The end of a hyperdeferential era: Supreme Court directs a more robust review of regulations

On November 8, the Supreme Court of Canada (SCC) unanimously decided that courts should apply the robust “reasonableness” standard of review when considering challenges to subordinate legislation.¹ In doing so, the SCC has lowered the threshold for declaring that regulations and similar instruments (e.g., ministerial directives, guidelines, and orders-in-council) are invalid. They ought to be reviewed in much the same way as any other administrative decision. 

The rejection of a distinct approach to reviewing regulations brings coherence and predictability to administrative law. It also removes an important barrier to the viability of legal challenges to regulations.

The road to reasonableness review of regulations 

The SCC’s landmark 2019 decision in Vavilov sets out a comprehensive framework for determining the degree of scrutiny courts must apply when conducting substantive review of an administrative decision.² Within this framework, “reasonableness” is presumed to be the standard of review.

Vavilov explains that reasonableness review allows a court to intervene where there is a failure of rationality internal to the reasoning of the administrative decision-maker, or where the decision is in some respect untenable in light of the relevant facts and law. 

Vavilov marked a significant departure from prior jurisprudence concerning both when and how reasonableness review would be conducted. Since 2019, Canadian courts have been tasked with re-evaluating prior jurisprudence in light of Vavilov. In doing so, lower courts were split on the question of whether reasonableness ought to apply when determining whether subordinate legislation is valid. 

When reviewing the validity of subordinate legislation, the main question is whether it is authorized by the enabling statute or whether it is ultra vires (i.e., not authorized).  

Since 2019, some courts have followed Vavilov and conducted reasonableness review to determine whether subordinate legislation is ultra vires; meanwhile, others continued to apply a much higher threshold for judicial intervention set out in an earlier SCC decision: Katz.³ Under Katz, a challenge would only succeed if subordinate legislation was shown to be “irrelevant,” “extraneous,” or “completely unrelated” to the purpose of its enabling statute. The Katz approach has been described as uniquely “hyperdeferential.”⁴

This difference in approach had significant practical consequences for litigants as regulations and other subordinate legislation were much more difficult to challenge under Katz than under Vavilov.

Reasonableness review is the rule: Auer and TransAlta

In two companion decisions—Auer and TransAlta—the SCC has confirmed that Vavilov’s robust reasonableness standard is presumed to apply to the review of subordinate legislation. Though some of the principles set out in Katz continue to inform aspects of the reasonableness analysis, the “hyperdeferential” approach is set aside. 

The SCC also confirmed that when determining whether subordinate legislation is ultra vires, the focus will typically be on ensuring government has acted within the scope of its lawful authority based on the legislation. In this regard, courts will be most concerned with the governing statutory scheme, other statutory or common law, and the principles of statutory interpretation. Courts may also consider whether regulations follow a coherent chain of reasoning. The reasoning process for regulations can often be deduced from various sources, including debate, policy, and regulatory statements.

The SCC warned that this does not, however, open the door to examining the policy merits of a regulation to determine whether it is “necessary, wise, or effective in practice.”⁵ Thus, examining the consequences of a given regulation will only be relevant in deciding whether the government was reasonably authorized to enact subordinate legislation that would have such consequences.

Ultimately, in Auer and TransAlta, the court upheld the validity of the impugned Federal Child Support Guidelines and Alberta’s Linear Property Assessment Guidelines. In both cases, the statutory wording was found to be broad enough to authorize these instruments.

Takeaways

For individuals and corporations operating in regulated industries, the decisions in Auer and TransAlta represent an important step forward. These decisions ensure that across Canada, courts will now follow a clear and consistent approach to reviewing regulations.

Stakeholders now have clear guidance on the arguments they can advance to ensure oversight and accountability of public decision-makers who exercise regulation-making powers. Where it appears that subordinate legislation does not bear the “hallmarks of reasonableness—justification, transparency and intelligibility”⁶—a previously improbable legal challenge may now be viable.