Larocque v. Canada (Minister of Fisheries and Oceans), 2006 FCA 237

Date: 20060623

Docket: A-152-05

Citation: 2006 FCA 237

CORAM:        DÉCARY J.A.

                        LÉTOURNEAU J.A.

                        NOËL J.A.

BETWEEN:

JEAN-VICTOR LAROCQUE

Appellant

and

HER MAJESTY THE QUEEN IN RIGHT OF CANADA,

as represented by the MINISTER OF FISHERIES AND OCEANS

Respondent

Hearing held at Québec, Quebec, on June 14, 2006.

Judgment delivered at Ottawa, Ontario, on June 23, 2006.

REASONS FOR JUDGMENT:                                                                           DÉCARY J.A.

CONCURRED IN BY:                                                                                        LÉTOURNEAU J.A.

                                                                                                                                   NOËL J.A.

Date: 20060623

Docket: A-152-05

Citation: 2006 FCA 237

CORAM:        DÉCARY J.A.

                        LÉTOURNEAU J.A.

                        NOËL J.A.

BETWEEN:

JEAN-VICTOR LAROCQUE

Appellant

and

HER MAJESTY THE QUEEN IN RIGHT OF CANADA,

as represented by the MINISTER OF FISHERIES AND OCEANS

Respondent

REASONS FOR JUDGMENT

DÉCARY J.A.

[1]                Reduced to its simplest terms, the issue raised in this appeal is the following: Does the Minister of Fisheries and Oceans (the Minister) have the power to finance the scientific research activities of the Department of Fisheries and Oceans (the Department) by selling fishery resources (in this case snow crab) that it manages?

[2]                Mr. Justice de Montigny, of the Federal Court, determined that yes, in relying exclusively on the Minister's power to issue fishing licences under the provisions of the Fisheries Act (R.S. c. F­­­­­­­­­­-14) (the Act) and the Fishery (General) Regulations (SOR/93-53) (the Regulations). I will find that the Minister cannot, based essentially on the Financial Administration Act (R.S. c. F-11) and on the legal and regulatory requirements relating to Crown expenditures and contracts. As in this case it is purely a question of law regarding the actual jurisdiction of the Minister, clearly the judge had to apply the standard of review of correctness and it is for me to ensure that the judge's decision was correct.

The facts

[3]                The relevant facts are not at issue and none of the judge's findings on the facts are really being challenged.

[4]                In the spring of 2003, negotiations failed on a co-management arrangement between the Minister and the traditional snow crab fisher fleet. That arrangement would have enabled the implementation of a scientific research system ultimately serving to ensure the long-term viability of snow crab fishing. Faced with this setback, the Department decided to undertake this research by itself. As there were not sufficient financial resources in the operating budget allotted to it by Parliament, it adopted a novel - what the judge described as creative - means of proceeding. It would have the research done by a ship from the private sector and, if there were no funds to defray the ship's operating costs, it would allow the ship to pay those costs from a fishing catch quota that the Minister would grant it. In short, a payment in kind from the proceeds of snow crab sales. The

Minister, of the opinion that the operating costs -- the amount of which is not known but which was somewhere between $200,000 and $500,000 -- corresponded to the cost of sale of some 50 metric tons of snow crab, decided to give to the ship with the research contract permission to sell up to 50 metric tons of snow crab.

[5]                A public invitation to tender process was then implemented. A notice for fishers was issued on July 23, 2003. The relevant parts of this notice read as follows

The Department of Fisheries and Oceans (DFO) wishes to advise that it will be conducting a snow crab trawl and trap survey in 2003 in Snow Crab Fishing Areas 12, 18, 25 and 26. The survey will be carried out under the authority of the Fishery (General) Regulations and related licence, issued to a fisher who will be authorized to sell up to 50t of legal-sized crab to cover the costs of the survey. The 50 t will be taken from within the existing TAC of 17,148 for 2003.

The objectives of the survey are to evaluate the condition of the stock, establish an abundance index, validate data from the fishery, compare the composition of the stock between the trap and trawl survey, and to study the biological survey of snow crab and their seasonal migration (tagging of males and females). The information collected during the survey will be used for the stock assessment and management planning of the 2004 fishery. DFO intends to begin the survey shortly.

. . .

[Emphasis added.]

SELECTION CRITERIA

The work consists of:

Part A: Trap survey

To conduct a trap survey with transects in two locations predetermined in the Southwestern Gulf of the St. Lawrence (portion of Area 12, Areas 25, 26 and 18) by following a scientific protocol established by the Department of Fisheries and Oceans (DFO) Canada. The trap survey will enable DFOOceans and Science representatives to collect information to assess snow crab stocks and to conduct biological analysis on the life cycle and seasonal movement of snow crab in the Southwestern Gulf of St. Lawrence.

Part B: Trawl survey

To successfully complete one trawl tow per station at 230 stations predetermined by DFO, by following a scientific protocol established by DFO, using a 20-meter Nephrops trawl provided by DFO, to enable Department of Fisheries and Oceans representatives to gather information needed to assess stock conditions in the southwestern Gulf of St. Lawrence (portion of area 12, Areas 25, 26 and 18).

a.r. tab 7, p. 26, 28

[6]                It appears from the affidavit of the Minister's main witness, Mr. Vienneau, that the means chosen for catching the snow crab was a trawl survey and that the Department had been able to [TRANSLATION] "identify temporary resources to defray the costs of certain activities relating to a trawl survey, with the exception of the operating costs of the proposed scientific licence holder who would be carrying out the trawl survey" (paragraph 10 of the affidavit, a.r. tab 6, pages 3 and 4) [emphasis added]. And according to Mr. Vienneau in his affidavit:

[TRANSLATION]

11.                  Following consultations with senior management, the option of using the crab to defray the operating costs was put forward.

12.                  The Department estimated the operating costs of the trawl survey and, based on the information available on crab prices, the Department believed that 50 tons of crab would be sufficient to cover the operating costs of the proposed licence holder.

[Emphasis added.]

[7]                Mr. Vienneau indeed acknowledged in his affidavit that the amount of commercial-sized snow crab caught during the trawl surveys was [TRANSLATION]"very minimal" (transcripts, page 353), which suggests that it was for that reason that the trap survey had also been authorized: without that opportunity to carry out two trap surveys, the ship would simply have not been able to

catch the 50 metric tons necessary to finance its operating costs. That inference is more easily made given that the judge, at paragraph 6 of his reasons, had determined that the trawl survey "is particularly useful for assessing the biomass of stocks, and such surveys had been carried out since 1990".

[8]                On April 7, 2003, the bid of a crabber from Nova Scotia, Mr. Desveaux, was accepted. A scientific fishing licence was then issued to him. I note in passing that the fishing season was then over and that the amount of snow crab caught was 300 tons lower than the quota of 17,148 metric tons anticipated at the beginning of the season. The parties' counsel recognized the fact that it was not relevant to the question of principle before the Court that the fifty-metric-ton quota awarded to Mr. Desveaux was within the maximum predetermined quota. I also note that the Minister refused to reveal the number of metric tons that Mr. Desveaux in fact caught and that the actual amount of the ship's operating costs remained unknown, even once the research was completed.

[9]                On September 5, 2003, the appellant (Mr. Larocque), whose company has a snow crab fishing licence, addressed the Federal Court for declaratory relief. He invited the Court to declare that the Minister did not have the power "to issue a scientific fishing licence in exchange for a 50-t allocation of snow crab." I point out at this time that the appellant was not asking that the licence given to Mr. Desveaux be voided retroactively. Nor was he seeking damages. His application is forward-looking and Mr. Desveaux is not a party to the proceedings.

[10]            The Federal Court denied the application on May 16, 2005 (2005 FC 694). In short, and at the risk of not doing justice to the judge's reasons, he dismissed the submission to the effect that

"issuing the licence would for all intents and purposes be no more than a veiled means of funding the DFO's activities" (paragraph 27). He says that in his opinion "the means of compensating the licence holder for his or her contribution to the DFO's scientific analyses is purely accessory to the true object of the licence" (paragraph 28); that "[t]he situation could have been regarded differently if it had been proven that the crab allocation granted to the licence holder resulted in significant net profits" (paragraph 29) and that "unless the Act were to prohibit the Minister from allocating a snow crab quota to a fisher in exchange for surveys carried out on behalf of the DFO for scientific purposes, I see nothing in the licence itself that would render its issuance unlawful or ultra vires" (paragraph 31). Stating that he was therefore of the opinion that "the Act is silent on this [issue]" (paragraph 32), he then says that the Minister has a broad discretion in issuing licences and that in this case he had exercised his discretion while taking into account the Parliament's objectives.

The relevant legislation and regulations

Analysis

[11]            I will say from the outset that nobody is challenging the scope of the Minister's discretionary power in matters of issuing fishing licenses. Nor is anyone challenging that the licence at issue had been delivered for purposes authorized by the Fisheries Act and by the Fishery (General) Regulations to the extent that the issuance of the licence for scientific purposes was "in keeping with the proper management and control of fisheries" within the meaning of section 52 of the Regulations.

[12]            However, in my opinion, that is not where the problem - or its solution - lies. The debate was tainted by asking only whether the manner of remunerating the ship was "purely accessory to the true object of the licence", which was scientific research. Rather, what should have been asked was whether the Minister had the power to remunerate a service provider in that manner. It is the Minister's finance power that is at issue, well before his power to issue fishing licenses.

[13]            It is accepted, as the Supreme Court of Canada put it in Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12, that "Canada's fisheries are a 'common property resource', belonging to all the people of Canada" and that "it is the Minister's duty to

manage, conserve and develop the fishery on behalf of Canadians in the public interest" (at pages 25 and 26). They do not belong to the Minister, any more than does their sale price. Also, when the Minister decided to pay a contracting party with the proceeds of sale of the snow crab, he was paying with assets that did not belong to him. Paying with the assets of a third party is, to say the very least, an extraordinary act that the Administration could not perform unless so authorized by an act or by duly enacted regulations. Such an act, on its very face, is like an expropriation of fishery resources or a tax on them for the purposes of funding the Crown's undertakings.

[14]            The judge properly understood the strange situation in which the Minister had put himself when he sought an enabling power in the Fisheries Act. He did not find any there. And it was then, in my opinion, that he erred in law. As the Act was silent, according to him, it would therefore not prohibit the Minister to act in such a way. But it is precisely because the Act is silent that one should refer to the statutes and regulations of general application in matters of contracts and payments from public funds, to verify whether the Minister had the power to do what he did.

[15]            It is accepted, in public law, that any disbursement of public funds must be authorized by legislation. The disbursement process must actively adhere to a specific administrative procedure to ensure compliance with the rules designed to ensure monitoring of the Crown's expenditures. One must be able to verify the jurisdiction of a party who makes a financial undertaking, the existence of unencumbered funds before the contract is entered into, as well as a sufficient balance upon its payment (See Issalys and Lemieux, L'action gouvernementale -- Précis de droit des institutions administratives, 2nd ed., Cowansville, Éditions Yvon Blais, 2003, pages 951 to 958; Dussault and

Borgeat, Traité de droit administratif, 2nd ed., Les Presses de l'Université Laval, volume II, p. 630-631; Hogg and Monahan, Liability of the Crown, 3rd ed. Carswell, 2000, pages 220 et seq.).

[16]            These principles are well stated by McEldowney, in Public Law, 3rd ed., Sweet & Maxwell, 2002, Sweet & Maxwell's Textbook Series, at page 357:

·             The purposes of expenditure must be clearly identified. It is a principle of Parliamentary authority that Parliament approves expenditure for specific purposes. Sums appropriated for a specific service cannot be used for another service. Estimates presented to Parliament provide details of the information necessary for Parliamentary approval. Supplementary estimates must be used for new services in cases where Government departments require a new service that is not covered by the ambit of existing authority.

·             The principle that voted sums authorised by Parliament cannot be exceeded. Departments cannot exceed the sums authorised in the annual Appropriation Act without Parliamentary authority. This may be in the form of a revised or supplementary estimate or by presenting an excess vote to Parliament which is subsequently authorised in the Appropriation Act. In the latter case there must be a report from the Comptroller and Auditor General setting out the reasons for the excess.

·             The principle of annuality: the sums authorised by Parliament are only available in the financial year for which they are appropriated. This principle is intended to ensure that departmental expenditure is subject to regular Parliamentary review and authorisation. Subject to Treasury rules about the carry-forward of underspends, this principle helps to maintain annual Parliamentary authority.

·             The principle of good stewardship: departments are expected to provide Parliament, through various departmental select committees, with information as the basis for the examination of the departments' performance in carrying out policies, functions, projects and programmes. In addition Parliament has to be provided with information to measure the performance of departmental expenditure.

[17]            In Canada, these principles are reflected in the Financial Administration Act, from which I have already reproduced certain provisions. These principles apply to contracting activities, as we see inter alia in paragraph 7 (1)(c), and sections 32, 34, 40 and 41 of that Act. For example, pursuant to subsection 32(2), the Department's General Administrator must "as the Treasury Board may prescribe, establish procedures and maintain records respecting the control of financial commitments". As I noted earlier, the Minister in this case did not have the necessary budget, the

exact amount of the expenditure was not known at the time of the contract, and it still is not known today!

[18]            The Supreme Court of Canada, in J.E. Verreault et Fils Ltée v. Quebec (Attorney General), [1977] 1 S.C.R. 41">[1977] 1 S.C.R. 41, decided that the Financial Administration Act as it was then (in French, the Loi sur l'Administration financière, now the Loi sur la gestion des finances publiques) was a "code" for the management of contracts entered into by the federal government and that in this code "restrictive provisions were to be found which had to be applied, without it being really necessary to have resort to general principles" (at page 49). Mr. Justice Pigeon pointed out that it was not alleged in that matter that the amount was not available and that "the contract was cancelled, not for lack of funds, but in order to give the job to another contractor on a lump sum basis".

[19]            The Minister himself acknowledged that in proceeding by a call for tenders, he was bound to the usual contract regulations. Those regulations are found in the Government Contracts Regulations (SOR/87-402), adopted pursuant to the Financial Administration Act. They require at sections 5 and 6 that bids be solicited, except, in the Minister's opinion since he opted to solicit bids, in cases where they would not apply (for example, a pressing emergency or an estimated amount less than 25,000$).

[20]            The Minister was indeed aware of the risks that he was taking in funding using fishery resources. Indeed, on March 14, 1997, the Director General, Finance and Administration, of the Department, Don Dickson, wrote the following to the Regional Directors

For your information, you will find attached a document that outlines potential mechanisms and associated criteria to be followed when using fish in support of DFO activities.

Note that the third mechanism, contracting for services with little or no monetary consideration, must be avoided for scientific, experimental and test fishing activities. The Auditor General has raised concerns on whether the Minister has authority to use fish to fund fisheries management activities pursuant to the Fisheries Act. The description for the third mechanism has been included in order to familiarize you with the characteristics.

a.r. tab 5, page 184

[21]            The Minister's counsel relies primarily on the scope of the discretionary power to issue licences. She goes so far as to claim, at paragraph 39 of her memorandum, [TRANSLATION] "that the instrument used by the Minister to carry out scientific research was a licence for scientific purposes and not a contract for services". That is denying the evidence itself: everything in this case begins with the contract for services signed after the Minister's call for tenders, and it is in that call for tenders that we read that the licence holder "will be authorized to sell up to 50t of legal-sized crab to cover the costs of the survey". Counsel is indeed wrong to speak exclusively in terms of fishing licences for scientific purposes, because they were in reality two licences issued by the Minister: one for scientific purposes, to carry out research, the other for commercial purposes, to finance research. Only the Minister's power to issue the latter is at issue here.

[22]            The only regulatory text that the Minister's counsel could find to justify her submissions is subsection 35(2) of the Fishery (General) Regulations. I reproduce it again for ease of reference:

[23]            According to counsel, this paragraph, by prohibiting the sale of fish not caught or retained under inter alia "a licence issued under Part VII", which deals with licences for scientific purposes, suggests that in authorizing fishing for scientific purposes, the Minister has the power to authorize the licence holder to fish and to sell fish.

[24]            This interpretation gives the text a scope that it does not have. This is not an enabling provision. It is a prohibitive provision which completes the restriction stated in section 33 of the Act and creates an offence punishable in the manner prescribed under section 78 of the Act. It ensures generally -- because it contemplates the holders of all types of licences -- that no fish will be purchased or sold unless it is caught or retained pursuant to a duly issued licence. It does not confer any power to the Minister that the Minister does not already have. It likely protects licence holders who fish and sell fish in accordance with their licence, as well as the purchaser of that fish. It does not authorize the Minister to issue a licence in a manner or for purposes not authorized by the Act.

[25]            At paragraph 30 of his reasons, the judge noted "in passing" the existence of that paragraph of the Regulations, simply stating that it "appears to explicitly provide for the possibility of selling fish caught under the authority of a scientific fishing licence". In fact, nobody argued before us that a holder of a licence for scientific purposes could not under any circumstances be given the right to sell the fish captured in the context of research financed in accordance with the Act.

[26]            In short, I determined that the Minister financed his scientific research program without first appropriating the funds necessary and by misappropriating, for all intents and purposes, resources that do not belong to him. He confused public funds and the public domain. Without appropriating public funds he appropriated public domain. This cannot be.

[27]            I would allow the appeal, I would set aside the judgment by the Federal Court, I would allow the application for a declaratory order and I would declare that the Minister of Fisheries and Oceans did not have the power to finance his Department's scientific research by issuing licences to fish and sell snow crab. I would award costs to the appellant in this Court and in Federal Court.

                "Robert Décary"

"I concur.

            Gilles Létourneau J.A."

"I concur.

            Marc Noël J.A."

Certified true translation

Kelley A. Harvey, BCL, LLB

FEDERAL COURT OF APPEAL

SOLICITORS OF RECORD

DOCKET:                                                                               A-152-05

STYLE OF CAUSE:                                                               JEAN-VICTOR LAROCQUE v. HER MAJESTY THE QUEEN IN RIGHT OF CANADA, as represented by the MINISTER OF FISHERIES AND OCEANS

PLACE OF HEARING:                                                         Québec, Quebec

DATE OF HEARING:                                                           June 13, 2006

REASONS FOR JUDGMENT:                                            DÉCARY J.A.

CONCURRED IN BY:                                                          LÉTOURNEAU J.A.

                                                                                                NOËL J.A.

CONCURRING REASONS:                                               

DATE OF REASONS:                                                           June 23, 2006

APPEARANCES:

SOLICITORS OF RECORD: