Grascan Construction Ltd. v. Metrolinx, 2017 ONSC 6424

CITATION: Grascan Construction Ltd. v. Metrolinx, 2017 ONSC 6424

DIVISIONAL COURT FILE NO.: 388/17 DATE: 20171027

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

GRASCAN CONSTRUCTION LTD. and TORBRIDGE CONSTRUCTION LTD.

Applicants

– and –

METROLINX and ONTARIO INFRASTRUCTURE AND LANDS CORPORATION

Respondents

Young Park, for the Applicants

Arthur Hamilton and Jed Blackburn, for the Respondents

HEARD at Toronto: September 15, 2017

SPIES J.

Overview

[1] This application was brought as an urgent application for judicial review before a judge of the Superior Court under Rule 14.05 of the Rules of Civil Procedure and ss. 2 and 6(2) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (JRPA), as amended. Leave was granted by Nordheimer J., as he then was, who was satisfied of the urgency of this application.

[2] In 2014, the Government of Ontario committed funding and announced that Regional Express Rail ("RER") would be delivered by Metrolinx over a ten-year period. The Lakeshore East - East Corridor Expansion project (the "Project") is one of the many projects required to deliver RER. The estimated value of the Project is between $120 and $130 million.

[3] On March 22, 2017, Metrolinx and Ontario Infrastructure and Lands Corporation, operating as Infrastructure Ontario ("IO"), issued an open market Request for Qualifications (RFQ) to build and finance the Project (Project RFQ). The Project RFQ is part of a public procurement process sponsored by IO and Metrolinx (collectively, the "Sponsors"), intended to identify prequalified parties to participate in the request for proposals (RFP) process, which is the next stage of the Project. The prequalification submissions of prospective applicants are assessed for technical capability, qualifications, experience, bid integrity and financial capacity. The successful bidder will then build the Project.

[4] Grascan Construction Ltd. ("Grascan") and Torbridge Construction Ltd. ("Torbridge") were part of a team called Lakeshore East Corridor Infrastructure Partnership ("LIP") that filed a submission seeking prequalification (LIP Prequalification Submission) for the Project RFQ by the deadline of May 18, 2017 (Submission Deadline).

[5] The Project RFQ required each construction Prime Team Member of an applicant team to obtain an accounting firm letter ("AFL") from a national accounting and advisory firm with expertise in forensic reviews by the Submission Deadline. I will come back to the content of the expected AFL but it was designed to protect against unethical bidding practices, including failures to disclose conflicts of interest.

[6] The applicants admit that they did not include an AFL in their LIP Prequalification Submission. Grascan, as the construction Prime Team Member that was required to obtain an AFL, alleges that it did not have sufficient time to obtain one. The applicants allege that this requirement for an AFL was new, that it had not been insisted upon in prior projects by the Sponsors and that refusing to exercise the discretion the Sponsors retained in the Project RFQ to waive the requirement for an AFL, the Sponsors effectively permitted only the largest construction companies to compete for the Project, and excluded smaller construction companies, like theirs, from the competition.

[7] Instead, LIP included a letter from Deloitte LLP ("Deloitte") advising that the AFL was currently in progress and that it would be working with Grascan over the upcoming weeks to complete the letter (Deloitte Substitute Letter).

[8] On June 1, 2017 the Sponsors notified LIP of their decision to disqualify LIP from the Project RFQ for its failure to include an AFL (the Decision). They also refused LIP's requests to withdraw their decision on the condition that LIP deliver an AFL by July 21st, the original target date for the issuance of the Project FP.

[9] The applicants allege that Sponsors have breached the duty of fairness they owed to them by failing to: (a) conduct a public procurement process that was open, fair and in a transparent manner; (b) provide equal treatment to vendors, to evaluate and consistently enforce the criteria set out in the Project RFQ; (c) provide reasonable notice and opportunity for LIP to compete; and (d) provide LIP with sufficient time to submit its response.

[10] Grascan and Torbridge challenge the Decision and ask for an order quashing the Sponsors' Decision to disqualify them and remitting the LIP Prequalification Submission back to the Sponsors for re-consideration.

[11] The respondents submit that the applicants' allegations are unfounded and that this application ought to be dismissed. The Project RFQ expressly states that failure to include an AFL is grounds for disqualification. They rely on: (a) the written declaration provided by the applicants to the respondents confirming their understanding that failure to submit an AFL may result in their LIP Prequalification Submission being disqualified; and (b) the failure of the applicants to request an extension of the Submission Deadline. The respondents submit that in these circumstances, disqualification was eminently reasonable and arguably the only reasonable outcome as the applicants seek to have this Court grant them special treatment not afforded to the five Prequalified Applicants who complied with the terms of the Project RFQ. The Sponsors argue that if the relief sought were to be granted, this would prejudice the integrity of the Project RFQ process as well as future RFQ processes conducted by the respondents and it would also give rise to potential claims by the five Prequalified Applicants who, unlike the applicants, would then have legitimate complaints of unfair treatment.

The Issues

[12] This application for judicial review raises the following issues:

a) Is the "Decision" subject to judicial review?

b) If so, what is the standard of review?

c) Did the Sponsors owe a duty of fairness to the LIP applicants and if so, have the LIP applicants proven that the Sponsors breached that duty and/or have the LIP applicants proven that the Decision was unreasonable?

d) Are the LIP applicants estopped from seeking judicial review?

e) Should relief be denied on the basis of prejudice?

The Facts

Background and the Parties

[13] Grascan is a private, mid-sized general construction company that has completed several large infrastructure projects for Metrolinx. Grascan is the "Applicant Lead" and construction "Prime Team Member" for the LIP. Torbridge is a private, small construction company that specializes in structural work, with a focus on bridge construction.

[14] Grascan, Torbridge, and Stonebridge Financial (a financial services company) agreed to form a team to respond to the Project RFQ under the team name LIP. They contemplated forming a partnership if they were prequalified. Despite being part of the LIP, Stonebridge is not an applicant in this proceeding.

[15] Grascan and Torbridge have successfully collaborated to perform numerous infrastructure projects for Metrolinx / GO Transit for over 30 years, including significant projects such as the West Toronto Diamond Grade Separation and Weston GO / UP Express Station.

[16] Metrolinx is a Crown agency continued under the Metrolinx Act, 2006, S.O. 2006, c. 16 ("Metrolinx Act"). Metrolinx's objects, set out in s. 5(1) of the Metrolinx Act, include providing leadership in the co-ordination, planning, financing, development and implementation of an integrated, multi-modal transportation network that conforms with certain policies.

[17] IO is a Crown agency continued under the Ontario Infrastructure Lands Corporation Act, 2011, S.O. 2011, c. 9, Schedule 32 ("OILCA"). IO's objects are set out in s. 4 of the OILCA and include, in s. 4(1)2, providing advice and services related to Government property, including project management, contract management and development, to the Minister and the Government when directed to do so by the Minister and pursuant to s. 4(1)8 to implement or assist in the implementation of transactions involving the Government.

The Project RFQ and Accounting Firm Letter Requirement

[18] The AFL was new and unique to projects involving IO, having been introduced in late 2015 as a requirement for Metrolinx projects where they were working with IO like the Project RFQ. According to the LIP applicants, November 30, 2015 was the first time an AFL was requested.

[19] In respect of the Project RFQ, Section 4.4 sets out the AFL requirement:

4.4 Accounting Firm Letter Regarding Bidding Practices Including Conflicts of Interest

Each construction Prime Team Member of any Applicant is required to provide a letter substantially in the form attached as Form 3-5 - Accounting Firm Letter to Schedule 3 - Prequalification Submission Forms from a reputable, national professional accounting and advisory firm with expertise in forensic reviews dated no earlier than two years prior to the RFQ Submission Deadline. Such accounting firm letter will be reviewed and approved by the Sponsors in their sole discretion. [Emphasis added]

[20] The form of the AFL, Form 3-5 to Schedule 3 of the Project RFQ ("Form 3-5"), states:

Dear Sir/Madam,

We have been engaged by [INSERT CONSTRUCTION PRIME TEAM MEMBER] (the "Construction Prime Team Member") to deliver the letter required by Section 4.4 of the RFQ.

After review of the Construction Prime Team Member, we confirm:

(a) attached as Schedule "A" to this letter is our methodology and key findings. In considering our summary of findings as documented in points (c) and (d) below one should read and consider all information documented in Schedule "A";

(b) Schedule "A" has been prepared in accordance with the Standard Practices for Investigative and Forensic Accounting Engagements adopted by Chartered Professional Accountants of Canada ("CPA Canada"). Schedule "A" should not be viewed as having been prepared in accordance with any assurance standards issued by CPA Canada;

(c) that the Construction Prime Team Member has, based on our view of general and best practices in managing conflicts of interest and ethical bidding practices, designed appropriate internal policies, processes and controls establishing ethical standards for its bidding practices (including with respect to reporting on conflicts of interest), and

(d) that such policies, processes and controls, if correctly implemented and consistently followed, are designed to provide protection against unethical bidding practices, including failures to disclose conflicts of interest.

[Emphasis added]

[21] All Project Applicants had the ongoing opportunity to submit questions regarding the requirements of the AFL or to request an extension of the Submission Deadline during the open-market period for the Project RFQ. However, the Sponsors did not receive any questions from any of the Project Applicants indicating that an extension of the RFQ process was necessary in order to obtain the AFL. In particular, the LIP applicants did not:

a) submit any questions to the Sponsors pertaining to the delivery of the AFL;

b) contact the Sponsors in respect of the requirements and timing of the AFL; or

c) request an extension of the Submission Deadline on the basis that additional time was required to obtain the AFL.

The LIP Prequalification Submission and Substantial Completeness Review

[22] LIP’s Prequalification Submission included Form 3-1 (the "Master Submission Declaration") executed by Angelo Grassa, Grascan's President and Chief Operating Officer, which among other things, declared that Grascan, as the applicant representative of LIP:

agrees to comply with and be bound by the requirements, terms and conditions contained in the "RFQ Documents" (as defined in the Project RFQ);

agrees that the Sponsors are not obligated, in any way whatsoever, to carry out further clarifications, verifications or investigations of any Project RFQ prequalification submission; and

understands that any omission or failure to substantially comply with a requirement included in the RFQ Documents may result in the Project RFQ Prequalification Submission being disqualified. [Emphasis added]

[23] The respondents rely on this letter in support of their estoppel argument. The LIP applicants submit that this letter must be considered in the context of the past practice of the Sponsors with respect to the AFL requirement.

[24] There is no dispute that LIP’s prequalification submission did not include the required AFL. Instead, it included the Deloitte Substitute Letter stated that Grascan engaged Deloitte on May 11, 2017, seven days prior to the deadline for prequalification submissions (and 50 days after the Sponsors issued the Project RFQ). The Deloitte Substitute Letter stated, in part, that:

At the date of this letter, the IO Letter required for the RFP [the AFL] is currently in progress. We will work with Grascan over the upcoming weeks to obtain the necessary information and documentation required to review the Company’s compliance program and complete the IO Letter. Deloitte cannot and does not provide any assurance that it will be able to issue an unqualified IO Letter or issue an IO Letter that will be acceptable in form, substance or content to Grascan or IO for the purposes of the bid submission. [Emphasis added]

[25] As the Sponsors submit, this letter did not even provide assurance that an AFL would ever be forthcoming.

[26] Following the Submission Deadline, the Sponsors conducted an assessment of the completeness of each Project RFQ prequalification submission, including the one submitted by LIP (the "Substantial Completeness Review"). The Substantial Completeness Review is the first step for the evaluation of a Project RFQ prequalification submission, as set out in Section 5.1 of the Project RFQ. The purpose and scope of the Substantial Completeness Review, set out in Section 5.1 of the Project RFQ, is as follows:

The [Project RFQ prequalification submissions] will be reviewed to determine whether they are substantially complete. The "substantial completeness" review will assess whether the required information and forms have been substantially provided in the [Project RFQ Prequalification Submission]. A [Project applicant's] failure to provide a substantially complete [Project RFQ Prequalification Submission] may result in the [Project RFQ Prequalification Submission] not being evaluated.

[27] A Project RFQ Prequalification Submission which does not pass the Substantial Completeness Review is not evaluated or scored for its technical and financial attributes.

[28] Since LIP’s Prequalification Submission did not contain the AFL required by s. 4.4 of the Project RFQ, it did not pass the Substantial Completeness Review. Accordingly, the Sponsors' evaluation committee did not consider LIP’s Prequalification Submission and this submission was not scored or ranked in comparison with the other Project Applicants.

The Decision

[29] The Sponsors’ Decision was based upon the right of the Sponsors to disqualify Project Applicants at the Substantial Completeness Review stage, in accordance with s. 8.3(1)(a)(iii) of the Project RFQ, for LIP's failure to deliver the AFL pursuant to s. 4.4 of the Project RFQ, and s. 8.3(1)(l) of the Project RFQ, for LIP's failure to provide a substantially complete Project RFQ Prequalification Submission. Notice of the Sponsors’ Decision was delivered to LIP on June 1, 2017.

[30] In particular the Project RFQ provided that:

a) the Sponsors have the general right to disqualify an Applicant "at any time and in their discretion…without incurring any liability for costs and damages incurred by the Applicant….in the event that the Applicant…(iii) fails to comply with a requirement prescribed by Section 4.4” to provide the AFL (s. 8.3(1)(a)(iii)) [Emphasis added]; and

b) an Applicant's failure to provide a substantially complete Prequalification Submission may result in the Prequalification Submission not being evaluated (s. 5.1(1)). [Emphasis added]

[31] One of the arguments advanced by the LIP applicants is that the wording of these sections makes it clear that the Sponsors had the discretion to not disqualify them at the prequalification stage for failure to provide the AFL. The LIP applicants also rely on s. 9.2(3) which confirms that the Sponsors' discretion (including to disqualify a Project Applicant) is to be given a very broad interpretation and that "discretion" means the Sponsors' absolute sole unqualified subjective discretion.

[32] The LIP applicants also point out that this discretion is not found, for example, in s. 3.3, which provides that Prequalification Submissions received after the deadline “shall be rejected”.

[33] The Sponsors rely on the same wording in support of their broad discretion to disqualify the LIP applicants.

Prequalified Project Applicants are notified

[34] Pursuant to Paragraph 5.2(1) and Schedule 1 of the Project RFQ, the maximum number of Project Applicants prequalified was five.

[35] Following the completion of the Sponsors' review of the Project RFQ Prequalification Submissions, on July 12, 2017, five prequalified Project RFQ Applicants ("Prequalified Project Applicants") were formally notified that they had been prequalified to submit proposals in response to the Project RFP.

[36] The individual notifications were followed by a press release by which the Sponsors publicly announced the Prequalified Project Applicants.

[37] The applicants commenced this proceeding on July 14, 2017, after the Prequalified Project Applicants had already been notified.

Chronology of events with respect to the steps taken by the applicants to obtain an AFL and the events demonstrating the applicants’ knowledge of the past practice of the Sponsors in requiring an AFL

[38] As Mr. Hamilton, counsel for the Sponsors submitted, the facts in this case are extremely important. Before deciding this application it is important to consider the applicants’ prior knowledge of the requirement for an AFL, their knowledge of the past practice of the Sponsors with respect to the AFL requirement and the steps the applicants took to obtain an AFL. For that purpose, the following chronology is of assistance:

July 6, 2016 - Grascan downloaded the RFQ in respect of IO's RER for GO Station infrastructure improvements on the Stouffville Corridor (the "Stouffville RFQ”). An AFL was included as a requirement in Stouffville RFQ version 1.0.

July 14, 2016 - John Balazic, Vice President and a director of Grascan, attended an applicants' meeting, hosted by the Sponsors, regarding the particular RFQ requirements of the Stouffville RFQ.

September 13, 2016 - Grascan downloaded RFQs for the RER Cooksville and the RER Highway 401/409 Tunnel, both requiring an AFL.

September 21, 2016 - Balazic, on behalf of Grascan, attends RER Cooksville RFQ and RER Highway 401/409 Tunnel RFQ applicants’ meeting. The uncontradicted evidence of David Ho, Senior Vice President, Procurement and Records Management of IO, is that the AFL requirement was discussed by representatives of the Sponsors.

October 18, 2016 - Grascan downloaded the RFQ for the Hurontario LRT which included an AFL requirement.

October 19, 2016 – Balazic emailed John Di Liso, a partner at Deloitte, to ask what the timelines would be to obtain an AFL. He deposed in his affidavit sworn July 14, 2017, in support of this application that he contacted Deloitte because of the Cooksville RFQ issued on September 13, 2016 by the same Sponsors, as an AFL was required. In fact he attached the Cooksville RFQ to the email. Di Liso responded by email the same day and suggested that they meet “to discuss process, timing etc.” Balazic deposed that he spoke to Di Liso shortly after he emailed Di Liso and that Di Liso told him that the AFL was a new requirement introduced by IO, that it would be expensive and “time consuming” and that Di Liso asked him to call him once “Grascan had laid the groundwork”.

November 30, 2016 - Grascan downloaded the RFQ for the RER Kipling Bus Terminal (the "Kipling RFQ"), which required an AFL.

December 8, 2016 – Grascan attends Kipling RFQ applicants’ meeting.

March 22, 2017 – Project RFQ issued.

March 30, 2017 – Grascan downloads Project RFQ.

April 3, 2017 – Grascan attends Project RFQ applicants’ meeting.

May 1, 2017 – Mr. Balazic deposed that he met with Di Liso and Phil Iorio of Deloitte to discuss the AFL reference in the Project RFQ. Gina Campbell, a partner at Deloitte, emails Balazic stating that she understands that “you may be moving forward with a response for an infrastructure Ontario project and have a need for the forensic letter and report”; a reference to an AFL. She asks Balazic to call her.

May 2, 2017 – Campbell provides Balazic with a draft engagement letter and information request list.

May 5, 2017 – Campbell follows up with Balazic to “check in and see if you had any questions on the provided materials.”

May 7, 2017 – Last day for Project Applicants to submit questions or concerns pursuant to s. 2.2(1) of the Project RFQ. At no time did the LIP applicants submit any questions or raise any concerns pursuant to this section.

May 10, 2017 – Balazic advises Campbell: “I hope to have some material for you on Friday [May 12th] to review”.

May 11, 2017 A.M. - Grascan employee Benjamin Day, Grascan’s Environmental Health and Safety Manager, sends Balazic “documents that you requested...”

May 11, 2017 P.M. - Campbell enquires whether the AFL “deadline is still May 18” which Balazic confirms. Campbell advises Balazic that:

If that is the case I will send you the finalized engagement letter for execution and could you please send us any materials you have collected to us today? It is going to be very challenging for us to review materials and draft the report for the deadline. We will work towards it the best that we can. I also want to point out that should there be gaps, there may not be enough time for you to close them before issuance of our report. (Emphasis added)

May 13, 2017 - Balazic signs the Deloitte engagement letter on behalf of Grascan. According to Balazic, Campbell would be performing the work for an AFL.

May 16, 2017 - Date of the Deloitte Substitute Letter. There is no dispute that this letter was not an AFL.

May 18, 2017 - Submission Deadline. The Sponsors receive the LIP Prequalification Submission, which included the Deloitte Substitute Letter.

June 1, 2017- The Sponsors issue the letter of disqualification to LIP; the Decision.

June 2, 2017 - Grascan sends a letter to IO requesting that the Decision be reconsidered.

June 15, 2017 – Grascan requests a response by IO to its June 2nd letter.

June 19, 2017 - IO responds to Grascan confirming the Decision.

June 20, 2017 - Day emails Campbell advising that he is “working with John Balazic to get the information required” for the AFL. Day circulates a spreadsheet of “all the items that need to be addressed...” to Grascan and Balazic. Balazic responds “That’s a BIG list!!!” Balazic also emails Campbell and asks Campbell to “commit to a July 21st date” for the AFL on the basis that “we will commit to providing all information by June 30th.”

June 21, 2017 - Day consults with Deloitte to consider prioritizing outstanding items.

June 22, 2017 – Campbell emails Balazic and states that she is “confirming that if we receive the information by June 30th that we should be in a position to issue your report on or before July 21st.”

June 23, 2017 - Counsel for Grascan writes to IO to request that IO withdraw their Decision and that the Sponsors confirm LIP’s continued participation in the RFQ process on a conditional basis, the condition being that the final decision regarding the disqualification not be made until Deloitte delivers the pending AFL which is expected by no later than July 21, 2017.

June 26, 2017 - Heidi Bereta of Deloitte follows-up with Balazic “on the documentation being pulled together” and asks: “[i]f there is a collection of documents/information that is ready for us to review, please feel free to pass it along in pieces and we can start reviewing as you continue to gather documentation.”

June 27, 2017 - Balazic forwards a file to Janice Wu of Grascan which he states is not complete but that he wants her to email it to Heidi Bereta at Deloitte. Wu then emails Deloitte, with “this is what we have thus far”.

June 30, 2017 - Marni Dicker, the Chief Commercial Officer, General Counsel and Corporate Secretary of IO, responds to June 23, 2017 letter from Grascan’s counsel requesting that IO withdraw the Decision. Dicker confirms again that the Sponsors’ Decision will stand and that the Prequalification Submission of Grascan will not proceed further in the evaluation process. In that letter Dicker stated that the “only standard of fairness to be applied is the fair treatment of the Applicants to the RFQ at hand”.

July 5, 2017 - Deloitte emails Grascan regarding “criterion gaps that would refrain Deloitte from being able to provide a fully designed report if we were to write the report today.”

July 6, 2017 - Balazic emails Deloitte to advise that: “we have a consultant helping us with the [outstanding items] noted below.” Deloitte responds: “In the meantime, if there are additional documents that you want pass (sic) along, we can work going (sic) through them.”

July 12, 2016 - Five Prequalified Project Applicants were formally notified that they had been prequalified to submit proposals in response to the Project RFP to build and finance the Project. Section 5.2(1) of the Project RFQ provided that a maximum of five Project Applicants could be prequalified.

July 12, 2016 - Deloitte emails Balazic advising that: “as discussed with you on the call we have identified gaps in the policies, process and controls described and the information provided as it relates to our assessment... until we see that (outstanding) information we cannot comment on whether it will be sufficient....we need to receive all outstanding information requests to respond to the gaps identified for the start of the business day on Monday in order for us to work towards delivering out report for July 21st.”

July 14, 2017 - Deloitte emails Balazic advising that “we continue with drafting the report on the information that has been provided to date and in expectation that the information referenced in Heidi’s email will be provided.”

July 17, 2017 - Deloitte emails Balazic advising that “we have gone through the documentation but do have a few questions/document requests....”

July 20, 2017 - AFL sent by Campbell on behalf of Deloitte to Grascan. I note that this is just a little over two months from the May 13, 2017 date of the engagement letter.

Past Practice of the Sponsors with Requiring an AFL

[39] The applicants submit that the Sponsors' Decision is not consistent with their past approach to the AFL requirement in two other projects and that as such their legitimate expectations were not met. They argue that the Sponsors refused to exercise their discretion to extend the deadline for the AFL even though they chose not to enforce this requirement in the Kipling RFQ, and removed this requirement from the Stouffville RFQ. By enforcing this new requirement and refusing to exercise the discretion they retained in the Project RFQ not to do so, the applicants submit that the Sponsors effectively permitted only the largest construction companies to compete for the project, and excluded smaller construction companies, like Grascan and Torbridge, from the competition. This is the basis for their argument that the Sponsors breached a duty of fairness owed to the LIP applicants.

[40] As I will come to, I do not accept the submission of the applicants that the size of the construction company is relevant given Graham Construction and Engineering LP (Graham) was able to obtain an AFL in less than two months and that there was at least one other company that did so. In any event, the respondents submit that the LIP applicants have misconstrued the evidence of the Stouffville RFQ and the Kipling RFQ in numerous respects.

[41] The facts as I find them to be are as follows. In the Stouffville RFQ issued July 5, 2016, an applicant had expressed the concern that the AFL seemed to be a newly added requirement and that they did not believe that such an audit would be possible to complete inside the timelines prescribed. Significantly certain project applicants sought an extension for the delivery of the AFL prior to the RFQ submission deadline. The Sponsors responded by removing the AFL requirement from the Stouffville RFQ on July 25, 2016, and postponing the requirement to the early stages of the request for proposals stage. There is a dispute between the parties as to why the requirement was removed by IO but in my view this conduct alone does not amount to an admission of any kind that would be relevant to the issues before me. There could have been any number of reasons for removing the requirement rather than extending the submission deadline. Significantly in this case the LIP applicants did not ask for an extension of the Submission Deadline. In my view without such a request they could not rely on what was done by the Sponsors in the Stouffville RFQ. Furthermore, it is significant that the decision in the Stouffville RFQ to remove the AFL requirement had the same impact on every applicant, and therefore treated every applicant equally. That is unlike the remedy sought by the LIP applicants which would benefit the LIP applicants only.

[42] The LIP applicants also allege that in January 2017 (only three months before the Project RFQ), the Sponsors elected not to enforce the AFL requirement in the Kipling RFQ and prequalified Grascan's team even though one of the two construction Prime Team Members did not provide an AFL by the deadline of January 18, 2017. The respondents submit that the lead construction Prime Team Member of the applicant team of which Grascan was a member7 provided a satisfactory AFL at the RFQ stage, which the Sponsors relied upon. When the applicant team subsequently sought to change its team composition at the RFP stage (in accordance with the rules of the RFP), IO required that the new lead construction Prime Team Member provide an AFL as a condition of permitting the change of team composition.

[43] The position of the respondents is at odds with the opening wording of s. 4.4 of the Kipling RFQ, which required “Each construction Prime Team Member of an Applicant” to provide an AFL. The LIP applicants argue that in that case the Sponsors interpreted “each” as “one”.

[44] I note that the opening wording of s. 4.4 of the Kipling RFQ is the same as the opening wording of s. 4.4 in the Project RFQ. It is clear that in the case at bar the word “each” has also been interpreted as “one”. In the case at bar there is no dispute that Grascan was the only applicant lead Prime Team Member and that Torbridge was not required to submit an AFL.

[45] To the extent the LIP applicants relied on the Kipling RFQ process they would have concluded that Grascan as the applicant lead needed to provide an AFL. The process followed by the Sponsors for the Kipling RFQ does not support the proposition that an AFL was not required as part of the LIP applicants’ Prequalification Submission. Thus the Kipling RFQ is not a precedent that supports the applicants’ position.

[46] It is also significant that the Stouffville RFQ was the only project where an AFL was not required. Another project, the Cooksville RFQ, required an AFL which Mr. Balazic of Grascan was aware of as a result of his attendance at the applicants’ meeting on September 21, 2016, although Grascan’s team did not submit a prequalification submission for that project. For the RER Highway 401/409 Tunnel project, which was also discussed at this applicants’ meeting, Grascan’s team made an RFQ prequalification submission which did contain an AFL from another member of the team although their team was not prequalified.

[47] Based on the evidence of these other projects I agree with the respondents’ submission that the applicants cannot argue that the enforcement by the respondents of requiring an AFL as part of the prequalification submission caught them by surprise.

The Certificate of Recognition (COR) Requirement

[48] The applicants rely on the fact that when Metrolinx was implementing the Certificate of Recognition (COR) safety program for its construction projects they phased it in over a period of almost two years to ensure that the number of certified contractors was sufficient to allow for competitive bidding. They complain that that was not done in this case. In my view this submission is without merit. The COR was a totally new concept as was the AFL. They are very different however, and in my view the fact that Metrolinx phased in the COR requirement and did not do so for the AFL requirement is not relevant.

Time Grascan Needed to Obtain an AFL

[49] The position of the LIP applicants is that it was not possible for Grascan to obtain an AFL in time for the Submission Deadline. The position of the respondents is that it was feasible in the circumstances for any Project Applicant to obtain an AFL by the Submission Deadline, even if that Project Applicant had not obtained an AFL by the Project RFQ issuance date. The Sponsors rely on the fact that they received complete and satisfactory AFLs from all five of the other Project Applicants that submitted a Project RFQ Prequalification Submission.

[50] The LIP applicants assert that since the Sponsors implemented the AFL requirement for their projects, there has been only one instance where the construction Prime Team Member obtained an AFL in less than two months. In particular, they assert that for the Project RFQ, Graham obtained an AFL from PricewaterhouseCoopers LLP dated April 6, 2017 (i.e. after the Project RFQ had been issued and prior to the Submission Deadline). The respondents also rely on the uncontradicted evidence of David Ho that Deloitte had prepared an AFL in approximately two months on a least one other occasion. They also submit that contrary to the LIP applicants’ assertions, there is no evidence that the Graham or other Deloitte example is collectively exhaustive.

[51] In my view what is significant is that by the LIP applicants’ own admission another Project Applicant was able to obtain an AFL within two months. Mr. Park submitted that the respondents refused to advise if Graham provided an AFL before, presumably for a different project. However, even if they did, there is no reason why the LIP applicants could not have also done so given the evidence of Mr. Balazic which makes it clear that Grascan became familiar with this new requirement for an AFL in July 2016 when it was first introduced.

[52] The applicants’ position is that no medium-sized company like Grascan could obtain an AFL in time. According to the applicants however, their combined annual revenue totals $130 million whereas Graham, headquartered in Calgary, has annual revenues exceeding $2 billion but that is through all of its 13 North American offices. I have no evidence as to the annual revenue of Graham’s Calgary office alone and so I don’t know that this evidence is that probative. In any event I do not see their comparative size as relevant. Grascan’s cost to obtain the AFL Deloitte provided was only $25,000. It is therefore not a matter of financial resources.

[53] I have already referred to Mr. Balazic’s evidence in his first affidavit about his early conversation with Mr. Di Liso from Deloitte, shortly after his email to him on October 19, 2016 and his evidence that around October 19, 2016, Mr. Di Liso told him that providing an AFL would be “time consuming” and that once Grascan had “laid the groundwork”, he should contact Mr. Di Liso. Mr. Balazic deposed in a later affidavit that he was told that Deloitte had gone through the same process for preparing an AFL for another company very recently.

[54] Mr. Balazic deposed in his first affidavit that he then did his own research and learned that the:

groundwork Grascan would have to perform to obtain an Accounting Firm Letter included developing a compliance program for the management of conflicts of interest and ethical bidding practices and establishing a risk committee to implement that program. I also learned that qualified national accounting firms would require Grascan to have an adequate history of operating its compliance program to audit. (at para. 9, emphasis added)

[55] Mr. Balazic’s affidavits do not explain why he did his own research as opposed to asking Deloitte for what was required. It seems unlikely to me that Mr. Di Liso would tell Mr. Balazic to call once Grascan had laid the “groundwork” and yet not explain what he meant by “groundwork” particularly since Deloitte was familiar with this new requirement and had prepared an AFL for another client. Mr. Balazic goes on in his first affidavit to set out the steps Grascan took thereafter to establish a Risk Committee, which he said had been meeting for five months by the time the Project RFQ was issued on March 22, 2017 (at paras. 10-12). This would mean that the six-month period that he claimed he needed before contacting Deloitte ended around April 22, 2017. Mr. Balazic does not explain why he waited until May 1, 2017 to meet with Mr. Di Liso to discuss the AFL requirement; particularly given the Submission Deadline for the Project RFQ was May 18, 2017.

[56] Mr. Balazic’s first affidavit goes on at para. 15 to state that in early May 2017 Ms. Campbell advised him that the process for preparing an AFL could be completed shortly after the Risk Committee had been enforcing Grascan’s compliance program for six months. By this point however, that had already happened on the evidence of Mr. Balazic.

[57] Mr. Balazic also deposed that based on his experience in the construction industry and his discussions with Deloitte (he does not say with whom) that most construction companies do not have the processes in place to obtain an AFL within less than two months as required by the Project RFQ. He stated that only a few large construction companies would be able to do so. Given he does not specify who he had the discussion with at Deloitte I do not find this evidence very persuasive. In any event I do not accept that Grascan only had two months to obtain an AFL. Grascan knew about the AFL requirement at least as of July 2016. Given that Grascan had completed several large infrastructure projects for Metrolinx and given the involvement of IO, Grascan management must have realized that they would need an AFL eventually, even if they did not need it right away. For reasons already given I have rejected Grascan’s argument that they could assume that the Sponsors would waive this requirement. In this regard it is also important to note that once an AFL is obtained it can be relied upon for two years; in other words a new one is not required for each project.

[58] The position of the Sponsors is that they did not require a six-month history of Grascan implementing and enforcing its compliance policies in order to satisfy the AFL requirement. This is confirmed by the direct evidence of Mr. Ho from IO, which created the AFL requirement. The LIP applicants respond that Mr. Ho is not a Chartered Professional Accountant (CPA), has no experience designing the policies described in the form for the AFL, has never worked at a national accounting and advisory firm, much less one with "expertise in forensic reviews", and is not an expert in the Standard Practices for Investigative and Forensic Accounting Engagements. This is an interesting submission since Mr. Ho is a Senior Vice President of IO, the Crown agency that implemented the AFL requirement. The applicants relied at least initially on research done by Mr. Balazic as to the groundwork needed for an AFL and he is the Vice President of a construction company with a Bachelor of Technology in Architecture.

[59] This position is also interesting given, as the respondents point out, while the LIP applicants have served six affidavits in support of this application and they were preparing these affidavits at the same time they were working with Deloitte to complete the AFL, the LIP applicants have not filed an affidavit from someone from Deloitte to speak to the issue of what was required for the AFL and how long it would have taken to prepare an AFL if the applicants had provided all of the information required when requested. Although the hearsay evidence of Mr. Balazic is admissible, in these circumstances I am left wondering why the best evidence which would have come from Deloitte is not before this Court. I am left with assessing this evidence in light of the documents and the chronology of events in this case.

[60] The documents support the Sponsors’ position that a six-month compliance history was not needed.

[61] Deloitte's engagement letter makes no reference to an audit or proof of compliance history. To the contrary, the engagement letter signed by Mr. Balazic himself confirms that:

Deloitte will not undertake any testing of the operating effectiveness of the identified policies, process and controls, and our services will not constitute an audit conducted in accordance with generally accepted auditing standards, an examination or any other form of assurance with respect to internal controls, or other attestation or review services in accordance with the standards or rules....." [Emphasis added]

[62] Form 3-5 for the AFL in the Project RFQ makes no mention of requiring a compliance history of six months and in fact its language suggests otherwise. Paragraph (c) of the AFL refers to the construction Prime Team Member having “designed appropriate internal policies, processes and controls establishing ethical standards for its bidding practices …” and paragraph (d) requires that those policies, processes and controls “if correctly implemented and consistently followed, are designed to provide protection against unethical bidding practices …”. Nowhere does the AFL suggest that an audit needs to be done or anything beyond designing policies and practices.

[63] The AFL ultimately issued to Grascan by Deloitte on July 20, 2017, expressly confirms that:

Deloitte has not undertaken any work to assess the implementation or operating effectiveness of any of the Proponent's internal policies, processes and controls. As such, Deloitte's procedures and findings do not address implementation and operational effectiveness… and … The Services performed under Deloitte's Engagement Letter dated May 11, 2017 do not constitute an audit... [Emphasis added]

[64] The AFL included a Schedule “A” setting out Deloitte’s methodology and key findings. Paragraph 11 of the Executive Summary includes a table that summarizes “leading practices in managing conflicts of interest and ethical bidding practices, compared to the Proponent’s related policies, processes and controls.” In the table the current state of all of the elements of compliance is stated as “Designed”. In paragraph 16 under the heading “Scope, limitations in scope and restrictions” the documents Deloitte reviewed and/or relied on are set out. Although there are a few in 2016 and early 2017, the majority of the documents have a version date after the Submission Deadline. I appreciate that this likely means there were earlier versions but it was the latest version that was relied upon by Deloitte in giving its opinion. At paragraph 18 of the same section Deloitte reported that it has not addressed “implementation and operational effectiveness” of any of Grascan’s internal policies, processes and controls.

[65] The Sponsors also point out that the Grascan ethics policies were revised on July 10, 2017, ten days before Deloitte ultimately issued the AFL to Grascan. As the Sponsors argue, this suggests that Deloitte was willing to issue an AFL to Grascan without evidence of a period of compliance by Grascan with the policies that were ultimately the subject of the AFL.

[66] Finally, there is absolutely no written record in correspondence with Deloitte or in the LIP applicants' internal communications (and the LIP applicants have confirmed that "such documents do not exist") of Deloitte advising that the AFL requires an audit or evidence of implementing and enforcing compliance policies for a six-month period or any period. Furthermore, the LIP applicants' reliance on the brief reference to meeting minutes in the list of documents which Deloitte "specifically reviewed and/or relied upon" as evidence that Deloitte evaluated Grascan's compliance history is entirely undermined by the fact that the meeting minutes referred to do not contain substantive reports of "Ethics Committee" activities which Deloitte could audit or that would demonstrate the compliance history that the LIP applicants claim was required. In fact, each of the minutes produced by the LIP applicants from December 9, 2016 - May 12, 2017 state"No major items brought forth in this meeting".

[67] The LIP applicants rely on the Stouffville RFQ in support of their position that a compliance history of six months was required before Deloitte could prepare the AFL. In that document an Industry Question was asked of the Sponsors about the AFL which was that since it was outside the normal scope of work of an accounting firm auditing company financials they did not believe that such an audit would be possible to complete inside the timelines specified. The fact the question included a reference to an audit does not mean that an audit was required and based on the other evidence an audit clearly was not required. In my view however this is consistent with Mr. Di Liso’s comment that the process would be “time consuming” but it does not support the position of the LIP applicants that a six-month history of compliance was required.

[68] Finally, Mr. Park, counsel for the LIP applicants, argued that Mr. Balazic’s interpretation of what was required was reasonable given the reference to the requirement that the AFL be prepared by a “reputable, national professional accounting and advisory firm with expertise in forensic reviews”. I disagree. The intention of the AFL was clearly to ensure appropriate procedures and processes had been designed and were in place and that is what I would expect of an accounting firm with expertise in forensic reviews.

[69] For these reasons I accept the evidence of Mr. Ho that a six-month compliance history was not required and the AFL Deloitte actually provided for Grascan does not suggest that this was done. In any event, even if Deloitte did advise the LIP applicants (incorrectly) that six months of compliance history was required to obtain an AFL, the Sponsors are not responsible for this incorrect advice. It could not create an obligation on the Sponsors to waive the Project RFQ requirements or reverse the Decision particularly as the applicants never asked for clarification as to what was required for the AFL or for an extension of the Submission Deadline.

[70] Even if I accept the position of the LIP applicants that six months of compliance history was needed for Deloitte to prepare the AFL, that six-month period could have begun in the summer of 2016 and in any event ended around April 22, 2017. As already stated, Mr. Balazic waited until May 1, 2017 to meet with Deloitte even though the Submission Deadline was May 18, 2017. I would have expected at least the engagement of Deloitte and some preliminary meetings to discuss what was required in advance of that as the end of the six-month period drew closer.

[71] Furthermore, after this meeting it seems that Grascan was slow in providing the information that Ms. Campbell requested on May 2, 2017. After she followed up on May 5th, Mr. Balazic advised her on May 10th that he hoped to have “some material” for her to review by May 12th. Nevertheless Ms. Campbell advised Mr. Balazic that preparing an AFL by the May 18th deadline would be very challenging but she did not say it would not be possible although she did say that should there be gaps, there might not be enough time for Grascan to close them before issuance of the AFL. It seems that the problem was the delay in Grascan providing the required materials to Deloitte. Certainly Ms. Campbell was being diligent in pressing Mr. Balazic.

[72] The respondents requested that the LIP applicants produce all internal communications between Grascan and Deloitte and they were told there were none. There is no document that explains what happened between Grascan and Deloitte in the period between May 10th and May 16th, the date of the Deloitte Substitute Letter except that the engagement letter with Deloitte was executed. Certainly had Mr. Balazic provided any documents to Ms. Campbell in this period of time as promised or at all, I would have expected an email to be produced.

[73] There is a further gap of documents evidencing communications between Grascan and Deloitte in the period between May 16, 2017 and June 20, 2017 when Mr. Day from Grascan emailed Deloitte advising that he was working with Mr. Balazic to get the information required for the AFL. Clearly even by June 20, 2017, Ms. Campbell continued to experience delays in obtaining the information that she needed from Grascan. In her email to Mr. Balazic of June 22, 2017, which was now more than a month after the Submission Deadline, Ms. Campbell confirmed that if Deloitte received the information they needed by June 30th that they should be in a position to issue the AFL on or before July 21st; a period of three weeks later. This email makes it clear that Deloitte could move quickly but only once it had all of the information it required. Based on the chronology, Deloitte was asking for information from Grascan until at least July 17, 2017. Notwithstanding all of the delay in receiving information, Ms. Campbell, on behalf of Deloitte, completed the AFL for Grascan by July 20, 2017, two months after Deloitte was retained.

[74] The LIP applicants argue that the Sponsors' suggestion that Grascan could have obtained the AFL in time because it was aware of the AFL requirement before March 22, 2017 is an implicit acknowledgement that the Sponsors did not provide the applicants with sufficient time to obtain an AFL. I do not accept that submission. The Sponsors simply make the point that given the LIP applicants’ misunderstanding that a six-month compliance history was required, that had Grascan reacted more quickly to this new requirement it would have started the process much earlier and even with its mistaken belief would have had an AFL in time.

[75] For these reasons, the LIP applicants have not persuaded me that had they moved more quickly in retaining Deloitte and providing Deloitte with the information they required that an AFL could not have been obtained in time for the Submission Deadline.

[76] Despite all of these factual determinations, in my view even if the LIP applicants are correct that they did not have enough time to obtain an AFL, they could not remain silent and not advise the Sponsors of their concern and ask for clarification as to what was required and for an extension of the Submission Deadline. They did neither of those things.

Analysis

A) Is the Decision subject to judicial review?

[77] In paragraph 26 of the Notice of Application the LIP applicants asked this Court to judicially review two decisions; 1) the Sponsors' policy that an AFL be required and submitted as part of a Project RFQ prequalification submission within the Submission Deadline; and 2) the Decision. At paragraph 14 of the LIP applicants' factum however, the LIP applicants appeared to limit the decision they seek to review to only the decision of the Sponsors to disqualify the applicants; the Decision.

[78] In argument Mr. Park did not challenge the requirement of the AFL itself but submitted that the Sponsors breached their duty of procedural fairness to the LIP applicants in refusing to exercise their discretion to not insist on the AFL requirement given it was a new requirement and unique to these Sponsors, was not phased in as the COR requirement had been and because of the Sponsors’ past practice in not insisting on the AFL which meant the LIP applicants had legitimate expectations that the AFL requirement would not be enforced. Mr. Park also submitted that the Decision itself was unreasonable.

[79] All of the issues raised by the LIP applicants relate to the Sponsors’ Decision, not the policy of providing an AFL itself. Accordingly the question is whether or not the Decision is subject to judicial review.

[80] Had the LIP applicants maintained their challenge to the requirement that an AFL form part of a Project RFQ prequalification submission, I agree with the respondents that this is not judicially reviewable. There is no legal basis for the LIP applicants to assert that the AFL requirement in the Project RFQ (which applied uniformly to all Project RFQ prequalification submissions) should not apply to them, and therefore, there would have been nothing for this Court to review in that respect.

(a) Under s. 2(1)1 of the JRPA

[81] The LIP applicants argue that the Sponsors' Decision was a statutory power of decision in that it was an exercise by the Sponsors of the statutory powers conferred by the Metrolinx Act and the OILCA, respectively, to make a decision deciding the legal rights, powers and privileges of the applicants and in particular their right to participate in the Project. They submit that as Crown agencies, the Sponsors could only act pursuant to their statutes and that the Decision was made pursuant to s. 4 of the OILCA, which I have already referred to, which sets out the objects of the IO. The LIP applicants submit that the Decision related to advice and services including project management in accordance with s. 4 and that in order to manage the Project, IO had to make a decision, in this case a joint decision with Metrolinx, to disqualify the LIP applicants.

[82] The applicants submit that the Sponsors' Decision is subject to judicial review as it (a) was an exercise of a statutory power of decision that decided the legal rights, powers, and privileges of the applicants under s. 2(1)2 of the JRPA, and (b) is a procurement decision made by Crown agencies that engages the broader public law interests and gives rise to this proceeding for certiorari under s. 2(1)1 of the JRPA.

[83] The Sponsors submit that the Decision is not an exercise of a statutory power of decision. I agree with this submission. As the Divisional Court stated in Midnorthern Appliances Industries Corp. v. The Ontario Housing Corp. (1977), 1977 1081 (ON SC), 17 O.R. (2d) 290 in the context of a decision by the Ontario Housing Corp. to refuse to consider a tender:

9. As we examine the decision that was before us and the circumstances we could see that there had been a power of decision exercised. We could see that the powers of the respondent are statutory. We could see that the effect of the decision would be to decide as to the eligibility of the applicant to continue to receive a benefit that it had had. However, the section must be read as a whole. The respondent is a creature of statute but not all that it does is reviewable by this court. … As a creature of statute any decision made by it might be said to be the exercise of a statutory power of decision, as without the statute there would be no power. This would apply to any corporation. …

10. If one turns again to the definition, one may read it as follows: a power conferred by a statute to make a decision deciding the eligibility of any person to receive a benefit. The Act under which the respondent receives its powers confers or makes no demand upon the respondent to decide as to the eligibility of the applicant for the benefit that it has been receiving. The Act empowers the respondent to negotiate as it sees fit with whatever suppliers are necessary. What is at issue between the parties herein is a matter of contract and it is not a question of a statutory power of decision for review by this court. We can find no specific power or right conferred under The Ontario Housing Corporation Act, R.S.O. 1970, c. 317 upon the respondent that in the circumstances herein would afford this court a power of review. [Emphasis added]

[84] On this issue the other decision the respondents referred to is also a decision of the Divisional Court in 2169205 Ontario Inc. v. LCBO, 2011 ONSC 1878, at paras. 24, 31-37, in which it was held that the process of granting authorization to open an agency store pursuant to a competitive procurement process did not involve a statutory power of decision because there were no statutory provisions or regulations which prescribed how the LCBO was to go about entering into the contract in question.

[85] The LIP applicants have failed to identify any specific right or power in either the OILCA or the Metrolinx Act prescribing how the Sponsors were to make policy decisions regarding the requirements of the Project RFQ (such as the AFL) nor how they were to make disqualification decisions. All they have referred to are the general objects of each Crown agency. Although as stated in Midnorthern the argument can be made that there has been a power of decision exercised and the effect of the Decision was to decide as to the eligibility of the applicants to receive a benefit, namely prequalification so they could then bid on the Project, surely that is not enough as if it were as Mr. Hamilton submitted, if language of this nature was sufficient there would be very little legislation where the court would not be able to exercise the right of judicial review.

[86] The LIP applicants also rely on s. 1.1 (5) of the Project RFQ which provides in part that the “procurement process in respect of the Project will be managed” by IO and the Project has been approved to proceed in accordance with five fundamental principles which include 1) the public interest is paramount, 2) value for the investment of public money must be demonstrated and 3) “fair, transparent and efficient processes must be used.” They also rely on s. 2.3 of the Project RFQ and the appointment of a "Fairness Monitor" who was responsible for verifying that the Project RFQ had been conducted in a fair, open and transparent manner. I understand that the Fairness Monitor made that finding. Finally the LIP applicants rely on the letter from the Sponsors of June 30, 2017, wherein the Sponsors acknowledged "[t]he only standard of fairness to be applied is the fair treatment of the Applicants to the RFQ at hand".

[87] The LIP applicants also rely on certain provisions set out in the Ontario Public Service Procurement Directive (Procurement Directive) issued by the Management Board of Cabinet in December 2014, the Ontario Infrastructure and Lands Corporation Procurement Policy (IO Procurement Policy) dated June 30, 2016 and the Metrolinx Procurement Policy dated December 4, 2012.

[88] The Sponsors submit that the LIP applicants rely on sections of the Procurement Directive that they say do not apply to the Sponsors. I agree with the respondents that only sections 3 and 8 apply to IO and Metrolinx, pursuant to s. 2 of the Procurement Directive, as they are defined as "Other Included Entities".

[89] Section 3 of the Procurement Directive provides that the Sponsors are required to acquire publicly-funded goods and services in the most economical and efficient manner through procurement processes that conform to the principle of value for money and ensuring access for qualified vendors to compete for government business must be open and the procurement process must be conducted in a fair and transparent manner, providing equal treatment to vendors. This principle is also found in s. 6 of the IO Procurement Policy and in the Metrolinx Procurement Policy.

[90] As for s. 8 of the Procurement Directive, I find it is not material. Mr. Park conceded that the LIP applicants’ factum misstates Section 8.9 of the Procurement Directive in a crucial respect and that in fact "Other Included Entities” are encouraged, not required, to use at least the minimum bid response times recommended for Ministries as noted in s. 5.4. Accordingly, the LIP applicants cannot argue that the Sponsors are in breach of s. 5.4 as they are not bound by it.

[91] In my view these policies do not have the force of legislation and cannot change the Decision into a statutory power of decision. That, however, still leaves the application pursuant to s. 2(1) of the JRPA where there is no requirement of the exercise of a statutory power.

(b) Under s. 2(1)1 of the JRPA

[92] The applicants also submit that the Decision gives rise to the common law remedy of certiorari, which is available for administrative decisions of a public nature under s. 2(1)1 of the JRPA, in that it was a procurement decision made by Crown agencies that engages broader public law interests. The LIP applicants rely on Martineau v. Matsqui Institution Inmate Disciplinary Board, [1980] S.C.R. 602 at p. 628 and Bot Construction Ltd. v. Ontario (Ministry of Transportation) (2009). 2009 92110 (ON SCDC), 99 O.R. (3d) 104 (Div Ct) rev'd on other grounds, 99 O.R. (3d) 104 (CA) at para. 11:

Certiorari is available as a general remedy to supervise the machinery of governmental decision-making. The order may go to any public body with power to decide any matter affecting the rights, interests, property, privileges or liberty of any person. The basis for the broad reach of this remedy is the general duty of fairness resting on all public decision-makers.

[93] The LIP applicants submit that the Decision is subject to judicial review under s. 2(1)1 of the JRPA because it engages public law interests as follows:

a) the Sponsors made the Decision in a public procurement process and in the course of performing public duties as mandated by their respective enabling statutes;

b) the Sponsors' procurement decisions have broad public interest implications that transcend the interests of the parties, including the efficient and effective completion of a public infrastructure project and the fairness and integrity followed by Crown agencies in the expenditure of significant public funds;

c) the government issued the Directive to the Sponsors to ensure open access to compete for government business, the procurement process was conducted in a fair and transparent manner, providing equal treatment to vendors and to evaluate submissions consistently, requirements the Sponsors have also affirmed in their Procurement Policies and the Project RFQ; and

d) the public law remedies sought in this application are the only suitable remedies, since the private law remedies may have been curtailed by the Sponsors and the disclaimers set out in the Project RFQ.

(c) The Case Law and Analysis

[94] In the Bot Construction case the Court concluded that a Ministry of Transportation (MOT) decision to award a road construction contract was subject to judicial review because it was: (a) a statutory power of decision under s. 2(1)2 of the JRPA; and (b) engaged broad public law interests sufficient to require judicial review under s. 2(1)1 of the JRPA; Bot Construction at paras. 23 and 24. As the respondents submit the Bot Construction case is distinguishable in that what was in issue in that case was whether the decision to award the road construction contract in a public tender was subject to judicial review whereas the issue in the case at bar is a prequalification process which precedes, and is distinguishable from, a bid process. Furthermore, on appeal, the Court of Appeal overturned the decision because the Court found that the MOT decision was reasonable but at para. 19, the Court specifically left open the issue of whether judicial review, as a remedy, is available with respect to the tendering process for government procurement contracts.

[95] The LIP applicants submit that the fact that Decision was made in an RFQ rather than at the tendering stage as in Bot Construction is irrelevant. They rely on a decision of the Federal Court; Airbus Helicopters Canada Limited v. Attorney General of Canada et al. 2015 FC 257 at paras. 12 and 88-91. In that case Airbus challenged by way of judicial review the process conducted on behalf of the Government of Canada by the Minister of Public Works (Minister) that led up to a request for proposals and ultimately the contract that was awarded to another company; Bell Helicopters, for the purchase of 15 helicopters. Although Airbus participated in that process it did not make a bid. Airbus did not challenge the process itself but rather the refusal by the Minister to reconsider and modify certain technical requirements contained in the request for proposals, which Airbus complained were tailored specifically for Bell Helicopters.

[96] With respect to jurisdiction, at para. 88 Roy J. stated that he was of the opinion that:

judicial review is a possibility under the circumstances because the Minister chose to hold a consultation process before launching the request for proposals. This choice prevents him from acting arbitrarily, which in turn, requires that judicial review of the exercise of discretion be available. [Emphasis added]

[97] The cases that Justice Roy referred to in support of his opinion all appear to deal with the actual bid process and the calling for tenders or request for proposals. He recognized this and then at para. 90 referred to para. 37 of Cougar Aviation Ltd. v. Canada (Minister of Public Works and Government Services, 2000 16572 which he concluded should apply where the Minister chose to consult within a very precise framework. Cougar at para. 37 states as follows:

…the application of the more stringent test advances the objectives of the Agreement, in view of the importance of the transparency and fairness of the process, and the avoidance of “pork-barrelling” in the award of procurement contracts. If potential bidders lack confidence in the integrity of the way in which government contracts are awarded, they may be discouraged from submitting a bid to the detriment of the public interest in obtaining the best value for money, and in ensuring that the competition is truly open to all.

[98] Justice Roy concluded at paras. 90 and 91:

In my opinion, what is important is that a process leading to a request for proposals was established. In this case, there was a public element in the awarding of the contract, even in the preliminary stage. The Minister cannot act arbitrarily. But this will be a very high bar for an applicant to try to jump. The Minister must ensure procedural fairness, however limited it may be, and must use his discretion reasonably. These are the parameters to which the applicant must submit.

In this case, it is not easy to identify the decision that would be subject to judicial review. The applicant refers to a refusal to reconsider and modify the technical requirements. The respondents appear to be satisfied with that characterization. Fine. No one doubts that fairness, transparency, equal opportunity and competition should be part of the contract awarding process. The same goes for the preliminary process leading to the eventual request for proposals itself. But there is no less a burden on the applicant, and that is to demonstrate that the refusal to consider the changes was unreasonable. In that same vein, it must also demonstrate that the refusal to make the changes was unreasonable.

[Emphasis added]

[99] Roy J. then went on to consider Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 and held that the standard of review was reasonableness. He went on to conclude that the applicant had not met its onus and dismissed the application.

[100] The respondents submit that no contractual relationship giving rise to the duty of fairness occurred in the Project RFQ regarding the LIP applicants, relying on Coco Paving (1990) Inc. v. Ontario (Minister of Transportation), 2009 ONCA 503, at paras. 4-5. decided by the Court of Appeal before Bot Construction. In Coco Paving the issue was whether Coco’s bid following a tender call was compliant. The Court stated that no contractual duties arise between the tender-calling authority and a bidder, which the Sponsors submit would include a duty of fairness, until what is termed under tendering law as "Contract A" is formed (i.e. when tender documents are received that are compliant with the terms of a bid). The Court also approved of the observation by the British Court of Appeal in Hub Excavating Ltd. v. Orca Estates Ltd., 2009 BCCA 167, at paras. 39 and 40 that “[t]here is no free-standing duty of fairness in the bidding process independent of [the] contractual duty [arising on the formation of Contract A.]”

[101] There is no dispute that in this case no Contract A was created with any of the Project Applicants, including the LIP applicants. Accordingly the Sponsors argue that they did not owe a duty of fairness to the LIP applicants arising from a contractual relationship and that they had a very wide discretion to determine the process to prequalify applicants and set the terms of the Project RFQ and a very wide discretion to disqualify LIP for failing to meet those clear requirements. LIP failed to prequalify in accordance with that process.

[102] The applicants rely on Metercor Inc. v. Kamloops (City), [2011] BCJ No. 543 (SC) at para. 15, where the Court found that the RFP process, where no initial contract arises, is distinct from a tender process where an initial contract arises. In that case, however, the parties agreed that the process followed by the City was subject to judicial review so the decision is of limited weight on the issues before me.

[103] The LIP applicants no longer challenge the fact that the Sponsors included the AFL requirement in the Project RFQ and there is absolutely no evidence that it was included for any improper purpose. On the evidence before me, it also cannot be said that requiring the AFL to be delivered by the Submission Deadline breached any requirement of good faith and fairness, particularly as the LIP applicants did not seek an extension of time because of any alleged inability to obtain the AFL in time for the Submission Deadline before the Submission Deadline. All of the evidence I have referred to in the chronology of the attempts to obtain the AFL and the communications between the LIP applicants and Deloitte were unknown to the Sponsors until service of the application materials. There being no allegation of wrongdoing or bad faith by the Sponsors, nor any basis for such allegations, the respondents submit that the Sponsors' process is not subject to judicial review; see General Skidding Stan. Bhd. v. Rothschild Canada Ltd., 1995 CarswellNS 211 at paras. 9-10.

[104] The weight of authority supports the position of the Sponsors that no duty of fairness arises at the stage where potential bidders are prequalified. For these reasons I conclude that the LIP applicants cannot ask this Court to judicially review the Sponsors’ Decision. I intend, however, to consider the balance of the application as if I had concluded otherwise.

B) What is the Standard of Review?

[105] The LIP applicants argue that enforcement of the requirement of an AFL was unfair given the past practice of the Sponsors and so the Sponsors breached their duty of procedural fairness which is determined without any assessment of the standard of review or deference to the Sponsors; see Bot Construction at para. 34.

[106] The Sponsors argue that procedural fairness cannot be relevant to the Sponsors’ Decision either to set the Project RFQ requirements or effect the Decision. They submit that if their Decision is subject to judicial review the issue of whether or not they acted within their statutory powers and for proper relevant considerations is to be judged on the standard of reasonableness which is the standard that the Divisional Court applied in Bot Construction at para. 35, relying on Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at paras. 51-60.

[107] In my view if the Sponsors’ Decision is subject to judicial review it must be judged by the standard of reasonableness. The challenge made by the LIP applicants is really not one of procedural fairness in that the Sponsors followed the process set out in the Project RFQ.

[108] Once again, however, even if the position of the LIP applicants is correct, for the reasons that follow I find that there was no breach by the Sponsors of any duty of procedural fairness and that the Decision was reasonable.

C) Did the Sponsors owe a duty of fairness to the LIP applicants and if so, have the LIP applicants proven that the Sponsors breached that duty and/or have the LIP applicants proven that the Decision was unreasonable?

[109] For the purpose of this application I am prepared to assume that the Sponsors owed a duty of fairness to the LIP applicants.

[110] The LIP applicants allege that the Sponsors breached their duty of fairness by failing to: (a) ensure that LIP had open access to compete for government business, and this public procurement process was conducted in a fair and transparent manner, providing equal treatment to vendors; (b) provide LIP with sufficient time to respond to the Project RFQ; (c) evaluate LIP’s submission consistent with the evaluation criteria, including its past postponement and waiver of the AFL requirement; and (d) provide LIP with reasonable notice and opportunity to compete.

[111] I have already dealt with arguments (a), (b) and (c) when I considered the facts and they all relate to the argument by the applicants that they did not have sufficient time to obtain an AFL. I have not accepted that submission and in any event have found that even if the LIP applicants are correct that they did not have enough time to obtain an AFL, they could not remain silent and not advise the Sponsors of their concern and/or not ask for clarification as to what was required and for an extension of the Submission Deadline. They did none of those things. The Sponsors had no knowledge of the applicants’ issues with the Project RFQ until after the Submission Deadline.

[112] The main argument the applicants rely on is the one set out as (c) above and the position of the LIP applicants that the Sponsors’ breached their duty of fairness to them given their reasonable expectations that given the Sponsors’ past practice they believed the Sponsors would not insist on an AFL prior to the Submission Deadline. In that regard, as I have already concluded, based on the evidence of these other projects, that the applicants cannot argue that the enforcement by the respondents of requiring an AFL as part of the prequalification submission caught them by surprise. Even if there was some truth to their belief in my view they could not ignore the clear terms of the Project RFQ and simply assume they could ignore the requirement of an AFL particularly after signing the Master Submission Declaration.

[113] Mr. Hamilton acknowledged that in considering the legitimate expectations of the parties, what the Project RFQ stated in terms of fairness and the rules that would be followed are to be considered. As he submitted, the Project RFQ is a self-contained document that set out all of the rules that those parties seeking to prequalify would have to follow. In my view given the Sponsors had no idea of any issues being experienced by the applicants, their decision to not exercise their discretion to permit the applicants to prequalify without an AFL was reasonable in all of the circumstances. As such there is no basis to find that there was any breach of any duty of fairness by the Sponsors.

[114] There is an additional reason for why such a submission must fail. Even if the Stouffville RFQ and Kipling RFQ were comparable to the Project RFQ and relevant, which they are not, neither could give rise to any legitimate expectations on the part of the LIP applicants. Rather, their legitimate expectations could only have been informed by the terms of the Project RFQ itself. The legitimate expectations doctrine is an aspect of the duty of fairness which operates to create an expectation that a clear, unambiguous and unqualified representation with respect to an administrative procedure will be followed. It does not fetter the discretion of the decision-maker in order to mandate a particular result. There is no evidence of any commitment by the Sponsors to employ any specific process with respect to prequalification for all RFQs over a period of several years. On the contrary, each RFQ had its own terms and conditions. In the circumstances, all that matters is that the Sponsors followed the fair and reasonable process set out in the Project RFQ.

[115] This, in my view, is perhaps the most important point for why this application must fail. The LIP applicants rely on other projects where they allege the Sponsors did not insist on the requirement of an AFL but their experience is their own. There is no evidence to suggest that other Project Applicants had a similar experience or a similar view. I do not know, for example, if any of them were aware of the other projects that the LIP applicants rely upon and if so, whether they understood the actions or inaction of the Sponsors in the same way. To allow the position of the LIP applicants to prevail would mean that the Sponsors in situations like this would have to consider what each of the applicants might be thinking the Sponsors might do in light of their own unique experiences rather than relying on the clear language of the Project RFQ. Were that permitted each Project Applicant which was not prequalified could create its own narrative for why it did not comply with a particular requirement of a RFQ. There would be no certainty and no level playing field among the Project Applicants in a RFQ process of this nature.

[116] This point is even stronger when I consider the fact that the LIP applicants were silent as the Submission Deadline approached and passed. It would have been a simple matter to ask the question of the Sponsors as to whether or not they needed a six-month compliance history for the AFL or whether or not the Sponsors intended to enforce the AFL requirement this time or whether or not they would grant an extension because the LIP applicants needed more time to obtain an AFL. Had the applicants taken any of these courses of action, any answer by the Sponsors or extension of the Submission Deadline would have benefited all of the Project Applicants. Instead, after the applicants were disqualified, they came to this Court to, in effect, obtain special treatment.

[117] For all of these reasons in my view the application should be dismissed. The Sponsors did not breach any duty of fairness owed to the LIP applicants and their Decision was reasonable. I will, however, deal with two additional arguments raised by the respondents briefly.

D) Are the LIP applicants estopped from seeking judicial review?

[118] The Sponsors argue that the LIP applicants are estopped from asserting entitlement to any relief by way of judicial review. They rely on the following:

a) The LIP applicants participated in the Project RFQ process without any complaint until after that process was complete and they had been disqualified.

b) Prior to the Decision, the LIP applicants provided the Master Submission Declaration to the Sponsors confirming their understanding that the failure to submit an AFL may result in their Project RFQ Prequalification Submission being disqualified.

c) The LIP applicants did not ask any questions or express any concerns regarding the AFL requirement prior to the Submission Deadline, despite being afforded opportunities to do so.

d) The LIP applicants did not request an extension of the Submission Deadline.

e) The LIP applicants admit that the LIP Prequalification Submission did not contain an AFL.

[119] Relying on the absence of any such questions, concerns, or requests, the Sponsors proceeded with and completed the Project RFQ process and notified the prequalified Project Applicants. The Sponsors submit that that process cannot now be subverted as a result of the LIP applicants’ late complaints.

[120] I have found each of these points raised by the Sponsors to be relevant to my conclusion that the Sponsors did not breach any duty of fairness owed to the LIP applicants and that their decision was reasonable. In my view it is not necessary to consider the estoppel argument which only serves to complicate the analysis.

D) Should relief be denied on the basis of prejudice?

[121] The Sponsors submit that to grant the relief sought by the LIP applicants would require the Sponsors to either:

a) re-start a completed evaluation process and potentially re-rank the Project RFQ Prequalification Submissions, which would put one Prequalified Project Applicant in jeopardy of losing its prequalified status (as a result of the limit of five prequalified Project Applicants) despite having already been notified of prequalification; and/or

b) exercise extraordinary discretion to permit a sixth Project Applicant to participate in the Project RFP, which would increase the costs of the Sponsors at the Project RFP stage.

[122] Again it is not necessary to consider the question of prejudice given my conclusion that the Sponsors did not breach any duty of fairness owed to the LIP applicants and that their decision was reasonable.

[123] The Sponsors allege that any decision which requires the LIP Prequalification Submission to be evaluated by the Sponsors despite the LIP applicants failing to meet the Project RFQ requirements would effectively render the Submission Deadline irrelevant, prejudice both the Sponsors and the prequalified Project Applicants, and in doing so, the certainty of and confidence in the Project RFQ process, and future projects, would be undermined.

[124] Indeed, in Coco Paving, the Court of Appeal emphasized the importance of maintaining the integrity of the process (albeit in the tendering context), at para. 12:

[T]he timing of bid delivery is not a mere formality in the tendering process. As emphasized by the appellants, bid closing time is sacrosanct in the competitive public tendering process. As this court stated in Bradscot (MCL) Ltd. v. Hamilton-Wentworth Catholic District School Board (1999), 1999 2733 (ON CA), 116 O.A.C. 257 (Ont. C.A.), at para. 6:

A bid submitted after the tender deadline is invalid, and an owner that considers a late bid would breach its duty of fairness to the other tenderers [emphasis in original].

[125] The applicants rely on s. 5.2(2) of the Project RFQ"[t]he Sponsors may, in their discretion and before the issuance of the RFP Documents, increase the number of Prequalified Parties…" The applicants also rely on the fact that IO has on at least two occasions increased the number of prequalified parties from five to six on its build and design projects, where the fifth and sixth ranked applicants were functionally tied. They submit that there is no evidence that the Sponsors or prequalified parties suffered any prejudice in these two instances.

[126] In my view if the applicants had persuaded me that the Sponsors had breached their duty of fairness and/or their Decision was unreasonable, then I agree with the applicants that to prequalify a sixth Project Applicant would be an exercise of discretion to cure unfairness and then the arguments raised by the Sponsors as to prejudice would not prevail.

[127] That, however, is not what I have concluded. I have found that the Sponsors did not breach any duty of fairness and that their decision was reasonable and so the applicants are really seeking special treatment and asking this Court to excuse their failure to include an AFL in their Prequalification Submission. I agree with Mr. Hamilton that the five Prequalified Project Applicants would have a good complaint if the applicants were prequalified even though they did not comply with all of the terms of the Project RFQ. The prejudice that would be suffered by the Sponsors and the five Prequalified Applicants and the RFQ process is accordingly another reason to deny the application. Fairness requires that the LIP applicants be treated the same as all other applicants, and that this application be dismissed in its entirety.

Disposition

[128] For these reasons the application is dismissed with costs to the respondents.

Costs

[129] Following the hearing of this application I was advised that the parties had reached an agreement on costs that the successful party be entitled to $45,000 in costs all-inclusive. Accordingly costs in the amount of $45,000 all-inclusive are ordered to be paid by the LIP applicants to the respondents within 30 days of the release of this decision.

Spies J.

Released: October 27, 2017

CITATION: Grascan Construction Ltd. v. Metrolinx, 2017 ONSC 6424

DIVISIONAL COURT FILE NO.: 388/17 DATE: 20171027

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

GRASCAN CONSTRUCTION LTD. and TORBRIDGE CONSTRUCTION LTD.

Applicants

– and –

METROLINX and ONTARIO INFRASTRUCTURE AND LANDS CORPORATION

Respondents

REASONS FOR DECISION

SPIES J.

Released: October 27, 2017