Date: 20020115
Docket: A-747-00
Neutral citation: 2002 FCA 9
CORAM: STONE J.A.
BETWEEN:
BCE NEXXIA INC.
Applicant
and
THE COMMISSIONER OF CORRECTIONS and
TELUS INTEGRATED COMMUNICATIONS INC.
Respondents
Heard at Ottawa, Ontario, on November 5, 2001.
Judgment delivered from the Bench at Ottawa, Ontario, on November 5, 2001.
REASONS FOR JUDGMENT BY: THE COURT
Date: 20020115
Docket: A-747-00
Neutral citation: 2002 FCA 9
CORAM: STONE J.A.
BETWEEN:
BCE NEXXIA INC.
Applicant
and
THE COMMISSIONER OF CORRECTIONS and
TELUS INTEGRATED COMMUNICATIONS INC.
Respondents
REASONS FOR JUDGMENT
[1] The Court allowed this application for judicial review at the conclusion of the hearing on December 5, 2001, with reasons to follow. These are the reasons for judgment.
[2] The decision under review is a November 2, 2000 decision of the Canadian International Trade Tribunal ("CITT"). The Corrections Service of Canada ("CSC") had selected BCE Nexxia Inc. ("BCE") to be the supplier of telephone services to inmates in Canadian prisons administered by the CSC. The telephone service included provision for the control and monitoring of inmate telephone calls by CSC personnel.
[3] Telus Integrated Communications Inc. (Telus) filed a complaint with the CITT that, inter alia, BCE's proposal to provide the telephone service was not compliant with mandatory requirements stipulated in the Request for Proposal issued by CSC.
[4] CSC then filed a notice of motion with the CITT objecting to the CITT's jurisdiction to enquire into the matter. BCE filed comments in support of CSC's motion and Telus filed comments opposing CSC's motion.
[5] The Tribunal denied CSC's motion, finding that it had jurisdiction to consider and decide the Telus complaint. It then found that there was merit to the Telus complaint and recommended that CSC award the contract to Telus as it was the only compliant bidder in respect of the supply of telephone services to CSC prisoners.
[6] On this judicial review, BCE and CSC submit that the CITT erred in finding that it had jurisdiction to consider the Telus complaint. BCE also submitted that the CITT's decision was patently unreasonable. We are of the opinion that the CITT was without jurisdiction to consider the Telus complaint. It is, therefore, not necessary to deal with the substance of the CITT's decision.
STANDARD OF REVIEW
[7] The jurisdictional issue is whether Chapter Five of the Agreement on Internal Trade (AIT) applies to this procurement by CSC of telephone services for prisoners. If it does, the CITT had the jurisdiction to consider and decide the Telus complaint.
[8] In its reasons, the CITT quoted portions of the definitions of "procurement", "goods", and "procurement value" in Chapter Five of the AIT. It then went on to conclude at page 4 of its reasons:
Each case must be considered individually to determine whether there is an ascertainable value. In the case of the AIT, that value must be at least $100,000, where the largest portion of the procurement is for services.
When read together, these provisions lead the Tribunal to conclude that the ITS solicitation does meet the minimum monetary threshold. Very obviously, there is considerable value to the government, in terms of equipment and services from which it will benefit, and value to the successful bidder that will have the exclusive right to provide and charge for telephone services to inmates over the duration of the contract.
[9] In coming to its conclusion that the ITS met the minimum monetary threshold, the Tribunal did not disclose any meaningful analysis of the term "estimated financial commitment resulting from the procurement" in the definition of "procurement value" in Article 518. These words are critical in determining whether there is a "procurement value", a requirement necessary to ground the CITT's jurisdiction to consider a complaint. When a term is specifically defined, it is the text of that definition that must be interpreted. That text, as interpreted, must then be applied to the facts in a reasoned manner.
[10] In our respectful opinion, that was not done by the CITT in this case. The CITT, while reciting the text of the definition of "procurement value", did not engage in any analysis of the term "financial commitment". Its bare conclusion that "the ITS necessarily involves financial commitments" (CITT reasons page 5) fails to deal with the meaning of the term "financial commitment" which is the central question to be determined.
[11] The CITT is an expert tribunal and its interpretation of the AIT will normally be entitled to deference by a reviewing court. However, that entitlement to deference will be weakened by the absence of a reasoned explanation for its interpretation of the relevant articles of the AIT. (See Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at 780, citing with approval R.P. Kerans, Standards of Review Employed by Appellate Courts. Edmonton: Juriliber, 1994, p. 17.) In Cougar Aviation Ltd. v. Canada (Minister of Public Works and Government Services), [2000] F.C.J. No. 1946, Evans J.A. states at paragraph 25:
The Tribunal's interpretation of the agreement [AIT] will normally be entitled to a considerable measure of deference [...]. Moreover, the Tribunal's claim for deference is weakened by the absence of a reasoned explanation for its interpretation of the relevant articles of the agreement.
In Cougar, supra, Evans J.A. applied the standard of correctness in reviewing the CITT's decision. In the absence of a reasoned interpretation of the definition of "procurement value" in this case, the Court must, while acknowledging the general expertise of the CITT as compared to the Court, perform its own analysis and the judicial review must be conducted on a correctness standard.
ANALYSIS
[12] The issue is whether there is a "financial commitment" in this case. If there is, there is a "procurement value". If the "procurement value" is $100,000 or greater, AIT Chapter Five - Procurement, applies to the procurement by the CSC of telephone services for prisoners and the CITT had the jurisdiction to hear and decide the Telus complaint.
[13] "Procurement value" is defined in Article 518 as meaning "the estimated total financial commitment resulting from a procurement".
procurement value means the estimated total financial commitment resulting from a procurement, not taking into account optional renewals when the compulsory part of the contract is of at least one year's duration; [emphasis added]
[14] Monetary thresholds for application of Chapter Five are set forth in Article 502(1). The parties are agreed that the largest part of the procurement is for services and, therefore, the monetary threshold is $100,000. Article 502(1) provides:
1. This Chapter applies to measures adopted or maintained by a Party relating to procurement within Canada by any of its entities listed in Annex 502.1A, where the procurement value is:
(a) $25,000 or greater, in cases where the largest portion of the procurement is for goods;
(b) $100,000 or greater, in cases where the largest portion of the procurement is for services, except those services excluded by Annex 502.1B; or
(c) $100,000 or greater, in the case of construction.
[15] Telus concedes that CSC is not paying a monetary amount for the services to be provided. However, it argues that there is consideration flowing from CSC to the supplier in the form of an "exclusive franchise" given to the supplier by CSC to provide telephone services for prisoners in CSC facilities. Telus says this exclusive franchise has value, "which is at least equal to the millions of dollars in equipment and services being provided by the supplier". The CITT appears to have accepted a version of this argument when it found that there was value to the government in the services being provided that would enable the CSC to monitor and control inmate telephone usage, and value to the successful bidder who would have the exclusive right to provide and charge for telephone services to the prisoners (CITT Reasons page 4).
[16] We agree that the supplier of telephone services is obtaining something of value in being awarded a contract for the exclusive supply of those services. However, broad concepts of value or consideration in a contractual sense are not found in the definition of "procurement value". "Procurement value" is specifically defined to mean only the "estimated financial commitment resulting from the procurement". The CITT did not analyse this definition. We proceed to do so now.
[17] The critical words are "financial commitment". Generally, this term connotes a monetary obligation. (See, for example, "financial" in The Encyclopedia of Words and Phrases
Legal Maxims Canada, 40th Cumulative Supplement at 2-231; and "commitment" in Black's Law Dictionary, 7th ed., at 266.) While a general definition is of limited assistance, the context in which the definition of "procurement value" is used supports the construction that a monetary obligation is what is intended by the term "financial commitment".
[18] "Procurement value" is used to determine whether the monetary thresholds in Article 502(1) are met for application of Chapter 5. The thresholds are set forth as simple monetary amounts. The intention is that the procuring entity estimate the monetary obligation it will incur for the goods, services or construction it is acquiring.
[19] In this case, there is no payment of money from CSC to the supplier. While the granting of an "exclusive franchise", as Telus characterises the arrangement in this case, may have value to a supplier, it is not an obligation to pay money by the government entity to the supplier.
[20] This conclusion is supported by Article 505(2) of Chapter Five. Article 505(2) provides that "procurement value" is to be calculated by taking into account all forms of remuneration. Article 505(2) states:
An entity shall, in calculating the procurement value, take into account all forms of remuneration including premiums, fees, commissions and interest.
The words "premiums, fees, commissions and interest" are all terms that refer to monetary obligations. Remuneration that can be calculated in terms of money must be the type of remuneration referred to in Article 505(2) because the object of taking into account "all forms of remuneration" is to determine whether the monetary threshold in Article 502(1) is met.
[21] The granting of an exclusive franchise is different. It is not ejusdem generis with the other words used to describe remuneration in Article 505(2). Undoubtedly, the agreement under which the supplier provides telephone services to the prisoners has value to the supplier. But it is not remuneration such as "premiums, fees, commissions and interest", which are monetary obligations. There is no remuneration of that type flowing from CSC to the supplier in this case. In this case, the supplier wishes to supply the telephone services to the prisoners and, in return, expects to be remunerated in the form of telephone tolls and charges that will be paid by the prisoners. That is the remuneration that will flow to the supplier. However, it will come from the prisoners, not CSC.
[22] In fact, there is no "financial commitment" to the supplier from either CSC or the prisoners. The CSC is paying no remuneration. And the prisoners are making no commitment of any kind. The supplier is accepting the risk that the prisoners may not sufficiently use the telephone services to justify the investment it is making. Because there is no "financial commitment" resulting from the procurement by either CSC or the prisoners, there is no "procurement value" for purposes of Article 502(1)(b).
[23] The Tribunal concluded at page 4 of its reasons:
It follows from this that the Tribunal finds that the procurement has a monetary value for the CSC. That the CSC has designed this procurement to pass the financial commitments on to the inmates does not change the fundamental fact that the ITS necessarily involves financial commitments. The Tribunal notes, in addition, Article 505(3) of the AIT, which provides, inter alia, that no procuring entity shall design a solicitation in order to avoid the obligations of Chapter Five of the AIT.
We are of the respectful opinion that the Tribunal erred in these conclusions. We have found "procurement value" requires a "financial commitment" and there is none here. Second, there is no "financial commitment" passed on to the inmates as the CSC has not made any "financial commitment" in the first place, and the inmates have not assumed any "financial commitment" themselves. Further, the Tribunal's reference to Article 505(3) is misplaced. There has been no allegation by Telus that the CSC designed its solicitation in order to avoid the obligations of Chapter Five. There is no evidence to that effect and the Tribunal has conducted no analysis of the facts that would lead to the conclusion that CSC has designed the solicitation in order to avoid the obligations of Chapter Five.
[24] Telus submits that there must be a "procurement value" in this case "to prevent simple avoidance of the AIT". However, procurements where there is no monetary obligation by the procuring entity are rare. As the CITT found:
It is rare, but not unheard of, to have a solicitation where there is no apparent cost to the procuring entity.
In our view, this is one of those rare cases. Excluding application of Chapter Five where there is no "financial commitment" and, therefore, no "procurement value", will not provide a simple way of avoiding the AIT as alleged by Telus.
[25] Further, the drafters of the AIT never intended that Chapter Five be applicable in every situation. Exceptions include:
1. acquisitions with a "procurement value" below the monetary threshold in Article 502(2);
2. procurements intended for resale to the public, procurements on behalf of entities not covered by Chapter 5, procurements from philanthropic institutions, prison labour or persons with disabilities and other procurements referred to in Article 507; and
3. acquisitions involving government assistance or government procurement of goods and services to persons or other government organizations which do not fall within the definition of "procurement" in Article 518.
Chapter Five, therefore, is not intended to be all-encompassing. Construing the term "financial commitment" to exclude procurements where the government is not assuming a monetary obligation to pay the supplier is not inconsistent with the less than pervasive scope of Chapter Five.
[26] Finally, Telus argues, and the CITT found, that the supplier's cost of providing the monitoring services to CSC was well above the AIT minimum threshold of $100,000. Could the supplier's cost of providing the service constitute the "financial commitment" referred to in the definition of "procurement value"? We think not. The "financial commitment" must be that of the procuring entity. There are two reasons for this conclusion.
[27] First, Article 505(1) provides that it is the government entity that is to estimate the "procurement value". Article 505(1) states:
An entity shall estimate the procurement value as at the time of publication of a notice of a call for tenders in accordance with Article 506.
While there can be only one "procurement value", different suppliers will likely have different costs. The necessary implication is that "procurement value" is the estimated "financial commitment" of the procuring entity and not the cost to the supplier.
[28] Second, Article 505(3), the anti-avoidance provision, is directed at the procuring entity. Article 505(3) provides:
No entity shall prepare, design or otherwise structure a procurement, select a valuation method or divide procurement requirements in order to avoid the obligations of this Chapter.
This is an indication that the "procurement value" and, therefore, the estimated "financial commitment", is the "financial commitment" of the procuring entity and not the supplying entity.
[29] For these reasons, we cannot agree that the supplier's cost of supplying the services is the "financial commitment" referred to in the definition of "procurement value".
[30] For the foregoing reasons, the application for judicial review was allowed with costs to the applicant and to the respondent Correction Service of Canada and the decision of the
Canadian International Trade Tribunal dated November 2, 2000 was quashed.
"A.J. Stone"
J.A.
"Marshall Rothstein"
J.A.
"J. Edgar Sexton"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-747-00
STYLE OF CAUSE: BCE NEXXIA INC. v. THE COMMISSIONER OF CORRECTIONS and TELUS INTEGRATED COMMUNICATIONS INC.
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: December 5, ?001
REASONS FOR JUDGMENT OF THE COURT (Stone, Rothstein, Sexton JJ.A.)
REN-DERED FROM THE BENCH BY: Stone J.A.
APPEARANCES:
Mr. Ronald D. Lunau Ms. Phuon!zT.V. Ntio
FOR THE APPLICANT
Mr. Christopher Rupar
FOR THE RESPONDENT, THE COMMISSIONER OF CORRECTIONS
Mr. Gordon Cameron FOR THE RESPONDENT, TELUS INTEGRATED COMMUNICATIONS INC.
SOLICITORS OF RECORD
GOWLING LAFLEUR HENDERSON LLP Ottawa, Ontario
FOR THE APPLICANT
Mr. Morris Rosenbera
Deputy Attorney General of Canada
FOR THE RESPONDENT. THE COMMISSIONER OF CORRECTIONS
BLAKE, C ASSELS & GRAYDON LLP Ottawa. Ontario
FOR THE RESPONDENT, TELLS INTEGRATED COMMUNICATIONS