Date: 20090313
Docket: T-549-08
Citation: 2009 FC 258
OTTAWA, ONTARIO, MARCH 13, 2009
PRESENT: The Honourable Mr. Justice de Montigny
BETWEEN:
ISLAND
TIMBERLANDS LP
and
THE
MINISTER OF FOREIGN AFFAIRS AND KEMP FOREST PRODUCTS LTD
REASONS FOR ORDER AND ORDER
[1]
This
is an application for judicial review of a decision, made by the Respondent Minister
of Foreign Affairs (the “Minister”) to allow a custom cutter, the Respondent
Kemp Forest Products Ltd. (“Kemp”) to make offers on logs designated for
export. That decision was made pursuant to the Export Control List (the
“ECL”) promulgated by regulation (SOR/89-202) under the Export and
Import Permits Act, R.S.C. 1985, c. E-19 (the “EIPA”), according to
which anyone wishing to export logs from Canada must first obtain an export
permit from the Department of Foreign Affairs and International Trade
(“DFAIT”).
BACKGROUND
[2]
The
Government of Canada has sole jurisdiction to control the export of harvested
timber (“logs”) from Canada. Logs from timber grown on provincial lands are
also subject to additional provincial requirements. Beginning in 1867, the Government
of Canada exercised export controls jurisdiction under the Customs Act,
followed by the War Measures Act and emergencies legislation. In 1947,
log export controls were authorized by the EIPA and the ECL.
[3]
Logs
were originally placed on the ECL in 1947 primarily for the purposes of s.
3(1)(e) of the EIPA, namely “to ensure that there is an adequate supply
and distribution of the article in Canada for defence or other needs”. Section
3(1)(b) of the EIPA has become an equally applicable purpose, as placing
logs on the ECL “ensures that any action taken to promote the further
processing in Canada of a natural resource that is produced in Canada is not rendered ineffective by reason of the unrestricted exportation of that
natural resource”.
[4]
All
federal export controls over logs are administered by the Export Controls
Division within DFAIT. In order to provide guidance to exporters, DFAIT issues
“Notices to Exporters” which set out the procedures to apply for specific types
of permits and criteria which the Minister normally considers in exercising his
or her discretion.
[5]
Federal
export control procedures specific to logs from British Columbia have been in
place since 1969. In 1986, the Government of Canada harmonized the provincial
and federal logs surplus tests through the implementation of Notice to
Exporters Serial No. 23 (“Notice 23”). Under Notice 23
and its successors, Notice 102, logs originating from federal land can
be exported only if they are surplus to domestic requirements. Logs are
determined to be surplus if no domestic processor makes a domestic fair market
value offer to purchase the logs.
[6]
Notice
102
replaced Notice 23 on April 1, 1998, and remains in effect to this day.
Notice 102 is a statement published under the Minister’s authority to
clarify the policy and administrative practices concerning the export of logs
from British Columbia (a different regime applies to the export of logs from
other parts of Canada). For logs originating from provincial lands, Notice
102 provides that normally an export permit will be issued when the
exporter presents a provincial authorization stating that the legal
requirements for removing the logs from British Columbia have been met.
[7]
For
logs originating from federal land, Notice 102 sets out the procedure
for obtaining authorization to export logs harvested on Federal Land. In her affidavit, Mrs. Lynne C. Sabatino, Senior Policy Analyst in the Export Controls
Division of DFAIT, summarizes that procedure in the following way:
a. Applicants for permits
to export logs from federal land in British Columbia must first submit to
Export Controls an application to advertise logs for domestic sale on the B.C.
Federal Bi-weekly List;
b. Upon receipt of the
application to advertise, Export Controls will request the British Columbia
Ministry of Forests to notify potential domestic purchasers that logs are
available for domestic sale and that they may submit written offers within
fourteen days of the notification date;
c. If offers to purchase
are made within the required time period, the offers are forwarded by Export
Controls to the Federal Timber Export Advisory Committee (“FTEAC”) to determine
whether the offers reflect domestic fair market value for the logs;
d. The role of FTEAC,
which consists of a Chair, a provincial secretary, industry members and a
federal representative, is to provide advice and recommendations to the
Minister. FTEAC makes an assessment as to whether an offer is valid according
to Notice 102 and is at domestic fair market value based on a market
review;
e. If an offer is valid
and at domestic fair market value, FTEAC makes a recommendation to the Minister
that the logs should be considered to be not surplus to domestic needs. If
FTEAC finds that an offer is invalid or low compared to domestic fair market
value, FTEAC makes a recommendation to the Minister that the logs should be
considered surplus to domestic needs;
f. In weighing a FTEAC
recommendation, the Minister’s objective in deciding whether to issue an export
permit is to ensure that there is an adequate supply and distribution within Canada of such logs, consistent with an assessment of domestic needs. This is generally
done by permitting only the export of logs that are surplus to those needs,
consistent with the authorized purposes for export controls in s. 3(1) of the EIPA.
[8]
In
accordance with this policy, the purpose of which appears to be to ensure an
adequate supply of logs for log processors in British Columbia, Section D(3)(c)
provides that:
For the purposes of surplus
testing, normally the FTEAC will consider offers only from persons who are
involved in log processing. That is, those persons who own or operate log
processing facilities.
[9]
According
to the non-contradicted affidavit of Mrs. Sabatino, DFAIT’ and FTEAC’s practice
prior to 2006 was to accept domestic offers to purchase logs advertised on the
B.C. Federal Bi-weekly List from entities that owned log processing facilities,
which could include offers made on behalf of third parties. Following
representations received from entities that operate log processing facilities
through rental or leasing arrangements, FTEAC recommended on November 10, 2006,
that such entities also be allowed to offer to purchase logs on the B.C.
Federal Bi-weekly List if they have a history of processing logs through rented
or leased facilities and/or they are able to prove the logs will be
manufactured locally. The Minister in turn accepted FTEAC’s recommendation.
[10]
According
to the Applicant, the aim of clarifying who could offer to purchase logs on the
B.C. Federal Bi-weekly List was to promote the objectives of Notice 102,
namely, to “ensure that there is an adequate supply and distribution of the article
in Canada for defence or other needs” (EIPA, s. 3(1)(e)).
[11]
This
new practice was published on the Export Controls website on May 12, 2008,
under the title “Clarification of “operator” status under Notice 102 for
the purposes of determining who may submit offers for logs (Section D(3)(c))”.
According to this Clarification, the following factors were to be taken into
consideration to determine whether a person operates a log processing facility according
to Section D(3)(c) of Notice 102:
1. Evidence that the person has
established a regular log cutting relationship with an entity that includes a
particular sawmill, maintenance and/or planer facilities (the sawmill);
2. Evidence that the sawmill has
endorsed the person as an independent purchaser of logs that will be processed
in the sawmill;
3. Confirmation from the sawmill
that the person’s operation will maintain employment in the sawmill; and;
4. Identification of the person’s
expected log processing volume at the sawmill.
THE IMPUGNED DECISION
[12]
By
letter of January 22, 2008, Kemp provided Mrs. Sabatino with a letter from
S&R Sawmills purporting to show that it had established a regular log
cutting relationship with that particular sawmill to manufacture the logs being
purchased and that the sawmill had endorsed Kemp as an independent purchaser of
logs. That material part of the letter from Sawmills Ltd. reads as follows:
I am writing this letter to
provide you with information that you requested from Kemp Forest Products
regarding their bid to be included in the surplus testing system.
Kemp Forest Products seeks to be
included in the surplus testing system as a means to gain access to purchase
suitable logs for cutting exclusively at S&R Sawmills. With access to
suitable timber Kemp Forest Products anticipates cutting approximately 5,000m3 per month which will
provide direct employment at S&R Sawmills.
To facilitate Kemp Forest
Products bid to be included in the surplus testing system and to continue to
operate and maintain staffing levels we endorse Kemp Forest Products as an
independent log buyer for logs to be processed at S&R Sawmills.
[13]
At
its February 1, 2008 meeting FTEAC considered Kemp’s request. After having
noted that the same issue had been discussed in early 2007 and that the committee
had not recommended approval of status at the time, and despite the
reservations of many members, the committee supported the new application and
recommended granting Kemp interim operator status, which would allow Kemp to
achieve a cutting program.
[14]
The
Minister concurred with the FTEAC recommendation; DFAIT advised Kemp of the
decision by letter on February 14, 2008. The gist of that letter transpires
from the following two paragraphs:
The Department of Foreign Affairs
and International Trade Canada, taking into account the recommendations of
FTEAC, has considered this matter and is prepared to consider, on an interim
basis, Kemp Forest Products Ltd to be an “operator of a log processing
facility” for the purposes of Section 4.3c) of Notice to Exporters No. 102:
this means that in principle its offers should be considered valid.
The FTEAC did however recognize
that your previous record of manufacturing has been somewhat limited and
therefore a re-evaluation will be required by September 1st, 2008.
At that time Kemp Forest Products Ltd should be prepared to provide new
evidence of manufacturing activity to confirm its status as an operator.
THE ISSUES
[15]
The
Applicant challenges the decision of the Minister on both substantive and
procedural grounds. Substantively, the Applicant alleges that the decision is
unreasonable as it is based on a finding of fact unsupported by the evidence.
More particularly, the Applicant argues that there is a complete absence of any
evidence that Kemp actually had the capacity to process 5,000 cubic meters of
timber per month. The issue, therefore, is whether the application does raise
a reviewable error.
[16]
Procedurally,
the Applicant raises two issues. First, it is contended that DFAIT changed the
relevant rules without consultation with Island Timberlands and then sought to
justify the new rules after the fact by issuing an addendum to Notice 102
setting out new criteria. Second, the Applicant is of the view that DFAIT has
breached the principles of procedural fairness in refusing to give written
reasons for the decision, despite two requests for such reasons. In its
written representations, the Applicant had also raised the fact that DFAIT
refused to produce the record of the decision on this application pursuant to a
request made under Rule 317 of the Federal Courts Rules until ordered to
do so by this Court. At the hearing, however, it was conceded that this was no
longer an issue. The questions for the Court to decide, then, are whether the
requirements of procedural fairness apply to the Minister’s policy decisions,
and if they do, whether they have been breached.
[17]
The
Respondent Minister has also raised a third issue, challenging the standing of
the Applicant to seek judicial review of the Minister’s decision to grant Kemp
operator status. I shall deal with this issue first.
ANALYSIS
[18]
It
is trite law that a party that is not a party to a decision taken by a Minister
has no status to seek judicial review of that decision under s. 18.1 of the Federal
Courts Act, R.S.C. 1985, c. F-7. This section provides that the Attorney
General of Canada or “anyone directly affected” by the matter in respect of
which relief is sought, has standing to apply for judicial review. It has been
held time and again that a party who is only affected in the commercial sense
by the decision of a Minister has no status to seek judicial review: see, for
ex., Rothmans of Pall Mall Canada Ltd. v. Canada (Minister of
National Revenue), [1976] 2 C.F. 500 (F.C.A.); Merck Frosst Canada Inc.
v. Canada (Minister of Health and Welfare) (1988), 146 F.T.R. 249
(F.C.A.); Aventis Pharma Inc. v. Canada (Minister of Health),
2005 FC 1396.
[19]
It
is true, as noted by the Applicant, that Kemp is somewhat more directly
affected by the impugned decision of the Minister than were the applicants in
the above-mentioned cases. In those cases, the applicants were complaining
essentially because they had to face a new competitor for the product they were
selling. The same would be true here if another custom cutter was challenging
the decision to allow Kemp to make an offer for purchasing logs on the B.C.
Federal Bi-Weekly List.
[20]
That
being said, I agree with the Respondent Minister that the Applicant is
nevertheless simply seeking to protect its purported commercial advantage or
interest associated with being able to export logs rather than having to sell
them domestically by trying to prevent Kemp’s inclusion in to the pool of
eligible domestic log purchasers. Moreover, this Application for Judicial
Review appears at the very least to be premature. The decision made by the
Minister with respect to Kemp will not prevent the Applicant from seeking
judicial review of the Minister’s eventual decision that its logs are not
surplus to domestic needs, whether as a result of a valid offer by Kemp or by
any other owner or operator of log processing facilities.
[21]
As
a result, this Application for Judicial Review could be dismissed on the sole
ground that it is premature and/or that the Applicant lacks the requisite
status to challenge the Minister’s decision to grant Kemp operator status. In
addition to not being a party to the Minister’s decision, and in the absence of
any entitlement under the EIPA to export logs, the decision neither
affects the Applicant’s legal rights nor does it impose any legal obligations.
[22]
Out
of abundance of caution, and in case I have misdirected myself on the standing
issue, I shall nevertheless address the substantive and procedural arguments
raised by the Applicant.
[23]
It
was agreed between the parties before the Court, namely the Applicant and the
Respondent Minister, that the applicable standard of review with respect to the
alleged substantive error is that of reasonableness, while the standard of
correctness governs the analysis of the suspected procedural defects.
[24]
According
to the Applicant, the decision of the Minister was not within a range of
possible, acceptable outcomes which are defensible in respect of the facts and
law. In its view, there was no evidence capable of supporting a key finding of
fact upon which the decision was made, namely that Kemp could and would process
5,000 cubic metres of timber per month. This would represent an increase of 53
times its average cutting over the past five years.
[25]
The
problem with this argument is that there is no evidence the decision was
premised on the assumption that Kemp would be processing 5,000 cubic metres of
timber per month. It is true that in its supporting letter, Sawmills Ltd.
mentions that Kemp anticipates cutting approximately 5,000 cubic meters per
month. According to the minutes of the FTEAC meeting held on February 1st,
2008, it also appears that the recommendation was that a six month period be
allowed so that Kemp get his cutting program up to the average of 5,000 cubic
metres per month. However this figure is nowhere to be found in the decision
as communicated to the Applicant by letter on February 14, 2008.
[26]
I
fail to see how the decision to grant operator status to Kemp under Notice
102 falls outside the range of possible outcomes contemplated under Section
D3(c) of that Notice, especially when read in light of the subsequent
Clarification. The evidence of Kemp’s track record was not ignored, and indeed
it is presumably on that basis that the decision of the Minister was provisional.
Kemp is not given a blank cheque, but is required to provide new evidence of
manufacturing activity six months after the decision in order to have its
status as an operator confirmed. This is clearly not an unreasonable outcome.
[27]
Even
if the decision was considered not to be in conformity with Notice 102,
it could not be determinative of its reasonableness. While Notice 102
sets out the policy applicable to log exports from British Columbia, the policy
cannot by itself constrain the Minister’s discretion under the EIPA.
This is indeed reflected in the use of the word “normally” in Section D3(c) of Notice
102; it does echo the fact that nothing in the EIPA constrains the
Minister’s discretion respecting the scope of parties that may submit offers for
logs advertised in the B.C. Federal Bi-Weekly List. The absence of a similar
word in the French version of Notice 102 cannot detract from this
fundamental principle of administrative law.
[28]
Sections
3(1)(b) and (e) of the EIPA confer a broad discretion to the Minister,
and he cannot fetter his discretion by the issuance of guidelines or policies.
This principle was clearly affirmed in Maple Lodge Farms Ltd. v. Canada, [1982] 2 S.C.R. 2. Commenting on a policy adopted within the context of s.
8 of the EIPA, Mr. Justice McIntyre (for the Court) wrote (at pp. 6-7):
It is clear, then, in my view,
that the Minister has been accorded a discretion under s. 8 of the Act. The
fact that the Minister in his policy guidelines issued in the Notice to
Importers employed the words: “If Canadian product is not offered at the market
price, a permit will normally be issued; …” does not fetter the exercise of
that discretion. The discretion is given by the Statute and the formulation
and adoption of general policy guidelines cannot confine it. There is nothing
improper or unlawful for the Minister charged with responsibility for the
administration of the general scheme provided for in the Act and Regulations to
formulate and to state general requirements for the granting of import
permits. It will be helpful to applicants for permits to know in general term
what the policy and practice of the Minister will be. To give the guidelines
the effect contended for by the appellant would be to elevate ministerial
directions to the level of law and fetter the Minister in the exercise of his
discretion.
[29]
Even
if a person other than an owner or operator of a log processing facility were
to make an offer on logs advertised on the B.C. Federal Bi-Weekly List, the
Minister would still have to take into account the merits of such a request
provided that person had a credible basis for considering a departure from Notice
102. The Minister would fetter his discretion if he were to do otherwise
because the EIPA does not define or limit who can offer to purchase logs
on the B.C. Federal Bi-Weekly List.
[30]
In
the present case, there is no evidence that the decision of the Minister with
respect to Kemp is unreasonable, or for that matter that the policy change following
which that decision was made is alien to the purposes of the EIPA. The
Minister is entrusted with the discretion to decide whether or not there is any
need to restrict the export of goods on the Export Control List in order to
ensure adequate supply and distribution of that article in Canada. According to the Clarification, there will still be some processing made in Canada as requested by s. 3(b) of EIPA. It may well be that, as a result of the
policy change and of the broadening of the category of persons who may be
considered as operator, there will be less processing of logs in Canada. Nonetheless, absent a showing of bad faith, of a breach of the principles of
natural justice where required, or of irrelevant considerations in the making
of that decision, this is a choice better left to the Minister.
[31]
For
all of the foregoing reasons, I have not been convinced that the decision to
grant Kemp operator status is unreasonable.
[32]
Turning
now to the alleged breaches of procedural fairness, it is the Applicant’s contention
that its legitimate expectations were violated as a result of the redefinition
after the fact of the persons who may be considered to “operate” a processing
facility. According to the Applicant, it was unfair to “backtrack” on
substantive promises – namely the statement in Notice 102 that the right
to make offers on the B.C. Federal Bi-Weekly List is limited to “persons who
own or operate log processing facilities”, which for a decade was interpreted
as not including custom cutters like Kemp without consultation. Moreover, the Applicant
submits that the failure to give reasons, considering the impact of the
decision on its revenues and on its reputation, is a further breach of
procedural fairness.
[33]
These
arguments can be easily answered. First of all, it is well established that
the rules governing procedural fairness or natural justice do not apply to the
Minister’s policy decisions. The Applicant is seeking to impose public
notification and consultation requirements when no such thing has been
stipulated by the EIPA. While there are statutes in which regulations
or policies cannot be promulgated without notifying and consulting the public,
the EIPA does not contain such a provision. As the Supreme Court stated
in Martineau v. Matsqui Institution Disciplinary Board, [1980] 1
S.C.R. 602, at p. 608
A purely ministerial decision, on
broad grounds of public policy, will typically afford the individual no
procedural protection, and any attack upon such a decision will have to be
founded upon abuse of discretion. Similarly, public bodies exercising
legislative functions may not be amenable to judicial supervision.
See also: Reference re Canada Assistance Plan (B.C.), [1991] 2 R.C.S. 525, at p. 558; A.G. of Canada v.
Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735, at p. 758; Canadian
Association of Regulated Importers v. Canada (A.G.), [1994] 2 F.C.
247 (F.C.A.).
[34]
Moreover,
it appears from the affidavit of Mrs. Sabatino that consultations were held and
that representations were made to FTEAC from entities that operate log
processing facilities through rental or leasing arrangements. As for the claim
that the Clarification was drafted after the fact and was meant to regularize
the decision made with respect to Kemp, it appears to be pure speculation and
is contradicted by Mrs. Sabatino in her affidavit. Not only does she provide,
as an annex to her affidavit, the minutes of a FTEAC meeting held on November
10, 2006, recommending that entities operating log processing facilities
through rental or leasing arrangement be allowed to offer to purchase logs on
the B.C. Federal Bi-Weekly List under certain circumstances, but she also
testified that until the Clarification was published on the Export Controls
website on May 12, 2008, entities asking DFAIT about their eligibility to make
offers on logs advertised on the B.C. Federal Bi-weekly List were informed
verbally of DFAIT’s new policy in this regard.
[35]
Therefore
I find that, even assuming for the sake of the argument that principles of
procedural fairness apply to the circumstances of this case, they have not been
breached. The rules were not changed after the fact; they were communicated to
all those enquiring about their eligibility to make offers. The Applicant was
not entitled to the reasons of the decision as it was not the affected party.
[36]
For
all of those reasons, this Application for Judicial Review is dismissed, with
costs.
ORDER
THIS COURT ORDERS that the Application for
Judicial Review is dismissed, with costs.
"Yves
de Montigny"
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