a municipality ignores or fails to appreciate concerns raised by neighbouring land owners when passing a planning instrument.[16] However, the SCC’s holdings in Aeur and TransAlta create ambiguity on whether such an approach would succeed, given such instruments are passed via by-law.

It remains to be seen whether the courts will now distinguish between bylaws that are policy-based or regulatory in nature, versus those that are individualized and site-specific. Notably, the ability to challenge the vires of municipal bylaws by application to the Ontario Superior Court of Justice already exists pursuant to s. 273(1) of the Municipal Act 2001 and s. 214(1) of the City of Toronto Act 2006. Should the courts not distinguish between site specific versus regulatory bylaws, the judicial review of decisions involving municipal bylaws will merely replicate the relief available via statute and not take into account any potential misapprehensions or disregard of planning evidence by municipalities.

What comes next? Auer and TransAlta may show the standard of review is the same across decision makers, but how that review is carried out appears, for now, to be contextual.

Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.