REASONS RELEASED: 20180712
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
METROLINX
Plaintiff
(Defendant by Counterclaim)
- and-
EXCLUSIVE ADVERTISING INC.
Defendant
(Plaintiff by Counterclaim)
BEFORE: MASTER D. E. SHORT
COUNSEL: Riaz S. Ahmed Fax: 905-882-3144
for Defendant, (Plaintiff by Counterclaim)
Adam J. Stephens Fax: 416-595-8695
for Plaintiff (Defendant by Counterclaim)
Ryan Hanna Fax: (905) 763-3772
for IMA Outdoor Inc., (Non-party)
REASONS RELEASED: July 12, 2018
Reasons for Decision
I Preamble
1Metrolinx is an agency of the Government of Ontario and owns and operates the GO Transit public transportation system. This action relates to claims arising out of a procurement process carried out by Metrolinx in 2014; whereby they sought bids for the provision of transit advertising services on GO Transit “assets” (e.g. trains and stations). Ultimately a non-party to this action, IMA Outdoor Inc.was the successful bidder and as a result, the defendant Exclusive Advertising Inc., which was the previous supplier, lost a lucrative contract.
2In the original claim, Metrolinx sought damages from Exclusive for alleged costs flowing from problems flowing from difficulties encountered in the transition from Exclusive to the new supplier, IMA.
3Ultimately Exclusive asserted a large counterclaim flowing from alleged serious defects in the tender process.
4Both sides brought motions seeking a range of relief which resulted in a very complex factual matrix which presented difficulties in my reaching decisions on a range of items.
5It is my hope these reasons will address most of the concerns raised by the parties and give guidance for moving forward.
6Because of the time taken to review these matters, and the progress in the action to date, I have determined to grant the motion of Exclusive to extend the set down date and have determined that an order should go directing that this matter ought to be set down for trial by June 30, 2019.
7Having resolved that issue I turn to the more vigorously disputed elements of relief sought by each side.
II. Background
8The action relates to a procurement process carried out by Metrolinx in 2014 for the provision of transit advertising services on GO Transit assets, in which IMA was the successful bidder. Exclusive alleges that Metrolinx held an undisclosed preference towards IMA and thereby breached its duty of good faith and fairness. Exclusive claims lost profits that it claims the amount of $10 million which it asserts would have earned, had the new advertising contract been awarded to it.
9Exclusive is an Ontario corporation in the business of transit advertising which brings this motion for an order granting it leave to amend its Statement of Defence and Counterclaim and for various discovery relief, including an order that the plaintiff (defendant by counterclaim), Metrolinx, serve a further and better affidavit of documents and an order that Metrolinx answer proper questions refused at examinations for discovery. Exclusive also sought an order for a forensic accounting of monies paid by IMA Outdoor Inc. ("IMA") to Metrolinx, and orders that IMA, a non-party, produce relevant documents and that its representative attend an examination for discovery pursuant to Rule 31.10.
10I turn first to an historic background may help frame the issues before me. On August 30, 1998, Metrolinx granted to the defendant Exclusive, the exclusive right to promote and sell interior train advertising on the GO Transit system. The agreement was for 10 years with an option for a five-year renewal. Pursuant to that agreement, Exclusive was required to pay to Metrolinx the greater of a pre-defined Guaranteed Annual Amount or 10% of its net revenues,. Prior to the expiry of that agreement, Exclusive and Metrolinx entered into an agreement to extend the term of the original contract for a further five years, to expire on October 31, 2013 (the "Expiry Date"). The terms of the contract remained the same, and the Minimum Guaranteed Annual Amount was set at about $600,000.
11Exclusive states that it was very successful during its tenure with Metrolinx. From 2000 to 2013, Exclusive expanded the in-train advertising program from annual advertising sales of $700,000 to over $2.8 million per year.
12The present non-party IMA, on the other hand, provided Metrolinx with advertising services for “out-of-train” advertising. On October 1, 2010, Metrolinx entered into an agreement with IMA pursuant to which IMA would manage all “out-of-train” advertising on Metrolinx assets, such as “in-station” and on bus shelters/exteriors. Under that contract, IMA was required to pay to Metrolinx a “Minimum Guaranteed Annual Amount” or 60% of net revenue, whichever was greater. IMA's contract also expired on October 31, 2013, at the same time as Exclusive’s contract.
13As the Expiry Date approached, Exclusive was advised by Metrolinx that it would be issuing a new tender for the provision of in-train and out-of-train advertising across Metrolinx's GO Transit assets.
14With respect to the principal representatives of the parties, Exclusive’s factum asserts:
“11. On October 2, 2013, Gregory Donohue, the President of Exclusive, met with Steve Naylor, Metrolinx's Director of Strategic Business Planning and Development, regarding the upcoming October 31 expiry of Exclusive's contract. Donohue was advised that after the October 31, 2013 contract expiry, Exclusive would not have access to the trains and their advertising program would come to a complete end. Donohue, in response, urged Naylor to allow Exclusive to perform upon existing contracts that extended beyond the Expiry Date, since Metrolinx had not yet released its Request for Proposal ("RFP") and there could be a large gap between expiry and the award of the new advertising contract. Donohue explained that an abrupt shutdown of advertising would damage long-standing relationships with advertising agencies and harm Metrolinx's reputation.
- Ultimately, after requiring Exclusive to provide a list of its ongoing contracts, Naylor agreed to allow Exclusive to perform ongoing contracts but insisted that it not engage in any new sales, in order to provide a "clean slate" to the new vendor. Despite request[sic], he refused to comment on whether such restrictions were being imposed on IMA.”
15Exclusive asserts that Metrolinx has failed to serve an affidavit of documents that lists all relevant documents in its possession, power or control. In particular their factum states:
“However, information obtained through Requests to Inspect, examinations for discovery, answers to undertakings and answers to questions first refused demonstrate that Metrolinx had a clear and undisclosed preference in favour of IMA and against Exclusive.
Metrolinx has the distinct advantage of having possession, power and control over the relevant documents that Exclusive requires to prove its case, and it has refused to produce those documents.”
16In response, the Metrolinx factum asserts:
“4. Metrolinx does not accept many of the factual assertions made by Exclusive in its factum. In particular, Metrolinx conducted a fair RFP process for the advertising contract. The evidence discloses that Exclusive could not have won the RFP based on the differential in its pricing compared with IMA's. However, given the nature of the relief claimed, the focus of this factum is whether Exclusive is entitled to further production/ discovery based on the relevance of the requested documents/evidence.”
17They further assert that Exclusive is not entitled to the relief claimed in respect of further disclosure/answers to refusals/examination of a non-party because:
(a) the additional evidence requested from Metrolinx is legally irrelevant, speculative, amounts to a fishing expedition and is prejudicial to Metrolinx;
(b) Exclusive has caused numerous and repeated delays of the reasonable prosecution of this Action and granting the relief claimed will further unreasonably delay matters;
(c) it has not met the test for the examination of/production from a non-party.
18However they do concede that Exclusive's request for leave to amend its Counterclaim should be permitted “on the following conditions”:
(a) certain of the requested amendments not be allowed as they fail to disclose a tenable cause of action and are irrelevant; and
(b) costs in the amount of $5,000 be paid to Metrolinx to account for the inefficiencies caused by the pleadings amendments.
19In my view the proposed $5000 inefficiency “charge” is best left to the trial judge, as the importance of the amendments sought is not sufficiently ascertainable at this stage in the proceeding.
20As well Metrolinx brought a counter motion seeking orders granting Metrolinx leave to amend its Statement of Claim and Reply and Defence to Counterclaim which I granted. They also sought directions with respect to the outstanding undertakings and refusals of Exclusive which I addressed with counsel during argument, utilizing the charts required under rule 37.10 (10).
III. Defendant’s Omnibus Motion
21In summary Exclusive sought Orders on this motion for the following relief:
(a) granting leave to amend its Statement of Defence and Counterclaim;
(b) that Metrolinx answer questions refused at the examination of Mr. Naylor;
(c) that Metrolinx serve a further and better affidavit of documents disclosing all documents in its possession, power or control relating, in particular, to the class of documents enumerated at paragraph 3 of the Notice of Motion [see 29 categories infra at para 50];
(d) that Stephen Naylor thereafter re-attend examinations for discovery, at Metrolinx's own expense;
(e) that a forensic accounting or audit be performed, at Metrolinx's expense, as to amounts paid by IMA under the advertising contract and set-offs applied thereto, and that Metrolinx cooperate with such an audit or accounting;
(f) that IMA produce relevant documents in its possession, control or power;
(g) that a representative of IMA attend for examination for discovery of a non -party;
(h) extending the current Timetable; and
(i) for costs of this motion;
22The first two items on the above list were addressed at the hearing of the motion. With respect to the further and better Affidavit of Documents, this component was partially addressed in the course of argument with the result that some elements of further production were ordered by me, while I held that others were not being required by me at this point in time, based upon the evidence before the court on this motion.
23At the hearing of the motion the parties submitted charts in accord with Form 37C I entered my dispositions in the appropriate columns of the tables before me and do not intend to address those determinations further in these reasons.
24As well on the hearing of the motion I granted leave for Exclusive to further amend its pleading by inserting a number of amendments but declined to permit the proposed new paragraph 65 together with the reference to “other projects” at the end of the last item in paragraph 64.
25I intend to address the remaining issues in various degrees of depth and apologize to readers of this decision for instances of repetition or disjointedness in outlining my findings and rulings in various areas.
IV. Non Party Involvement
26Exclusive is seeking production of documents from, and examination of, a non-party, the successful bidder, IMA Outdoor Inc. ("IMA").
27Exclusive moves under Rule 31.10 which deals with the discovery of non-parties with leave, provides in part:
31.10 (1) The court may grant leave, on such terms respecting costs and other matters as are just, to examine for discovery any person who there is reason to believe has information relevant to a material issue in the action, other than an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation
Test for Granting Leave
(2) An order under subrule (1) shall not be made unless the court is satisfied that,
(a) the moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person the party seeks to examine;
(b) it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and
(c) the examination will not,
(i) unduly delay the commencement of the trial of the action,
(ii) entail unreasonable expense for other parties, or
(iii) result in unfairness to the person the moving party seeks to examine.
28It is IMA's position that Exclusive has not met the test necessary “to grant the extraordinary remedy of pulling a non-party into the discovery process of this action.”
29IMA’s counsel asserts that Exclusive is asking for an extremely broad scope of information and that “the information is either not relevant to the action or its disclosure by IMA would cause prejudice to IMA as the information is sensitive in nature and would be disclosed to Exclusive, a direct competitor of IMA.”
30The affidavit of the CEO and a Director of IMA Outdoor Inc. describes it as an outdoor advertising company that markets rights for third party advertisers throughout Canada. He asserts that the advertising industry in which IMA Outdoor operates is a very competitive market. In that market, knowledge about any one or more areas of a competitor’s business practices can create an unfair competitive advantage. “This information includes business interests, clients, sales and costing strategies, pricing, business methodology, standard and non-standard contractual terms, internal operations, to name a few. Therefore, confidentiality is extremely important for the survival and success of any outdoor advertising company such as IMA.”
31The factum filed on behalf of IMA reads in part:
- The Defendant Exclusive Advertising Inc. ("Exclusive") is seeking to have IMA Outdoor .produce a sweeping array of information about IMA and its internal practices and its relationship with not only the parties to the action but other non-parties. IMA objects to producing any and all of the information requested and also objects to Brian Rodkin or any other representative of IMA, being examined. Any and all such disclosure would result in providing Exclusive with confidential information.
32The relevance of at least some of the information sought, largely turns on the law relevant to bidding processes in Canada.
V. Bidding Related Caselaw
33The Law of Tendering is addressed in a very technical group of cases. The courts consider the obligations and rights under a notional “Contract A” between an owner and the bidders in response to a request for tenders as distinct from “Contract B” being the ultimate agreement the Owner enters with the successful bidder.
34Guidance for the issues before me in part flows from a brief 2010 decision of the Ontario Court of Appeal in Bois A. Lachance Lumber Ltd. v. Conseil Scolaire Catholique de District des Grandes Rivières;2010 ONCA 694; 194 A.C.W.S. (3d) 798; 94 C.L.R. (3d) 167; 326 D.L.R. (4th) 74; 2010 CarswellOnt 7920. (“Lachance”)
35There R.J. Sharpe, R.A. Blair and P.S. Rouleau JJ.A dealt with an appeal by defendant School Board from an original judgment awarding damages to an unsuccessful bidder on ground that Board breached its obligation to treat all bidders equally and fairly following a call for tenders.
36The Court held that the tender documents only required that successful bidder obtain performance bonds upon acceptance of its bid and did not require proof of ability to obtain those bonds.Two bids were submitted. The bid accepted by the Board was lower than that of the plaintiff, who alleged that the successful bidder failed to furnish a performance bond and a labour and material payment bond. After being notified that its bid had been accepted, the successful bidder provided the Board with a letter of credit in place of the performance bonds, as required in the requirements set out in the tender documents.
37In allowing the appeal, the Court determined that the tender documents only required that the successful bidder obtain the performance bonds upon acceptance of its bid and did not require that proof of the ability to obtain those bonds be included in the package.
38The appellate Court observed:
3 The trial judge found that the appellant had breached its obligation to treat all bidders equally and fairly. He found that the successful bidder failed to supply the performance bonds required by "Contract A" and that the letter notifying the successful bidder that its bid had been accepted was insufficient to form "Contract B".
4 In our view, the trial judge erred in coming to these conclusions. The tender documents only required that the successful bidder obtain the performance bonds "[u]pon acceptance" of its bid and did not require that proof of the ability to obtain those bonds be included in the package. Accordingly, the successful bid was compliant when it was submitted and evaluated by the appellant.
5 That bid constituted an offer to enter into "Contract B" and the appellant's letter of July 17, 2007, notifying the successful bidder that its bid had been accepted, amounted to a binding acceptance of the offer, i.e. "Contract B": see Ontario v. Ron Engineering, 1981 CanLII 17 (SCC), [1981] 1 S.C.R. 111; Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] 1 S.C.R. 116 at para. 3. At that point, any obligations owed by the appellant pursuant to "Contract A" to the respondent, an unsuccessful bidder, were discharged. The respondent was not required to investigate the successful bidder's capacity to provide performance bonds before accepting the compliant bid. The trial judge did not find that before the bid was submitted the respondent had colluded with the successful bidder to ignore the bonding requirement. There was nothing in the tender documents to preclude the appellant from waving or modifying a term after a bidder had been retained, and "Contract B" was a distinct contract to which the respondent was not privy: Double N Earthmovers at paras. 71-72. Accordingly, having accepted the bid, it was open to the appellant to accept an alternate type of security for the successful bidder's performance in the form of a letter of credit. [my emphasis]
39Significantly in the present circumstances, the Court of Appeal ultimately held:
6 We conclude that as the successful bidder submitted a compliant bid that was accepted by the appellant, the modification to the contract agreed to by those parties following the formation of "Contract B" did not amount to a breach of any contractual right of the respondent. . [my emphasis]
40Generally, Exclusive's allegations against Metrolinx in the Counterclaim are that it breached Contract "A" by failing to conduct a fair RFP process.In my view relevant evidence is therefore limited to matters in relation to Contract "A". That is, the timeframe before Contract "B" was formed with the successful bidder.
41As noted by the Court of Appeal in Lachance, the Supreme Court of Canada in Double N Earthmover held that evidence in relation to Contract "B" is legally irrelevant to claims in relation to Contract "A" and, further, that it is contrary to public policy to give an unsuccessful bidder access to this information.
42In Double N, the issue was whether an unsuccessful bidder had any recourse where the performance of Contract "B" by the successful bidder was different than the requirements set forth in the RFP. The Supreme Court answered that it did not.
43In that case the City of Edmonton had issued a call for tenders for the supply of certain equipment and operators to move refuse at a waste disposal site. The tender required that all equipment to be used on the job be “new”(1980 or newer). Prior to the City awarding the tender to a rival bidder, Double N complained that the rival's equipment was older than required by the tender. The City of Edmonton nonetheless awarded the tender to the rival and the contract was performed using older equipment.
44In its decision dismissing Double N's claimed entitlement to any relief in respect of Contract "B", a majority of the Supreme Court of Canada confirmed, at para.51, that an owner has no obligation to investigate the accuracy of representations made in a bid:
“There is no reason why the parties would expect an owner to investigate whether a bidder will comply, when each bidder is legally obliged to comply in the event its bid is accepted. Whether or not the bidder is, at the time of tender, capable of performing as promised is irrelevant in light of the bidder's legal obligation to do so once its bid is accepted.”
45The majority’s reasoning was partially set out in the reasons of Justices Abella and Rothstein at paras 71-72:
The conduct Double N complains of ... (i.e. the waiver by the City of the 1980 requirement) is conduct which occurred after the award of Contract B. Where an owner undertakes a fair evaluation and enters into Contract B on the terms set out in the tender documents, Contract A is fully performed. Thus, any obligations on the part of the owner to unsuccessful bidders have been fully discharged. Contract B is a distinct contract to which the unsuccessful bidders are not privy ...
In the face of a failure to perform Contract B on the part of one of the parties, the other party has the contractual rights and remedies set out in the contract and at common law. Bidders may be held to perform as promised, or the owner may have the right to cancel the contract. It is this range of remedies that acts as a disincentive to submit deceitful bids as, absent collusion, bidders cannot predict how the owner will respond. Where an owner determines that it is in the best interest to waive a term of the contract, that is within its contractual rights unless the contract stipulates otherwise .... [my emphasis]
46I am guided as well by the court’s observation at para 73,with respect to the decision at the Alberta Court of Appeal, that there are good policy reasons for rejecting Double N's position.
“…The observation of Russell J.A. at para. 56, is particularly apt:
[P]arties to contract B might be subject to constant surveillance and scrutiny of other bidders, challenging any deviation from the original terms of contract A, thereby ultimately frustrating the tendering industry generally and introducing an element of uncertainty to contract B.
... Once the City accepted the offer of compliant units, Sureway's failure to supply as promised became a matter between the City and Sureway alone. The City was entitled to deal with Sureway's obligations as it saw fit.” [my emphasis]
47The majority’s reasons end with this statement:
74 We conclude that Double N's bid received fair treatment throughout the bidding process. Sureway's bid offered units that were compliant on their face and open to acceptance by the City. The City was not aware of Sureway's deceit until after it had accepted Sureway's bid, nor did it collude with Sureway during the bidding process to perpetrate an unfairness against other bidders. Once the City accepted the offer of compliant units, Sureway's failure to supply as promised became a matter between the City and Sureway alone. The City was entitled to deal with Sureway's obligations as it saw fit.
My interpretation of the guidance of the SCC in this case is that changes occurring after the acceptance of a bid compliant on its face do not involve any breach of Contract "A", nor is any duty owed to the other tenders after making Contract "B". However, as discussed below the fairness of the initial bidding process is still open to challenge by an unsuccessful bidder.
VI. Position of Parties on Tendering Process
48In my view, the foregoing law must guide my approach to the numerous requests for additional productions sought by the defendant, and in particular the extra documents now requested and the basis for those requests.
49In Exclusive’s counsel’s factum it is noted:
“42. On this motion, Exclusive seeks production of documents relating to, inter alia, the following, as more fully set out in the notice of motion:
(a) Metrolinx's grant of the Wi-Fi contract to IMA in March, 2013;
(b) The appointment of Steve Naylor to oversee and manage IMA's contract in June, 2013;
(c) Naylor's request to extend IMA's contract in June; 2013;
(d) Metrolinx's grant of "new initiatives" to IMA prior to the procurement process being initiated, including throughout 2013
(e) Metrolinx's engagement of Thomas Perry;
(f) Metrolinx's meeting with Thomas Perry and IMA in July, 2013 and at any other time;
(g) Naylor's request to extend IMA's contract in September, 2013;
(h) The Transitional Advertising Services Agreement between Metrolinx and Exclusive, and between Metrolinx and IMA;
(i) All correspondence between Metrolinx and IMA from March, 2013 to the award of the contract, relating to new initiatives and relating to the RFP
(j) Metrolinx's preparation and development of the Request for Proposal;
(k) Metrolinx's selection of the Evaluation Committee/Team, and correspondence amongst those members during the evaluation process;
(l) The Waiver Notice;
(m) IMA's performance, if any, of the digital display device capital upgrades;
(n) Metrolinx's complete waiver of the letter of credit requirement, and/or Metrolinx's efforts to obtain a letter of credit from IMA;
(o) Metrolinx's award of the UP Express project to IMA;
(p) Sales records of IMA under the new contract;
(q) Payments made by IMA to Metrolinx under the advertising contract, including set-offs applied, towards the Minimum Guaranteed Fee;
50Exclusive’s counsel’s factum submits that:
“43. All the above issues are raised in the proposed Amended Statement of Defence and Counterclaim, and are therefore relevant. For instance, a central allegation made by Exclusive in its Statement of Defence and Counterclaim is that IMA was granted a fee waiver post-award, which is denied by Metrolinx in its Reply and Defence to Counterclaim. Further, Exclusive submits that the evidence it has filed provides sufficient and persuasive grounds to find that Metrolinx's affidavit of documents is deficient.
- More broadly, Exclusive's claim is that upon submitting a compliant bid in response to Metrolinx's RFP, Contract A between Metrolinx and Exclusive was created. In the context of procurement law, Contract A includes an implied duty of good faith and fairness on the part of Metrolinx. The content of that duty includes the obligation to treat all bidders fairly and equally, to not hold any undisclosed preference to a particular bidder; to disclose relevant, accurate information; to avoid a conflict of interest or a reasonable apprehension of bias; to evaluate bids using disclosed criteria; to reject noncompliant bids; and to award Contract B on the terms set out in the tender documents.
51In support of these propositions counsel of Exclusive cites Envoy Relocation Services Inc. v. Canada (Attorney General). [2013] O.J. No. 1553, 2013 ONSC 2034.
52Exclusive, in its counterclaim, pleads that Metrolinx has breached its duty of good faith and fairness. In opposing this motion, Metrolinx asserts that the duty of good faith and fairness implied in Contract A is limited to the evaluation of compliant bids and, therefore, that conduct pre-procurement or post-award are irrelevant. Metrolinx seeks to restrict production of documents on the basis that any conduct outside of the limited time period during which the bids were evaluated are excluded from the content of the implied duty of good faith and fairness.
53There are relatively few decisions in this area and the applicability of Envoy is pivotal to my interpretation of the applicable principles. To a large extent, timing is everything. My analysis of the available case law makes it clear that our courts and directed that the treatment of pre- tender information differs markedly from post award events.
54In Envoy Relocation Services Inc. Justice Peter Annis, then of the Ontario Superior Court of Justice, held that the federal government breached its obligation of good faith and fairness to Envoy in the context of a competitive procurement process for federal employee relocation services. Justice Annis awarded damages of $29 million to Envoy for lost profits that it would have earned under the contract. In reaching his conclusion that there was a breach of the implied duty of good faith and fairness, Justice Annis considered not only the conduct of the Crown in evaluating Envoy's bid, but also all of the Crown-s pre-procurement and post-award conduct in relation to the successful bidder, “RLRS”.
55In very lengthy reasons, having over 1800 paragraphs, Annis, J. wrote:
"1206 The defendant argues that the duty of fair and equal treatment is limited to the evaluation stage of the tendering process. I review and reject this argument on the basis that the jurisprudence cited describes an evaluation of a concealed
56In the course of his reasons in Envoy Justice Annis also considered Martel Building Ltd. v. Canada, 2000 SCC 60 ("Martel") where the Supreme Court affirmed that Contract A contained an implied term that the owner must be fair and consistent in the assessment of tender bids (“duty of fair and equal treatment”). In that case the Court concluded that an implied duty of fairness was necessary to give efficacy to the tendering process and is consistent with the goal of protecting and promoting the integrity of that process.
57His Honour observed, at para.1233,that:
“... the duty of fair and equal treatment of bidders includes an obligation to ensure that bidders are not provided any unfair advantage or disadvantage by undisclosed preferences in tender documents or instructions to bidders during the open bidding period.”
58Of relevance to my evaluation of the positions taken before me, were these observations concerning a bid evaluation process:
More complicated, is the impact of the Crown's conflict of interest regarding the evaluation of the bids. The technical evaluation was principally carried out by individuals called in to perform a specific task, but it was under the oversight of Mr. Goodfellow. This would be sufficient to have the evaluations set aside, but again that is unworkable nine years later after the contracts are over.
In my view, the only reasonable remedy is for the court to re-evaluate the items where Envoy lost points substituting my opinion for that of the evaluation committee. See Monit International Inc. v. Canada, 2004 FC 75 at para. 271: "The courts refuse to substitute their judgment for that of the evaluation committee, unless it is demonstrated that the committee acted in bad faith or did not treat the bidders on an equal footing.
Implied Terms of the 2004 Contract A
Contact A contains an implied duty on owners to act fairly and in good faith. The plaintiffs have described a number of specific obligations said to flow out of the general duty of the owner to act fairly and in good faith.
These include the duties to treat all bidders fairly and equally; to disclose relevant, accurate information; to avoid conflict of interest or reasonable apprehension of bias; to evaluate bids using disclosed criteria; to reject noncompliant bids; and to award Contract B on the terms set out in the tender documents. See: Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860, at paras. 83-85.
59I also found helpful this further discussion of the Supreme Court’s decision:
- The defendant is relying upon a form of what I describe as a "bright line" analysis that distinguishes on a temporal and existential basis between Contract A and Contract B to deny liability to the plaintiffs. In my view, the jurisprudence does not support such an analysis.
1291 In particular, I conclude that the jurisprudence in this area stands for the proposition that the law on the duty of fair and equal treatment is comprised in two steps. Firstly, there is the court's determination whether to imply a duty of fairness that is relevant to the circumstances before the court. Faced with new circumstances, the issue becomes whether the content of the implied duty of fairness recognizes the impugned activity as being unfair. This is similar to recognizing a new duty of care in negligence following a somewhat similar procedure based on policy considerations applied to the objectives of contracting.
Secondly, the court must decide, based on all the relevant facts before it, whether the defendant has failed to perform, i.e. breached, the implied terms.
One of the conclusions of Martel is that performance of Contract A cannot precede its formation, thus the false prescription advanced by the Crown that events occurring before the formation of Contract A are not relevant. This fails to recognize that unfairness as part of an implied duty may be demonstrated by evidence found anywhere, at any time.
For example, the courts have recognized that there cannot be concealed unfair preferences in tender documents. As demonstrated below, establishing that the terms are unfair is a matter of evidence, which may include demonstrating that the contractor intentionally drafted the contract so as to favour one of the tendering parties. What could be more unfair?
Thus, the evidence of the unfairness, when it is not apparent on the face of the contract, depends upon an examination of the conduct of the contractor at the time the impugned provision was drafted, for example when the decision was made to vary the weight of technical merit in the selection formula. Similarly, the unfairness of the PMS provisions are demonstrated by previous results from the same provisions. Conduct of the parties after the contract has been awarded they also demonstrate unfairness of a rigged process.
There is no policy possible, when the overriding objective is to ensure fair and equal treatment of tendering parties, that would either deny the recognition of a duty not to rig the tender process, or to make use of the evidence on events from anywhere at any time that establishes the process as being unfair." [my emphasis added throughout]
60Counsel argues that the court in Envoy held that unfairness may be demonstrated by circumstantial evidence showing a pattern of past significant advantage to the successful bidder.It is further noted that Justice Annis commented on the inherent disadvantage a bidder faces in bringing forth a claim of unfairness:
"1428 Procedural rules are intended, among other objectives, to level the playing field in terms of the exchange of information upon which cases are decided. The Crown clearly holds most the cards in a challenge to its procurement process. Much of this case has turned around the failure of the Crown to provide information that ought to have been produced. The most important documents in the case never would have been obtained without recourse to the full and complete rules of disclosure enforceable by the Court. This, of course, is in addition to the obvious need for an exhaustive trial procedure to determine fully the import of the documents once produced." [my emphasis added]
61Exclusive submits that all of Metrolinx's conduct, from pre-procurement to post-award, is relevant to the duty of good faith and fairness owed to Exclusive and submits that on the evidence filed, it has provided sufficient and persuasive grounds to find that Metrolinx has served a deficient affidavit of documents and that it is in possession, control or power of further relevant documents related to various stages of the procurement process.
VII. Metrolinx Position
62Metrolinx distinguishes Envoy asserting that in that case the Court confirmed that its finding of a breach of contract A was based on evidence prior to Contract B being entered into. In terms of its ability to consider evidence relating to the performance of Contract B, the Court referred to the fact that the plaintiff had specifically pled and led evidence on collusion which is an acknowledged exception to the principal set forth in Double N. Metrolinx Factum asserts:
“63. Here, no pleading-existing or proposed-pleads collusion. There is no evidence of collusion. Yet Exclusive is seeking information about the performance of Contract B in an attempt to find some evidence to support an entirely speculative and generic claim that Metrolinx breached its duty of fairness owed in relation to Contract A. What is missing is any evidence of improper conduct in relation to Contract A which is related in any way to IMA's performance of Contract B.
Collusion is a serious allegation that must be specifically pled with particulars. Despite adding particulars of alleged unfairness with each of its amendments (first to add the counterclaim and now with the proposed amended pleading) there is no allegation of collusion.
The issue with respect to the request for documents and discovery on Contract B comes down to relevance. In the absence of evidence prior to Contract B being entered into that there was some form of collusion whereby Metrolinx and IMA agreed that IMA would not be held to its bargain, nothing about the performance of Contract B is relevant.
Exclusive's request for disclosure of evidence and to amend its pleading to allege issues relating to IMA's performance of Contract B should be refused because:
(a) The evidence is legally irrelevant based on Double N.
(b) Amounts to a fishing expedition;
(c) The disclosure of the requested information would:
(i) give rise to the public policy concerns raised in Double N concerning the improper surveillance by losing bidders on the performance of contract B;
(ii) be onerous on Metrolinx and further delay the proceedings out of any proportion to the value of such evidence; and
(iii) give rise to concerns relating to production of
63In my view there is no implied duty for an owner to examine the ability of an approved bidder to actually fully comply with the stipulated contractual requirements. The Supreme Court has refused to recognize that Contract A contains an implied duty requiring the owner reasonably to investigate whether a bidder who submits a bid will (or can) really do what it asserts it is able to perform, in its bid.
64This result is applied even where one bidder brings information to the owner's attention that suggests that another bidder cannot satisfy the tender call's requirements or another has submitted an inaccurate or deceptive bid since, if such a duty to investigate were imposed on the owner in these circumstances it would invite unwarranted and unfair attacks by rival bidders thereby undermining the integrity of the tendering process.
65Moreover, in my view, based on the guidance of the Supreme Court, it is irrelevant that a bidder cannot perform all the elements of the tender it submitted, at any time before it is required to do so, under the terms of the tender and the bid.
66If its bid is selected, it will be obliged to perform the originally agreed terms or the may elect from a number of remedies flowing from non-performance of any of the contracted work. In the event of non-performance by the successful bidder, it will be liable to pay damages to the owner for a failure to perform its agreed contractual obligations.
VIII. Discovery of the Successful Bidder: IMA
67The plaintiff seeks broad disclosure of documents and an examination for discovery of the non-party IMA which that company opposes:
68Rule 30.10(1) reads:
The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged where the court is satisfied that,
(a) the document is relevant to a material issue in the action; and
(b) it would be unfair to require the moving party to proceed to trial without having discovery of the document."
69The rule requires the court to consider the following factors when considering whether to order a non-party to produce documents. A panel of the Ontario Court of Appeal made up of Justices Labrosse, Doherty and Austin JJ.A. provided helpful guidance in Ontario v. Ballard Estate, 1995 CanLII 3509 (ON CA), 1995 CarswellOnt 1332; [1995] O.J. No. 3136; 129 D.L.R. (4th) 52; 26 O.R. (3d) 39; 44 C.P.C. (3d) 91; 58 A.C.W.S. (3d) 564; 6 W.D.C.P. (2d) 445; 86 O.A.C. 43; [1995] O.J. No. 3136.
70At para. 15 of their reasons the Court indicated that in a contested production motion such as this, the factors to be considered should include:
(a) the importance of the documents in the litigation;
(b) whether production at the discovery stage as opposed to production at trial is necessary to avoid unfairness to the party seeking productions;
(c) whether discovery of a party on the issues to which the documents are relevant is adequate and, if not, whether responsibility for the inadequacy rests with another party;
(d) the non-party's position with respect to the production request;
(e) the availability of the document or their informational equivalent from some other source which is accessible to the moving party; and,
(f) the relationship of the non-party from whom production is sought. If the non-party has an interest in the subject-matter of the litigation and its interests are allied with the party opposing production, the non-party should be more susceptible to a production order than a true stranger to the litigation.
71Exclusive submits that IMA, as the successful bidder of what Exclusive alleges to be a rigged procurement process, is not a "true stranger" to the litigation and that its interests are allied with Metrolinx. Exclusive submits that the documents it seeks from IMA are relevant to the issues in the action and that it would be unfair to require Exclusive to proceed to trial without production by IMA.
72IMA objected to any order requiring it or Metrolinx to produce any documents, on the basis that any such order would result in the disclosure to its competitor of information that is confidential and proprietary to IMA, thereby resulting in a loss of competitive advantage.
73Exclusive also seeks to examine the principal of the non-party, IMA, with respect to the same issues.
74Rule 31.10 of the Rules of Civil Procedure reads as follows:
(l) The court may grant leave, on such terms respecting costs and other matters as are just, to examine for discovery any person who there is reason to believe has information relevant to a material issue in the action, other than an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation.
(2) An order under subrule (1) shall not be made unless the court is satisfied that,
(a) the moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person the party seeks to examine;
(b) it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and
(c) the examination will not,
(i) unduly delay the commencement of the trial of the action,
(ii) entail unreasonable expense for other parties, or
(iii) result in unfairness to the person the moving party seeks to examine."
75Justice D.M. Brown, then sitting on the Commercial List, considered the application of this rule in In Manga Hotels (Toronto) Inc. v. GE Canada Equipment Financing G.P., 2014 ONSC 2699; 2014 CarswellOnt 5659; 239 A.C.W.S. (3d) 593; 68 C.P.C. (7th) 404.
76He observed that the test under Rule 31.10 contains two basic components. First, a finding under Rule 31.10(1) that there is reason to believe that a person has information relevant to a material issue in the action. Second, the conjunctive factors enumerated in Rule 31.10(2) must be met.
77In this case I am satisfied that in the case of IMA “there is reason to believe that a person has information relevant to a material issue in the action”.
78The involvement of IMA in this motion and the positions taken by it lead me to the view that the moving party would be unable to obtain the information from other persons it is entitled to examine for discovery.
79Also, from the position taken by IMA I infer that there would have been no point in the moving party going through the formal exercise of posing numerous questions to the Metrolinxrepresentative on his examination for discovery to make inquiries of IMA. The situation parallels that described by Justice Brown where he observed that the non-party “no doubt would have taken the same position in response to any inquiry from the defendants - i.e. go get an order under Rule 31.10.”
80As to Rule 31.10(2)(b), I conclude that it would be unfair to require the plaintiffs to proceed to trial without having the opportunity to examine a representative IMA. A significant amount of money is at stake in this lawsuit. In my view it makes sense that the party which may wish to adduce evidence from IMA at trial have the opportunity to obtain information from a representative of that company prior to trial. To decline this motion and, instead, to require the Exclusive to summons a representative of IMA to attend at the trial and make the trial the first opportunity to find out what the IMA representative will say would only create trial delay.
81In my view, to refuse to grant the order would infringe the proportionality principle by ensuring some delay during the course of the trial as the parties, in effect, conducted an examination for discovery of the IMA witness within the confines of the trial court room. In civil matters, the trial is no place to conduct initial examinations for discovery; trial time should not be wasted in that way.
82I am guided by the conclusion of Brown, J.A. observed:
“Our Rules provide mechanisms, such as Rule 31.10, to conduct such detailed examinations prior to trial, ensuring that the actual questioning conducted at the trial will be much more focused.”
83I also found helpful the directions of his Honour, regarding the costs of such an examination. While there was no contingent agreement of the parties discussed before me, I expect that they will be guided by his description of the guidelines applicable in the case before him:
“…the moving party has satisfied the factors in Rule 31.10(2)(c). The examination will not delay the trial of this action - the action has not yet been set down for trial. The plaintiffs seek to examine a RBC representative for up to four (4) hours. That strikes me as a reasonable amount of time, and I limit the duration of the Rule 31.10 examination to four hours. Finally, the plaintiffs have agreed to the payment of costs sought by RBC in respect of the examination, so there will not be any financial prejudice to the person sought to be examined. The cost-impact of the examination on the defendants will be minimal.
84I am satisfied that a limited examination of IMA should be permitted. The examination is limited to pre-award events as I have held that Contract B is not available for challenging by Exclusive at this stage.
85I am therefore permitting up to 4 hours of “air time” on an examination by Exclusive’s counsel of the representative of IMA on matters of interest, up to the awarding of the subject contract to it.
86I am also granting an option of two hours of examination time to Metrolinx following Exclusive’s examination. I suggest the parties apply Justice Brown’s guidance mutatis mutandis. However if they cannot come to an agreement, and if an examination is to proceed, I am prepared to convene a telephone conference with counsel to resolve any issues in this regard.
87Rule 30.10 applies to production of Documents by a non-party. It is not for this court to guess what documents may be probative and I am not requiring any listing in the nature of an affidavit of documents from the non-party.
88I suspect all three counsel will consult with a view to making the examination time as useful as possible and with a view to identifiying key documents sought prior to the examination taking place.
IX. Temporal Context
89More than a year before I heard this motion, the parties came before my colleague Master Muir on a timetable motion. At that time, he determined that it was appropriate for him to case manage this matter. However, when the motion was first sought to be scheduled the hearing dates sought fell during a period of time when my colleague no “Long Motion” hearing date availability. As a consequence, I agreed to deal with this motion in what, in hindsight, was a futile attempt to to avoid an unnecessary period of delay and to keep the matter moving.
90In particular Master Muir, on May 24th 2016 established a timetable which inter alia, provided:
Motions to be scheduled by Both Parties by March 17, 2017;
Action to be Set Down for Trial by May 24, 2017
However the current motion brought by Exclusive was dated with a late with a July return date) and sought virtually four full pages of relief.
91Only a few days prior to the return date of this omnibus motion, Exclusive served an Amended Notice of Motion, which included a request to allow a new further amendment to the statement of defence and counterclaim to add the following content:
Exclusive states that Metrolinx colluded with IMA with a view to granting Contract B to IMA. The particulars of such collusion are set out at paragraph 64 above. including attempting to extend IMA's contract without a formal tender process; thereafter surreptitiously granting IMA new advertising initiatives for the very initiatives that would be included in the RFP without advising the other bidders that such proiects had been granted to IMA: granting IMA access to the tracks and failing to aive other bidders said opportunity; permitting IMA to continue selling beyond its expiry date so as to avoid any interruption in outdoor advertising after the contract is inevitably awarded to IMA: and. most significantly. agreeing to ignore the RFP requirements relating to the letter of credit Minimum Guaranteed Fee and capital upgrades and allowing IMA to submit an inflated bid.
IMA, by all its conduct prior to the release of the RFP. during the evaluation process and after the award of Contract B. revealed its intention not to be bound bv its bid. and Metrolinx acquiesced to and actively participated in said conduct.
92As well the original Notice of Motion sought permission to add the following paragraph dealing with a forensic audit:
- Excusive states that a forensic accounting and/or audit of monies paid to Metrolinx by IMA since the award of the advertising contract is necessary to determine whether Metrolinx, in fact granted the fee waiver of $800,000 or any other such waiver to IMA, whether IMA has been held responsible for its financial obligations under the advertising contract and whether IMA's pricing bid was commercially reasonable. Exclusive states that any such accounting and/or audit will require an examination not only of payments made by IMA to Metrolinx, but also an examination of any set-offs applied by Metrolinx in IMA's favour and the nature of any set-offs.
93I dealt with whether these amendments ought to be permitted at the outset of the hearing of the main motion as a preliminary matter.
94Following submissions, I delivered an oral decision, which indicated I would include in these reasons a finding that it was too late for the defendant to seek to add the proposed new paragraphs 66 and 67.
95This action was subject to case management and was expected to be set down in accordance with an agreed timetable. To reopen an entirely new cause of action, seeking to investigate the Contract B regime, would recast the entire litigation in a manner that was inconsistent with the agreed timetable, and the clear intent of my colleague to bring this matter trial within a reasonable period of time.
X. Forensic Audit?
96The Exclusive notice of motion sought an Order directing that a forensic accounting or audit be performed, at Metrolinx's expense, as to amounts paid by IMA under the advertising contract and set-offs applied thereto, and that Metrolinx cooperate with such an audit or accounting
97With respect to this request I am satisfied that at best the request is pre-mature and given my finding as to the lack of relevance of the Contract B implementation, there is nothing to be gained by ordering any such review at this time.
XI. Other Relief Sought
98Having refused the amendment. I then proceeded to deal with Contents of the properly served Notices of Motion from each side.
99With respect to item “(d)”, “that Stephen Naylor thereafter re-attend examinations for discovery, at Metrolinx's own expense” I am satisfied that a continued discovery of Mr. Naylor is appropriate; but I am not prepared to deviate from the normal approach for funding discoveries of parties prior to trial.
100As indicated above, I dealt with the individual Refusals the course of argument and I provided counsel with direction as to which items need to be answered and which ones do not.
101I think that there are enough issues remaining to be clarified that it would be appropriate for Mr. Naylor to re-attend for a further examination for discovery, not to exceed six hours of actual examination time.
102To be clear particular to make clear I am not allowing examination with respect to post award activities relating to Contract B, but I am permitting a thorough examination with respect to the Contract “A” procedures and dealings with potential bidders prior to the contract being awarded.
103The moving party further sought:
(c) that Metrolinx serve a further and better affidavit of documents disclosing all documents in its possession, power or control relating, in particular, to the class of documents enumerated at paragraph 3 of the Notice of Motion;
104The extent of requests contained in the notice of motion for further and better production encompassed the following:
“3. An Order that Metrolinx serve a further and better affidavit of documents disclosing, and an Order that Metrolinx produce, all documents, including, but not limited to, any letters, emails or any other correspondence made internally within Metrolinx or between Metrolinx and IMA or Metrolinx and any other relevant party, notes, whether typed or hand-written, drafts, works-in-progress, waiver, notices, requests, memorandums, briefings, minutes, approvals, orders, resolutions, invoices, purchase orders, contracts, payments, proof of payments, cancelled cheques, bank statements, financial statements, transaction information, audio or video recordings, or otherwise, in relation to the following matters:…”
105The current test for production is relevance and not “semblance” of relevance. In my view counsel for the producing party is responsible for properly producing relevant documents of any kind but proportionality dictates that an assessment be made as opposed to a dump truck of data.
106My former colleague Master Champagne as she then was considered the extent of production required in DST Consulting Engineers Inc. v. 2299910 Ontario Inc., 2017 ONSC 1464; 2017 CarswellOnt 3581; 277 A.C.W.S. (3d) 499. I agree with her approach and direction that the scope of discovery is defined by the pleadings; discovery questions must be relevant to the issues as defined by the pleadings. Furthermore, the requirement to answer any proper question relevant to any matter in issue in the action must be proportional in terms of effort, time and expense, to the issues in the litigation.
107Paragraph 3 of the motion extracted above continued with the list of some 28 items of varying complexity and magnitude that were requested as components of an order for further and better production. A number of these items were based upon the expectation of being able to examine these conduct of contract B. As I have determined that that type of analysis is not permitted by the applicable caselaw. A number of the categories words struck from the list during argument. I also am obliged to apply proportionality in cases like this. This is a 2014 action and it is very late in the day after examinations for discovery, to be seeking for luminous production on the eve of the date previously established for the setting down of the action for trial.
108Applying my analysis as set out in these reasons and proportionality, I advised counsel at the conclusion of argument that I was directing further and better production by Metrolinx with respect to these items as listed in the notice of motion of Exclusive:
(a) Metrolinx's grant of the Wi-Fi contract to IMA in March, 2013;
(c) Stephen Naylor's request to extend the contract of IMA in June, 2013;
(e) Metrolinx's engagement of Thomas Perry;
(f) Metrolinx's meeting on July 31, 2013 [….] with IMA and Thomas Perry;
(h) Stephen Naylor's request to extend the contract of IMA, made on September 16, 2013;
(j) The Transitional Advertising Services Agreement between Metrolinx and Exclusive;
(k) The Transitional Advertising Services Agreement between Metrolinx and IMA;
(l) Metrolinx's selection of the Evaluation Committee/Team;
(m) Correspondence between Evaluation Committee/Team members relating to the RFP proposals;
(r) Metrolinx's waiver of the requirement for IMA to provide an irrevocable Letter of Credit;
(s) Efforts, if any, by Metrolinx to obtain the irrevocable Letter of Credit from IMA;
(y) All emails passing between Stephen Naylor and Thomas Perry from March, 2013 to the award of the contract relating to IMA in any way; to the development of new advertising-related initiatives; and to the development of the Request for Proposal;
109I am not prepared to order production with regard to all other areas where further production was sought.
XII. Disposition
110Many of my rulings in this case were given during the course of the argument and the balance in these admittedly unduly complex reasons. I am concerned that despite my efforts I may have failed to address an issue or otherwise perplexed counsel. If they are unable to draft any necessary Order or Orders, based on what has been addressed to date; I will convene an in-person case conference at the request of any counsel so as to provide for, as practical a set of orders as possible
111I indicated at the hearing that I was inclined to the view that success had been divided on all fronts and that no Order as to costs might well be the fairest disposition.
112Nevertheless, I feel I ought to consider any submissions made in the next 30 days by counsel, flowing from the interaction of the parties and the results obtained.
113The skill of all counsel regrettably added a challenge to my getting this decision completed. I truly regret the time it took to reach this stage and hope the parties can now expedite this matter so as to allow the matter being set down for trial within the time line I have established.
Released: July 12, 2018
Master D. E. Short
DS/ R196