SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-46808
DATE: 20120925

RE: Glenview Iron & Metal Ltd., Plaintiff

AND:

The Corporation of the Town of Smiths Falls, Defendant

ARGUED: September 19-20, 2012 (Ottawa)

BEFORE: Hackland R.S.J.

COUNSEL:
William R. Hunter, for the Plaintiff

David Sherriff-Scott, for the Defendant (Moving Party)

ENDORSEMENT

Overview

[ 1 ] The defendant moving party, the Town of Smiths Falls (the “Town”), brings this Rule 20 Summary Judgment motion seeking the dismissal of this action. The Town argues that there is no issue requiring a trial with reference to the Town’s entitlement to cancel a tender (referred to as RFP-007), which it issued for the collection and disposal of the Town’s garbage. The plaintiff, one of the bidders, claims that the Town acted in bad faith in an attempt to create circumstances to justify the cancellation of the RFP by purporting to invoke the privilege clause in the bidding contract, which stated:

The lowest or any proposal will not necessarily be accepted. The Corporation of the Town of Smiths Falls reserves the right to not accept any of the submitted proposals pending internal review of proposals submitted. (emphasis in original)

[ 2 ] The Court of Appeal has recently held that in deciding if summary judgment is appropriate, the motion judge must ask the following question: “Can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?” See Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 , p.28, para.50.

[ 3 ] I am of the opinion that a trial is not necessary to decide this case. The course of events is not significantly in dispute and the outcome is dependent on the terms of the bidding contract (the Contract A). Such factual and credibility disputes as there are are not material to the outcome.

[ 4 ] In my opinion, for the reasons which follow, the Town was contractually entitled to cancel the RFP and did so in good faith and for valid reasons.

Background

[ 5 ] In June 2009 the Town issued RFP-007 for the collection and haulage of its garbage. The contract was to be performed over a period of up to seven years, although the specific duration was to be negotiated with the successful bidder. The plaintiff bid on what was termed “Option A”, for the collection and disposal of garbage to its own existing garbage disposal site. It was one of thirteen bidders. The bid closed on July 24, 2009.

[ 6 ] The RFP terms included the common requirement that the bid forms which were part of the tender documents were to be used and that errors in completing the forms could not be corrected unless the bid document was completely withdrawn and resubmitted before bid closing time. The RFP included, at paragraph J of the General Conditions, a mechanism for bidders to ask questions, in writing, about the RFP, or to seek clarification of its terms before bid closing. The plaintiff did not file any such questions or seek clarification of bid terms prior to the closing.

[ 7 ] Finally, the RFP included what is commonly known as a “privilege clause” at paragraph H of the General Conditions of the RFP. This clause confirmed that the lowest or any proposal did not necessarily have to be accepted and that the Town reserved the right to decline all proposals and to cancel the RFP.

[ 8 ] An issue ultimately arose between the parties concerning the manner in which the plaintiff’s bid for the monthly rental fee for garbage containers was to be interpreted.

[ 9 ] In particular, item #4 in the Form of Bid “A” required the bidder to quote a monthly rental fee for various sized steel containers (dumpsters) to be placed at apartment buildings in the Town. The apartment building owners, who choose to rent a container, would be responsible to pay the rental fee of these containers. Item #4 set out three sizes and quantities of containers as below:

For the sum of (all applicable taxes included)

SIZE: (a) 3.06 m 3 (4 yd 3 ) (6 units approximately) $__________(per unit/month)

(b) 4.59 m 3 (6 yd 3 ) (10 units approximately) $__________(per unit/month)

(c) 7.65m 3 – 22.94 m 3 (10 yd 3 – 30 yd 3 ) $__________(per unit/month)

[ 10 ] Notwithstanding that the bid form was entitled “Schedule of Unit Prices” and the forms stated “$__________(per unit/month)” the plaintiff multiplied its unit rental price, which was intended to be $86, by the number of units referenced in the form i.e. “6 units approximately” or “10 units approximately”. The figure inserted in the plaintiff’s bid forms was $516 for the approximately 6 units and $860 for the approximately 10 units. All of the other bidders inserted the amount they would charge for a single unit.

[ 11 ] Subsequent to the closing of the bid, the Town’s employee Ms Bernicky, who was administering the bid process, telephoned an employee of the plaintiff and discussed what the plaintiff’s intention was as to the cost of rental of a single unit. It was clarified in this conversation that the plaintiff had multiplied the unit price by the approximate number of units disclosed in the bid form and that the plaintiff’s intended single unit price was $86. Ms. Bernicky was unaware that the Town was not entitled to clarify or adjust the bid to give effect to the bidder’s intention.

[ 12 ] Ms. Bernicky deposed that in the course of this telephone conversation a representative of the plaintiff acknowledged that they had completed the form erroneously. As noted, she further deposed that she was unaware that she could not adjust for this error. If Ms. Bernicky’s evidence is accurate, the plaintiff’s bid was non-compliant and it should have been rejected. On the other hand, the plaintiff’s representative denied that their representative had admitted to any error in the bid and deposed that the conversation with Ms. Bernicky simply served to clarify what the plaintiff’s single unit cost was intended to be (i.e. $86).

[ 13 ] In my view it is not necessary to resolve this credibility issue as to whether the plaintiff admitted to an error in its bid preparation. What is common ground is that the plaintiff did not indicate a single unit rental price on the bid form and that Ms. Bernicky and her employer, the Town, proceeded to work with the $86 figure (the plaintiff’s single unit price), which they ascertained or at least confirmed in their conversation with a representative of the plaintiff. Ms. Bernicky used the $86 per unit as the bid amount attributed to the plaintiff when preparing publically available documentation comparing the respective bids of all bidders. Proceeding in this fashion, the plaintiff’s bid was the lowest. It is not disputed that had Ms. Bernicky used the figure the plaintiff had inserted in the bid form, the plaintiff would not have been the lowest bidder.

[ 14 ] As I understand the plaintiff’s position, it is that the $86 per unit price was properly used by the Town because that was what they (the plaintiff) intended to express in what was an ambiguous form. Alternatively, the plaintiff submits that even if the $86 per unit price is not used, they are entitled to be treated as a compliant bidder using the higher amounts they actually entered on the bid form, although it is acknowledged that in such event, they were not the lowest bidder. They argue that they may well have been awarded the contract regardless because of other factors having to do with their capabilities and experience.

[ 15 ] In any event, the Town did not award the contract and instead entered into negotiations with another bidder, Topps Waste Management (“Topps”). This company offered an option whereby much of the garbage would be converted to “green energy” and potentially turned in hydro electric power. The Town became very interested in what was perceived to be more environmentally friendly technology offered by this bidder. Ultimately, on October 19, 2009, Town Council passed a Resolution awarding the RFP to Topps Waste Management. The Resolution of the Town Council stated:

THAT Request for Proposals #APS-09-007 be awarded to TOPPS for their alternative proposal, which incorporates a Waste Reduction Initiative by including recycling pick-up/processing, expanding recycling, and potential use of new waste processing technology, subject to development and signing of an acceptable agreement.

[ 16 ] The plaintiff learned of this decision of Town Council from the media and was shocked because it had understood from information previously compiled and made public by the Town, that they were the lowest bidder. The plaintiff’s legal counsel wrote to the Town in protest on November 2, 2009 stating:

Our information is that Glenview bid on the aforesaid contract and was the lowest bidder. We are also advised that the Town negotiated with one of the other higher bidders namely, Topps Waste Management (“Topps”), after the tenders had been opened. As a result of these private negotiations, certain items were added to the work requested and Topps was awarded a contract. Glenview was not given an opportunity to bid on the revised work requested nor was an RFP issued for this work.

This letter demanded that the Town award the contract to the plaintiff on the basis that it was the lowest bidder.

[ 17 ] In response to this letter, the Town undertook a re-examination of the bids. One result of this exercise was that the Town accepted that their dealings with Topps were not fully in accordance with the bidding contract and they therefore rescinded the resolution awarding the contract to Topps. As part of this process, the Town also identified the issue involving the plaintiff’s bid and Ms. Bernicky’s error in employing the $86 per unit price when that was not the amount actually utilized by the plaintiff in its bid submission. To complicate matters further, the Town had developed a concern that it needed to re-orient its waste disposal practices to conform with policy statements from the Provincial Government which strongly promoted recycling and other environmentally friendly waste management solutions. They were concerned that their failure to act in this regard could prejudice the Town in obtaining its needed share of provincial grants for waste disposal.

[ 18 ] The Town responded to these developments by cancelling the RFP. They did this by Council Resolution dated December 21, 2009 which stated:

APS-09-007 Waste Collection and Disposal Request for Proposals

WHEREAS on October 19, 2009 the Council of the Town of Smiths Falls by way of Resolution 2009-10-298, awarded the Waste Collection and Disposal Request for Proposals (#APS-09-007) to TOPPS, subject to development and signing of an acceptable agreement;

AND WHEREAS subsequent to passing of the Resolution and prior to signing an agreement Council was made aware of new information about the bidding process that called the awarding of the contract into question from a legal perspective;

NOW THEREFORE BE IT RESOLVED that the Council of the Town of Smiths Falls hereby rescinds Resolution 2009-10-298;

AND FURTHER be it resolved that Council instructs staff to consider the APS-09-007 Request for Proposals to be cancelled and commence the process of a new Request for Proposals that better reflects the Town’s desire to reduce waste by way of recycling and other waste diversion methods.

[ 19 ] Subsequently, the Town issued a new RFP in respect of which the plaintiff was an unsuccessful bidder. The new RFP had many similarities to the original one, but as well contained a number of clauses which contemplated diversion of garbage to new recycling initiatives and which was significantly more in line with the Provincial Government’s waste disposal objectives.

Analysis

[ 20 ] The Town’s position is that it validly and in good faith cancelled RFP-007 for the reasons identified in the Resolution of Town Council quoted above i.e. (1) that counsel was now aware of “information about the bidding process that called the awarding of the contract into question from a legal perspective”, and (2) the Town’s desire to commence a new RFP “that better reflects the Town’s desire to reduce waste by way of recycling and other waste diversion methods”.

[ 21 ] The plaintiff responds that the Town’s actions give rise to four issues which require a trial:

(1) Whether the cancellation of RFP-007 was carried out in bad faith;

(2) Whether a representative of the plaintiff admitted to Ms. Bernicky that the plaintiff made an error in its completion of its bid for the unit price of the dumpsters so as to render the plaintiff’s bid non-compliant with the RFP;

(3) Whether the plaintiff would have been awarded the contract if the bid was taken as submitted (i.e. assuming they were not the lowest bidder);

(4) Whether the recycling/waste diversion policy rationale was merely a pretext to justify cancelling the tender.

[ 22 ] In my opinion, the plaintiff could not succeed at trial on any of the issues it raises. I see no evidence that the Town in the course of considering and ultimately cancelling this bid, could reasonably be found to have acted in bad faith.

[ 23 ] As noted the RFP contained a privilege clause stating “the lowest or any proposal will not necessarily be accepted”. This clause, which is bolded for emphasis in the bid terms, is followed by a sentence stating: “The Corporation of the Town of Smiths Falls reserves the right to not accept any of the submitted proposals pending internal review of proposals submitted”. The plaintiff argues that this sentence should be interpreted to mean that once the internal review of the proposals is completed, a contract must then be awarded. However, that interpretation would be inconsistent with the Town’s clearly expressed right to not necessarily accept any proposal. It is also clear in the evidence that prior to the cancellation the bids remained under internal review, except only for the time interval when Town Council resolved to award the contract to Topps. In my view, this RFP allowed the Town to cancel the tender as long as this was done in good faith, which I take to mean for legitimate municipal purposes, and in a manner ensuring equal treatment to all parties who had submitted compliant bids.

[ 24 ] On the evidence the Town found itself in an unfortunate legal position resulting from its own missteps. Missteps do not equate with bad faith. In particular, the plaintiff had initially been treated preferentially by accepting the “intended” per unit price for dumpster rental at an amount of $86, thereby allowing all concerned to think that the plaintiff was the lowest bidder. The case law is clear that mistakes, however obvious, cannot be corrected after bid closing. The rationale is that the integrity of the bidding process is dependent on the complete equality of treatment among bidders. See Maystar General Contractors Inc. v. Newmarket (Town) (2009), ONCA 675 (Ont. C.A.); Vachon Construction Ltd. v. Cariboo (Regional District) (1996), 1996 1851 (BC CA) , 136 D.L.R. (4 th ) 307 (B.C.C.A) and B.A. Blacktop Kamloops v. R., 1996 1751 (B.C.S.C.).

[ 25 ] The plaintiff’s alternative interpretation argument is that the bid forms were ambiguous such that either its bid was entered properly and all the other bidders did it wrongly or there were more than one correct way of completing the bid forms.

[ 26 ] The bid interpretation issues were certainly capable of generating litigation against the Town by one or more of the bidders. In addition, the Town had apparently wrongfully negotiated post-closing, with the Topps bidder and then backed out of commitments to that firm. They also had a specific threat of litigation from the plaintiff’s counsel who demanded that the contract be awarded to the plaintiff as lowest bidder. The complexity of the situation made cancellation of the RFP an obviously prudent course.

[ 27 ] It has been observed that re-tendering can be seen as protecting the interests of all parties and as protecting the integrity of the tendering process. In Glenview Corp. v. Canada (Minister of Public Works) (1990), 34 F.T.R. 292 (F.C.T.D.) , Denault J. stated at p.4:

In the present case where all the original tenders were rejected, and all original tenderers were invited to re-submit based on clearer specifications, there is no longer any ground for alleging procedural unfairness. The applicant can no longer claim that its interests were unfairly affected. By initially offering the contract to Seltzer the Minister acted only with an eye to his own interests, but by re-tendering he preserved not only his own interests but also the interests of all parties and the integrity of the tendering process. Thus unless the applicant can demonstrate that the decision to refuse all tenders was perverse, in the sense that it was based on irrelevant considerations, it cannot fault the Minister’s procedure.

Similarly in Silex Restorations Ltd. v. Strata Plan VR 2096 , [2002] B.C.J. No. 2898 (B.C.S.C.) ; appeal dismissed, 2004 BCCA 376 , [2004] B.C.J. No. 1339 (B.C.C.A.), the court stated at paras. 50 and 51:

50 The discretion not to award a contract as discussed in Glenview was also affirmed by the Supreme Court of Canada in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., supra, at para. 47 as follows:

The additional discretion not to award a contract is presumably important to cover unforeseen circumstances, which is not at issue in this appeal. For example, Glenview Corp. V. Canada (1990), 34 F.T.R. 292 concerned an invitation to tender whose specifications were found to be inadequate after the bids were submitted and opened by the Department of Public Works. Instead of awarding a contract on the basis of inadequate specifications, the department re-tendered on the basis of improved specifications. {emphasis added]

51 In my view, those observations apply in this case; the Strata Corporation’s determination to re-tender and to allow Silex to participate in that process was an entirely reasonable one in the exercise of its discretion not to award Contract B when faced with the late difficulties with Inter-Coast’s design and qualifications.

[ 28 ] The plaintiff argues that its actual bid, even though not disclosing the single unit rental cost, should still have been treated as one of the compliant bids (although not the lowest) and that there is a triable issue as to whether it may have been awarded the contract. On the evidence before the court, it is pure speculation as to who would have been awarded the contract had cancellation not occurred and this is in any event irrelevant to the issue of the Town’s entitlement to invoke the privilege clause to cancel the RFP.

[ 29 ] In support of its argument of bad faith on the part of the Town, the plaintiff challenges the position of Town Council that the other reason for cancelling the RFP (other than legal concerns about the bidding process), was the desire for a new RFP that better reflected the Town’s desire “to reduce waste by way of recycling and other waste diversion methods”. The plaintiff submits that this was a pretext offered in bad faith or at least that a trial is required to properly appreciate that issue. I do not accept this argument.

[ 30 ] The Town has placed in evidence in this hearing a series of documents that reflect the policy of the Provincial Government to encourage municipalities to adopt waste diversion strategies to reduce solid waste, traditionally put into landfills. Failing to adopt such strategies can have funding implications for the municipalities concerned. The plaintiff’s expert criticized the Town’s approach, or explanation for their strategy, but confirmed the legitimacy and importance of these concerns in waste disposal planning.

[ 31 ] Policy decisions that fall within the legitimate purview of municipal councils, are not open to review by the courts who are required to approach this type of municipal decision making with deference, see Friends of Lansdowne Inc. and Ottawa (City) (2011) 2011 ONSC 4402 , 107 O.R. (3d) 104 at para. 13-16 , affirmed (2012) 1992 7423 (ON SC) , 11 OR (3d) 1 (CA).

[ 32 ] In summary, I am satisfied that there is no evidence capable of establishing that the Town of Smiths Falls, the moving party in this summary judgment motion, acted in bad faith when it invoked the privilege clause in RFP-007. I am satisfied on the evidence that the Town validly cancelled this tender pursuant to the privilege clause with the result that this motion for summary judgment will be granted dismissing the plaintiff’s claim.

[ 33 ] In the event that defendant municipality wishes to claim costs, it shall provide a written submission within 14 days of the release of the release of these reasons and the plaintiff may respond within 14 days of receiving the defendant’s submission.

Mr. Justice Charles T. Hackland

Released: September 25, 2012

COURT FILE NO.: 09-46808

DATE: 20120925

BETWEEN: GLENVIEW IRON & METAL LTD. AND THE CORPORATION OF THE TOWN OF SMITHS FALLS ENDORSEMENT

HACKLAND R.S.J.

Released: September 25, 2012