A-561-03
2004 FCA 285
Attorney General of Canada (Applicant)
v.
Georgian College of Applied Arts and Technology (Respondent)
Indexed as: Canada (Attorney General) v. Georgian College of Applied Arts and Technology (F.C.A.)
Federal Court of Appeal, Décary, Létourneau and Sexton JJ.A.--Ottawa, August 31 and September 8, 2004.
Internal Trade -- Judicial review of Canadian International Trade Tribunal's (CITT) refusal to grant Crown costs, though successful, in defence of procurement complaint -- Tribunal's policy not to grant Crown costs based on power under Canadian International Trade Tribunal Act, s. 30.16 -- Argued discouraging bidders from challenging procurement process would defeat NAFTA purpose of ensuring government gets best value for money -- Also relied on American, Mexican practice -- Applicable review standard -- CITT lacking statutory authority to implement measures to encourage complaints -- Not conferred by Act, s. 30.16 -- NAFTA, Art. 1017 not providing Canada, CITT have duty to encourage complaints -- American, Mexican practice not to be taken into account as their legislation different from Canadian -- When appropriate to deny Crown costs in procurement matter considered -- Matter referred back with direction CITT award applicant costs.
This application for judicial review arose from the Canadian International Trade Tribunal's continuing refusal to award Human Resources Development Canada (HRDC) the costs of its successful defence to a procurement complaint brought by Georgian College of Applied Arts and Technology. This Court had previously set aside CITT's denial of a costs award and sent the matter back to the Tribunal to make a decision based on proper principles governing costs.
The College had responded to HRDC's request for submissions for the provision of help to the unemployed. When its response was rejected, the College filed a subsection 30.11(1) Canadian International Trade Tribunal Act complaint. Its position was that the HRDC's Expression of Interest (EOI) was subject to the procurement provisions of both the North American Free Trade Agreement (NAFTA) and the Agreement on Internal Trade (AIT). The CITT dismissed the complaint, holding the NAFTA and AIT procurement provisions inapplicable. The matter of costs was not addressed but the Attorney General subsequently requested an award of costs. This was denied for three reasons: (1) there was little purpose in awarding costs to the Crown, represented as it is by salaried Department of Justice counsel; (2) this would increase the burden on complainants to the CITT; and, (3) most complaints have some merit, and are pursued in a forthright, candid manner. The Federal Court of Appeal held that the CITT had fettered its discretion by adopting a general policy against awarding costs to the Crown. The Court also held that the matters taken into account were irrelevant, and rejected the submission that the CITT had a duty to encourage people to make complaints. The matter was referred back to the CITT for redetermination, and it again refused to award costs on policy grounds and on the facts. The Tribunal defended its policy of denying costs to the Crown by reference to its discretionary power under CITT Act, section 30.16. Its view was that discouraging potential bidders from full participation in the procurement process by imposing costs that would deter them from challenging that process would defeat a purpose of NAFTA: ensuring that government receives the best value for its money. The Tribunal explained that, while in the judicial system costs serve as a useful deterrent against the bringing of weak actions, there is no similar need in the procurement review context since the CITT does not even accept for inquiry any complaint which fails to disclose a reasonable indication that trade agreements have been breached. Less than half of all complaints have been accepted for inquiry. It also noted that under American legislation, only the complainant is allowed costs in a procurement inquiry before the federal government's bid challenge authority. In Mexico, costs are awarded against neither side in a procurement inquiry.
Turning to the facts, the CITT found that HRDC had induced the College to respond to the EOI on the basis that it was a public procurement subject to NAFTA and AIT provisions. The language in the EOI along with the absence of any indication in the EOI that it was not a procurement constituted the inducement.
Held, the application should be allowed.
In reviewing the CITT's exercise of discretion whether to award costs in a particular case, patent unreasonableness is the applicable review standard. But as to whether a practice or principle relied upon by the CITT is authorized by its Act, the review standard is reasonableness simpliciter.
On the policy issue, nothing in the Act justified the CITT in distinguishing between complainants and the Crown in the awarding of costs. This Court has already held that the CITT lacks any statutory authority to implement measures to encourage complainants to come forward. Certainly, it was not conferred by section 30.16, the only statutory reference in the Tribunal's reasons. There is a quantum leap between providing a forum for dispute resolution and encouraging disputes to take place. As for the argument that section 30.16 should be interpreted in a manner consistent with NAFTA obligations, especially Article 1017, which requires each Party to adopt and maintain bid challenge procedures for procurements, that Article does not provide that either Canada or the CITT has a duty to encourage complaints. It simply provides that contracting states must allow the making of complaints, ensure complaints are dealt with fairly and in a timely manner and not prevent the initiating of challenges. Awarding the Crown costs is not inconsistent with NAFTA. The CITT also erred in considering the fact that both the U.S.A. and Mexico do not award costs to government when successful in a procurement complaint. The legislation in those countries is different. The broad policy principles advanced by the Tribunal in support of its decision failed to meet the reasonableness simpliciter review standard.
In Canada (Attorney General) v. Educom TS Inc., Evans J.A. suggested circumstances in which it would be appropriate to deny the Crown costs, though successful, in procurement matters. The general principle of awarding a successful party costs could be departed from if the Crown is somehow responsible for complainant's failure to submit a compliant bid or for inducing the complainant to file a complaint with the Tribunal. It is not reasonable for anyone to suppose that whenever the word "contract" is used, that any agreement contemplated would be subject to international trade agreements. No blame could be assigned to HRDC for the College's decision to persist with its complaint.
While, upon judicial review, the Court lacked power to order the College to pay costs, it could refer the matter back with a direction that CITT award costs to applicant in the amount of $3,327.05.
statutes and regulations judicially
considered
Agreement on Internal Trade, Canada Gazette, Part I, vol. 129, No. 17 (29 April 1995).
| Canadian International Trade Tribunal Act, R.S.C., 1985 (4th Supp.), c. 47, s. 30.11 (as enacted by S.C. 1993, c. 44, s. 44), 30.16 (as enacted idem). |
| Federal Courts Act, R.S.C., 1985, c. F-7, ss. 1 (as am. by S.C. 2002, c. 8, s. 14),18.1(3) (as enacted by S.C. 1990, c. 8, s. 5; 2002, c. 8, s. 27). |
| North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, December 17, 1992, [1994] Can. T.S. No. 2, Art. 1017. |
cases judicially considered
applied:
Canada (Attorney General) v. Georgian College of Applied Arts and Technology, [2003] 4 F.C. 525; (2003), 228 D.L.R. (4th) 201; 2 Admin. L.R. (4th) 24; 305 N.R. 275 (C.A.).
considered:
Canada (Attorney General) v. Educom TS Inc., 2004 FCA 130; [2004] F.C.J. No. 574 (QL).
referred to:
Georgian College of Applied Arts and Technology (Re), [2002] C.I.T.T. No. 49 (QL); Georgian College of Applied Arts and Technology (Re), [2002] C.I.T.T. No. 73 (QL).
APPLICATION for judicial review of the Canadian International Trade Tribunal's continuing refusal to award costs to the Crown, although successful, in a procurement complaint (Georgian College of Applied Arts and Technology (Re), [2003] C.I.T.T. No. 29 (QL)). Application allowed; CITT directed to pay Crown's costs of fixed amount.
appearances:
Derek Rasmussen for applicant.
No one appearing for respondent.
solicitors of record:
Deputy Attorney General of Canada for applicant.
No one appearing for respondent.
The following are the reasons for judgment rendered in English by
Sexton J.A.:
INTRODUCTION
[1]This application for judicial review arises out of the continuing refusal by the Canadian International Trade Tribunal (CITT) to award costs to Human Resources Development Canada (HRDC) arising out of its successful defence to a procurement complaint brought by Georgian College of Applied Arts and Technology (Georgian). This Court had earlier set aside the decision of the CITT refusing to award costs to HRDC and referred the matter back to the CITT so that it could address the issue of costs based upon proper principles. The issue in the application is whether the CITT has done so.
FACTS
[2]In 2001, Georgian responded to an Expression of Interest (EOI) published by HRDC which invited submissions regarding the provision of help to unemployed people. The approach by Georgian was rejected so it indicated it intended to file a complaint against HRDC pursuant to subsection 30.11(1) [as enacted by S.C. 1993, c. 44, s. 44] of the Canadian International Trade Tribunal Act, R.S.C., 1985 (4th Supp.), c. 47 (the Act) arguing that the EOI was subject to the procurement provisions of the North American Free Trade Agreement [North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, December 17, 1992, [1994] Can. T.S. No. 2] (NAFTA) and the Agreement on Internal Trade [Canada Gazette, Part I, Vol. 129, No. 17 (29 april 1995)] (AIT) and that HRDC had failed to comply with these agreements.
[3]As a result, representatives of HRDC met with Georgian on January 9, 2002 and explained why Georgian was not the successful candidate.
[4]On February 14, 2002, HRDC wrote to Georgian advising that the EOI was not subject to trade agreements and that a competitive bid type process was not required. Nevertheless, Georgian persisted in pursuing its complaint, filing it on February 28, 2002.
[5]On May 29, 2002 [[2002] C.I.T.T. No. 49 (QL)], the CITT dismissed Georgian's complaint on the basis that the procurement provisions of NAFTA and AIT did not apply. The issue of costs was not addressed.
[6]On July 17, 2002, the Attorney General of Canada (AGC) requested the CITT award costs to it.
[7]On August 9, 2002 [[2002] C.I.T.T. No. 73 (QL)], the CITT denied the AGC's request for costs. Factors upon which the CITT relied in so deciding included:
(a) little purpose is served by awarding costs to the Crown because it is represented by salaried counsel from the Department of Justice;
(b) awarding costs to the Crown would increase the already significant burden on complainants to the CITT;
(c) most complaints before the CITT have some merit and are pursued by complainants in a forthright and candid manner.
[8]On May 2, 2003, this Court allowed the application for judicial review by the AGC on the grounds that the CITT had fettered its discretion by adhering to a general policy against awarding costs to the Crown (Canada (Attorney General) v. Georgian College of Applied Arts and Technology, [2003] 4 F.C. 525 (C.A.)).
[9]The Court also found that the factors considered by the CITT were irrelevant and further the Court rejected submissions made to the Court that the CITT had a duty to ensure Canada's compliance with international obligations arising under NAFTA and AIT relating to procurement matters, and that such duty entailed encouraging people to make complaints.
[10]The Court referred the matter back to the CITT for redetermination in accordance with proper principles governing costs. In particular, the Court alluded to the principle that, in the absence of exceptional circumstances, costs are normally awarded to the successful party.
[11]On November 3, 2003 [[2003] C.I.T.T. No. 29 (QL)], the CITT, upon reconsidering the issue of costs, again rejected the claim for costs by the AGC. The CITT based its decision on two main grounds, the first on the basis of policy and the second on the basis of the particular facts of this case.
A. Policy Grounds
[12]The Tribunal said [at paragraphs 11-15]:
In its decision, the Court concluded that the Tribunal had fettered its discretion, in this instance, by adhering to a predetermined practice of denying costs to the Crown in procurement inquiries despite the latter's success. The Tribunal's discretionary authority is derived from section 30. 16 of the CITT Act, which reads as follows:
| 30.16(1) Subject to the regulations, the Tribunal may award costs of, and incidental to, any proceedings before it in relation to a complaint on a final or interim basis and the costs may be fixed at a sum certain or may be taxed. |
| (2) Subject to the regulations, the Tribunal may direct by whom and to whom any costs are to be paid and by whom they are to be taxed and allowed. |
The above provision was added by the North American Free Trade Agreement Implementation Act, which came into effect on January 1, 1994. Before that time, the Tribunal's predecessor, the Procurement Review Board, had no discretion to award costs against a complainant, even when the complainant acted in a way that amounted to an abuse of the complaint process.
The above-quoted provision, which corrected the last-mentioned defect, must be interpreted in its proper context, i.e. the establishment of a bid challenge system that would promote "fair, open and impartial procurement procedures", in accordance with Canada's NAFTA obligations. The Tribunal believes that the intent of the above provision was to ensure that Canada's bid challenge authority would act as a "court" of easy access for the purpose of assuring, via the trade agreements, the integrity of the public procurement process.
Transparency and efficiency in the procurement process are advanced when there is a bid challenge system in place that allows suppliers to question procurement decisions that were made sub rosa or otherwise unfairly. Such a system makes a large pool of competitive bidders available to government buyers, thereby ensuring that the government receives the best value for its money. To discourage potential bidders from full participation in the procurement process by imposing costs that would deter them from challenging that process would defeat the above purpose of the NAFTA chapter on procurement.
Unlike the judicial system, where costs serve as a deterrent against bringing actions based on weak or incredible grounds, there is no need for costs to serve as such a deterrent in procurement review. Under section 30.13 of the CITT Act, upon receipt of a complaint, the Tribunal has discretion to conduct an inquiry. Moreover, it cannot accept for inquiry any complaint that fails to disclose a reasonable indication of a breach of the trade agreements. Historically, the Tribunal has not accepted half of all complaints for inquiry. Adding a further deterrent in the form of costs where cases have already passed this vetting procedure would risk creating an access barrier to procurement review.
It further said [at paragraphs 20-25]:
In the Tribunal's opinion, section 30.16 of the CITT Act is similar to SIMA in this respect, in that the Tribunal must give consideration to the terms of Canada's obligations under the AGP, the AIT, and NAFTA in interpreting the procurement provisions of the CITT Act. As mentioned, this section was part of the NAFTA implementation legislation and should be interpreted with this context in mind.
Such an approach would indicate that the Tribunal's discretion to award costs against complainants should be exercised sparingly in the course of a dispute. As stated previously, the express purpose of the trade agreements is to promote the transparency and efficiency of the procurement process by, among other things, making independent bid challenge available and accessible. This approach has been consistent with the practice of the other parties to NAFTA.
Under U.S. legislation, only the complainant is allowed its costs in a procurement inquiry before the federal government's bid challenge authority, i.e. the General Accounting Office (GAO). As stated in relevant U.S. legislation:
21.8 Remedies.
. . .
(d) if GAO determines that a solicitation, proposed award, or award does not comply with statute or regulation, it may recommend that the contracting agency pay the protester the costs of:
| (1) Filing and pursuing the protest, including attorneys' fees and consultant and expert witness fees; and |
| (2) Bid and proposal preparation. |
(e) If the contracting agency decides to take corrective action in response to a protest, GAO may recommend that the agency pay the protester the reasonable costs of filing and pursuing the protect, including attorneys' fees and consultant and expert witness fees.
Similarly, in Mexico, according to the Secretaria de la Función Pública (formerly Secretaria de Contraloria y Desarrollo Administrativo), the national bid challenge authority, consistent with Mexican civil law of not imposing costs against either party in a procurement inquiry, the practice is followed.
The fact that all three NAFTA bid challenge authorities have followed a similar practice, in the sense of not imposing costs on complainants, is no accident. All three member states have an obligation to make a bid challenge mechanism accessible to suppliers from each other's territories.
The Tribunal does not read the Court's decision as prohibiting it from having regard to these broader trade policy concerns when exercising its discretion in individual procurement inquiries, provided that the discretion is actively exercised each time and not merely pre-empted by a predetermined outcome through some policy or practice. [Emphasis added.]
B. Factual Grounds
[13]The CITT found that HRDC had induced Georgian to reply to the EOI on the basis that it was a public procurement subject to the provisions of NAFTA and AIT. In reaching this conclusion, the CITT relied on the fact that the final sentence of the EOI stated as follows: "Not all submissions will proceed to the proposal or contract stage". The CITT found that this language in the EOI and the lack of any indication in the EOI that it was not a procurement constituted the inducement. Accordingly, it found that the EOI was misleading to Georgian and that even HRDC was not completely certain that it had followed the appropriate process for the EOI. Given this lack of clarity, it was reasonable for Georgian to infer that the EOI was subject to the trade agreements.
[14]The applicant sought judicial review of the second decision denying costs arguing that the decision does not accord with the directive given by this Court on the first judicial review application. The applicant argues that the broad policy grounds on which the CITT relied to again deny costs were specifically found by this Court not to justify such a denial and that the facts do not justify a denial either.
STANDARD OF REVIEW
[15]In Georgian College, this Court articulated two different standards to apply when reviewing a decision of the CITT regarding costs. When reviewing the CITT's simple exercise of discretion whether or not to award costs in a particular case, the standard of review is patent unreasonableness. However, when the Court is deciding whether a practice or principle relied upon by the CITT is authorized by the provisions of the Act, the standard of review is reasonableness simpliciter.
[16]Accordingly, the CITT's consideration of the particular facts of this case and its decision whether or not to award costs based on these facts should be reviewed on the standard of patent unreasonableness. However, to the extent that the CITT relied on general principles applicable to all costs decisions, these principles should be reviewed on the reasonableness standard.
POLICY ANALYSIS
[17]In my view, there is nothing in the Act which would justify the CITT in distinguishing between complainants and the Crown when making costs awards. Section 30.16 [as enacted by S.C. 1993, c. 44, s. 44] provides as follows:
30.16 (1) Subject to the regulations, the Tribunal may award costs of, and incidental to, any proceedings before it in relation to a complaint on a final or interim basis and the costs may be fixed at a sum certain or may be taxed.
(2) Subject to the regulations, the Tribunal may direct by whom and to whom any costs are to be paid and by whom they are to be taxed and allowed. [Emphasis added.]
[18]The CITT has a practice of awarding costs to successful complainants. There is no justification for adopting a policy of depriving the Crown of costs when it is successful.
[19]Furthermore, in Georgian College, this Court expressly found that it was not appropriate for the CITT to refuse to award the Crown costs on the grounds that it wanted to encourage complaints in order to ensure Canada's compliance with international obligations arising under trade agreements. Noël J.A. stated at paragraphs 36-37:
Although it seems clear that the practice of denying costs to the Crown despite its success has the effect of encouraging complaints to come forward, the Tribunal has alluded to no provision which would authorize it to implement measures towards that end. Indeed, the only statutory reference contained in the reasons is to section 30.16 which, as we have seen, provides for no such authority. The respondent has been unable to point to any other provision which could be construed as authorizing the Tribunal to assume a pro-active role in encouraging complaints.
I accept that Parliament has designated the Tribunal as the competent forum for adjudicating procurement complaints and that, in fulfilling this function, the Tribunal is called upon to give effect to the international obligations which bind Canada in relation to procurement matters. But there is a quantum leap between providing a forum for dispute resolution and encouraging disputes to take place. I can find nothing in the Act which would give the Tribunal authority to encourage or invite litigation in the area of procurement by adhering to a practice fo denying costs to the Crown despites its success. [Emphasis added.]
Accordingly, it was inappropriate for the CITT to consider this principle when deciding whether to award costs in this case. The CITT did not point to any provision of the Act which would give it the authority to refuse costs in order to encourage complaints.
[20]The CITT did, however, try to argue that section 30.16 of the Act should be interpreted in a way that is consistent with its obligations under NAFTA, and in particular Article 1017. The relevant portions of 1017 provide:
Article 1017: Bid Challange
1. In order to promote fair, open and impartial procurement procedures, each Party shall adopt and maintain bid challenge procedures for procurements covered by this Chapter in accordance with the following:
(a) each Party shall allow suppliers to submit bid challenges concerning any aspect of the procurement process, which for purposes of this Article begins after an entity has decided on its procurement requirement, leading up to and including the contract award;
. . .
(c) each Party shall ensure that its entities accord fair and timely consideration to any complaint regarding procurement covered by this Chapter;
(d) whether or not a supplier has attempted to resolve its complaint with the entity, or upon an unsuccessful attempt at such a resolution, no Party shall prevent the supplier from initiating a bid challenge or seeking any other relief available to such supplier;
Article 1017, however, does not provide that Canada or the CITT have a duty to encourage complaints. It simply provides that contracting states must allow people to make complaints regarding the procurement process, must ensure that complaints are treated on a fair and timely basis, and must not prevent persons from initiating challenges. Awarding costs to the Crown when it successfully defends against a complaint does not constitute preventing a supplier from initiating a complaint. Accordingly, awarding costs to the Crown is not inconsistent with NAFTA. Suppliers are free to initiate complaints; however, if a complaint is ultimately unsuccessful, the Crown should be compensated for its costs. Overall, the fact that Canada has a duty to allow people to make certain complaints does not mean that it has a duty to encourage those complaints by refusing to award costs to the Crown when it is successful.
[21]It was also clearly an error for the CITT to consider the fact that the United States and Mexico do not award costs to successful governments in procurement complaints. The legislation in these countries is different, and accordingly, is not relevant to the CITT. In Canada--unlike the U.S. and Mexico--the Act contemplates that costs may be awarded to any person.
[22]The reasonableness simpliciter standard of review requires a determination as to whether the reasons provided by the decision maker are capable of supporting the decision. In my view the broad policy principles articulated by the CITT in support of its decision do not meet this criteria. They are not supported by the legislation and they conflict with the general principle that costs should be awarded to the successful party absent exceptional circumstances.
FACTUAL ANALYSIS
[23]In Canada (Attorney General) v. Educom TS Inc., 2004 FCA 130; [2004] F.C.J. No. 574 (QL) (Educom), Evans J.A. elucidated some of the particular circumstances in which it would be appropriate to deny the Crown costs in cases when it is successful. He stated at paragraph 11:
The general principle that costs follow the event applies to the Tribunal's discretion over costs conferred by subsection 30.16(1). The Tribunal may depart from the general principle if the conduct of the successful party was in some way responsible for the failure of the complainant to submit a compliant bid or for inducing the complainant to file a complaint with the Tribunal. However, there must be some evidence rationally capable of supporting such findings: speculation is not sufficient. Merely to identify a minor error in the procurement documentation or process is not sufficient to deny the Crown its costs when a complaint is rejected.
[24]There was no finding by the CITT that Georgian was induced by HRDC to lodge a complaint. Instead the CITT found that the lack of clarity in the EOI induced Georgian to reply to the EOI. Apparently the CITT concluded that because the word "contract" was used in the EOI it was reasonable for Georgian to infer that it was subject to NAFTA. However, not all government contracts are subject to NAFTA and, in any event, it is not reasonable for anyone to conclude that because the word "contract" is used, somehow any agreement contemplated will be subject to international trade agreements. Such a leap in logic cannot be justified.
[25]In any event, Georgian was told by HRDC that the EOI was not subject to the trade agreements, and Georgian plunged ahead undeterred. No blame can be attached to HRDC for Georgian's actions and there is no causal link between HRDC's action and Georgian's decision to persist with its complaint.
CONCLUSION
[26]The AGC requested this Court to award costs in its favour in defending the complaint. On application for judicial review this Court's powers are set forth in subsection 18.1(3) [as enacted by S.C. 1990, c. 8, s. 5; 2002, c. 8, s. 27] Federal Courts Act, R.S.C., 1985, c. F-7 [s. 1 (as am. idem, s. 14)].
18.1 . . .
(3) On an application for judicial review, the Federal Court may
(a) order a federal board, commission or other tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or
(b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.
[27]Thus the Court does not have the power to directly order Georgian to pay the costs of the appeal. However, this Court does have the power to refer the matter back to the CITT with a direction that it award costs to the applicant.
[28]Counsel for the applicant has submitted that a reasonable award for its costs for the first CITT hearing would be $3,327.05. Counsel explained that this figure includes an amount of $3,182.75 for counsel fees and $144.30 for disbursements. We were advised that 35.15 hours were spent by counsel for the applicant in responding to the complaint. In my view this request is reasonable.
[29]Accordingly, I would allow the application for judicial review, set aside the decision of the Tribunal, and refer the matter back to the Tribunal with the direction that the Tribunal award costs in favour of the applicant in the amount of $33,27.05.
[30]On the hearing of this application, counsel for the applicant indicated that the applicant was not seeking costs against Georgian for the second hearing before the CITT nor the costs of this application because Georgian did not appear on either of those hearings and made no submissions.
Décary J.A.: I agree.
Létourneau J.A.: I agree.