The school is being denied not because of religion, but specifically because of the covenant that restricts the right to equality as set out by the Canadian Charter of Rights and Freedoms.
They were also away of the right to religion, and carefully considered that when making their decision.
As has been discussed in this thread previously, the covenant is damaging to the students of that school. It has nothing to do with their religion. Why should they recognise law degrees from a school that violates the right to equality?
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