A New Standard of Review for Challenges to the vires of Regulations: Auer v Auer, 2024 SCC 36

I.    Introduction

A recent case of the Supreme Court of Canada, Auer v Auer, 2024 SCC 36 [Auer],¹ has changed the standard of review applicable to challenges of the vires, or jurisdiction, of regulations.

Auer does away with the standard established by the Supreme Court in Katz Group Canada Inc. v Ontario (Health and Long-Term Care), 2013 SCC 64 [Katz Group], which was the leading decision for a court’s review to challenges of the vires of regulations. In Auer, the Court held that the presumptive reasonableness framework established in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 [Vavilov] is comprehensive, and should be utilized by courts even beyond cases considering “true” administrative decisions. The Vavilov framework now applies to the review on challenges to regulations, but in a slightly modified form.

II.   The Previous Standard

The Court in Katz Group required a challenge to the impugned regulations to show that the regulations were inconsistent with the objectives of the enabling statute. The Court stated at paragraph 28, “that the vires does not hinge on whether it will not achieve the statutory objective, but that it is irrelevant, extraneous, or completely unrelated to the statutory purpose.” The Court specified that it would take an egregious case for regulations to be struck down on the basis of being ultra vires.

Determining whether particular regulations meet the standard in Katz Group was informed by four principles:

1. Subordinate legislation must be consistent with the specific provisions of the enabling statute and with its overriding purpose or object, reading the enactment as a whole;
2. Regulations benefit from a presumption of validity. This presumption firstly places the burden on challengers to demonstrate the invalidity of regulations, rather than on the regulatory bodies to justify them. Secondly, it favours an interpretative approach to the regulations which reconciles it to its enabling statute, and wherever possible ensures that the regulation is construed in a manner which renders it intra vires;
3. The regulations and their enabling statute should be interpreted using a broad and purposive approach to statutory interpretation; and
4. The review of the vires of the impugned regulations is not an assessment of the policy merits or to determine whether the regulations are necessary, wise, or effective in practice.

Prior to Auer but since Vavilov, it was an open question whether the Katz Group standard continued to be applicable to challenges to the vires of regulations. Vavilov created a presumption of reasonableness review on all judicial reviews of administrative decisions, unless the legislature indicates a different standard or the rule of law requires it. A decision is “reasonable” if it is based on internally coherent reasoning, and it is justified in light of the legal and factual constraints that bear on the decision.

Vavilov involved a judicial review of a decision made by the Registrar of Canadian Citizenship to cancel Mr. Vavilov’s citizenship. The Court in Vavilov did not explicitly address the standard of review for reviewing the vires of regulations. For that reason, many courts took the position that Vavilov did not apply to challenges to the vires of regulations.

III.    Alberta Court of Appeal’s Decision

The Alberta Court of Appeal found that the standard set out by Katz Group continues to apply to “true regulations” such as those enacted by Governor in Council, while the presumption of reasonableness in Vavilov applies to bylaws, rules, and regulations made by administrative tribunals or municipal governments.

The Court noted that Vavilov made no explicit comments on Katz Group, and that the explicit purpose of the decision was to reconsider the standard of review in the context of administrative decisions. Vavilov went to lengths to discuss that binding, precedential decisions should not be overruled in the absence of compelling circumstances. It thus concluded that Vavilov had not overtaken Katz Group.

The Court also drew the conclusion that Vavilov reasonableness review does not apply neatly in the context of a review of regulations. The Court stated that many of the factors of a Vavilov review are not applicable to a review of the vires regulations and the process of law-making. This includes:

• The evidence before the decision-maker;
• The facts underlying the decision;
• The submissions of the parties;
• The past practices of the decision-maker;
• The potential impact on the individual or stakeholder; and
• The reasons given for the decision.

The Court emphasized the distinction between an administrative decision, which almost always involves an application by some individual or stakeholder, as opposed to regulations generated internally by the executive branch.

The Court of Appeal concluded that Mr. Auer’s challenge had no merit, and through applying the Katz Group framework, dismissed the appeal as not meeting the “completely unrelated” threshold.

IV. The Supreme Court’s Decision

The Supreme Court of Canada disagreed with the reasoning of the Alberta Court of Appeal. Justice Côté stated that maintaining the Katz Group threshold would be inconsistent with the new robust reasonableness scheme as established by Vavilov, and would undermine Vavilov’s promise of simplicity, predictability, and coherence. Vavilov thus created a comprehensive framework for determining standards of review, and eliminated the need for contextual inquiries in determining the appropriate standard of review. The Court stated that Vavilov created the presumption of reasonableness review with full acknowledgement of the sheer variety of administrative decisions and decision-makers.

The Court rejected the Alberta Court of Appeal’s distinction of “true regulations” as distinct from law-making powers that are delegated to entities such as boards or municipal bodies. In the Court’s view, the identity of the decision-maker does not determine the standard of review, as regulations derive their validity from the statute, rather than from the executive body from which they are made.

While the Court found that Katz Group’s review threshold has been overtaken by Vavilov, the considerations in Katz Group continue to be applicable. Specifically, the focus remains upon the objective of the enabling statute, a presumption of validity still protects the impugned regulations, a broad and purposive statutory interpretation is undertaken, and there is still no assessment of the policy merits of the regulations.

The Court then discussed at length how a reasonableness review is conducted in the case of a challenge to the vires of subordinate legislation. While formal reasons are not provided for the enactment of regulations, the Court applied the logic from cases such in Catalyst Paper Corp v North Cowichan (District), 2012 SCC 2, which found in the circumstance of municipal bylaws that the “reasons” are the debate, the deliberation and the statement of policy that give rise to that bylaw. The Court stated a similar approach should be followed in the context of regulations.

Secondly, the Court rejects the Alberta Court of Appeal’s contention that a reasonableness review involves the policy merits of the legislation. The Court summarizes, at paragraph 58, how the analysis centres upon the authority given to the statutory delegate rather than the substance of the regulations themselves:

[58]     The potential or actual consequences of the subordinate legislation are relevant only insofar as a reviewing court must determine whether the statutory delegate was reasonably authorized to enact subordinate legislation ...

Finally, in conducting a reasonableness review, the appropriate constraints which bear upon the legality of regulations are the governing statutory scheme, other applicable statutory or common law, and the principles of statutory interpretation. Through each of these considerations, the focus remains on the statutory delegate’s authority, rather than the substance of the regulations themselves.

V.    Discussion and Takeaways

Following Auer, the question is not whether regulations are “completely unrelated” to the purpose of their enabling statute, as Katz Group instructs. Instead, courts will apply a modified reasonableness review informed by the four principles set out by Katz Group, focused upon the principles of statutory interpretation and the legal constraints on the regulator. The fundamental question is whether the exercise of the statutory delegate’s authority reflects a reasonable interpretation of their authority granted by the enabling legislation.

This change of standard may have made the vires of regulations more vulnerable to challenge, as the prior Katz Group standard required an “egregious” case for a successful challenge. In response to the Court of Appeal’s concerns that the analysis upon a judicial review of an administrative decision does not fit cleanly with the process of law-making, the Supreme Court modified the reasonableness analysis. Only time will tell how other courts will interpret the application of this standard, and whether, in practice, it leaves regulations more vulnerable to challenge.

McDougall Gauley LLP has extensive experience acting in administrative and civil litigation matters. To learn more, contact a member of our Regulatory and Administrative Law or Litigation, Dispute Resolution & Appeals team.