Date: 20051102
Dockets: T-509-03
Citation: 2005 FC 1485
BETWEEN:
HER MAJESTY IN RIGHT OF
NEWFOUNDLAND AND LABRADOR
Applicant
- and -
THE MINISTER OF TRANSPORT CANADA
First Respondent
- and -
PORT HARMON AUTHORITY LIMITED
Second Respondent
Docket: T-682-03
AND BETWEEN:
THE TOWN COUNCIL OF THE TOWN OF
STEPHENVILLE, A MUNICIPALITY INCORPORATED
UNDER THE LAWS OF THE PROVINCE OF
NEWFOUNDLAND AND LABRADOR
Applicant
- and -
THE MINISTER OF TRANSPORT CANADA
First Respondent
- and -
PORT HARMON AUTHORITY LIMITED
Second Respondent
- and -
STEPHENVILLE PORT AUTHORITY INC.
Third Respondent
REASONS FOR ORDER
[1] The Port of Stephenville, nestled in St-George's Bay on the west coast of Newfoundland, has played, plays and hopefully will continue to play an important role in the region's economy; on that the parties all agree. After owning and operating the port for many years, in March 2003 Transport Canada sold it to Port Harmon Authority Limited, a private for-profit corporation set up by the town of Stephenville's Mayor, its town manager and the harbour master. The sale took place on the express directive of the then Minister of Transport, the Honourable David Collenette, and against the wishes of both the government of Newfoundland and Labrador and the town of Stephenville. They were of the view that there was no need to sell the port at that time and that, in any event, it should have been sold to the province or to a not-for-profit corporation. This is a judicial review of Minister Collenette's decision.
[2] The sale was referenced by the federal government's National Marine Policy, which was introduced in December 1995. As part of that policy, a Port Divesture Program was established for the purpose of commercializing Canada's local and regional ports by transferring ownership, management and control thereof to third parties. Detailed "Guidelines and Directives for Port Divestiture" were developed within Transport Canada to deal with the mechanics of divestitures and the funding authorized the Treasury Board. It was recognized that in many cases new owners would have to be financially induced to take over, maintain and operate the port.
[3] Although the guidelines were internal and not made public as such, many of the details were made public, not only at large, but specifically in communications with the government of Newfoundland and Labrador and the town of Stephenville. Both were aware that the guidelines set out a priority list for port divestiture. Regional ports such as Stephenville were to be offered to other federal government Departments, provincial governments and then to local interests comprising municipalities, port users and stakeholders, in that order.
[4] In essence, the applicants submit that the Minister's decision to divest the port to a private for-profit corporation was in violation of provincial priority, and was contrary to the principles of natural justice and procedural fairness as well as their legitimate expectations.
[5] These allegations must be analyzed first in terms of procedural fairness and then in accordance with the appropriate standard of judicial review.
THE FACTS
[6] The Port Divestiture Program covered approximately 550 regional, local or remote port facilities across the country. Fifty-four ports, including Stephenville, within the province of Newfoundland and Labrador were identified by D.A. Lester, the regional director of Transport Canada's Harbour and Ports Directorate as being available for divestiture. In January 1996, he wrote the province to inquire whether it was "interested in accepting transfer of ownership of any of the ports under our administration..." He went on to say that if the province did not request a transfer, Transport Canada would then approach the municipalities. However, he added that he was aware that under the provincial Municipalities Act, municipalities were barred from owning and operating port facilities.
[7] A deputy Minister wrote back to confirm that municipalities were restricted from accepting jurisdiction for port operations, but that his Department intended to ask the new provincial government to revisit this position. It was suggested that it might be beneficial if the port divestiture issue could be "put on hold" for a few months.
[8] As it turns out, Stephenville did not come under specific federal provincial discussion until late 1998, almost three years later. However, by then a number of sites had been turned over to the provincial government along with a considerable amount of money, three sites had been transferred to other federal government departments and private interests had acquired assets at six sites in the province.
[9] Turning now to the town, in late April 1996, Mr. Lester wrote to Cecil Stein, the Mayor of Stephenville, to inform him that Transport Canada would be conducting a public information session the following month in Stephenville in order to invite "expressions of interest" from individuals or groups interested in acquiring ports in the region.
[10] The meeting proceeded as scheduled and was well attended. Among the attendees was Barry Coates, the town manager. However, no expressions of interest were forthcoming until almost two years later.
[11] The next development of note was in March 1998 when Mayor Stein writing on "Office of Mayor" letterhead expressed concern to Mr. Lester about possible acquisition of the port by a single user, which might want it for its exclusive use. The mayor was of the view that the port was too vital to the economic well-being of the region to be under the control of a single port user. He said that "a not-profit corporation will be set up with the objective of acquiring and administering this facility in the same professional manner Transport Canada has done for the region over the years." The mayor was fully supported by the Town Council. A not-for-profit corporation, Stephenville Port Authority Inc., was quickly established. The three directors were Mayor Stein, town manager Coates and harbour master James Cochrane.
[12] By July 1998, Stephenville Port Authority Inc. provided the federal Minister of Transport with a letter of intent. The letter, which in reality was on a federally approved form, recognized that further discussions and negotiations were required before a Transfer Agreement could be executed. The letter was said to be non-binding, created no enforceable legal or equitable rights and noted that the transfer agreement itself would not be binding upon Her Majesty, the Minister or Stephenville Port Authority until such time as it had been reduced to writing and been executed by both sides.
[13] The corporation also signed a non-disclosure agreement which later became a bone of contention between the Mayor and the Town Council.
[14] According to the Guidelines, these two documents marked early milestones in the divestiture process. The prospective purchaser was required to develop a detailed business plan before the execution of an Agreement in Principle, followed by an Agreement To Transfer and finally by the actual closing and transfer of title.
[15] In the months that followed, the Town Council became concerned that its role in Stephenville Port Authority Inc. might run afoul of provincial law. Town Manager Coates made inquiries and was informed that the town was still barred from owning or operating the port. Indeed, bulletins to that affect had been sent to all municipalities in years past.
[16] This led to the passing of following resolution at a special meeting of the council in June 1999:
That due to the letter from John Moore and The Provincial Government Policy, Council is aware that Cec Stein and Barry Coates are members of the Stephenville Port Authority and have no objections to them serving as private citizens and not in their capacity as Mayor and Town Clerk/Manager.
Carried Unanimously
[17] Rightly or wrongly, Mayor Stein concluded that the directors were then at liberty to establish a for-profit corporation. Mr. Coates went along with the plan as Mayor Stein had informed him that he, the Mayor who was an engineer, and harbour master James Cochrane would be working for the port and that they both could not be paid unless it was a for-profit corporation.
[18] Be that as it may, unbeknownst to the Town Council, Mayor Stein instructed a solicitor to establish a new corporation under the name of Stephenville Port Authority (1999) Ltd. This entity was never actually incorporated because the solicitor saw no need to spend money on the incorporation until the time came to sign contracts. However, the Stephenville Port Authority (1999) Ltd. name was used frequently in letterheads and in the business plan. Certainly by March 2000 Mr. Lester was on notice that the individuals behind the proposed takeover intended to use a for-profit corporate vehicle. Indeed the business plan mistakenly states that Stephenville Port Authority (1999) Ltd. was incorporated in June 1999. It was agreed, in a non-binding way, that the Federal Government would contribute $7,490,000.00 for port maintenance and capital projects. However, this stage of the discussions between Transport Canada and, what I shall call, the Stein Group came to an end in May 2000. They were informed that Transport Canada was unwilling to proceed to an agreement in principle because the province had expressed an interest.
NEGOTIATIONS WITH THE PROVINCE
[19] By November 1998, there were still 21 ports, including Stephenville, in Newfoundland and Labrador to be divested by Transport Canada. A block transfer of these ports against a lump sum federal contribution was discussed at a meeting between Premier Brian Tobin and Minister Collenette. This was followed in short order by a letter from the province in which it said it would present a detailed proposal, including an appropriate compensation package. It was hoped that an agreement would be reached by the end of February 1999.
[20] The record does not reveal much of the federal/provincial negotiations other that they went on into 2002 without an agreement. The only port of the 21 in which title was actually vested in Her Majesty in Right of Canada was Stephenville. The others were all subject to reversionary clauses in favour of the province. No doubt this posed a problem in evaluating the properties and the physical conditions in which they were to be returned if decommissioned. The province wanted a compensation package of not less that $400 million dollars, which Transport Canada considered too high. There was also some concern as to whether the province would actually commit itself to use the contribution, which would take the form of a grant, strictly for port capital expenditures and maintenance. These discussions reached very high levels indeed and were mentioned in an exchange of letters between Prime Minister Chrétien and Premier Grimes in March and April 2001. By December 2001, Mr. Barrett, the provincial Minister of the Department of Works, Services and Transportation, reported to the House of Assembly that discussions were not going anywhere fast because the price was not right. On 29 April 2002, he answered a question in the Provincial Service Committee by saying the discussions with the federal government were over.
[21] This was followed in short order by a letter from Margaret Bloodworth, Deputy Minister, Transport Canada, to Don Osmond, provincial Deputy Minister, advising that the Port Divestiture Program, which was originally scheduled to terminate in March 2002, had been extended until 31 March 2003. She added: "In order to allow best use of Departmental funding and resources, Transport Canada will seek to divest those sites which it believes can be divested affordably over the next year. Those for which negotiations were underway as of December 31, 2001 will be a first priority."
[22] Minister Collenette said much the same thing in a letter in late May 2003 to Minister Barrett. However, he added:
With respect to the province of Newfoundland and Labrador, the only Transport Canada port that meets the criteria set out in the extension to the Port Divestiture Program is the Stephenville facility. This being the case, I have instructed Transport Canada officials to conclude negotiations in a timely fashion in order to facilitate the transfer of the Stephenville public port facilities, including the harbour bed, to the local entity.
[23] The province then proposed further discussions in the form of a joint federal/provincial committee. However, in early August 2002 Randy Morriss, who had replaced the then retired D.A. Lester, reiterated to Mr. Osmond that Stephenville was the only site in Newfoundland and Labrador then currently eligible for divestiture and that Transport Canada hoped to divest it by the end of March 2003.
[24] The federal government, perhaps to the chagrin of the province, which may have overstated its case, never waivered from that position. The draft minutes of a federal/provincial joint committee meeting 8 November 2002 notes that Transport Canada intended to conclude an agreement for the transfer of the port of Stephenville (sometimes known as Port Harmon) and had no intention of involving the province in ongoing discussions.
[25] After almost seven years, the pace finally accelerated. The Stein Group was approached and confirmed that it was still interested in acquiring the port against a federal contribution of $7,490,000.00. Although there was some confusion as to the intended corporate vehicle in that Mayor Stein came to realize that Stephenville Port Authority (1999) Inc. had not been incorporated, and that in the interim the federal government had taken out a trade-mark on "Port Authority", a freshly incorporated body "Port Harmon Authority Limited" was established for the purpose of signing the Agreement in Principle with the Minister.
[26] By then, various members of the local community became aware that the intended transfer was to a private corporation, not a not-for-profit corporation. The province claimed it "has not formally concluded discussions concerning Stephenville or any of the other sites, and no release has been provided to authorize third party discussions". Concerned citizens, including members of the town council, came together under the name of the Port Harmon Port Committee to call for the transfer to be to a not-for-profit corporation.
[27] Although it has been suggested that Minister Collenette had been inadequately briefed as to the nature and character of Port Harmon Authority Limited, I find that the evidence, including letters from the Port Harmon Port Community, clearly establishes that the Minister was aware of the for profit aspect of the purchaser.
[28] The province added that all environmental laws would have to be respected to the letter.
[29] It also made reference to a possible breach of its 1949 terms of union with Canada, although this latter allegation has not been pursued in these proceedings.
[30] Those in opposition considered the March 31 deadline to be no more than a frivolous excuse. Although Minister Collenette and Transport Canada conceded the possibility that the divestiture program might be extended, which it was, they had concern that the full $7,490,000.00 might not then be available for Stephenville. There had been a change of governments in Quebec. Discussions with respect to ports in that province might ensue and the total amount of new funding was uncertain.
[31] The port committee offered to develop a business plan and to incorporate a not-for-profit corporation to take over the port. Finally on the eve of closing, the province offered to take over the port, adding however that it was its intention to divest it within 90 days. The Minister nevertheless proceeded to close.
ISSUES
[32] Should the Minister's decision to divest the Port of Stephenville to Port Harmon Authority Limited be set aside because:
a. It was made contrary to the Department's own Policy Guidelines;
b. It was made contrary to the province's and town's legitimate expectations;
c. It did not otherwise conform to the principles of natural justice;
d. It was made in bad faith or was made upon considerations that were irrelevant or extraneous; or
e. It was not in compliance with the Canadian Environmental Assessment Ac.
[33] Does the Town Council of the Town of Stephenville have capacity and standing to sue?
ANALYSIS
[34] The issues as set out above reflect aspects of natural justice and of the standard of judicial review. Although they overlap and it is often difficult to distinguish one from the other, the legal consequences are significant. Under the modern functional and pragmatic approach to judicial review as summarized by the Supreme Court in Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226 and Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, there are three standards of judicial review of administrative decisions: correctness, reasonableness simpliciter and patent unreasonableness. The standard is determined by examining these four factors:
1. The presence or absence of a privative clause;
2. The relative expertise of the decision-maker and the Court;
3. The purpose of the statutory provision within the context of the legislation as a whole;
4. The nature of the question: one of fact, of law or mixed fact and law.
[35] On the other hand, Binnie J. stated in C.U.P.E. v. Ontario(Minister of Labour), [2003] 1 S.C.R. 539 at paragraph 102:
The content of procedural fairness goes to the manner in which the Minister went about making his decision, whereas the standard of review is applied to the end product of his deliberations.
[36] When it comes to procedural fairness, as part of natural justice, the Court owes no deference to the decision-maker. Despite the province's submission to the contrary, the doctrine of legitimate expectations is limited to and forms part of procedural fairness (Mount Sinai HospitalCenter v. Quebec(Minister of Health and Social Services), [2001] 2 S.C.R. 281 at paragraphs 22-38.
[37] Put another way, legitimate expectations are reviewed on a correctness standard as stated by the Federal Court of Appeal in Sweet v. Canada(Attorney General), [2005] FCA 51.
[38] I close these preliminary remarks with the words of Lord Fraser of Tullybelton in Attorney-General of Hong Kong v. Ng Yuen Shiu, [1983] 2 A.C. 629 (P.C.), referred to by Hugessen J.A., as he then was, in Bendahmane v. Canada (Minister of Employment and Immigration), [1989] 3 F.C. 16 (C.A.), which in turn was cited in Mount Sinai, supra. Lord Fraser said at page 638:
... when a public authority has promised to follow a certain procedure, it is in the interest of good administration that it should act fairly and should implement its promise, so long as implementation does not interfere with its statutory duty.
DID THE DECISION VIOLATE THE MINISTER'S OWN GUIDELINES?
[39] The applicants submit that the Guidelines required that in the event there was more than one expressed interest with respect to a port, Transport Canada's regional team would attempt to seek a consensus on how differing interests could be accommodated. If no consensus could be reached, sealed bids meeting special conditions would be sought and the port would be sold to the highest bidder.
[40] Apart from the principle that policy guidelines are not regulations and do not have the force of law, they were not promulgated and cannot be said to have generated any expectations that there would be a bidding war. Even if the guidelines had been promulgated, it is clear that the expression of interest phase was required to be near the outset, in this case in 1996. No one expressed an interest at that time. It was only in the days leading up to the closing that the committee expressed an interest and the province made an offer. The Minister would not have been in breach of the Guidelines even if he ignored the town in 1998, and the province in 2000.
WAS THE SALEIN VIOLATION OF THE APPLICANTS' LEGITIMATE EXPECTATIONS?
[41] As a result of correspondence, with reference to some parts of the Guidelines, both the Province and the Town did have legitimate expectations. However, they are badly mistaken in thinking that they were given a veto over any sale and could, in effect, oblige Transport Canada to continue to operate the Port of Stephenville indefinitely, by simply unilaterally declaring that negotiations were not over, notwithstanding that they had earlier said they were over.. They were entitled to expect to be consulted, and they were. More particularly, the Province, which had priority over the Town, assuming it had legal standing, was in consultation over a period of years. The parties could not agree on a price, it is as simple as that.
[42] The Town submits Mayor Stein was in conflict of interest, Barry Coates having walked away from the deal. If he is to be held accountable, this is not a matter before me on judicial review of the Minister's decision and, in any event, is probably beyond the subject jurisdiction of this Court.
STANDARD OF REVIEW
[43] As held in Mount Sinai, supra,decisions of Ministers of the Crown in the exercise of discretionary powers in an administrative context should usually receive the highest standard of deference, that is to say patent unreasonableness.
[44] Having thus dealt with legitimate expectations as a procedural fairness issue to be assessed on a correctness standard, an administrative discretionary policy decision is not subject to judicial review unless it was made in bad faith, does not conform with the principles of natural justice or relies upon considerations that are irrelevant or extraneous (Maple Lodge Farms v. Canada, [1982] 2 S.C.R. 2, reaffirmed in Dagg v. Canada (Minister of Finance), [1997] 2 S.C.R. 403 and in Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817. See also a very useful analysis in St. Anthony Seafoods Limited Partnership v. Newfoundland and Labrador(Minister of Fisheries and Aquaculture)2004 NLCA 59.
[45] I am quite satisfied that the Minister acted in good faith, that the principles of natural justice were observed and that the decision was not based on a relevant or extraneous considerations.
[46] The applicants urged that there was no rush, that they should have been given more time, that the Minister knew or should have known that the program would be extended and that there would have been adequate funds to cover the Stephenville divestiture.
[47] The Province was on notice for close to a year of the Minister's intentions to divest the Port of Stephenville before the end of March 2003. It simply will not do to make an offer the night before closing, which offer violated the Guidelines because no business plan had been submitted. Furthermore, the Province declared it intended to divest itself of the port within 90 days. Under the Guidelines and contract forms generated within that context, any divestiture required the Minister's approval.
[48] Although the Program was extended, Transport Canada obtained far less additional funding from the Treasury Board that it had sought. No consideration can or should be given to the divestitures which actually took place in the year commencing 1 April 2003.
[49] These were all legitimate policy matters for the Minister to take into consideration. It is difficult enough to make and implement policy without having to worry that discretionary decisions such as these may be set aside by the Court. We live under the rule of law, not the rule of judges. Although expressed within a tort action, I find the following words of Hugessen J. in A.O. Farms Inc. v. Canada (2000), 28 Admin. L.R. (3d) 315, [2000] F.C.J. No. 1771 (QL) compelling. Hugessen J. was dealing with claims in negligence against public authorities. The Court must first ask if there is sufficient proximity to give rise to a duty of care, and then, if so, whether there are policy considerations which negate that duty. He said at paragraphs 11 and 12:
[11] Here it seems to me that on both branches of the test the action must fail. The relationship between the government and the governed is not one of individual proximity. Any, perhaps most, government actions are likely to cause harm to some members of the public. That is why government is not an easy matter. Of course, the government owes a duty to the public but it is a duty owed to the public collectively and not individually. The remedy for those who think that duty has not been fulfilled is at the polls and not before the Courts.
[12] Very similar considerations, it seems to me, apply to the second branch of the test. A public authority must be free to make its choices with an eye only to their political consequences, not to the possibility of being sued for damages... Government, when it legislates, even wrongly, incompetently, stupidly, or misguidedly is not liable in damages. That, in essence, is what the plaintiff has alleged and it discloses, in my view, no cause of action for trial.
By the same token, it is not for this Court to say that the decision was wrong, incompetent, stupid or misguided. However, it is for this Court to say that it was not made in bad faith and was not based on extraneous considerations. Even if a reasonableness simpliciter standard were to apply, as in Baker, supra, the decision would not be set aside.
ENVIRONMENTAL ISSUES
[50] Although on March 17, 2003, James Walsh, Minister of Newfoundland and Labrador Department of Works Services and Transportation, informed Mr. Collenette that he would insist on full compliance with the Canadian Environment Assessment Act prior to any divestiture of the Port of Stephenville, he was either not aware of or ignored the fact that his province had already given the federal authorities the go ahead in the sense that registration was not required under the Provincial Act. Formalities under the Federal Act were observed, although the Province complains that the federal assessments are not detailed enough and are tainted because the individuals signing off were too closely involved with the divestiture. No proof whatsoever as been brought forward on this front.
STANDING AND CAPACITY OF THE TOWN
[51] In the circumstances, it is not necessary to consider whether the Town Council had the capacity under provincial law to sue, and whether they had standing even though the town itself never offered to purchase the port.
CONCLUSION AND COSTS
[52] For these reasons, the applications shall be dismissed. Both the Minister and Port Harmon Authority Limited shall have their costs. Since the cases were joined at an early stage, each shall only be entitled to one set of fees, for which the applicants shall be jointly and severally liable. Although named as a respondent in one application, Stephenville Port Authority Inc. did not participate and is not entitled to costs. Indeed, the Court was informed that that corporation no longer exists.
"Sean Harrington"
JUDGE
Ottawa, Ontario
November 2, 2005
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE: HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR v. THE MINISTER OF TRANSPORT CANADA and PORT HARMON AUTHORITY LIMITED
AND DOCKET: T-602-83
STYLE OF CAUSE: THE TOWN COUNCIL OF THE TOWN OF STEPHENVILLE, A MUNICIPALITY INCORPORATED UNDER THE LAWS OF THE PROVINCE OF NEWFOUNDLAND AND LABRADOR v. THE MINISTER OF TRANSPORT CANADA and PORT HARMON AUTHORITY and STEPHENVILLE PORT AUTHORITY INC.
PLACE OF HEARING: HALIFAX, NOVA SCOTIA
DATES OF HEARING: SEPTEMBER 19-21, 2005
REASONS FOR ORDER: HARRINGTON J.
APPEARANCES:
| Mr. Paul D. Dicks Mr. Philip Osborne
|
|
For the Applicant Her Majesty in Right of Newfoundland and Labrador |
| Mr. Michael F. Harrington Mr. Rob J. Zdebiak
|
|
For the Applicant Town Council of the Town of Stephenville |
| Mr. James Gundvaldsen-Klaassen
|
|
For the Respondent Minister of Transport Canada
|
| Mr. David Mills |
|
For the Respondent Port Harmon Authority Limited |
SOLICITORS OF RECORD
| Benson Myles LLP Barristers & Solicitors St. John's, Newfoundland
|
|
For the Applicant Her Majesty in Right of Newfoundland and Labrador |
| Stewart McKelvey Stirling Scales LLP ST. John's, Newfoundland
|
|
For the Applicant Town Council of the Town of Stephenville |
| Mr. John H. Sims, Q.C. Deputy Attorney General of Canada
|
|
For the Respondent Minister of Transport Canada |
| Mills & Gallant LLP Barristers & Solicitors Stephenville, Newfoundland |
|
For the Respondent Port Harmon Authority Limited |