Breaking Up Is Not So Hard To Do: The SCC Gets Over Grenier in Canada (AG) v TeleZone Inc

On December 23, 2010, the Supreme Court of Canada (“SCC”) released its long-awaited decision in Canada (Attorney General) v TeleZone Inc, 2010 SCC 62 [Telezone]. This decision finally puts to rest the contentious debate over whether private law actions involving the decisions of federal administrative decision makers must be first adjudicated by way of judicial review in the Federal Court.

The debate originated from the Federal Court of Appeal’s (“FCA”) decision in Canada v Grenier, 2005 FCA 348 [Grenier], which essentially condemned a private law action involving a federal decision as a collateral attack. The SCC’s decision in Telezone addresses the FCA’s concerns as well as provides clarity on key issues such as the jurisdiction of the Federal Court and the provincial courts. This post takes the position that the SCC correctly decided this case because it promotes access to justice and avoids unnecessary detours to the Federal Court.

Facts of Telezone and the Companion Cases

Six cases, including Telezone, hinged on the SCC’s determination of whether Grenier was good law. For your convenience, I will briefly discuss the facts of each case. In each one of them, a federal administrative decision maker sought to avoid private law claims against it by arguing that Grenier required that judicial review of its impugned decision by the Federal Court had to occur before any private law claims could be made against it. Furthermore, the judicial review had to  invalidate the decision. It is noteworthy that none of the plaintiffs actually sought to challenge the decision maker’s decision. Where the plaintiff initiated private law claims in the provincial courts the decision maker argued not only that judicial review had to occur first, but also that the Federal Court had exclusive jurisdiction.

In Telezone, Telezone Inc. initiated a claim in the Ontario Superior Court for $250 million in damages against Industry Canada for breach of contract, negligence and unjust enrichment. Telezone alleged that Industry Canada broke the rules of a call for telecommunication licence applications.

My colleague Katherine MacLellan recently wrote about Canada (Attorney General) v McArthur, 2010 SCC 63, here. Like Grenier, that case involved an inmate claimed damages in the Ontario Superior Court for wrongful or false imprisonment, and for the intentional or negligent infliction of emotional and mental distress arising out of his stay in solitary confinement.

In Canadian Food Inspection Agency v Professional Institute of the Public Service of Canada, 2010 SCC 66, slaughterhouse operators claimed $1.8 million in damages against striking veterinarians in a labour dispute with the Canadian Food Inspection Agency (CFIA). After the veterinarians did not inspect the slaughterhouse operators’ meat, the CFIA declared that meat did not satisfy regulatory requirements and had to be destroyed. In defence, the veterinarians argued that the damages arose out of the CFIA’s decisions and measures and called the CFIA in warranty.

Last year, I discussed the FCA’s decision in Manuge v Canada, 2010 SCC 67 [Manuge], in detail here. After the amount he received from his disability pension was deducted monthly from the among that he received for long-term disability benefits under the Canadian Forces’ disability plan, Denis Manuge claimed among other relief, constitutional remedies, declaratory relief and damages in relation to these deductions in the Federal Court.

In Nu-Pharm Inc v Canada (Attorney General), 2010 SCC 65, a drug maker claimed injunctive and mandatory relief and damages for various torts against Health Canada in the Federal Court. The claims were in relation to Health Canada’s decision not to authorize the sale of the drugmaker’s product in Canada.

Finally, in Parrish & Heimbecker Ltd v Canada (Agriculture and Agri-Food), 2010 SCC 64, an importer claimed damages for various torts and recovery costs against the CFIA. The CFIA revoked the importer’s permits then reissued them with new conditions that made the product unacceptable to customers.

As will be discussed below, the Telezone decision determined all of these cases in favour of the plaintiffs with private law actions against federal administrative decision makers.

Grenier Creates Controversy

In order to understand the SCC’s decision and its significance, it is important to recall the decision in Grenier. As alluded to above, the FCA had to determine whether an inmate, Daniel Grenier, could challenge an administration decision by the institutional head of a penitentiary through an action for damages instead of judicial review. This issue was essentially one of statutory interpretation. Although many court decisions involve statutory interpretations, the decision in Grenier was particularly significant because of its implications for limitations periods and access to remedies.

According to s. 17 of the Federal Courts Act, RSC 1985, c F-7 [FCA], the Federal Court has concurrent jurisdiction in all cases in which relief is claimed against the Crown. One exception to this provision is a claim for damages under the Crown Liability and Proceedings Act, RSC 1985, c C-50, s 17(2)(d) [CLPA]. However, s. 18(1)(b) of the FCA states that the Federal Court has exclusive jurisdiction to hear any application for relief that includes “any proceeding brought against the Attorney General of Canada, to obtain relief against a federal board, commission or other tribunal.” Moreover, s. 18(3) of the FCA states that the relief provided for in s. 18(1) may only be obtained through an application for judicial review made under s. 18.1.

According to the unanimous decision of the FCA in Grenier, the combined effect of these provisions was that judicial review must be used to challenge the decision of a federal administrative body. In other words, Grenier could not initiate proceedings to seek damages for the institutional head’s decision. The FCA’s decision seemed to undercut access to justice because s. 18(2) of the FCA requires that an application for judicial review of a decision of a federal board, commission or tribunal be made within thirty days after the decision is communicated. Since Grenier waited three years after the decision was communicated to him to initiate his action, he was effectively barred for seeking recourse for what he considered to be an “oppressive and arbitrary” decision to segregate him from the rest of the prison population.

Despite these negative implications for access to justice, Letourneau J.A. writing for the unanimous FCA was unwilling to interpret the FCA otherwise for several reasons. First, review of the lawfulness of decisions of federal administrative bodies through an action in damages would allow a remedy under s. 17. To do so would ignore legislative intent in s. 18(3) that the remedy must be exercised only by way of an application for judicial review.

Second, the clear division of jurisdiction between the Federal Court and the provincial courts would be upset. It would be unclear where to apply for damages since s. 18(1) provides that the Federal Court has exclusive jurisdiction to hear applications for relief involving federal boards, while s. 17(2) states that the Federal Court does not have concurrent jurisdiction to hear any application for damages under the CLPA.

Third, the public interest would be undermined on various fronts. The public interest in the finality of decisions and the accompanying legal certainty would be destroyed. Letourneau J.A. reasoned that it was Parliament’s intent that finality be protected based on the short limitations period for judicial review. As well, the public interest not allowing collateral attacks of federal administrative decisions through tort actions would be undermined.

On the issue of collateral attacks, the FCA added that SCC clearly indicated that judicial review of administrative decision making requires a determination of the appropriate standard of review. The latter signals to a reviewing court the amount of deference that a decision of an administrative decision maker should receive. Letourneau J.A. reasoned that if an action for damages were allowed to proceed rather than judicial review, then the appropriate level of deference would not be accorded to the decision of an administrative decision maker.

In summary, Grenier was a significant precedent because it precluded private law claims against federal administrative decision-makers in relation to impugned decisions where judicial review was not sought first. As well, the decision was overextended so that the Federal Court had exclusive jurisdiction over such claims.

The SCC Rejects Grenier

Writing for the unanimous seven judge panel in Telezone, Binnie J. overturned the principle in Grenier and clarified the state of the law. Upholding the lower provincial courts’ decisions, he held that s. 17 of the FCA and s. 21 of the CLPA conferred concurrent jurisdiction on the superior courts and the Federal Court for claims against the Crown. He also held that it was unnecessary for claimants to seek judicial review of federal administrative decision makers’ decisions before they could seek private law claims. To uphold Grenier and require judicial review by the Federal Court would be contrary to access to justice. If claimants do not wish to challenge a federal administrative decision and seek compensation for alleged damages, then there is no reason to force them to jump through the additional hoop of judicial review.

The Proper Interpretation of the Federal Courts Act

Binnie J. rejected the interpretation of the FCA in Grenier based on the overarching principle of Parliamentary intent. At paragraph 22, he wrote that it was Parliament’s intention to have concurrent jurisdiction in all cases in which relief is claimed against the federal Crown. The subject matter overlap in ss. 17 and 18 of the FCA was meant to provide claimants with convenience and a choice of forum.

At paragraph 42, Binnie J. added that the derogation of jurisdiction requires clear and explicit statutory language. Since there was no such language, exclusive jurisdiction by the Federal Court was implausible. In particular, the language in s. 18 does not oust the superior courts’ jurisdiction. The “exclusive jurisdiction” accorded to the Federal Court is over prerogative writs, declarations, and injunctions federal administrative decision makers. Disagreeing with the FCA in Grenier, he emphasizes that s. 18

does not say that a dispute over the lawfulness of exercise of statutory authority cannot be assessed in the course of a trial governed by the Crown Liability and Proceedings Act brought in the provincial superior court or pursuant to s. 17 of the Federal Courts Act itself.

In addition to the lack of explicit language ousting the superior courts’ jurisdiction, he adds at paragraph 51 that s. 18 merely provides a grant of exclusive jurisdiction to judicially review federal administrative decisions. Further, the remedies in s. 18 do not include an award for damages. The unfairness and arbitrariness of the procedure advocated by the Attorney General is implicit in that observation. A claimant cannot seek damages in an application for judicial review. It is contrary to access to justice to require  that a claimant waste time and money going to the Federal Court for judicial review of a decision that it has no interest in so that it can satisfy a pre-condition to making a damages claim in the provincial courts.

Access to justice is also impeded by the short limitations period in s. 18. Recall that s. 18 requires applicants to make an application for judicial review within thirty days of a decision being communicated to it. One problem with that provision is that, as noted by colleague James Gotowiec here, s. 18 does not incorporate the discoverability principle. The latter is a principle which states that the limitations period starts ticking when a person obtains knowledge of his or her potential cause of action. Section 18 would preclude a person that obtains knowledge about their cause of action after that short period from seeking damages.

Although he does not explicitly addresses the lack of the discoverability principle, Binnie J. did note that a thirty day cut-off to file a damages claim is unrealistic. As well, consistent with the rest of the decision, he added that that s. 18 is designed to facilitate access to justice. The short limitations period in s. 18 is designed to facilitate a quick and summary judicial review procedure and not designed to address a private law action for damages.

The Doctrine of Collateral Attack

The Attorney General’s support for Grenier based on the doctrine of collateral attack also fell apart before the SCC. To begin its analysis, the SCC quoted the following excerpt from Garland v Consumers’ Gas Co, [2004] 1 SCR 629:

The fundamental policy behind the rule against collateral attack is to “maintain the rule of law and to preserve the repute of the administration of justice” (R. v. Litchfield, [1993] 4 S.C.R. 333, at p. 349).  The idea is that if a party could avoid the consequences of an order issued against it by going to another forum, this would undermine the integrity of the justice system.  Consequently, the doctrine is intended to prevent a party from circumventing the effect of a decision rendered against it. [Emphasis added.]

Among other things, the SCC noted that Telezone Inc. was not attempting to avoid the consequences of Industry Canada’s decision. Instead, its alleged financial losses constitute the foundation of its damages claim.

Floodgates vs. Gate Keeper

In my post on Manuge here, I was concerned that overturning Grenier would open up the floodgates to the provincial courts and create chaos. My observation that the jurisdiction between the Federal Court and the provincial courts would be muddied and that people would wage collateral attacks that undermine the principles of finality and legal certainty was consistent with the position of the Attorney General. The SCC’s decision in Telezone eases these fears.

The SCC’s reasoning illuminates why Grenier is bad law that needed to be overturned. With the benefit of the SCC’s decision, it is now clear that it is contrary to access to justice and irrational to require claimants to seek judicial review first in order to claim damages against a federal administrative decision maker. Collateral attack is not a great concern because the claimant is not trying to get around the decision – rather, in those circumstances where the claimant accepts the decision and yet feels aggrieved by it, it should be able to seek damages notwithstanding the identity of the decision-maker as a federal body.

The concern should be over the waste of scare judicial resources on litigation that claimants must undertake so that it can access the provincial courts. Further, affirming Grenier would not completely avoid the mudding of jurisdiction since federal administrative decision makers would still have to appear before the provincial courts after judicial review was completed.

The SCC correctly saw through the Attorney General’s use of Grenier to gate keep access to the provincial courts so that federal administrative decision makers would be shielded from civil liability. While there is some merit to the argument that this decision will open floodgates of civil liability, that argument should not overshadow the fact that the decision serves to increase access to justice by eliminating a needless and time-sensitive two step process. Furthermore, it is possible that this decision will increase the accountability of federal administrative decision makers because they will no longer be shielded from civil liability.

On the other hand, the ability of decision makers to make decisions in an impartial manner may be compromised. It is possible that decision makers will let the potential for civil liability sway their decision making. However, that possibility does not signal the end of days for administrative decision makers. As noted by the SCC, decision-makers can rely upon the defence of statutory authority to protect themselves. Coupled with the ability of the courts to see through crafty pleadings that mask a collateral attack so that the provincial courts can be accessed, the existing safeguards favour the approach in Telezone.