Ontario Human Rights Commission v. Eleanor Iness and Caroline Co-operative Homes Inc., 2005 HRTO 17

HUMAN RIGHTS TRIBUNAL OF ONTARIO

B E T W E E N:

Ontario Human Rights Commission Commission

-and-

Eleanor Iness Complainant

-and-

Caroline Co-operative Homes Inc. Respondent

INTERIM DECISION

Adjudicator: Mary Ross Hendriks Date: June 10, 2005 Citation: 2005 HRTO 17

Human Rights Tribunal of Ontario 400 University Avenue, 7th Floor Toronto ON M7A 1T7 Phone (416) 314-0004 Fax (416) 314-8743 Toll free 1-800-668-3946 TTY (416) 314-2379 / 1-800-424-1168 E-mail hrto.registrar@jus.gov.on.ca Website www.hrto.ca

APPEARANCES

Ontario Human Rights Commission ) Anthony D. Griffin, Counsel Eleanor Iness, Complainant ) M. Kate Stephenson, Counsel Caroline Co-operative Homes Inc., Respondent ) Bruce W. Cameron, Counsel

INTRODUCTION

1This is a motion brought by the Ontario Human Rights Commission (the “Commission”), with the support of the Respondent, for an Order addressing the jurisdiction of the Human Rights Tribunal of Ontario (the “Tribunal”) under the Human Rights Code, R.S.O. 1990, c.H.19 (the “Code”) with respect to section 2(9) of the Respondent’s Operating Agreement, flowing from an earlier decision of the Court of Appeal in this matter.

2Specifically, the Commission has asked the Tribunal to determine that it lacks the jurisdiction to find that section 2(9) of the Operating Agreement violates the Code, prior to the commencement of the hearing on the merits, in order to save time during the hearing. The Respondent supports the Commission’s position on jurisdiction set out in this motion. This motion is opposed by the Complainant, who maintains that the Tribunal needs to hear all of the evidence before it makes a determination on its jurisdiction with respect to section 2(9) of the Operating Agreement, in light of the complexities surrounding shelter components. Moreover, the Complainant maintains that there are distinctions to be made between issues of jurisdiction and issues of remedy.

BACKGROUND

3The Complaint, dated May 15, 1995, involves a single mother in receipt of public assistance. She alleged that the Respondent violated her right to equal treatment with respect to the occupancy of accommodation, without discrimination because of the receipt of public assistance.

4Prior to the commencement of this motion, with the input and consent of all parties, Commission counsel filed a brief entitled, “Agreed Facts and Documents,” for the Tribunal’s benefit. The pertinent facts from it are summarized below.

EVIDENCE ON THE MOTION

5The Complainant lived at the Respondent from 1981 to 1997.

6The Respondent is a 60 unit housing co-operative located near the St. Lawrence Market in Toronto. It receives its funding for its operation under an agreement made with Canada Housing and Mortgage Corporation (“CMHC”), dated January 7, 1980. This Operating Agreement is before the Tribunal now, and is the subject-matter of this motion.

7Under this Operating Agreement, the Respondent must allocate at least 15% of its units to occupants who are income-tested, if the Respondent has enough money in its subsidy pool to do so.

8The Respondent holds an annual meeting of its membership, specifically to decide an operating budget for the following year. During this meeting, the Respondent determines its market rent or market occupancy charge (“market rent”).

9The Respondent’s Operating Agreement provides for assistance to income-tested occupants so that they do not pay market rent, but rather, an amount set out in Schedule “A” to the Operating Agreement, which is on a graduated scale. This graduated scale provides that occupants who are receiving assistance are charged an occupancy charge, calculated as a percentage of the household’s income. For household’s with a monthly income above $404, the graduated scale fixed the occupancy charge at 25% of household income. Until 1994, the Respondent set the occupancy charge for all assisted occupants as a percentage of their household income, and at 25% of their household income if that figure exceeded $404.

10On December 11, 1994, the members of the Respondent with the agreement of CMHC decided to set the occupancy charge for assisted occupants at 28% of income, effective January 1, 1995. The occupancy charge has since been increased to 30% of income. During a routine audit of the Respondent’s operations by CMHC, which included a review of its books and records, CMHC noted that the Respondent was not setting the occupancy charge for recipients of assistance as required by the terms of the Operating Agreement. Specifically, CMHC’s letter of May 25, 1994 to the Respondent’s Board of Directors, stated as follows on p.2:

The following is a summary of the issues, along with our recommendations:

1. We noted that the Co-op has not been applying the greater of the shelter component of the welfare or family benefit payment or the amount required by the application of the total welfare payment to the graduated occupancy charge scale, whichever is greater as required by the Operating Agreement.

We recommend that households receiving social assistance should pay the full potential shelter component (basic shelter and variable shelter) of the welfare or family benefit payment or the amount determined by the application of the total payment to the graduated occupancy charge scale, whichever is greater.

11On October 19, 1994, the Respondent’s Board of Directors met and decided that, “the shelter component portion of assistance benefits be utilized as the housing charge for members receiving social assistance or welfare effective January 1, 1995.” As a result of this Board meeting, the Respondent distributed a notice to its members receiving income from family benefits or welfare, which outlined these changes to the calculation of their housing charges, effective January 1, 1995. See: Agreed Facts and Documents, Tab 4.

12The Complainant received a memorandum from the Respondent, dated October 26, 1994, which advised her that the housing charge for her unit would be set at $602, which the memorandum clearly indicated was her housing charge of $652 minus her hydro allowance of $50. The Respondent set the hydro allowance at $50 per month on May 12, 1994, but prior to that, it had been set at $25.

13The maximum monthly shelter allowance available to the Complainant as social assistance benefits was $652. The General Welfare Assistance (“GWA”) scheme, at all material times, provided the Complainant with two parts to her benefits: shelter allowance and basic needs allowance. Shelter allowance is calculated based on actual shelter costs, i.e. rent/mortgage, property taxes, fire insurance, and fuel or utilities other than to heat the dwelling. In 1994 and 1995, the maximum shelter allowance for a family of two people, such as the Complainant and her son, was $652. Her basic needs allowance was set at $620 for her and her son.

14When the Complainant’s housing charge was set at $602 by the Respondent in 1995, she could no longer pay her housing charge plus fire insurance and utilities from the maximum shelter allowance available, which was $652. Her documented hydro expenses were consistently more than double the hydro allowance of $50 per month. Her housing charge in December 1994, just before the increase, had been $164 per month.

15The Complainant moved out of the Respondent in July 1997.

SUBMISSIONS

16Counsel for the Commission reviewed the history of the prior decisions rendered in this case to submit that the Tribunal lacks the jurisdiction to find that section 2(9) of the Operating Agreement violates the Code. Rather, he maintains that the Code empowers the Tribunal to make the ultimate finding that the Respondent should have set the occupancy charge at a point where the Complainant could have paid the three elements of rent, utilities and insurance out of her shelter allowance, and that the Respondent could have done so and stayed within the terms of the Operating Agreement.

17In particular, counsel for the Commission referred the Tribunal to the decisions rendered by the Divisional Court and Court of Appeal in this matter, set out at [2002] O.J. No. 2761 and 2004 CanLII 15104 (ON CA), 70 O.R. (3d) 148, respectively. (The application for leave to appeal was dismissed by the Supreme Court of Canada, without reasons, on September 16, 2004, see: Canada Mortgage and Housing Corp. v. Iness [2004] S.C.C.A. No. 167.) The decisions of the Divisional Court and Court of Appeal both dealt with a judicial review of an earlier interim decision of the (then) Board of Inquiry, Iness v. Caroline Co-operative Housing Inc. (No.1) (2001), 2001 CanLII 26220 (ON HRT), 40 C.H.R.R. D/182 (Ont. Bd. Inq.), in which it granted a motion brought by the Complainant and the Respondent to add Canada Mortgage and Housing Corp. (“CMHC”) as a Respondent to these proceedings.

18Counsel for the Respondent advised the Tribunal at the outset of this motion that he agreed with the position taken by counsel for the Commission with respect to jurisdiction. He apologized, but stated for the record that he could not remain for the balance of the motion, due to his client’s financial position. Thus, he left after making these remarks, with the Tribunal’s permission.

19Counsel for the Complainant opposed the motion. She urged the Tribunal to consider the context in which the Court of Appeal made its ruling. She said that the issue emerged when the Complainant and the Respondent wanted CMHC added as a party, because the agreement was between two parties, being CMHC and the Respondent. She argued that while we now know that CMHC’s actions fall under its exercise of federal power, and thus it is immune, the issue before the Divisional Court and the Court of Appeal was not whether s.2(9) of the Operating Agreement itself was immune.

20Counsel for the Complainant argued that the Operating Agreement is not federal legislation, but an agreement, and that the other party to the agreement is the Respondent, which is subject to provincial jurisdiction. She maintains that the Respondent must answer for its conduct.

21In other words, she submits that the Respondent cannot shield itself because CMHC is shielded, and adds that this was not the intention of the Court of Appeal in rendering its decision and does not flow from its reasoning. In order to have a full airing of the issues, she submits that the Tribunal needs to hear CMHC’s evidence as to what would happen if the Respondent were ordered to set rents differently, since the remedies sought by the Complainant all flow from the conclusion that s.2(9) breaches the Code. She relied upon the Court of Appeal’s decision in Ontario (Human Rights Comm.) v. London Monenco Consultants Ltd. (1992), 1992 CanLII 7425 (ON CA), 18 C.H.R.R. D/118 (Ont. C.A.) for the proposition that parties cannot contract out of human rights prohibitions.

22Counsel for the Complainant is ultimately seeking a number of declarations, and presented them to the Tribunal at this motion, to demonstrate the distinction between issues of jurisdiction and issues of remedy.

23The first declaration sought is that the conduct of the Respondent violated s.2(1) of the Code by treating social assistance recipients differently than other households, by setting their rent charge at the amount equivalent to the maximum total available shelter allowance, rather than setting it by reference to the rent-to-income formula applied to income from other sources.

24The second declaration sought, going beyond the relief requested by the Commission, is that it is a violation of s.2(1) of the Code for a landlord to set rental rates for social assistance recipients higher than the rates for other tenants in comparable rental units, including where the higher rent is set at the maximum shelter allowance to which the household is entitled under social assistance.

25The third declaration is based on the notion that if s.2(9) of the Operating Agreement did mandate this formula for social assistance recipients, that the Respondent violated the Code by entering into that provision and by complying with it.

26The fourth declaration sought deals with the future actions of the Respondent when setting rent in the future, so that members in receipt of assistance have their rent adjusted to their income, so as to be consistent with the same rent-to-income formula applied to income from other sources, pursuant to the Tribunal’s statutory authority under s.41(1)(a), to “direct the party to do anything that, in the opinion of the Tribunal, the party ought to do to achieve compliance…” with the Code.

27Counsel for the Complainant also proposed an alternative remedy to the fourth declaration she sought, if the Tribunal is satisfied that there is a real possibility that compliance with the fourth declaration sought would cause the Respondent to lose its federal funding. In such a case, the Complainant still asks the Tribunal to adopt the first three declarations noted above, but would prefer that the Respondent renegotiate with CMHC regarding the operation of s.2(9) or create an arrangement where s.2(9) is declared inoperative; and further, that the Respondent is required to set rents in the future so that members in receipt of public assistance are able to pay their rent, hydro, utilities and insurance costs from the shelter allowance received from social assistance, until such time as s.2(9) is changed or declared inoperative, at which such time the Respondent is required by the Tribunal to set the rent so that members in receipt of assistance have their rent adjusted to their income so as to be consistent with the rent-to-income formula applied to income from other sources.

28Counsel for the Complainant submits that where there are parties to a contract, and the contract violates the Code to the detriment of a third party, the parties are both liable. Counsel for the Complainant commented that the facts here create an odd situation, in that CMHC has already been found by the Court of Appeal to be immune. However, she stressed that this does not mean that the other party to the contract is also immune. She argued that the Respondent remains liable for its breach of the Code stemming from the operation of this contract, and that it cannot escape this responsibility.

29Moreover, she maintains that the language of the Operating Agreement itself is not clear. Specifically, she asks rhetorically, what it means to say, “shall pay the shelter component”? Does that mean to the maximum, because if it does, those words do not appear in the document. She said that this was not the practice for the first ten years of the Operating Agreement, and as such, is a relatively new interpretation. Further, the terms, “basic component” and “variable component” are also ambiguous.

30She argues that while the Tribunal cannot direct CMHC to do anything, it can find that the Respondent is liable as a party to this agreement. At the end of the day, she asks the Tribunal to use its remedial power to direct the Respondent to take corrective action.

31Counsel for the Complainant also made submissions about the distinction between issues involving jurisdiction and those involving remedy. She suggested that the Tribunal may need to create a contingent remedy to avoid the possibility that CMHC withdraws its support for the Respondent, as per Dwyer v. Toronto (Metro) (No.3) (1996), 1996 CanLII 20051 (ON HRT), 27 C.H.R.R. D/108 (Ont. Bd. Inq.). She maintains that it is important to have a full understanding of all the relevant evidence before considering what remedies and alternative remedies flow from it.

32Although counsel for the Complainant does not agree with the submissions made by counsel for the Commission, and in particular, disagrees with the submissions made about its impact on the evidence, and argues that all the evidence ought to be heard and then the issue of jurisdiction should be decided, she nevertheless did state that it would be helpful to know the Tribunal’s view before proceeding with the hearing on the merits.

33By way of reply, counsel for the Commission referred the Tribunal to paragraphs 14 and 18 of the Court of Appeal’s decision, and submitted that the remedy has been identified and its effect is to “negate s. 2(9).” He submits that everyone agrees that CMHC is immune.

34Counsel for the Complainant recognizes that CMHC’s letter of January 20, 2005 (Exhibit 2) will become an exhibit for the purpose of this motion, but asked the Tribunal whether or not she needs to call a witness to prove it at the hearing. In this letter, CMHC advises that it would prefer not to testify at the hearing. In response to the Commission’s correspondence, this letter states:

Based on and assuming the scenario set out in your January 12, 2005 letter, and assuming no other household income to be taken into account, the answer is Caroline Co-op would have been in compliance with the terms of its project operating agreement with CMHC and with CMHC’s program expectations on the point, if Caroline Co-op had charged the occupant $577 per month.

35This letter from CMHC also provides, on p.2, that:

In particular, we wish to make it clear that the practical net financial effect of the proper application of paragraph 2(9) of the project operating agreement on the occupant is zero. The intent and proper effect of paragraph 2(9) is simply to maximize the amount of available provincial or municipal social assistance available to occupant. Since CMHC’s financial contribution is subject to various limits, this maximizing of provincial or municipal funding maximizes the total benefit available to the project as a whole and all the occupants.

DECISION

36The motion seeking an Order that the Tribunal lacks the jurisdiction to find that section 2(9) of the Operating Agreement violates the Code is premature. The Tribunal finds that while the Court of Appeal has ruled in para. 47 of its decision that, “by virtue of the doctrine of interjurisdictional immunity, the Code must be read down so as not to apply to s. 2(9) of the Operating Agreement or CMHC…”, that in order to give proper effect to this direction, the Tribunal must fully understand the meaning of all key terms and sections of the Operating Agreement. The reading down of the Code in this instance is predicated on the assumption that all or part of the Operating Agreement is in violation of the Code, which remains an unknown and unproven variable. The Tribunal requires a full understanding of the entire Operating Agreement, which requires hearing from all witnesses. The Tribunal also seeks a discussion from counsel of the severability of s. 2(9) of the Operating Agreement, as it applies to federal undertakings. For these reasons, and after careful thought, the Tribunal has determined that the better course is to hear from all witnesses and then revisit the matter of jurisdiction at the end of the hearing once it has a clear picture of all the issues. Although CMHC is not a party to this proceeding, the Tribunal would prefer to hear directly from it, as well.

ANALYSIS

37Before the Tribunal can consider when or how to read down the Code with respect to s.2(9) of the Operating Agreement, it must first fully understand how s.2(9) fits within the Operating Agreement, whether or not it is severable, and what the provisions and sections of the Operating Agreement mean to each of its contracting parties, before determining whether or not the Respondent is liable for any breach of the Code.

38When the Divisional Court reviewed Iness (No.1), supra, and quashed the order to add CMHC as a Respondent to these proceedings, it held that CMHC’s authority to advance funds to the Respondent was an exercise of Parliament’s authority to legislate in relation to public debt and property under s. 91(1A) of the Constitution Act, 1867. The Divisional Court held that CMHC could attach conditions to the provision of funds and in so doing, CMHC did not take control of the subject of human rights, housing or rents within the province. The Divisional Court held, at para.32, that:

I therefore conclude that the exercise of CMHC’s authority to advance funds to the Co-op pursuant to Federal Legislation is an exercise of an enumerated federal power; that it is not an invasion of provincial power; and that it can be accompanied by such conditions as CMHC may require. By imposing conditions relating to the subsidies that may be given to and by the Co-op, CMHC is not purporting to take control over the subjects of human rights or of housing or of rents within the Province, but is exercising the federal power of stating the terms upon which federal money is available.

39Rather, CMHC was exercising the federal power of stating the terms upon which federal money is available. The Divisional Court held that by virtue of the doctrine of interjurisdictional immunity, the Code should be read down so as not to limit the authority given to CMHC by valid federal legislation, since the terms on which CMHC disbursed federal funds were part of its core function. Thus, the Divisional Court found that the impugned condition in s. 2(9) of the Operating Agreement was not subject to the Code. The Complainant appealed, and argued that s. 2(9) of the Operating Agreement fell within the province’s jurisdiction over housing or human rights in the context of housing, and thus, the Code ought to apply to CMHC and to s. 2(9).

40The Court of Appeal dismissed the appeal. It examined two questions in its analysis, set out in para. 24, as follows:

a. How should s. 2(9) be characterized - - as an exercise of an exclusive federal power flowing from the Constitution Act, 1867 or as an action of the federal government in an area within the jurisdiction of the province?; and

b. Does the doctrine of interjurisdictional immunity apply to preclude the application of the Code to CMHC and to s. 2(9)?

41The Court of Appeal examined Parliament’s exclusive power to spend its own money accompanied by the power to impose conditions or restrictions on the disposition of its funds, and asked, in para. 28:

…at what point does the exercise of the federal spending power become an impermissible intrusion into matters that fall within the exclusive jurisdiction of the provinces?

42The Court of Appeal then held:

In this case, I am satisfied that the impuged condition in s. 2(9) of the Operating Agreement is a valid exercise of the federal government’s exclusive power to spend its own money. It was not, in substance, an attempt to regulate in the provincial areas of housing or human rights relating to housing.

The grant to the Co-op with the impugned condition was not mandatory. The Co-op was free to accept or reject it. The voluntary nature of the grant argues against the condition being construed as a regulation. Moreover, s. 2(9) is manifestly linked to an exercise of Parliament’s spending power. It is a provision that limits the amount of the grant that is available to certain individuals. The condition reflects a federal government policy that federal moneys be used to supplement, not replace, provincial social assistance for housing. The condition is rationally connected to the federal government’s exercise of its spending power.

43The Court of Appeal also considered the doctrine of interjurisdictional immunity, at paras. 43 to 45. It found that Parliament’s power to spend its money, like other powers found in s. 91 of the Constitution Act, 1867, is exclusive. Thus, it held it would be “untenable” if provincial legislatures could use their legislative authority to “dictate the unassailable core of the federal spending power.” The Court of Appeal, at para. 45 and 47, held:

In this case, I am satisfied that the impuged condition in s. 2(9) of the Operating Agreement forms part of the unassailable core of the exercise of the federal spending power. The purpose of s. 2(9) is to limit the amount of federal funds advanced by way of grant by setting an eligibility criterion. The section implements a policy that federal funds be used to add to, not replace, provincial social assistance. The section is an essential component of the federal government’s exercise of its spending power in making grants to the Co-op.

In summary, I agree with the Divisional Court that, by virtue of the doctrine of interjurisdictional immunity, the Code must be read down so as not to apply to s. 2(9) of the Operating Agreement or CMHC in this case.

44While the Divisional Court and the Court of Appeal have found that there is a solid link between s.2(9) of the Operating Agreement and the exercise of Parliament’s exclusive spending power, they have not engaged in any detailed analysis based on evidence whether or not the Operating Agreement as a whole violates the Code, and if so, whether or not the Respondent was liable for entering into a discriminatory contract. This evidentiary vacuum exists because the Divisional Court and the Court of Appeal were asked to review the Board of Inquiry’s decision to add CMHC as a party, which they overturned, before the Board had heard the full case.

45In Central Okanagan School District No. 23 v. Renaud 1992 CanLII 81 (SCC), [1992] 2 S.C.R. 970, the Supreme Court of Canada held that where a trade union and an employer have entered into a collective agreement, and the terms of that agreement violated the Code, both parties were liable. Similarly, the Board of Inquiry held in Thornton v. North American Life Assurance Co. (No.1) (1991), 1991 CanLII 13125 (ON HRT), 16 C.H.R.R. D/162 (Ont. Bd. Inq.), that an employer could not escape responsibility for a contract in which they involved an employee with a third party.

46Despite the very capable and arguments and practical considerations advanced by counsel for the Commission, the Tribunal finds that, as a matter of natural justice and fairness, it cannot read down the Code with respect to section 2(9) of the Operating Agreement until it first determines whether or not the Code even applies to it. If the Operating Agreement, in whole or in part, does not violate the Code, then there is nothing to read down. This remains an open question.

47According to Peter Hogg, in his seminal work, Constitutional Law of Canada, Thomson-Carswell, looseleaf, at p.15-24, the doctrine of reading down is one which ought to be applied narrowly, as noted below:

The “reading down” doctrine requires that, whenever possible, a statute is to be interpreted as being within the power of the enacting legislative body. What this means in practice is that general language in a statute which is literally apt to extend beyond the power of the enacting Parliament or Legislature will be construed more narrowly so as to keep it within the permissible scope of power. Reading down is simply a canon of construction (or interpretation). It is only available where the language of the statute will bear the (valid) limited meaning as well as the (invalid) extended meaning; it then stipulates that the limited meaning be selected. Reading down is like severance in that both techniques mitigate the impact of judicial review, but reading down achieves its remedial purpose solely by the interpretation of the challenged statute, whereas severance involves holding part of the statute to be invalid. Reading down is sometimes said to depend upon a presumption of constitutionality: the enacting legislative body is presumed to have meant to enact provisions which do not transgress the limits of its constitutional powers; general language which appears to transgress the limits must therefore be “read down” so that it is confined within the limits.

48Moreover, Hogg, supra, noted at p.15-25, that the “term interjurisdictional immunity does not have a precise meaning.” There are three routes of attacking a matter that falls outside the jurisdiction of the enacting legislative body, which he summarized on p.15-25, as attacking: “(1) the validity of the law, or (2) the applicability of the law, or (3) the operability of the law.” When attacking the applicability of the law, Hogg described a scenario where the law was valid in most of its applications, and thus, the law remains valid in most of its applications but is interpreted so as not to apply to the matter that is outside the jurisdiction of the enacting body. This is the essence of the doctrine of reading down, offered as a practical solution to the problem of interjurisdictional immunity.

49The Tribunal finds that in interpreting both the doctrine of reading down and the concept of interjurisdictional immunity, that, but for the finding that the Code ought to be read down if the Tribunal were to find that s.2(9) is otherwise violating the statute, the balance of the Operating Agreement may still remain subject to the Code. In order to determine whether or not the Operating Agreement violates the Code, the Tribunal must hear the relevant evidence about the entire agreement.

ORDER

50In accordance with these reasons, the Tribunal makes the following orders:

(1) The motion is dismissed; and

(2) The parties are directed to bring forward all relevant witnesses.