This article is an update for health lawyers on the recent Divisional Court case in Yarco Developments Inc. v. Home Construction Regulatory Authority (Registrar) 2024 ONSC 93. It may seem odd to you at first glance that an article about a home construction case is being included in the OBA Health Law Newsletter. But trust us, it is directly relevant to the practice of health law, particularly on professional regulation and registration matters.
Most regulatory bodies in Ontario, including all 26 Regulated Health Professional Colleges, require applicants to demonstrate they will act with honesty and integrity and/or that they are of good character before they are allowed into the profession. This registration requirement can be worded in many ways, but it often takes the form of a requirement that the applicant’s past and present conduct show reasonable grounds for belief that the applicant will practice their profession with honesty, integrity and in accordance with the law.
The Divisional Court recently reinforced who bears the onus in showing this criterion is met (or not met) in Yarco Developments. John McIntyre recently reviewed the impacts of this case on health regulators and professionals at the Health Law Section’s Lunch and Learn on February 21, 2024. Some of those key points are revisited below.
I. FACTUAL BACKGROUND
Yarco Developments Inc. [“Yarco”] is a corporate entity that first received a licence to build and sell new homes in 2018. In 2021, it applied for a renewal of that licence under the newly enacted New Home Construction Licensing Act, 2017 [the “Act”]. The Registrar proposed to refuse Yarco’s application for a renewal of its licence on the basis that its sole director and officer had been convicted of 22 criminal offences between 2007 and 2010, including fraud over $5,000, breach of recognizances and probation orders, and various charges related to forgery and use of fraudulent materials. Many of these charges stemmed from his involvement in what was described as the largest counterfeiting scheme in Canadian history.
The Registrar relied in part on section 38(1)(b)(iii) of the Act, which allows the Registrar to refuse to grant a licence if in the Registrar's opinion, “it has not been demonstrated that having regard to the past and present conduct of the Applicant, […] the Applicant can be reasonably expected to carry on business in accordance with the law and integrity and honesty."
Yarco appealed the proposal. After a hearing, the Licence Appeal Tribunal granted Yarco’s appeal. In its decision, the Tribunal held that if Yarco showed reasonable grounds for belief it would carry on business with honesty and integrity, the onus was then on the Registrar to show the licence should not be renewed under the applicable legislative sections. Factually, the Adjudicator was swayed by the lack of recent criminal activity, noting that a dated criminal record in and of itself can’t preclude an applicant from obtaining a license, especially when the Applicant was forthcoming in disclosing that history. Legally, the Adjudicator based his findings on the differences in the wording of the test in section 38, and the test in the previous legislation.
The section 38(1)(a)(iii) test in the new Act is framed using positive language: “the past and present conduct […] affords reasonable grounds for belief that its business will be carried on in accordance with the law and with integrity and honesty” in comparison to the previous legislation which used negative language: “the past conduct of its officers or directors affords reasonable grounds for belief that its undertakings will not be carried on in accordance with law and with integrity and honesty.” This change, in the Adjudicator’s reasons, indicated a shifted burden of proof.
The Licence Appeal Tribunal granted Yarco’s appeal, and it was upheld on a reconsideration. The Registrar then appealed to the Divisional Court.
II. THE DIVISIONAL COURT DECISION
The Divisional Court held that the Adjudicator had failed to take into account the legislative scheme and context in his interpretation of section 38(1)(a)(iii) and had instead focused too narrowly on the literal words of the section in isolation. The legislative intent of consumer protection statutes and the gatekeeping role given to the Registrar is inconsistent with an interpretation of the licensing section that assumes that an applicant will conduct itself appropriately, unless the Registrar can prove otherwise. Further, the Court reinforced that both past and present conduct are relevant to its analysis.
The Court highlighted two key errors – first that the Adjudicator found the onus was on the Registrar rather than Yarco, which essentially flipped the legal test. The second error was that the Adjudicator had imposed a balance of probabilities standard rather than the reasonable grounds for belief standard. Reasonable grounds to believe is a lower standard of proof, requiring more than mere suspicion, but less than what is needed to meet the balance of probabilities standard. This error was evident in the Tribunal’s finding that Yarco was entitled to a renewal of its licence unless the Registrar could prove the licence should not be renewed.
The Court also noted that the use of positive or negative framing is immaterial in these types of regulatory provisions, and should have no impact on the gatekeeping function regulators are required to perform when reviewing a candidate’s eligibility. The onus is not on the Registrar, it is on Applicant to prove the non-existence of reasonable grounds for belief in order to be entitled to a licence under the Act.
III. TAKEAWAYS
Yarco is a reminder that public protection statutes will be interpreted in a way that is consistent with their overarching purpose – namely the public interest and ensuring public confidence in the applicable profession or sector. This is important to health law lawyers, as the Regulations that govern health professions have similar language. For example, O Reg 865/93: Registration (under the Medicine Act), includes almost identical language that “the applicant’s past and present conduct afford reasonable grounds for belief that the applicant…will practise medicine with decency, integrity and honest and in accordance with the law.”
In coming to its decision, the Divisional Court also relies on the leading health law case of Chauhan v. Health Professions Appeal and Review Board and The College of Physicians and Surgeons of Ontario, 2013 ONSC 1621 to illustrate the analysis required of regulators when assessing integrity and honesty provisions. In Chauhan, a medical resident had been charged with several criminal offences, but had not been found guilty at the time the CPSO refused to renew his post-graduate licence to practice medicine. In that case, the Court had held there was no presumption of good character, and the onus was on Dr. Chauhan to demonstrate he should have the privilege of practicing medicine.
Yarco re-affirms the principle that decision-makers will not start from the presumption that an Applicant meets the honesty, integrity and/or good character provisions; rather the question on a licensing appeal will be whether the evidence provides a credible and compelling foundation for the Registrar’s reasonable grounds to believe the Applicant is not entitled to a licence.
Also worth noting are the Courts comments in its decision to remit the matter back to the Tribunal for a re-hearing rather than to substitute its own decision. While this decision in itself is not surprising, the Court highlights the lack of a recording of the Tribunal Hearing, and the fact that the Court did not have access to a complete record of the evidence before the Tribunal as the reason it would be unfair to the parties for the Court to substitute its own decision for that of the Tribunal. Parties appearing in front of a Tribunal may wish to consider retaining a Court Reporter for the hearing, if they anticipate an appeal may be brought.
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