Canada: Presumptive Deference to Tribunals on Appeal: When Will the Courts Intervene?

When an administrative tribunal interprets its governing statute, this usually raises a question of law.  The tribunal is engaged in an exercise of statutory interpretation, something Canadian Courts do with aplomb.   So when the tribunal's analysis of the language or application of legislation is challenged on appeal, should the Courts nonetheless defer to that analysis?   A recent decision of the Ontario Court of Appeal answers this question in the affirmative.

The Tribunal's Ruling on the Retrospective Application of its Legislation

CNH Canada Ltd. v. Chesterman Farm Equipment Ltd., 2018 ONCA 637, involved a statutory appeal from an order of the Agriculture, Food and Rural Affairs Tribunal (the "Tribunal").   

The appellant and the respondent were engaged in a farm implement distribution agreement (the "Dealership Agreement"), which, as of April 25, 2006, is now governed by a regulation to the Farm Implements Act, R.S.O. 1990, c.F.4 (the "Regulation"). 

Prior to the coming into force of the Regulation, the relationship between the appellant and the respondent was simply governed by their contract, the Dealership Agreement.  The Dealership Agreement was automatically renewed each year between the parties from 2003 to 2006.   

The appellant then gave written notice to the respondent on September 30, 2006 that it would not renew the Dealership Agreement beyond 2006 on September 30, 2006.   Approximately five months prior to the non-renewal, the Regulation, which prescribes the manner in which a farm implements dealership agreement may or may not be renewed, came into force.

The respondent commenced proceedings at the Tribunal against the appellant, arguing that the appellant had improperly breached the Dealership Agreement by not complying with the requirements of the Regulation at the time of non-renewal.  

The Tribunal agreed with the respondent.  It held that the Regulation applied retrospectively to the Dealership Agreement, thereby amending the agreement and imposing the mandatory process for non-renewal set out in the Regulation.  The respondent was awarded damages of $200,516.61 for the breach of the Dealership Agreement.

On appeal to the Divisional Court, the Court held that the issue of whether the Regulation applied retrospectively to the Dealership Agreement raised a question of law.  The Tribunal properly held that the Regulation applied in this case.  The Court split, however, on a number of other issues.

The Court of Appeal dismissed the further appeal and cross-appeal from the Divisional Court Order.  The Court of Appeal restored the Tribunal's original order, however, on costs.

Deference to the Tribunal on a Question of Law

In this case, statutory appeals of the Tribunal's orders under the Farm Implements Act were restricted to questions of law.    The Court of Appeal noted that, in general, the Tribunal's interpretation of the Dealership Agreement itself would raise questions of mixed fact and law, subject to certain exceptions set out in the Supreme Court of Canada's decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53. 

One of the primary issues in this case, however, i.e. whether the parties' contractual rights not to renew the Dealership Agreement survived the changes imposed by the Regulation, raised a clear question of law amenable to review on appeal by the Courts.

In applying the standard of review, the Court of Appeal held that the Divisional Court erred in analyzing the Tribunal's decision on the non-deferential standard of "correctness".   The Divisional Court erroneously applied the standard of review relevant to civil appeals, i.e. "palpable and overriding error" vs. "correctness", as opposed to the standard of review applicable to administrative law proceedings, i.e. "reasonableness" vs. "correctness".

Pursuant to the administrative law appellate "framework", the Court of Appeal echoed recent Supreme Court of Canada jurisprudence, Edmonton (City) v. Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47 and Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Association, 2011 SCC 61, for the principle that where a tribunal is engaged in the statutory interpretation of its constituent legislation, that interpretation will be presumptively reviewed by the Courts on the deferential reasonableness standard, even where there is a statutory right to appeal to the Courts on a question of law.

The reasonableness standard of review on questions of law means that the Tribunal's decision on a question of law will only be subject to judicial intervention if the decision does not fall "within a range of possible, acceptable outcomes which are defensible in respect of the facts and law".

The Deferential Standard of Review Applied

Applying the reasonableness standard of review to a question of law in this had significant implications.  

On the general issue of whether the Dealership Agreement was retroactively amended by the Regulation, which the Court of Appeal effectively identified as a question of law, the Court concluded that the Tribunal's decision was reasonable.     The Court upheld the decision by the Tribunal to revise the Dealership Agreement to include the regulated renewal process set out in the Regulation.

In identifying this issue as a question of law, the Court noted that the "interpretation of a contract incorporating statutory terms by operation of law is of precedential value and transcends the particular factual circumstances of the parties in dispute".  Accordingly, it raised a legal question, nonetheless subject to a deferential standard by the Courts.

The Effect of Judicial Deference on Questions of Law

The decision in Chesterman Farm Equpiment is consistent with prior appellate case law which views an administrative tribunal's interpretation of its home statute as a question of law that is subject to a deferential standard of review by the Courts.

What the decision leaves unresolved for another case, however, is the issue of when a Court will intervene in a tribunal's assessment of a pure question of law.  

In general terms, Chesterman was not only about the Tribunal's interpretation of the Regulation, but about the application of the legal doctrines of retroactivity / retrospectivity to legislation.  These are questions squarely within the purview of the Courts.   They are not within the expertise of administrative tribunals. 

Accordingly, it may be time to revisit the principle of judicial deference to tribunals on questions of law.   Canadian Courts should once again assert their judicial authority on matters of pure legal doctrine. 

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