Date: 20090527
Docket: T-1971-08
Citation: 2009
FC 554
Vancouver, British
Columbia,
May 27, 2009
PRESENT: The Honourable Mr. Justice Zinn
BETWEEN:
AYC PHARMACY LTD.
and NIKHIL BUHECHA
Applicants
and
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA as represented
by THE MINISTER OF HEALTH,
ATTORNEY GENERAL OF CANADA
and FIRST CANADIAN HEALTH
MANAGEMENT CORPORATION INC.
Respondents
REASONS FOR ORDER AND ORDER
[1]
This is an
appeal of the Order of the Prothonotary dismissing the respondents’ motions to
strike the applicants’ Notice of Application for Judicial Review.
[2]
The
applicants (collectively referred to as AYC) operate a pharmacy. First Canadian
Health Management Corp. (FCH) administers the direct billing and payment
process related to claims made under the Non-Insured Health Benefits Program
(NIHB). Health Canada created the NIHB which provides eligible
registered members of First Nations and recognized Inuit and Innu persons with
medically necessary health-related goods and services not covered by other
federal provincial territorial or third-party insurance plans.
[3]
On
November 21, 2007, AYC and FCH entered into a written agreement allowing AYC to
be a provider of pharmaceutical products to clients of the NIHB; they would then
be reimbursed directly through FCH for these products and services. Section 8
of that agreement sets out the rights to terminate the agreement – either on
notice, for cause without notice, or after giving notice of deficiencies which
have not been cured. The termination provision has previously been considered
by Justice Sharlow, as she then was, in 687764 Alberta Ltd. v. Canada
(Minister of Health), [1999] F.C.J. No. 545; 166 F.T.R. 87. In that case,
the termination was made for cause without notice. In this case, the
agreement was terminated at the end of the calendar year by giving at least 90
days written notice.
[4]
FCH
provided that notice of termination in a letter dated September 30, 2008. One
day prior, FCH informed AYC in a letter dated September 29, 2008, that it had
been selected for an on-site audit of the claims paid to it on behalf of the
NIHB be clients. The close timing of these led AYC to the view that they were
connected. This, they claim, created a reasonable expectation that if the audit
disclosed concerns they would have an opportunity to discuss them with FCH with
a view to convincing them to withdraw the termination notice.
[5]
That
audit was completed and a report issued on November 19, 2008, which indicated
that AYC had been overpaid. Counsel for AYC wrote to FCH challenging some
aspects of the audit and advising that AYC had cured the noted deficiencies; he
asked that the notice of termination be deferred in order that the parties
could further discuss the audit. FCH responded indicating that the contract
would terminate on December 31, 2008, as previously advised.
[6]
The
respondents brought a motion to strike the Notice of Application on the grounds
that the termination of the agreement between AYC and FCH is not subject to
judicial review and on the basis that the application is bereft of any
possibility of success. They submitted that the relationship between AYC and
FCH was a matter of private contract law and did not concern the decision of a
“federal board, commission or other tribunal". They further submitted that
in terminating the agreement, FCH was not acting as an entity which exercised
or purported to exercise jurisdiction of powers conferred by or under an Act of
Parliament, and therefore the jurisdiction of this Court was not engaged.
Additionally and in any event, the respondents submitted that the applicants
had no right to be heard before the agreement was terminated, citing the
decision in 867764 Alberta Ltd. Lastly, they submitted that even if FCH
was considered a public authority or the alter ego of a public authority, the
Supreme Court of Canada in Dunsmuir v. New Brunswick, 2008 SCC 9
stands for the proposition that public law duties are not engaged when the
relationship is contractual.
[7]
In
dismissing the motion, the Prothonotary held that although the respondents
“raised compelling arguments” he was not satisfied that the application was
bereft of any possibility of success, or that the respondents’ objection should
be entertained on an interlocutory motion in the absence of the full
evidentiary record.
[8]
The
test to be applied in considering appeals from the decision of a Prothonotary
has been stated by the Federal Court Appeal in Merck & Co. v.
Apotex Inc., [2004] 2 F.C.R. 459. Discretionary orders of a Prothonotary
ought not to be disturbed on an appeal unless the question raised is vital to
the case or the orders are clearly wrong in the sense that the exercise of
discretion by the Prothonotary was based upon a wrong principle or upon a
misapprehension of the facts. In those cases, the Court may review that matter
de novo.
[9]
The
respondents submit that the vital issue in this case is the effect of the
agreement “on the rights of FCH and AYC when one party decides to terminate the
agreement with 90 days notice.” This Court has held that it is not the question
but the result that determines whether or not the issue is vital: See Peter
G. Whyte Management Ltd. v. Canada, [2007] F.C.J. No. 931, 2007 FC 686; Chrysler
Canada Inc. v. Canada, 2008 FC 1049; Apotex Inc. v. AstraZeneca Canada
Inc., [2009] F.C.J. No. 179, 2009 FC 120. Accordingly, where a proceeding
has been struck that decision is vital to the final issue of the case as it
effectively disposes of the action or application before the Court; however, in
cases such as the present where the Prothonotary has not struck the proceeding,
the decision has not determined the matter and thus it cannot be said to be
vital to the case.
[10]
Accordingly,
in this case, in order to conduct a review de novo the Court must find
that the Prothonotary misapprehended the facts or proceeded on a wrong
principle. There is no suggestion by the respondents that the Prothonotary
misapprehended the facts of this case. They submit that he proceeded on a wrong
principle.
[11]
The
respondents submit firstly that the Prothonotary erred in failing to apply the
principle that because the relationship between AYC and FCH is a contractual
one, it is a matter of private law and judicial review is not available as it
does not contemplate the involvement of Canada. In this
case, however, the applicants take the position that AYC is the alter ego, or
an administrative arm, of the Minister of Health. If established, that might
bring the matter within the jurisdiction of this Court. While this submission
appears somewhat tenuous on the record as it currently stands, it cannot be
said that it is bereft of any possibility of success, particularly as a full
record has not yet been developed.
[12]
The
respondents submit secondly that the Prothonotary erred in failing to properly
consider the decision in Dunsmuir and they rely on the dissenting
judgment of Deschamps J. in Société de l’assurance automobile du Québec v.
Cyr, [2008] S.C.J. No. 13, 2008 SCC 13 as an illustration of the
impact of the Dunsmuir decision. Justice Deschamps found that there was
a contractual relationship between the parties and wrote that “the deficiencies
that justify resorting to the rules of public law are not present where there
is an established contractual relationship.”
[13]
It
is submitted on these authorities that the application for judicial review is
thus bound to fail. If so, it is bereft of any possibility of success and ought
to be struck at a preliminary stage.
[14]
Without
doubt these decisions will pose a substantial hurdle for the applicants in this
matter. Last month the Federal Court of Appeal in Irving Shipbuilding Inc.
v. Canada (Attorney General), [2009] F.C.J. No. 449, 2009 FCA 116 observed
that the impact of these decisions was such that judicial review was all but
ousted when dealing with commercial arrangements.
In
Dunsmuir the Court considered (at paras. 102-17) the appropriateness of
imposing a duty of fairness prior to the dismissal of a Crown employee and
office holder. The Court decided that, as a general rule, a duty of
procedural fairness, and remedies other than damages for breach of
contract, have no place in the legal relationship between the Crown on the
one hand, and office holders and employees on the other, when their
relationship is rooted essentially in contract.
Admittedly,
the facts of our case are different from those in Dunsmuir because the
appellants have no contractual rights against PWGSC. Nonetheless, the broader
point made by both Design Services and Dunsmuir is that when the
Crown enters into a contract, its rights and duties, and the available
remedies, are generally to be determined by the law of contract.
Finally,
if a case arose where the misconduct of government officials was so egregious
that the public interest in maintaining the essential integrity of the
procurement process was engaged, I would not want to exclude the possibility
of judicial intervention at the instance of a subcontractor. However, given
the powerful reasons for leaving procurement disputes to the law of contract, it
will only be in the most extraordinary situations that subcontractors should be
permitted to bring judicial review proceedings to challenge the fairness of the
process.
[Emphasis added]
[15]
It
is submitted on these authorities that the application for judicial review is
thus bound to fail. If so, it is bereft of any possibility of success and ought
to be struck at a preliminary stage. The Federal Court of Appeal left open
the possibility that there might be some instances where judicial review was
appropriate, even in the face of a commercial contract. In my view, it cannot
be said at this stage of the proceeding that this case is one where the
possibility of judicial review clearly and obviously can be said to not be
available; a full record is required before such a determination can be made. I
find that the Prothonotary did not proceed on a wrong principle in failing to
strike on the basis of the decision in Dunsmuir. Accordingly, the appeal
is dismissed with costs to the applicants.
ORDER
THIS COURT ORDERS AND ADJUDGES that the respondents’
appeals are dismissed with costs to the applicants.
“Russel
W. Zinn”
Email this Content