Looking Back – The 10 Most Important Appeals Of 2015

"Those who cannot remember the past are condemned to repeat it" - George Santayana

Over the holidays, many reflect over the past year in search of lessons learned for the coming year. In line with this tradition the Appeals Monitor is, once again, pleased to present our annual review of the most significant appeal decisions of the past year which we should be mindful of and which can be expected to impact Canadian employees and businesses for years to come.

10. OEB v OPG and ATCO v AUC: Power to the Regulators Starting out our countdown are the companion decisions of Ontario (Energy Board) v Ontario Power Generation Inc, 2015 SCC 44 ("OEB"), and ATCO Gas and Pipelines Ltd v Alberta (Utilities Commission), 2015 SCC 45 ("ATCO"), (previously discussed here), in which the Supreme Court of Canada ("SCC") held that utility regulators can assess the prudence of a utility's costs with the benefit of hindsight. These decisions were included in our top ten Appeals to Watch in 2015. Both cases involved utility regulators disallowing costs that the utilities claimed were prudent. (Generally, utilities are entitled to recover prudent costs from ratepayers.) OEB involved labour costs that the utility was obligated to pay under collective bargaining agreements (including following a binding arbitration). ATCO involved pension costs related to an annual cost of living adjustment. In both cases, the regulators relied upon after-the-fact benchmarking—i.e., comparing the subject costs to costs incurred by similar utilities. The SCC held that statute and circumstances can mandate a specific methodology in determining the prudence or "reasonableness" of a utility's costs. For example, committed costs (i.e., costs to which the utility is already committed) or statutory language referring to "prudently incurred" costs may mandate a "no-hindsight" approach that only looks at the information available to the utility at the time the decision to incur the cost was made. If the statute and circumstances do not mandate a specific methodology, then the regulator has discretion to choose the methodology. Absent statutory language to the contrary, there is no presumption of prudence, particularly when the onus of proof in a rate application is on the utility. The SCC held that the regulators' decisions in both cases were not unreasonable. OEB and ATCO affirm the broad discretion of utility regulators in determining whether costs are prudent (i.e., borne by ratepayers) or should be disallowed (i.e., borne by the utility or its shareholders). As noted by Abella J in her OEB dissent, this introduces some uncertainty into utility rate regulation. Moreover, the decisions legitimize a role for utility regulators to act as a countervailing force against the demands of unionized labour. The OEB decision is also significant because it provides guidance on when and how a statutory decision-maker can participate in a judicial review of its own decision.

9. Tervita: No Predicting the Future in Merger Competition Cases Tervita Corporation et al v Commissioner of Competition, 2015 SCC 3, was a long-awaited decision on the merger review test under the Competition Act (it was previously discussed here and was included on both the Appeals to Watch in 2014 and Appeals to Watch in 2015 lists). In this decision, the SCC confirmed the proper analytical framework to apply to the "prevention" branch of s. 92(1). Justice Rothstein (writing for the entire Court on this issue) confirmed that a two-stage forwarding-looking "but for" market condition analysis should be used to determine if a merger gives rise to a substantial prevention of competition under s. 92(1). First the potential competitor must be identified, then it must be determined whether "but for" the merger, the potential competitor would have likely entered the market and had a substantial effect on competition. The Court clarified that the timeframe for likely entry must be discernable, based on evidence of when the potential competitor was realistically expected to enter the market (in absence of the merger). It was emphasized that, in performing this analysis, the Competition Tribunal should not look farther into the future than the evidence supports, as speculation is improper and mere possibilities are insufficient to meet the standard, nor should the Tribunal or courts try to make future decisions for companies. A majority of the SCC also confirmed the proper approach to the "efficiencies defence" set out in s. 96 (one justice was in dissent). This was described as a balancing test, requiring analysis of whether the quantitative and qualitative efficiency gains of the merger outweigh the anti-competitive effects. The Tribunal has flexibility to choose which methodology should be used in light of the particular circumstances of each merger but the approach should be as objectively reasonable as possible, quantifying all effects that are realistically measurable and ensuring that the estimates provided are grounded in the evidence. The SCC did not restrict at all the scope of the Competition Bureau's power to review and undo mergers of any size, but it did comment briefly that this case (dealing with competition on a local scale) did not appear to reflect the policy considerations Parliament likely had in mind in in creating the efficiencies defence (although, it was technically available, given the current wording of the statute). Overall, this decision should: (i) reduce complications in assessing competitive...