ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-12-446055
DATE: 20131113
B E T W E E N:
1634584 Ontario Inc.
Plaintiff
- and -
Attorney General of Canada
Defendant
Glenn Ackerley and Faren Bogach
for the Plaintiff
Jacqueline Dais-Visca
for the Defendant
HEARD: August 14, 2013
REASONS FOR DECISION
FIRESTONE J.
[1] The plaintiff, 1634584 Ontario Inc. (“163”), brings this claim for damages against the defendant, Attorney General of Canada named on behalf of Public Works and Government Services Canada (“PWGSC”). 163 alleges that PWGSC breached its duty of fairness and good faith by conducting its tender process in a manner that ensured that one particular bidder, Farhi Investments Ltd. (“Farhi”), would be the successful bidder.
[2] This is a motion for summary judgment brought by the defendant before examinations for discovery. The defendant argues that this is a document-driven case which can be decided by interpreting the tender documents. As a result, full appreciation of the evidence and issues required to make dispositive findings can be achieved by way of summary judgment and therefore a trial is not required. PWGSC argues that the evidence in the record makes it clear that all bidders were in fact treated fairly in accordance with the tender package.
[3] 163 argues that this case is not appropriate for summary judgment since this motion is brought before discovery and full documentary disclosure. Whether PWGSC treated 163 unfairly and whether PWGSC failed to act in good faith are genuine issues requiring a trial. The central issues, 163 argues, require a trial judge to closely scrutinize the evidence and make credibility assessments of key persons involved in the tender process. A trial is the only way a full appreciation of the evidence and issues can be achieved in order to make dispositive findings.
The Parties
[4] PWGSC is a federal government department. Various public servants working at PWGSC were involved in the procurement at issue.
[5] 163 is an Ontario corporation. It carries on business in real estate development. Warren Green (“Green”) is the President and CEO of 163. Farhi is also a real estate development company. Farhi has previously been successful on tenders regarding office buildings for PWGSC. The principal of Farhi is Mr. Farhi. Both 163 and Farhi put in a bid in PWGSC’s first tender to provide a lease for office space to Services Canada (“SC”) and the Canada Revenue Agency (“CRA”) in Peterborough, Ontario.
The Office Space
[6] In 2010, several federal government departments were leasing office space in Peterborough. These government departments included both SC and CRA. The term of the lease was expiring on March 31, 2012.
[7] Because of differing accommodation requirements, PWGSC decided that the existing office space was no longer appropriate. PWGSC decided to carry out multiple tender projects for leasing office space in Peterborough commencing on April 1, 2012. One of those tender projects forms the basis of this action.
[8] Audrey Ellis (“Ellis”) was the Senior Project Manager on the projects. Ellis has over 30 years of experience in project management at PWGSC. The acting Regional Manager, Michael Winterstein (“Winterstein”), was her boss on and off during the relevant time in question.
[9] In or around July 7, 2010, PWGSC issued a Request for Information (“RFI”). The RFI invited the public to submit information identifying an office space that would meet the location requirements for relocating the SC and CRA. The deadline for RFI responses was July 28, 2010.
[10] On July 27, 2010, 163 entered into an Agreement of Purchase and Sale (“APS”) to purchase a suitable property to be developed to meet PWGSC’s requirements. Since the property was part of a larger parcel of land, 163’s APS had a condition that the seller must obtain Planning Act consent to finally sever the lands in a timely manner and the seller must be satisfied with all the terms and conditions attached to the granting of the severance.
[11] Both 163 and the seller allege that they anticipated severance would be easily obtained and a City of Peterborough planner told both of them that obtaining severance would not be an issue. On July 27, 2010, 163 submitted an RFI response, which included a copy of its APS. Ellis did not carry out a detailed review of 163’s APS at this point to determine if it contained impermissible conditions.
[12] Prior to July 28, 2010, three other companies submitted responses to the RFI. One of the properties offered up for lease in the RFI responses was obtained by Farhi. On September 13, 2010, Mr. Farhi contacted Ellis and told her of Farhi’s right to the property. Mr. Farhi provided her with a copy of its APS for the property.
The First Tender
[13] PWGSC issued a lease tender documentation package (“the Tender Package”) on November 17, 2010 to various companies who had complied with the RFI requirements. This included 163 and Farhi. Contained with the Tender Package was an Invitation to Tender (“the Invitation”), an Offer, a Specimen Lease, and Standards for Leased Accommodation.
[14] The Invitation contained terms that all bidders agreed to upon submitting a bid. Section 13.1 afforded PWGSC the right to accept or reject any and all bids. Other pertinent terms contained in the Invitation were as follows:
Preparation and Submission of an Offer
8.2 If the Building in which Leased Premises are offered is not yet constructed, not yet completed or does not presently meet all the provisions, requirements and standards set out in this Lease Tender Documentation Package, Offerors may submit an Offer which shall include a commitment to meet these provisions, requirements and standards prior to the date set for occupancy by the Lessee, all at the Offeror’s sole expense.
Clarification
10.1 The Lessee may require clarification from the Offeror with respect to any information provided by the Offeror …
Evaluation
12.1 The evaluation of Offers received is an ongoing process and the Lessee reserves the right to terminate any further consideration of any Bid at any time during the Acceptance Period for any reason whatsoever without any notice thereof.
12.3 An Offer may not be subject to further evaluation if, in the sole opinion of the Lessee, the Offer fails to meet or comply with the provisions, requirements or standards as set forth in this Lease Tender Documentation Package.
12.4 An Offer will not be subject to further evaluation if, in the sole opinion of the Lessee, the Bid is conditional or qualified in any matter.
12.6 Notwithstanding the above, the Lessee reserves the unqualified right to carry out a comparative evaluation of all or any of the Offers and evaluate them based on considerations which in the sole opinion of the Lessee would yield to the Lessee the best value.…
[15] Section 2.1of the Offer states as follows:
The Offeror hereby offers to grant to the Lessee a Lease (hereinafter called the “Lease”) for the premises herein described (hereinafter called the “Leased Premises”) in compliance with and subject to the provisions, requirements and standards of this offer and the complete Lease Tender Documentation Package.
[16] PWGSC received four bids to the tender. 163’s bid made a commitment following section 8.2 of the Invitation to “meet the provisions, requirements and standards of the RFP Project No. 531787 prior to the date set for occupancy by the Lessee, all at the Offeror’s sole expense.” Based on rental rate per square metre of space, Farhi was the lowest and 163 was the second highest bidder.
[17] Following a technical compliance review, Ellis discovered errors in each bid that rendered them non-compliant. This was confirmed by a legal opinion from the Department of Justice’s Legal Department (“DOJ-Legal”). Regarding 163’s bid, the severance condition in its APS was an issue. DOJ-Legal advised “PWGSC could request … clarification regarding the status of the severance application pursuant to Paragraph 10.1” of the Tender Package. Ellis never sought clarification from 163. Regarding Farhi’s bid, its APS required a third party release from a previous APS that was incapable of being waived by Farhi. The other bidders’ bids had a commencement date error and impermissibly altered the terms of the Invitation, respectively. Winterstein was informed all the bids were non-compliant. He then inquired about a deficiency with Farhi’s bid. Within four days of his inquiry, Farhi attempted to rectify that same deficiency.
[18] PWGSC, following an internal process, made the decision to deem all the bids non-compliant and therefore re-tender the project. The bidders were advised by correspondence that all the bids had been deemed non-compliant following consultation with DOJ-Legal. They were also told why their bid was non-compliant and were invited to attend a post-tender meeting as a group to discuss the issues regarding the bids.
The Second Tender
[19] Given the incumbent landlord’s refusal to extend the current lease term and the expiry of the term which was coming up, a second tender documentation package was sent to the initial companies who met the RFI requirements on February 18, 2011. This included 163 and Farhi. The deadline for submitting bids to the second tender was March 3, 2011. The second tender package was modeled on the Tender Package with the following changes:
• The winning bidder had 30 days after the award to prove full, unconditional ownership of the leased premises if the bidder had provided a copy of an APS on its bid.
• Base building completion had to occur in 12 weeks not 16 weeks.
• The amount of bid security was reduced to $40,000 from $50,000.
[20] On the assumption that it would not have been awarded a separate contract for performing tenant improvement work that PWGSC would tender in the future, a bid was not tendered by 163. 163 decided that it would be very risky to make the commitment to construct and deliver the premises within the short time frame left. The other three companies from the first tender including Farhi, submitted bids to this tender. Before the tender was awarded, Mr. Farhi emailed Winterstein noting that a strict schedule would have to be enforced to complete the project.
[21] PWGSC awarded the project to Farhi upon their determination that its bid yielded the best value.
The Action
[22] 163 commenced an action against PWGSC seeking $4 million in damages for PWGSC’s breach of the duty of fairness and good faith in the conduct of the tender process. Specifically, 163 argues that “PWGSC intentionally, and in bad faith, conducted the tender process in a manner which ensured that another bidder, Farhi, was the winning bidder.” The damages claimed are based on 163’s loss of the contract to build and lease the premises.
[23] On this motion PWGSC relies on the affidavit of Ellis. 163, in response, relies on the affidavit of Green. Ellis was cross-examined on her affidavit. Green was not cross-examined on his affidavit.
The Position of the Parties
[24] PWGSC submits that one of the objectives of a summary judgment motion is to remove claims that have no chance of success at an early stage of litigation. In Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1, at paras. 51, 53-54, leave to appeal to S.C.C. granted for two of the within cases, [2012] S.C.C.A. No. 47, [2012] S.C.C.A. No. 48, the Court of Appeal states that a trial will not be required in the interests of justice if the motion judge determines that full appreciation of the evidence and issues can be had without the benefit of a trial narrative, without the ability to hear witnesses, and without the assistance of counsel as the judge examines the record. The court also states, at para. 52, the full appreciation test will likely be met in document-driven cases with limited testimonial evidence and may be met in cases with limited contentious factual issues.
[25] PWGSC argues that the determination in this action depends on interpreting the rights and obligations contained in the Tender Package and whether there exists a tendering duty owed to 163. PWGSC states that no material facts are in dispute: 163 agreed that its APS contained certain conditions including the seller had to obtain consent for severance of the land. This condition made the bid conditional on third parties granting a severance. There was a chance 163 would not have obtained the consents of third parties in order to complete the leased premises for PWGSC on time. They argue that the terms of the Tender Package were accepted by 163. The Tender Package afforded PWGSC the right to
• seek clarification if it chose.
• terminate a bid at any time for any reason without notice.
• determine if a bid was conditional or qualified in any matter that would discount it from further evaluation.
[26] PWGSC submits that in its sole opinion, PWGSC concluded that the severance condition was a condition or qualification within the meaning of section 12.4 of the Invitation such that PWGSC could chose to terminate and/or stop any further evaluation of 163’s bid.
[27] PWGSC argues that Green’s affidavit is self-serving and contains bald allegations and denials such as 163 would have been the winning bidder had PWGSC conducted the tender properly, despite evidence suggesting another bidder would have won. PWGSC submits this court has instructed that such evidence will not create triable issues: see Royal Bank of Canada v. Tie Domi Enterprises Ltd., 2011 ONSC 7297, 38 C.P.C. (7th) 317, at para. 30.
[28] PWGSC argues that 163’s allegations of bias are conjecture and unsupported by evidence.
Analysis
[34] For the reasons set forth below, in my view a full appreciation of the evidence and issues required to make dispositive findings can be had in this case. I find PWGSC did not breach its duty to treat all bidders fairly and equally. The specific terms of the Tender Package afforded PWGSC broad discretion to reject bids with no positive obligation to seek clarification from 163. I further find that the second tender was carried out in the interests of time and not because PWGSC wanted Farhi to be the successful bidder. The record does not, in my view, support that conclusion.
[35] In Combined Air, the Court of Appeal set forth the interpretation and application of the amended Rule 20. It establishes the manner in which summary judgment motions are to be decided.
[36] A motion judge is permitted to grant summary judgment where he or she is satisfied by exercising his or her enhanced powers under the Rule that no factual or legal issues raised by the parties requires a trial in order to reach a just resolution.
Disposition
[53] For the reasons set forth above, the defendant’s motion for summary judgment is granted and this action is dismissed.
[54] I wish to thank counsel for their written and oral submissions which were exceptional.
[55] If the parties cannot agree on costs, written submissions, with a costs outline totaling no more than six pages may be submitted by the defendant on or before December 5th, 2013 and the plaintiff on or before December 20th, 2013.
FIRESTONE, J.
DATE: November 13, 2013
COURT FILE NO: CV-12-446055
DATE: 20131113
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1634584 Ontario Inc.
Plaintiff
- and -
Attorney General of Canada
Defendant
REASONS FOR DECISION
FIRESTONE J.
Released: November 13, 2013