Canada (Attorney General) v. Georgian College of Applied Arts and Technology, 2004 FCA 285

Date: 20040908

Docket: A-561-03

Citation: 2004 FCA 285

CORAM:        DÉCARY J.A.

LÉTOURNEAU J.A.

SEXTON J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                    GEORGIAN COLLEGE OF APPLIED ARTS AND TECHNOLOGY

                                                                                                                                        Respondent

                                          Heard at Ottawa, Ontario, on August 31, 2004.

                              Judgment delivered at Ottawa, Ontario, on September 8, 2004.

REASONS FOR JUDGMENT BY:                                                                               SEXTON J.A.

CONCURRED IN BY:                                                                                                  DÉCARY J.A.

                                                                                                                           LÉTOURNEAU J.A.

Date: 20040908

Docket: A-561-03

Citation: 2004 FCA 285

CORAM:        DÉCARY J.A.

LÉTOURNEAU J.A.

SEXTON J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                    GEORGIAN COLLEGE OF APPLIED ARTS AND TECHNOLOGY

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

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) of the Canadian International Trade Tribunal Act, R.S.C. 1985 (4^th Supp.), c. 47 ("the Act") arguing that the EOI was subject to the procurement provisions of the North American Free Trade Agreement ("NAFTA") and the Agreement on Internal Trade ("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, 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 l of Canada ("AGC") requested the CITT award costs to it.

[7]                On August 9, 2002, 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. AGC v. Georgian College 2003 FCA 199.

[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, 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:

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:

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 partes 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 [Emphasis added]

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.

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 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 paras. 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 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:

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 of any good or service of another Party 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 reasonable 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 CRTC 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] F.C.J. 574 ("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 para. 11:

The general principle that costs follow the event applies to the Tribunal's discretion over costs conferred by subsection30.16(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) Federal Courts Act, R.S.C. 1985, c. F-7.

(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 te 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 $3327.05. Counsel explained that this figure includes an amount of $3182.75 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 $3327.05.

[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.

                                                                        "J. EDGAR SEXTON"         

                                                                                                      J.A.

"I agree

    Robert Décary j.a."

"I agree

   Gilles Létourneau J.A."

                          FEDERAL COURT OF APPEAL

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                                       A-561-03

STYLE OF CAUSE:                                       Attorney General of Canada v. Georgian College of Applied Arts and Technology

PLACE OF HEARING:                                             Ottawa, Ontario

DATE OF HEARING:                                               August 31, 2004

REASONS FOR JUDGMENT:                                SEXTON J.A.

CONCURRED IN BY:                                              DÉCARY & LÉTOURNEAU JJ.A.

DATED:                                                          September 8, 2004

APPEARANCES:

SOLICITORS OF RECORD: