Federalism and the Scope of Procedural Fairness: P. & S. Holdings Ltd. v. Canada, 2017 FCA 41

Paul Daly March 14, 2017

As is well known, the scope of the duty of fairness owed by administrative decision-makers to individuals has expanded greatly in recent decades, so much so that one might reasonably ask whether the duty of fairness knows any bounds. In its very interesting decision in P. & S. Holdings Ltd. v. Canada, 2017 FCA 41, the Federal Court of Appeal held that the Minister owed no duty of fairness to objectors who claimed their interests would be affected by granting its neighbour a license to produce medical marijuana. Interestingly, de Montigny JA invoked federalism concerns in support of limiting the scope of the duty of fairness. In addition, the duty of fairness was held to have been ousted by clear statutory language.

The neighbour had applied for an approval under the (now defunct) Marihuana for Medical Purposes Regulations, S.O.R./2013-119. Next door are located the offices of a trade union, a trade school with about 200 students, and a restaurant.

Separately, the neighbour had applied to the municipality for permission to rezone its site for marijuana production. Those next door objected, on the following grounds:

[Joe Shayler] shared concerns regarding the application on behalf of United Association Local 170 noting that the subject property is next door to the union, training school, and restaurant. Mr. Shayler advised that UA Local 170 has invested millions of dollars in their building and it is considered one of the top facilities in North America. Over 200 students attend the facility and this proposal will have an adverse effect on them. In the collective agreement, there is a no drug and alcohol policy and it is therefore not conducive to have a marihuana production facility next door. Concern was expressed regarding the potential odour emanating from the facility.

Notwithstanding the objection, the municipality granted the rezoning application, subject to conditions. The objectors focused their attentions on the Minister and sought participatory standing in the federal licensing process. Having received no response from the Minister, they turned to the courts. They were unsuccessful at first instance and again on appeal.

de Montigny JA pointed out that “the common law duty of fairness is not free-standing and reviewing courts must therefore examine the scheme according to which the impugned administrative decision is taken” (at para. 26). The first-instance judge was right to find, in light of “the nature and purpose of the regulatory scheme” that the objectors “were strangers to that process and therefore not entitled to even a minimum degree of participation” (at para. 26).

The objectors had fastened upon a provision in the Regulations that requires the Minister to refuse a license where it “would likely create a risk to public health, safety or security“, arguing that matters relating to the suitability of the location could thus be considered in the federal licensing process. For de Montigny JA, however, the different purposes of the federal licensing process and the municipal rezoning process had to be borne in mind. It was “absolutely clear that the Minister’s foremost concern when deciding whether or not to issue a licence must be to ensure the security and safety of the commercial production and distribution of marijuana for medical purposes” (at para. 30).

For the Minister to inquire into matters pertaining to the location of marijuana production facilities would, indeed, be an unconstitutional intrusion on provincial power: “Parliament would exceed its jurisdiction and trench upon provincial heads of power if it were to delegate to the Minister, either directly or indirectly, the power to determine where marijuana production facilities may be geographically located. This is a pure zoning issue, one that falls either within the power of the provincial legislatures to make laws in relation to municipal institutions or in relation to local or private matters” (at para. 30). Even though the objectors had legitimate concerns, the “regulatory licensing scheme cannot be used to bypass or second-guess a decision that has been delegated to the municipal authorities and to broaden impermissibly the Minister’s mandate” (at para. 37).

Borrowing federalism concepts for the purposes of judicial review of administrative action is very interesting indeed. On the one hand, de Montigny JA could perhaps be criticised for overlooking the possibility that the location of this facility had a ‘double aspect’, such that it was of legitimate concern both to the federal and provincial authorities. On the other hand, his conclusion seems to be that in ‘pith and substance’ the objectors wished to make a zoning challenge (at paras. 35-36) — to continue in the argot of federalism, they were putting forward a zoning challenge under ‘colour’ of a licensing challenge.

Interestingly, de Montigny JA went even further. In his view, the scope of the duty of fairness turned on an interpretation of the Regulations. Noting that procedural fairness can be ousted by clear statutory language, de Montigny agreed with the first-instance judge that the Regulations “do address explicitly the participatory rights of those directly affected by the licensing scheme” (at para. 39):

The Regulations are not only silent as to the participatory rights of opponents to a licence like the appellants, but they also specifically grant such rights to a number of individuals: to an applicant or licence holder whose licence or permit the Minister proposes to refuse to issue, amend or renew (s. 7); to a producer (s. 33); to import permit holders (s. 80); to export permit holders (s. 87); to security clearance applicants (s. 94); to security clearance holders (s. 97); and to clients (ss. 114, 117, 123 and s. 133(1)). It is clear from these sections that the Governor in Council and the Minister, in drafting the Regulations, knew exactly to whom they sought to offer procedural fairness rights; the omission of third parties like the appellants is certainly not an oversight (at para. 40).

de Montigny JA referred twice to the reasonableness of the first-instance judge’s interpretation of the Regulations (at paras. 38 and 40). One wonders whether he meant to suggest that deference was due to the Minister. In one sense, this would be logical, because the Minister was, after all, interpreting a set of Regulations administered by Health Canada. However, this would mean that the scope of the duty of fairness, classically considered to be in the province of the courts, is rather in the gift of the Minister, albeit subject to the constraints of reasonableness review. Given de Montigny’s conclusion that the duty of fairness had been ousted in “clear” terms the point is more or less academic in the present context, but his analysis certainly provides food for thought on the scope of fairness and the scope of reasonableness review.

Updated March 14, 2017 at 21:20.