Canada Mortgage and Housing Corporation v. Iness et al. [Indexed as: Canada Mortgage and Housing Corp. v. Iness]

70 O.R. (3d) 148

[2004] O.J. No. 771

Docket No. C39479

Court of Appeal for Ontario

O'Connor A.C.J.O., Catzman and Weiler JJ.A.

March 1, 2004

*Application for leave to appeal to the Supreme Court of Canada was dismissed September 16, 2004 (Major, Binnie and Fish JJ.)

Constitutional law -- Distribution of legislative authority -- Interjurisdictional immunity -- Condition in Operating Agreement between Canada Mortgage and Housing Corporation (CMHC)and provincial housing [page149] co-op differentiating between co-op members who were in receipt of social assistance and those who were not -- Condition constituting valid exercise of federal spending power -- Condition not constituting attempt to regulate in provincial areas of housing or human rights relating to housing -- By virtue of doctrine of interjurisdictional immunity, Human Rights Code must be read down so as not to apply to condition in Operating Agreement or to CMHC -- Constitution Act, 1867, s. 91(1A) -- Human Rights Code, R.S.O. 1990, c. H.19.

The Canada Mortgage and Housing Corporation ("CMHC") is a federal Crown corporation authorized to make loans and contributions under the National Housing Act, R.S.C. 1985, c. N-11 and to attach terms and conditions thereto. In the exercise of the authority conferred upon it under the Act, CMHC enters into operating agreements with housing co-operatives to which it provides funding. The complainant, a Co-op member and resident, filed a complaint against the Co-op under the Human Rights Code, alleging that the Co-op was discriminating against her on the prohibited ground that she was receiving provincial social assistance. She alleged that when determining the amount of rental charges, the Co-op differentiated between members who received social assistance and those who did not. The Co-op established the rental charges in accordance with the provisions of the Operating Agreement. For occupants of subsidized units not receiving social assistance, rents were fixed at 25 per cent of their income. For occupants receiving social assistance, rents were established pursuant to s. 2(9) of the Operating Agreement, which provided, "Occupants receiving welfare assistance or family benefits shall pay the shelter component of the welfare or family benefit payment or the amount required by the application of the total payment to the rent-to-income scale identified in Schedule A, whichever is greater".

The Human Rights Commission referred the complaint to a Board of Inquiry. By interim order, the Board added CMHC as a respondent in the proceedings, holding that CMHC's funding policy and the Operating Agreement were subject to provincial regulatory authority under the Code. The Divisional Court quashed that order, holding that CMHC's authority to advance funds to the Co-op 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 court held that CMHC could attach conditions to the provision of funds and that, in so doing, CMHC did not take control of the subjects of human rights, housing or rents within the province. Rather, it was exercising the federal power of stating the terms upon which federal money is available. The 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. As such, the court determined that the impugned condition in s. 2(9) of the Operating Agreement was not subject to the Code. The complainant appealed, arguing 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 that, as a result, the Code applied to CMHC and to s. 2(9).

Held, the appeal should be dismissed.

Parliament has the power to spend money raised by taxes and to dispose of its property. This power, often referred to as the "spending power", is not expressly set out in the Constitution Act, 1867. However, it may be inferred from s. 91(1A), which confers on Parliament the exclusive authority to legislate in relation to the "Public Debt and Property". Parliament's exclusive power to spend its own money [page150] is accompanied by the power to impose conditions or restrictions on the disposition of its funds. It is generally accepted that the federal government is not constitutionally limited to spending or lending money in those areas in which it has the express power to legislate. The power to spend or lend federal money is not, however, unlimited. The exercise of that power will be considered to impermissibly trench on the exclusive jurisdiction of a province if the exercise of the power is in reality an attempt to regulate a matter within the provincial jurisdiction. Mere impact upon a constitutional interest of a province is not enough to constitute an encroachment on provincial jurisdiction.

The impugned condition in s. 2(9) of the Operating Agreement was a valid exercise of the federal government's 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 argued against the condition being construed as a regulation. Moreover, s. 2(9) was manifestly linked to an exercise of Parliament's spending power. It was a provision that limited the amount of the grant that was available to certain individuals. The condition reflected a federal government policy that federal moneys be used to supplement, not replace, provincial social assistance for housing. The condition was rationally connected to the federal government's exercise of its spending power. In making the grant to the Co-op and attaching s. 2(9) of the Operating Agreement as a condition to the grant, the federal government acted pursuant to its exclusive legislative authority flowing from s. 91(1A) of the Constitution Act, 1867.

The doctrine of interjurisdictional immunity protects the core content of an exclusive federal power from provincial regulation. If a provincial law affects a vital or essential aspect of the exercise of a federal power, then the otherwise valid provincial law must be read down so as not to apply to the exercise of the federal power. The doctrine of interjurisdictional immunity applies as much to Parliament's exclusive authority to spend its money as it does to any other exercise of federal powers. The impugned condition in s. 2(9) of the Operating Agreement formed part of the unassailable core of the exercise of the federal spending power. There is no basis for exempting human rights legislation from the application of the interjurisdictional immunity doctrine because human rights legislation is quasi-constitutional in nature. By virtue of the doctrine of interjurisdictional immunity, the Human Rights Code must be read down so as not to apply to s. 2(9) of the Operating Agreement or CMHC in this case.

APPEAL from a judgment of the Divisional Court (Lane, Then and Lax JJ.), [2002] O.J. No. 276 (QL) (Div. Ct.) quashing an order of a Board of Inquiry adding a federal agency as the respondent in human rights proceedings.

Cases referred to

A.G. Canada v. A.G. Ontario, [1937] A.C. 355, [1937] 1 D.L.R. 684 (P.C.); Bell Canada v. Québec (Commission de la santé et la sécurité du travail du Québec), [1988] 1 S.C.R. 749, 51 D.L.R. (4th) 161, 21 C.C.E.L. 1; Canada v. Lewis (1997), 36 O.R. (3d) 688, 155 D.L.R. (4th) 442, 121 C.C.C. (3d) 156 (C.A.) (sub nom. R. v. Lewis); Central Mortgage and Housing Corp v. Co-operative College Residences, Inc. (1975), 13 O.R. (2d) 394, 71 D.L.R. (3d) 183 (C.A.); Greater Toronto Airports Authority v. Mississauga (City) (2000), 50 O.R. (3d) 641, 192 D.L.R. (4th) 443, 16 M.P.L.R. (3d) 213 (C.A.); Ordon Estate v. Grail, [1998] 3 S.C.R. 437, 40 O.R. (3d) 639n, 166 D.L.R. (4th) 193, 232 N.R. 201; Reference Re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, 58 B.C.L.R. (2d) 1, 83 D.L.R. (4th) 297, 127 N.R. 161, [1991] 6 W.W.R. 1 (sub nom. Constitutional Question Act (Re)); Winterhaven Stables Ltd. v. Canada (Attorney General) (1988), 1988 ABCA 334, 62 Alta. L.R. (2d) 266, 53 D.L.R. (4th) 413, [1989] 1 W.W.R. 193 (C.A.); [page151] YMHA Jewish Community Centre of Winnipeg Inc. v. Brown, [1989] 1 S.C.R. 1532, 59 Man. R. (2d) 161, 59 D.L.R. (4th) 694, 97 N.R. 161, [1989] 4 W.W.R. 673, 89 C.L.L.C. Â14,030 (sub nom. YMHA Jewish Community Centre v. Brown)

Statutes referred to

Canada Mortgage and Housing Corporation Act, R.S.C. 1985, c. C- 7, s. 5(1) Canadian Bill of Rights, R.S.C. 1985, App. III Canadian Charter of Rights and Freedoms Canadian Human Rights Act, R.S.C. 1985, c. H-6 Constitution Act, 1867 (U.K.), 30 & 31 Vict., c. 3., reprinted in R.S.C. 1985, App. II, No. 5, ss. 91(1A), (3), 106 Co-operative Corporations Act, R.S.O. 1990, c. C.35 Financial Administration Act, R.S.C. 1985, c. F-11, Part X, Sched. III, Part I Human Rights Code, R.S.O. 1990, c. H.19, s. 2(1) National Housing Act, R.S.C. 1985, c. N-11, ss. 3, 4, 95

Authorities referred to

Hogg, P.W., Constitutional Law of Canada, looseleaf ed. (Scarborough: Carswell, 2001) La Forest, G.V., The Allocation of Taxing Power Under the Canadian Constitution (Toronto: Canadian Tax Foundation, 1967)

John A. Campion, Edward W. Purdy and Sophie Vlahakis, for applicant (respondent in appeal). Raj Anand and Marie-Andrée Vermette, for respondent (appellant). Anthony D. Griffin, for respondent Ontario Human Rights Commission. James C. Morton, for Board of Inquiry of the Human Rights Tribunal of Ontario.

The judgment of the court was delivered by

[1] O'CONNOR A.C.J.O.: -- The issue in this appeal is whether eligibility criteria attached to a federal government housing grant are subject to provincial human rights legislation.

[2] In May 1995, the appellant, Eleanor Iness, made a complaint to the Ontario Human Rights Commission (the "Commission") alleging that one of the criteria under which she received a housing subsidy discriminated against her as a person in receipt of social assistance.

[3] In March 2000, the Commission referred the matter to a Board of Inquiry (the "Board"). By interim order dated June 13, 2001, the Board added Canadian Mortgage and Housing [page152] Corporation ("CMHC"), the federal agency which provided the housing subsidy, as a respondent in the proceedings. On July 8, 2002, the Divisional Court quashed that order.

[4] Ms. Iness appeals with leave. For the reasons that follow, I would dismiss the appeal.

Facts

[5] CMHC is a federal Crown corporation that is constituted as an agent of Her Majesty in Right of Canada pursuant to s. 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; and Part I of Schedule III and Part X of the Financial Administration Act, R.S.C. 1985, c. F-11.

[6] The purposes of the National Housing Act, which are set out in s. 3, include: "to promote housing affordability and choice" and "to protect the availability of adequate funding for housing at low cost".

[7] In furtherance of those purposes, Parliament authorized CMHC to make loans and contributions and to attach terms and conditions thereto. The relevant provisions of the National Housing Act are as follows:

95(1) [CMHC] may make loans and contributions to assist with the payment of the capital and operating costs of housing projects, and may forgive amounts owing on those loans.

(2) [CMHC] may determine the terms and conditions on which it makes a loan or contribution or forgives an amount under subsection (1), including, without limiting the generality of the foregoing,

(a) conditions with respect to the operation or occupancy of a housing project.

[8] In the exercise of the authority conferred upon it under the National Housing Act, CMHC enters into operating agreements with housing co-operatives to which it provides funding.

[9] On January 7, 1980, CMHC entered into an operating agreement (the "Operating Agreement") with Caroline Co- Operative Homes Inc. (the "Co-op"), a non-profit housing co- operative established under the Co-operative Corporations Act, R.S.O. 1990, c. C.35. The Operating Agreement sets out the maximum amount of federal funding that the Co-op is eligible to receive and the terms and conditions pursuant to which CMHC is willing to provide federal funding.

[10] From 1981 onwards, Ms. Iness was a member and resident of the Co-op. She is a single mother and, at all material times, was in receipt of social assistance. [page153]

[11] In 1995, Ms. Iness filed a complaint against the Co-op with the Commission alleging that the Co-op was discriminating against her on the prohibited ground that she was receiving provincial social assistance. Ms. Iness alleged that when determining the amount of rental charges, the Co-op differentiated between members who received social assistance and those who did not.

[12] The Co-op established the rental changes in accordance with the provisions of the Operating Agreement. For occupants of subsidized units not receiving social assistance, rents were fixed at 25 per cent of their income. For occupants receiving social assistance, rents were established pursuant to s. 2(9) of the Operating Agreement, which reads as follows:

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

(Emphasis added)

[13] Prior to 1995, the Co-op calculated Ms. Iness' rent on the same rent-to-income scale as it applied to occupants not receiving social assistance. Since the shelter component of Ms. Iness' social assistance slightly exceeded 25 per cent of her total benefits, she had a small portion of the shelter component available to pay for utilities and insurance.

[14] In December 1999, the Commission released the results of its investigation and recommended that a Board of Inquiry not be established. Ms. Iness and the Co-op requested a reconsideration and, subsequently, the Commission referred the complaint to the Board of Inquiry. Before the Board, Ms. Iness sought an order directing the Co-op to set the rents of members receiving social assistance according to the rent-geared-to- income formula that it applied to other members. Although Ms. Iness did not include CMHC in her initial complaint, in October 2000, she and the Co-op brought a motion to have CMHC added as a party to the proceedings before the Board.

[15] In the statement of facts and issues filed by the Commission with the Board, the Commission alleged that in 1994, CMHC directed the Co-op to charge all social assistance recipients the full amount of the allowable shelter component as rent. As a result, Ms. Iness was required to pay her utility and insurance costs of approximately $27.50 per month from the basic living component of her social assistance, which is generally used for needs such as food and clothing. This, Ms. Iness alleges, is discrimination based on the prohibited ground of "receipt of [page154] social assistance", pursuant to s. 2(1) of the Human Rights Code, R.S.O. 1990, c. H.19 (the "Code").

[16] Ms. Iness and the Co-op argued that s. 2(9) of the Operating Agreement was discriminatory because it was that provision that led the Co-op to calculate Ms. Iness' rent in an amount equal to the full shelter component of her social assistance. CMHC opposed the motion on the basis that the Board did not have jurisdiction over CMHC or over the Operating Agreement. The Commission joined CMHC in opposing the motion.

The Board's Decision

[17] On June 13, 2001, the Board rendered an interim decision adding CMHC as a respondent. The Board held that CMHC's funding policy and the Operating Agreement are subject to provincial regulatory authority under the Code. The Board concluded that s. 95 of the National Housing Act was enacted pursuant to the "federal spending power" which is not an enumerated head of power under the Constitution Act, 1867. Citing Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, 83 D.L.R. (4th) 297, the Board acknowledged that "there are no constitutional restraints on the federal spending power." However, the Board concluded that because the power was engaged in a matter that is otherwise provincial, i.e. housing, the matter was not brought into the legislative authority of Parliament.

[18] The Board also held that it had jurisdiction over CMHC to order the remedy sought by Ms. Iness and the Co-op. The effect of the remedy would be to negate s. 2(9) of the Operating Agreement by requiring that the Co-op set rents for those receiving social assistance on the same rent-geared-to- income formula used for other members.

The Divisional Court's Decision

[19] CMHC applied to the Divisional Court seeking to quash the Board's decision to add it as a party to the proceedings. The Commission supported CMHC's application. Ms. Iness and the Board (now renamed the Human Rights Tribunal of Ontario) opposed it. The Co-op did not appear.

[20] The Divisional Court concluded that CMHC's authority to advance funds to the Co-op is an exercise of Parliament's authority to legislate in relation to public debt and property under s. 91(1A) of the Constitution Act, 1867. Further, the court held that CMHC may attach conditions to the provision of funds and that in so doing, CMHC does not take control of the subjects of human rights, housing, or rents within the province. Rather it [page155] "is exercising the federal power of stating the terms upon which federal money is available".

[21] The court went on to hold 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 disburses federal funds are part of its core function. As such, the court determined that the impugned condition in s. 2(9) of the Operating Agreement is not subject to the Code.

[22] Accordingly, the Divisional Court held there was no basis on which CMHC could be made a respondent to the complaint pending before the Board and quashed the Board's interim order.

Issues

[23] At the outset, it is important to keep in mind what is not in issue in this appeal. The appellant does not argue that the National Housing Act, which authorizes CMHC to make housing grants or loans, is invalid. The appellant accepts that Parliament has the power to dispose of its own property, to spend the money which its taxes yield and to impose conditions on the disposition of such funds. The appellant also does not argue that CMHC acted beyond its authorized powers when it inserted s. 2(9) into the Operating Agreement.

[24] The appellant argues, however, that s. 2(9) falls within the province's jurisdiction over housing or human rights in the context of housing and that, as a result, the Code applies to CMHC and to s. 2(9). That argument can best be addressed by answering two questions:

(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)?

Analysis

(a) The characterization of s. 2(9)

[25] Parliament has the power to spend money raised by taxes and to dispose of its property. This power, often referred to as the "spending power", is not expressly set out in the Constitution Act, 1867. However, it may be inferred from s. 91(1A), which confers on Parliament the exclusive authority to legislate in relation to [page156] "the Public Debt and Property". Under s. 91(1A), "property" has been held to mean property in its broadest sense and includes moneys raised by taxes. YMHA Jewish Community Centre of Winnipeg Inc. v. Brown, [1989] 1 S.C.R. 1532, 59 D.L.R. (4th) 694 at p. 1548 S.C.R.; Central Mortgage and Housing Corp. v. Co-operative College Residences, Inc. (1975), 13 O.R. (2d) 394 at p. 410, 71 D.L.R. (3d) 183 (C.A.); Greater Toronto Airports Authority v. Mississauga (City) (2000), 50 O.R. (3d) 641, 192 D.L.R. (4th) 443 (C.A.) at p. 661 O.R.; Peter W. Hogg, Constitutional Law of Canada, looseleaf ed. (Scarborough: Carswell, 2001) at pp. 6-15 to 6-16 [See Note 1 at end of the document]; Gerard V. La Forest, The Allocation of Taxing Power Under the Canadian Constitution (Toronto: Canadian Tax Foundation, 1967) at p. 36.

[26] In Central Mortgage and Housing Corp. v. Co-operative College Residences, supra, this court held that Part VI A of the National Housing Act which authorized grants for housing came within the power of Parliament under s. 91(1A) of the Constitution Act, 1867.

[27] It is well-accepted that Parliament's exclusive power to spend its own money is accompanied by the power to impose conditions or restrictions on the disposition of its funds or, as the Divisional Court put it, to state the terms upon which federal money is available. In Central Mortgage and Housing Corp. v. Co-operative College Residences, this court said, at p. 410 O.R.:

The Parliament of Canada has power under s. 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.

See also YMHA, supra, at p. 1548 S.C.R.; Hogg, supra, at pp. 6-17 to 6-18; La Forest, supra, at pp. 36-37, 41.

[28] What remains to be resolved then is whether there are limits on Parliament's authority to spend its money and, if so, where those limits should be set. That is to say, 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? [page157]

[29] Viewed in its narrowest form, the federal spending power would be limited solely to matters that are expressly within the federal legislative competence under the Constitution Act, 1867. In other words, Parliament's spending power would be equated with its legislative power. However, few argue for such a restrictive approach, primarily because it fails to recognize the distinction between the authority to legislate compulsory regulation on the one hand and the spending or lending of money, with or without conditions, that may be voluntarily accepted by the intended recipient on the other.

[30] It is generally accepted that the federal government is not constitutionally limited to spending or lending money in those areas in which it has the express power to legislate: YMHA, supra, at p. 1548 S.C.R.; Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525 at pp. 565-67 S.C.R.; Central Mortgage and Housing Corp. v. Co-operative College Residences, supra, at p. 410 O.R.; Winterhaven Stables Ltd. v. Canada (Attorney General) (1988), 1988 ABCA 334, 53 D.L.R. (4th) 413, 62 Alta. L.R. (2d) 266 (C.A.) at p. 433 D.L.R.; Hogg, supra, at pp. 6-17 to 6-19; La Forest, supra, at p. 47.

[31] The power to spend or lend federal money, however, is not unlimited. The exercise of that power will be considered to impermissibly trench on the exclusive jurisdiction of a province if the exercise of the power is in reality an attempt to regulate a matter within the provincial jurisdiction: A.G. Canada v. A.G. Ontario, [1937] A.C. 355, [1937] 1 D.L.R. 684 (P.C.) (Reference Re Unemployment Insurance); [Central Mortgage and Housing Corp. v. Co-operative College Residences], supra, at p. 411 O.R.; La Forest, supra, at pp. 38-39; Hogg, supra, at pp. 6-18 to 6-19.

[32] Drawing a line between what is considered to be a permissible exercise of the federal spending power and what, in substance, is an attempt to regulate a matter within provincial jurisdiction will not always be easy. Mere impact upon a constitutional interest of a province is not enough to constitute an encroachment on provincial jurisdiction. More is required: Reference re Canada Assistance Plan (B.C.), supra, at p. 567 S.C.R.

[33] Interestingly, over the years, the federal government has frequently used its spending power to influence social and economic policies in a broad range of areas, such as education, health care, housing, highways and social programs, that come within the provincial competence with few, if any, challenges. Currently, there are over one hundred federal/provincial shared-cost programs, mostly of a continuing nature: Hogg, supra, at p. 6-11.

[34] In this case, I am satisfied that the impugned condition in s. 2(9) of the Operating Agreement is a valid exercise of the [page158] 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.

[35] 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.

[36] As I pointed out above, the appellant accepts that CMHC had the authority to make the grant to the Co-op and to attach the impugned condition. The appellant argues, however, that in exercising the spending power in the area of housing, the federal government acted as a private individual and, as such, is subject to provincial laws.

[37] In support of this argument, the appellant points to the fact that the Crown in Right of Canada is considered to be a legal person and, when acting in that role, its executive has full power over its private property. Like any private individual, the executive may engage in commercial activities. It can sell, mortgage, lease, license or manage its property without the necessity of legislation. The exercise of those commercial types of power need not coincide with the federal government's legislative power because they are powers that flow directly from the Crown's ownership and control of its own property.

[38] In this case, however, the power exercised by CMHC, in making the grant to the Co-op, was authorized by legislation, the National Housing Act. As this court held in Central Mortgage and Housing Corp. v. Co-operative College Residences, supra, the National Housing Act is a valid exercise of Parliament's authority to legislate in relation to its debt and property pursuant to s. 91(1A) of the Constitution Act, 1867. Pursuant to the National Housing Act, Parliament specifically conferred on CMHC the authority to make grants for housing assistance, like the ones made to the Co-op, and to attach conditions to those grants. CMHC exercised that authority. This is a case of Parliament exercising its constitutional authority to spend its money. It is not a case of the federal government acting merely as a private individual in disposing of its property.

[39] In summary, I am satisfied that in making the grant to the Co-op and attaching s. 2(9) of the Operating Agreement as a [page159] condition to the grant, the federal government acted pursuant to its exclusive legislative authority flowing from s. 91(1A) of the Constitution Act, 1867.

(b) Interjurisdictional immunity

[40] The Divisional Court held that pursuant to the principle of interjurisdictional immunity the Code should be read down so as not to apply to conditions imposed by CMHC on the Co-op. The appellant submits that the Divisional Court erred in applying the principle of interjurisdictional immunity to the exercise of the federal spending power in an area of provincial jurisdiction.

[41] The doctrine of interjurisdictional immunity protects the core content of an exclusive federal power from provincial regulation. If a provincial law affects a vital or essential aspect of the exercise of a federal power, then the otherwise valid provincial law must be read down so as not to apply to the exercise of the federal power: Bell Canada v. Québec (Commission de la santé et de la sécurité du travail du Québec), [1988] 1 S.C.R. 749, 51 D.L.R. (4th) 161 at pp. 816-17 S.C.R.; Greater Toronto Airports Authority, supra, at pp. 653-54 O.R.; Ordon Estate v. Grail, [1998] 3 S.C.R. 437, 166 D.L.R. (4th) 193 at pp. 496-97 S.C.R.; Canada v. Lewis (1997), 36 O.R. (3d) 688, 155 D.L.R. (4th) 442 (C.A.) at pp. 696-98 O.R., pp. 452-53 D.L.R.

[42] In Greater Toronto Airports Authority, supra, at p. 653 O.R., Laskin J.A. upheld the decision of MacPherson J. and described the interjurisdictional immunity doctrine as follows:

The interjurisdictional immunity principle holds that "a basic minimum and unassailable content" must be assigned to each head of federal legislative power. Because federal legislative power is exclusive, provincial laws cannot affect that essential core. A provincial law, valid in most of its applications, must be read down not to apply to the core of the exclusive federal power. The application of this principle differs from the paramountcy doctrine in that it does not require conflicting or inconsistent federal legislation, or even the existence of federal legislation.

[43] In my view, the doctrine of interjurisdictional immunity applies as much to Parliament's exclusive authority to spend its money as it does to any other exercise of federal powers. Parliament's power to spend its money, like other powers found in s. 91 of the Constitution Act, 1867, is exclusive. Moreover, if the doctrine of interjurisdictional immunity did not apply to protect the federal spending power, provincial legislation could, in effect, determine the terms and conditions upon which federal funds are expended. That would be untenable. In the same way that Parliament is not constitutionally permitted to use its spending power to regulate matters of provincial jurisdiction, provincial legislatures are not [page160] permitted to use their legislative authority to dictate the unassailable core of the federal spending power. To do so would trench upon Parliament's exclusive authority to spend federal money.

[44] Importantly, the doctrine of interjurisdictional immunity does not operate to protect all exercises of federal power. The doctrine requires that a provincial law only be read down when it affects the unassailable core or, as it is sometimes described, a vital or integral part of the exclusive federal power.

[45] In this case, I am satisfied that the impugned 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.

[46] Finally, the appellant argues that the Ontario human rights legislation is quasi-constitutional in nature and that, as such, it should be exempt from the application of the interjurisdictional immunity doctrine. The appellant does not cite any authority to support this submission and I fail to see the basis for making that distinction in this case. It is worth noting that the exercise of the federal spending power is not immune from scrutiny for the types of concerns that underlie the Ontario Code. The Canadian Human Rights Act, R.S.C. 1985, c. H-6, the Canadian Charter of Rights and Freedoms and the Canadian Bill of Rights, R.S.C. 1985, App. III all apply to federal laws and undertakings. These regimes have the advantage of subjecting the exercise of federal powers to uniform scrutiny across the country, rather than to potentially differing provincial standards.

[47] 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.

Disposition

[48] I would dismiss the appeal.

[49] Having regard to the fact that all of the parties to this appeal are recipients, directly or indirectly, of public funding, I would make no order as to costs against any of them.

Appeal dismissed.

Notes

1. Professor Hogg opines that the power of Parliament to spend its money may also be inferred from the power to levy taxes (s. 91(3)) and the power to appropriate federal funds (s. 106).