Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources)

Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources)
Collection
Supreme Court Judgments
Date
1989-08-10
Report
[1989] 2 SCR 49
Case number
20304
Judges
Dickson, Robert George Brian; McIntyre, William Rogers; Lamer, Antonio; Wilson, Bertha; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John
On appeal from
Federal Court of Appeal
Subjects
Constitutional law
State
Notes
SCC Case Information: 20304
Decision Content
Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources), [1989] 2 S.C.R. 49
The Auditor General of Canada Appellant
v.
The Minister of Energy, Mines
and Resources, the Minister of Finance,
the Deputy Minister of Energy, Mines
and Resources, and the Deputy Minister
of Finance Respondents
indexed as: canada (auditor general) v. canada (minister of energy, mines and resources)
File No.: 20304.
1988: October 7; 1989: August 10.
Present: Dickson C.J. and McIntyre, Lamer, Wilson, La Forest, L'Heureux-Dubé and Sopinka JJ.
on appeal from the federal court of appeal
Crown -- Auditor General -- Access to information -- Auditor General seeking to obtain access to Crown corporation's records and to Cabinet documents relating to the purchase of an oil company -- Whether the Auditor General has a judicially-enforceable right of access to information -- Whether reporting remedy only remedy available to Auditor General when his right of access to information denied -- Auditor General Act, S.C. 1976-77, c. 34, ss. 7(1)(b), 13(1).
Constitutional law -- Role of the courts -- Judicial review of federal auditing process -- Dispute between Parliament and Auditor General -- Auditor General denied access to Crown corporation's records and to Cabinet documents relating to the purchase of an oil company -- Whether the Auditor General has a judicially-enforceable right of access to information -- Whether courts proper remedial forum -- Whether reporting remedy only remedy available to Auditor General when his right of access to information is denied -- Auditor General Act, S.C. 1976-77, c. 34, ss. 7(1)(b), 13(1).
In 1981 Petro-Canada, a Crown corporation and an agent of Her Majesty, acquired Petrofina for $ 1.7 billion. The ultimate funding for the takeover came from Parliament in the form of Vote 5c, Schedule to Appropriation Act No. 4, 1980-81. Vote 5c created a non-budgetary trust account from which payments were made to Petro-Canada for the purchase of Petrofina. The Auditor General audited the trust account and, pursuant to s. 7(2)(d) of the Auditor General Act ("the Act"), sought to ascertain whether due regard to economy had been demonstrated and value for money achieved in using $ 1.7 billion of public funds to acquire Petrofina. In its 1982 and 1983 Reports, the Auditor General indicated that his request for certain documentation relevant to an evaluation of the transaction had been denied by the Department of Energy, Mines and Resources and by senior officials of Petro-Canada. The Auditor General was of the view that he was entitled to that information by virtue of s. 13(1) of the Act which provides that "the Auditor General is entitled to free access at all convenient times to information that relates to the fulfilment of his responsibilities". The Auditor General's attempts, under s. 14(1) and (2) of the Act, to obtain the missing information from Petro-Canada's auditors and from Petro-Canada were unsuccessful and the Governor in Council declined to exercise its s. 14(3) power to assist the Auditor General by ordering Petro-Canada to provide the information. The Auditor General then sought to obtain the information through the judicial process. He was successful in the Federal Court, Trial Division but that judgment was reversed by the Federal Court of Appeal. This appeal is to determine whether, under s. 13(1) of the Act, the Auditor General has a judicially-enforceable right of access to information including the records of Petro-Canada and Cabinet documents which relate to the acquisition of Petrofina by Petro-Canada. No issue affecting the Canadian Charter of Rights and Freedoms arose in this case.
Held: The appeal should be dismissed.
The Auditor General has no recourse to the courts in the event of the refusal by Parliament, responsible Ministers, and the Governor in Council to make available to him all of the documentation he may seek in what he regards as the discharge of his responsibilities in auditing the accounts of Canada. It is reasonable to interpret s. 7(1)(b) of the Act as the Auditor General's final remedy for claimed denials of s. 13(1) entitlements. Section 7(1)(b) provides that "The Auditor General shall report annually to the Houses of Commons . . . on whether, in carrying on the work of his office, he received all the information . . . required." The linkage between s. 13(1) (the asserted right) and s. 7(1)(b) (the statutory remedy), and the extent to which the reporting remedy is part of a comprehensive remedial code, indicate that the remedy was meant to be exclusive. The Auditor General can report on difficulties in obtaining information at any stage, even if other remedies are simultaneously being pursued, and the House of Commons can act at any time. However, once the ss. 13 and 14 remedies have been exhausted in relation to particular information, the only remedy left to the Auditor General is the s. 7(1)(b) reporting remedy.
Not only is the text of the Act conducive to such an interpretation, but also, in the circumstances, a political remedy of this nature is an adequate alternative remedy. The Auditor General is acting on Parliament's behalf carrying out a quintessentially Parliamentary function -- namely, the oversight of executive spending pursuant to Parliamentary appropriations. Where the exercise of this auditing function involves the Auditor General in a dispute with the Crown, this is in essence a dispute between the legislative and executive branches of the federal government. Section 7(1)(b) is the means by which Parliament itself retains control over the position it wishes to take in such a dispute. Therefore, where Parliament has indicated in the Act that it wishes its own servant to report to it on denials of access to information needed to carry out his functions on Parliament's behalf, it would not be appropriate for this Court to consider granting remedies for such denials, if they, in fact, exist. For this Court to order access to information for the Auditor General would be, in effect, to overrule a decision of the House of Commons not to act in his matter and to disturb the balance of constitutional powers between the executive and legislative branches of government. The fact that the executive, through its control of a House of Commons majority may in practice dictate the position the House of Commons takes on the scope of Parliament's auditing function is not constitutionally cognizable by the judiciary. The grundnorm with which the courts must work in this context is that of the sovereignty of Parliament. The ministers of the Crown hold office with the grace of the House of Commons and any position taken by the majority must be taken to reflect the sovereign will of Parliament.
The adequacy of the s. 7(1)(b) remedy must not be underestimated. A report by the Auditor General to the House of Commons that the government of the day has refused to provide information brings the matter to public attention. It is open to the Opposition in Parliament to make the issue part of the public debate. The Auditor General's complaint that the government has not been willing to provide all the information requested may, as a result, affect the public's assessment of the government's performance. Thus, the s. 7(1)(b) remedy has an important role to play in strengthening Parliament's control over the executive with respect to financial matters.
Cases Cited
Considered: Temple v. Bulmer, [1943] S.C.R. 265; British Railways Board v. Pickin, [1974] A.C. 765; Terrasses Zarolega Inc. v. Régie des installations olympiques, [1981] 1 S.C.R. 94; Harelkin v. University of Regina, [1979] 2 S.C.R. 561; distinguished: British Columbia Development Corp. v. Friedmann, Ombudsman, [1984] 2 S.C.R. 447; referred to: City of Lethbridge v. Canadian Western Natural Gas, Light, Heat and Power Co., [1923] S.C.R. 652; Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441; P.P.G. Industries Canada Ltd. v. Attorney General of Canada, [1976] 2 S.C.R. 739.
Statutes and Regulations Cited
Access to Information Act , S.C. 1980-81-82-83, c. 111 (Schedule I).
Act to amend the Financial Administration Act in relation to Crown corporation and to amend other Acts in consequence thereof, S.C. 1984, c. 31, s. 14 (Schedule II, Item 40(9), (14)).
Appropriation Act No. 4, 1980-81, S.C. 1980-81-82-83, c. 51, Schedule, Vote 5c.
Auditor General Act, S.C. 1976-77, c. 34, ss. 3, 5, 6 [rep. & subs. 1980-81-82-83, c. 170, s. 25], 7, 8, 13, 14.
Canada Evidence Act, R.S.C. 1970, c. E-10, s. 36.3 [ad. 1980-81-82-83, c. 111, s. 4 (Schedule III)].
Canadian Charter of Rights and Freedoms, ss. 1 , 33 .
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 28(6).
Financial Administration Act, R.S.C., 1985, c. F-11 .
Petro-Canada Act, S.C. 1974-75-76, c. 61, ss. 14, 17, 26.
Privacy Act, S.C. 1980-81-82-83, c. 111 (Schedule II).
Authors Cited
Canada. Auditor General. Report of the Auditor General of Canada to the House of Commons. Ottawa: Minister of Supply and Services Canada, 1982.
Canada. Auditor General. Report of the Auditor General of Canada to the House of Commons. Ottawa: Minister of Supply and Services Canada, 1983.
Cane, Peter. An Introduction to Administrative Law. Oxford: Clarendon Press, 1986.
de Smith, S. A. Judicial Review of Administrative Action, 4th ed. By J. M. Evans. London: Stevens & Sons, 1980.
APPEAL from a judgment of the Federal Court of Appeal, [1987] 1 F.C. 406, 35 D.L.R. (4th) 693, 73 N.R. 241, setting aside a judgment of the Trial Division, [1985] 1 F.C. 719, 23 D.L.R. (4th) 210. Appeal dismissed.
Gordon F. Henderson, Q.C., Emilio Binavince and Martin Mason, for the appellant.
W. I. C. Binnie, Q.C., and Graham R. Garton, Q.C., for the respondents.
//The Chief Justice//
The judgment of the Court was delivered by
THE CHIEF JUSTICE -- This appeal raises an issue as to the proper role of the courts and their constitutional relationship to the other branches of government. The appellant in the proceedings is the Auditor General of Canada, appointed pursuant to s. 3 of the Auditor General Act, S.C. 1976-77, c. 34. As such he is the auditor of the accounts of Canada and is required to make such examinations and inquiries as he considers necessary to enable him to report annually to the House of Commons, calling attention, inter alia, to any cases in which he has observed that money has been expended without due regard to economy or efficiency. The respondents in the proceedings are the Minister of Energy, Mines and Resources, and his Deputy Minister, and the Minister of Finance, and his Deputy Minister. The issue before the Court is whether the Auditor General has a judicially-enforceable right of access to information including the records of Petro-Canada and Cabinet documents which relate to the acquisition of Petrofina Canada Inc. by Petro-Canada.
Petro-Canada is a Crown corporation incorporated under the Petro-Canada Act, S.C. 1974-75-76, c. 61, and an agent of Her Majesty. Its accounts are regularly audited not by the appellant, but by external auditors, Peat Marwick Mitchell. The accounts of Petro-Canada are not consolidated with the accounts of Canada. Section 17 of the Petro-Canada Act provides specifically that its officer, agents and employees shall be deemed not to be employed in the Public Service of Canada.
Over a period of several years, the appellant sought, without success, to obtain access to Petro-Canada and Cabinet documents relating to the purchase by Petro-Canada of shares and property of Petrofina Canada Inc. in 1981. Having failed to obtain the documents he sought through the political process, the appellant decided to invoke the powers of the courts and obtain the documents through the judicial process. He was successful in the Trial Division of the Federal Court of Canada, [1985] 1 F.C. 719, but that judgment was reversed in the Federal Court of Appeal, [1987] 1 F.C. 406, and the matter is now before this Court by leave.
Associate Chief Justice Jerome in the Trial Division stated the issue in these terms (at p. 724):
The issue in this case, in the briefest possible terms, is whether the right of access to information, given to the Auditor General of Canada in section 13 of the Auditor General Act, S.C. 1976-77, c. 34, takes precedence over or must defer to the convention of confidence of the Queen's Privy Council for Canada.
Hugessen J. in the Federal Court of Appeal saw another issue underlying the question stated by the trial judge, and which required to be answered first, namely (at p. 427):
It is to know the nature and extent of the responsibilities of the Auditor General. More particularly, it is to know whether the Auditor General's duty to make examinations and inquiries and to report to the House of Commons includes the responsibility to follow the use which has been made of public funds beyond their immediate or first recipient through to their ultimate beneficiary in order to determine whether the Canadian people have had value for their money.
Before broaching that subject, an even more fundamental question must be answered, namely, whether the issue raised by the Auditor General is, in fact, justiciable. What is really at issue in this case is the appropriateness of the Court assuming the role of arbiter in resolving a dispute between Parliament and a parliamentary servant, albeit of high rank. Can, or should, the courts give the Auditor General access to (and therefore disclosure of) documents, including Cabinet documents, which the Governor in Council has denied him? Are the Auditor General's demands ones which ought properly to be determined by the courts or by the House of Commons? In other words, are the claims which the Auditor General seeks to invoke legally enforceable?
Only after those questions have been answered does one reach the issue as to the nature of the Auditor General's role in the Parliamentary system of checks and balances and, more precisely, the extent to which an Auditor General may evaluate the pre-legislative decision-making process to see if value for money for post-appropriation expenditures has been obtained. The Auditor General here is claiming access, inter alia, to Cabinet documents which were generated prior to Parliament's appropriation of the funds for the Petrofina acquisition. He claims that this information is relevant to an evaluation of the transactions between the two oil companies (i.e., one step beyond the two transactions between the Minister of Energy, Mines and Resources and Petro-Canada) which is a legitimate part of auditing the Canadian Ownership Account. The respondents claim that the Auditor General's claim is really a thinly-veiled assertion that he may "audit" whether Cabinet decisions and Parliament's own appropriation were fiscally wise, a position incompatible with his role as a servant of Parliament, not its overseer; the Auditor General's claim also amounts to a claim that an auditor general may audit the accounts of a Crown corporation, even though that corporation already has its own auditor.
Let me make it clear at the outset that this is not a Charter case. Although I will have a word or two to say later about Charter adjudication, no issue affecting the Canadian Charter of Rights and Freedoms arises.
I. Statutory Provisions
Auditor General Act, S.C. 1976-77, c. 34
AUDITOR GENERAL OF CANADA
3. (1) The Governor in Council shall, by commission under the Great Seal, appoint a qualified auditor to be the officer called the Auditor General of Canada to hold office during good behaviour for a term of ten years, but the Auditor General may be removed by the Governor in Council on address of the Senate and House of Commons.
DUTIES
5. The Auditor General is the auditor of the accounts of Canada, including those relating to the Consolidated Revenue Fund and as such shall make such examinations and inquiries as he considers necessary to enable him to report as required by this Act.
6. The Auditor General shall examine the several financial statements required by section 55 of the Financial Administration Act to be included in the Public Accounts, and any other statement that the President of the Treasury Board or the Minister of Finance may present for audit and shall express his opinion as to whether they present fairly information in accordance with stated accounting policies of the federal government and on a basis consistent with that of the preceding year together with any reservations he may have.
7. (1) The Auditor General shall report annually to the House of Commons
(a) on the work of his office; and
(b) on whether, in carrying on the work of his office, he received all the information and explanations he required.
(2) Each report of the Auditor General under subsection (1) shall call attention to anything that he considers to be of significance and of a nature that should be brought to the attention of the House of Commons, including any cases in which he has observed that
(a) accounts have not been faithfully and properly maintained or public money has not been fully accounted for or paid, where so required by law, into the Consolidated Revenue Fund;
(b) essential records have not been maintained or the rules and procedures applied have been insufficient to safeguard and control public property, to secure an effective check on the assessment, collection and proper allocation of the revenue and to ensure that expenditures have been made only as authorized;
(c) money has been expended other than for purposes for which it was appropriated by Parliament;
(d) money has been expended without due regard to economy or efficiency; or
(e) satisfactory procedures have not been established to measure and report the effectiveness of programs, where such procedures could appropriately and reasonably be implemented.
(3) Each annual report by the Auditor General to the House of Commons shall be submitted to the Speaker of the House of Commons on or before the 31st day of December in the year to which the report relates and the Speaker of the House of Commons shall lay each such report before the House of Commons forthwith after receipt thereof by him or, if that House is not then sitting, on the first day next thereafter that the House of Commons is sitting.
8. (1) The Auditor General may make a special report to the House of Commons on any matter of pressing importance or urgency that, in his opinion, should not be deferred until the presentation of his annual report.
(2) Each special report of the Auditor General to the House of Commons made under subsection (1) or 20(2) shall be submitted to the Speaker of the House of Commons and shall be laid before the House of Commons by the Speaker of the House of Commons forthwith after receipt thereof by him, or if that House is not then sitting, on the first day next thereafter that the House of Commons is sitting.
ACCESS TO INFORMATION
13. (1) Except as provided by any other Act of Parliament that expressly refers to this subsection, the Auditor General is entitled to free access at all convenient times to information that relates to the fulfilment of his responsibilities and he is also entitled to require and receive from members of the public service of Canada such information, reports and explanations as he deems necessary for that purpose.
(2) In order to carry out his duties more effectively, the Auditor General may station in any department any person employed in his office, and the department shall provide the necessary office accommodation for any person so stationed.
(3) The Auditor General shall require every person employed in his office who is to examine the accounts of a department or of a Crown corporation pursuant to this Act to comply with any security requirements applicable to, and to take any oath of secrecy required to be taken by, persons employed in that department or Crown corporation.
(4) The Auditor General may examine any person on oath on any matter pertaining to any account subject to audit by him and for the purposes of any such examination the Auditor General may exercise all the powers of a commissioner under Part I of the Inquiries Act .
14. (1) Notwithstanding subsections (2) and (3), in order to fulfil his responsibilities as the auditor of the accounts of Canada, the Auditor General may rely on the report of the duly appointed auditor of a Crown corporation or of any subsidiary of a Crown corporation.
(2) The Auditor General may request a Crown corporation to obtain and furnish to him such information and explanations from its present or former directors, officers, employees, agents and auditors or those of any of its subsidiaries as are, in his opinion, necessary to enable him to fulfil his responsibilities as the auditor of the accounts of Canada.
(3) If, in the opinion of the Auditor General, a Crown corporation, in response to a request made under subsection (2), fails to provide any or sufficient information or explanations, he may so advise the Governor in Council, who may thereupon direct the officers of the corporation to furnish the Auditor General with such information and explanations and to give him access to those records, documents, books, accounts and vouchers of the corporation or any of its subsidiaries access to which is, in the opinion of the Auditor General, necessary for him to fulfil his responsibilities as the auditor of the accounts of Canada.
Canada Evidence Act, R.S.C. 1970, c. E-10
(as amended by S.C. 1980-81-82-83, c. 111, s. 4 (Schedule III))
36.3 (1) Where a Minister of the Crown or the Clerk of the Privy Council objects to the disclosure of information before a court, person or body with jurisdiction to compel the production of information by certifying in writing that the information constitutes a confidence of the Queen's Privy Council for Canada, disclosure of the information shall be refused without examination or hearing of the information by the court, person or body.
(2) For the purpose of subsection (1), "a confidence of the Queen's Privy Council for Canada" includes, without restricting the generality thereof, information contained in
(a) a memorandum the purpose of which is to present proposals or recommendations to Council;
(b) a discussion paper the purpose of which is to present background explanations, analyses of problems or policy options to Council for consideration by Council in making decisions;
(c) an agendum of Council or a record recording deliberations or decisions of Council;
(d) a record used for or reflecting communications or discussions between Ministers of the Crown on matters relating to the making of government decisions or the formulation of government policy;
(e) a record the purpose of which is to brief Ministers of the Crown in relation to matters that are brought before, or are proposed to be brought before, Council or that are the subject of communications or discussions referred to in paragraph (d); and
(f) draft legislation.
(3) For the purposes of subsection (2), "Council" means the Queen's Privy Council for Canada, committees of the Queen's Privy Council for Canada, Cabinet and committees of Cabinet.
(4) Subsection (1) does not apply in respect of
(a) a confidence of the Queen's Privy Council for Canada that has been in existence for more than twenty years; or
(b) a discussion paper described in paragraph (2)(b)
(i) if the decisions to which the discussion paper relates have been made public, or
(ii) where the decisions have not been made public, if four years have passed since the decisions were made.
Petro-Canada Act, S.C. 1974-75-76, c. 61
14. (1) The Corporation is, for all purposes of this Act, an agent of Her Majesty, and its powers under this Act may be exercised only as an agent of Her Majesty.
(Later repealed and substituted by S.C. 1984, c. 31, s. 14 (Schedule II, Item 40(9)):
14. (1) The Corporation is, for all purposes of this Act, an agent of Her Majesty in right of Canada.
26. (1) Subject to subsection (2), the accounts of the Corporation shall be audited each year by an auditor appointed by the Governor in Council.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10
28. . . .
(6) Notwithstanding subsection (1), no proceeding shall be taken thereunder in respect of a decision or order of the Governor in Council, the Treasury Board, a superior court or the Pension Appeals Board or in respect of a proceeding for a service offence under the National Defence Act .
II. The Facts
From February 2, 1981, to May 12, 1981, Petro-Canada acquired ownership of Petrofina Canada Inc. through a series of transactions which are set out in some detail in the judgment at trial of Jerome A.C.J., supra, at pp. 726-32, and succinctly summarized in the dissenting judgment on appeal of Hugessen J., supra, at pp. 427-29. The share capital of Petro-Canada is held in trust for the Crown by the Minister of Energy, Mines and Resources. Petro-Canada's capital budget must be approved by the Governor in Council.
Negotiations with Petrofina S.A., the Belgian parent company of Petrofina Canada Inc., began in August 1980, and culminated in Petrofina S.A.'s agreeing on February 2, 1981, to sell Petrofina Canada Inc. to Petro-Canada. On that same day, the Governor in Council approved a supplementary capital budget "permitting Petro-Canada to undertake or commit to share purchase investments to an amount of $1,500,000,000 including the undertaking of external financing commitments for that amount as required" (Order-in-Council P.C. 1981-259). This agreement was announced publicly on the following day, February 3, 1981. The ultimate funding for the takeover came from Parliament some six weeks later, on March 21, 1981, in the form of Vote 5c, Schedule to Appropriation Act No. 4, 1980-81, S.C. 1980-81-82-83, c. 51:
5c Energy -- Operating expenditures including payments, in the current and subsequent fiscal years, in accordance with such terms and conditions as may be prescribed by the Governor in Council on the recommendation of the Minister and the Minister of Finance, of such amounts as are from time to time required for investment in shares, debentures, bonds or other evidences of indebtedness of Petro-Canada in order to increase Canadian public ownership of the oil and gas industry in Canada through the share purchase of and property acquisition from Petrofina Canada Inc., by Petro-Canada, (not to exceed 1.7 billion dollars which includes the interim financing costs) for which purpose there shall be established in the Accounts of Canada a non-budgetary trust account to be known as the Canadian Ownership Account:
a)to which shall be credited all amounts received as a consequence of a Canadian Ownership special charge for the purpose of increasing the Canadian Public Ownership of the oil and gas industry in Canada; and
b)to which shall be charged any investment made hereunder for the share purchase of and property acquisition from Petrofina Canada Inc.
and to further provide that no investment shall be made pursuant hereto in excess of the amount of the balance to the credit of the account, and to provide a further amount of $ 5,382,000.
Vote 5c clearly stipulated that the funds voted were for investment in shares, debentures, bonds, and other evidences of indebtedness of Petro-Canada, although it was contemplated that the funding provided to Petro-Canada would be used solely for the purchase of Petrofina Canada Inc. The earlier capital budget approval in Order-in-Council P.C. 1981-259 made no mention either of a specific target company or of the source from which Petro-Canada would acquire its authorized increased capital. Following Vote 5c, Petro-Canada, through a subsidiary (Petro-Canada Exploration Inc.), made an offer on April 18, 1981, of $120 per share to Petrofina Canada Inc. shareholders; the terms and amount of this offer had been previously settled by the agreement between Petro-Canada and Petrofina S.A., which had preceded Parliament's Vote 5c. On May 11, 1981, Petrofina Canada Inc. shareholders accepted the Petro-Canada offer.
Vote 5c created a non-budgetary trust account known as the Canadian Ownership Account (COA) from which payments would be made to Petro-Canada for the acquisition of Petrofina Canada Inc. The proceeds from a special charge on Canadian petroleum consumption were paid into the COA to cover the cost of the takeover. It is the COA, as an account of Canada within the meaning of s. 5 of the Auditor General Act, that the Auditor General of Canada began to audit in the summer of 1981.
As part of that audit of the COA, the Auditor General sought to determine whether "value for money" had been achieved in the flow of purchase funds from Petro-Canada to the shareholders of Petrofina Canada Inc. He sought to ascertain whether due regard to economy had been demonstrated and value for money achieved in the $1.7 billion acquisition of Petrofina Canada Inc. This kind of audit was perceived by him to be part of the Auditor General's duty to determine under s. 7(2)(d) of the Auditor General Act whether "money had been expended without due regard to economy or efficiency". In the Report of the Auditor General of Canada to the House of Commons, Fiscal Year Ended 31 March 1982, para. 15.2, at pp. 516-17, the Auditor General reported:
Other Audit Observations
Canadian Ownership Account Transactions. We audited transactions in the Canadian Ownership Account (COA), which forms part of the Public Accounts of Canada. The following table summarizes the financial transactions in the COA for the period 1 July 1981 to 31 March 1982:
Receipts
Petroleum and Petroleum Products $ 567.7 million
Gas and Gas Liquids 218.7
786.4
Payments
To Petro-Canada regarding Petrofina
Canada Inc. acquisition 710.9
$ 75.5 million
═══════
Weakness in Managing Public Funds. We would have expected that the parties processing and authorizing such an expenditure would have available an evaluation of the entity to be purchased, including:
- its value in relation to price;
- alternate strategies considered in acquiring the entity;
-the implications of such a purchase to the effective purchaser (the Government of Canada); and
- the means of financing the purchase.
Also, one would expect a formal plan for, or a report on, a post-evaluation of the assets acquired to ascertain that value for money was received.
To fulfil our responsibility as auditor of the accounts of Canada, we requested from the Department of Energy, Mines and Resources and responsible central agencies documentation demonstrating that due regard was given to economy in the acquisition process and that reasonable value was in fact received for money expended. As well, we sought explanations of the events leading up to the loan transactions, including an examination of the role of the Department of Energy, Mines and Resources, Petro-Canada and others.
Senior management in the Department of Energy, Mines and Resources informed us that, because Petro-Canada was the vehicle used to identify, evaluate, negotiate and recommend the acquisition of Petrofina Canada Inc., the Department was not responsible to ensure that value for money was or had been achieved. It had not carried out any such analysis and had no documentation available for audit. In their view, Petro-Canada had made the acquisition and was thus responsible for doing any necessary analysis and evaluation. Departmental management viewed any review by the Department as inappropriate second-guessing of a Crown corporation decision. The role of departmental managers consisted only of providing advice to the Minister on the consistency of the proposal with the Canadianization policy. They explained that this was due to the fact that the agent for this transaction was Petro-Canada and, in keeping with their view of the arm's length nature of relations between departments and Crown corporations, departmental management was not asked to advise on the substance of Petro-Canada's analysis.
Although Petro-Canada's available expertise would be valuable in an analysis of this kind of acquisition, exclusive reliance on the corporation could effectively remove any overall accountability for such expenditures of public funds.
Although certain documentation has been provided to us by the Department, we have not received supporting evidence relating to the advice given to ministers on such considerations as the value of the assets acquired in relation to price or alternative acquisition and financing mechanisms.
In the absence of such information, we are unable to ascertain that due regard to economy has been demonstrated or achieved in respect of a transaction that has advanced $711 million out of an eventual $1.7 billion to a Crown corporation.
In the subsequent year of 1983, the Auditor General again reported that certain documentation had been sought and denied, this time from senior officials of Petro-Canada; Report of the Auditor General of Canada to the House of Commons, Fiscal Year Ended 31 March 1983, para. 9.196, at p. 329. Consequently, the Auditor General reported to the House of Commons that, as in 1982, this lack of information again precluded a s. 7(2)(d) evaluation:
9.196 During the past year, we communicated with senior officials of Petro-Canada, requesting evidence that due regard to economy had been exercised in using $1.7 billion of public funds to acquire Petrofina Canada Inc. We also asked whether any post-evaluation of the acquired assets had been undertaken to determine what value had been received. The preparation of pre and post-acquisition evaluations is an accepted practice of prudent decision makers in the private sector. Although we have been informed by a senior official of Petro-Canada that a pre-acquisition commercial evaluation was undertaken, this has not as yet been made available to us. However, there is no indication that the evaluation considered the possible effects on the Government of Canada that would result from the acquisition. Effects on such matters as the balance of payments, foreign exchange, tax revenues and possible future capital requirements, in our view, merited pre-acquisition evaluation. Further, we were informed that a contract was awarded to independent appraisers in the spring of 1983 to conduct an evaluation of assets acquired, including oil and gas properties.
9.197 We have requested of Petro-Canada these evaluations but, as of 15 September 1983, we had not received them. Consequently, we have been unable to ascertain whether due regard to economy has been demonstrated and value for money achieved in the $1.7 billion acquisition of Petrofina Canada Inc.
These statements were made in both the 1982 and 1983 Reports notwithstanding the fact that on the introductory page of each report (p. 1 of each), the Auditor General states: "My staff was provided with all the information and explanations required."
From the written and oral pleadings before this Court, it is evident that the Auditor General took the view that he was entitled to request and receive the information in issue by virtue of s. 13(1) of the Auditor General Act. Having failed to obtain the desired documentation by this means, the Auditor General turned to s. 14 which deals with methods the Auditor General may use to try to obtain information from Crown corporations. Pursuant to s. 14(1), he sought the missing information from Peat Marwick Mitchell, the auditors of Petro-Canada appointed pursuant to s. 26 of the Petro-Canada Act. (I would note that the auditors of Petro-Canada are now appointed pursuant to s. 134(1) of the Financial Administration Act, R.S.C., 1985, c. F-11 .)
In a letter of August 4, 1983, Peat Marwick Mitchell replied that such information was not available given that its auditing mandate did not extend as far as the "value for money" audits envisaged by s. 7(2)(d) of the Auditor General Act. The Auditor General next turned to s. 14(2) and on March 9, 1984, wrote to Petro-Canada requesting the information and explanations he had deemed necessary to fulfill his responsibilities as auditor of the accounts of Canada. When, on April 10, 1984, Petro-Canada refused the request, the Auditor General had recourse to s. 14(3), which contemplates that a Crown corporation may refuse to yield to a s. 14(2) request and permits the Governor in Council to order such Crown corporation to provide the information wanted by the Auditor General. On April 16, 1984, the Auditor General asked for the Governor in Council's assistance pursuant to s. 14(3). By Order-in-Council P.C. 1984-2243 of June 26, 1984, the Governor in Council declined to exercise its s. 14(3) power to assist the Auditor General. The Order-in-Council reads:
WHEREAS Petro-Canada publicly announced on February 3, 1981, the offer made for the acquisition of Petrofina Canada Inc.;
WHEREAS Parliament enacted on March 31, 1981, Appropriation Act No. 4, 1980-81, S.C. 1980-81, c. 51, which authorized under Vote 5c (Energy, Mines and Resources), "payments, in the current and subsequent fiscal years, in accordance with such terms and conditions as may be prescribed by the Governor in Council on the recommendation of the Minister and the Minister of Finance, of such amounts as are from time to time required for investment in shares, debentures, bonds or other evidences of indebtedness of Petro-Canada in order to increase Canadian public ownership of the oil and gas industry in Canada through the share purchase of and property acquisition from Petrofina Canada Inc., by Petro-Canada, (not to exceed 1.7 billion dollars which includes the interim financing costs) for which purpose there shall be established in the Accounts of Canada a non-budgetary trust account to be known as the Canadian Ownership Account . . .";
WHEREAS the price to be paid by Petro-Canada for each share of Petrofina Canada Inc., was discussed in Parliament prior to the enactment of Appropriation Act No. 4, 1980-81, S.C. 1980-81, c. 51, by Parliament;
WHEREAS the Auditor General has not alleged that the accounts of the moneys expended for the said purchase and acquisition, as appropriated by Parliament, has not been faithfully and properly maintained, that the moneys have not been fully accounted for or that the moneys were expended other than for the purpose for which they were appropriated by Parliament;
WHEREAS the Auditor General has, pursuant to subsection 14(3) of the Auditor General Act, S.C. 1976-77, c. 34, advised the Governor General in Council on April 16, 1984 that Petro-Canada had failed to provide him with information, in particular evaluations of the said purchase and acquisition, requested by the Auditor General under subsection 14(2) of the said Act;
AND WHEREAS the Governor General in Council has, in the context of the request to Petro-Canada by the Auditor General, had regard to the scope and nature of the authority conferred upon the Auditor General by the Auditor General Act, S.C. 1976-77, c. 34, as auditor of the accounts of Canada, and in particular whether the Auditor General has the authority to audit whether Parliament in authorizing the expenditure of moneys, or Petro-Canada in making the said purchase and acquisition, exercised due regard to economy or efficiency.
THEREFORE, HER EXCELLENCY THE GOVERNOR GENERAL IN COUNCIL, on the recommendation of the Minister of Energy, Mines and Resources, hereby declines to direct the officers of Petro-Canada in respect of the matters referred to in subsection 14(3) of the Auditor Genera