Tuesday, 21 May 2013

Reviewing Regulations

The Supreme Court of Canada heard argument last Monday in an important case on reviewing delegated legislation: Shopper's Drug Mart v. Minister for Health. The pharmacies lost in the Ontario Court of Appeal: 2011 ONCA 830; though Epstein J.A. delivered a convincing dissent. Up for discussion at the Supreme Court of Canada was the vires of the regulations and, in particular, whether they sought to use a power to regulate to prohibit commercial activities.

Not quite on the agenda was judicial review of an administrative decision as to the vires of delegated legislation. This point was addressed by the New Brunswick Court of Appeal in Enbridge Gas New Brunswick Limited Partnership et al. v. The Attorney General in and for the Province of New Brunswick, 2013 NBCA 34.

For the most part, the case involved an unremarkable application of general principles to a regulation passed pursuant to statutory authority to regulate the rates and tariffs of natural gas. The legislature had granted a power to adopt "methods or techniques" of regulation: Gas Distribution Act, 1999, s. 52(5)(a).

A (complicated) regulation was passed, requiring the New Brunswick Energy and Utilities Board to impose either cost-based or market-based rates and tariffs. But the cost-based approach could not be used if it exceeded the market-based approach. And, no matter what, there was a ceiling: revenue-cost ratios could not exceed 1.2:1. So (I think!), 1.2:1 > market-based approach > cost-based approach.

The requirement that the market-based approach should be used whenever the cost-based approach would exceed it was upheld. There was a clever argument against this: that the true goal here was to protect consumers by guaranteeing them the lowest possible price, arguably an extraneous consideration or improper purpose. But for Robertson J.A., this aspect of the regulation spoke directly to "methods or techniques".

However, Robertson J.A. agreed that the imposition of a ceiling was ultra vires
                      [11] If one looks to the Act and the Regulation, it is clear the Legislature was addressing itself to two known “methods or techniques” for fixing rates: (1) cost of service; and (2) market based. There may be others. But regardless, the phrase “methods or techniques” cannot be reasonably interpreted to include the right of the LGC to direct the Board to apply, for example, a designated “cost to service ratio”. It may well be true, as suggested by counsel for the Province, that the Board has never exceeded the prescribed ratio of 1.2:1. But that is not a matter relevant to the task of statutory interpretation. The point is simply this. As the Act presently reads, it is for the Board to determine what the ratio should be and that is why the directive is ultra vires the regulation-making authority of the LGC.
And now for the interesting part. Robertson J.A. suggested -- though without deciding -- that the proper course would have been to make an application to the Board in the first instance. Any such determination as to vires would possibly be reviewable on a deferential standard, the reviewing court doffing the cap to the Board's relative expertise: "the Board’s interpretation of the Gas Distribution Act, 1999 and the pertinent Regulations would be subject to review on the basis of a rebuttable presumption that reasonableness is the applicable standard. In brief, the route taken by Enbridge not only bypassed the relative expertise of the Board but also the application of the deference doctrine" (at para. 14). 

In the face of a forthright concurrence from Bell J.A., Robertson J.A. did not commit himself to the position that a deferential review ought to be conducted. Rather, he left the question open. Interestingly, he noted the general utility of having first had the Board's opinion: "the reality is that neither the application judge nor this Court had the benefit of the Board’s opinion even if correctness were the proper review standard. What a pity!" (at para. 16).

Talk about deference too often devolves into high-minded discussion of standards of review (I am as guilty as anyone). At base, deference requires judges to take administrative decisions seriously, not to treat them as falling below judicial decisions in a hierarchy. Robertson J.A. does well to remind us of that.

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