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Delegated Legislation - Ultra Vires Regulations

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. Toronto District School Board v. Ontario

In Toronto District School Board v. Ontario (Div Ct, 2021) the Divisional Court considered the test for finding regulations as ultra vires:

The Test for Quashing Regulations as Ultra Vires

[19] The leading authority on when a regulation may be quashed as ultra vires is Katz Group Canada Inc. v Ontario, 2013 SCC 64. The core principles are summarized below.

[20] A successful challenge to the vires of regulations requires that they be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate.

[21] It is necessary to ascertain the scope of the mandate conferred by Parliament, having regard to the purpose(s) or objects(s) of the enactment as a whole. The power-conferring language must be taken to be qualified by the overriding requirement that the subordinate legislation accord with the purposes and objects of the parent enactment read as a whole.

[22] Regulations benefit from a presumption of validity. This presumption has two aspects: it places the burden on challengers to demonstrate the invalidity of regulations, rather than on regulatory bodies to justify them; and, it favours an interpretative approach that reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires. Both the challenged regulation and the enabling statute should be interpreted using a broad and purposive approach consistent with the well-settled approach to statutory interpretation generally.

[23] Judicial review of regulations on the basis of vires is restricted to the grounds that they are inconsistent with the purpose of the statute or that some condition precedent in the statute has not been observed. This inquiry does not involve assessing the policy merits of the regulations to determine whether they are necessary, wise, or effective in practice. The motives for their promulgation are irrelevant. Nor is judicial review an inquiry into the underlying political, economic, social or partisan considerations or whether the challenged regulations will actually succeed at achieving the statutory objectives. In order to succeed on such an application, the applicant must show that the impugned regulations are “irrelevant”, “extraneous” or “completely unrelated” to the statutory purpose. Although it is possible to strike down regulations as ultra vires on this basis, it would take an “egregious case” to warrant such action”: Katz at paras. 24 – 28.

[24] The Ontario Court of Appeal articulated the method of review in Wildlands League v Ontario (Lieutenant Governor in Council), 2015 ONSC 2942 (Div Ct), aff’d 2016 ONCA 741at para. 88:

The foundational question is whether the regulation is ultra vires such that it is inconsistent with the purpose of the Act. This inquiry necessitates an understanding of the express regulation-making authority in the context of the enabling statute as a whole and the statutory scheme the legislature adopted to achieve that purpose. As Katz Group instructs, the court is to look at the terminology of the enabling provision, qualified by the overriding requirement that the regulation accord with the purposes and objects of the parent enactment read as a whole.

[25] On the basis of Katz and Wildlands, therefore, I conceive of the analytical exercise in this case as requiring the answer to three questions:

1. Are the impugned regulations consistent with the statutory grant of authority?

2. Are they consistent with the object, purpose and scheme of the enabling statute? and

3. Are they consistent with Ontario Home Builders’ Association?

. Friends of Simcoe Forests Inc. v. Minister of Municipal Affairs and Housing

In Friends of Simcoe Forests Inc. v. Minister of Municipal Affairs and Housing (Div Ct, 2021) the Divisional Court considered an ultra vires regulation issue:

General Principles Applicable to Determining the Vires of a Regulation

[26] The leading authority on the vires of a regulation is Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64, [2013] 3 S.C.R. 810 (“Katz”). At para. 24 of Katz, Abella J. begins her analysis with the following statement:

[24] A successful challenge to the vires of regulations require that they be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate (Guy Régimbald, Canadian Administrative Law, (2008), at p. 132). This was succinctly explained by Lysyk J.:

In determining whether impugned subordinate legislation has been enacted in conformity with the terms of the parent statutory provision, it is essential to ascertain the scope of the mandate conferred by Parliament, having regard to the purpose(s) or object(s) of the enactment as a whole. The test of conformity with the Act is not satisfied merely by showing that the delegate stayed within the literal (and often broad) terminology of the enabling provision when making subordinate legislation. The power-conferring language must be taken to be qualified by the overriding requirement that the subordinate legislation accord with the purposes and objects of the parent enactment as a whole.

[27] In Hudson’s Bay at para. 37, the Divisional Court summarized the principles that apply when determining the vires of a regulation:

(a) Judicial review of a regulation is usually restricted to two questions: (1) Was a condition precedent not met before the regulation was enacted; (2) Is the regulation inconsistent with the purpose of the enabling statute? To this principle, in accordance with para. 24 of Katz, I would add the question: (3) Was the regulation inconsistent with the scope of the statutory mandate?

(b) Regulations are presumed to be valid. This means that the burden falls on the party challenging the validity of the regulation and that the court is to favour an interpretation that “reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires” (Katz at para. 25).

(c) Both the challenged regulation and the enabling statute should be interpreted using a broad and purposive approach.

(d) “Courts are not to assess the policy merits of a regulation to decide whether it is ‘necessary, wise or effective in practice’” (Hudson’s Bay at para. 37, citing Katz at para. 27).

(e) The motives for enacting a regulation are irrelevant.

(f) “Underinclusiveness is not a valid ground for challenging a regulation as ultra vires” (Hudson’s Bay at para. 37, relying on Katz at para. 40).

(g) Regulations must be “‘irrelevant’, ‘extraneous’ or completely inconsistent with the statutory purpose to be found ultra vires on the basis of inconsistency with the statutory purpose... it would take an egregious case to warrant such an action” (Katz at para. 28).

. Hudson’s Bay Company ULC v. Ontario (Attorney General)

In Hudson’s Bay Company ULC v. Ontario (Attorney General) (Div Ct, 2020) the Divisional Court reviews the law on ultra vires regulations:

General principles applicable to determining whether a regulation is ultra vires

[37] The test for challenging a regulation as ultra vires is well settled. In Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64, [2013] 3. S.C.R. 810, at para. 24, the Supreme Court of Canada held that a “successful challenge to the vires of regulations requires that they be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate”. The Court went on to provide a number of general principles that apply when a court is asked to determine whether a regulation is ultra vires:

a. Regulations are presumed to be valid. This means that challengers have the burden of demonstrating that the regulations are invalid. In addition, courts are to favour an interpretation that “reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires” (para. 25).

b. “Both the challenged regulation and the enabling statute should be interpreted using a ‘broad and purposive approach … consistent with this Court’s approach to statutory interpretation generally’” (para. 26).

c. Judicial review of a regulation is usually restricted to the issue of whether the regulation is inconsistent with the purpose of the enabling statute or whether a condition precedent was not met before the regulation was made (para. 27).

d. Courts are not to assess the policy merits of a regulation or to decide whether it is “necessary, wise, or effective in practice” (para. 27).

e. The motives for making a regulation are irrelevant (para. 27).

f. Under-inclusiveness is not a valid ground for challenging a regulation as ultra vires (para. 40).

g. Regulations must be “irrelevant”, “extraneous” or completely inconsistent with the statutory purpose to be found ultra vires. It would take an “egregious” case to strike a regulation down as ultra vires (para. 28).

[38] The principles in Katz have been consistently followed: see, for example, West Fraser Mills Ltd. v. British Columbia (Workers’ Compensation Appeal Tribunal), 2018 SCC 22, [2018] 1 S.C.R. 635 at para. 12; and Wildlands League v. Ontario (Lieutenant Governor in Council), 2016 ONCA 741, 134 O.R. (3d) 450 at paras. 41-47.

[39] HBC argues that the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, has changed the test for challenging regulations and that courts must now assess regulations on a standard of reasonableness. There is no support for this argument in Vavilov or in any decision since its release. In Vavilov, at para. 111, the Supreme Court refers to Katz when describing the constraints on the power to make a regulation as precluding an authority from adopting an interpretation of the grant of power “that is inconsistent with applicable common law principles regarding the nature of statutory powers”. This does not suggest that a reasonableness standard applies to the contents of the regulation or that the test set out in Katz was in any way changed.

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[41] In accordance with the principles in Katz, assessing whether the regulation at issue is ultra vires is a two-step process. The first step is to determine the purpose and scope of the authority under the enabling statute. The second step is to assess whether the regulation is authorized by the statute, including whether it falls within its purposes. These are matters of statutory interpretation.

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[74] HBC argues that, as a matter of law, the LGIC cannot make invidious distinctions not expressly rooted in the enabling legislation. In this respect, HBC relies heavily on the decision of the Federal Court of Appeal in British Columbia Ferry Corporation v. Minister of National Revenue, 2001 FCA 146, [2001] 4 F.C. 3 and Tesla Motors Canada ULC v. Ontario (Ministry of Transport), 2018 ONSC 5062, 144 O.R. (3d) 701, a decision of Myers J. sitting as a single judge of the Divisional Court on an urgent application. HBC argues that the distinction in s. 2 of Schedule 2, which permits only big box stores which happen to sell groceries to remain fully open for business, is irrational and falls outside the purposes of the ROA.

[75] The BC Ferry case involved a fuel tax refund under the federal Excise Tax Act, R.S.C., 1985, c. E-15 (“ETA”). The ETA permitted the Governor in Council to make regulations designating certain classes of goods as ship’s stores for use on board a conveyance that would be entitled to benefit from the fuel tax refund. The regulation under challenge, in essence, permitted ship operators on the Great Lakes and upper St. Lawrence to enjoy the benefit of the rebate while ship operators elsewhere could not. In dispute was the scope and purpose of the ETA provisions granting the regulation-making power in question.

[76] The Minister of National Revenue argued that the purpose of the regulation was to incentivize ship operators to purchase fuel from Canadian as opposed to foreign suppliers. The Federal Court of Appeal found, however, that this could not be the purpose of the enactment or the regulation because the regulation did not, in fact, serve that purpose. For example, ships out of Vancouver had the same access to foreign ports as ships in the Great Lakes, yet did not benefit from the rebate. “At best”, the Court found at para. 28, the regulations were “designed to give a fiscal preference” to ship operators in certain areas of the country compared to those in certain other areas. The conferral of fiscal benefits based on geographic location was not, the Court held, within the scope or purpose of the ETA and its regulation-making power.

[77] Thus, the decision in BC Ferry turned on an express finding, having regard to the specific Act and regulation in question, that the true purpose of the regulation was not authorized by the enabling statute.

[78] In Tesla, the government decided to cancel a subsidy program under the Public Transportation and Highway Improvement Act, R.S.O. 1990, c. P.50 for the purchase of electric cars. There was a two-month transition period before the program came to an end. However, Tesla was singled out for special treatment. Every other electric car dealer was able to utilize the transition period and qualify for the subsidy. Tesla was not, allegedly because it was not a “franchised automobile dealer” in Ontario. After careful analysis of the government’s policy and its underlying purposes, Myers J. held, at para. 61, that the means of implementing the government’s policy – singling out Tesla for special, adverse treatment – were “unrelated to the achievement of the supposed policy goal” or “any purpose under the Public Transportation and Highway Improvement Act.” “Therefore” he held, “it cannot stand.”

[79] Thus, as in BC Ferry, the conclusion of the Court in Tesla turned on a close analysis of the purposes of the legislation and the decision being challenged and whether the decision fell within the scope of the enabling regulatory scheme’s purpose. Tesla is a classic example of the application of the famous words of Rand J. in Roncarelli v. Duplessis, 1959 CanLII 50 (SCC), [1959] S.C.R. 121 where he wrote at p. 140:

In public regulation of this sort there is no such thing as absolute and untrammeled “discretion”, that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator; no legislative Act can, without express language, be taken to contemplate an unlimited arbitrary power exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute … “Discretion” necessarily implies good faith in discharging public duty; there is always a perspective within which a statute is intended to operate; and any clear departure from its lines or objects is just as objectionable as fraud or corruption.

. Katz Group Canada Inc. v. Ontario (Health and Long‑Term Care)

In Katz Group Canada Inc. v. Ontario (Health and Long‑Term Care) (SCC, 2013) the Supreme Court of Canada set out the doctrine of ultra vires regulation:

[24] A successful challenge to the vires of regulations requires that they be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate (Guy Régimbald, Canadian Administrative Law (2008), at p. 132). This was succinctly explained by Lysyk J.:

In determining whether impugned subordinate legislation has been enacted in conformity with the terms of the parent statutory provision, it is essential to ascertain the scope of the mandate conferred by Parliament, having regard to the purpose(s) or objects(s) of the enactment as a whole. The test of conformity with the Act is not satisfied merely by showing that the delegate stayed within the literal (and often broad) terminology of the enabling provision when making subordinate legislation. The power-conferring language must be taken to be qualified by the overriding requirement that the subordinate legislation accord with the purposes and objects of the parent enactment read as a whole.

(Waddell v. Governor in Council (1983), 1983 CanLII 189 (BC SC), 8 Admin. L.R. 266, at p. 292)

[25] Regulations benefit from a presumption of validity (Ruth Sullivan, Sullivan on the Construction of Statutes (5th ed. 2008), at p. 458). This presumption has two aspects: it places the burden on challengers to demonstrate the invalidity of regulations, rather than on regulatory bodies to justify them (John Mark Keyes, Executive Legislation (2nd ed. 2010), at pp. 544-50); and it favours an interpretative approach that reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires (Donald J. M. Brown and John M. Evans, Judicial Review of Administrative Action in Canada, vol. 3 (loose-leaf), at 15:3200 and 15:3230).

[26] Both the challenged regulation and the enabling statute should be interpreted using a “broad and purposive approach . . . consistent with this Court’s approach to statutory interpretation generally” (United Taxi Drivers’ Fellowship of Southern Alberta v. Calgary (City), 2004 SCC 19, [2004] 1 S.C.R. 485, at para. 8; see also Brown and Evans, at 13:1310; Keyes, at pp. 95-97; Glykis v. Hydro-Québec, 2004 SCC 60, [2004] 3 S.C.R. 285, at para. 5; Sullivan, at p. 368; Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, s. 64).

[27] This inquiry does not involve assessing the policy merits of the regulations to determine whether they are “necessary, wise, or effective in practice” (Jafari v. Canada (Minister of Employment and Immigration), 1995 CanLII 3592 (FCA), [1995] 2 F.C. 595 (C.A.), at p. 604). As explained in Ontario Federation of Anglers & Hunters v. Ontario (Ministry of Natural Resources) (2002), 2002 CanLII 41606 (ON CA), 211 D.L.R. (4th) 741 (Ont. C.A.):

... the judicial review of regulations, as opposed to administrative decisions, is usually restricted to the grounds that they are inconsistent with the purpose of the statute or that some condition precedent in the statute has not been observed. The motives for their promulgation are irrelevant. [para. 41]

[28] It is not an inquiry into the underlying “political, economic, social or partisan considerations” (Thorne’s Hardware Ltd. v. The Queen, 1983 CanLII 20 (SCC), [1983] 1 S.C.R. 106, at pp. 112-13). Nor does the vires of regulations hinge on whether, in the court’s view, they will actually succeed at achieving the statutory objectives (CKOY Ltd. v. The Queen, 1978 CanLII 40 (SCC), [1979] 1 S.C.R. 2, at p. 12; see also Jafari, at p. 602; Keyes, at p. 266). They must be “irrelevant”, “extraneous” or “completely unrelated” to the statutory purpose to be found to be ultra vires on the basis of inconsistency with statutory purpose (Alaska Trainship Corp. v. Pacific Pilotage Authority, 1981 CanLII 175 (SCC), [1981] 1 S.C.R. 261; Re Doctors Hospital and Minister of Health (1976), 1976 CanLII 739 (ON SC), 12 O.R. (2d) 164 (Div. Ct.); Shell Canada Products Ltd. v. Vancouver (City), 1994 CanLII 115 (SCC), [1994] 1 S.C.R. 231, at p. 280; Jafari, at p. 604; Brown and Evans, at 15:3261). In effect, although it is possible to strike down regulations as ultra vires on this basis, as Dickson J. observed, “it would take an egregious case to warrant such action” (Thorne’s Hardware, at p. 111).

....

[45] Nor do the private label Regulations contravene the principle that a statutory power to regulate an activity does not include the power to prohibit it. This principle had its origins in Municipal Corporation of City of Toronto v. Virgo, [1896] A.C. 88 (P.C.), where Lord Davey held that

there is marked distinction to be drawn between the prohibition or prevention of a trade and the regulation or governance of it, and indeed a power to regulate and govern seems to imply the continued existence of that which is to be regulated or governed. [p. 93]

[46] Assessing whether a regulation has crossed the line from being a permissible condition into being an impermissible prohibition requires establishing the scope of the activity to be regulated and then determining the extent to which it can continue to be carried on (Keyes, at p. 312). Here, the activity to be regulated is the sale of generic drugs in the private and public markets in Ontario. The private label Regulations do not prohibit manufacturers from selling generic drugs in Ontario’s markets; they restrict market access only if a particular corporate structure is used. That cannot be characterized as a total or near-total ban on selling generic drugs in Ontario.

[47] The “discrimination” or unauthorised distinctions argument is similarly without a legal foundation. Regulatory distinctions must be authorised by statute, either expressly or by necessary implication (Forget v. Quebec (Attorney General), 1988 CanLII 51 (SCC), [1988] 2 S.C.R. 90, at pp. 106-7). The applicable legislation in this case expressly authorises the making of distinctions between different drug manufacturers. Section 14(1)(a) of the Drug Interchangeability and Dispensing Fee Act expressly states that the Lieutenant Governor in Council may make regulations “prescribing conditions to be met by products or by manufacturers of products in order to be designated as interchangeable with other products”. Prescribing conditions to be met by drug manufacturers necessarily creates classes of manufacturers who do or do not meet those conditions, and, consequently, to whom the regulations apply differently.