Facts:
Ontario’s Ministry of Transportation (the “Ministry”) initiated a procurement process in 2021 by issuing a call for bids aimed at the production of driver’s licenses and health cards. These identification cards were to be manufactured utilizing card stock with specific security features. Notably, the bid solicitation stipulated a prerequisite that the production of these identification cards, including the card stock, must occur within the borders of Canada. Thales, a subsidiary of a French company, put forth a proposal to manufacture the card stock at a facility in Poland.
Thales contested the stipulated requirement necessitating Canadian production of the card stock through an internal bid review mechanism within the Ontario government. Thales argued that mandating Canadian production of the card stock contravened Canada’s non-discrimination obligations under the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”). Despite Thales’s assertions, the complaint was dismissed on grounds that the requirement fell within the purview of the public safety exception (the “Decision”). Undeterred, Thales applied for judicial review, challenging both the dismissal of its complaint and the request for bids itself. The majority of the Divisional Court granted the application for judicial review, finding both that the Decision and the choice to issue a request for bids with a domestic production requirement in the first place was unreasonable.
Decision:
Appeal allowed; Thales’s application for judicial review dismissed (per Doherty, Hoy, Favreau JJ.A.).
- The majority of the Divisional Court misapplied the reasonableness standard of review.
Reasonableness is the applicable standard, but the Divisional Court erred in its application of that standard by failing to assess whether the Decision, in light of the law, evidence, and arguments presented by the parties, offered a coherent line of reasoning. Specifically, the Divisional Court veered off course by conducting a de novo assessment to determine whether the requirement for Canadian card stock production violated CETA, rather than scrutinizing the rationale behind the Decision. This departure led to three interconnected errors.
First, the majority failed to consider the broader context in which the decision was made and disregarded pertinent submissions from both parties. The Ministry relied on the WTO decision in Brazil – Measures Affecting Imports of Retreaded Tyres (2007) to support its position that any alternative measure would have to preserve the Ministry’s desired level of protection against fraud and identity theft. Thales offered alternative measures without engaging with the precedent in Brazil. Crucially, Thales argued against applying the public safety exception in this case, contending that its past record demonstrated the ability to securely transport card stock from Poland to Ontario.
Second, contrary to the approach set out in Vavilov, the Divisional Court assessed the decision against its own interpretation of whether the public safety exception applied to the domestic production requirement. After determining that the Decision was unreasonable because it failed to apply the two-part material necessity test, the Divisional Court erred in going on to independently evaluate whether the two-part material necessity test was satisfied.
Third, even if the Decision was deemed unreasonable due to the Director’s failure to apply the material necessity test, the majority erred in opting to quash the decision outright without remitting it for reconsideration. A reviewing court should refrain from conducting its own analysis to determine the appropriate outcome unless the matter fits into one of the “limited scenarios” set out in Vavilov, such as where a particular outcome is inevitable and where remitting the case would serve no useful purpose. This was not such a case.
In essence, the Divisional Court’s misapplication of the reasonableness standard resulted in an erroneous conclusion. Contrary to their finding, the Decision exhibited logical and coherent reasoning. The Director’s determination that offshore production posed inherent risks, despite one manufacturer’s ability to transport securely, was a reasonable assessment.
- The Divisional Court erred in finding that the request for bids is subject to judicial review on its own apart from the Decision.
Wauzhushk Onigum Nation v. Minister of Finance (Ontario)1 does not support a sweeping proposition that the terms of a request for bids are never subject to judicial review. In this case, the question of whether the request for bids could be judicially reviewed must be examined within the context of Ontario’s obligations to establish a dispute resolution process for procurement-related disputes under CETA.
As a general principle, if an administrative process is in place to address an issue, parties should exhaust that avenue before seeking judicial review. By doing so, the reviewing court gains insights from the administrative decision-makers’ reasoning and expertise. If parties have already engaged in the administrative process, there is no justification for conducting a separate, fresh review of the request for bids. Such an action falls outside the purview of the court’s role in an application for judicial review.
The concurring judge in the Divisional Court primarily argued that the process did not comply with CETA due to the distinction between a right of appeal and a right of judicial review. While this differentiation holds true as a general principle, its significance diminishes in the context of implementing CETA’s dispute resolution provisions. Additionally, it is not the courts’ responsibility to ascertain whether Ontario’s process aligns with its obligations under CETA. Any failure on Ontario’s part to establish an appropriate dispute process could be addressed under the treaty through mediation and arbitration between the concerned parties.
Commentary:
The main issue before the Director was whether a “public safety” exception could be invoked to justify a domestic production requirement. The Divisional Court failed to recognize that the parties had differing views regarding the authority and criteria for invoking this exception. This fundamental misstep resulted in the Court overlooking the parties’ submissions when conducting its reasonableness analysis. The Divisional Court was persuaded that the Decision was unreasonable largely due to its insistence on adhering to trade law precedents, particularly the material necessity test set out in Brazil, even though they are not binding on Canadian courts or subsequent WTO panels. While the Ministry referred to and relied on the two-part material necessity test, Thales did not adopt this test. The Court of Appeal aptly noted that it is “unclear that the two-part material necessity test is a legal constraint on the decision”. Thus, the Court of Appeal’s decision serves as a useful caution to litigants and courts relying too heavily on importing international precedent into domestic judicial reviews without a full appreciation for the legal force of those decisions.
This decision also serves as another warning for reviewing courts to refrain from inadvertently engaging in a disguised correctness review. After deeming the Director’s decision unreasonable, the Divisional Court inappropriately proceeded to adjudicate whether the domestic production requirement satisfied the public safety exception. This approach, cautioned against under the reasonableness standard, is generally ill-advised. Once a decision is deemed unreasonable, the Court should refrain from further intervention, unless exceptional circumstances warrant otherwise.
With respect to the issue of reviewability, Favreau J.A. appropriately exercised restraint. The question of whether procurement-type decisions are subject to review remains contentious and likely to persist. This determination will have to be made on a case-by-case basis. In this instance, Favreau J.A. draws an analogy to cases involving adequate alternative remedies, which holds merit. There is little practical rationale for revisiting the procurement itself if a tailored process already exists to challenge the bid. While the decision does not definitively close the door on all standalone judicial reviews of the criteria of requests for proposals, such challenges are unavailable where administrative review procedures already exist. Unsuccessful bidders should avail themselves of such recourses first, and can then seek judicial review of the decision if they are still unsuccessful.
- 2019 ONSC 3491 (Div. Ct.). ↩︎