Date: 20011120
Docket: A-436-01
Neutral citation: 2001 FCA 352
CORAM: STONE J.A.
BETWEEN:
PROFAC FACILITIES MANAGEMENT SERVICES INC.
Applicant
- and -
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
Docket: A-440-01
BETWEEN:
BROOKFIELD LEPAGE JOHNSON CONTROLS
FACILITY MANAGEMENT SERVICES
Applicant
-and-
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
Heard at Toronto, Ontario, on November 19, 2001.
Judgment delivered from the Bench at Toronto, Ontario, on November 20, 2001.
REASONS FOR JUDGMENT OF THE COURT BY: EVANS J.A.
Date: 20011120
Docket: A-436-01
Neutral citation: 2001 FCA 352
CORAM: STONE J.A.
BETWEEN:
PROFAC FACILITIES MANAGEMENT SERVICES INC.
Applicant
- and -
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
Docket: A-440-01
BETWEEN:
BROOKFIELD LEPAGE JOHNSON CONTROLS
FACILITY MANAGEMENT SERVICES
Applicant
-and-
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto,
Ontario on November 20, 2001)
A. INTRODUCTION
[1] As general rule, when a public authority enters into a procurement contract worth more than a specified amount the procurement process must comply with rules established under NAFTA. It is common ground in this litigation that compliance is not required in respect of the renewal of an existing contract.
[2] In response to a complaint made by FM One Alliance Corp., the respondent in these proceedings, the Canadian International Trade Tribunal held that property management contracts entered into by Canada Post Corporation on the one hand, and the applicants on the other, were new contracts to which the NAFTA requirements applied, not renewals of previous contracts. This was largely because Canada Post had not given notice of its intention to exercise its right to renew within the time specified in the original contract.
[3] Whether the Court may set aside this decision for error of law on an application for judicial review depends on the answers to two questions. First, did the Tribunal base its decision on a question of the general law of contract so as to remove it from the highly deferential standard of review normally applied by the Court to Tribunal decisions relating to procurement? Second, depending on the applicable standard of review, was the Tribunal's conclusion either patently unreasonable or incorrect?
[4] These issues arise from two applications for judicial review. The applicant in A-436-01 is ProFac Facilities Management Services Inc. ("ProFac") and in A-440-01 the applicant is Brookfield LePage Johnson Controls Facility Management Services ("Brookfield"). Both applications have been brought to review one decision by the Tribunal and a single set of reasons, raise precisely the same legal questions and concern contracts with Canada Post Corporation that are identical in all material respects. The Tribunal was given leave to intervene in both applications. Although named as a respondent, Canada Post has taken no part in these proceedings. The applications were heard together and these reasons relate to both. A copy will be inserted in each file.
B. FACTUAL BACKGROUND
[5] Canada Post entered into the original property management services contracts with the applicants in 1994, under which ProFac managed Canada Post's properties in central and eastern Canada, while Brookfield was responsible for properties in central and western Canada. Subject to a renewal clause, the contracts were to last for five years and seven months, terminating on March 31, 2000. The renewal clause, article 3.4 of the agreements, provided:
On at least 6 months notice given prior to March 31, 2000, Canada Post shall have the right to renew [these] agreement[s] for a further term of 5 years on terms and conditions to be mutually agreed upon, in advance, by Canada Post and [ProFac or Brookfield].
[6] It is common ground that no notice of renewal was given by Canada Post six months prior to March 31, 2000. Instead, in 1999 Canada Post indicated to the applicants that it was considering expanding the range of services to be covered by the contracts and was interested in contracting with a single services provider.
[7] Consequently, in February 2000, Canada Post decided to issue a Request for Procurement ("RFP") and, in order to ensure that its buildings continued to be managed in the interim, Canada Post agreed with the applicants on March 30, 2000 to extend the 1994 agreements until February 2001. The agreement recited that Canada Post had elected not to renew the 1994 contracts, which, but for the March 30 agreement, were due to expire on the following day, March 31, 2000. The agreement also noted that Canada Post would be issuing an RFP, as in fact it did. FM One prepared a bid in response to that RFP.
[8] Some time later in 2000, Canada Post had a change of heart about its existing contractual arrangements, and entered into discussions with ProFac and Brookfield with a view to continuing the 1994 agreements. As a result, in January 2001 the parties agreed to enter a second five-year contract on much the same terms as the first, although at a somewhat lower price.
[9] Canada Post accordingly withdrew the RFP, at which point FM One complained to the Tribunal that, in failing to invite bids for these property management services contracts, Canada Post was in breach of its NAFTA obligations respecting the procurement process. The Tribunal ordered Canada Post not to enter into the contracts until it had disposed of FM One's complaint.
[10] In letters dated March 23, 2001, Canada Post confirmed with ProFac and Brookfield that, in order to ensure continuity of service pending the Tribunal's determination of the complaint, the original 1994 service agreements had been extended again in January 2001. The letter also attached a copy of the agreement to enter a five-year renewal on the same terms as the 1994 contracts, save for price. After reciting Canada Post's right to renew contained in the 1994 contract, the renewal contract provided that it would be deemed to have started on April 1, 2001, although its actual implementation was to await the outcome of the complaint to the Tribunal.
C. THE TRIBUNAL'S DECISION
[11] On July 9, 2001, the Tribunal released its decision on the complaint. Much of the parties' written representations had dealt with the question of whether the renewal clause in the 1994 agreements was sufficiently precise to enable Canada Post to rely upon it in order to justify exempting the March 23, 2001 agreement from NAFTA procurement requirements. However, the Tribunal did not decide this issue, but upheld the complaint on a narrower ground.
[12] Thus, the Tribunal stated that the second five-year contracts into which the parties had agreed to enter were not a proper exercise of the renewal clause, because Canada Post had not exercised the right to renew at least six months before the expiry of the 1994 contracts, as the renewal clause stipulated, and because it had stated in the March 30, 2000 extension of the 1994 contracts that it had elected not to renew.
[13] The Tribunal went on to observe that, even though it had not given timely notice, if Canada Post had been a private entity it could have renewed the 1994 contracts with the consent of the other contracting parties. However, since Canada Post is a public authority and the contracts in question are "designated contracts" for NAFTA purposes, "the new contracts to be issued should be subject to a tendering procedure compliant with NAFTA". Accordingly, the Tribunal recommended that Canada Post not implement the March 23 agreement, but, instead, should issue a solicitation for property management services in accordance with NAFTA requirements.
D. ISSUES AND ANALYSIS
Issue 1: The standard of review
[14] The applicants concede that it is settled law in this Court that questions of fact and law decided by the Tribunal in the course of determining a procurement matter are reviewable on the most deferential administrative law standard, namely, patent unreasonableness. However, they submitted, the Court has also acknowledged that, should an issue arise that does not engage the Tribunal's expertise in matters of trade law, a less deferential standard should be applied.
[15] The applicants derive these propositions from Siemens Westinghouse Inc. v. Canada (Minister of Public Works and Government Services), 2001 FCA 241 at para. 15, where the Court affirmed the position that it had taken in, for example, Canada (Attorney General) v. Symtron Systems Inc., [1999] 2 F.C. 514 (C.A.). When the Court is reviewing a decision of the Tribunal in a procurement matter, the pragmatic or functional approach indicates that the Tribunal is entitled to the high degree of judicial restraint embodied in the patent unreasonableness standard.
[16] However, the Court also acknowledged that the Supreme Court of Canada had said in Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., 2001 SCC 36; (2001), 199 D.L.R. (4th) 598, a customs case decided by the Tribunal, that the same standard of review did not necessarily apply to all the legal questions decided by a given administrative agency. Much depended on whether the Tribunal's expertise extended to that question. Nonetheless, inSiemens, supra, at para. 20, the Court expressed the opinion that "only rarely" would an issue decided by the Tribunal be reviewable on a standard of correctness because it was outside its broad area of expertise.
[17] The applicants submitted that the issue on which the Tribunal had based its decision in the case at bar was not within its expertise and was thus, exceptionally, subject to review for correctness. The argument was that the Tribunal's conclusion that the agreement of March 23, 2001 was not a mere continuation of the 1994 contracts depended, in whole or for the most part, on the construction of the relevant contractual documents and on ascribing legal consequences to them and to the conduct of the parties, and of Canada Post in particular, that derived from the general law of contract.
[18] Thus, counsel submitted, the Tribunal had either overlooked the right of the applicants to waive Canada Post's delay in giving notice, or had ignored the fact that the extensions of the 1994 contracts had extended all their provisions, including the renewal clause, which, if it were to remain effective, must also have deferred the date by which Canada Post was to give notice of its intention to renew. Moreover, nowhere in its reasons did the Tribunal rely on a provision in NAFTA that precluded the parties from waiving a contractual time limit or from agreeing by implication to extend it.
[19] Despite the ingenuity with which counsel for the applicants developed their arguments, we are not satisfied that a pragmatic or functional analysis justifies treating this case as one of those rare instances in which it would be appropriate to depart from the standard of patent unreasonableness normally applied to questions of law decided by the Tribunal in the course of determining procurement disputes.
[20] First, in regulating the fairness and propriety of the procurement process in order to ensure compliance by government institutions with the relevant trade regime, the Tribunal is performing an exercise of considerable legal, factual and business complexity, in which it has extensive experience. Its work includes the scrutiny and construction of contractual documents, in order, for example, to determine the value of a contract, including any optional purchase provisions, for the purpose of deciding the applicability of the NAFTA procurement requirements (Article 1002), and to determine whether tenders are responsive to the conditions of participation (Article 1015). The Tribunal's area of expertise is indicated by its broad statutory mandate to investigate complaints "concerning any aspect of the procurement process that relates to a designated contract": Canadian International Trade Tribunal Act, R.S. 1985, c. 47 (4th Supp.), subsection 30.11(1).
[21] Second, it is impossible to divorce from the context of the matter before it, the Tribunal's conclusion that, on the facts, it was not open to Canada Post to exercise the renewal option on March 23, 2001 when it agreed to enter into a second five-year contract with the applicants. The Tribunal was determining a complaint by a potential bidder, FM One, that the purported renewal of the 1994 agreements was an attempt by the parties to avoid the NAFTA requirements on the procurement process. In other words, the Tribunal decided simply that the March 23, 2001 agreement was not exempt from NAFTA tendering requirements as a continuation of a pre-existing contract.
[22] As the Tribunal itself pointed out, NAFTA circumscribes government institutions' freedom of contract in respect of designated contracts. Consequently, the effect for NAFTA purposes of Canada Post's failure to exercise its renewal option by the date prescribed in the first contract is not necessarily to be equated with the rights of private parties whose legal relationship is governed solely by the common law of contract.
[23] The applicants argued that, since no provision of NAFTA deals with contractual renewals, the Tribunal's expertise in trade law was not relevant to the basis on which it decided FM One's complaint. This may be true, but is not, in our opinion, persuasive. Chapter 10 of NAFTA, which deals with government procurement, seeks to protect the regulatory regime that it creates by warning parties not to "prepare, design or otherwise structure any procurement contract in order to avoid the obligations of this Chapter" (Article 1001(4)), and it specifically provides that "option clauses shall not be used in a manner that circumvents this Chapter" (Article 1015(4)(e)). We would also note in passing that, in view of the very high value of these contracts, compliance with NAFTA assumes a particular significance here.
[24] Maintaining the integrity of the regime created by Chapter 10, bolstered by the anti-avoidance provisions noted above, was such an important part of the legal context in which the Tribunal held that the renewal was not made in the exercise of Canada Post's right to renew that it is simply unrealistic to say that the Tribunal was dealing primarily with a question of the general law of contract and was thus operating outside its area of expertise. Indeed, on a fair reading of the reasons for decision, the Tribunal related its conclusion to the need for Canada Post to comply with NAFTA obligations.
[25] Hence, the Court can only review for patent unreasonableness the Tribunal's conclusion that the contracts of March 23, 2001 were subject to NAFTA because they were new contracts and did not spring from the renewal clause in the 1994 contracts.
Issue 2: Was the Tribunal's conclusion patently unreasonable?
[26] Whether or not one needs to go as far as Beetz J. in Syndicat des employés de production du Québec et de l'Acadie v. Canada Labour Relations Board, [1984] 2 S.C.R. 412 at 420, who equated a patently unreasonable decision with a "fraud on the law or a deliberate refusal to comply with it", it is clear that this standard signals a very high degree of judicial deference to the reasoning and conclusions of an administrative tribunal to which it applies. A reviewing court is not even to subject it to the "somewhat probing analysis" applicable to decisions reviewable on a standard of unreasonableness (Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 at para. 56). It is sufficient that, in light of the factual, legal and regulatory contexts in which it was made, the agency's decision has some rational basis.
[27] In our view, the Tribunal's decision in the case at bar easily meets this undemanding standard. Given the objectives of Chapter 10, it was not patently unreasonable for the Tribunal on these facts to have decided to hold Canada Post strictly to the renewal clause in its original contract in order to limit the contractual advantages that existing contractors often enjoy over competitors.
[28] The most significant facts were that, on the eve of the expiry of the first contract, and six months less a day after the date prescribed for the exercise of the option, Canada Post acknowledged that it had earlier elected not to renew and stated that it would issue a RFP, which it did. Further, the parties subsequently agreed to enter into the second five-year contracts nearly eighteen months after the time for exercising the option had expired. Further, agreeing to "renew" high value contracts for another five years, long after the expiry of the time originally prescribed for exercising the option, was hardly the kind of minor adjustment that parties may make during the life of a contact, in order to meet exigencies, without engaging NAFTA obligations.
[29] In these circumstances, it was not patently unreasonable for the Tribunal to have considered neither the application of the common law doctrine of waiver, nor to have read into the temporary extension contracts modifications of the latest date for the exercise of the renewal option in order to keep it effective.
E. CONCLUSIONS
[30] For these reasons, the application for judicial review will be dismissed, with one set of costs payable by the applicants to the respondent, FM One.
"John M. Evans"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: A-436-01
STYLE OF CAUSE: PROFAC FACILITIES MANAGEMENT SERVICES INC.
Applicant
- and -
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
DOCKET: A-440-01
STYLE OF CAUSE: BROOKFIELD LEPAGE JOHNSON CONTROLS
FACILITY MANAGEMENT SERVICES
Applicant
-and-
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
Page:2
DATE OF HEARING: MONDAY, NOVEMBER 19, 2001
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT
OF THE COURT BY: EVANS J.A.
DELIVERED FROM THE BENCH AT TORONTO, ONTARIO ON TUESDAY, NOVEMBER 20, 2001.
APPEARANCES BY: Mr. Joel Richler, and
Mr. Bradberg
For the Applicant, Profac Facilities Management Services Inc.
Mr. Brian Radnoff, and
Mr. Milosbarutciski
For the Respondent, FM One Alliance Corp.
No one appearing
For the Respondent, Canada Post Corporation
Ms. Michèle Hurteau, and
Mr. Philippe Cellard
For the Intervener, Canadian International Trade Tribunal
Mr. Gordon Cameron
For the Applicant, Brookfield LePage Johnson Controls Facility Management Services
SOLICITORS OF RECORD: Blake, Cassels & Graydon LLP
Barristers & Solicitors
Box 25, Commerce Court West
Toronto, Ontario
M5L 1A9
For the Applicant, Profac Facilities Management Services Inc.
Page: 3
Davies Ward Phillips & Vineberg LLP
Barristers & Solicitors
4400-1 First Canadian Place
Toronto, Ontario
M5X 1B1
For the Respondent, FM One Alliance Corp.
Fraser Milner Casgrain LLP
Barristers & Solicitors
Suite 4100 - 1 First Canadian Place
Toronto, Ontario
M5X 1B2
For the Respondent, Canada Post Corporation
Canadian International Trade Tribunal
333 Laurier Ave. West
Ottawa, Ontario
K1A 0G7
For the Intervener, Canadian International Trade Tribunal
Blake, Cassels & Graydon LLP
Barristers & Solicitors
45 O'Connor Street, 20th Floor
Ottawa, Ontario
K1P 1A4
For the Applicant, Brookfield LePage Johnson Controls Facility Management Services
FEDERAL COURT OF APPEAL
Date: 20011120
Docket: A-436-01
BETWEEN:
PROFAC FACILITIES MANAGEMENT SERVICES INC.
Applicant
- and -
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
Docket: A-440-01
BETWEEN:
BROOKFIELD LEPAGE JOHNSON CONTROLS FACILITY MANAGEMENT SERVICES
Applicant
-and-
FM ONE ALLIANCE CORP. and CANADA POST CORPORATION
Respondents
-and-
CANADIAN INTERNATIONAL TRADE TRIBUNAL
Intervener
REASONS FOR JUDGMENT
OF THE COURT