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Suing federal Crown for damages may be thing of the past

|Written By Shannon Kari

The Ontario Court of Appeal is set to hear a series of cases that could make it extremely difficult to successfully sue the federal Crown for damages.

If a two-step process is required ‘it will be much more difficult to sue the federal Crown,’ says Patrick Monahan.

Three or possibly four Superior Court rulings related to jurisdiction when launching a civil claim against the federal Crown are likely to be heard by the appeal court in a consolidated hearing, perhaps as early as the spring.

Lawyers representing the attorney general of Canada have argued in a number of recent cases that a party must first seek judicial review in the Federal Court of an administrative decision before a claim for damages can be brought in Superior Court.

In the most recent decision on the issue, Ontario Superior Court Justice Geoffrey Morawetz rejected this argument in a motion to dismiss a $250-million lawsuit filed by Telezone Inc. against Industry Canada.

Telezone initially filed its claim in 1999, claiming breach of contract and negligence in the process that led to the awarding of four new digital wireless licenses in 1995.

A civil trial was supposed to begin this month, but the federal government brought a motion last year seeking to dismiss the action, arguing that the Superior Court lacked jurisdiction.

The Federal Court of Appeal decision in Canada v. Grenier in 2006 was cited as authority for the position that a party is not entitled to disregard judicial review and use an action for damages as a collateral attack on an administrative decision.

The Grenier decision requires judicial review in the Federal Court if a party wants to “impugn the lawfulness” of an administrative decision, concluded Morawetz in his ruling, released Dec. 5.

“Telezone’s action is not, in my view, a collateral attack,” wrote Morawetz. “Telezone is not seeking to set aside the licenses that have been granted. It is not seeking a licence for itself. It is seeking damages as a result of alleged breach of contract and negligence and the collateral-attack doctrine has no application,” he wrote.

“Telezone’s allegation that Industry Canada breached an implied contract to which they were parties is not an allegation that Industry Canada had no administrative authority for its action or a challenge to the legal validity of its decision. It is simply an allegation that by virtue of the minister’s actions - administratively proper or otherwise - the Crown is in breach of its private law contractual obligations.”

Patrick Monahan, dean of Osgoode Hall Law School and one of the lawyers acting for Telezone, said the ruling is in line with amendments in 1990 that no longer gave the Federal Court exclusive jurisdiction over claims against the federal Crown.

A “two-step process” that requires successful judicial review in the Federal Court before a claim can be brought in Superior Court is “completely unfair,” says Monahan. “It is not what Parliament intended,” he suggests.

Monahan was originally retained by Telezone when the federal government successfully argued in the Ontario Court of Appeal in 2004 that sitting MPs are immune from having to testify when Parliament is in session. Telezone had wanted to question former industry minister John Manley.

The legal action initiated by Telezone is already more than eight years old and to add another step to the process would be unnecessarily duplicative, Monahan says.

In recent Ontario Superior Court decisions in two cases known as McArthur v. Attorney General of Canada  and G-Civil Inc. v. Canada (Public Works and Government Services), the arguments of the federal government were accepted. Both cases have been appealed.

In G-Civil Inc. the court found that a decision involving tenders for bridge repairs first required a successful judicial review application.

Marc Doucet, who represents G-Civil Inc., says his client is not arguing the minister was unable to make the decision that was made. “The issue is whether or not the minister contractually, made the wrong decision,” says Doucet, a partner at the Ottawa law firm of Doucet McBride LLP.

If the federal government is correct in its arguments then “in essence there is no concurrent jurisdiction” as set out in the 1990 amendments to the Federal Courts Act, says Doucet.

If a two-step process is required, “it will be much more difficult to sue the federal Crown in this country,” predicts Monahan.

The Divisional Court granted the federal government leave to appeal Morawetz’s decision in the Telezone case on Jan. 14. A decision is expected this month about whether the Telezone proceeding, McArthur, G-Civil and one other related case will proceed directly to the Court of Appeal as a consolidated hearing.

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