Canada Mortgage and Housing Corp. v. Iness

2002-07-08

Ontario Superior Court

CHRR Doc. 02-124

Canada Mortgage and Housing Corporation

Applicant

v.

Eleanor Iness, Caroline Co-operative Homes Inc. and Ontario Human Rights Commission

Respondents

Date of Decision:

July 8, 2002

Before:

Ontario Superior Court of Justice (Divisional Court), Lane, Then and Lax JJ.

Appeal from:

Iness v. Caroline Co-operative Homes Inc. (No. 1) (2001), 2001 26220 (ON HRT), 40 C.H.R.R. D/182 (Ont. Bd.Inq.)

Court File No.:

516/2001

Appearances by:

Alan L.W. D'Silva and Sophie Vlahakis, Counsel for the Applicant

Sheilagh Turkington, Counsel for the Respondent Eleanor Iness

Anthony D. Griffin, Counsel for the Respondent Commission

Margaret Leighton, Counsel for the Ontario Board of Inquiry

JURISDICTION — provincial boards/tribunals over federal bodies — jurisdiction to order added parties — PARTIES — authority of board/tribunal to order added parties — APPEALS AND JUDICIAL REVIEW— appeal of order to add party — error of law in interpreting legislation

Summary: The Ontario Divisional Court has overturned a decision of the Ontario Board of Inquiry to add the Canadian Mortgage and Housing Corporation ("CMHC") as a party to a complaint filed by Eleanor Iness against Caroline Co-operative Homes Inc. ("Caroline").

Ms. Iness alleged that she was discriminated against by the terms of the agreement between Caroline and CMHC because she is a social assistance recipient. Prior to 1995, Ms. Iness paid 25 percent of her income as rent, as did other Caroline occupants, whether they were social assistance recipients or not. The remainder was subsidized by CMHC. Effective January 1, 1995, because of a review of Caroline's practices for compliance with CMHC requirements, Ms. Iness was required to pay the whole of the "shelter allowance" portion of her welfare benefit as rent, with the rest subsidized by CMHC. The change had a significant impact on Ms. Iness. She was no longer able to pay her insurance and hydro out of the shelter portion of her benefit, but instead had to pay these out of her "basic needs" allowance.

Since the change to Ms. Iness's payment was made to comply with CMHC requirements, the Board of Inquiry was asked to join CMHC as a party. The Board of Inquiry decided that CMHC was not immunized from the application of provincial law by virtue of being a federal Crown agency. It found that the issue of housing falls squarely within provincial jurisdiction, and the Operating Agreement between Caroline and the CMHC defined the terms upon which housing was available to the complainant. The Board of Inquiry issued an order making CMHC a party to the complaint.

The Ontario Divisional Court overturned this decision. It found that the exercise of CMHC's authority pursuant to the National Housing Act to advance funds to the Co-op is not an invasion of provincial powers regarding housing or human rights. CMHC can advance funds and impose conditions relating to the subsidies that may be given by the Co-op. In doing so, CMHC is exercising the federal power to state the terms upon which federal money is available. Provincial legislation cannot limit the authority given to CMHC by affecting a vital part of the management and operation of the federal undertaking.

The Court found that there was no basis on which to add CMHC as a party, and quashed the order of the Board of Inquiry.

CASES CITED

Bank of Montreal v. Hall, 1990 157 (SCC), [1990] 1 S.C.R. 121: 38

Bell Canada c. Quebec (Comm. de la santé et de la sécurité du travail), 1988 81 (SCC), [1988] 1 S.C.R. 749: 37

Central Mortgage and Housing Corp. v. Cooperative College Residences Inc. (1975), 1975 636 (ON CA), 13 O.R. (2^d) 394 (C.A.): 27, 31, 34

Four B Manufacturing Ltd. v. U.G.W., 1979 11 (SCC), [1980] 1 S.C.R 1031: 23

Imperial Oil Ltd. v. Entrop (2000), 2000 16800 (ON CA), 37 C.H.R.R. D/481, 2 C.C.E.L. (3^d) 19 (Ont. C.A.): 1

Iness v. Caroline Co-operative Housing Inc. (No. 1)(2001), 2001 26220 (ON HRT), 40 C.H.R.R. D/182 (Ont. Bd.Inq.): 1, 11

R. v. Lewis (1997), 1997 1711 (ON CA), 155 D.L.R (4^th) 442 (Ont. C.A.): 36

Reference re Canada Assistance Plan (B.C.), 1991 74 (SCC), [1991] 2 S.C.R. 525: 17, 19

Reference re Employment and Social Insurance Act, 1936 30 (SCC), [1936] S.C.R. 427: 28

Reference re Employment and Social Insurance Act, 1937 363 (UK JCPC), [1937] 1 D.L.R. 684 (P.C.): 30

YMHA Jewish Community Centre of Winnipeg Inc. v. Brown, 1989 53 (SCC), [1989] 1 S.C.R. 1532: 17, 23

LEGISLATION CITED

Canada

Canada Elections Act, R.S.C. 1985, c. E-2: 36

Canada Mortgage and Housing Corporation Act, R.S.C. 1985, c. C-7, s. 5(1): 2

Canadian Human Rights Act, R.S.C. 1985, c. H-6: 14

Constitution Act, 1867 (U.K.), 30 & 31 Vict., c. 3

s. 91(1A): 15, 21, 31, 35

s. 92(10): 27

s. 92(13): 27

s. 92(16): 27

Financial Administration Act, R.S.C. 1985, c. F-11: 2

National Housing Act, R.S.C. 1985, c. N-11

s. 3: 3

s. 4: 2

s. 95: 11

s. 95(2): 4

Ontario

Human Rights Code, R.S.O. 1990, c. H.19, s. 41(1)(a): 14

Public Accountancy Act, R.S.O. 1990, c. P.37: 36

AUTHORITIES CITED

Hogg, Peter W., Constitutional Law of Canada, 3^d ed. (Toronto: Carswell, 1992): 33

LANE J.

1This is an application for judicial review of the order of a Board of Inquiry ("Board") constituted under the Human Rights Code [R.S.O. 1990, c. H.19] ("Code") dated June 13, 2001, whereby the applicant ("CMHC") was made a respondent in the proceeding before the Board [reported 2001 26220 (ON HRT), 40 C.H.R.R. D/182]. The central point at issue is the extent of the jurisdiction of a provincial human rights body over the operations of CMHC, a federal agency. All parties submitted, and we agree, that the standard of review is correctness: Entrop v. Imperial Oil Ltd.(2000), 2000 16800 (ON CA), 2 C.C.E.L. (3^d) 19 [37 C.H.R.R. D/481] (Ont. C.A.).

BACKGROUND FACTS

Background Facts

2CMHC is a federal Crown corporation that is constituted as an agent of Her Majesty in Right of Canada pursuant to subsection 5(1) of the Canada Mortgage and Housing Corporation Act [R.S.C. 1985, c. C-7]; s. 4 of the National Housing Act [R.S.C. 1985, c. N-11]; Part X of the Financial Administration Act [R.S.C. 1985, c. F-11]; and Part I of Schedule III of the Financial Administration Act (collectively, the "Federal Legislation").

3One of CMHC's functions under the Federal Legislation is to provide housing co-operatives in many provinces with federal loans and funding to operate co-operative housing for persons of low and moderate income. One of the central purposes of CMHC providing this assistance, according to s. 3 of the National Housing Act, is to "promote housing affordability and choice" for Canadians, and "to protect the availability of adequate funding for housing at low cost".

4Under subsection 95(2) of the National Housing Act, CMHC may determine the terms and conditions on which it grants funding. Accordingly, CMHC enters into Operating Agreements with co-operatives to which it is providing funding. On January 7, 1980, CMHC and the respondent Caroline Co-operative Homes Inc. ("Co-op") entered into an Operating Agreement which describes, among other things, how the contributions CMHC was providing the Co-op were to be distributed, and how the Co-op may use CMHC contributions and funding to subsidize the rents of low-income residents.

5On January 1, 1995, the respondent Eleanor Iness ("complainant") filed a complaint against the Co-op with the Ontario Human Rights Commission ("OHRC") alleging that the Co-op was discriminating against her on the prohibited ground of receipt of provincial social assistance. The complainant alleged that the formula which the Co-op was using to calculate the amount of rent she paid for her "rent-geared-to income" dwelling unit was discriminatory as it was different from the formula which the Co-op used to calculate rent for those tenants residing in rent-geared-to-income units who were not in receipt of provincial social assistance.

6The formula is set out in the Operating Agreement in clause 2(9):

Occupants receiving welfare assistance or family benefits shall pay the shelter component of the welfare or family benefit payment or the amount required by application of the total payment to the rent-to-income scale identified in Schedule A, whichever is the greater.

7The rental charge for occupants of subsidized units not receiving welfare or family benefits was 25 percent of their income. The complainant alleged that prior to 1994, the Co-op calculated her rent on the same percentage basis applied to occupants not receiving social assistance. Since the shelter allowance slightly exceeded 25 percent of her total benefits, this left her with a small portion of the shelter allowance component of her social assistance with which to pay the utility and insurance costs. She alleged that, following an audit in 1994, CMHC directed the Co-op to charge her, as a social assistance recipient, the full amount of the allowable shelter component as her rent. Because of this change, she could no longer pay her hydro and insurance costs from the provincial shelter subsidy; therefore, she had to pay these costs of $27.50 per month from her provincially funded basic living allowance that is generally allocated for basic needs such as food and clothing. This, according to the complainant, is discrimination based on the prohibited ground of discrimination in respect of "receipt of social assistance".

8No complaint was brought against CMHC by the complainant in 1995 and no mention is made of CMHC or the Operating Agreement in the complaint.

9The OHRC released the results of its investigation on December 30, 1999, concluding that the payment of the shelter allowance portion of social assistance by those in receipt of social assistance was not discriminatory, and recommended that a Board of Inquiry hearing not take place. However, both the complainant and the Co-op requested a reconsideration and a Board of Inquiry ("Board") was subsequently appointed. In October 2000, more than five years after the complaint was filed, the complainant and the Co-op brought motions before the Board to add CMHC as a party.

10The Co-op and the complainant each alleged that the Operating Agreement was discriminatory and contrary to the Code because the Operating Agreement was allegedly the reason behind the calculation of the complainant's social assistance contribution to her rent. Both CMHC and OHRC opposed these motions on the basis that the Board of Inquiry did not have jurisdiction over CMHC. These motions were heard on November 30, 2000.

THE DECISION OF THE BOARD OF INQUIRY

The Decision of the Board of Inquiry

11On June 13, 2001, the Board rendered its Interim Decision to add CMHC as a respondent to these proceedings. It held that CMHC's funding policy and the Operating Agreement are subject to provincial regulatory authority under the Code. In reaching this conclusion, the Board did not find it necessary to address certain constitutional legal principles that the applicant says were applicable to the motion, including: pith and substance, paramountcy, reading down and double aspect. Instead, the Board based its decision on the premise that the Operating Agreement made under s. 95 of the National Housing Act was made pursuant to the "federal spending power" which [at § 46] "is not an enumerated head of power under the Constitution Act, 1867" and while [at § 47] "there are no constitutional constraints on the federal spending power", in the opinion of the Board the fact that the federal spending power was engaged in a matter that was otherwise provincial did not bring that matter into federal competence.

12The Board further decided that CMHC's status as a Crown agent did not suffice to render the Code inapplicable to it. Rather, the determining factor was the nature of CMHC's impugned activities. The Board concluded that [at § 55]: "The advancing of funds to [the Co-op] does not make accommodation within the Co-op a matter within the legislative authority of Parliament".

13Finally, the Board concluded that it possessed remedial jurisdiction to address the terms of the Operating Agreement. No issue arose of the discriminatory impact of the federal legislation as the contractual terms were not statutorily specified; it was the contract and not the legislative authority for it that would be under scrutiny. The Board's general remedial jurisdiction was adequate.

THE POSITIONS OF THE PARTIES

The Positions of the Parties

14CMHC submits that the Board of Inquiry erred in law and was patently incorrect when it added CMHC as a respondent to the complaint. The Board erred in finding that CMHC, a federal Crown agent solely representing Her Majesty The Queen in Right of Canada and providing funding of co-operatives across the country under its specific Federal Legislation was, in this instance, subject to the Code. Principles of inter-jurisdictional immunity ought to have been applied by the Board and would have led to the conclusion that the provincial Code did not affect CMHC. It also contended that the Board erred in failing to conclude that the Canadian Human Rights Act [R.S.C. 1985, c. H-6] has paramountcy over and ousts the jurisdiction of the Ontario Code with respect to CMHC and its operations in this case; and also erred in finding that it had jurisdiction to add CMHC as a respondent and grant a remedy against CMHC pursuant to subsection 41(1)(a) of the Ontario Code.

15The OHRC supported the submission of CMHC that the Ontario legislation did not bind CMHC. The issue was whether a valid provincial law can be applied to regulate the conduct of a federal Crown corporation, an agent of Her Majesty (Canada) when that federal agency is carrying out its core function under valid federal legislation. The provision of funding in support of a national scheme to support low-cost housing is within the jurisdiction of Parliament under s. 91(1A) of the Constitution Act "The Public Debt and Property". A provincial law which is valid, as is the Ontario Code, may not impair the essential powers of a federal agency; it will be read down so as not to apply to the federal agency.

16The respondent Iness submitted that federal agencies are nevertheless subject to provincial laws of general application including human rights laws. The Code has the special status of being quasi-constitutional legislation; the doctrine of inter-jurisdictional immunity did not apply because CMHC, although a Crown corporation, is not an exclusive federal undertaking; and the use of the federal spending power cannot bring a provincial matter into federal jurisdiction. Further, it was submitted that federal legislation, in particular the Financial Administration Act, authorized Crown corporations to enter contracts in their own name or in the name of the Crown, and provided for legal proceedings in any court that would have jurisdiction if the corporation were not an agent of the Crown. These provisions envisaged the Crown corporation acting as any other corporation and being bound by provincial legislation in doing its business, just as federally incorporated commercial corporations are. The Supreme Court's unified approach to human rights legislation, recognizing the shared and interdependent nature of the equality guarantees in different jurisdictions, is compatible with the Board's approach.

17The Board submitted that the federal government had, through CMHC, involved itself in an area of provincial jurisdiction, housing, through the exercise of the spending power, which was not an enumerated head. In such a case, the question of jurisdiction over a particular enterprise rested on factual findings about the nature of that enterprise. The mere spending of money does not buy federal jurisdiction over provincial matters. The Board submitted that its decision was to stand or fall on the correctness of its interpretation of the Supreme Court's decision in Reference re Canada Assistance Plan (B.C.), 1991 74 (SCC), [1991] 2 S.C.R. 525, ("Canada Assistance") and YMHA Jewish Community Centre of Winnipeg Inc. v. Brown, 1989 53 (SCC), [1989] 1 S.C.R. 1532 ("YMHA"). The Board found in Canada Assistance authority for a rejection of the view that the federal spending power was subject to judicial review aimed at protecting the division of powers. It reasoned that as spending was not an enumerated power, there was no reason to apply division of powers analysis. In YMHA, it found authority that mere spending would not give the federal government power to regulate all related aspects of the area being funded. The Board submitted that the federal spending here did not give federal authority over the related aspects of the housing relationship such as setting the housing charge, without being accountable to the provincial human rights regime.

ANALYSIS

Analysis

18As noted above, we were referred by the Board to two cases in the Supreme Court upon which, it submitted, its decision ought to stand or fall: Canada Assistance and YMHA.

19Canada Assistance was an appeal from a decision on reference by British Columbia to the provincial Court of Appeal asking whether Parliament could lawfully unilaterally enact legislation reducing the federal financial contribution to a shared-cost program. The Supreme Court answered that Parliament could do so, rejecting the submission that such alteration amounted to regulation of a provincial matter. The passages to which the Board drew our attention were § 84 and 85. In § 84, the Court disagreed with the submission that reducing previous funding amounted to the regulation of the provincial program previously funded at the higher level. The Court acknowledged that the reduction in funding "impacted" upon a provincial constitutional interest beyond the jurisdiction of Parliament, but observed that impact alone was clearly not enough to find that a statute encroaches upon the jurisdiction of the other level of government.

20As to § 85, the Board submitted at § 28 of its Factum:

In Reference re Canada Assistance Plan the Supreme Court explicitly rejects any notion that the spending power be subject to judicial supervision aimed at protecting the division of powers between the provinces and Parliament.

85. Finally, I turn to the second branch of this argument of the Attorney General of Manitoba. This was the argument that the "overriding principle of federalism" requires that Parliament be unable to interfere in areas of provincial jurisdiction. It was said that, in order to protect the autonomy of the provinces, the Court should supervise the federal government's exercise of its spending power. But supervision of the spending power is not a separate head of judicial review. If a statute is neither ultra vires nor contrary to the Canadian Charter of Rights and Freedoms, the courts have no jurisdiction to supervise the exercise of legislative power.

Reference re Canada Assistance Plan, supra, at p. 567.

21I am unable to see in what way this passage assists the Board. Contrary to the submission in the Board's Factum at § 23, this is not a finding that the spending power is not an enumerated head of federal power, but a finding that supervision of the spending power is not a separate head of judicial review, an altogether different matter. Judicial review of the spending power depends upon the existence of an issue of ultra vires or a Charter issue. In the present case, the imposition of conditions upon the recipients of federal grants is within the power of Parliament pursuant to s. 91(1A) of the Constitution Act: see the Ontario Court of Appeal decision in Central Mortgage, to be discussed at § 27, infra.

22The Board's reference to the YMHA case is premised upon the erroneous idea that the exercise of the federal spending power was "unconnected to a federal head of power" (Board Factum, § 30). It continues by citing from YMHA (p. 1548) a passage which may represent the Supreme Court's view, as the Board submits, although it may also in part be a summary of the views of La Forest J. when he was an academic. I have added in [ ] the opening part of the passage cited to us:

[There has been some debate over the extent to which the exercise of the federal spending power can justify federal incursions into what would otherwise be areas of provincial legislative jurisdiction. In The Allocation of Taxing Power under the Canadian Constitution (2^nd ed. 1981), at p. 45, Dr. G.V. La Forest, now a Justice of this Court, expressed the view that the federal spending power can be exercised so long as it is not in substance legislation on a provincial matter.] Thus, the federal government could spend money to create jobs in the private sector, or in areas not directly under its competence. However, while Parliament may be free to offer grants subject to whatever restrictions it sees fit, the decision to make a grant of money in any particular area should not be construed as an intention to regulate all related aspects of that area. Thus a decision to provide a job creation grant to an organization such as the YMHA should not be construed, without other evidence, as an intention to remove provincial labour law jurisdiction over the project.

23At p. 1550 of YMHA, the Court, after reviewing Four B Manufacturing Ltd. v. United Garment Workers of America, 1979 11 (SCC), [1980] 1 S.C.R 1031, where the Court held that the receipt of federal subsidies did not bring a business within the jurisdiction of Parliament, continued:

Similarly in the present case, I find it difficult to believe that simply by providing federal money to promote employment in a region or sector, the federal government can obtain jurisdiction over the workers employed by virtue of the grant.

24The Board submits that these passages support its decision that the condition contained in the Operating Agreement cannot escape provincial scrutiny under the Code. In analyzing this submission, it is important to note that the issue was not the application of a condition attached to the grant as is the case in the present litigation. The YMHA was renovating its premises and receiving funding from a number of sources. It applied to participate in a job creation program under which it would employ persons in receipt of Unemployment Insurance ("UIC"). The federal authorities agreed with the YMHA to continue the status of these persons as eligible recipients of UIC if the YMHA would "top up" the benefits by paying wages to bring the recipients up to the minimum wages for the relevant class of work. The contribution of the federal authorities was the UIC amounts; the balance was the responsibility of the YMHA. The appellants were classified as cleaners and grieved that they were performing construction work for which the appropriate Manitoba minimum wage level was higher. The Manitoba Labour Board allowed the complaint and ordered the YMHA to pay the higher rate of top-up. YMHA argued that the appellants were unemployed persons under federal jurisdiction and not employees and therefore the Manitoba Labour Board had no jurisdiction. The Manitoba Court of Appeal agreed; the Supreme Court reversed.

25YMHA's argument was that its receipt of federal support through the job creation plan insulated it from having to pay minimum wage because the employees were entirely governed by federal law. This was rejected in the passages noted above. What is important for our present case is that the order of the Labour Board did not affect the position of the federal authority at all. The top-up was solely the responsibility of the YMHA; the federal contribution was the UIC benefit already payable to the employees. As I see it, the case does not assist the Board's position. It does not hold that federal conditions attached to grants are subject to provincial law; only that federal grants do not give federal authority over every aspect of the relationship or project being supported, a claim that is not made by CMHC. The analogous position in our situation would be if the Co-op defended the human rights complaint by saying that it was insulated from the Code by its receipt of federal funds.

26Thus, if the Board's decision stands or falls on the basis of Canada Assistance and YMHA, it fails.

27One pillar of the respondents' submissions is that the federal spending power does not derive from an enumerated head of power under the Constitution Act. However, in Central Mortgage and Housing Corp. v. Cooperative College Residences Inc.(1975), 1975 636 (ON CA), 13 O.R. (2^d) 394 (C.A.) ("Central Mortgage"), the Court had to consider the constitutionality of Part VIA of the National Housing Act, the part which authorized the making of loans by CMHC to specified organizations to assist them in providing new or improved housing for students and their families. While the Act has been changed in some respects, for our purposes the issue is the same: the effect of the spending of federal funds in the support of housing in a province. The Court recognized that housing would itself fall within the jurisdiction of the province under one or more of ss. 92(10), 92(13) or 92(16) of the Constitution Act and the province itself might well enact legislation to encourage or assist in the construction of housing in the province. At p. 410, the Court continued:

Part VIA of the Act is not in pith and substance legislation in relation to housing, but rather legislation to provide financial assistance to certain specified bodies so that they can improve student housing. It falls within the power of the Parliament of Canada under section 91(1A) – "the Public Debt and Property".

The Parliament of Canada has power under section 91(1A) to legislate in relation to its own debt and property. It can spend money which it has raised through a proper exercise of its taxing power. It can impose conditions on the disposition of such funds while they are still in its hands. It has used this power to make federal grants-in-aid, which are subject to compliance with conditions that the Parliament of Canada has prescribed.

28The Court also referred to Reference re Employment and Social Insurance Act, 1936 30 (SCC), [1936] S.C.R. 427 where, at 457, Kerwin J. said:

It is quite true that Parliament, by properly framed legislation may raise money by taxation and dispose of its public property in any manner that it sees fit. As to the latter point, it is evident that the Dominion may grant sums of money to individuals or organizations and that the gift may be accompanied by such restrictions and conditions as Parliament may see fit to enact. It would then be open to the proposed recipient to decline the gift or to accept it subject to such conditions.

29In the same case, Duff J. observed, at pp. 431–32, that it could not be doubted that Parliament could exercise its authority over its property in the widest sense, but that Parliament did not gain jurisdiction over matters exclusively provincial under the pretence of exercising a power which does not embrace the real subject matter of the legislation. He went on to point out that Parliament could make grants to anyone for any purpose and had the exclusive authority to determine the manner in which public assets were applied for such purposes.

30On appeal to the Judicial Committee, 1937 363 (UK JCPC), [1937] 1 D.L.R. 684 at 687, Lord Atkin pointed out that Dominion legislation disposing of funds raised by taxation as grants might be so framed as to invade provincial powers, and if so would be ultra vires. The test was what was the pith and substance of the Dominion legislation.

31Having reviewed these authorities, the Court in Central Mortgage stated, at p. 411, that the loaning of money to aid student housing was simply one way of imposing conditions on the disbursing of public funds pursuant to s. 91(1A) and was not an invasion of a provincial field; nor was it in pith and substance legislation in relation to housing. It was a proper exercise of the power under s. 91(1A). The Court acknowledged that if CMHC sought to enforce its security, it would be subject to provincial laws of general application in so doing. The applicants rely on this passage, but in my opinion it does not support their proposition that provincial law can invalidate a condition upon which federal funds are advanced, a quite different aspect.

32I therefore conclude that the exercise of CMHC's authority to advance funds to the Co-op pursuant to the 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.

33An alternative approach may be adopted if one considers that the conditions indirectly affect matters beyond federal power such as the regulating of rents or human rights of persons in a province. The question of the relationship between two validly enacted laws, one federal and the other provincial, has been the subject of much litigation and a number of principles have emerged. Central to the issue is the pith and substance approach referred to above, which Professor Hogg summarizes, in Constitutional Law of Canada (loose-leaf edition) at p. 15-25"... that a law which is in relation to a matter within jurisdiction ... is not objectionable just because it affects a matter outside jurisdiction ... The limits of the pith and substance doctrine mark out an ill-defined zone of 'interjurisdictional immunity' ..."

34Professor Hogg goes on to discuss the three attacks that may be made upon such legislation. The first is that it is invalid because the pith and substance of the legislation is not within the power of the legislating body. In the present case, the Central Mortgage case has determined that the pith and substance of the Federal Legislation is indeed federal. Accordingly, it is not invalid, or ultra vires, as trenching upon provincial exclusive legislative power.

35The second such attack is based upon accepting that a law purporting is same particular to grasp beyond its constitutional reach is generally valid, but should be read down so that its grasp and its lawful reach coincide. The OHRC submitted that this technique should be applied to the Code. To the extent that the Code may be seen as limiting the conditions which the Federal Legislation authorizes CMHC to impose on recipients of its grants and subsidies, I agree. Valid provincial legislation, even though of general application within the province, may not cut down the essential powers granted to CMHC by the Federal Legislation. Theoretically, it would also be possible to read down the CMHC conditions so as not to affect the provincial legislation, but that would mean that the province was dictating the tenors on which the federal authority may make its grants. The terms on which federal funds are disbursed by a federal agency such as CMHC are part of the core of its powers under s. 91(1A). Since they are not grasping beyond their reach, they may not be read down.

36A useful case is R. v. Lewis(1997), 1997 1711 (ON CA), 155 D.L.R (4^th) 442 (Ont. C.A.) where Lewis was charged with breach of the Ontario Public Accountancy Act [R.S.O. 1990, c. P.37] for performing audit functions under the Canada Elections Act [R.S.C. 1985, c. E-2] for which he was qualified under that Act, but for which he did not hold a provincial licence. The Court held that the provincial Act must be read down so as not to regulate who could be an auditor under the federal Act. In giving the judgment of the Court of Appeal, Rosenberg J.A. said at § 20–23:

The substance of the respondent's claim in this case is that the provincial Public Accountancy Act cannot apply to the acts that he performed in accordance with the federal legislation. In Constitutional Law of Canada Loose-leaf ed. (Toronto, Carswell, 1997), at pp.15-25-6, Professor Hogg describes the three different ways in which it may be argued that a law may be attacked because the law purports to apply to a matter outside the jurisdiction of the enacting legislative body. First, it may be argued that the law is invalid because the law's pith and substance "comes within a class of subjects that is outside the jurisdiction of the enacting legislative body". This method of attack has no application in this case. There is no doubt that the pith and substance of the Public Accountancy Act comes within a class of subjects over which the provincial legislature has jurisdiction under s. 92 of the Constitution Act, 1867. It is well established that a law in relation to a provincial matter may validly affect a federal matter: Hogg, supra at p. 15-32. The appellant relies upon this doctrine.

A second way in which a law may be attacked is to argue that the law is inoperative through the doctrine of paramountcy. "The doctrine of paramountcy stipulates that, where there are inconsistent [otherwise valid] federal and provincial laws, it is the federal law that prevails, paramountcy renders the provincial law inoperative to the extent of the inconsistency": Hogg, supra at p. 15-26. Thus, for the paramountcy doctrine to succeed it must be shown that there exists a competing federal law. The appellant argues that the Supreme Court has adopted a very strict test for application of the paramountcy doctrine and that only where there is an express contradiction between the federal and provincial laws will the federal law prevail and the provincial law, to the extent of the inconsistency, be held to be inoperative.

The third way in which a provincial law may be attacked is through what Professor Hogg terms interjurisdictional immunity. The law is acknowledged to be valid in most of its applications, but it is argued that "the law should be interpreted so as not to apply to the matter that is outside the jurisdiction of the enacting body": Hogg, supra at p. 15-25. Where the doctrine applies, the law is not held invalid nor is it held inoperative. The law is simply held to be inapplicable to the extra jurisdictional matter through application of the reading down doctrine. The theory or rationale of interjurisdictional immunity is that "each head of federal power not only grants power to the federal Parliament but, being exclusive, denies power to the provincial Legislature"; Hogg, supra at p. 15-31. Thus, just as the province cannot directly legislate with respect to a matter within federal jurisdiction, so it cannot through a law of general application indirectly accomplish the same result. The reading down doctrine does not necessarily depend upon there being an existing competing federal law. In my view, the cases demonstrate that an important component of this doctrine is the presumption of constitutionality: the legislative body is presumed to be legislating within its competence and the impugned law should be so interpreted.

There is an obvious tension between these three doctrines. As Professor Hogg points out, it is difficult to predict when the courts will uphold the provincial law in its entirety because in pith and substance it relates to a provincial matter although it "affects" an aspect of federal jurisdiction and when the courts will read down the provincial law so that it does not intrude into the federal sphere. Similarly, and especially where there is an existing federal law in the field, it is not always possible to reconcile the cases where the court has applied the reading down doctrine to hold the provincial law inapplicable, as opposed to applying the paramountcy doctrine and holding the provincial law inoperative. Nevertheless, I am satisfied that in this case the most appropriate doctrine to apply is the reading-down doctrine. The provincial legislation should be read down so that it is inapplicable to the conduct of an auditor acting in accordance with the federal legislation.

37In my view, this reasoning applies equally to the present case. CMHC is acting pursuant to valid federal legislation authorizing it to determine the conditions upon which certain federal funds will be expended in the pursuit of one of its core functions: the making of grants in support of the efforts of the grantees to supply reasonably priced housing to Canadians. Otherwise valid provincial legislation cannot limit the authority given to CMHC by valid federal legislation by affecting a vital part of the management and operation of the federal undertaking. The decision of the Supreme Court in Bell Canada v. Quebec (CSST), 1988 81 (SCC), [1988] 1 S.C.R. 749 is to that effect.

38Reference may also be made to Bank of Montreal v. Hall, 1990 157 (SCC), [1990] 1 S.C.R. 121, where, at 155, La Forest J. said that as Parliament had enacted a complete Code to regulate banking and the realization of security interests, there was no room left for provincial legislation requiring certain notice as a prerequisite to seizure of the collateral. Accordingly, it should "... be construed as inapplicable to the extent that it trenches on valid federal banking legislation". The Federal Legislation completely governs. the spending of federal funds by CMHC in its core endeavour. There is no room for a provincial demand that the rules be changed and CMHC advance federal funds upon conditions to be set by provincial legislation.

39In the result, the impugned condition is not subject to the Code and therefore there is no basis on which to add the applicant as a party. The Board's order doing so is quashed. The declarations sought by the applicant are unnecessary. The parties made brief submissions as to costs at the hearing. In my view, it is not a case for costs in the light of the nature of the issues.