Due process and the duty of fairness require the federal
government to articulate the rationale behind policies and provide
those affected with an opportunity to be heard in advocating for
change to such policies. That was the key message recently
delivered by the Federal Court in Island Timberlands LP v. Canada (Foreign
Affairs), 2008 FC 1380 (CanLII).
The decision resulted from an application for judicial review
brought by Island Timberlands against a decision by the Minister of
Foreign Affairs that rejected Island Timberland's applications
to advertise standing timber for sale located on its private
timberlands located on Vancouver Island. The export of timber from
B.C. is restricted by federal and provincial export control regimes
that impose a "surplus test" under which timber may only
be exported if it is found to be surplus to domestic needs. Private
timberlands, such as those held by Island Timberlands, are subject
to the federal regime imposed under the authority of the Export
and Import Permits Act. The first step of the federal process
requires proposed exporters to apply to the Department of Foreign
Affairs and International Trade (DFAIT) in order to advertise
timber on a bi-weekly list so that domestic saw mills may make
offers. If no fair offers are received, the timber is considered
surplus to domestic needs and an export permit may be granted. The
refusal to accept Island Timberlands' application to advertise
precluded it from getting beyond the first step in this export
The federal regime is set out in official written guideline
entitled "Notice 102," which has been and continues to be
the target of a series of federal court cases. It is also currently
the target of a challenge brought by a US investor under
NAFTA's Chapter 11. One of the stated policies under Notice 102
is that only harvested timber (logs) may be considered for the
export approval process. Nevertheless, an unwritten policy has
developed whereby applications for standing timber located in the
interior region of B.C., but not on the coast, are permitted.
Island Timberlands' applications to advertise standing timber
located on the coast were refused outright by DFAIT, which stated
its reliance on this unwritten policy without providing for any
During the course of the first session of the hearing of the
application, in the hope of resolving the dispute, the court
suspended the session and invited the Minister to explain the
rationale behind its policy and to provide an opportunity for
Island Timberlands to provide a justification for a change to the
policy. The Minister declined the invitation, thereby necessitating
a second session. Lead counsel for Island Timberlands, Geoff R.
Hall of McCarthy Tétrault LLP, took advantage of the
scheduling of the second session to accommodate a request made by
Professor Audrey Macklin of the University of Toronto Law School
for the hearing of the second session to be held in front of her
Administrative Law class in the mock courtroom at U of T.
Recognizing the benefit of the novel administrative law issues at
stake and the obvious educational benefit of such an exercise, the
court and counsel agreed to hear the second session at the law
school. The event was an overwhelming success for all involved.
In its decision issued shortly after the second session, the
court held that the Minister had committed a breach of due process
by failing to state the rationale behind its policy, thereby
failing to administer a transparent and meaningful process by
effectively precluding Island Timberlands from making an argument
to deviate from the policy. The Minister's decision to refuse
the applications to advertise was set aside with directions to the
Minister to state the policy rationale and then provide Island
Timberlands with an opportunity to argue for a change to the
policy. The Minister was further directed to consider those
arguments and provide written reasons for any decision to accept or
reject Island Timberlands' applications to advertise.
McCarthy Tétrault Notes:
This decision is significant in that the court intervened in a
case that involved federal government policy, an area where it has
traditionally been reluctant to interfere. It provides critical
support for counsel who wish to challenge government decisions that
affect their clients when the decisions are based on a policy with
an unarticulated rationale.
The case was also interesting as it involved not only issues of
administrative law, but issues under Canada's export control
laws. McCarthy Tétrault was able to draw on the firm's
expertise in this area by including Orlando Silva of the firm's
International Trade and Investment Law Group as counsel.
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This paper discusses contract law issues including decisions of relevance to commercial lawyers and business leaders giving a snapshot of particular principles of interest that arose in case law over the past 12 months.
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