COURT FILE NO.: 06-DV-1222

DATE: 2008/01/22

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

B E T W E E N:

CERTIFIED GENERAL ACCOUNTANTS ASSOCIATION OF CANADA

Bruce Carr-Harris and Gerry H. Stobo, for the Applicant (Respondent)

Applicant (Respondent)

• and -

CANADIAN PUBLIC ACCOUNTABILITY BOARD

Robert W. Cosman and Murray Braithwaite, for the Respondent (Moving Party)

Respondent (Moving Party)

HEARD: August 29, 2007

DECISION ON MOTION TO QUASH APPLICATION FOR JUDICIAL REVIEW

M. Linhares de Sousa J.

INTRODUCTION

[1] The matter before me is a motion brought by the Respondent, the Canadian Public Accountability Board (“CPAB”) to quash an application for judicial review brought against it by the Applicant, the Certified General Accountants Association of Canada (“CGA-Canada”). In its application for judicial review against the CPAB, the Applicant is seeking the following declaratory relief:

(a) A declaration that CPAB is subject to the rules of natural justice and procedural fairness,

(b) A declaration that CPAB’s structure does not meet the requirements of natural justice and procedural fairness in that it:

(i) lacks fair representation from Certified General Accountants (“CGA”), one of the professional accounting designations CPAB purports to oversee,

(ii) has failed to provide meaningful or adequate representation within its governance structure for CGAs, as it has undertaken to do,

(iii) is not acting in the public interest because it is structurally biased and partial towards the interests of Chartered Accountants (“CA”) to the exclusion of other accounting designations,

(iv) is unduly influenced by the CAs in is governance structure and activities while denying the CGAs any meaningful role or input, and

(v) is not institutionally independent of the CAs whose work CPAB oversees.

JURISDICTION TO HEAR THE MOTION

[2] A motion to quash an application for judicial review properly comes before me as a single judge of the Divisional Court pursuant to section 21(3) of the Courts of Justice Act, R.S.O. 1990, c. C. 43:

Section 21

(3) A motion in the Divisional Court shall be heard and determined by one judge, unless otherwise provided by the rules of court.

[3] In presiding over this motion to hear and determine it, one option given to me pursuant to Section 21(4) of the Courts of Justice Act, supra, is to adjourn the motion to a panel of the Divisional Court:

(4) A judge assigned to hear and determine a motion may adjourn it to a panel of the Divisional Court.

[4] Pursuant to Section 21(5) of the Courts of Justice Act, supra, “A panel of the Divisional Court may, on motion, set aside or vary the decision of a judge who hears and determines a motion.”

POSITION OF THE RESPONDENT (MOVING PARTY ON THE MOTION)

[5] CPAB seeks an order to quash the application for judicial review on the following grounds. First, it argues that the Divisional Court has not jurisdiction to hear the application for judicial review because CPAB exercises no statutory powers subject to judicial review. CPAB derives its powers of a natural person and its powers to enact by-laws under a general corporate statute, namely the Canadian Corporations Act. This fact, CPAB argues, does not make the actions of the corporation, its board or its management an exercise of statutory powers.

[6] Secondly, CPAB argues that CGA-Canada lacks standing to bring the application for judicial review in that it lacks both private interest standing as well as public interest standing to seek the declaratory relief it wants. With respect to the former, CPAB maintains that CGA-Canada has not identified any contractual or legal interest it has which is directly affected by CPAB’s organization or governing structure.

[7] With respect to the latter, CPAB argues that CGA-Canada cannot meet the accepted three-part test that (1) there is a serious issue as to the validity of the exercise of a statutory power, (2) CGA-Canada has a genuine interest in the matter, and (3) there is not another reasonable and effective way to have the matter adjudicated.

[8] Finally, CPAB argues that because declaratory relief is a discretionary remedy granted by the Court, it should not be granted where it serves little useful purpose. On the facts of this case such relief would not resolve any existing legal dispute. According to CPAB, the declaratory relief sought by CGA-Canada is sought merely for its political objectives of seeking an expanded role for certified general accountants in the auditing of public companies.

POSITION OF THE APPLICANT (MOTION RESPONDENT)

[9] CGA-Canada contests the motion to quash its application for judicial review on the following grounds. Firstly, an examination of the facts and issues of this case leads one to the conclusion that the high threshold test applied on a motion to quash an application for judicial review has not been met by CPAB. Based on the assumption that CGA-Canada can prove its case on the merits, CPAB has not in this motion established that it is “plain and obvious” that the application for judicial review brought by CGA-Canada has no chance of success.

[10] Secondly, According to CGA-Canada, an association or other organization need not be created by statute in order to be a public body subject to an application for judicial review of its organization or actions. Despite the fact that CPAB has no obvious statutory source of power or authority, it is a public body, exercising a public function and mandate. It makes rules and sets standards for the purpose of protecting the public interest in the practice of public accounting.

[11] Thirdly, CGA-Canada argues that in its application for judicial review, it has raised serious and justiciable issues concerning CPAB and the way that it has conducted itself with regards to CGA-Canada and CGAs in general which bear on CGA-Canada’s own statutory rights, mandate and jurisdiction as a self-governing professional body. This grants it standing to bring the application for the judicial review. Furthermore, CPAB’s response to these allegations is essentially an argument on the merits which should be left to the application for judicial review where the matter will be decided on the merits. It should not be decided on this motion where there is an incomplete evidentiary record.

[12] Finally, CGA-Canada argues that its application, if it succeeds will be purposefully useful. Because its application for judicial review raises serious justiciable issues, the disposition of the application will have a real impact on the legal rights and mandate of CGA-Canada. It will also have a bearing on the division of powers and the interaction between CGA-Canada and CPAB. The declaratory relief will also have a direct bearing on the ability of CGA members to work in the marketplace in the public accounting field.

FACTUAL OVERVIEW

[13] Before entering on the merits of the motion before me it is useful to provide the following factual context of the dispute between the parties, much of which is agreed to by both parties.

[14] The Applicant is an association founded in 1908 and incorporated by an Act of Parliament in 1913. Its purpose is to promote the interests of CGAs and to establish professional practice standards and services. It establishes and develops national standards for education, independence, admission to the profession, examinations, ethics, discipline and professional practice which are implemented and administered by the provincial and territorial CGA associations which have been granted power to regulate the profession within each provincial or territorial jurisdiction. In this way the CGA-Canada also sees itself as promoting the interests of the public in the area of its jurisdiction and mandate.

[15] The CGAs are one of the three professional accounting designations in Canada. The other designations are the Certified Management Accountants (“CMAs”) and the Chartered Accountants (“CAs”). These two other designations have their own self-regulating associations or institutes, both at the provincial, territorial and national levels, with comparable jurisdictions and mandates to those of the CGAs’ associations. Some examples of these are the Institute of Chartered Accounts of Ontario (“ICAO”), the Canadian Institute of Chartered Accountants (“CICA”) and Provincial Chartered Accountants Institutes (“PICA”).

[16] This case arises in the context of a long standing dispute which has existed between two of those accounting designations, the CGAs and the CAs. Specifically, the dispute concerns the right of CGAs to enjoy full practice rights with CAs including the ability to perform audits for publicly-traded companies. This parity has been achieved in many provinces as well as in a number of federal statutes. However, in Ontario and Quebec there are restrictions that largely preclude some accounting designations other than CAs from enjoying full public practice rights. There is no question that CGA-Canada and its provincial and territorial associations have been working to eliminate those restrictions to public accounting functions placed on its professional membership.

[17] The Respondent, CPAB is a not-for-profit corporation without share capital incorporated by letters patent issued under the Canada Corporations Act in April, 2003. The letters patent and initial by-laws, establishing the essential structure of the CPAB, were approved by the Federal Minister of Industry under the Canada Corporations Act.

[18] The objects of CPAB, as set out in its letters patent, among other things includes contributing to public confidence in the integrity of financial reporting of reporting issuers by promoting high quality, independent auditing.

[19] It is not disputed that CPAB lacks statutory powers beyond its general corporate powers. Rather, it operates by way of “Participation Agreements”. In order to conduct inspection of public accounting firms that audit reporting issuers to ensure compliance with professional standards and other requirements, CPAB enters into Participation Agreements with public accounting firms that audit reporting issuers. CPAB then relies on contractual powers created and outlined by the Participation Agreements to conduct its inspections of participating audit firms. Under CPAB’s by-laws, all public accounting firms that audit reporting issuers are eligible to enter in to a Participation Agreement with CPAB.

[20] Under CPAB’s by-laws, CPAB has enacted rules to govern its process in relation to the audit firms that have entered into Participation Agreements with it. The rules have been incorporated by reference to become terms of each Participation Agreement. Every participating audit firm is contractually obligated to comply with the rules of the contract and to permit the CPAB to conduct its oversight activities in accordance with the rules.

[21] In the event that a dispute in relation to the Participation Agreement arises, it may be resolved by an arbitration process which is to be the “sole and exclusive procedure for the resolution of any such Dispute” (see sections 901 and 902 of CPAB Rules enacted under its by-laws).

[22] It was agreed by both parties that CPAB was created as a result of the accounting scandals and high-profile business failures, such as Enron and Arthur Anderson which took place in the early 2000s. One response of the American government was the passing of the Sarbanes-Oxley Act of 2002. Among other things, this Act created the Public Company Accounting Oversight Board, an independent, non-profit corporation, to oversee auditors of public companies.

[23] In Canada also, in early 2002, various significant players in the securities and investment field came together to discuss actions to restore investor confidence. Those players included such people as the Chairman of the Ontario Securities Commission, the Chairman of the Technical Committee of the International Organization of Securities Commissions and other chairpersons of securities commissions from the largest jurisdictions.

[24] At the national level at about the same time, such organizations as the Canadian Securities Administrators, which is an umbrella organization comprised of all provincial and territorial securities regulators, (“CSA”), the federal Office of the Superintendent of Financial Institutions (“OSFI”) and CICA came together to formulate and release details about a system of more rigorous inspection of auditors of public companies, tougher auditor independence rules and new quality control requirements for firms auditing public companies.

[25] Following these many meetings among Canada’s securities regulators and their international counterparts, it was announced that CPAB would be created to administer and enforce the new requirements and that the creation of CPAB would ensure the independence and transparency of the new process.

[26] In the creation of the CPAB a decision was made to proceed by means of a not-for-profit corporation incorporated under the Canada Corporations Act. The constitutional make-up of Canada is such that there is an absence of a national mechanism, such as a national securities regulator or federal legislation under which CPAB could be constituted and endowed with the statutory powers to oversee auditors of public companies across Canada. Trying to co-ordinate provincial legislative changes within the desired timeframe would have been impractical. Finally, it was decided that the objectives would be met by having the participating members of CPAB become contractually subject to the new standards administered by CPAB.

[27] As indicated earlier, the governance structure of CPAB was eventually constituted by letters patent issued April 14, 2003, under the Canada Corporations Act and the initial corporate by-laws. The details of the governance and structure of CPAB is not disputed and is described in detail in both of the parties’ material filed on this motion and in the main application for judicial review (see the letters patent and the corporate by-laws of the CPAB, part (vi) of the Factum of the Applicant, part D of the Factum of the Certified General Accountants Association, tab I, pages 9 to 11 inclusive of the Supplementary Motion Record of the Respondent (Moving Party), and tab 2, pages 12 to 14 inclusive of Application Record of the Applicant, vol. 1 of 3). I, therefore, need not repeat it here but by reference incorporate it into these reasons.

[28] The Canadian federal government never enacted any legislation with respect to CPAB and its auditor oversight activities. Instead, after the conclusion of hearings regarding the Canadian perspective to the Enron collapse, held by the Senate Standing Committee on Banking, Trade and Commerce, the federal government chose to support the formation of CPAB as proposed with the participation of the federal Superintendent of Financial Institutions and the representatives of the CSA in the Council of Governors. The federal Superintendent of Financial Institutions also let it be known publicly and at the Senate hearings that he was involved on behalf of the federal government. As can be seen from the structure of the CPAB the Superintendent of OSFI is a permanent member of the Council of Governors of CPAB.

[29] Other federal government spokespersons have similarly expressed their support and responsibility for the creation of CPAB. In a December 2, 2002 speech, Deputy Prime Minister and Minister of Finance, John Manley recognized his Department’s role in the establishment of CPAB and stated that it was “an example where governments, regulators and the private sector have worked together to provide a timely and effective solution for Canada.”

[30] This federal government support was granted in the face of objections and concerns raised by CGA-Canada to the federal government. The objections and concerns raised are the issues put before this Court in the application for judicial review.

[31] In the face of those same concerns raised by CGA-Canada about the governance and structure of CPAB, in June 2003 the CSA published a Multi-Lateral Instrument on Auditor Oversight (Multilateral Instrument 52-108) that required all accounting firms conducting audits of publicly-traded companies to have entered into a Participation Agreement with CPAB. Effectively, it requires that a reporting issuer that files its financial statements accompanied by an auditor’s report must have the auditor’s report prepared by a public accounting firm that is, as of the date of the auditor’s report, a firm that has entered into a Participation Agreement with CPAB and that is in compliance with any restrictions or sanctions imposed by the CPAB.

[32] All provincial and territorial securities regulators adopted Multilateral Instrument 52-108. It thus became a National Instrument. Since the National Instrument 52-108 came into force all auditors of publicly-traded companies must have entered into a Participation Agreement with CPAB and be in good standing under that Participation Agreement.

[33] As the CPAB mentioned in its report of 2003 at page 4 (see exhibit #33 of the Affidavit of Ronald Colucci, sworn July 19, 2006):

As a consequence of National Instrument 52-108, mentioned above, audit firms have no choice but to participate in CPAB’s oversight process if they wish to audit public companies.

[34] In that same report the CPAB Chief Executive Officer, Mr. David E. Scott indicated that another objective of the organization for 2004 was,

Making progress towards obtaining certain statutory powers and protections that are necessary for CPAB to operate with maximum effectiveness. We were encouraged that the March 19 federal budget included the Government’s commitment to work with us closely to ensure that we are able to achieve our mandate within a sound governance structure and a strong legal framework.

[35] The CPAB continues to operate as a not-for-profit corporation through Participation Agreements with auditing firms and with the support of National Instrument 52-108.

[36] The Federal Government has continued to support and endorse the work and mandate of the CPAB. It was mentioned in the 2005 budget as an organization with whom the Federal Government would continue to work in maintaining Canadian auditing standards.

[37] The CPAB, true to the 2003 report of its Chief Executive Officer, has been working to obtain some statutory immunity from prosecution for its actions or omissions in the course of carrying out its mandate and objectives. It appears to have been somewhat successful in the province of Quebec on the issue of professional confidentiality (see Affidavit of Ronald Colucci, para. 123, tabs 2 and 70 of Application Record of the Applicant, vol. 1 of 3 and vol. 3 of 3 respectively).

[38] In Ontario, the Ontario Legislature has passed legislation that, once it has been proclaimed by the Lieutenant Governor, will grant to the CPAB a statutory and public mandate as well as certain statutory immunities the Ontario Government sees as necessary in the Act to carry out its purpose, namely, “to promote the integrity of financial reporting in Ontario’s capital markets”. This legislation establishes the CPAB’s mandate to oversee the audit of the financial statements of reporting issuers in Ontario. It further indicates that the CPAB is to carry out its mandate in accordance with its letters patent, its by-laws and its rules which, if they were to be amended, would only take effect in Ontario after being approved by the Ontario Finance Minister. The Bill also provides for a dispute resolution process for the Board’s oversight activities in Ontario that ultimately includes an appeal to the Divisional Court on a question of law only (see Supplementary Motion Record of the Respondent (Moving Party), tab 1 B, Bill 151, an Act to enact various 2006 Budget measures and to enact, amend or repeal various Acts, 2006; c. 33, S O., 2006) (not yet proclaimed into force as of the writing of these reasons).

TEST TO BE APPLIED ON MOTION TO QUASH APPLICATION FOR JUDICIAL REVIEW

[39] The test to be applied on a motion to quash an application for judicial review is not contested. It is clear that such a motion can succeed only where it is “plain and obvious that the judicial review application would fail” or where the Court is satisfied that “the case is beyond doubt.” (See Ofner Essex Resources v. Ontario (Minister of Environment and Energy) (1996), 18 C.E.L.R. (N.S.) 317 at p. 318 (Ont. Div. Ct.); Re Ainsworth Electric and Exhibition Place (1987), 58 O.R. (2d) 432 at 434 (Div. Ct); and Operation Dismantle Inc. v. Canada, [1985] 1 S.C.R. 441).

[40] While Doherty J. A. explained in the decision of Schreiber v. Canada (Attorney General), 52 O.R. (3d) 577 at para. 15 (C.A.) why the test against the pre-emptive striking of legal actions is set so high, that decision also established that there are certain questions that can only be properly determined on a preliminary basis. On the facts of that case, a claim for sovereign immunity was just one of those questions. The question of the jurisdiction of a Court to hear a matter, as raised by the Respondent, would clearly be another.

DOES THIS COURT HAVE JURISDICTION TO HEAR THE APPLICATION FOR JUDICIAL REVIEW?

[41] Section 2 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 as amended (the “JRPA”) outlines the scope of applications for judicial review. Section 2(1)2 indicates that he Court may grant relief in,

Proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.

[42] In Keewatin v. Ontario (Minister of Natural Resources), [2003] O.J. No. 2937, 66 O.R. (3d) 370 (Div. Ct.) Mr. Justice Then quashed an application for judicial review with leave to bring an action where the issues raised could only be properly and adequately adjudicated on the basis of evidence tendered at trial. More importantly, Mr. Justice Then found that essentially the ministerial decision questioned by the applicants could not be characterized as a statutory power of decision but rather was a question of constitutional validity of the legislation in question.

[43] The exercise of a statutory power was also found lacking in the case of Re Tomen and Ontario Public School Teachers’ Federation et al., [1986] O.J. No. 727 at p. 2 despite the “public aspect” of the Ontario Teachers’ Federation. Its By-Law 1 did not have the force of subordinate legislation but of private law.

[44] In Re Ainsworth Electric Co. Ltd. v. Board of Governors of Exhibition Place et al., (1987), 58 O.R. (2d) 432 (Div. Ct.) where a Board of governors of Exhibition Place, created under provincial legislation and given a public mandate to operate, manage and maintain Exhibition Place made a decision relating to the number of electrical contractors on the premises of Exhibition Place, the Divisional Court unanimously found that it lacked jurisdiction in the matter. The decision in question was a commercial decision and the “courts have no authority in the exercise of their prerogative jurisdiction, to review a commercial business decision”.

[45] In Ripley v. Investment Dealers Association (1990), 99 N.S.R. (2d) 338 at 346, 347 (S.C. T.D.), aff’d (1991), 108 N.S.R. (2d) 38 (C.A.), Mr. Ripley was a member of the Investment Dealers’ Association of Canada (I.D.A.) who came under the investigation of the I.D.A. as a result of a complaint against him. One question before the Court was whether the decision of the discipline panel of the I.D.A. should be quashed on an application for certiorari. The Court found that the decision of the disciplinary committee was not subject to certiorari. The Court came to that conclusion in finding that the I.D.A. was not performing a public function or acting as an agent of the government. This was so despite the fact that the provincial Securities Act of Nova Scotia provided for a potential delegation of certain authority to the I.D.A. (in fact, no such delegating regulation had been passed), made reference to membership with the I.D.A. as a condition of being registered under certain categories of investment dealers as defined under the Act and provided certain exemptions from bonding and participation in a compensation fund to members of the I.D.A. In essence, the Court found that the Nova Scotia Securities legislation and Regulations merely recognized that the I.D.A. has rules and procedures that were acceptable to the Registrar of Securities for the province. Significantly, the Court found that if the I.D.A. disciplinary panel were to revoke the approval of the applicant, it would not result in the automatic revocation of his registration under the provincial Securities Act.

[46] Nonetheless, the Nova Scotia Court of Appeal did find that as an unincorporated association, not specifically empowered under any statute and whose members bind themselves by contract to comply with the requirements of the I.D.A. constitution by-laws and regulations and where the right to practice one’s profession is in issue, the I.D.A. must comply with the rules of natural justice which includes such things as a fair hearing and reaching a decision untainted by bias.

[47] In McDonald v. Anishinabek Police Service, [2006] O.J. No. 4210 (Div. Ct.), the Divisional Court had the following to say about the purpose of requiring a “statutory power” as a prerequisite to relief in the form of a declaration or injunction…” at paragraphs 51 to 53 inclusive:

51. On a plain reading of the JRPA, where an injunction or a declaration is sought, judicial review must relate to a statutory power. However, where the order sought is in the nature of mandamus, prohibition or certiorari, the exercise of a statutory power is not required.

52. The purpose of requiring a “statutory power” as a prerequisite to relief in the form of a declaration or injunction is to restrict the JRPA’s application to only the public, and not the private, law uses of these remedies. However, as the prerogative writs are only available as public law remedies, no such limitation is required.

53. While early interpretations of s. 2(1)1 of the JRPA may have read in the requirement of a “statutory power” as a prerequisite to relief in the nature of mandamus, prohibition or certiorari, subsequent cases have rejected this interpretation. Rather, the prerogative writs are available where the public decision-maker owes a duty of fairness.

[48] In that same decision the Court went on to discuss the evolving nature of judicial review applications by way of prerogative writs. It made reference to the need of such evolution in order to meet the ever-changing nature of the administrative state. Hence, in R. v. Criminal Injuries Compensation Board, Ex p. Lain, [1967] 2 Q.B. 864, the Court found the decision of the Criminal Injuries Compensation Board amenable to judicial review even though it was not created by statute but by the prerogative powers of the executive branch of government. It was found that in the exercise of its function and mandate the board had sufficient public or official character to negate the notion that it operated merely in the private domaine.

[49] The Court in McDonald v. Anishinabek Police Service, supra, in coming to its decision also relied on a decision of the British Court of Appeal, R. v. Panel on Take-overs and Mergers, [1987] 1 Q.B. 815 (C.A.). The Applicant strongly relies on this case in its argument that this Court has jurisdiction to hear its judicial review application for declaratory relief. On the facts of that case the Panel of Take-overs and Mergers dismissed a complaint that a company, N. Plc. had acted in concert with other parties in breach of the City Code on Take-overs and Mergers. The applicant sought to quash the panel’s decision on an application for judicial review. The relief sought among other things, included an order of certiorari to quash the panel’s decision and /or a declaration that the decision was wrong in law. In coming to its decision the British Court of Appeal did not appear to make a distinction between the categories of relief sought.

[50] In coming to its conclusion that the British Court of Appeal had the jurisdiction to hear the matter even though the source of the Panel’s power could not be said to be derived from public law such as a statute or a statutory instrument or prerogative, the Court described the Panel of Take-overs and Mergers in the following way,

The Panel on Take-overs and Meragers is a truly remarkable body. Perched on the 20th floor of the Stock Exchange building in the City of London, both literally and metaphorically it oversees and regulates a very important part of the United Kingdom financial market. Yet it performs this function without visible means of legal support.

The panel is an unincorporated association without legal personality and, so far as can be seen, has only about twelve members. But those members are appointed by and represent the Accepting Houses Committee, the Association of Investment Trust Companies, the Association of British Insurers, the Committee of London and Scottish Bankers, the Confederation of British Industry, the Council of the Stock Exchange, the Institute of Chartered Accountants in England and Wales, the Issuing Houses Association, the National Association of Pension Association and the Unit Trust Association; the chairman and deputy chairman being appointed by the Bank of England. Furthermore, the panel is supported by the Foreign Bankers in London, the Foreign Brokers in London and the Consultative Committee of Accountancy Bodies.

It has no statutory, prerogative or common law powers and it is not in contractual relationship with the financial market or with those who deal in the market. According to the introduction of the City Code on Take-overs and Mergers, which it promulgates:

The code has not, and does not seek to have, the force of law, but those who wish to take advantage of the facilities of the securities markets in the United Kingdom should conduct themselves in matters relating to take-overs according to the code. Those who do not so conduct themselves cannot expect to enjoy those facilities and may find that they are withheld. The responsibilities described herein apply most directly to those who are actively engaged in all aspects of the securities markets, but they are also regarded by the panel as applying to directors of companies subject to the code, to persons or groups of persons who seek to gain control (as defined) of such companies, and to all professional advisers (insofar as they advise on the transactions in question), even where they are not directly affiliated to the bodies named in section (1) (a). Equally, where persons other than those referred to above issue circulars to shareholders in connection with take-overs the panel expects the highest standards of care to be observed. The provisions of the code fall into two categories. On the one hand, the code enunciates general principles of conduct to be observed in take-over transactions: these general principles are a codification of good standards of commercial behaviour and should have an obvious and universal application. On the other hand, the code lays down a series of rules, some of which are no more than examples of the application of the general principles whilst others are rules of procedure designed to govern specific forms of take-over. Some of the general principles, based as they are upon a concept of equity between one shareholder and another, while readily understandable in the City and by those concerned with the securities markets generally, would not easily lend themselves to legislation. The code is therefore framed in non-technical language and is, primarily as a measure of self-discipline, administered and enforced by the panel, a body representative of those using the securities markets and concerned with the observance of good business standards, rather than the enforcement of the law. As indicated above, the panel executive is always available to be consulted and where there is doubt this should be done in advance of any action. Taking legal or other professional advice on matters of interpretation under the code is not an appropriate alternative to obtaining a view or a ruling from the executive.

[51] The Court concluded as follows at page 826:

The panel is a self-regulating body in the latter sense. Lacking any authority de jure, it exercises immense power de facto by devising, promulgating, amending and interpreting the City Code on Take-overs and Mergers, by waiving or modifying the application on the code in particular circumstance, by investigating and reporting upon alleged breaches of the code and by the application or threat of sanctions. These sanctions are no less effective because they are applied indirectly and lack a legally enforceable base. …

[52] And at page 838, the Court stated:

But in between these extremes there is an arena in which it is helpful to look not just at the source of the power but at the nature of the power. If the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may … be sufficient to bring the body within the reach of judicial. It may be said that to refer to “public law” in this context is to beg the question. But I do not think it does. The essential distinction, which runs through all the cases to which we were referred, is between a domestic or private tribunal on the one hand and a body of persons who are under some public duty on the other.

[53] As the Divisional Court in McDonald v. Anishinabek Police Service, supra, pointed out, the principles established in R. v. Panel on Take-overs and Mergers, supra, have since been applied by Canadian Courts (see Volker Stevin N.W.T. (’92) Ltd. v. Northwest Territories (Commissioner) (1993), 113 D.L.R. (4th) 639 (N.W.T.C.A.); Masters v. Ontario (1993), 16 O.R. (3d) 439 (Div. Ct.); and Scheerer v. Waldbillig, [2006] O J. No 744 (Div. Ct.)).

[54] The Divisional Court came up with its own list of various factors which can be used to distinguish domestic tribunals from public bodies found at page 18 of McDonald v. Anishinabek Police Service, supra:

the source of the board’s powers;

the functions and duties of the body;

whether government action has created the body, or whether, but for the body, the government would directly occupy the area, such that there is an implied devolution of power;

the extent of the government’s direct or indirect control over the body;

whether the body has power over the public at large, or only those persons who consensually submit to its jurisdiction;

the nature of the body’s members and how they are appointed;

how the board is funded;

the nature of the board’s decision –does it seriously affect individual rights and interests;

whether the body’s constituting documents, or its procedures, indicate that a duty of fairness is owed; and

the body’s relationship to other statutory schemes or other parts of government, such that the body is woven into the network of government.

[55] Based on the factual overview described above, it is clear that the CPAB does not carry out its objectives and mandate by way of any statutory powers accorded to it by any Legislative body. It remains and continues to operate as a not-for-profit corporation without share capital incorporated by letters patent issued under the Canada Corporations Act. Accounting firms, if they are to come within the oversight activities of the CPAB, do so on a voluntary basis by virtue of the Participation Agreements which they enter into with the CPAB. The Rules of the CPAB provide for a dispute resolution process should any dispute arise under the Participation Agreement between the two parties to the Participation Agreement.

[56] Nonetheless, I am not persuaded, on the evidence before this Court, that it is so “plain and obvious” or “beyond doubt” that the CPAB cannot be considered a public body subject to this judicial review application. I come to this conclusion after considering the expanded principles enunciated in R. v. Panel on Take-overs and Mergers, supra and applied by Canadian courts and the list of factors one should consider as set out in the decision of McDonald v. Anishinabek Police Service, supra.

[57] Despite the legal source and form of the CPAB’s creation, it was created to serve a public interest at a time of crisis in the business community. In the face of the high profile business failures, there was a public need, recognized by all levels of Canadian governments and other statutory bodies mandated to deal with these questions, to restore investor confidence in the securities and investment field. These bodies recognized the public need to establish a more rigorous system of inspection of auditors of public companies and to have an independent and transparent body that could oversee the process. No one would nor could deny that these public needs became the objectives and mandate of the CPAB.

[58] Clearly, it is an area that both the Federal and provincial governments could have entered and filled, within the limits of their constitutional powers, and more than likely would have, had the CPAB not been created. It is conceded that the response of governments and Canadian regulatory bodies could not have been so quickly engaged, as was done in the United States, because of the specific constitutional division of powers between the different levels of government in Canada.

[59] The federal government chose instead to work through the CPAB and has continued to do so. It publicly supported the objectives and mandate of the CPAB as well as its oversight work. Individuals within the CPAB governance structure have publicly declared themselves to represent the federal government such as the Office of the Superintendent of Financial Institutions.

[60] Certain provincial governments, such as Quebec and Ontario, also supported and continue to support the mandate and work of the CPAB. More importantly, such governments, to the extent of their constitutional powers, have passed and are in the process of passing provincial legislation that entrenches in the law or provides certain legal immunities to, in one form or another, the mandate and work of the CPAB. Schedule D of Bill 151, Canadian Public Accountability Board Act (Ontario 2006) will, once it comes into force, recognize that according to section 5. (1) of that Schedule:

The Board, in carrying out its mandate and in exercising its powers and duties under this Act, is independent from, but accountable to, the Commission [Ontario Securities Commission] and the Government of Ontario as set out in this Act.

[61] The decision of the CSA to publish the Multi-Lateral Instrument on Auditor Oversight which is now in force as National Instrument 52-108, has effectively, as was stated in the 2003 CPAB annual report, given audit firms, “no choice but to participate in CPAB’s oversight process if they wish to audit public companies”.

[62] The Respondent rightly points out that under the CPAB’s by-laws, all public accounting firms that audit reporting issuers are eligible to enter into a Participation Agreement with CPAB. Consequently, the dispute resolution process under the CPAB rules if a dispute arises with any auditing firm, including a CGA accounting firm, would be available to that participating auditing firm. However, in view of the fact that all auditors of public companies have no choice but to enter into such a Participation Agreement if they wish to audit public companies, this begs some fundamental questions raised on the application for judicial review brought by CGA-Canada, such as: is the CPAB, in holding out equal availability to Participation Agreements to all auditing firms who are legally able to do public auditing, treating all such auditing firms and their regulatory bodies, regardless of professional accounting designations, fairly, given the public interest objectives and mandate of the CPAB? Perhaps another way of formulating the question might be: should an organization such as the CPAB that has a public interest mandate and that has the approbation of both federal and provincial governments as well regulatory bodies to control the gate to full public practicing rights of the auditing profession, by way of their Participation Agreements, be subject to the supervisory jurisdiction of this Court on questions of natural justice and bias? The very public nature and mandate of the CPAB leads me to answer this latter question in the affirmative. I find that this Court does have jurisdiction to hear this matter.

DOES THE APPLICANT LACK STANDING TO BRING THIS APPLICATION FOR JUDICIAL REVIEW?

[63] On this issue the evidence supports the conclusion that the Applicant can be found to have standing to bring the application for judicial review.

[64] The CGA-Canada has the mandate and exists to promote the interest of the CGAs as well as the interests of the public in the area of its jurisdiction and mandate. With that purpose, “CGA-Canada develops and establishes national standards for education, independence, admission to the profession, examinations, ethics, discipline and professional practice, which are implemented and administered by the provincial and territorial CGA associations that have been granted the power to regulate the profession within each provincial or territorial jurisdiction.”

[65] In that role, CGA-Canada, as a professional self-regulatory body has and should have the standing to challenge matters affecting the profession that it regulates and for which it sets standards. I am persuaded of this fact by the jurisprudence presented by the Applicant on this point (see Federation of Law Societies of Canada v. Canada (Attorney General) (2002), 57 O.R. (3d) 383 (S.C.J.) leave ref’d [2002] O.J. No. 1706 (S.C.J.); Association of Architects (Ontario) v. Association of Architectural Technologists (Ontario) (2002), 2002 FCA 218, 215 D.L.R. (4th) 550 (F.C.A.); Association of Professional Engineers and Geoscientists of British Columbia v. Visser (2004), 2004 BCSC 700, 16 Admin L.R. (4th) 117 (B.C.S.C.); and College of Dental Surgeons (British Columbia) v. Findlay (2000), B.C.S.C. 1311 and 496482 Ontario Inc. v. Canada (Attorney General) (1982), 25 C.P.C. 207 (F.C.)).

[66] CGA-Canada has public interest standing to seek declaratory relief. The evidence relating to the history of the adoption of the independence standards by the CPAB, prior to the application for judicial review being brought and which was an impetus for the bringing of the judicial review application by the CGA-Canada against CPAB, is indicative of how the public mandate of the CPAB and how its governing body chooses to exercise it has the potential of encroaching on the standard setting jurisdiction of the CGA-Canada without the involvement of the CGA-Canada. Such actions on the part of CPAB can affect the availability of full public practice rights of the CGA-Canada membership. This specific question is now moot with respect to independence standards. But it only became moot after the launching of these proceedings.

WILL DECLARATORY RELIEF SERVE A USEFUL PURPOSE?

[67] I accept the submissions of counsel for the Respondent that declaratory relief is a discretionary remedy that should not be granted unless it serves a useful purpose. Based on my decisions on the previous two questions, I cannot conclude that any declaratory relief granted on this judicial review application after the matter has been decided on its merits would serve “merely political purposes” in this long standing dispute between the different accounting designations.

[68] I have found that the CPAB has the nature and characteristics of a public body with a public mandate and purpose to oversee the auditing of public companies. As a result of the support and the powers accorded to it by both levels of government, federal and provincial, and the regulatory bodies in order to carry out that mandate, it exercises control over who can and cannot audit public issuers by way of its Participation Agreements, its by-laws and its rules.

[69] The jurisprudence does not support the conclusion that declaratory relief should be granted only in those cases in which the declaratory relief, if granted, will resolve a specific present or existing legal dispute. In the decisions of Morneault v. Canada (Attorney General) (2000), 189 D.L.R. (4th) 96 (F.C.A.) and Operation Dismantle Inc. v. Canada, [1985] 1 S.C.R. 441, the Court recognized that it was a much broader relief justified by serving a “useful purpose” or even a “preventative role”. The question of the function and import of the declaratory relief on the facts of this case should be left to the argument of the matter on its merits.

CONCLUSION

[70] For all of these reasons the motion to quash the application for judicial review is dismissed. At the end of submissions on this motion counsel for the Applicant raised the question of whether, if the Court assessed it to be so, this matter would be more appropriately advanced as an action as opposed to an application for judicial review. The Applicant’s counsel submitted that he would be open to such an order as was done in the cases of Keewatin v. Ontario (Minister of Natural Resources), [2003] O.J. No. 2937, 66 O.R. (3d) 370 (Div. Ct.) and in Seaway Trust Co. et al. v. The Queen in right of Ontario et al., (1983), 41 O.R. (2d) 501 (Div. Ct.). In view of the results of this motion I decline to make such an order. Both counsel are, of course, free to seek such an order as well as to seek an order to set aside or vary my decision on this motion before a panel of the Divisional Court pursuant to section 21(5) of the Courts of Justice Act, supra.

COSTS

[71] The last issue to determine on this motion is the question of costs. If counsel cannot resolve this issue between them, the Applicant shall have two weeks from the release of this decision to serve and file its submissions on costs. The Respondent shall then have one week from that date to serve and file its submissions on costs. The Applicant shall then have one week from that date to serve and file a reply if it so wish.

M. Linhares de Sousa J.

Released: January 22, 2008

COURT FILE NO.: 06-DV-1222

DATE: 2008/01/22

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

B E T W E E N:

CERTIFIED GENERAL ACCOUNTANTS ASSOCIATION OF CANADA

Applicant (Respondent)

• and –

CANADIAN PUBLIC ACCOUNTABILITY BOARD

Respondent (Moving Party)

DECISION ON MOTION TO QUASH APPLICATION FOR JUDICIAL REVIEW

M. Linhares de Sousa J.

Released: January 22, 2008