Court of Appeal for Ontario affirms that the “Student Choice Initiative” was imposed unlawfully
Colleges operate as agents of the Crown and are regulated by the OntarioColleges of Applied Arts and Technology Act (“OCAAT Act”).[i] The OCAAT Act grants the Minister of Training, Colleges and Universities (the “Minister”) substantial control over colleges’ internal operations.[ii]
By contrast, universities in Ontario are quasi-public institutions. A statute incorporates each university (collectively the “University Acts”) as a not-for-profit corporation. Their quasi-public nature has been interpreted as affording universities significant autonomy to govern their internal processes.[iii]
Ontario provides operating grants to colleges and public universities. Some of this funding is provided on a conditional basis; for example, conditional funding is used to set domestic tuition rates throughout the province.[iv]
On March 29, 2019, at the direction of the Ontario Cabinet, the Minister released two SCI directives: a binding policy for colleges[v] and guidelines for publicly funded Ontario universities.[vi] The SCI directly prohibited colleges, universities and student governments from levying mandatory fees other than for “essential” activities.[vii] Colleges, universities and student government were required to provide students with an online opt-out option for “non-essential non-tuition fees”.[viii]
To ensure the implementation of the SCI, Ontario placed conditions on colleges’ and universities’ operating grants. Failure to implement the SCI allowed the Minister to deduct from the college’s operating grant.[ix] Similarly, the Minister required universities to reimburse students for the excess or non-compliant fees or else face cuts to their operating grants.[x]
In the Divisional Court [xi]
On November 21, 2019, a three-judge panel of the Divisional Court quashed the SCI. The court characterized the SCI as an exercise of executive discretion made pursuant to the Crown’s prerogative powers, specifically its spending power.[xii] Although the court accepted that Ontario has a broad discretion to impose conditions on the use of government funds, it found that existing legislation limited the government’s discretionary powers to interfere with the funding of student governments at colleges and with the internal affairs of universities.
For colleges, the court held that the OCAAT Act explicitly precludes Ontario from interfering with student governments.[xiii] The court relied on section 7 of the OCAAT Act, which states:
Nothing in this Act restricts a student governing body of a college elected by the students of the college from carrying on its normal activities and no college shall prevent a student governing body from doing so.[xiv]
For universities, the Court held that the University Acts “occupy the field” and grant universities the exclusive power to regulate their internal affairs. Because the court concluded that the SCI interferes with this exclusive power, the court held that the SCI was unlawful.[xv]
In the Court of Appeal
Justice Huscroft, writing for a unanimous three-judge panel of the Court of Appeal, rejected Ontario’s appeal in full, and upheld the quashing of the SCI. However, the Court of Appeal substituted its own reasons for why imposing the SCI on universities was an unlawful application of Ontario’s spending powers; according to Huscroft J.A., the Crown’s spending power is not prerogative, but is instead “third-source”.
With respect to colleges, Huscroft J.A. upheld the Divisional Court’s conclusions, in particular concerning section 7 of the OCAAT Act.[xvi] The Court of Appeal affirmed that the legislature’s use of the word “nothing” in section 7 of the OCAAT Act constrains the Minister’s otherwise broad powers to control Ontario colleges.[xvii] The Court of Appeal also held that there was “ample evidence” to substantiate the Divisional Court’s findings that the SCI interfered with student governments’ ability to carry out their normal activities.[xviii]
With respect to universities, the court substituted its own reasons for the Divisional Court’s decision to quash the SCI. The Court of Appeal concluded that the SCI constituted as an unlawful application of a “third source” power, rather than an unlawful application of Ontario’s prerogative powers.[xix]
According to Huscroft J.A., prerogative powers are “a limited source of non‑statutory administrative power accorded by the common law to the Crown”.[xx] Prerogative powers are “unique in nature” because they represent “vestiges of powers once enjoyed by the Monarch and now exercised by the Crown”,[xxi] These powers are a closed and shrinking list, largely being supplanted by statute and having no greater status than the common law.[xxii]
The Crown’s spending power is not a prerogative power, the Court of Appeal held. Instead, the spending power is a “description of executive authority to spend money in support of government policies and programs”.[xxiii] On this basis, the court concluded that governmental spending power is “an example of the exercise of the ‘third source’ of government authority – the first two being statute law and the prerogative”.[xxiv] Accordingly, the SCI was neither mandated by prerogative nor created by legislation; it was instituted pursuant to Ontario’s “third source” powers.[xxv]
Consequently, Huscroft J.A. held that the Divisional Court should not have applied the “occupy the field” test to analyze the scope of the Minister’s authority to implement the SCI.[xxvi] Instead, the correct analysis of a “third source” power’s lawfulness is to establish if the effect of the executive action conflicts with legislation. Thus, if the application of spending powers conflicts with the language or purpose of legislation, the application of the power is unlawful under the principle of legislative supremacy.[xxvii]
The Court of Appeal underscored that the University Acts “make plain that universities are self-governing bodies”;[xxviii] thus, any exercise of “third source” power that conflicts with universities’ self-governance may be unlawful. The Court of Appeal further noted that the Divisional Court had reasonably found that student governments play an “important part” in university governance.[xxix] Given this role, the Court of Appeal concluded that the SCI constituted a “profound” — and therefore unlawful — “interference” with universities’ autonomy.
Finally, the Court of Appeal briefly addressed Ontario’s argument that this decision also impacted the province’s ability to regulate tuition fee prices at universities. While the court made no decisions on this issue, Huscroft J.A. suggested in obiter dicta that the regulation of university tuition by executive action, rather than by legislation, may be unlawful.[xxx]
Subject to further appeal by Ontario (to the Supreme Court of Canada, if leave to appeal is granted), the Court of Appeal for Ontario’s decision has potentially far reaching implications for the regulation of colleges in Ontario and universities throughout Canada. By underscoring university autonomy, the court has potentially narrowed the role that provincial governments can play in regulating universities’ internal affairs. This may, in turn, have implications for the application of the Canadian Charter of Rights and Freedoms to university decision-making, an issue on which there is an emerging split among Canadian appellate courts — as discussed here.
The Court of Appeal’s judgment in the SCI case also helps to clarify the scope of governments’ ability to use conditions on funding to enact policy objectives, and suggests important limits on the use of ministerial and governmental spending powers. It remains to be seen if this decision will be read narrowly, in light of the particular social role and history of tertiary educational institutions, or whether the judgment will have a broader impact on governmental powers.
[i]Ontario Colleges of Applied Arts and Technology Act, 2002, S.O. 2002, c. 8, Sched. F, s. 1 [OCAATA Act]; DIRM Inc. v. Dalton Engineering & Construction Ltd.,  O.J. No. 3524 (Sup. Ct.), at para. 26; Loyalist College of Applied Arts and Technology v. The Municipal Property Assessment Corporation, 2014 ONSC 7152, at para. 17; Hassum v. Contestoga College Institute of Technology and Advanced Learning,  O.J. No. 1141 (Sup. Ct.), at para. 8.
[ii] See OCAATA Act, ss. 4(1), 5 under which the Minister may, respectively: “issue policy directives in relation to the manner in which colleges carry out their objects or conduct their affairs” and “intervene into the affairs of a college or a subsidiary of a college in such manner and under such conditions as may be prescribed.”
[iii] For more information, see the summary of the statutory context of colleges and universities included in our previous blog post on the Divisional Court’s decision here; see also McKinney v. University of Guelph,  3 S.C.R. 229, at para. 34, citing Harelkin v. University of Regina,  2 S.C.R. 561, at p. 594.
[iv] Ontario, Ministry of Training, Colleges and Universities, Tuition Fee Framework and Ancillary Fee Guidelines, (March 29, 2019), at pp. 4-5.
[v] Ontario, Ministry of Training, Colleges and Universities, Tuition and Ancillary Fees Minister’s Binding Policy Directive, (March 29, 2019), at p. 25.
[vi] Ontario, Ministry of Training, Colleges and Universities, Tuition Fee Framework and Ancillary Fee Guidelines, (March 29, 2019), at p. 23.
[vii] “Essential” activiites included: athletics and recreational; career services; student buildings; health and counselling; academic support; student ID cards; student achievement and records (prizes and trasncripts); financial aid offices; and campus safety programs; see Ontario, Ministry of Training, Colleges and Universities, Tuition Fee Framework and Ancillary Fee Guidelines, (March 29, 2019), at p. 17 and Ontario, Ministry of Training, Colleges and Universities, Tuition and Ancillary Fees Minister’s Binding Policy Directive, (March 29, 2019), at pp. 13-15.
[viii] Ontario, Ministry of Training, Colleges and Universities, Backgrounder: Affordability of Postsecondary Education in Ontario, (January 16, 2019).
[ix] Ontario, Ministry of Training, Colleges and Universities, Tuition and Ancillary Fees Minister’s Binding Policy Directive, (March 29, 2019), at p. 2.
[x] Ontario, Ministry of Training, Colleges and Universities, Tuition Fee Framework and Ancillary Fee Guidelines, (March 29, 2019), at p. 25.
[xx]Canada (Prime Minister) v. Khadr, 2010 SCC 3, at para. 34 quoting Peter W. Hogg, Constitutional Law of Canada, 5th ed., (loose‑leaf updated 2009, release 1), (Toronto: Carswell, 2007), at pp. 1-17.
[xxii]Appeal Decision, at paras. 23-24; see also Laskin J.A. in Black v. Canada (Prime Minister) (2001), 199 D.L.R. (4th) 228, 54 O.R.(3d) 215 (C.A.), at para. 27: “In England and Canada, legislation has severely curtailed the scope of the Crown prerogative.”
[xxvii]Appeal Decision, at para. 29. See also the Court in Reference re Pan‑Canadian Securities Regulation, 2018 SCC 48, at para. 58: “aside from […] constitutional limits, the legislative branch of government remains supreme over both the judiciary and the executive.”