In a landmark 100-page decision, in which all nine judges concurred, the Supreme Court of Canada has significantly reduced the rights of public office holders, and in the course of doing so has redefined the standards courts must apply in deciding whether to judicially review a decision of an arbitrator or administrative tribunal. The decision of a 5-member majority in Dunsmuir v. New Brunswick was authored by Justices Bastarache and LeBel. Two concurring judgments  were written, one by Justice Binnie, the other by Justice Deschamps on behalf of herself and two fellow judges.

Holding that "[t]he time has arrived to re-examine the Canadian approach to judicial review of administrative decisions and develop a principled framework that is more coherent and workable," the Supreme Court of Canada has decreed that henceforth the courts are to choose between two standards for reviewing such decisions – correctness or unreasonableness – and that the third standard of patent unreasonableness is no more.

In the same decision, the Supreme Court has also sharply curtailed the "due process" rights of public office holders, ruling that those who occupy their positions on a contractual basis (and not just "at pleasure") have no greater entitlement to procedural fairness in matters of dismissal than the typical employee. The only remedies available to them are those that are to be found in the ordinary law of contract, the Court said.  For the most part, in the event of dismissal without cause this means pay in lieu of reasonable notice; with limited exceptions, reinstatement will not be available.

Judicial review standards simplified

With regard to standards of judicial review, a majority of the Court declared that "[d]espite efforts to refine and clarify it, the present system has proven to be difficult to implement." Explaining that lower courts have been struggling with the conceptual distinction between the standards of "patent unreasonableness" and "reasonableness simpliciter," the majority ruled that "the two variants of reasonableness review should be collapsed into a single form of 'reasonableness' review. The result is a system of judicial review comprising two standards: correctness and reasonableness."

The Dunsmuir case was initially about whether an adjudicator had erred in determining that a New Brunswick public servant, David Dunsmuir, a lawyer employed on contract who also held a public office as Clerk of the Court of Queen's Bench, was entitled as a matter of procedural fairness to reasons and an opportunity to respond prior to dismissal. However, while ruling that the adjudicator had indeed erred because "[i]n these circumstances it was unnecessary to consider any public law duty of procedural fairness," the Court made it clear that it had bigger fish to fry by stating at the outset that "these reasons will address first and foremost the structure and characteristics of the system of judicial review as a whole."

Noting that "[t]he recent history of judicial review in Canada has been marked by ebbs and flows of deference, confounding tests and new words for old problems, but no solutions that provide real guidance for litigants, counsel, administrative decision makers or judicial review judges," the majority concluded that "[t]he time has arrived for a reassessment of the question." Determining that henceforth the only standards should be correctness and reasonableness, the majority explained that "questions of fact, discretion and policy as well as questions where the legal issues cannot be easily separated from the factual issues generally attract a standard of reasonableness while many legal issues attract a standard of correctness. Some legal issues, however, attract the more deferential standard of reasonableness."

Referring to existing jurisprudence, the majority elaborated that "[t]he existence of a privative or preclusive [statutory] clause [limiting judicial review] gives rise to a strong indication of review pursuant to the reasonableness standard. This conclusion is appropriate because a privative clause is evidence of Parliament or a legislature's intent that an administrative decision maker be given greater deference and that interference by reviewing courts be minimized. This does not mean, however, that the presence of a privative clause is determinative. The rule of law requires that the constitutional role of superior courts be preserved…. Judicial review is necessary to ensure that the privative clause is read in its appropriate statutory context and that administrative bodies do not exceed their jurisdiction…. Where the question is one of fact, discretion or policy, deference will usually apply automatically…. We believe that the same standard must apply to the review of questions where the legal and factual issues are intertwined with and cannot be readily separated…. Deference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity…. Deference may also be warranted where an administrative tribunal has developed particular expertise in the application of a general common law or civil law rule in relation to a specific statutory context: … Adjudication in labour law remains a good example of the relevance of this approach."

On the other hand, the majority held, "correctness review has been found to apply to constitutional questions regarding the division of powers between Parliament and the provinces in the Constitution Act, 1867…. Administrative bodies must also be correct in their determinations of true questions of jurisdiction or vires…. [C]ourts must also continue to substitute their own view of the correct answer where the question at issue is one of general law 'that is both of central importance to the legal system as a whole and outside the adjudicator's specialized area of expertise'…. Questions regarding the jurisdictional lines between two or more competing specialized tribunals have also been subject to review on a correctness basis."

Determining whether the applicable standard in any given case is correctness or reasonableness will involve a two-step process, the majority said: "First, courts ascertain whether the jurisprudence has already determined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question. Second, where the first inquiry proves unfruitful, courts must proceed to an analysis of the factors making it possible to identify the proper standard of review."

Along with "patent unreasonableness," the majority also jettisoned the term, "pragmatic and functional analysis," used in determining the applicable standard of review, that the Court had previously established in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048. It held that "[t]he existing approach to determining the appropriate standard of review has commonly been referred to as 'pragmatic and functional'. That name is unimportant. Reviewing courts must not get fixated on the label at the expense of a proper understanding of what the inquiry actually entails. Because the phrase 'pragmatic and functional approach' may have misguided courts in the past, we prefer to refer simply to the 'standard of review analysis' in the future…. The analysis must be contextual. As mentioned above, it is dependent on the application of a number of relevant factors, including: (1) the presence or absence of a privative clause; (2) the purpose of the tribunal as determined by interpretation of enabling legislation; (3) the nature of the question at issue; and (4) the expertise of the tribunal. In many cases, it will not be necessary to consider all of the factors, as some of them may be determinative in the application of the reasonableness standard in a specific case."

As to the meaning of the new unified standard of reasonableness, the majority specified that "[r]easonableness is a deferential standard animated by the principle that underlies the development of the two previous standards of reasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law."

The majority emphasized that "[t]he move towards a single reasonableness standard does not pave the way for a more intrusive review by courts…. Deference is both an attitude of the court and a requirement of the law of judicial review. It does not mean that courts are subservient to the determinations of decision makers, or that courts must show blind reverence to their interpretations, or that they may be content to pay lip service to the concept of reasonableness review while in fact imposing their own view. Rather, deference [means] respect for the decision-making process of adjudicative bodies with regard to both the facts and the law…. In short, deference requires respect for the legislative choices to leave some matters in the hands of administrative decision makers, for the processes and determinations that draw on particular expertise and experiences, and for the different roles of the courts and administrative bodies within the Canadian constitutional system."

Rights of public office holders curtailed

Having eliminated the judicial review standard of patent unreasonableness, the Supreme Court then turned its attention to the substantive merits of the case before it, and made clear that, here too, it intended to create new law: "We are of the view that the principles established in Knight [v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653] relating to the applicability of a duty of fairness in the context of public employment merit reconsideration."

The issue in Dunsmuir was whether an adjudicator under New Brunswick's Public Service Labour Relations Act had erred in finding that a provincial government lawyer who had "dual" employment status – he was contractually employed under the Civil Service Act as a legal officer and at the same time appointed by Order-in-Council as Clerk of the Court of Queen's Bench in Fredericton – was entitled to procedural fairness when the government decided to fire him. Relying on Knight, the adjudicator determined that this right had been breached when the government dismissed him without cause, on four months' notice, without telling him why it was dissatisfied with his work performance and giving him a chance to argue against dismissal. The adjudicator therefore ordered Dunsmuir's reinstatement, but the New Brunswick Court of Queen's Bench overturned this decision on judicial review and the provincial Court of Appeal dismissed Dunsmuir's appeal, causing him to take the matter to the Supreme Court.

In its decision, the majority of the Supreme Court ruled that, "[w]here a public employee is employed under a contract of employment, regardless of his or her status as a public office holder, the applicable law governing his or her dismissal is the law of contract, not general principles arising out of public law."

The majority reasoned that, "[w]here the employment relationship is contractual, it becomes difficult to see how a public employer is acting any differently in dismissing a public office holder and a contractual employee. In both cases, it would seem that the public employer is merely exercising its private law rights as an employer…. If the Crown is acting as any other private actor would in hiring its employees, then it follows that the dismissal of its employees should be viewed in the same way. Furthermore, while public law is rightly concerned with preventing the arbitrary exercise of delegated powers, the good faith exercise of the contractual rights of an employer, such as the right to end the employment relationship on reasonable notice, cannot be qualified as arbitrary…. [W]here a dismissal decision is properly within the public authority's powers and is taken pursuant to a contract of employment, there is no compelling public law purpose for imposing a duty of fairness."

In unequivocal language, the majority declared that "the distinction between office holder and contractual employee for the purposes of a public law duty of fairness is problematic and should be done away with….. [I]t is assumed that most public employment relationships are contractual. Where this is the case, disputes relating to dismissal should be resolved according to the express or implied terms of the contract of employment and any applicable statutes and regulations, without regard for whether the employee is an office holder. A public authority which dismisses an employee pursuant to a contract of employment should not be subject to any additional public law duty of fairness. Where the dismissal results in a breach of contract, the public employee will have access to ordinary contractual remedies."

Certain exceptions will continue to exist. Thus, a duty of fairness will still apply in situations "where a public employee is not, in fact, protected by a contract of employment. This will be the case with judges, ministers of the Crown and others who 'fulfill constitutionally defined state roles'." As well, the majority acknowledged, "[it] may also be that the terms of appointment of some public office holders expressly provide for summary dismissal or, at the very least, are silent on the matter, in which case the office holders may be deemed to hold office 'at pleasure'…. Because an employee in this situation is truly subject to the will of the Crown, procedural fairness is required to ensure that public power is not exercised capriciously."

None of these exceptions were of assistance to Dunsmuir, who, the Supreme Court ruled, "was a contractual employee of [the New Brunswick government] in addition to being a public office holder. Section 20 of the Civil Service Act provided that, as a civil servant, he could only be dismissed in accordance with the ordinary rules of contract. In these circumstances it was unnecessary to consider any public law duty of procedural fairness … [T]he adjudicator erred in his application of the duty of fairness and his decision was therefore correctly struck down by the Court of Queen's Bench." Dunsmuir was held entitled to pay in lieu of eight months' notice, but not to a hearing before dismissal or to reinstatement.

Supreme Court of Canada
Justices Michel Bastarache, Louis LeBel, Beverley McLachlin, Morris Fish, and Rosalie Abella; Justice Ian Binnie concurring; Justices Marie Deschamps, Louise Charron and Marshall Rothstein concurring

March 7, 2008

View the full text of the decision in Dunsmuir v. New Brunswick.