The decision of the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov (2019 SCC 65) and its companion decision in Bell Canada v. Canada (Attorney General) (2019 SCC 66), both released on December 19, 2019, breathe new life into the statutory right of appeal contained in section 9 of the Ontario Securities Act, R.S.O. 1990, c. S. 5. Section 9 allows a person or company directly affected by a final decision of the Ontario Securities Commission (OSC) to appeal to the Divisional Court. Following the decisions in Vavilov and Bell Canada, such appeals will no longer be reviewable on a deferential reasonableness standard.

The decisions also signal that even where the reasonableness standard does apply, the court's review must entail a "robust" evaluation of the tribunal's decision.

The Dunsmuir Regime

Beginning with the decision of the Supreme Court of Canada in Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557 Canadian courts have given decisions of provincial securities commissions a high degree of deference even in relation to the interpretation of the regulators' home statutes, notwithstanding the existence of statutory rights of appeal and the absence of a privative clause. Courts "looked past" appeal clauses in securities legislation because securities regulators were perceived to have greater relative expertise as it related to matters of securities law.

The decision in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190 and its subsequent interpretation by the courts put the nail in the coffin for meaningful review of decisions of administrative tribunals like the OSC, by applying a deferential reasonableness standard of review to both judicial review and appeal of decisions of such tribunals, except in exceptional circumstances involving true questions of vires or jurisdiction, general questions of law of central importance to the legal system as a whole, or questions related to the jurisdictional boundaries between two administrative bodies.

The application of Dunsmuir deference and the reasonableness standard of review effectively rendered OSC decisions appeal proof.

Impact of Vavilov

The Vavilov decision is important for two primary reasons:

  • It sets out a revised framework for determining the standard of review of the merits of administrative decisions (other than review related to a breach of natural justice and/or the duty of procedural fairness) that clearly distinguishes between reviews and statutory rights of appeal; and
  • It clearly articulates how review on a standard of reasonableness should proceed.

Presumed Application of the Reasonableness Standard

Vavilov dictates that analysis of the applicable standard of review begins with a presumption that a deferential reasonableness standard is the applicable standard in all cases, including with respect to questions related to the interpretation of an administrative decision maker's enabling statute. Reviewing courts should derogate from that standard only where required by a clear indication of legislative intent, either:

  • Where the legislature explicitly specifies the standard of review or there is a statutory right of appeal; or
  • Where the rule of law requires that the standard of correctness to be applied for certain types of legal questions, namely:
  • constitutional questions;
  • general questions of central importance to the legal system as a whole; or
  • questions regarding the jurisdictional boundaries between two or more administrative bodies

The Court left open the possibility that new categories could be recognized as requiring a derogation from the application of the reasonableness standard. However, jurisdictional questions are no longer to be treated as a distinct category attracting review using a correctness standard.

Statutory Appeals are to be Determined Using Appellate Standards of Review

Significantly, the existence of a statutory appeal mechanism (like section 9 of the Ontario Securities Act) rebuts the presumption that a reasonableness standard applies and signals the application of appellate standards of review, to be determined according to the nature of the issues on appeal.

Therefore, where a court is hearing an appeal from an administrative decision, it must apply the standard of correctness to questions of law, and the standard of palpable and overriding error for questions of fact and questions of mixed fact and law with no readily extricable legal questions.

Accordingly, in a statutory appeal from a decision of an OSC hearing panel, the reviewing court will determine questions of law, including questions of statutory interpretation and those concerning the scope of a decision maker's authority, on a correctness standard. This represents a welcome and marked change from Dunsmuir and opens the door to greater interference by the Divisional Court in the determination of questions of law by OSC panels.

What the Reasonableness Standard Entails: Not a Rubber Stamp

In Vavilov the Supreme Court offers a clearer articulation of what the reasonableness standard entails:

  • Review on a reasonableness standard is intended to be "robust". It is not a "rubber stamping" process or a means of sheltering administrative decision makers from accountability.
  • The requirements of the duty of procedural fairness and whether it requires a decision maker to give reasons for its decision will impact how a court conducts a reasonableness review.
  • The focus of a reasonableness review will be on the decision actually made by the decision maker, not on the conclusion the court itself would have reached. It includes both the decision-making process and its outcome: "a reasonable decision is one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision maker".
  • Reasonableness is a single standard that accounts for context. What is reasonable in a given situation will depend upon the constraints imposed by the legal and factual context of the decision under review.
  • Formal reasons for a decision should be read in light of the record and with sensitivity to the administrative setting in which they were given:
  • Written reasons should not be assessed against a standard of perfection;
  • Courts should pay "respectful attention" to the application by decision makers of specialized knowledge and "demonstrated expertise"; and
  • The reviewing court should consider the history and context of the proceedings in which the decision was rendered, including the evidence before the decision maker, submissions of the parties, publicly available policies informing the work of the decision maker, and past decisions of the administrative body.
  • However, where reasons contain a "fundamental gap" or reveal "an unreasonable chain of analysis", even if the outcome could be reasonable under different circumstances, it is not appropriate for the court to fashion its own reasons to buttress the administrative decision, and the decision will generally fail to meet the requisite standard of justification, transparency and intelligibility.
  • A reasonable decision is one that is (1) based on an internally coherent reasoning and (2) justified in light of the legal and factual constraints that bear on the decision. Relevant factors in evaluating whether a decision is reasonable will include the governing statutory scheme, other relevant law, principles of statutory interpretation, the evidence before the decision maker and facts of which it may take notice; the parties' submissions; past practices and decisions of the administrative body; and the potential impact of the decision on the party to which it applies.
  • Reasonableness review "does not give administrative decisions makers free reign in interpreting their enabling statutes". The governing statute will always act as a constraint on administrative decision makers. Although a decision maker's interpretation of its statutory grant of authority is generally entitled to deference, "the decision maker must nonetheless properly justify that interpretation".
  • Whether an interpretation is justified will depend on the context including the language in the legislation describing the limits of the decision maker's authority. Where the legislature has used broad, open-ended or highly qualitative language like "in the public interest", it contemplates that the decision maker is to have greater flexibility in interpreting that language.
  • Depending on the statutory language chosen by the legislature, questions relating to the scope of a decision maker's authority may support only one interpretation of the scope of an administrative decision maker's authority or more than one such interpretation.
  • Minor missteps should not result in the decision being overturned. Any shortcomings in the decision must be "sufficiently central or significant" to render the decision unreasonable.

This explanation of what review on a reasonableness standard should involve is unlikely to be of much significance to parties to proceedings before the OSC given the existence of a statutory right to appeal decisions rendered by it that are final. In general, judicial review of preliminary or interlocutory decisions is discouraged by the courts. Further, the Court specifically noted that the framework for review of decisions on the merits set out in Vavilov does not apply to reviews relating to breach of principles of natural justice or the duty of procedural fairness.

Implications

As a result of Vavilov, we anticipate that appeals of OSC decisions to the Divisional Court, which will now be governed by standards of appellate review rather than Dunsmuir reasonableness, will likely increase in frequency. In theory, the odds of success on appeals grounded in alleged errors of law should also improve.

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