Have The Katz Been Let Out Of The Bag? Uncertainty About The Standard Of Review For Challenges To Regulations

• Published date: 26 December 2022
• Subject Matter: Environment, Government, Public Sector, Litigation, Mediation & Arbitration, Environmental Law, Constitutional & Administrative Law, Trials & Appeals & Compensation, Clean Air / Pollution
• Law Firm: Osler, Hoskin & Harcourt LLP
• Author: Mr W. David Rankin and David Williams

Individuals or businesses aggrieved by regulations can apply to a court to review the regulation and determine whether it is valid or should be struck down. Recent case law has split on the appropriate standard of review: should the reviewing court assess whether the regulation is "reasonable" on the same flexible standard that applies to other types of government decision making? Or should the court instead apply a "hyperdeferential" standard that permits minimal scope for judicial interference?

Recent appellate decisions from Alberta apply the hyperdeferential approach, which does not depend on the specific facts and circumstances of each case and allows the court to find a regulation invalid only in the clearest of cases.

In contrast, since August 2021 the Federal Court of Appeal has applied a flexible, contextual standard of review which does not second-guess the policy decisions lying behind regulations but also does not give regulation-making authorities a blank cheque. Recently in Innovative Medicines Canada v. Canada (Attorney General), 2022 FCA 210, the Federal Court of Appeal confirmed the flexible approach and explicitly rejected the hyperdeferential standard applied in Alberta.

The different approaches stem from a disagreement over whether the legal doctrine governing how courts review all other decisions of the executive branch of government applies to the review of regulations or not.

This Osler Update summarizes the contrasting views on this issue and notes the practical consequences for individuals and businesses who are directly affected by government regulation.

Legal framework

As we have written about previously, the Supreme Court of Canada fundamentally reshaped the nature and scope of judicial review of administrative action in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (Vavilov). Vavilov holds that in most cases the reviewing court should be deferential to the decision-maker and apply a standard of reasonableness. In essence, the reviewing court must pay respectful attention to the decision of the administrative actor and only interfere where the decision falls outside the outer bounds of what is reasonable. "Reasonableness" must be assessed in relation to the specific facts and circumstances of each case.

Prior to Vavilov, the Supreme Court articulated a different approach to the review of regulations in Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64 (Katz). Unlike Vavilov, the Katz standard of review is inflexible and does not depend on the specific facts and circumstances of each case. Instead, Katz holds that regulations always benefit from a presumption of validity and should be interpreted in a manner that render them valid whenever possible.¹ According to Katz, a regulation can only be invalid if it is "irrelevant", "extraneous", or "completely unrelated" to the statutory purpose.² Leading scholars have called Katz "hyperdeferential".³

While regulations are undoubtedly actions of the executive branch of government, Vavilov refers primarily to "administrative decision-makers" and does not explicitly address the standard of review for regulations. Some have said it is unclear if Vavilov has overtaken Katz or if Katz still provides the framework for reviewing regulations.⁴

In the face of this...