E. H. Industries Ltd. v. Canada (Minister of Public Works and Government Services)

E. H. Industries Ltd. v. Canada (Minister of Public Works and Government Services) Court (s) Database Federal Court of Appeal Decisions Date 2001-03-07 Neutral citation 2001 FCA 48 File numbers A-696-00 Notes Digest Decision Content Date: 20000307 Docket: A-696-00 Neutral Citation: 2001 FCA 48 CORAM: DÉCARY J.A. SEXTON J.A. MALONE J.A. BETWEEN: E.H. INDUSTRIES LIMITED Applicant - and - MINISTER OF PUBLIC WORKS AND GOVERNMENT SERVICES CANADA Respondent Heard at Ottawa, Ontario, on Thursday, February 22, 2001. JUDGMENT delivered at Ottawa, Ontario, on Wednesday, March 7, 2001. REASONS FOR JUDGMENT BY: MALONE J.A. CONCURRED IN BY: DÉCARY J.A. SEXTON J.A. Date: 200100307 Docket: A-696-00 Neutral Citation: 2001 FCA 48 CORAM: DÉCARY J.A. SEXTON J.A. MALONE J.A. BETWEEN: E.H. INDUSTRIES LIMITED Applicant - and - MINISTER OF PUBLIC WORKS AND GOVERNMENT SERVICES CANADA Respondent REASONS FOR JUDGMENT MALONE J.A. I. Application for Judicial Review This is an application for judicial review under section 28 of the Federal Court Act ("the Act") in which the Applicant E.H. Industries Limited (‘EHI") seeks to set aside the decisions of the Canadian International Trade Tribunal ("CITT" or "Tribunal"), dated October 31, 2000 and November 28, 2000. EHI had complained to CITT regarding the procurement by Public Works and Government Services Canada ("PWGSC" or "Canada") of twenty eight maritime shipborne helicopters in a procedure alleged to be intentionally structured to discriminate against EHI. In its decisions, CITT decided not to conduct an inquiry into this complaint. It's review of the evidence and information provided led to the conclusion that there was no reasonable indication that Canada had acted contrary to the procurement procedures in the Agreement on Internal Trade ("AIT"). In addition the Tribunal ruled that the complaint was "premature"; the procedure being at the letter of intent ("LOI")stage, with the final specifications and selection criteria not yet set. II. The Issues Before this Court the central issue is whether CITT erred in refusing to accept EHI's complaint for inquiry. Sub-issues include, what is the proper standard of review, was EHI's complaint premature, and, did CITT err in finding that the complaint did not disclose a reasonable indication that Canada had acted contrary to the procurement procedure in the AIT. III. Factual Background In order to deal with these issues a brief recital of the facts is necessary: i) In 1987, EHI successfully acquired the contract to supply Canada with EH-101 helicopters to replace its maritime shipborne helicopter fleet. In 1991, a similar contract issued to replace Canada's search and rescue fleet. A total of fifty EH-101 helicopters were ordered but those orders were subsequently cancelled with the payment of substantial penalties to EHI; ii) In 1996, Canada issued a Request for Proposal ("RFP") for search and rescue helicopters known as the Canadian Search Helicopter procurement. EHI was the successful bidder and has contracted with Canada to supply fifteen Cormorant helicopters for search and rescue duties; iii) On August 17, 2000 the Minister of National Defence announced Canada's intention to proceed with the replacement of the Canadian Forces fleet of CH124 Sea King helicopters. On August 22, 2000 a LOI was posted on the Government Electronic Tendering Services (MERX). The LOI provided general information to potential bidders with respect to the upcoming and mandatory requirement that interested bidders respond to the LOI by stating their interest in being a prime contractor for one of the two proposed requirements set out in the LOI. iv) The LOI also outlined the anticipated steps in the proposed procurement procedure. In addition to the LOI, Canada advised potential bidders that it's intention was to conduct a mandatory pre-qualification process, to distribute a draft RFP to potential prime contractors and, finally, to solicitor bids for the projects through a final and official RFP. The LOI stated that it was not a RFP, nor was it a commitment that Canada would proceed with an RFP. Specifically it stated: This is not a call for Tenders or a RFP and no agreement of contract will be entered into, with any contractor, based on unfunded responses to this LOI. The issuance of this LOI is not intended to be considered in any way as a commitment by the Government of Canada or as authority to companies to undertake any work which could be charged to Canada; nor is this LOI to be considered a commitment to issue RFPs or award contracts for this project. v) The LOI went on to state that nothing in its terms bound Canada in the development of its project requirements or the statement of work which would form the basis for the final RFP, should the project proceed to that stage; vi) In accordance with the LOI, Canada consulted with industry including the Applicant which posed several questions to which responses were given; vii) EHI submitted a response to the LOI within the designated time period and identified its interests and qualifications to provide the maritime shipborne helicopter fleet in response to a RFP, thus becoming one of a number of companies listed as potential prime contractors on Canada's Maritime Helicopter Project web site; viii) On October 11, 2000, the Applicant filed a complaint with CITT alleging that Canada has structured the procurement procedure for maritime shipborne helicopters in an intentionally discriminatory manner contrary to Article 504(2) of the AIT; ix) Under the complaint procedure, Canada is not notified of the complaint and can take no part in the CITT review until such time as CITT decides to conduct an inquiry; x) On October 31, 2000, CITT advised EHI that it had reviewed the complaint and determined that it did not disclose a reasonable indication that Canada has acted contrary to the procurement procedures in the subject agreement. The reasons of the Tribunal were as follows: The Tribunal has reviewed the evidence and the information provided by the complainant and is of the view that the complaint does not disclose a reasonable indication that PWGSC has acted contrary to the procurement procedures in the applicable agreement, namely the Agreement on Internal Trade (AIT). The AIT does not require that the government use a certain type of selection method and nothing in the AIT requires the government to purchase a particular type or brand of product simply because it already owns some of that product or brand. In addition, the procurement is currently at the "letter of interest" stage and, therefore the final specifications and selection criteria are not yet set. xi) On November 8, 2000 EHI commenced the within application seeking to review the CITT decision. On November 21, 2000, the Applicant again contacted CITT and asked for reconsideration of its decision of October 31, 2000 based on new information submitted. On November 28, 2000, CITT refused EHI's second request on the grounds that no new issues were raised in the subsequent submissions. IV. Standard of Review In considering the standard to be applied in reviewing decisions of CITT this Court has held in the case of Canada (Attorney General) v. Canadian Symtron Systems Inc. and CITT, [1992] 2 F.C. 514 as follows: Pursuant to the decisions of the Supreme Court of Canada and this Court, the standards of review to be employed here are as follows: (1) when making a determination within its jurisdiction, decisions of the CITT may only be overturned if they are patently unreasonable; (2) when making a decision regarding its own jurisdiction, the CITT must be correct. Not surprisingly, EHI asserts that the issues in this appeal are matters of jurisdiction and therefore no deference should be afforded the decision. In contrast, Canada suggests the decision not to investigate was within the jurisdiction of the Tribunal and therefore is only reversible if it is patently unreasonable. In order to decide this issue, I need to consider the administrative scheme, the purpose of the provisions in dispute and the nature of the matter before CITT. Chapter Five of the AIT sets out the rules and regulations that apply to procurements involving the federal government and the provinces. Briefly summarized, Chapter Five requires that federal government contracts of a certain size are to be open to suppliers from all provinces without discrimination (articles 501, 504, 514 AIT). Parliament has conferred on CITT the authority to conduct inquiries into complaints by potential suppliers made under trade agreements, including the AIT. The CITT Act, and its Regulations, set out a comprehensive regime for bid protests and procurement review ( articles 30.11, 30.13 CITT Act, 7(1) Canadian International Trade Tribunal Procurement Inquiry Regulations). In this case subsections 7(1) and (2) of the Regulations govern. These subsections read as follows: 7.(1) The Tribunal shall, within five working days after the day on which a complaint is filed, determine whether the following conditions are met in respect of the complaint: (a) the complainant is a potential supplier; (b) the complaint is in respect of a designated contract; and (c) the information provided by the complainant, and any other information examined by the Tribunal in respect of the complaint, discloses a reasonable indication that the procurement has not been carried out in accordance with whichever one of Chapter Ten of NAFTA, Chapter Five of the Agreement on Internal Trade or the Agreement on Government Procurement applies. (2) Where the Tribunal determines that the conditions set out in subsection (1) in respect of a complaint have been met and it decides to conduct an inquiry, the Tribunal shall publish a notice in the publication of the filing of the complaint. The three conditions set out in subsection 7(1) must be met in order for CITT to have jurisdiction. In this case, CITT made no comment on the first two conditions but found that no reasonable indication of a violation of the AIT existed. Clearly, the purpose of an assessment under subsection 7(1)(c), as to whether or not a complaint discloses a "reasonable indication" of a violation of AIT is to determine if the evidence and arguments in support of the complaint are sufficient to warrant investigation. What the phrase "reasonable indication" means is the subject of debate. There are at least two possible interpretations. The first suggests that "reasonable indication" creates a modest threshold that only allows CITT to refuse to investigate complaints that are almost certain to fail. This interpretation would make it mandatory for the Tribunal to investigate any complaint that reasonably demonstrates that a violation may have occurred. It follows that any complaint that is not frivolous or vexatious must be investigated. Not only does such an interpretation reads words into the section, in my analysis, it impairs CITT's discretion in a manner contrary to the legislative scheme. In my opinion, the correct interpretation of subsections 7(1) and (2) must account for the fact that the functions to be performed are administrative in nature. That is, the decision of whether or not to investigate a complaint by conducting an inquiry is non-adjudicative and largely a matter of discretion to which CITT should be accorded a wide degree of deference. This is made abundantly clear in subsections 7(2) where even in the circumstance where the conditions set out in subsection (1) have been met, CITT may still decide not to conduct an inquiry. It follows that the Tribunal's decision not to conduct an inquiry should only be the subject of intervention by this Court where it is patently unreasonable. In reaching this conclusion, I am supported by the decision of another panel of this Court in Jastram Technologies Inc. v. Canada (Minister of Public Works and Government Services), [2000] F.C.J. No. 367 (Q.L.)(F.C.A.) where Robertson J.A. concluded that where the CITT had refused to investigate a complaint on the issue of timeliness that the standard of review was patently unreasonableness. V. Is the complaint premature? Verification of prematurity actually exists in the EHI complaint to CITT when it stated: When on September 27, 2000, EHI received these non-answers to its questions, it became even more concerned that commonality will not be evaluated in the BV RFP process. The BV RFP has not yet been issued and the process of consultation with industry is said by PWGSC to continue up to the date that it is issued. Accordingly, there is still time for PWGSC to incorporate the consideration of the price impact of fleet commonality in the RFP. However, inasmuch as EHI had received two non-answers to its question on a topic that (as discussed below) was very familiar to those refusing to answer the questions, EHI considered it prudent to file its complaint at this time rather than face an argument that it was timed-out on this matter. (Emphasis Added) In essence, this complaint relates to the criteria that will be employed in the final selection process, in an RFP that has yet to be finalized. It follows that at this point in time it is impossible to know whether or not the final form of the RFP will discriminate against the Applicant's products. It is, however, clear that EHI will have an opportunity to comment on the draft RFP before it is finalized. It will also have a future opportunity to again complain if it believes that it is being discriminated against when the final RFP stage is reached. The Applicant argued that CITT overlooked relevant evidence supporting its allegation of discrimination contrary to article 504(2) of the AIT. The following highlights a few of the most demonstrative pieces of evidence of alleged discrimination assembled by EHI: (1) Contrary to past procurement practices, Canada has excluded "fleet" commonality" as a factor and employed, for the first time in a procurement of this type, a "lowest priced compliant" selection criterion. (2) An E-mail to Pierre Lagueux, Assistant Deputy Minister in charge of procurement for DND to Vice-Admiral Garnett states: "Timing and choice of procurement approach, as well as definition of operational requirements will be key"... "it would be useful ... to meet in the not too distant future ... to ensure we have a common sense of the issues. Not a lot of staff present". (3) Correspondence from Major Richard Bouchard, Staff Officer, Maritime Air Component (Pacific), to his commander Major General Campbell dated December 4, 1998: "Even though the Cormorant (EH-101) is politically unacceptable ("political suicide" as you said), how do you ensure that it does not win a MH competition? Taken together this evidence may eventually demonstrate that the procurement procedure suffered from patent politicization within the Department of National Defence. However, in my view, it does not reveal discrimination against EHI at this preliminary stage of the process and the ingoing consultative process with industry. VI. Conclusion This appeal was argued on the basis that the alleged discrimination fell within the parameters of the AIT, and more particularly article 504, even though the alleged ground of discrimination had no interprovincial or inter-regional component. The appeal was also argued on the basis that the LOI constituted a procurement procedure within the meaning of that expression in article 518 of the AIT and could be challenged on that basis at this early stage of that process. In view of the conclusion the Court has reached on the merits of the application for judicial review, it is expressing no opinion as to the jurisdiction of the Tribunal to entertain the complaint filed by the applicant. The Tribunal was wrong, in my view, to examine the merit of the complaint. It should have dismissed it solely on the ground of prematurity and the conclusions it has reached on the merit of the complaint have, of course, no value as a precedent. In summary, CITT had a rational basis to find that the complaint did not give rise to a reasonable indication of a violation of the AIT which would mandate an investigation at this stage of the procurement process. EHI's application should therefore be dismissed with costs. (B. Malone) J.A. I agree Robert Décary J.A. I agree J. Edgar Sexton J.A.