Seventy pieces of Ontario legislation provide for regulators of professions and industries to scrutinize the integrity of applicants for registration or licensure. Ontario’s Divisional Court urged that a common approach should be taken to interpreting that legislation in Yarco Developments Inc. v. Home Construction Regulatory Authority (Registrar), 2024 ONSC 93 (CanLII). In particular, the Court was of the view that integrity is integral to the registration of applicants and that regulators have an important gatekeeping function in order to protect the public.
In Yarco the License Appeal Tribunal (“LAT”) was tasked with reviewing a proposal to refuse the renewal of a new home builder’s licence primarily on the basis of the applicant’s integrity. The applicant’s sole owner and director had engaged in various concerning conduct and had been convicted of serious crimes in the past. He had previously been licensed under earlier legislation. LAT, noting that new legislation applied, carefully contrasted the language of the current and previous integrity and honesty provisions. LAT noted that the test was switched from the negative (i.e., applicants are not entitled to registration where their conduct affords reasonable grounds for belief that they will not carry out their activities “in accordance with law and with integrity and honesty”) to the positive (i.e., applicants are entitled to registration where their conduct affords reasonable grounds for belief that the applicant will carry out its activities “in accordance with law and with integrity and honesty”). As a result, LAT concluded that the applicant only had to show there were reasonable grounds for belief they would carry on business with integrity, and if they did, the Registrar would have the onus on appeal to show the applicant was not entitled to a licence. Further, LAT was of the view that the reference in the provision to “past and present” conduct, from just “past” conduct, mandated a broader review of the applicant’s current integrity.
LAT concluded that the applicant had “current integrity”. The convictions, though serious, were 15 years old. LAT accepted the applicant owner’s testimony that they had turned their life around. Their criminal convictions were fully declared on the application form. LAT found that “the onus was on the Registrar to prove, on a balance of probabilities, that granting a licence was not in the public interest” and the Registrar had not done so. LAT ordered that the applicant’s licence be renewed.
The regulator appealed the LAT decision. The Court on appeal viewed the interpretation of the test for scrutinizing integrity by regulators as a question of law that was subject to review on the basis of correctness. The Court concluded that the tribunal had made three errors of law.
The first error was failing “to take the modern approach to statutory interpretation”. As this was consumer protection legislation, the interpretation should not be based on the wording of the provision alone. Instead, one had to look at its purpose and statutory framework. “A literalist approach ‘presupposes the impossible — that meaning can in fact be constructed in the absence of context’”. The Court said: “discerning the ordinary meaning of the words in a text is only the beginning of the interpretive exercise.”
The Court said:
“… the use of positive as opposed to negative language and the reference to both past and present conduct is immaterial to the interpretation of a provision…. Any criteria framed in the negative can be reframed in positive terms and vice versa. This should have no impact on the gatekeeping purpose or function.”
Noting that there were 70 integrity screening provisions in the various provincial statutes, the Court said:
Regardless of these wording differences, courts and tribunals have recognized that all these gatekeeping provisions have the same purpose and function and read them consistently to permit the gatekeeper to deny certification or licensure on a “reasonable grounds for belief” standard.
The second error was related to who had the onus of demonstrating integrity or lack thereof. The Court said:
“… the [tribunal] interpreted this provision to place on the Registrar the onus to disprove an applicant’s entitlement to a licence if there is some evidence that its business will be carried on in accordance with the law and with integrity and honesty. To read the provision this way ignores the language in s. 38(1)(b)(iii) that shows that the legislator intended the Registrar to play a meaningful gatekeeper role.”
The approach taken by LAT “led to an interpretation clearly inconsistent with the intent of the New Licensing Act, that is, the enhancement of consumer protection and strengthening of the licensing regime.”
The third error related to the basis upon which the regulator could act. The phrase “reasonable grounds for belief”, while more than mere suspicion, is less demanding than a balance of probabilities:
“In short, the text, history, purpose, and statutory context of s. 38(1)(b)(iii) all indicate a legislative intent to increase the consumer protection. This supports an interpretation that gives the Registrar the ability to deny a licence or licence renewal where it believes, on some objective basis based on compelling and credible information, that the applicant will not conduct itself with integrity and honesty. The legislative intent is inconsistent with an interpretation that assumes that an applicant will conduct itself appropriately, unless the Registrar can prove otherwise.”
The Court said an approach with: “… robust gatekeeping powers is supported by the interpretation given to similar integrity and honesty provisions in other regulatory legislation.” The Court, in urging a consistent approach across regulators, reviewed similar provisions in other legislation in very different contexts, such as for the registration of physicians.
However, in terms of the actual decision on this application, the Court deferred to the adjudicator and returned the matter for consideration by a differently constituted panel.
One can expect many regulators, when exercising their integrity gatekeeping role, to refer to a belief founded on “some objective basis based on compelling and credible information.”
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc, at Law360 Canada.