Judgments

Decision Information

Decision Content

T-2252-91
CNG Transmission Corporation (Applicant) v.
National Energy Board, ANR Pipeline Company, Rochester Gas & Electric Corporation, St. Clair Pipelines Limited, TransCanada PipeLines Limited (Respondents)
INDEXED AS: CNC TRANSMISSION CORP. V. CANADA (NATIONAL ENERGY BOARD) (T.D.)
Trial Division, Cullen J.—Ottawa, October 3, 4 and 18, 1991.
Judicial review — Prerogative writs — Certiorari — Appli cation to quash National Energy Board (NEB) decision to review refusal of respondent companies' application for authorization to çonstruct pipeline — Applicant submitting competing pipeline proposal — Former Board Chairman con sultant to respondent, contacting Chairman directly (contrary to Board policy) to arrange meeting between Chairman, Vice- Chairman and representatives of unsuccessful pipeline compa nies — Presenting negative reactions to refusal and sugges tions as to how NEB should proceed in light of allegedly changed circumstances — Applicant unrepresented at meeting — Board deciding to abridge review process — Given terms of National Energy Board Act, procedural nature of decision and type of function exercised, principle of fairness applied, although not to same degree as to hearing on merits — Man ner of conducting meeting unfair — Applicant denied reasona ble opportunity to address issue of whether should be review — Reasonable apprehension of bias — Although NEB members should not be precluded from meeting with industry representa tives, meeting should have been limited to procedural matters.
Judicial review — Prerogative writs — Prohibition — Appli cation to prohibit eleven named National Energy Board mem bers from participating in review of refusal of application for authorization to construct pipeline — Subsequent to refusal, meeting between Board Chairman, Vice-Chairman and repre sentatives of unsuccessful companies — Meeting violated audi alteram partem principle of fairness — Application allowed with respect to Chairman and Vice-Chairman — Given sub stantive nature of discussions, and their participation in deci sion to review refusal, reasonable apprehension of bias — Denied as to Board members who received minutes of meeting.
Energy — National Energy Board deciding to review refusal of respondents' application for authorization to construct pipe line and to abridge review process — Applicant not given opportunity to address issue of whether should be review — Respondents given two opportunities to make case, one of which at private meeting in absence of applicants — Consider ation of National Energy Board Act, procedural nature of deci sion and function exercised — Board's powerful mandate accompanied by heavy responsibility to be fair — Breach of audi alteram partem principle of fairness — Decision to review quashed — NEB Chairman and Vice-Chairman prohibited from participating in any review as present at private meeting and participating in decision to review refusal.
This was an application for certiorari to quash the National Energy Board's (NEB) decision to review its refusal of the respondent companies' application for authorization to con struct a pipeline and for prohibition prohibiting 11 named NEB members from participating in a rehearing. The applicant had submitted a competing proposal for the transportation of gas received from the Canadian pipeline system to New York state. Both proposals required regulatory approval in Canada and the United States. After the NEB refusal was released, the U.S. Federal Energy Regulatory Commission (FERC) approved the respondents' proposal conditional upon NEB approval. Mr. Edge, a former NEB Chairman and now consultant to a parent company of a respondent company, contacted the present Chairman to arrange a meeting with the latter, Vice-Chairman and legal counsel. Board policy/rules require that all contacts with the Board be made through the Secretary. At the meeting the respondent companies expressed negative reactions to the NEB decision, made representations on aspects of the case and expressed the view that the FERC decision was a changed cir cumstance which justified review. The Chairman and Vice- Chairman indicated that they did not think that the Board would initiate a review of its own volition, and it was agreed that the respondent companies would submit a section 21 review application in which they could request that the review process be expedited. Board members received a summary of this meeting. As agreed, a section 21 review application was filed and a copy forwarded to the applicant, which requested an opportunity to address the issue of whether a review should take place. Without responding thereto, the Board decided to abridge the review process, having been "persuaded by the applicants' arguments" that a review was justified. Board Rules require the Board to hear public comment on whether a decision should be reviewed, but it also has the power to dis pense with any provision of the Rules. The issues were whether the NEB decision to review was subject to the princi ples of fairness; and if so, whether the meeting with the respondent companies raised a reasonable apprehension of bias or constituted a denial of natural justice and breach of the requirements of fairness as a result of the breach of the audi alteram partent principle.
Held, the application for certiorari should be allowed; the application for prohibition should be allowed only with respect to the Chairman and Vice-Chairman.
Upon consideration of the terms of the National Energy Board Act, the procedural nature of the decision and the type of function exercised by the Board, it had to be concluded that procedural fairness did apply although not to the same degree as with respect to hearings into the merits. It could be argued that the applicant had been prejudiced by the denial of the opportunity to address the issue of whether a review should take place, when the respondents had been given two opportu nities to make out their case, one of which took place privately and in the absence of any of the parties opposed in interest. The rules of fairness cover the audi alteram partem and the neuro judex in causa sua debet esse rules.
As to reasonable apprehension of bias, the problem with the Board's decision was that the source of the idea to abridge the review procedure came from a group representing the losing pipeline interests during a private meeting with the Chairman and Vice-Chairman. Had it come from the NEB itself without input from outside sources, there would be no problem.
The Board has a powerful mandate which is accompanied by a heavy responsibility to be fair, not to favour one side to the detriment of the other, or not to seem to do so. A meeting to discuss procedure would have been appropriate, even if held with only some of the participants and on the clear understand ing that it was to discuss procedure only. The meeting should have been stopped when it became apparent that matters other than procedure were to be introduced for discussion.
In light of all the circumstances, there was a reasonable apprehension of bias. NEB members should not be precluded from meeting with members of the "industry". Preliminary dis cussions or meetings do not automatically trigger a reasonable apprehension of bias. However, the extraordinary circum stances warranted intervention. The context of and overall sub stance of what transpired was a determining factor, bearing in mind the NEB's mandate as well as its policies and proce dures. The NEB was on notice that the "losing party" would be filing an application for review; the Chairman and Vice-Chair man met with certain pipeline representatives who made up the "losing parties"; the meeting was arranged through direct con tact by the former Chairman, who was acting on behalf of one of the pipeline companies, with the Chairman, which was con trary to the NEB's rules and policy; significant and substantive
issues were discussed; arguments were advanced in support of representatives' positions and ideas were advanced as to how the NEB should proceed, i.e. that the NEB should initiate a review on its own volition. A few days later an application for review was filed and shortly thereafter the NEB decided to conduct a review, stating that it had acceded to the applicants' arguments. The meeting and the way it was conducted were unfair to the applicant and others involved in the original pro ceeding who did not have a reasonable or fair opportunity to address the issue of whether the review should take place.
The participation of the Chairman and Vice-Chairman in the meeting, given what was discussed and their participation in the decision to review, gave rise to a reasonable apprehension of bias. They should be prohibited from participating in any review or rehearing. It would not be appropriate to prohibit the other NEB members from participating in a review just because they received minutes of the meeting.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
National Energy Board Act, R.S.C., 1985, c. N-7, ss. 3(1) (as am. by S.C. 1990, c. 7, s. 3), 4, 6 (as am. idem, s. 4), 7(2), 8(b), 11, 21 (as am. idem, s. 10).
CASES JUDICIALLY CONSIDERED
APPLIED:
Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170; (1990), 75 D.L.R. (4th) 385; [1991] 2 W.W.R. 145; 2 M.P.L.R. (2d) 217; 69 Man. R. (2d) 134; 46 Admin. L.R. 161; 116 N.R. 46; Energy Probe v. Atomic Energy Control Board, [1984] 2 F.C. 227; (1984), 8 D.L.R. (4th) 735; 5 Admin. L.R. 165; 13 C.E.L.R. 66; 43 C.P.C. 13 (T.D.); affd [1985] 1 F.C. 563; (1984), 15 D.L.R. (4th) 48; 11 Admin. L.R. 287; 13 C.E.L.R. 162; 56 N.R. 135 (C.A.).
COUNSEL:
J. H. Smellie and D. K. Wilson for applicant CNG Transmission Corporation.
Nicol J. Schultz and Susan Brown for intervenor Tennessee Gas Pipeline Company.
John J. Marshall, Q.C. for respondent St. Clair Pipelines Limited.
H. G. Intven and Robert B. Cohen for respon dent TransCanada PipeLines Limited.
T. Bradbrooke Smith, Q.C., T. Gregory Kane and Rowland J. Harrison for respondents Roch- ester Gas & Electric Corporation and ANR
Pipeline Company.
Margery A. Fowke for respondent National Energy Board.
SOLICITORS:
Osier, Hoskin & Harcourt, Ottawa, for applicant CNG Transmission Corporation.
Fraser & Beatty, Ottawa, for intervenor Tennes- see Gas Pipeline Company.
Macleod, Dixon, Calgary, for respondent St. Clair Pipelines Limited.
McCarthy, Tétrault, Toronto, for respondent TransCanada PipeLines Limited.
Stikernan, Elliott, Toronto, for respondents Rochester Gas & Electric Corporation and ANR Pipeline Company.
Law Branch National Energy Board, Calgary, for respondent National Energy Board.
The following are the reasons for order rendered in English by
CULLEN J.: This is an application by CNG Trans mission Corporation (CNG) for certiorari quashing the decision of the respondent National Energy Board (NEB), dated August 9, 1991, to proceed with an internal review of an NEB decision dated July 4, 1991 in respect of Hearing Order GH-1-91 and for prohibition prohibiting 11 named members of the NEB from participating in any review or rehearing of the July 4, 1991 decision.
GROUNDS OF THE MOTION
The applicant submits that the circumstances sur rounding the NEB's decision of August 9, 1991 give rise to a reasonable apprehension of bias on the part of the named NEB members and constitute a denial of natural justice and a breach of the requirements of fairness.
BACKGROUND
The facts of this case concern two groups of large pipeline companies which are competing for authori zations to transport gas to the upper New York state market. Both groups propose to transport gas received from the Canadian pipeline system of Trans-
Canada PipeLines Limited (TransCanada). One group, consisting of TransCanada, ANR Pipeline Company (ANR), Rochester Gas & Electric Corpora tion (RG&E) and St. Clair Pipelines Limited. (St. Clair), proposes that the gas reach the market by means of a new pipeline in New York State called the Empire State Pipeline. This pipeline would connect with the TransCanada system at the Niagara River near Chippewa, Ontario. To reach the Niagara River connecting point, TransCanada proposes to construct a 20.6 km pipeline, known as the Blackhorse Exten sion, and related facilities. This proposal requires approvals from both the Canadian and U.S. energy regulatory authorities. The Empire facility would pass through market areas traditionally served by CNG. The second group, consisting of CNG and Ten- nessee Gas Pipeline Company (Tennessee), proposes that the gas be taken from the TransCanada system at an existing connecting point on the Niagara River near Lewiston, New York. In such a proposal the Blackhorse Extension would not be required but would require new compression facilities and expan sion of existing pipeline facilities in New York. This proposal also requires regulatory approvals both in Canada and the U.S.
On July 20, 1989, TransCanada filed an application with the NEB for authority to construct the Blackhorse Extension and related facilities. By Hear ing Order No. GH-1-91 the NEB set the matter down for public hearing at Niagara Falls, Ontario for April 22, 1991. Evidence was heard in Niagara Falls between April 22 and 26, 1991, and oral argument was heard in Ottawa on May 6, 1991.
In a letter dated January 28, 1991 (see exhibit B to affidavit of Henry Edwards Brown (Brown)), Trans- Canada, through a Mr. Varga, "requested the Board release its decision with reasons or alternatively its decision without reasons, the Board's Order and Con ditions of approval relating thereto for the Blackhorse Extension. Application by July 3, 1991, with reasons
to follow thereafter as soon as possible." Mr. Varga had cited a cogent rationale for this request.
On July 4, 1991, the NEB issued its decision (GH- 1-91) denying TransCanada's application with rea sons to follow.
On July 9, 1991, the U.S. Federal Energy Regula tory Commission (FERC) granted authorization for construction of. the Empire State Pipeline conditional upon NEB approval of the Blackhorse extension. The FERC dismissed without prejudice CNG's and Ten- nessee's application for authorization to construct their proposed pipeline and facilities.
On July 11, 1991, Mr. Varga again pressed for an early release of reasons for decision preferably by July 22, 1991. He also indicated that TransCanada anticipated filing a review application (Exhibit D to affidavit of Brown).
On July 16, 1991, Mr. Edge, a consultant acting on behalf of Coastal Corp. (parent company of ANR), contacted the NEB Board Chairman to arrange a meeting with NEB officials on July 23, 1991. Mr. Edge is a former member and Chairman of the NEB. This meeting was eventually held on July 29, 1991.
On July 25, 1991 the NEB issued its reasons in respect of the GH-1-91 decision. The NEB indicated that its decision was based on a finding that the pro posed Blackhorse extension facilities were not needed and that the New York markets could be served in a timely fashion by less expensive and envi ronmentally superior means.
On July 29, 1991, Mr. Edge and representatives of The Coastal Group, RG&E and St. Clair (note: Mr. Bergsma is V.P. of Union Gas and appeared as a wit ness in the NEB hearing in his capacity as President of St. Clair), met with Chairman Priddle, Vice-Chair man Fredette and a member of the NEB's legal staff. The pipeline representatives expressed negative
views and reactions to the NEB's decision; they made representations on aspects of the case and expressed the view that the FERC decision was a changed circumstance upon which the GH-1-91 deci sion was based and therefore a review of the decision was warranted. Mr. Edge proposed that the NEB ini tiate a review on its own volition. The Chairman and Vice-Chairman indicated that they did not think it likely that the NEB would initiate such a review. It was then agreed that those corporations represented at the meeting could submit a section 21 review application in which they could request that the review process be expedited by the NEB. This expe ditious review would be achieved by dispensing with the two-step review process and proceeding directly with a review on the merits with a short but fair com ment period. At the outset of the meeting Mr. Priddle agreed to report back to the members of the NEB on the results of the meeting. A few days later, the 11 members named in this motion received a summary of the meeting.
On August 2, 1991, TransCanada, on behalf of itself, ANR, St. Clair and RG&E filed an application with the NEB for review of the GH-1-91 decision, pursuant to section 21 of the National Energy Board Act [R.S.C., 1985, c. N-7 (as am. by S.C. 1990, c. 7, s. 10)] (the Act). The applicants relied on the FERC decision as a changed circumstance to justify the review. The applicants also requested, on the grounds of urgency, that the Board dispense with the two- stage review process contemplated in Part V of the Board's Draft Rules of Procedure.
Although CNG and Tennessee received no formal notice, they did receive a copy of TransCanada's review application and wrote to the NEB requesting a reasonable and fair opportunity to address the issue of whether a review should take place at all.
No response was received to this request, but on August 9, 1991, the NEB decided to abridge the
review process and advised that it had been "per- suaded by the applicants' arguments" that a review was justified.
ISSUES
The decision being attacked is the decision of August 9, 1991 to abridge the review process and ini tiate a review of the merits of the GH-1-91 decision. Essentially what has to be determined is whether this decision should be quashed on the basis that the NEB's conduct with respect to the July 29 meeting with certain pipeline representatives raises a reasona ble apprehension of bias on the part of the NEB or constitutes a denial of natural justice and a breach of the requirement of fairness as a result of the breach of the audi alteram partem principle and whether prohi bition should issue against any or all members of the NEB.
APPLICANT'S POSITION
The applicant CNG submits that in hearing and deciding on the Blackhorse extension the NEB clearly exercised a quasi-judicial function and is sub ject to the rules of natural justice and procedural fair ness and that it is equally clear that the NEB per forms a quasi-judicial function when conducting a review or rehearing application pursuant to section 21. Therefore, the NEB and its members must he seen to act impartially. All parties must be given a fair opportunity to make representations. The NEB must not hear evidence or representations of one side behind the back of others.
The applicant argues that the circumstances are such as to, give rise to a reasonable apprehension of bias. At the meeting of July 29 advice was given on important underpinnings of the very application that was filed with the NEB on August 2, 1991. The sig nificance of this advice, according to the applicant, is evident in the structure of the August 2 application for review which essentially mirrored the proposal advanced by Mr. Priddle and Mr. Fredette at the pri vate meeting on July 29. Further, that a reasonable person can only conclude that the decision of Mr. Priddle, Mr. Fredette and the other members of the
NEB who received the notes of the private meeting may have been influenced by the course of conduct leading to the August 9 decision. The NEB stated that it had been "persuaded by the applicants' arguments" that a review was warranted, to which the applicant CNG asked the question "which arguments", those advanced at the private meeting or in the application for review?
The applicant CNG also submits that the NEB's course of conduct breached the principle of audi alteram partem in that the NEB heard evidence and representations from one side behind the back of the other. The applicant maintains that the NEB gave no opportunity to interested parties, such as CNG, to address the preliminary issue of whether the GH-1-91 decision should be reviewed, as is normally required by the Board's Draft Rules.
The applicant also alleges that the events took place in the face of established external and internal policies of the NEB regarding contact by outside par ties with the NEB or its members, which include that NEB members or staff never discuss the merits of a particular application or offer an opinion on the like lihood of success of an application as these are mat ters upon which the NEB must adjudicate and decide.
The applicant maintains that by virtue of their par ticipation in the private meeting, their gratuitous advice on important underpinnings of the application for review, which was formally submitted a few days later, and their active participation in the August 9 decision, Mr. Priddle and Mr. Fredette must be dis qualified from participating in any review or rehear- ing of the GH-1-91 decision. Further, that in the cir cumstances, the disqualification should be extended to those additional individuals named in the notice of motion.
RESPONDENTS' POSITION
The various respondents have submitted separate arguments, which are basically similar. All submit
that the decision to initiate a review of the GH-1-91 decision was not a decision or order of an administra tive nature required by law to be made on a judicial or quasi-judicial basis. They have characterized the decision as procedural and preliminary in nature, as interim with no final rights, privileges or licences affected. The question whether GH-1-91 should be varied or rescinded remains to be determined in the NEB's ongoing review proceeding. As such, the NEB is not required to hold hearings in these matters. At worst, it is submitted that the NEB was obliged to comply with the duty of fairness. TransCanada main tains that the rules of procedural fairness, including the audi alteram partem rule (it would follow that reasonable apprehension of bias would also be included), generally do not apply to preliminary deci sions. TransCanada argues that the decision to initiate the review would not have an important impact on CNG or the other parties because they would have a full opportunity to participate in the review proceed ing to attempt to persuade the NEB that the decision should not he changed. At most the applicant CNG has lost its right to have "two or more kicks at the can". Therefore, no substantive rights were lost. The respondents add that interested parties were served with the application for review, which included the request to abridge the review procedure, and there fore were afforded an opportunity to respond and comment on this request.
It is also submitted that even if the principles of fairness are ordinarily applicable to applications to review or to rehear, the NEB has a discretion by vir tue of Rule 5 to abridge those rules in special circum stances. In this case, the NEB simply chose to exer cise its discretion under its own procedures and the respondents note that a reviewing Court should exer cise caution in overruling the legitimate exercise of discretion by a specialized tribunal such as the NEB.
With respect to the issue of reasonable apprehen sion of bias, the respondent TransCanada maintains
that the mere fact that a Board member participated in a preliminary meeting of a procedural or investiga tive nature does not give rise to a reasonable appre hension of bias. It therefore follows that the receipt of minutes of such a meeting also does not raise a rea sonable apprehension of bias. This respondent further maintains that the fact that the members present at the July 29 meeting may have had discussions with other NEB members who participated in the decision to initiate the review does not give rise to the reason able apprehension of bias on the part of those other members so as to justify their exclusion from the review. The respondent argues that it would trivialize the principle nano judex in causa sua debet esse to find a reasonable apprehension of bias in these cir cumstances. Moreover, it would unduly fetter tribu nals, such as the NEB, which have a broad supervi sory and regulatory mandate over an industry. The NEB should not be precluded from meeting with members of the industry or learning about significant developments relevant to decisions made.
The respondents submit that CNG's allegation of the breach of the audi alteram partem rule only applies to the application for certiorari and not to prohibition as CNG and the other parties had a full opportunity to make their case on the matters dis cussed at the July 29 meeting during the course of the NEB's ongoing review proceeding. It is further sub mitted that the issuance of prohibition against all members of the NEB would frustrate the purposes of the Act. In summary, it is argued that the CNG appli cation represents an attempt to judicialize the process of the NEB, particularly in respect of meetings held while no "relevant proceedings" were ongoing and in respect of a procedural or preliminary nature made in the course of fulfilling the NEB's mandate under the Act.
STATUTORY CONTEXT—THE NATIONAL ENERGY BOARD
The NEB derives its powers from the National Energy Board Act, R.S.C., 1985, c. N-7, as amended. Section 11 stipulates that the NEB is a "court of record". It is given a broad mandate to discharge various functions under the Act, including the grant ing of authorizations to construct pipelines and related facilities. Subsection 3(1) [as am. by S.C. 1990, c.7, s. 3] of the Act provides that the NEB con sist of not more than nine members appointed by the Governor in Council; in addition, up to six temporary members may be appointed at any one time (section 4). As of June 1, 1991, the following were members of the NEB: R. Priddle (Chairman); J. G. Fredette (Vice-Chairman); R. B. Horner, Q.C.; W. G. Stewart; D. B. Gilmour; A. Côté-Verhaaf; M. Musgrove; C. Bélanger; R. Illing; D. B. Smith (temporary member) and K. W. Vollman (temporary member). A quorum consists of three members, (subsection 7(2)). The Chairman is designated by the Governor in Council under section 6 [as am. idem, s. 4] of the Act as the chief executive officer of the NEB to have supervi sion over and direction of the work and staff of the NEB.
Section 21 of the Act empowers the NEB to review, vary or rescind any order or decision made by it or to rehear any application before deciding it.
Pursuant to section 8 of the Act, the NEB may make rules respecting, inter alia, the procedure for making applications, representations and complaints to the Board, the conduct of hearing and generally the manner of conducting any business before the Board, (paragraph 8(b)). The NEB's Draft Rules Part V pro vide that applications for review are required to be filed with the Secretary of the NEB and must be served on every person who was a party to the origi nal proceeding. The party served then has 20 days in which to submit a written statement, file it and serve it. The applicant then has 10 days in which to submit a reply (Rules 41, 42 and 43). It is an established practice of the NEB, as prescribed by Rule 45 (Deter- mination), to deal with applications for review in a two-step process. First, the NEB determines whether
a decision should be reviewed once it hears from interested parties, i.e., public comment on the ques tion of whether the decision should be reviewed. Sec ond, if it decides to review, the NEB then disposes of the application or determines the appropriate proce dures to govern the conduct of that review. However, under Rule 5 of the Draft Rules, the NEB has the power to dispense with, vary or supplement any pro visions of these Rules and under Rule 7 the NEB has the power to abridge the time prescribed in the Rules
for the review.
COMMENTS
I agree with the respondent's view that the deci sion of August 9 to abridge the two-step review pro cess in respect of the GH-1-91 decision is not quasi- judicial in nature but is a procedural decision. There fore the question that I have to deal with is whether the NEB is obliged to comply with the principles of fairness and if so, to what extent does the fairness go? I disagree with TransCanada's argument that pro cedural fairness does not apply in the circumstances as the NEB's decision is a preliminary decision. I think the proper approach to resolving the question of whether procedural fairness applies is the approach noted by Sopinka J. in Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [ 1990] 3 S.C.R. 1170,
at page 1191:
The content of the rules of natural justice and procedural fair ness were formerly determined according to the classification of the functions of the tribunal or other public body or official. This is no longer the case and the content of these rules is based on a number of factors including the terms of the statute pursuant to which the body operates, the nature of the particu lar function of which it is seized and the type of decision it is called upon to make. This change in approach was summarized in Syndicat des employé.s de production du Québec et de l'Acadie v. Canada (Canadian Human Rights Commission),
[1989] 2 S.C.R. 879. I stated (at pp. 895-96):
Both the rules of natural justice and the duty of fairness are variable standards. Their content will depend on the circum stances of the case, the statutory provisions and the nature of the matter to be decided. The distinction between them there fore becomes blurred as one approaches the lower end of the
scale of judicial or quasi-judicial tribunals and the high end of the scale with respect to administrative or executive tribunals. Accordingly, the content of the rules to be followed by a tribu nal is now not determined by attempting to classify them as judicial, quasi-judicial, administrative or executive. Instead, the court decides the content of these rules by reference to all the circumstances under which the tribunal operates. [Empha- sis added.]
It has been argued that the principles of fairness normally applied in respect of NEB hearings into the
merits of a case should not be applied with the same rigour to the process by which the NEB determines to
rehear. I agree that the degree of procedural fairness to be applied in this case should be lower, but fair ness should still apply. In the circumstances it can be argued that the applicant CNG has been prejudiced
by the NEB decision in that the respondents ANR, St. Clair and RG&E have been effectively given two opportunities to make out their case, one of which took place privately and in the absence of any of the parties opposed in interest. Further, CNG has been
denied the opportunity to address the issue of whether a review should take place.
The jurisprudence is clear on the fact that the rules of fairness cover the audi alteram partem rule and the nemo judex rule: Energy Probe v. Atomic Energy Control Board, [ 1984] 2 F.C. 227 (T.D.); affd by [1985] 1 F.C. 563 (C.A.). As Reed J. noted in the Energy Probe case, at page 234, "I have no doubt that
the duty to act fairly as enunciated by the Supreme
Court of Canada in the Nicholson case must include a requirement for an unbiased decision maker. Any
other conclusion would undercut the whole concept of the requirement of a duty of fairness."
With respect to the question of reasonable appre hension of bias, there is no dispute that the issue is not whether the members named are actually biased (and counsel for the applicant made it quite clear they were not making such an allegation) but whether the circumstances could properly cause a reasonably well-informed person to have a reasonable apprehen sion of a biased appraisal or judgment by the
member, however unconscious or unintentional it might be.
The major problem with the NEB's decision is that the source of the idea to abridge the review procedure came from a group representing the losing pipeline interests during a private meeting with certain mem bers of the NEB, notably the Chairman and the Vice- Chairman. Had the decision come from the NEB itself without any input from outside sources, it could not be subject to attack as the Act does allow for pro cedural changes.
It is clear, certainly, that had Chairman Priddle and Vice-Chairman Fredette met on July 29, 1991 with counsel for National Energy Board (NEB) to discuss the FERC decision, following which counsel's report was sent to all members of the NEB, such a meeting, and the consequential notification, was wholly within the powers given to the NEB. This would, in my view, be within the NEB's mandate and certainly it would have been appropriate if counsel's report stated that they had considered the FERC report and decided not to review the decision on their own voli tion, but would await any development that might be pursued by corporations under the provisions of sec tion 21. No case could be made that the Court should interfere in those circumstances and if it did so it would clearly be judicializing the process of the NEB.
The real issue here is: did the meeting that was actually held on July 29, 1991 and initiated by Mr. Edge and attended by representatives of the Coastal Group, RG&E and St. Clair, warrant the Court's attention as suggested by the applicant and as dis puted by the respondents. In my view, yes, bearing in mind that both parties accepted that the Court must consider all the circumstances. As indicated earlier, the FERC decision was made on July 9, 1991 and within the week Mr. Edge contacted the NEB Chair man to arrange a meeting with NEB officials for July 23, 1991. The Board's policy/rules require that all contacts with the Board be made through the Secre tary. This policy is outlined in a NEB letter, dated
April 23, 1980, (exhibit M to affidavit of Brown), addressed to all companies under the NEB's jurisdic tion and specifically states:
If for any reason representatives of the industry subject to the Board's jurisdiction wish to meet with the Board or a member, a communication should be addressed to the Secre tary outlining the purpose of the meeting and the topics to be discussed. The communication and the Secretary's response would form part of the Board's public record.
Mr. Edge would have been aware of that and also aware of the fact that he was in clear violation of them when he contacted the Chairman directly. I sus pect that if it had been anyone other than Mr. Edge, Mr. Priddle would have pointed out to him that any such contact should be made through the Secretary. This was not put to Mr. Edge and it is not surprising given the fact that he had a long and distinguished career with the Board, and I suspect Mr. Priddle responded as most objective observers would expect him to and did not put this admonition to Mr. Edge.
Further, a NEB memorandum dated July 21, 1987 (exhibit B to affidavit of Brown), directed to all staff from the then acting Secretary provides in part that:
The Board has an obligation to make itself and its staff availa ble for consultation with applicants on matters such as proce dure, filing requirements, etc., but should never discuss the merits of a particular application or offer an opinion on the likelihood of success of an application, as these are matters upon which the Board must adjudicate and render a decision.
It is clear that Mr. Priddle and other Board mem
bers were apprehensive about a meeting before the NEB issued its reasons in respect of GH-1-91. In a letter dated August 30, 1991 to counsel for the appli cant Mr. F. J. Morel, A/General Counsel, (exhibit R to affidavit of Brown), we found the following:
You are correct in assuming that Board members other than the Chairman and Vice Chairman of the Board were aware of the
29 July meeting. However, I have ascertained that the opening paragraphs of the notes of the 29 July meeting that were pro vided to you, is [sic] not quite accurate when it refers to a brief discussion among members of the meeting prior to its taking place. In fact during an informal meeting of the Board that took place on 22 July 1991, the Chairman of the Board informed the members present at the meeting that Mr. C.G. Edge, acting on behalf of Coastal, had contacted the Adminis trative Assistant to the Chairman to request a meeting on 23 July with Board officials regarding the GH-1-91 decision. Members expressed the view that such a meeting could better take place after publication of the GH-1-91 reasons for deci sion on 25 July. The meeting requested by Mr. Edge was con sequently postponed to 29 July 1991.
In my view it was wrong to have such a meeting unless Mr. Priddle was convinced that it was to dis cuss procedure only. The NEB has a powerful man date and with it goes a heavy responsibility to be fair, not to favour one side to the detriment of the other, or not to seem to do so. A meeting to discuss procedure is appropriate, even, in my view, if held with only some of the participants and on the clear understand ing that it is to discuss procedure only. Mr. Priddle had no way of knowing that they would be discussing other than procedure when he acquiesced to Mr. Edge's request for a meeting. However, upon receipt of the document handed in by Mr. Edge, entitled "Board Action", the Chairman, Vice-Chairman and counsel should have been aware that Mr. Edge was seeking more than procedural guidance. Secondly, members of the corporations expressed their negative reaction to the reasons that had been published by the Board. Other matters of substance were discussed and the introduction of any one of them should have been stopped or the meeting should have been can celled. I will refer to these later.
Given the importance of this meeting, it is appro priate that the report prepared by counsel for the NEB be reproduced here, along with a document headed "Board Action" "which was used by Mr. Edge for his presentation" (exhibit C to affidavit of Brown).
Blackhorse Meeting 29 July 1991
Representations from Messrs. Geoff Edge (Consultant), Jim Cordes (President, Coastal), John Bergsma (VP, Union) and David Laniak (Senior VP, RG&E)
Messrs. Mr. Priddle and Fredette and Ms. Fowke in attend ance.
Mr. Priddle said that with the decision and reasons now pub lished, a meeting can now appropriately take place. It has no formal status in the Board's processes. Ile would however report back to Members on the meeting which had been briefly discussed among them.
After receiving their reaction to the reasons (not positive) Cordes pointed out that FERC has now found that Tennessee is not a viable alternative, as it was when the panel made its deci sion. In their view this is new information which results in changed circumstances.
RG&E reiterated its position that Tennessee is not an accept able transportation supplier. Tennessee was not interested in the expansion until RG&E started to look at it itself and expressed interest in becoming a part owner. RG&E ques tioned whether Tennessee could provide service without con struction.
The parties emphasized the need for the facilities so that cogens could get financing.
They pointed out that NYPSC and FERC made decisions on the NY market and to have them overturned by another regula tory body in another jurisdiction is unfortunate. Edge put for ward the proposition that normally a regulatory body respects another regulatory body's decision. He suggested that in this instance the Board should give weight to where the other regu latory action is taking place. He noted that the bulk of the facil ities are in the USA. Parties wondered whether the panel could have reached the same decision if the Tennessee option was not an option.
Bergsma contrasted the NEB decision with the favourable FERC decision on the St. Clair connecting facilities. He went on to discuss the market and how several parties will now be looking for US gas because Canadian gas would not give them competitive diversity. Sourcing through the US is cheaper than alternative Canadian arrangements. End users have to make their arrangements now because they don't have the luxury of waiting any longer. They need approved transport as well as firm gas supply.
Edge wondered how the Board could evaluate the Canadian public interest without knowing what the US decision is: there may be something that needs balancing against the US deci-
sion. He proposed that the Board initiate a review on its own motion to place the FERC decision on the record. This would save time which is of the essence. Edge's proposal is attached.
The members indicated that they did not think it likely that the Board would initiate a review on its own motion. It was agreed that the parties could submit a s. 21 application. Since a primary concern is timing they could request in that applica tion that the review process be expedited: that the two-step process be done away with by the Board finding that there is prima fade evidence of changed circumstances and proceed directly to a review on the merits with a short (although fair) comment period.
There was, of course, no indication by members as to partic ular timing much less that the Board would go to an immediate review upon receiving an application. Fredette pointed out the importance of the applicants supplying a convincing explana tion of the relevant FERC decision. (At the ANE dinner that evening, George Hugh indicated that TCPL has a review appli cation in hand.)
BOARD ACTION:
— Initiate a review of the decision (s. 21(I)), of its own motion (s. 15(3)).
— A review under s. 21(I) is in the nature of an appeal. As such, it can be confined to the specific grounds giving rise to the review, without the need to reconsider the whole Blackhorse proceeding, and can be dealt with by the Board as a whole or a panel of its members.
— Take judicial notice of the FERC Decision, on the basis that it has, inter alia, denied certification of the alternative means by which the proposed markets can be served and has approved the Empire State Pipeline application.
— Notify parties that the Board will receive submissions on the issue of whether the FERC Decision is a changed cir cumstance that required review of the Blackhorse Decision and has, inter alla, rendered nugatory the Board's conclu sion "that, through expansion of TransCanada's existing Niagara Line, the proposed markets can be served in a timely fashion by less expensive and environmentally superior means".
— Convene a proceeding on not more than two weeks' notice, to hear oral argument on this issue only.
— Alternatively, fix a two week period for written submis sions.
— Indicate if possible this week whether the Board will initi ate a review, so that a formal application for review, if necessary, can be made expeditiously.
Unhappily, as there were no minutes of the meet ing, we have no way of knowing precisely who domi nated the meeting or who may have made the repre sentations and what emphasis was placed on the various representations made by the respondents.
We do know, however, that Mr. Priddle began the meeting by stating that with the decision and reasons now published, "A meeting can now appropriately take place." He put all on notice that this meeting did not have a formal status in the Board's processes but that he would report back to the members "on the meeting which had been briefly discussed among them."
Next, I was somewhat taken aback to hear that the respondents made, and the Chairman and Vice-Chair man heard, negative comments on the reasons for the decision. One could hardly expect that they would be positive but I think one is entitled to assume that this should hardly be an item on the agenda dealing with procedure. Apparently Mr. Cordes felt it necessary to point out the decision of FERC. In my view, this is offensive because the Board is deemed to be fully apprised of FERC's decisions and particularly one so intimately involved with the Board's own decision. Again, this is hardly the time, place, or manner in which the issue of changed circumstances should be raised. The substantive issue raised by RG&E is even more inappropriate in these circumstances, particu larly when CNG and Tennessee are not present to rebut these comments. The other substantive issue made is that: "The parties emphasized the need for the facilities so that cogens could get financing."
Again, in the next paragraph, the respondents are pointing out further issues of substance, namely, that the NEB's decision was in conflict with NYPSC and FERC, that it was unfortunate, and that normally a
regulatory body respects another regulatory body's decision. Throughout that whole paragraph we in effect have Mr. Edge making the case, not only for a review, but also what conclusions should be reached by the Board given the fact that FERC and NYPSC have declared the Tennessee option was not an option. Mr. Bergsma, for his part, "went on to discuss the market and how several parties will now be look ing for US gas because Canadian gas would not give them competitive diversity. Sourcing through the US is cheaper than alternative Canadian arrangements." This whole paragraph indicates once again that the meeting was replete with substantive issues. Then we read where Mr. Edge wondered how the Board could evaluate the Canadian public interest without know ing what the United States decision was and then made the substantive point that the Board should review on its own volition.
It is also clear that a decision was taken by the Board, namely, that they would not be initiating a review on their own volition and then went on to sug gest or recommend or point out the most expeditious way of getting the respondents' point of view across.
And finally we hear from Mr. Fredette that it is important for the applicants to supply a convincing explanation of the relevant FERC decision. This may have been obvious, as suggested by the respondents, but when the Vice-Chairman says it, it pretty well drives it home. The Chairman and the Vice-Chair man, and possibly counsel if she was consulted, reached the conclusion that the FERC decision was not a changed circumstance which would move them to review their decision on their own volition. They were not satisfied, and Mr. Fredette said that it was important that the applicants supply a convincing explanation of the relevant FERC decision.
There can be no question that this meeting and the conduct of it were unfair to the applicant and others. Of real concern to me are the following:
1. Mr. Edge did not contact the Board through the Secretary but went directly to the Chairman, which was clearly contrary to rules and policy of the Board, and Mr. Edge knew it.
2. Mr. Edge had requested a meeting which would have been held under his timetable before the reasons for the order came out, seemingly an indication that they wanted to have some impact on the reasons and in all likelihood on the decision itself.
3. This was a meeting where significant, substantive issues were discussed and arguments advanced by the respondents in support of their strongly held views.
4. If the respondents wanted to know whether the FERC decision represented a changed circumstance which would move the Board to act under its own volition, a letter, through the Secretary, would have been sufficient to secure that information. It was inappropriate in my view to advance ideas about why they should do so and more particularly that it was done at this meeting.
5. If anything, the respondents made the obvious point that matters were in a mess as a result of two different decisions from two different tribunals. How ever, they then argued or represented that the NEB decision was the decision to be reviewed.
6. When the Board indicated it had decided to con duct a review, it stated that it was acceding to the "applicants' arguments" but as counsel for CNG pointed out, were these arguments made at the meet ing or were they made on the application, or both?
7. The respondents left that meeting in the full knowledge that if they wanted a review they would have to initiate it themselves and also that they had to come up with a convincing explanation of the rele vant FERC decision. They also had good reason to believe the process would be expedited, i.e., "proceed directly to a review on the merits with a short (although fair) comment period."
8. The counsel's report was not sent to any of the par ties, and only received by CNG August 22, 1991 (exhibit L) after Mr. Smellie's letter of 15 August 1991 (Exhibit K). The respondents made the point that nothing was secret and it was always available to the applicant if asked for. Here one cannot ask for something one doesn't know exists.
All of which can be described at best as an "extremely indiscreet mode of proceeding."
In light of the circumstances noted above, includ ing the fact that the NEB had been on notice that TransCanada was likely to file a review application, I agree with the applicant that a reasonably informed person could envisage that the NEB was going to be asked at some point to make some decision and that there was some risk that the information discussed at the meeting could possibly find its way into such a decision.
After reviewing the arguments, I agree with the respondents that NEB members should not he pre cluded from meeting with members of the "industry" and that a reasonable apprehension of bias is not automatically triggered as a result of preliminary dis cussions or meetings. Clearly a situation where a party whose application for pipeline construction has been granted meets with NEB members to discuss when pipeline construction can commence would not warrant and should not warrant judicial interference. However, in the case before me we have a number of extraordinary circumstances which have raised a number of concerns and which I feel warrant inter vention. As such, a determining factor in my coming to this decision was the context of and the overall substance of what transpired, bearing in mind the NEB's mandate as well as its policies and proce dures. This was not merely a situation where an NEB member participated in a preliminary meeting of a procedural or investigative nature. Instead, we have a situation where the NEB is on notice that the "losing party" would be filing an application for a review; the Chairman and Vice-Chairman meet with certain pipeline representatives who make up the "losing
parties"; this meeting is arranged through direct con tact by the former Chairman, who is now acting on behalf of one of the pipeline companies, with the Chairman, which is contrary to the rules and policy of the NEB; significant and substantive issues are discussed; arguments are advanced in support of rep resentatives' position and ideas are advanced as to how the NEB should proceed, i.e., that the NEB should initiate a review on its own volition. A few days later an application for review is filed and shortly after that the NEB decides to conduct a review and states that is has acceded to the appli cants' (in the section 21 application) arguments.
Clearly the July 29 meeting and how it was con ducted were unfair to the applicant and others involved in the original proceeding. Further, in the circumstances I do not think that the applicant and other interested parties can be said to have had a rea sonable or fair opportunity to address the issue of whether the review should even take place.
I am also of the view that Messrs. Priddle and Fredette's participation in the July 29 meeting, given what was discussed at this meeting and their partici pation in the August 9 decision to proceed with a review of the GH-1-91 decision, gives rise to a rea sonable apprehension of bias which a reasonably well-informed person could properly have, of a biased appraisal and judgment of the issue.
Therefore, for the reasons noted above, the appli cation for certiorari will be granted quashing the decision of the NEB, dated August 9, 1991, to pro ceed with an internal review of the NEB decision dated July 4, 1991 in respect of Hearing Order GH-1- 91.
With respect to the application for prohibition, on the basis of the evidence I cannot find that the named members of the NEB, other than Messrs. Priddle and Fredette, should be prohibited from participating in
any review or rehearing of the July 4, 1991 decision. I agree with the respondents' position that the issu ance of a writ of prohibition against the other NEB members would not be appropriate in the circum stances. Therefore, prohibition will be granted prohibiting Messrs. Priddle and Fredette from partici pating in any review or rehearing of the July 4, 1991 decision in respect of Hearing Order GH-1-91.
The applicant is entitled to its costs.
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