Court File and Parties

COURT FILE NO.: CV-15-11180-00CL DATE: 20181011 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CG ACQUISITION INC. Plaintiff (Responding Party) – and – P1 CONSULTING INC., ONTARIO INFRASTRUCTURE AND LANDS CORPORATION and LIQUOR CONTROL BOARD OF ONTARIO Defendants (Moving Parties)

Counsel: Harvin Pitch and Adam Brunswick, for the Plaintiff (Responding Party) Gerry Stobo and Marc McLaren-Caux for P1 Consulting Inc., Defendants (Moving Parties) Robin D. Linley, and Erin Hoult for the Ontario Infrastructure and Liquor Control Board of Ontario, Defendants (Moving Parties)

HEARD: June 12 and 13, 2018

REASONS FOR DECISION

MR. JUSTICE T. MCEWEN

Overview

[1] The plaintiff, CG Acquisition Inc. (“CG”) has commenced an action against the defendants, P1 Consulting Inc. (“P1”), Ontario Infrastructure and Lands Corporation (“IO”) and the Liquor Control Board of Ontario (“LCBO”, together with IO, the “Sponsors”) resulting from CG’s disqualification from a request for proposal (“RFP”) conducted by the Sponsors.

[2] All three defendants bring motions seeking orders granting summary judgment and dismissing CG’s claim.

[3] IO is a Crown agency. It provides a range of services to support the Ontario government’s initiatives to modernize and maximize the public infrastructure and realty. The LCBO is also a Crown agency.

[4] On September 4, 2014, IO issued an RFP. The purpose of the RFP was to identify companies which would negotiate with the LCBO and, if successful in negotiations, finalize an agreement related to the proposed sale and subsequent redevelopment of land located along the Toronto waterfront. Essentially, the successful company would purchase the land, complete a development which would include a new LCBO head office and flagship retail location and lease back to the LCBO both the office and retail space. It was an RFP of significance.

[5] P1 was hired by the Sponsors to act as a third-party Fairness Monitor in connection with the RFP. Generally speaking, P1 contracted with IO to observe the procurement process and provide impartial opinions on the fairness of the process. It did not provide legal or quasi-legal advice, and it was not an ombudsman; it was providing a service to the Sponsors under contract.

[6] CG is a real estate development company which submitted a bid in response to the RFP.

[7] In doing so, as will be explained further below, CG was disqualified from the RFP procurement process for including an Ineligible Person as one of its design team members. CG, through its solicitor, wrote to IO asking that it reconsider its decision to disqualify CG on the basis that the addition of the Ineligible Person was inadvertent, harmless and not in violation of the principles and values underlining Ineligible Persons List.

[8] The Sponsors reconsidered but maintained their decision, and CG remained disqualified.

[9] CG is not challenging its initial disqualification. In oral argument, CG conceded that there is a reasonable argument that the defendants did nothing wrong when they initially disqualified CG. Rather, CG submits that the Sponsors owed it a duty of fairness during the RFP which required that the defendants reconsider its disqualification in an adequate manner. Insofar as CG says that the defendants did not do this, it submits that all three defendants conducted a negligent investigation and were negligent in the provision of a service to CG.

Background Facts

CG’s Flawed Proposal

[10] In September 2014, CG received an information flyer setting out a summary of the key Project Details. CG registered to obtain the RFP documents. CG decided to participate in the RFP which was being conducted in three stages.

[11] Sidney Lew, a vice-president of CG who was responsible for its proposal, contacted Michael McClelland at a company called ERA Architects Inc. (“ERA”). The problem with this contact was that ERA was listed as an Ineligible Person in the RFP. ERA was part of the Sponsors’ team.

[12] Shortly after the discussion between Mr. Lew and Mr. McClelland, CG received the RFP documents which clearly identified ERA as an Ineligible Person.

[13] After receiving the documentation, Mr. Lew reviewed the RFP documents and saw that ERA was an Ineligible Person. He was aware that CG could not use ERA in its proposal and if CG did so it could be disqualified.

[14] Despite having this information CG made no attempts to contact or retain another heritage consultant. On September 30, 2014, Mr. Lew and another CG representative attended a General Proponents’ Meeting in respect of the RFP. In the meeting ERA’s involvement as an advisor to the Sponsors was expressly addressed by IO.

[15] In mid-October 2014 CG contacted a third party consultant by the name of Hersh Tencer to assist in preparing its stage one RFP proposal (the “CG Proposal”). Mr. Tencer was chosen by CG given his expertise in the area as a former employee of IO.

[16] Mr. Tencer had primary responsibility for preparing CG’s Proposal and Mr. Lew was to oversee his work and review the proposal prior to its being submitted to the Sponsors.

[17] Mr. Lew provided Mr. Tencer a list of the consultants to include in the CG Proposal. Notwithstanding the fact that Mr. Lew knew that ERA was an Ineligible Person, he advised Mr. Tencer to include ERA in the CG Proposal. He did this by mistake. Mr. Lew does not deny that he knew that ERA was an Ineligible Person and does not recall if he had forgotten about ERA’s ineligibility at the time he provided Mr. Tencer with the list of consultants.

[18] Mr. Tencer did not check the list of consultants that Mr. Lew provided to him against the list of Ineligible Persons in the RFP and therefore was unaware that ERA was an Ineligible Person.

[19] In November 2014, the RFP was put on hold. Ultimately, the submission date was delayed until April 17, 2015.

[20] In advance of their submission Messrs. Lew and Tencer reviewed their RFP which still listed ERA as an Ineligible Person. Mr. Lew has admitted that this was also a mistake on their part.

The Submission of the Proposal

[21] On April 17, 2015, CG submitted its Proposal to the Sponsors. ERA was still noted as part of the CG Proposal.

[22] Notwithstanding the fact that Mr. Lew had only one brief conversation with Mr. McClelland at ERA, CG noted in the CG Proposal that it had conducted several meetings with each member of its team to provide them with a solid understanding of CG’s expectations and the expectations of the Sponsors. The CG Proposal further stated that members of the design team had been carefully selected.

[23] Once all of the proposals were received by the Sponsors, they had their Completeness and Procurement Compliance Review Team (the “CPCRT”) determine whether the proposals were complete and in compliance with the RFP.

[24] Not surprisingly, the CPCRT determined that the CG Proposal included ERA which was an Ineligible Person.

[25] The CPCRT presented its review of all of the seven proposals it received, including CG’s, to the Evaluation Committee on April 23, 2015. The Evaluation Committee met, along with P1 as Fairness Monitor and IO’s in-house counsel, to discuss issues identified by the CPCRT with respect to the seven proposals.

[26] On April 23, 2015, the CPCRT report recommended disqualification of the CG Proposal and another proposal submitted by a competitor. A decision to disqualify CG was made the next day. CG was disqualified for having an Ineligible Person in the CG Proposal. The Evaluation Committee was also of the view the inclusion of ERA was a conflict of interest that created a potential unfairness to the other proponents and the Sponsors.

[27] It is worth noting the Evaluation Committee rejected two alternatives to the disqualification of CG.

[28] The first alternative would have allowed CG’s Proposal to proceed through the evaluation process with the issue of disqualification being determined after the evaluations were complete. This was rejected since the Evaluation Committee feared that this would create a risk of bias, as CG would continue to provide information to the Sponsors, irrelevant to the decision of disqualification, which could create a risk of apprehension bias in making the disqualification decision at a later date.

[29] A second alternative was also considered that would invite CG to clarify the role of ERA. This had been suggested by P1. This suggestion was dismissed too since the CG Proposal including ERA was unambiguous. The Sponsors felt there was nothing to clarify and, further, that any clarification would require CG to rectify its Proposal which the Sponsors determined was unfair to the other proponents.

[30] As a result of all of the above the Sponsors wrote to CG on April 30, 2015, advising of the disqualification.

[31] The basis for the disqualification was that CG had breached the conflict of interest and ineligibility provisions of the RFP in speaking with Mr. McClelland and adding ERA to its Proposal.

CG’s Response

[32] After receiving the disqualification letter CG sought legal counsel. On May 6, 2015, CG’s counsel wrote to IO providing affidavits from Mr. Lew and Mr. Tencer as to what occurred.

[33] In part, the letter stated that it was hoped that the two affidavits would persuade the Sponsors that the mistake of including ERA was inadvertent and that “we… hope that you will reconsider in light of the facts now presented”.

[34] CG did not request a meeting or dispute resolution.

[35] The affidavits, which the defendants do not challenge the credibility of, included the following information:

Affidavit of Mr. Lew

• He previously worked with ERA.
• After receiving notification with respect to the RFP (but before receiving the RFP) he telephoned Mr. McClelland and advised him that CG would be bidding and wanted to know if ERA was committed to any other bidder.
• Mr. McClelland said he would check on it and get back to him, but nothing further occurred until after the disqualification letter was received.
• In the interim, CG received the RFP documents and hired Mr. Tencer to be its main consultant.
• Later, Mr. Lew did not re-check the RFP and failed to see that ERA was an Ineligible Person.
• Having not heard from Mr. McClelland, Mr. Lew assumed that Mr. McClelland was agreeable to being part of the CG team and he provided Mr. Tencer with a list of consultants which included ERA.
• After receiving the disqualification letter he contacted Mr. McClelland about the discussion and Mr. McClelland had no memory of it.
• The inclusion of ERA was an unfortunate mistake. It was never CG’s intention to do anything improper.

[36] It bears noting that, notwithstanding CG’s statements in its Proposal, it was untrue that it had conducted several meetings with ERA and ERA had been carefully selected for its expertise and ability to complete work on time. Mr. Lew conceded on his cross-examination that CG had not conducted any meetings with ERA and that ERA had not been “carefully selected” despite making the aforementioned representations. CG never did receive any confirmation from ERA that it was prepared or able to be a member of CG’s Proposal. Once again, Mr. Lew admitted that these references were errors.

Affidavit of Mr. Tencer

• In 2014, he met with CG and was subsequently retained as having primary responsibility for drafting a response to the RFP. He reported directly to Mr. Lew.
• After the RFP was temporarily put on hold, he re-engaged with CG in February 2015 and the response was submitted to the Sponsors in April 2015.
• As part of his task in preparing the response Mr. Tencer received a list of consultants from Mr. Lew. Mr. Tencer assumed that the process had been complied with and he did not check if ERA was contained in the Ineligible Persons list.
• He conceded he should have checked to verify that no Ineligible Person was contained in the response and failed to do so. It was a mistake. ERA had no input into the process.

The Reconsideration

[37] After the receiving the letter from CG’s counsel the Sponsors reconsidered their decision to disqualify CG.

[38] The letter and attached affidavits were circulated between the Sponsors and a copy was provided to P1. On May 11, 2015, senior management at IO met to discuss the decision to disqualify and to review the information that had been received from counsel. On the same day IO met with LCBO for further discussions and the Sponsors sought advice from outside counsel with respect to its decision to disqualify CG.

[39] After review, the Sponsors decided not to change their decision to disqualify CG for having breached the terms of the RFP. The Sponsors determined that, in addition to the previous identifiable errors, the affidavits reveal additional problems: the inclusion of ERA had not been a result of inadvertent error such as a typographical error or the failure to correct an earlier draft but had been intentional, albeit mistaken; CG had only very limited contact with ERA notwithstanding the statement in its Proposal that there had been several meetings and ERA had been provided with a solid understanding of the expectations of CG and the Sponsors; and, CG had included ERA as a member of its team without the consent of ERA.

[40] The Sponsors then consulted P1 who concurred with the decision to disqualify CG. On May 13, 2015, IO sent CG a letter confirming the Sponsors’ decision to disqualify the CG Proposal.

[41] In a nutshell, CG’s main complaint is that the Sponsors made their decision before consulting P1 and without engaging CG any further.

[42] In particular, CG relies upon a string of internal emails that passed amongst the Sponsors and between the Sponsors and P1.

[43] Essentially, the following can be taken from the critical emails generated between May 8 and May 13:

• P1 was aware that the Sponsors were reconsidering CG’s disqualification and asked to be involved.
• Before meeting with P1, the Sponsors reviewed CG’s counsel’s correspondence and the affidavits and obtained a legal opinion with respect to CG’s disqualification.
• Based on the factual assessment, a review of the legal memorandum, and a risk assessment to IO and LCBO they determined from a commercial, legal-litigation, procurement and fairness perspective, not to change their disqualification decision for either CG or the other company that was disqualified.
• Since there were time constraints in moving the RFP along the Sponsors then looked to P1 for confirmation as to the course that they were now taking from a fairness perspective.
• The Sponsors made it clear to P1 that their decision would not change, as no new information had been provided to change their minds and the legal opinions supported their position. They stated to P1 that, from a fairness perspective, they trusted that P1 would agree.
• The Sponsors and P1 subsequently reviewed the decision to disqualify CG and P1 agreed with the disqualification. Generally, the record discloses is that this type of situation had never arisen in the past. P1 agreed with disqualification in part because the Sponsors advised that they would take a consistent position moving forward with respect to further RFPs should the same issue again arise.

[44] CG submits that this process was unfair, that the Sponsors excluded P1 from the reconsideration process and that P1 engaged in a “face-saving exercise” in agreeing with the conclusion of the Sponsors.

CG’s Pleading

[45] As a result of the above CG commenced this action against the Sponsors and P1. Initially CG framed its claim against the Sponsors in contract, but now frames its claim against all defendants in tort. CG claims that the Sponsors owed CG a common law duty of fairness and, consequently, that all of the defendants owed CG a duty to ensure that the fairness monitoring services were carried out in a satisfactory manner and to investigate the complaints or concerns raised by CG with respect to failure of the Sponsors to carry out the RFP in a fair, open and transparent manner.

[46] CG thereafter enumerates a number of acts in breach of the duty of fairness, and claims negligence in the provision of fairness monitoring services and investigation.

[47] Essentially, CG complains that:

• The RFP did not contain a written complaint process.
• Having received CG’s explanation by way of correspondence by counsel, the defendants ought to have contacted CG, determined the reason for the mistake and carried out an investigation to determine the circumstances surrounding CG selection of ERA.
• The defendants should have allowed CG to remedy its proposal.
• The Sponsors excluded P1 from the reconsideration process.

[48] As a result the plaintiff’s claim damages in the amount $150,000,000.00 as well as special damages.

Analysis

Is this action suitable for summary judgment?

[49] In my view this is a suitable case for summary judgment.

[50] There is no genuine issue requiring a trial. The parties agree that there are no material facts in dispute or credibility issues of any significance. A full record was provided to me to determine the issues of duty of care and liability.

[51] The parties agree that there is no further evidence that will be available at trial and have agreed to have me determine the issues on this summary judgment motion which do not include issues of damages.

[52] In my view this is completely consistent with the decision of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, in order to provide proportionality and fair, affordable and timely adjudication of this claim.

Preliminary Issue re Expert’s Report

[53] CG has delivered an expert’s report prepared by Michael Asner. Mr. Asner purports to be an expert in public procurements. He was cross-examined by defence counsel prior to the hearing of the motions on the basis on the defendants reserved their rights to challenge the admissibility of the report.

[54] Having heard submissions and reviewed the applicable case law I am of the view that the report is admissible and that Mr. Asner is a properly qualified expert.

[55] That being said, however, I have relied very little upon the report which outlines on issues of best practices in public procurements and monitoring. That is essentially the same issue that has been put before me. While the report was helpful in understanding the context surrounding public procurements, I have preferred to largely chart my own course in coming to this determination.

[56] Of further interest is the fact that none of the parties are actually referred to the report during argument, except to debate its admissibility.

[57] I will now turn to the main issues in this application.

Did the Sponsors and/or P1 owe CG a duty of fairness?

[58] I do not find that any of the defendants owed CG a duty of fairness.

[59] By way of a starting point CG does not bring any claims against the defendants in contract, but rather in tort. Nevertheless, it frames its tort claims in the context of a duty of fairness. The tort claims flow from the ‘principle of fairness,’ says CG, with the result that said principle informs the other duties owed by the defendants.

[60] Further, as noted, CG concedes that the Sponsors reasonably disqualified it as per the terms of the RFP. CG only takes issue with the way in which the Sponsors and P1 dealt with the reconsideration.

[61] Insofar as the duty of fairness is concerned, I agree with the defendants that no such freestanding duty exists independent of a contractual duty unless the RFP documents explicitly provide to the contrary: Coco Paving (1990) Inc. v. Ontario (Transportation), 2009 ONCA 503, 79 C.L.R. (3d) 166 [Coco]. Unless and until ‘contract A’ is formed by the submission of a compliant bid, there will be no duty of fairness between a proponent and a sponsor. CG, by its own admission, never submitted a compliant bid.

[62] In my view this observation is further supported by the decision of the British Columbia Court of Appeal in Hub Excavating Ltd. v. Orca Estates Ltd., 2009 BCCA 167 at para. 39, 92 B.C.L.R. (4th) 286, where it stated:

The contractual duty of fairness is an implied term of Contract A, and thus only comes into existence when that contract is formed. There is no free-standing duty of fairness in the bidding process independent of that contractual duty: Midwest Management (1987) Ltd./Monad Contractors Ltd. v. BC Gas Utility Ltd., 2000 BCCA 589, 82 B.C.L.R. (3d) 79, at para. 13. While the trial judge’s comment might support a duty of care in the context of tortious misrepresentation, it cannot form the basis for a finding of breach of contract arising from an owner’s decision to go to tender.

[63] I am in agreement with the British Columbia Court of Appeal regarding the application of Midwest Management. Support for this conclusion is also found in the recent Ontario Superior Court decision in Kaymar Rehabilitation Inc. v. Champlain Community Care Access Centre, 2017 ONSC 1843 at para. 24.

[64] Additional support for this conclusion is found in the statements of author Paul Emanuelli in his text Government Procurement, 3rd ed.:

D. Future Considerations Regarding Free-standing Fairness Duties

While rumours of a free-standing duty of fairness existing outside of Contract A may ultimately prove to be greatly exaggerated, a lingering uncertainty hovers over the tendering process on account of these reported sightings. The final resolution of this issue has been deferred as a matter for another day. In the interest of promoting greater certainty and less litigation, when that day comes, it is suggested that this matter be put unequivocally to rest. Fairness calls for certainty. In the final analysis, no claim should stand where no duty lies.

The reliance on vaguely articulated fairness and good faith duties as a means of scrutinizing purchasers’ conduct outside of a formal Contract A process creates unnecessary uncertainty in the procurement process. While a robust and reasonably well-defined regime has evolved to provide predictability within the Contract A paradigm, the application of a free-standing duty undermines the equality of bargaining position and contradicts the free negotiation principles articulated by the Supreme Court of Canada in Martel.

The recent legal trend, which helped resolve two decades of uncertainty, generally sees the courts drawing a clear distinction between the rules that apply to the formal tendering process and the rules that otherwise apply to direct negotiations. The free-standing strain of decisions offers no legal foundation, policy rationale or predictability for applying new duties to a non-Contract A procurement process. Failing to maintain this clear distinction between the Contract A paradigm and the negotiated paradigm simply serves to dilute the clarity and certainty created by MJB and Martel.

[65] CG relies on a number of cases that it submits stand for the contrary proposition that there is a duty of fairness in the bidding process owed prior to the formation of ‘contract A.’

[66] In this regard CG relies upon the following cases: Mellco Developments Ltd. v. Newton Enterprises (1983), 2002 MBCA 125, 222 D.L.R. (4th) 67; McFadyen v. Ontario (Mining & Lands Commissioners) (2007), 41 M.P.L.R. (4th) 267 (Div. Ct.), Buttcon Limited v. Toronto Electric Commissioners (2007), 65 O.R. (3d) 601) (ON S.C.J.), and Leeds Transit Sales Ltd. v. Ottawa (City).

[67] The first problem with CG’s reliance on these cases is that they do not provide any analysis as to why the defendants owe a duty of fairness on the facts of this case. All of Mellco, Buttcon, and Leeds are suits brought by frustrated proponents alleging that a successful competitor was non-compliant. Here, we have a suit brought by an unsuccessful proponent which admits non-compliance. Mellco, Buttcon, and Leeds do not provide guidance on how a sponsor should exercise its authority to reject bids.

[68] Second, I accept the Sponsors’ submissions that CG’s reliance upon McFadyen is misconstrued as that case deals with administrative law principles which do not apply to this case.

[69] These cases are distinguishable by virtue of the fact that they do not deal with a non-compliant RFP and a subsequent, gratuitous reconsideration. Those cases involve fairness in a context of a ‘contract A’ situation and do not acknowledge a free-standing duty in a RFP context.

[70] The Ontario Court of Appeal in Coco followed the cases relied upon by CG. That case nevertheless stands for the proposition, in my view, that there is no duty of care or fairness in respect of a RFP proposal—particularly one that is non-compliant.

[71] Further, more recently in the decision Grascan Construction Ltd. v. Metrolinx, 2017 ONSC 6424 [Grascan], a case involving judicial review, the Divisional Court held at para. 104 that:

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

[72] The Divisional Court in Grascan also discussed the potential prejudice that could be created if proponents were allowed to proceed even when RFP requirements were not met. In this regard the court stated at para. 127:

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

[73] I therefore do not accept CG’s argument that any ‘principle of fairness’ properly informs a duty to perform a service or carry out an investigation owed to CG by any of the defendants.

Did the Sponsors and/or P1 owe CG a duty of care?

[74] I have found that CG cannot rely on a freestanding duty of fairness to invoke a duty of care in tort. Accordingly, any discussion with respect to whether the defendants owed CG a duty of care should begin with a discussion of the Anns test. The Supreme Court of Canada described the Anns test as follows in Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643 at para. 11:

In Anns v. Merton London Borough Council, [1978] A.C. 728, Lord Wilberforce proposed a two-part test for determining whether a duty of care arises. The first stage focuses on the relationship between the plaintiff and the defendant, and asks whether it is close or “proximate” enough to give rise to a duty of care (p. 742). The second stage asks whether there are countervailing policy considerations that negative the duty of care. The two-stage approach of Anns was adopted by this Court in Kamloops (City of) v. Nielson, [1984] 2 S.C.R. 2, at pp. 10-11, and recast as follows:

1. is there “a sufficiently close relationship between the parties” or “proximity” to justify imposition of a duty and, if so,
2. are there policy considerations which ought to negative or limit the scope of the duty, the class of persons to whom it is owed or the damages to which breach may give rise?

[75] Further, as stated, in the subsequent Supreme Court of Canada decision in Design Services Ltd. v. Canada, 2008 SCC 22 at para. 47, [2008] 1 S.C.R. 737 [Design Services], if a prima facie duty of care is found at the first stage of the Anns test, and there are no residual policy concerns in negating the creation of that duty in the second stage, then a new category of duty is recognized.

[76] There is certainly no reasonable expectation that P1 owed a duty to any non-compliant bidders, including CG, either in the context of the RFP or upon reconsideration. There is simply no sufficiently close relationship or proximity to justify the imposition of a duty in the facts of this case.

[77] The same is also true with respect to the Sponsors. Having been properly disqualified in the procurement context where the terms of the RFP have been properly applied, I see no sufficiently close relationship between the Sponsors and CG to import a duty of care if the Sponsors undertake a reconsideration that they are not legally obligated to do.

[78] Further, any finding of foreseeability must be grounded in a relationship of sufficient closeness such that it is just and reasonable to impose a duty of care taking into the account the expectations, representations and reliance of the parties. In the present case where CG, without legal foundation, asked for and received reconsideration, it would be unjust and unreasonable to suggest that some duty was created in tort.

[79] Even if there existed a sufficiently close relationship or proximity to justify the imposition of a duty, in my view there are policy considerations which entirely negate the scope of that duty.

[80] I accept the submissions of the defendants that a duty of care in tort would be contrary to public policy for the following reasons:

• It would lead to indeterminate liability, especially in cases of pure economic loss and in procurements such as this one where the proposals included a team of various entities beyond just a proponent: Design Services, supra at paras. 59-67.
• Procurements such as this one are balanced, efficient and ensure that goods and services are acquired at the lowest cost to taxpayers. They create a competitive negotiating environment in the pre-contract stage. As such, a duty would place procuring authorities in a disadvantaged commercial position and impair their ability to maximize value: Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860 at paras. 64, 119 [Martel].
• Such a duty in non-binding negotiated RFPs would interject tort law, as after-the-fact insurance, against arms-length commercial parties’ failure to act with due diligence: Martel, supra at para. 68.
• Such a duty would encourage needless litigation as extending negligence claims to non-binding negotiated RFPs and would create lawsuits from “bitter bidders”.

[81] These concerns are particularly relevant with respect to Fairness Monitors such as P1. Fairness Monitors are engaged to serve the procurement process and provide observations with respect to the issue of fairness and prepare a report at the conclusion of the procedure. Fairness Monitors perform an advisory and monitoring function. They do not make the decision. The decision is that of the Sponsors.

[82] I agree with P1 that is in the public’s interest that Fairness Monitors be able to carry out their duties objectively and free from the prospect of litigation in the RFP context.

[83] The defendants, particularly the Sponsors, owed CG no common law duty of care or fairness when CG submitted a non-compliant bid. It is arguable that the most pressing duty owed by the Sponsors was actually to maintain CG’s disqualification in order to maintain fairness towards other compliant proponents. The record shows that the Sponsors were mindful of this very concern.

Were the defendants negligent in the performance of a service or investigation?

[84] Once again, the answer to this question is “no”. Even if I were to find that the defendants were under a duty to CG, I would decline to find a breach of that duty in this case. First and foremost, I do not accept that the defendants performed a disservice to CG. This cause of action only applies when a party, possessing particular skills, contracts with a client provides services and in doing so carelessly causes damage to that person to whom a duty of care is owed: James v. British Columbia, 2005 BCCA 136 at para. 39, 38 B.C.L.R. (4th) 263. Here, no such relationship existed. CG received a concession - in this case the reconsideration of their non-compliant bid - without any consideration for that benefit.

[85] In any event, I do not accept CG’s submission that the defendants acted negligently in performing a service or caring out an investigation.

[86] CG’s primary complaint appears to be that the Sponsors refused to change their decision to disqualify CG upon reconsideration without giving CG an opportunity to present its views or clearing its decision in advanced with P1. Thereafter, P1 was negligent in “rubber stamping” the Sponsors’ decision.

[87] I do not accept this submission.

[88] Once again, there was no obligation for the Sponsors to connect with CG to obtain any further information. All information was known to them and was provided by way of the affidavits of Messrs. Lew and Tencer. The Sponsors reconvened to review all of this information and also obtained an opinion from legal counsel.

[89] CG does not allege that the Sponsors did not follow the terms of the RFP as it concedes it was reasonably disqualified. In these circumstances, I am of the view that the Sponsors also acted reasonably where they gratuitously agreed to once again review the matter, engaged legal counsel and came to the conclusion that to allow CG to continue in the process would be unfair to its competitors. This is particularly so where CG’s competitors could raise fairness objections of their own, since CG’s submissions to the Sponsors revealed additional inaccuracies and misrepresentations with respect to the nature of its relationship with ERA. After careful consideration the Sponsors reasonably concluded that CG could not continue.

[90] While it may have been preferable to engage P1 before coming to the decision it is immaterial given the fact that the Sponsors’ decision was a reasonable one. In any event, P1 ultimately agreed with the Sponsors’ decision based on the Sponsors’ determination that this would be a protocol that they would follow in the future.

[91] It is also unfair to describe P1’s reaction as a “rubber stamp”. The record discloses that P1 sought to be in engaged from the very beginning of the reconsideration. After being told that the decision was made, P1 reached a reasonable conclusion concerning the issue of fairness.

[92] Although not specifically dealt with at the motion by the parties I wish to note that in my view Mr. Asner’s conclusions with respect to best practices as they relate to Fairness Monitoring do not resonate in this case. First, his complaints about the contents of the RFP wording are not material since CG is conceded that the disqualification pursuant to the terms of the RFP was reasonable.

[93] Second, while perhaps a better practice, I do not accept that the failure to have a complaint procedure in an RFP constitutes negligence. Even if a complaint procedure ought to been inserted into the RFP, this too is immaterial, since CG did make a complaint which was considered by the Sponsors and P1.

[94] Third, I do not accept that a remediation process is required. Such a process would slow down the RFP process and to a greater uncertainties, legal liabilities and hard feelings with and amongst proponents.

[95] Fourth, as I have noted above, I do not agree that the reconsideration process was in any way inadequate or negligent. I do not accept the Mr. Asner’s conclusion that neither the Sponsors nor P1 recognized counsel’s letter and affidavits as “a complaint”. Nor do I accept that the failure of P1 to meet with the Sponsors in advance constituted negligence or violation of a best practice. Last, I do not accept his conclusion that P1’s report was deficient and lacked mention of critical events and significant issues. These conclusions do not accord with the evidence of what steps were taken by the Sponsors and P1 after CG’s flawed proposal came to light.

[96] In my view the aforementioned complaints are, at best, hindsight observations that perhaps some steps could have been done more effectively, but fall well short of negligence.

The Limitation Clause

[97] Even if a finding of negligence could be made the defendants rely upon s. 8.2 of the RFP that sets out the main limitation of liability clause.

[98] It states as follows:

Neither the Sponsors nor the Government of Ontario shall be liable for any expense, cost, loss or damage incurred or suffered by any Proponent, any Proponent advisor or any Person connected with any one of them, as a result of any action taken by the Sponsors in respect of the RFP Process, Negotiations Process, and settlement and execution of the Transaction Agreements, and implementation of the Transaction.

[99] Other sections of the RFP also refer to the scope of s. 8.2, including the following:

Sub-section 3.10(b)

“Neither the Sponsors nor the Government of Ontario are liable to pay any costs or expenses of any Proponent or to reimburse or compensate a Proponent under any circumstances, regardless of the outcome of the RFP Process.”

Subsection 6.3(1)(b)

“If, in the sole discretion of the Sponsors, an RFP Stage 1 Proposal or RFP Stage 2 Proposal, as applicable, does not comply with the requirements set out in the RFP Documents, the Sponsors may, in their sole discretion, without liability, cost or penalty, eliminate or disqualify the RFP Stage 1 Proposal or RFP Stage 2 Proposal, as applicable, such that it shall not be given any further consideration.”

[100] In my view s. 8.2 protects both the Sponsors and P1.

[101] Firstly, CG takes the position that the clause does not limit liability in negligence. I disagree.

[102] Given the fact that there was no contract in place during bid prequalification, the section can seemingly only be directed towards a tort claim. In my view the wording of s. 8.2 is broad enough to exclude such liability.

[103] Second, in my view P1 is entitled to shelter under the exclusion. In a RFP Proposal such as the one in this case the Proponents, the Sponsors and the Fairness Monitors all know that the process would be carried out with the assistance of subcontractors such as P1. P1 is not in a position to and cannot enter into any form of contract with the proponents. P1 contracted to observe and provide opinions to the Sponsors, not to provide professional representations which third parties might rely upon, as was the case in Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd., [1993] 3 S.C.R. 206. In my view it cannot be a reasonable expectation of the parties that the Sponsors could be immune from liability but that its subcontractors, who have no opportunity to limit their liability with proponents, would face liability and be exposed to the entire burden of such liability: London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299 at 423.

[104] I agree with P1 that such a construction would frustrate sound commercial practice and justice.

[105] Last, I reject CG’s argument that the exclusion clause should not be applied on the basis that the defendants have subverted the fairness requirements of the RFP. This argument cannot stand given CG’s concession that it was reasonably disqualified. In any event, as I have outlined above, I do not find that the defendants acted unreasonably or negligently.

Disposition

[106] For the aforementioned reasons CG’s action is dismissed.

[107] The defendants are entitled to their costs. If the parties cannot agree they can attend before me at a 9:30 am appointment to discuss what submissions are required.

McEwen J. Released: October 11, 2018