Supreme Court of Canada holds that the Vavilov framework applies to the review of subordinate legislation

Introduction

On November 8, 2024, the Supreme Court of Canada (SCC) confirmed in two companion decisions, Auer v Auer (Auer) and TransAlta Generation Partnership v Alberta (TransAlta),[1] that the robust reasonableness standard set out in Canada (Minister of Citizenship and Immigration) v Vavilov (Vavilov) is the presumptive standard for reviewing the vires of subordinate legislation, such as regulations.

Background

In Vavilov,[2] the Supreme Court of Canada recalibrated the standard of review for administrative decision-making by discarding the need for courts to engage in a contextual inquiry in favour of a categorical approach, attempting to bring greater coherence and predictability to the standard of review analysis. The presumption is that administrative decisions are reviewed for reasonableness, with only certain categories of questions or exemptions that are reviewable for correctness. Although the Supreme Court in Vavilov imagined various exemptions, not every situation of administrative decision-making was within the SCC’s contemplation at the time of its decision. Post-Vavilov, the SCC has repeatedly affirmed the application of its framework, bolstering the presumption that reasonableness review applies while also carving out exceptions for correctness review when necessary.

In Auer, a father brought an application for judicial review to challenge the vires of the Federal Child Support Guidelines,[3] arguing that the Governor in Council exceeded their authority under the Divorce Act,[4]when enacting the guidelines that require the paying parent to pay a greater share of child-related costs than the receiving parent.

In TransAlta, a company owning coal-fired electric power generation facilities in Alberta challenged the vires of the 2017 Alberta Linear Property Assessment Minister’s Guidelines [5] under Alberta’s Municipal Government Act.[6] The company’s coal-fired facilities were treated as linear property for municipal taxation purposes. The guidelines deprived the company of its ability to claim additional depreciation on the basis of its facilities’ reduced lifespan arising from a prior agreement with the province of Alberta to cease coal-fired emissions.

Lower Court decisions

In both cases, the chamber judges dismissed the applications and held that the guidelines were intra vires.[7] Although each judge recognized the presumption that reasonableness review applied pursuant to Vavilov, they applied the principles set out in Katz Group Canada Inc v Ontario (Health and Long-Term Care) (Katz Group), a decision addressing the validity of subordinate legislation that pre-dated Vavilov.[8]

The Court of Appeal of Alberta (Court of Appeal) dismissed the subsequent appeals in each instance.[9] In TransAlta, the Court of Appeal held that Vavilov did not overtake Katz Group with respect to the judicial review of subordinate legislation for reasonableness. The majority in Auer reached the same conclusion but distinguished between regulations enacted through the exercise of a legislative function and those enacted by administrative tribunals or municipal governments. Applying Katz Group, the majority reasoned that regulations promulgated through legislative function could only be ultra vires if “irrelevant”, “extraneous” or “completely unrelated” to the purpose of the enabling statute. Whereas, regulations by administrative tribunals or municipal governments were reviewed for reasonableness. The concurring justice in Auer held that the reasonableness standard in Vavilov applied but a regulation that satisfied the “irrelevant”, “extraneous” or “completely unrelated” threshold would rebut the presumption that a regulation is valid.

Prior to the SCC decisions, there was competing caselaw regarding the appropriate standard of review for subordinate legislation. In Innovative Medicines Canada v Canada, the Federal Court of Appeal dismissed the approaches taken by the Court of Appeal in TransAlta and Auer and followed its prior decision in Portnov v Canada (AG) to affirm that the Vavilov reasonableness standard, rather than the Katz Test, applies when assessing the policy merits of subordinate legislation.[10]

Supreme Court of Canada decision

In two unanimous decisions, the SCC dismissed the appeals and found the challenged guidelines were intra vires.

Justice Côté, writing for the court, held that the Vavilov framework applied to the review of the vires of subordinate legislation. Neither appeal engaged a question of the rule of law requiring a correctness review. Therefore, the presumptive reasonableness standard established in Vavilov applied. The SCC took the opportunity to reconcile the principles in Katz Group with Vavilov’s robust reasonableness standard and held that certain principles continued to inform the assessment of the vires of subordinate legislation:

Subordinate legislation must be consistent both with specific provisions of the enabling statute and with its overriding purpose or object;
Subordinate legislation benefits from a presumption of validity;
The challenged subordinate legislation and the enabling statute should be interpreted using a broad and purposive approach to statutory interpretation; and
A vires review does not involve assessing the policy merits of the subordinate legislation to determine whether it is necessary, wise or effective in practice.[11]

The SCC rejected the requirement that subordinate legislation, which is inconsistent with the purpose of the enabling statute, had to be “irrelevant”, “extraneous” or “completely unrelated” to the statutory purpose. Such a threshold was inconsistent with the purposes of simplicity, coherence and predictability in Vavilov and the principle that courts should intervene in administrative matters where it is “necessary to safeguard the legality, rationality and fairness of the administrative process.”[12] The degree of deference required under the Katz threshold was too high and inconsistent with the degree of scrutiny required in reasonableness review. The SCC also rejected the notion that the identity of the decision-maker enacting the regulations or the process by which the regulations were enacted determined the applicable standard of review.[13]

To conduct a reasonableness review of the vires of subordinate legislation, the inquiry involves assessing whether the decision bears the hallmarks of reasonableness review—justification, transparency and intelligibility—and whether it is justified in relation to the relevant factual and legal constraints bearing on the decision.[14] The onus is on the challenging party to show that the regulations are not reasonably within the decision-maker’s authority. The SCC affirmed the two types of fundamental flaws that make an administrative decision unreasonable: (1) there is a failure of rationality internal to the reasoning process; or (2) the decision is untenable in light of the factual and legal constraints that bear on it.[15]

In accordance with Vavilov, the legal and factual contexts of the decision are relevant as constraints on the decision-maker’s exercise of delegated power. Since a review of the vires of subordinate legislation is fundamentally an exercise of statutory interpretation, the governing statutory scheme, other applicable statutory or common law and the principles of statutory interpretation apply as constraints in conducting the reasonableness review. The statutory delegate must respect the legislature’s use of language in the enabling statutory scheme to determine a decision-maker’s authority. They are also required to apply the modern principles of statutory interpretation similar to other legislation and applicable common law principles: their authority must be read in a manner that is consistent with the text, context and purpose of their enabling statute. The review does not involve conducting a de novo analysis to determine the correct interpretation of the enabling statute as a benchmark for reasonableness. Rather, a statutory delegate’s exercise of authority is reasonable where it falls within a reasonable interpretation of the enabling statute with regard to the relevant constraints.[16]

Importantly, the SCC stressed that reasonableness review of the vires of subordinate legislation is not concerned with a review of its policy merits or consequences. Rather, a court is concerned only with reviewing the regulations legality or validity. Potential or actual consequences of subordinate legislation are “relevant insofar as a reviewing court must determine whether the statutory delegate was reasonably authorized to enact subordinate legislation that would have such consequences.”[17]

Applying the principles above, the SCC dismissed both appeals, holding that the Federal Child Support Guidelines and 2017 Alberta Linear Property Assessment Minister’s Guidelines were intra vires and fell within a reasonable interpretation of the respective statutory delegates’ authority.[18]

Conclusion

The SCC is clear that the Vavilov framework continues to apply to the review of administrative decision-making, including subordinate legislation. Unless the review of subordinate legislation engages the rule of law thereby requiring a review under the correctness standard, the robust reasonableness review set out in Vavilov applies and is informed by some of the principles established in Katz Group. As this is the first opportunity the SCC has had to address the review of subordinate legislation post-Vavilov, it will be necessary to observe how future challenges to subordinate legislation are brought to sufficiently define the contours of reasonableness review in this context.

For more information on this case or any questions related to the legal implications of this decision on your business, please contact the authors, Brandon Barnes Trickett, Laurie Livingstone, Mélanie Power or Tom Nichini.

[1] 2024 SCC 36 [Auer]; 2024 SCC 37 [TransAlta].

[2] 2019 SCC 65.

[3] SOR/97-175.

[4] RSC 1985, c 3 (2nd Supp).

[5] Ministerial Order No. MAG:021/17.

[6] RSA 2000, c M-26.

[7] Auer v Auer, 2021 ABQB 370; TransAlta Generation Partnership v Regina, 2021 ABQB 37.

[8] 2013 SCC 64.

[9] Auer v Auer, 2022 ABCA 375; TransAlta Generation Partnership v Alberta (Minister of Municipal Affairs), 2022 ABCA 381.

[10] Innovative Medicines Canada v Canada,2022 FCA 210 at paras 29, 37-43; Portnov v Canada, 2021 FCA 171.

[11] Auer, supra note 2 at para 33.

[12] Ibid at para 46.