Jurisdictional issues affecting claims against the federal government

Introduction
Facts
Appeal court decision
Supreme Court decision
Comment

Introduction

In December 2010 the Supreme Court of Canada rendered its decision in TeleZone Inc v Canada (Attorney General),(1) following an appeal of the Ontario Court of Appeal's decision in the case.(2) The proceedings began in the Ontario Superior Court with motions by the federal government(3) to dismiss TeleZone's action and three unrelated actions on the principal ground that the federal court – rather than the Ontario court – has jurisdiction over claims against the crown for damages.(4) The crown was unsuccessful in two of the four cases, including TeleZone. All four cases were appealed to the Ontario Court of Appeal, which found that the Ontario Superior Court had jurisdiction. The Supreme Court upheld the Ontario Court of Appeal's decision and rendered a pragmatic decision that promotes access to justice for persons claiming damages against the crown.

Facts

TeleZone's action
TeleZone was incorporated for the purpose of obtaining a personal communications services (PCS) licence from Industry Canada, a federal government ministry. After receiving positive feedback from Industry Canada on its efforts to launch a PCS business, TeleZone prepared and submitted an application for a PCS licence at significant cost. Despite fulfilling the necessary criteria in its application, TeleZone was not among the successful bidders.

TeleZone brought an action against the crown in the Ontario Superior Court of Justice for damages in the amount of C$250 million for breach of contract and negligence as a result of Industry Canada's decision. TeleZone's position was that the terms and conditions of the call for applications from Industry Canada created a contract which was breached when Industry Canada failed to award TeleZone one of the PCS licences. TeleZone did not challenge the validity of Industry Canada's decision with respect to the PCS licences that it awarded, which is relevant to the discussion below.

Motion to dismiss TeleZone's action
The crown brought a pre-trial motion to dismiss TeleZone's action on the grounds that the Ontario Superior Court had no jurisdiction over the subject matter of the action, as exclusive jurisdiction lay with the Federal Court under Section 18(1) of the Federal Courts Act.(5) The motion was dismissed.(6)

The motion judge found that Section 18(1) of the act excluded jurisdiction of provincial courts over the explicit prerogative remedies set out under that section,(7) but did not extend to claims for damages against the crown flowing from civil causes of action.

The crown also argued that TeleZone's claim was a collateral attack on Industry Canada's decision and should not be permitted to continue before judicial review proceedings in the Federal Court had been completed. The motion judge dismissed that argument and found that TeleZone's claim was permissible as it had an independent cause of action that did not impugn the legal validity of Industry Canada's decision.(8) The crown appealed.

Appeal court decision

The Ontario Court of Appeal unanimously dismissed the crown's appeal in respect of both the jurisdictional and collateral attack issues. On the jurisdictional issue, the appeal court found that as a court of general jurisdiction, the superior court has jurisdiction over all claims that constitute a reasonable cause of action.(9) When considering the effect of Section 18(1) of the act, the appeal court arrived at the same conclusions as the superior court – that is, that the remedies under Section 18(1) are extraordinary and do not extend to civil claims for damages based in contract and tort in which the plaintiff is not impugning the legal validity of an administrative decision.(10) The remedies being sought were for such damages, and Telezone's claim did not seek to challenge or change Industry Canada's decision on the PCS licences. Accordingly, the appeal court found that there was no jurisdictional problem in respect of TeleZone's right to bring its claim in the Ontario Superior Court of Justice.(11)

The appeal court agreed with the motion judge that the collateral attack doctrine applies only when a litigant challenges the legal force of an administrative decision in subsequent proceedings.(12) As TeleZone's action did not challenge the legal validity of Industry Canada's decision, the action was not a collateral attack that would render it impermissible. In its reasons, the appeal court rejected the application of the Federal Court of Appeal's decision in Grenier v Canada (Attorney General),(13) on which the crown relied.(14) This decision was further considered by the Supreme Court, as reflected in the discussion below.

Supreme Court decision

Early in the reasons for its decision, the Supreme Court stated that "[t]his appeal is fundamentally about access to justice".(15) This theme was central to the court's rationale for upholding the lower courts' judgments and reflects the pragmatic approach that the court adopted in considering the issues under appeal.

In regard to the jurisdictional issue, the Supreme Court's analysis largely reiterates the lower courts' conclusions. The court started with the premise that a grant of exclusive jurisdiction to the federal decision maker is a reservation or subtraction from the more comprehensive grant of concurrent jurisdiction under Section 17 of the act.(16) This reservation or subtraction is expressed in Section 18 of the act in terms of particular remedies that do not include awards of damages. The Supreme Court also made several statements on the impracticality of the crown's position that a claimant would first have to seek judicial review under Section 18(1) of the act before bringing an action. Such impracticalities include a 30-day limitation period for commencing judicial review applications which, for most potential claimants, would be unrealistic.(17) The court's findings in this regard reflect the pragmatic slant of its reasons.

In regard to collateral attack, the Supreme Court held that while the crown can raise this argument as a defence to proceedings in a provincial superior court, it is not a proper argument against provincial superior court jurisdiction.(18) As with the jurisdictional issue, the court's rationale on the collateral attack issue confirms that of the lower courts – that is, since Telezone's claim did not seek to nullify or deprive the government's decision of any legal effect, its claim was dominated by private law considerations which were properly within the provincial court's jurisdiction.

In regard to the Federal Court of Appeal's decision in Grenier, relied on by the crown on this issue, the Supreme Court endorsed the lower courts' rulings that the principles established in Grenier would undermine Section 17 of the act, which grants concurrent jurisdiction to the provincial superior courts. In so doing, the court stated that: "Grenier is based on what, in my respectful view, is an exaggerated view of the legal effect of the grant of judicial review jurisdiction to the Federal Court in section 18 of the Federal Courts Act."(19)

It would appear that as a result of the Supreme Court's treatment of Grenier, it should be given limited weight in any future jurisdictional arguments.

The Supreme Court noted the crown's concern that damages claims proceeding before a variety of superior court judges would reintroduce a spectre of inconsistency and uncertainty across the country.(20) However, the court was not swayed to this point of view, which would have permitted a regime inconsistent with the purpose of Sections 17 and 18 of the act. Here the court again reflects its practical consideration of the matter and stated that: "This degree of overlap is inherent in the legislative scheme designed to provide claimants with convenience and a choice of forum in the provincial courts."(21)

The Supreme Court justified its position in this regard on the basis of its interpretation of Parliament's intent,(22) and noted that the 1990 amendments to the act (which brought in Sections 17 and 18) were designed to enhance government accountability and promote access to justice. The court further noted that the legislation should be interpreted in such a way to promote those objectives, but the Grenier approach does not do so.(23)

Comment

On the basis of the Supreme Court's decision, claims for damages against the crown, both in Ontario and now across the rest of Canada, may be safely brought in the provincial courts, provided that there is an independent and reasonable cause of action that does not rely on the challenge to the legal validity of an administrator's decision that would require a remedy provided for under Section 18(1) of the act.

The Supreme Court's reasons in Telezone are appealing. They reflect what appears to be the correct interpretation of the act, especially with consideration given to the 1990 amendments to the act that permitted concurrent jurisdiction of the provincial superior courts. Further, they reflect a pragmatic approach in considering the issues, sympathising with the procedural challenges faced by litigants if the crown's (and Grenier's) approach was adopted. This is reflected in several areas of the court's decision, but is perhaps best espoused in the following question posed by the court in its reasons: "What is a practical benefit to a litigant who wants compensation rather than a reversal of a government decision to undergo the Grenier two-court procedure?"(24)

The Supreme Court's endorsement has effectively done away with what some commentators described as "archaic rules" that no longer reflected modern Canadian legal thinking. The court has confirmed on a national basis, not simply in Ontario, that the old rules of jurisdiction truly are a thing of the past.

For further information on this topic please contact Douglas BB Stewart at Fraser Milner Casgrain LLP by telephone (+1 416 863 4511), fax (+1 416 863 4592) or email ([email protected]).