Interpaving Limited v. City of Greater Sudbury

CITATION: Interpaving Limited v. City of Greater Sudbury 2018 ONSC 3005

DIVISIONAL COURT FILE NO.: 475-17

DATE: 2018/06/29

ONTARIO

SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

Wilton-Siegel, Thorburn and Ellies JJ.

INTERPAVING LIMITED

• and -

CITY OF GREATER SUDBURY

Applicant )

Peter Mantas and Tala Khoury, for the Applicant

Robin Linley, Nicole Henderson and Christopher

Thorburn and Wilton-Siegel JJ.

Respondent )

DiMatteo, for the Respondent

HEARD at Toronto: January 18, 2018

[l] The Applicant, Interpaving Limited ("Interpaving"), provides road paving services, primarily in the City of Greater Sudbury ("the City"). Interpaving seeks judicial review of the City's decision to debar it from bidding on City contracts for four years (the "Debarment Decision"). lnterpaving seeks an order to quash and set aside the Debarment Decision and a declaration that the "By-Law, or parts thereof, is without effect as it is contrary to law. ..and the rules of natural justice."

FACTUAL BACKGROUND

[2] Interpaving and its group of related road work companies have been providing services to the City for over 40 years. Prior to the debarment, Interpaving worked on City contracts having a value of up to $19 million annually. Interpaving states that it regularly employs 200 people in the City and an additional 200 people in the summer, which is the primary road work season.

The By-Law

[3] The Debarment Decision was made pursuant to City By-Law 2014-1, entitled "A By-Law of the City of Greater Sudbury Governing Procurement Policies and Procedures" (the "By- Law"). Subsection 37 of the By-Law provides, in part, as follows:

(2) A Bidder or Supplier may be excluded from eligibility to submit Bids or quotes or a submitted Bid or quote may be summarily rejected and returned to a Bidder or Supplier where the Agent and the applicable [Senior Management Team Member] agree, in consultation with the City Solicitor, in their absolute sole discretion that one of the following circumstances has occurred:

(a) the Bidder or Supplier is or has been involved in Litigation with the City, its elected officials, officers or employees;

(c) there is documented evidence of poor performance, non- performance or default by the Bidder or Supplier in respect to any Contract;

(g) the Bidder, Supplier or its personnel have demonstrated abusive behaviour or threatening conduct towards City employees, their agents or representatives;

(3) In arriving at a determination for the disqualification of a Bidder or Supplier pursuant to this Section, the SMT Member and the Agent, in consultation with the City Solicitor, will consider whether the circumstances are likely to affect the Bidder or Supplier's ability to work with the City, its consultants and representatives, and whether the City's experience with the Bidder or Supplier indicates that the City is likely to incur increased staff time and legal costs in the administration of any dealings with the Bidder or Supplier.

(4) Based on the severity of the events leading to the disqualification, the SMT Member and the Agent, in consultation with the City Solicitor, shall establish the duration of the period during which the disqualification shall be effective.

[4] "Litigation" is defined in the By-Law as "any dispute between the City and any other party or related party adverse in interest before any Court, administrative tribunal or arbitrator and includes a threat of litigation made in writing."

The March Debarment Letter

[5] By letter dated March 21, 2016 (the "Debarment Letter"), the City gave Interpaving three reasons for debarring Interpaving from bidding on City contracts for four years:

a. Interpaving issued a statement of claim against the City in a 2014 Supreme Court action. In that action, Interpaving seeks judgment in the amount of approximately

$233,500 plus HST with respect to five enumerated City projects or contracts.

b. Interpaving violated health and safety legislation.

By way of example, the City cited seven orders issued by the Ministry of Labour under the Occupational Health and Safety Act, R.S.O. 1990, c.0.1 (the "OHSA") relating to the Elgin Street Project.

On September 30, 2015, apedestrian was struck and killed by a construction vehicle as she entered a construction zone in which Interpaving was working. The Ministry of Labour (the "MOL") investigated the accident immediately and issued four substantive work orders and three stop work orders against Interpaving. The MOL also issued four orders against the City and an order that the City was the "constructor" (as defined under the OHSA) on the Elgin Street Project having overall responsibility for health and safety on the Project. There are now charges against both Interpaving and the City as a result of this event.

The City appealed the orders against it. Interpaving also appealed the work orders issued against it. These appeals have been adjourned pending the City's appeal of the MOL order that it was the "constructor" of the Project, which is material to the charges against the City.

Under the contractual documentation between Interpaving and the City, Interpaving had the responsibilities of the "constructor" of the Project. However, Interpaving obtained intervener status in the City's appeal and, in doing so, provided evidence and made submissions in support of the MOL position that the City was the "constructor" of the Project. Interpaving has not changed its position in that proceeding since the commencement of this application.

The City also referred to Interpaving's failure on numerous occasions, to understand its obligations under the OHSA, including its role as "constructor", and stated "is also apparent that Interpaving is unwilling to co-operate with the City in relation to health and safety matters." It is understood that these statements also refer, in part, to Interpaving's involvement in respect of the Elgin Street Project.

The City also stated that it had documented evidence of poor performance in the management oflnterpaving's contractual relationships with the City. It gave as an example, Interpaving's "routine abuse" of the change order mechanism under the City's General Conditions, including the assertion of frivolous claims and the failure to assert claims in a timely manner. The General Conditions govern the contractual arrangements between a contractor and the City regarding City projects.

c. Interpaving had a "significant history of abusive behaviour and threatening conduct directed from Interpaving owners and employees toward City employees from May 2003 to [the date of the Debarment Letter]". Those instances were set out in writing. The City referred by way of example to an incident on August 29, 2012 in which Mr. Argento, a director and shareholder of Interpaving, threatened to run over a City inspector who had ordered a suspension of work due to issues regarding concrete testing and pouring on the site. The Debarment Letter also stated that the City had met with Interpaving representatives on numerous occasions to put a stop to such behaviour without success.

Interaction between the Parties after Delivery of the Debarment Letter

[6] After Interpaving received the Debarment Letter, City officials met with employees of Interpaving on March 30 and April 12, 2016, in each case at the request of Interpaving. Interpaving sought to have the Debarment Decision rescinded. At the end of the March 30 meeting, the City invited Interpaving to formally request reconsideration of the Debarment Decision and to provide the City with written submissions with respect to the debarment and the steps Interpaving was taking to respond to the City's concerns.

[7] At the commencement of the second meeting, Interpaving provided a letter dated April 12, 2016 written by Steve Vacarro, the Vice-President oflnterpaving ("Vacarro"), containing written submissions explaining why it believed that it should not be debarred (the "Vacarro Letter"), together with a summary thereof. At the second meeting, Interpaving was accompanied by legal counsel who subsequently also had conversations with City representatives regarding Interpaving's position on certain issues referred to in the Debarment Letter and the two meetings.

[8] In the Vacarro Letter, Interpaving addressed, among other things, the position it had taken regarding the "constructor" of the Elgin Street Project and the consequences of the Debarment Decision on Interpaving and the City, as well as the probability of a court challenge based on a denial of procedural fairness. In addition, it set out Interpaving's position that an alternative dispute resolution process was necessary to address the issues that had arisen respecting its management of its contractual arrangements with the City. The Vacarro Letter also set out Interpaving' s commitment to the City and to a continuous improvement process that it said it was in the course of implementation.

[9] Of particular relevance to the present proceeding, the Vacarro Letter also raised most of the arguments that have also been put forward to this Court regarding the substantive and legal merits of the Debarment Decision, including in particular, the retrospective operation of the By-laws, the significance to be attached to the OSHA orders to Interpaving in relation to the Elgin Street Project, the abusive behaviour incident in 2012, the issue of poor contractual management and the alleged differential treatment of Interpaving relative to other bidders on City projects or contracts.

[10] The City treated the Vacarro Letter as Interpaving's formal request that the City reconsider the Debarment Decision and treated the Vacarro Letter as Interpaving' s written submissions.

The May Reconsideration Letter

[I I] On May 2, 2016, the City sent Interpaving a further letter (the "Reconsideration Letter") setting out the conclusion of its reconsideration of the Debarment Decision. The Reconsideration Letter starts with the following conclusion of the City's reconsideration process:

While we appreciate the effort that representatives of Interpaving have spent with the City to discuss the issues raised in our March 21 Letter, we are writing to inform you that, after due consideration of the explanations provided by Interpaving as well as your description of proposed process improvements, the City is not prepared to vary any of the terms of the debarment set out in our March 21 Letter.

[12] The Reconsideration Letter then addressed the issues raised by Interpaving in the Vacarro Letter, as well as in the meetings of March 30 and April 12, 2016, in the context of the three grounds upon which the Debarment Decision was based.

[13] With respect to Interpaving's health and safety issues (Section 37(2)(c) of the By-Law), the Letter states that the on-going Elgin Street Project was not the only instance in which such concerns were raised with Interpaving although it was a great concern. The Letter refers to other instances of potential non-compliance that were raised in the past with Interpaving including:

(1) inappropriate use of travel control contrary to applicable standards;

(2) carrying on work without a qualified supervisor on site; and

(3) carrying on work with inadequate or inappropriate barricades presenting hazards to construction workers, City staff and the public travelling in proximity of the site.

[14] The Reconsideration Letter then specifically addressed Interpaving's actions and position in the City's appeal of the MOL order regarding the "constructor" issue in respect of the Elgin Street Project.

[15] With respect to Interpaving's litigation matters (Section 37(2)(a) of the By-Law), the Reconsideration Letter addressed Interpaving' s argument regarding the retrospective effect of the By-Law. The Letter then reiterated the City's position that "Interpaving has advanced numerous significant claims on recent projects which claims are not timely and appear to be frivolous in nature." Itreferred to a recent project known as the "Regent Street Project." In the City's view, Interpaving was continuing to disregard the provisions of the General Conditions contained in its contracts with the City. On this issue, the Letter concludes that "[w]hile the City is open to discussions regarding efficiencies in resolving disputes with its contractors and suppliers, we do not believe it is appropriate to have those broader discussions in the context oflnterpaving's current debarment."

[16] Lastly, with respect to Interpaving's poor contractual performance (Section 37(2)(c) of the By-Law), the Letter cited certain other performance issues that the City says it previously

brought to the attention of Interpaving. The principal issue in this category was an on- going dispute regarding the quality oflnterpaving's work on a project referred to as the Big Nickel Mine Road.

[17] In summary, therefore, the Reconsideration Letter sets out the conclusion of the City that the grounds for the Debarment Decision remain valid notwithstanding Interpaving's oral and written submissions and that there are other instances oflnterpaving's behaviour drawn to its attention in the Reconsideration Letter that provide further support for that conclusion.

[18] The City concluded by stating the City's position regarding notice to Interpaving as follows:

Furthermore, in your April 12 Letter, you state that Interpaving was never notified of, nor offered the opportunity to respond to any of the issues that were of concern to the City which is clearly not the case, given the numerous meetings and written correspondence in relation to Interpaving's performance as well as discussions during the development and implementation of the City's Contractor Appraisal System.

THE ISSUES

[19] The issues in dispute on this application are as follows:

a. Is the City by-law valid and enforceable?

b. Was Interpaving denied procedural fairness:

1. by failing to give Interpaving notice of the City's intention to debar before debarment was effected, reasons why and how the decision was arrived at, and an opportunity to respond? and/or

n. by failing to reconsider the issue after the Debarment Letter was sent to Interpaving?

c. Was the Debarment Decision reasonable?

d. If Interpaving was denied procedural fairness, what is the appropriate remedy?

JURISDICTION

[20] This application is brought under s. 2(1) of the Judicial Review Procedure Act, R.S.O. 1990,

c. J.l (the "JRPA"). The City does not challenge the court's jurisdiction to hear the application or to grant the relief sought under the JRPA.

VALIDITY OF THE BY-LAW

[21] Section 272 of the Municipal Act, 2001, S.O. 2001, C.25, provides as follows:

A by-law passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law.

[22] However, in Shell Canada Products Limited v. Vancouver (City), [1994] l S.C.R. 231, the Supreme Court of Canada held that a municipal by-law that falls outside of the scope of the powers granted to the municipality under the enabling legislation is invalid. (See also: Catalyst Paper Corp. v. North Cowichan (District), 2012 SCC 2, [2012] 1 S.C.R. 5).

[23] Interpaving claims:

a. the By-Law contravened The Agreement on Internal Trade ("AIT") which regulated interprovincial trade in Canada at the time, and The Canadian Free Trade Agreement which replaced the AIT; and

b. the By-Law violates its right to access to justice because a government body should not be able to debar a party just because that party has commenced legal proceedings against it.

[24] We do not agree. There is no evidence that either the By-Law or the Debarment Decision contravenes Canada's free trade agreements. Moreover, as noted in Shell"a municipality has essentially the same right as a business person to decide with whom it will do business". There are good reasons for doing this including the effect of ongoing litigation on the parties' working relationship and the fear of doing business with a party prone to litigation. (See Cox Bros. Contracting & Assoc. Ltd. v. Big Lakes (Municipal District) (1997), 215

A.R. 126 (Q.B.)

THE STANDARD OF REVIEW ON ISSUES OF PROCEDURAL FAIRNESS

[25] Evaluating the standard of review in deciding whether a party has been accorded procedural fairness by a tribunal requires an assessment of the procedures and safeguards required in the particular situation. (Moreau-Berube v. New Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 S.C.R. 249, at para. 74 and London (City) v. Ayerswood Development Corp

(2005), 167 0.A.C. 120 at para 10.)

[26] This involves a review, on a non-exhaustive basis, of the nature of the decision; the process followed; the statutory scheme pursuant to which the body operates; the importance of the decision to the individual affected; the legitimate expectations of the person challenging the decision; and the choice of procedure selected by the agency. (See Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, at paras. 21-28.)

PROCEDURAL FAIRNESS

[27] lnterpaving says that it was denied natural justice by the City in reaching the Debarment Decision. Determination of this issue requires a consideration of three issues: (1) the content of procedural fairness; (2) whether there was a denial of procedural fairness in the City's determination in the Debarment Letter; and (3) whether any defect in the City's process was rectified by the City's reconsideration of the Debarment Decision.

A. Was there a Breach of Procedural Fairness?

[28] In considering the content of procedural fairness in this case, the following factors are relevant.

[29] First, the Debarment Decision was an administrative decision, as to who was entitled to bid on contracts paid for with public funds, which involves the exercise of discretion. The City is not adjudicating Interpaving's rights as there is no right to obtain contracts from the City.

[30] Second, this is a commercial decision regarding who the City is prepared to do business with. A municipality is entitled to discriminate against a supplier, provided it does so within the confines of the enabling legislation and without contravening the Charter or prevailing legislation. In Shell Canada at p. 282, Sopinka J. wrote for the majority;

Obviously in carrying on the business of the City or acquiring property from suppliers or vendors, the City must make choices that can be said to discriminate. Discrimination for commercial or business reasons is a power that is incidental to the powers to carry on business or acquire property.

[31] Third, on the other hand, while private entities are free to discriminate with respect to the parties with whom they contract, different considerations apply to similar decisions of public bodies such as municipalities that undertake commercial and contractual activities using public funds. (Shell Canada (supra).) In particular, they cannot act in bad faith or for an improper purpose. Moreover, they must have regard to the consequences for the municipality. In this regard, disqualification of a contractor can have the effect of reducing competition among eligible bidders which, in tum, can have the effect of increasing the price that the City is required to pay for its work.

[32] Fourth, under the By-Law, the decision-makers have "absolute sole discretion" to decide whether or not to debar a person whose actions fall within the provisions of the Bylaw, which argues for a reasonableness standard. In addition, the By-Law contains no right of appeal or formal reconsideration procedure.

[33] Fifth, an important aspect of the duty of fairness is the individual's entitlement to notice and the right to know the case to be met. Notice allows a party an opportunity to respond to the proposed decision.

[34] Sixth, debarment can have a significant direct financial impact on a contractor insofar as it cannot bid on contracts as the contractor. This financial impact may be mitigated in this case to the extent that Interpaving can continue to work as a sub-contractor on City projects. The parties dispute the ability oflnterpaving to obtain such contracts. However, in addition, debarment is a public process that may adversely affect a contractor's reputation more generally as the decision becomes a matter of public knowledge.

[35] Seventh, the reasons offered must be sufficient to explain what was decided and why it was decided that way, but not how it was decided. (R. v. R.E.M., 2008 SCC 51, [2008] 3 S.C.R. 3.)

[36] Finally, one of the goals of the By-Law is "to ensure openness, accountability and transparency while protecting the financial interests of the City of Greater Sudbury".

[37] Given the importance of the decision to Interpaving, and the fact that there is no appeal of the City's decision, although it is an administrative decision, Interpaving should have received notice of the intention to debar and the proposed penalty, a summary of the grounds for the proposed decision, an opportunity to respond, and reasons for the decision. (Khan v. University of Ottawa, 34 OR. (3d) 535, at p. 546.)

[38] The City's failure to provide Interpaving with formal notice of the City's proposal to debar it from bidding on City paving contracts for four years and an opportunity to be heard before the Debarment Decision was made constitutes a breach of procedural fairness.

B. Were the Procedural Defects Cured by the Citv's Reconsideration Process?

[39] The City submits that its reconsideration process, including the meetings of March 30 and April 12, 2016, the City's review of the matters raised in the Vacarro Letter, the further communications with Interpaving's counsel, and the subsequent deliberations of the City's decision-makers rectified any defects in the process in making the decision set out in the Debarment Letter.

Applicable Law

[40] Reconsideration can cure procedural defects in an earlier decision. This was addressed in

Khan, supra, at p. 548 in which the Court of Appeal stated the following:

Curing errors made at first instance depends on the seriousness of the initial error, the procedures followed by the appellate body, the powers of the appellate body, the way these powers were exercised and the weight the appellate body attributes to the initial decision. The closer the appeal is to a complete reconsideration, with fair procedures, by a body that does not attribute significance to the initial decision, the more likely the defects will be cured: see Mullan, supra, at para. 240. If the appeal is not a hearing de nova then the person affected is confronted by adverse findings made in a procedurally unfair proceeding, which nonetheless an appeal body would find hard to ignore. Weatherston J. made this point in Polten v. University of Toronto (1975), 8 O.R. (2d) 749 at p. 768, 59 D.L.R. (3d) 197 (Div. Ct.):

[41] Reconsideration may be conducted by the same body that made the earlier decision: (See, for example, McNamara v. Ontario (Racing Commission), [1998] O.J. No. 3238 (C.A.)). A similar circumstance arose in Canadian Recording Association v. Canada (Attorney General), 2006 FCA 336, in which the Federal Court of Appeal held that:

Any duty of fairness owed by the Board with respect to issuing the order was discharged when it subsequently confirmed the order after

considering submissions from [the applicant] as to why the order should not have been made.

[42] The issue is whether what took place was "a fresh consideration of the events": see

McNamara at para. 28 per Abella J.

Preliminary Issues

[43] Before addressing the City's pos1t1on, it 1s necessary to address the following two arguments raised by Interpaving:

a. the Decision-Makers had no further authority after rendering the decision in the Debarment Letter as they were functus officio and, therefore, without power to reconsider the Debarment Decision; and

b. the discussions between the parties in the two meetings, and between legal counsel, were subject to settlement privilege and are therefore inadmissible.

[44] With respect to the first issue, Interpaving submits that, in the absence of any procedure in the By-Law that contemplated a reconsideration process, the City decision-makers were functus officio and therefore had no power or authority to undertake a reconsideration of the Debarment Decision.

[45] We do not agree. The doctrine of fimctus officio does not operate to preclude a decision- maker from curing a procedural defect. (Chandler v. Alberta Association of Architects, [1989] 2 S.C.R. 848, at pp. 861-862.) It exists to give finality to judgments from courts which are subject to appeal. (Doucet-Boudreau v. Nova Scotia (Minister of Education), 2003 SCC 62, [2003] 3 S.C.R. 3, at para. 79.) It does not apply to prevent an administrative decision-maker from reconsidering a decision where there is no right of appeal.

[46] With respect to the second issue, Interpaving alleges that the discussions of the parties in the meetings of March 30 and April 12, 2016 were "without prejudice" discussions and therefore subject to settlement privilege with the result that the subject-matter of those discussions cannot be disclosed or relied upon in these proceedings.

[47] We do not agree with this submission either. In its application materials, the City included an affidavit of Kevin Fowke sworn August 17, 2017. The affidavit describes the chronology of events after delivery of the Debarment Letter and denies that either Interpaving or the City made any settlement proposals "in the sense that there were no offers to compromise." Apart from these matters, the affidavit does no more than state the subjects discussed and the City's characterization of Interpaving's presentations - that it objected to the disqualification and requested that the City reverse its decision. It also sets out the facts upon which the City relies in asserting that the City's decision-makers engaged in a bona fide reconsideration of the Debarment Decision.

[48] In a responding affidavit of Vacarro sworn October 4, 2017, however, Interpaving itself waived privilege by providing specific information regarding the specific proposals that it made to the City in an attempt to obtain a reversal of the City's position, in addition to

setting out Interpaving's position on a number of issues raised in the Debarment Letter. It

would be unfair to deny the City the opportunity to respond.

[49] Further, Interpaving asserts that the City did not conduct a process that cured any procedural defects in taking the decision set out in the Debarment Letter. It would be unfair to prevent the City from adducing evidence that was directed toward whether or not it conducted such a process.

[50] In addition, the evidence in question is not being introduced as evidence as to whether or not Interpaving admitted responsibility for the matters upon which the City based the Debarment Decision. Rather, it is being introduced in the context of a consideration of whether the City undertook a bonafide reconsideration of its decision.

[51] In this context, what is relevant is the nature of the matters addressed, whether or not Interpaving was able to raise all of the matters that it considered were relevant to the Debarment Decision, and the nature of the evidence before the City's decision-makers. These discussions are therefore relevant to issues other than simply establishing liability and showing the weakness of one party's claim in respect of those matters and, as such, should be permitted to be adduced: (See Lederman, Bryant and Fuerst state in The Law of Evidence in Canada, 5th ed. (Toronto: LexusNexis, 2018), at para. 14.367.) The situation is also analogous to the cases in which otherwise privileged evidence is admitted to prove that a matter was settled, or on what terms: (See Lederman, Bryan and Fuerst, at para. 14.371.)

[52] Lastly, it is not appropriate to characterize Interpaving as, in substance, offering to settle an outstanding dispute given the proposals it relies upon. Effectively, in return for a withdrawal of the Debarment Decision, Interpaving suggested that it would: (1) acknowledge its contractual obligations as the "constructor" of the Elgin Street Project and act accordingly in the MOL proceedings; and (2) abide by the General Conditions if the City changed the General Conditions to incorporate a new dispute resolution process. These "proposals" are directed only at finding a means of obtaining a withdrawal of the Debarment Decision. They cannot convert the meetings into settlement negotiations in the absence ofreal negotiations regarding real compromises to come from Interpaving.

[53] For these reasons, evidence about what occurred after the March 21 letter was received by Interpaving is admissible to address the issue of whether the City engaged in a bona fide reconsideration of the Debarment Decision.

Analysis and Conclusions Regarding the Reconsideration

[54] The City argues that any unfairness that resulted from the procedure that was followed by the City in this case was cured by the Decision-Makers' subsequent reconsideration and redetermination of the Debarment Decision.

[55] Interpaving says that it did not ask for a reconsideration of the Debarment Decision. It

suggests that, therefore, the City's actions cannot be characterized as a reconsideration.

[56] We do not agree. Interpaving sought to convince the City that the Debarment Decision was wrong and sought a withdrawal of that decision. This amounts to a request for a reconsideration and rescission of the Debarment Decision. The City could not rescind the Debarment Decision without first reconsidering it. Further, the manner in which Interpaving sought a withdrawal of the Debarment Decision does not determine what occurred as a substantive matter. The issue is whether the City engaged in a bona fide reconsideration of Debarment Decision that satisfies the requirements of procedural fairness.

[57] Initially, Interpaving sought to circumvent the Decision-Makers and to obtain a political decision overriding the Debarment Decision. The City was not, however, prepared to proceed in this manner. Instead, the Mayor ensured that the City's Decision-Makers were present at the meeting on March 30, 2016 and that the Interpaving representatives made their case to them as well as to the other participants in the meeting. Further, at the end of that meeting, Interpaving was invited by the City representatives to request a reconsideration and to put its position in writing. Interpaving met the City's Decision- Makers and other City representatives a second time at Interpaving' s request. At that meeting, Interpaving delivered the Vacarro Letter. Between the two meetings Interpaving and the City appear to have thoroughly canvassed the issues between them.

[58] In any event, there was nothing in the City's actions that prevented Interpaving from putting forward its views including regarding the penalty imposed. Nor is there any suggestion that Interpaving failed to do so. There is also no suggestion that the City's Decision-Makers did not understand the position of Interpaving on the matters upon which the City based the Debarment Decision after these two meetings and delivery of its written submissions. Interpaving says that it did not understand that the City's Decision-Makers were approaching the presentations in these meetings and in the written submissions as a reconsideration. This is certainly open to doubt. In any event, however, there is no suggestion that Interpaving would have put forward any material arguments or evidence in support of its position on these matters if it had known that the City's decision-makers were approaching the presentations in these meetings and in the written submissions as a reconsideration.

[59] The evidence provided demonstrates that the City cured the procedural defects in the Debarment Letter by engaging in a fresh consideration of the events.

[60] First, having received the Debarment Letter, Interpaving had notice of the principal matters on which the Debarment Decision was made, to the extent it was not already aware based on its regular interaction with City representatives.

[61] Second, Interpaving was able to put forward any evidence it considered to be relevant that had not been put before the City's Decision-Makers. In the end, the only evidence of this nature was the fact that, in respect of the incident involving Mr. Argento, the City representative who was cross-examined indicated that he was not aware that, several years before Mr. Argento threatened to run over the City employee, the City employee involved had allegedly stated in another interchange with Mr. Argento, that he wished Mr. Argento had been under a bridge that had recently collapsed in Montreal. Whatever the prior history

between the two individuals, it did not justify Mr. Argento's physical threat to the City employee involved in the incident several years later.

[62] Third, Interpaving was able to put forward all of its submissions for discussion by the parties. There is no evidence put before this Court that was not raised in the meetings. In particular, Interpaving could have raised the length of the debarment period if it considered that there was a principled reason for a shorter period. It chose, however, to restrict its demand to a complete withdrawal of the Debarment Decision.

[63] Fourth, there is no suggestion that the procedure followed in order to allow Interpaving an opportunity to respond would have been any different or that the content of the meetings would have been any different if the City had provided notice of its intended decision and an opportunity to be heard prior to taking its decision.

[64] Most importantly, the difference between the parties on the principal issues is not factual to any material extent. Rather, it is a matter of a difference of opinion as to the significance to be attached to a number of matters in dispute that have arisen between the parties over the years as evidenced by the Record and of which Interpaving is well aware. That is an issue that goes to the reasonableness of the Debarment Decision, which is addressed below, rather than to any issue of procedural fairness. Moreover, the fact that the City's Decision- Makers confirmed the Debarment Decision after the reconsideration is not evidence, in itself, of a lack of procedural fairness in the reconsideration process. In the present circumstances, it is merely a reflection of the reasonableness of the Decision as discussed below.

[65] Lastly, the central issue is whether the City's decision-makers kept an open mind during the reconsideration. There is no doubt that they responded in the two meetings to the Interpaving submissions. However, that is not the same as saying that they acted in bad faith and merely "went through the motions". Interpaving does not suggest this and there is no evidence to support such a finding.

[66] While it might have been preferable to have confined the matters in the Reconsideration Letter to the matters previously raised in the Debarment Letter, reference to additional matters does not vitiate the Debarment Decision for the following reasons.

[67] First, the grounds that were set out in the Debarment Letter, including the principal examples, were discussed with Interpaving thereafter in the two meetings as discussed above. Those grounds alone are more than sufficient to justify the City's Debarment Decision on the merits as discussed below. Second, both letters stated that the Debarment Decision was "not limited" to the grounds expressed under s. 37(2)(a), (c) and (g). Third, the principal additional matter in the Reconsideration Letter was a reference to the "Big Nickel Mine Road Project". In both his affidavits, Ken Edwards, the general manager of one of the Interpaving companies, specifically referred to this Project as one of the contractual issues giving rise to disputes between the parties and to meetings that he attended that failed to resolve the outstanding issues between the City and lnterpaving. Interpaving was therefore well aware that this was one of the matters in which the City considered that Interpaving abused the change order mechanism.

[68] For these reasons, the process followed by the City after delivery of the Debarment Letter constituted a bonafide reconsideration of the Debarment Decision that cured the initial lack of procedural fairness in the City's failure to give notice of the proposed decision and an opportunity for Interpaving to make its submissions prior to the delivery of the Debarment Letter. For these reasons, the City's actions after delivery of the Debarment Letter satisfied the requirements for procedural fairness in respect of the Debarment Decision.

THE STANDARD OF REVIEW ON THE MERITS OF THE DEBARMENT DECISION

[69] The standard of review for municipal decisions made intra vires is a deferential one: Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342, at para. 35. This deferential standard applies even to questions of law, unless those questions are "both of central impotiance to the legal system as a whole and outside the adjudicator's specialized area of expertise''. (Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] l S.C.R. 190, at paras. 58-61.)

[70] In Dunsmuir at para. 47, the Supreme Court addressed the requirements of reasonableness as follows:

Reasonableness is a deferential standard animated by the principle that underlies the development of the two previous standards of reasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solution. A court conducting a review for reasonableness inquiries into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[71] In this application, the issue for the Court is whether the Decision is reasonable, that is, whether the Decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

WAS THE DECISION REASONABLE?

[72] There is ample support in the record for each of the City's grounds for the Debarment Decision. The lawsuit of Interpaving and its subcontractor is an admitted fact. It pertains to five City projects and is on-going. Similarly, the MOL orders against Interpaving and its position in regard to the MOL order that the City was the "constructor" of the Elgin Street Project, notwithstanding Interpaving's contractual arrangements, are also matters of fact. There are also documented instances of abusive behaviour on the part of Interpaving's

representatives, principally Mr. Argento and Mr. Edwards, that were discussed with Interpaving previously and therefore known to it. The Interpaving position appears to be that these are merely isolated instances that were resolved at the time. This disregards the fact that there is an historical record over time that remains and can validly be relied upon by the City. Similarly, there is a record of abuse of the change order mechanism. Interpaving's position is that this is the City's fault for not providing for a dispute resolution mechanism in its General Conditions. However, Interpaving accepted the General Conditions and cannot expect to be relieved of compliance with that agreement when it finds that its contractual commitments do not work to its advantage. Viewed collectively, these matters amply support the Debarment Decision. Further, given the time required to resolve the outstanding issues between the parties in order to permit a fresh start in the relationship, a debarment period of four years is also reasonable in our view.

[73] Section 37(2) of the By-Law enables the City to disqualify a party who has commenced litigation against the City. Once the City determined that one of the disqualifying events in section 37(2) has occurred, section 37(3) of the By-Law requires that the Decision- Makers consider whether the City is likely to incur increased staff time and legal costs in the administration of any dealings with the Bidder. The evidence discloses that the foregoing matters upon which the Debarment Decision was based have resulted, and continue to result, in such increased staff and legal costs.

[74] In its application materials, Interpaving alleged that the Debarment Decision was made in bad faith as a means of "punishing" Interpaving for the Elgin Street Project event, and in particular for the City's potential liability both civilly and criminally as the "constructor" of the Project. The City denies this and says that the circumstances pertaining to the Elgin Street Project were only one of the circumstances upon which the Debarment Decision was based.

[75] For the hearing on this application, Interpaving withdrew its allegation of bad faith in the City's determination to issue the Debarment Decision. In any event, there is ample evidence in the Record to support the City's position that the Elgin Street Project was only one of the circumstances leading to the Debarment Decision.

[76] At the same time, however, the circumstances pertaining to the Elgin Street Project provide strong support for the Debarment Decision. In the MOL proceedings, Interpaving denied its contractual obligations with the City and has taken a position directly contrary in interest to the City. The lack of respect for its contractual obligations as the "constructor" of the Elgin Street Project, combined with a lack of proper regard for proper management of Interpaving's contractual arrangements, provide good reasons for the Debarment Decision. They justify a legitimate concern for the integrity and trustworthiness of Interpaving. The City's lack of confidence in Interpaving's willingness to observe its contractual arrangements in the future is palpable in this case and is not unreasonable given the evidence regarding the foregoing matters.

[77] Interpaving claims that the Debarment Decision was unreasonable in that:

(I) The City relied on claims for additional work made by Interpaving using the claims process available under various construction contracts (rather than suing in court). Interpaving argues that this is not "Litigation" under the By-Law.

(2) The By-Law was applied retrospectively to include incidents that predated the enactment of the By-law.

(3) The City's Decision-Makers relied on orders issued by the MOL that did not result in convictions.

(4) The City's Decision-Makers failed to consider the performance records of other bidders for City projects or contracts in making the Debarment Decision.

[78] In the Debarment Letter, the City made reference to "the assertion of numerous claims and the failure to assert claims in a timely manner". Interpaving contends that such claims do not qualify as "Litigation" under the By-Law and, as such, cannot support the Debarment Decision. However, such claims are described under the heading "Poor Contract Performance". There is nothing unreasonable in the consideration of such claims as evidence of Interpaving's abuse of the change order mechanism under the General Conditions governing City projects in the context of assessing Interpaving's contractual performance.

[79] We disagree with Interpaving's contention that "(t)he City cannot reach back in time to past incidents, over the lengthy period of its relationship with Interpaving, to justify debarment". The presumption that the legislature does not intend to confer on a municipality a power to make by-laws that operate retrospectively does not apply in this case. The purpose of the By-Law is to protect the public rather than to punish a contractor. The list of disqualifying acts is meant to prevent the unnecessary expenditure of public funds, and to protect City employees and members of the public. Where the purpose of the By-Law is to protect the public, the presumption against retrospective application is rebutted: Ruth Sullivan,

h

Sullivan on the Construction of Statutes, 61

ed. (Markham: LexisNexis, 2014) at para.

25.90; Brosseau v. Alberta (Securities Commission), [1989] l S.C.R. 301, at pp. 321.)

[80] Accordingly, the City is entitled to rely on events that pre-dated the By-law pertaining to poor contractual performance and abusive or tlueatening behaviour. Moreover, while Interpaving's lawsuit against the City was commenced before the By-Law came into force, Interpaving has maintained the lawsuit since the implementation date of the By-Law.

[81] In the Debarment Letter, the City made reference to "numerous orders in relation to projects that Interpaving has been involved in for the City...including seven orders in relation to the City's Elgin Street Project issued by the Ministry of Labour". The reference to OHSA orders was also made under the heading "Poor Contract Performance" . Contrary to the assertion made by Interpaving, there is nothing unreasonable in the consideration of OHSA orders in connection with the quality oflnterpaving's contract performance.

[82] Lastly, contrary to the assertion by lnterpaving, the City was not obliged to consider the records of other bidders for City projects or contracts before deciding to debar Interpaving.

[83] Based on the foregoing, the Debarment Decision was reasonable.

CONCLUSION AND REMEDY

[84] The City is a public body that must make sound business decisions but must also consider the public interest.

[85] Given the discretionary nature of the By-Law and the importance of the decision to Interpaving, among other things, the duty of procedural fairness entails giving Interpaving notice of the decision to debar, an opportunity to respond before the final decision is taken, and reasons for the decision. Interpaving was given a full opportunity to meet with City's Decision-Makers twice to make submissions on the Debarment Decision after receiving notice in the Debarment Letter of the grounds upon which the Debarment Decision was based and there were further written communications exchanged. These steps cured the initial lack of procedural fairness resulting from the failure to give Interpaving an opportunity to respond prior to the decision of the City's Decision-Makers. Whether or not there were additional reasons for the decision to debar Interpaving set out in the Reconsideration Letter is not determinative as, even without considering any of these additional reasons, there were ample grounds to debar lnterpaving for four years.

[86] As a result, the application is dismissed and the Debarment Decision is upheld.

COSTS

[87] During argument, the parties agreed that costs of $40,000, all-inclusive, should be awarded to the successful party. Costs in the amount of $40,000 are therefore awarded to the City payable within 60 days.

Thorburn J.

Wilton-Siegel J.

Ellies J. (dissenting):

[88] I agree with the analysis of my colleagues and the conclusions reached by them, with two exceptions.

[89] The first relates to the scope of the duty of procedural fairness. In my respectful view, in the context of the By-Law at issue in this case and the reasons given by the City for debarment, the duty of procedural fairness required that the City disclose to Interpaving the documentary evidence upon which it relied.

[90] The second exception relates to whether the procedural unfairness that occurred before the Debarment Decision was made was cured by what occurred afterwards. In my respectful view, it was not. Simply put, it was unfair for the City to rely on any additional grounds for debarment that were neither disclosed nor discussed between the dates of the March and the May Letters.

THE CONTENT OF THE DUTY OF PROCEDURAL FAIRNESS

[91] I agree with my colleagues that the duty of procedural fairness imposed upon the City required it to give notice, an opportunity to respond, and reasons for its decision. However, I believe that fairness required more in the circumstances of this case. I believe that by virtue of the wording of the By-Law and the specific grounds upon which the City relied in debarring Interpaving, fairness also required documentary disclosure.

[92] One of the provisions of the By-Law relied upon by the City was s. 37(2)(c). That section allows disqualification where "there is documented evidence of poor performance". In my view, the City should have disclosed these documents, the very existence of which provides a ground for debarment.

[93] In the Debarment Letter, the City also said it had "a documented record" of a history of abusive behaviour going back to 2003 in support of debarment under s. 37(2)(g). At the very least, Interpaving could expect disclosure of such a record, to refer to one of the Baker factors specifically. In my opinion, such an expectation would be reasonable, given the By-Law's expressed purpose of ensuring "openness, accountability and transparency" in the procurement (and debarment) process. The City ought to have disclosed these documents in advance of making the Debarment Decision.

[94] Moreover, given the importance of the decision both to the taxpayers of the City and to Interpaving, I do not think it is too much to suggest that the City should disclose all of the documentary evidence upon which it proposes to debar a bidder. I am not persuaded that imposing such a requirement would place too great a burden on the City.

[95] The Record of Proceedings compiled by the City in response to this application demonstrates the potential for a significant amount of documentary disclosure as part of the debarment process. This is no doubt due, at least in part, to the grounds relied upon for debarment and the length of time over which the Decision-Makers considered Interpaving's conduct. Disclosure of the documentary evidence in most other cases is likely to be much less onerous. Take, for example, where the basis for the proposed debarment is just that the contractor has sued the City, or failed to pay an amount owed to the City.

[96] In any event, if the Decision-Makers are looking at the whole picture before making a decision to debar, as they should, then disclosure of what they find along the way could not be that difficult.

WHETHER THE PROCEDURAL UNFAIRNESS WAS CURED

[97] While I agree that what took place after the Debarment Decision was communicated in the Debarment Letter was in the nature of a request for reconsideration and, for that reason, settlement privilege does not apply to preclude evidence about those events, I do not agree with my colleagues that those events had the effect of curing the procedural fairness that preceded the Debarment Decision.

[98] I do not agree that the issues were "thoroughly canvassed" between Interpaving and the City during the meetings, as my colleagues suggest (para. 57). The parties did not even discuss the length of the debarment. That is one of the few conclusions that we can safely draw from the record in this case.

[99] The Application Record contains wildly contradictory statements about what took place during the meetings after the Debarment Letter was sent. Even if we were able to resolve these contradictions on a purely paper record - and we are not - it is clear that there was also no discussion whatsoever with respect to some of the grounds relied upon in the Reconsideration Decision. In particular, there is no affidavit evidence that the parties ever discussed Interpaving's performance on the Big Nickel Mine Road project as a ground for debarment.

[100] Nor did Interpaving ever address any grounds for debarment that were not discussed. Kevin Fowke deposes that, at the conclusion of the meeting, Interpaving was invited to "formally request reconsideration of the [Debarment] Decision and to provide the City with written submissions with respect to the disqualification" . Based on this evidence, Interpaving was asked to address only the grounds that had been expressed in the Debarment Decision. These did not include Big Nickel Mine Road project. Clearly, Interpaving had no notice that the City would rely on allegations relating to that project. This is confirmed by the fact that there was no mention made of that project in the Vaccaro letter.

[101] For a number of reasons, I do not agree with the suggestion that Interpaving ought to have known that it could be debarred and why. For one, Interpaving commenced the Lawsuit before the By-Law was even passed. For another, there is no evidence that debarment was ever mentioned during any of the many discussions between officials from the City and Interpaving in the years leading up to the Debarment Decision. Even if Interpaving was "an outlier" with respect to its contract performance, health and safety issues, and its abusive working environment, how could it have known when "enough was enough" without the mention of debarment? The relationship between the parties was approximately 40 years old and Interpaving was the first contractor ever to be debarred under the By-Law. It is no answer to the failure to give notice and an opportunity to be heard to say that Interpaving ought to have known that it "had it coming".

[102] My colleagues refer to the fact that Ken Edwards, the general manager of one of the Interpaving companies, was well aware of the issues between the parties over the Big Nickel Mine Road project. In my view, even if this conclusion is available to us, this knowledge does nothing to cure the procedural unfairness that resulted when the City relied on those issues to support its Debarment Decision. It is one thing to be aware of the facts

upon which a decision-maker may rely; it is entirely another not to be given the opportunity to make submissions about the accuracy and the importance of those facts.

[103] Interpaving was given no opportunity to be heard with respect to the further grounds relied upon by the City in the Reconsideration Decision. Instead, when Interpaving was asked to address the grounds for the Debarment Decision, the City then relied on other grounds that it admitted were "additional" to those it relied on initially. That was not fair, in my respectful view.

CONCLUSION

[104] For these reasons, I would quash the Debarment Decision and remit the matter to the City for a fresh determination. As disclosure has now been made by the City as part of its response to this application, it is not necessary that it be made again. However, the City should provide notice of all of the grounds upon which it intends to rely and Interpaving should be given an opportunity to make further submissions in writing with respect to those grounds.

[105] Given the involvement of the Decision-Makers in the decisions at issue, fairness requires that Interpaving's submissions be considered by a differently composed group of Decision- Makers. The City should be free to choose two other members of the City's staff who are knowledgeable with respect to the supply of services by Bidders such as Interpaving. If necessary, the City should retain outside counsel to take the place of Labelle with respect to the fresh decision.

______________________________________________________________________________________________-

Ellies J.

Released: June 29, 2018

CITATION: Interpaving Limited v. City of Greater Sudbury 2018 ONSC 3005

DIVISIONAL COURT FILE NO.: 475-17

DATE: 2018/06/29

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Wilton-Siegel, Thorburn and Ellies JJ.

BETWEEN:

INTERPAVING LIMITED

Appellant

• AND –

CITY OF GREATER SUDBURY

Respondent

REASONS FOR JUDGMENT

Released: June 29, 2018