Date: 20110620
Dockets: A-264-10
A-312-10
A-321-10
Citation: 2011 FCA 207
CORAM: BLAIS
C.J.
SHARLOW
J.A.
MAINVILLE
J.A.
Docket: A-264-10
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
ENTERASYS NETWORKS OF CANADA LTD.
and CCSI TECHNOLOGY SOLUTIONS
CORPORATION
Respondents
Docket: A-312-10
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
ENTERASYS NETWORKS OF CANADA LTD.
and CCSI TECHNOLOGY SOLUTIONS
CORPORATION
Respondents
Docket: A-321-10
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
ENTERASYS NETWORKS OF CANADA
LTD.
Respondent
REASONS FOR
JUDGMENT
SHARLOW J.A.
[1]
The
Attorney General of Canada (the “Crown”) filed three applications for judicial
review seeking to quash three determinations of the Canadian International
Trade Tribunal. The applications were consolidated because they raise common
issues on similar facts. The determinations upheld in part a number of complaints
made by the respondent Enterasys Networks of Canada Ltd. under subsection 30.11(1)
of the Canadian International Trade Tribunal Act, R.S.C. 1985, c. 47 (4th
Supp.) (the “Act”). The Crown’s principal argument in the consolidated
application is that the Tribunal had no jurisdiction to determine the
complaints because Enterasys did not submit a bid and the Tribunal found that
no act of Public Works and Government Services Canada (“PWGSC”) in the
procurement process precluded Enterasys from submitting a bid. For the reasons
that follow, I agree with the Crown, and on that basis I would quash the Tribunal’s
determinations.
Procedural
history
[2]
The
Crown’s consolidated application challenges the following Tribunal determinations:
(1)
Procurement Determination issued June 21, 2010 for reasons issued July 21, 2010
in relation to 44 complaints of Enterasys (file numbers PR-2009-080 to
PR-2009-087, PR-2009-092 to PR-2009-102 and PR-2009-104 to PR-2009-128)
(reported as Enterasys Networks of Canada Ltd. v. Canada (Department of Public
Works and Government Services), [2010] C.I.T.T. No. 104);
(2)
Procurement Determination issued August 9, 2010 for reasons issued November 4,
2010 in relation to 22 complaints of Enterasys (file numbers PR-2009-132 to
PR-2009-153) (reported as Enterasys Networks of Canada Ltd. v. Canada
(Department of Public Works and Government Services), [2010] C.I.T.T. No.
141); and
(3)
Procurement Determination issued September 10, 2010 for reasons issued December
22, 2010 in relation to 3 complaints of Enterasys (file numbers PR-2010-004 to
PR-2010-006) (reported as Enterasys Networks of Canada Ltd. v. Canada
(Department of Public Works and Government Services), [2010] C.I.T.T. No.
148).
[3]
In
the three proceedings before the Tribunal, the Crown opposed all 69 complaints.
In the first two CITT proceedings, the position of the Crown was supported by
an intervener, CCSI Technology Solutions Corporation, a successful bidder on
some of the designated contracts. That intervener was named as a respondent in two
of the Crown’s three applications for judicial review, but it did not file
notices of appearance. No one intervened in the third CITT proceeding.
Statutory
authority of the CITT to determine a complaint
[4]
The
Tribunal has the statutory authority to determine a complaint under subsection
30.11(1) of the Act only if the complainant meets the definition of “bidder or
prospective bidder on a designated contract” in section 30.1 of the Act (Northrop
Grumman Overseas Services Corp. v. Canada
(Attorney General), [2009] 3 S.C.R. 309, 2009 SCC 50).
Whether the
Tribunal had the jurisdiction to determine the complaints
[5]
The
Enterasys complaints that are the subject of these applications relate to
contracts issued to qualified bidders in a process governed by the Networking
Equipment Support Services National Master Standing Offer (sometimes referred
to as “NESS NMSO” or “NESS”), which is the means by which federal government
departments may obtain computer networking equipment.
[6]
When
a government department wishes to procure equipment covered by the Networking
Equipment Support Services National Master Standing Offer, it may engage a
process which, in effect, is a request to PWGSC to procure the equipment under
a standing offer. Subject to certain conditions, PWGSC may then issue a “request
for volume discount” (sometimes referred to as “RVD”) inviting bids from
pre-qualified suppliers. The bids are assessed, and the winning bidder is
awarded a contract.
[7]
It
is undisputed that the contracts that are the subject of the Enterasys complaints
are “designated contracts” as defined in section 30.1 of the Act, and that they
are subject to the 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, Can T.S. 1994, No. 2, Ann.
1001.1b-1 (“NAFTA”).
[8]
Pursuant
to subsection 30.11(1) of the Act, a complaint concerning any aspect of the
procurement process relating to a designated contract may be made by a
“potential supplier”. The phrase “potential supplier” is defined in section
30.1 of the Act to mean, subject to any regulation made under paragraph
40(f.1), “a bidder or a prospective bidder on a designated contract” (no
regulations have been made under paragraph 40(f.1)).
[9]
Enterasys
was a pre-qualified supplier under the Networking Equipment Support Services
National Master Standing Offer, and had a legal right to bid on every request
for volume discount that resulted in a designated contract that became the
subject of one of its complaints. In fact, Enterasys did submit one bid, but
its complaint in relation to the resulting designated contract was dismissed
and need not be considered further. Enterasys did not submit a bid on any of
the other requests for volume discount. By the time it submitted its complaints
on the resulting designated contracts, it could not have submitted a bid
because the permitted bidding period had expired.
[10]
Clearly,
Enterasys could not complain as a bidder on a designated contract on which it
failed to bid, and it would appear to be arguable on a narrow interpretation of
the phrase “prospective bidder” that Enterasys ceased to be a prospective
bidder when the bidding period expired. However, according to counsel for the
Crown, the Tribunal interprets the phrase “bidder or prospective bidder on a
designated contract” to include a person who was eligible to bid for a
designated contract but was precluded from doing so by an aspect of the
procurement process that is objectionable under the relevant trade agreement,
which in this case is NAFTA.
[11]
The
Crown does not dispute the Tribunal’s interpretation of the phrase “bidder or
prospective bidder on a designated contract”, and also accepts that an
allegation by a complainant that it was precluded from submitting a bid because
of an aspect of the procurement process that is objectionable under NAFTA
may be a sufficient prima facie indication of the complainant’s standing
to permit the Tribunal to exercise its discretion to commence an inquiry.
[12]
However,
the Crown argues that if the Tribunal commences an inquiry on the basis of such
an allegation, and the Tribunal finds after reviewing the evidence that the
complainant was not in fact precluded from bidding by any objectionable aspect
of the procurement process, the Tribunal must dismiss the complaint for want of
jurisdiction.
[13]
Given
the Crown’s position on these points, I will assume for the purposes of these
applications, without deciding, that it was appropriate for the Tribunal, in
determining whether to commence an inquiry into the complaints of Enterasys, to
employ the interpretation of the phrase “bidder or prospective bidder on a
designated contract” stated above. I will also assume that the Enterasys
complaints provided the Tribunal with a sufficient basis to warrant a prima
facie finding that it was a potential supplier because it was precluded
from bidding by an objectionable aspect of the bidding process. It follows from
these assumptions that the Tribunal was justified in commencing the inquiry.
The question is whether, given the factual findings of the Tribunal at the
conclusion of the inquiry, the Tribunal had the jurisdiction to determine the
complaints.
[14]
I
agree with the Crown that the Tribunal’s reasons for each of the three
determinations in issue contain clear findings of fact that disprove any
allegation that Enterasys was precluded from bidding by any aspect of the
procurement process that was objectionable under NAFTA. These findings of
fact appear at paragraph 296 of the reasons for the June 21 determination,
which reads in relevant part as follows:
|
The
Tribunal notes that, despite its conclusion that PWGSC failed to comply with
Article 1007(3) of NAFTA in certain instances, it found that Enterasys
did not establish that additional information from PWGSC was required in
order to permit bidders to submit responsive tenders. In the Tribunal's
opinion, this means that PWGSC's actions did not have the effect of ensuring
that no compliant equivalent bid could be submitted. In other words, the
Tribunal considers that PWGSC's action did not preclude Enterasys from
submitting a bid and, possibly, being awarded a contract.
|
(This statement appears in the part of the
reasons dealing with remedy, but in my view nothing turns on that.)
[15]
Substantially
the same statements appear in paragraph 254 of the reasons for the August 9
determination, and paragraph 245 of the September 10 determination.
[16]
The
Crown argues that, based on the facts as found by the Tribunal after its inquiry,
Enterasys did not meet the statutory definition of “potential supplier”, and
therefore the Tribunal was obliged as a matter of law to dismiss the complaints
for want of jurisdiction. In my view, the Crown’s argument is correct in law.
[17]
That
is a sufficient reason for allowing the Crown’s applications for judicial
review, quashing the Tribunal’s determinations, and returning this matter to the
Tribunal with a direction that the complaints of Enterasys be dismissed.
Other issues
[18]
The
Crown made written and oral submissions on the substantive issues determined by
the Tribunal in upholding many of Enterasys’ complaints. In my view, the most
important of those substantive issues relates to the issue of when it is permissible
for a procurement to specify the item to be procured by brand name. Although it is not
necessary to consider this issue for the purpose of disposing of these
applications, I propose to do so because of one particularly striking aspect of
the Tribunal’s reasons.
[19]
The
designated contracts that were the subject of the Enterasys complaints were
awarded on the basis of procurements that specified the desired equipment by
brand name or equivalent. Enterasys alleged in its complaints that there was a sufficiently
precise or intelligible way of describing the procurement requirements other
than by brand name, and therefore PWGSC was not entitled to specify its
requirements by brand name. PWGSC argued the contrary. The Tribunal upheld the
complaint on this issue.
[20]
The
Tribunal’s determination as to whether PWGSC was entitled to specify equipment by
brand name required consideration of the interpretation and the application of NAFTA
Article 1007(3), which reads as follows:
|
1007. (3)
Each Party shall ensure that the technical specifications prescribed by its
entities do not require or refer to a particular trademark or name, patent,
design or type, specific origin or producer or supplier unless there is no
sufficiently precise or intelligible way of otherwise describing the
procurement requirements and provided that, in such cases, words such as "or
equivalent" are included in the tender documentation.
|
1007. (3) Chacune des Parties fera en sorte que les
spécifications techniques prescrites par ses entités n'exigent ni ne
mentionnent de marques de fabrique ou de commerce, de brevets, de modèles ou
de types particuliers, ni d'origines, de producteurs ou de fournisseurs
déterminés, à moins qu'il n'existe pas d'autre moyen suffisamment précis ou
intelligible de décrire les conditions du marché, et à condition que des
termes tels que "ou l'équivalent" figurent dans la documentation
relative à l'appel d'offres.
|
[21]
The Tribunal’s
interpretation and application of NAFTA Article 1007(3) must be reviewed on the
standard of reasonableness (Canada (Attorney General) v. McNally Construction Inc., [2002] 4 FC. 633, 2002
FCA 184).
[22]
As I
understand the reasons of the majority and the dissenting member, the essential
difference between them related to the legal relevance of a substantial body of
cogent and uncontradicted evidence explaining the practical reasons for specifying
brand names when procuring products covered by the Networking Equipment
Support Services National Master Standing Offer for installation within an existing
computer network.
[23]
The
conclusion of the majority to disregard that evidence appears in paragraph 126
of the reasons for the June 21 determination (my emphasis), which reads in
relevant part as follows:
|
In
summary, the Tribunal is of the view that PWGSC has not established that the
conditions necessary for using brand names as required by Article 1007(3) of NAFTA
have been met in the circumstances of the RVDs that specify products by brand
name that are at issue. Practical/operational and/or general systemic
considerations, such as the ones taken into account by PWGSC, do not fall
within the scope of the language set out in Article 1007(3), which provides
for the use of brand names. Accordingly, the Tribunal concludes that
PWGSC's conduct regarding these RVDs was inconsistent with Article 1007(3).
|
[24]
The
majority took the same approach in the other two determinations, although the
underlined passage is not repeated.
[25]
In
my respectful view, discounting or ignoring the evidence and justification
offered by PWGSC rendered the conclusion of the majority on the interpretation
and application of NAFTA 1007(3) wrong in principle and therefore unreasonable.
Specifically, I agree with the Crown that the majority misdirected itself on
the object and purpose of the permitted exception. I do not accept the
proposition implicit in the decision of the majority that NAFTA Article
1007(3) necessarily requires the federal government to take unacceptable
operational risks. It follows that the Tribunal, in determining whether a
particular procurement may use a brand name specification, cannot disregard or
discount as irrelevant evidence submitted by PWGSC in support of its position
that the use of brand names in relation to a particular procurement was
necessary to avoid an unacceptable operational risk.
[26]
The approach
taken by the dissenting member on this issue was reasonable. She considered the
evidence in issue to be legally relevant and sufficient to justify the decision
of PWGSC to use brand name specifications in all but two of the designated
contracts in issue. She explained her conclusion at paragraphs 145 to 152 of
the reasons for the June 21 determination (which is substantially repeated in
the other two determinations). The following excerpts from those paragraphs
highlight the parts of her analysis that disclose her understanding of NAFTA
Article 1007(3) and its application (footnotes omitted, my emphasis):
|
146 […] In my view, in the
circumstances of the present case, Article 1007(3) of NAFTA authorizes
PWGSC to identify products by brand name when using an RVD, to the extent
that it can provide to the Tribunal a reasonable explanation to the effect
that generic specifications are not sufficiently precise to allow it to
ensure that the requested product will properly integrate into the existing
network. In such a case, my opinion is that PWGSC presented a reasonable
explanation that there is no other sufficiently precise or intelligible way
to identify the products, since the use of generic specifications would risk
compromising the Government's networks and prevent it from purchasing the
products effectively required.
147 PWGSC submitted in the GIR and
confirmed during the hearing that, when switches are to be
installed and integrated into existing networks, whose integrity and
reliability are essential to the host department or agency, failure of the switches
to properly integrate into those networks could compromise those networks.[…]
[…]
151 It is my view that, in the
circumstances of this case, as reviewed above, the risk and the
consequences of not procuring the right product when a switch is to be used
in an existing system/infrastructure constitute a sufficient and
reasonable justification for PWGSC to require a "brand name or
equivalent".
152 Therefore, in my view, PWGSC
presented the necessary justifications to specify products by "brand name
or equivalent" for each of the 43 RVDs at issue, with the exception of
RVD 651 and RVD 650, in terms required by Article 1007(3) of NAFTA.
[…]
|
[27]
If I
had concluded that the Tribunal had the statutory authority to determine the
Enterasys complaints, I would have concluded that its determinations in
relation to the interpretation and application of NAFTA Article 1007(3) are
unreasonable and can not justify upholding the Enterasys complaints, with the
two exceptions noted by the dissenting member.
Costs of the
applications for judicial review
[28]
The
Crown included a request for costs in each of the three notices of application
for judicial review. The same request was repeated in the Crown’s memorandum of
fact and law in the consolidated application. Counsel for the Crown made no
oral submissions on costs, and he was not obliged to do so as the request for
costs was on the record. In my view, there is no reason in this case to depart
from the normal rule in this Court that costs follow the event, if sought.
[29]
Enterasys
filed a notice of appearance but did not file a record or a memorandum of fact
and law opposing the Crown’s applications, or its request for costs. Enterasys
did not and was not obliged to explain why it did not defend the Tribunal determinations.
However, counsel for Enterasys attended the hearing of the applications to
inform the Court that Enterasys wished to make oral submissions on costs only. In
the absence of any written submissions from Enterasys in advance of the
hearing, the Court exercised its discretion not to permit Enterasys to make oral
submissions on costs.
[30]
Despite
the lack of oral submissions, I have considered whether the amount of costs awarded
to the Crown in this consolidated application should be reduced or limited in
some way because Enterasys did not oppose the consolidated application. I have
concluded that no such reduction or limitation is warranted. The fact that
Enterasys did not oppose the consolidated application did not relieve the Crown
of the normal burden of an applicant to produce a record, prepare a memorandum
of fact and law, and appear at the hearing to make submissions to persuade the
Court that the determinations of the Tribunal were based on an error warranting
the intervention of this Court.
[31]
Enterasys
initiated the complaint proceedings. Having succeeded before the Tribunal,
Enterasys bore the risk that the Tribunal’s determinations of its complaints might
be successfully challenged in this Court, and that the Crown might be awarded
costs in this Court. That risk did not disappear when Enterasys decided not to
defend the Tribunal’s determinations.
Conclusion
[32]
I
would allow the Crown’s applications for judicial review with costs, quash the determinations
of the Tribunal, and refer the complaints of Enterasys back to the Tribunal
with a direction that they be dismissed for want of jurisdiction.
“K.
Sharlow”
“I
agree
Pierre Blais C.J.”
“I
agree
Robert M.
Mainville J.A.”
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