COURT FILE NO.: CV-11-2721
DATE: 20190111
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Inzola Group Limited
David Chernos, Stuart Svonkin and Emilia Galan, for the Plaintiff
Plaintiff
- and -
The Corporation of the City of Brampton
Adam Stephens, Daniel Rabinowitz, Elizabeth Bowker and Kate Genest, for the Defendant
Defendant
HEARD: May 7-11, 14-18, 22-25, 28-31, June 1, June 5-8, 11-14, 18-22, 25-28, September 12 and 13, 2018
REASONS FOR JUDGMENT
Sproat J.
INDEX
I. INTRODUCTION AND OVERVIEW.. 3
II. LIABILITY – EVIDENCE.. 5
A. Introduction. 5
B. Background. 6
C. The RFP.. 11
D. Events leading to the Disqualification of Inzola on June 11, 2010. 18
E. Testimony as to the Reasons for Disqualification. 26
F. After-the-Fact Evidence. 43
i. Introduction. 43
ii. Role of Mayor Fennell and Ms. Dubenofsky. 44
iii. Bias in Favour of Dominus. 45
iv. Staff Review and Revisions to Professor McKellar’s Draft Reports to Council 50
v. Alteration of Records. 51
vi. Other Evidence. 52
III. LIABILITY – LAW.. 53
IV. LIABILITY – ANALYSIS AND CONCLUSION.. 56
A. Did Inzola Breach the RFP?. 56
B. Was the Decision to Disqualify Inzola Unfair or Made in Bad Faith?. 61
V. DAMAGES – LAW.. 68
A. Introduction. 68
B. The Nature of RFPS in General and this RFP in Particular. 70
C. Agreements to Negotiate or to Agree Are Not Enforceable. 71
D. The Minimum Performance Principle. 72
E. Analysis – Expectation Damages Are Not Appropriate. 75
VI. DAMAGES – EVIDENCE AND ANALYSIS.. 81
A. Introduction. 81
B. The Likelihood that Inzola Would Have Been Awarded the Contract 82
C. Inzola’s Profit if Awarded the Contract 84
VII. CONCLUSION.. 90
I. INTRODUCTION AND OVERVIEW
[1] Inzola Group Limited (“Inzola”) is based in Brampton and has extensive experience in land development and construction. An Inzola related company built the Brampton City Hall in the late 1980s. The principals of Inzola are John Cutruzzola and Bill Kanellopoulos.
[2] On October 30, 2009 the City of Brampton (“the City”) issued a Request for Proposals (“RFP”) for an addition to the Brampton City Hall. (Terms are capitalized as they appear in the RFP.) The RFP provided that qualified Respondents would engage with City staff in a “Competitive Dialogue” process. Competitive Dialogue was widely used in the European Union and particularly in the United Kingdom. It was considered appropriate when the contracting authority was not able to define the scope of the project and so wanted to harness the creativity of the private sector to craft possible solutions.
[3] The RFP required Respondents to sign a Confidentiality Agreement. Any Respondent that had questions concerning the RFP process was required to communicate through the Purchasing Supervisor, Diane Oliveira, who was designated as the sole point of contact. A Process and Fairness Advisor was to monitor the RFP process and report directly to City Council.
[4] Inzola, Dominus Construction and Morguard Investments submitted proposals and were invited to participate in the Competitive Dialogue. On April 7, 2010, the City sent the Respondents a Confidentiality Agreement to be signed prior to the Competitive Dialogue.
[5] The Respondents Dominus and Morguard signed the Confidentially Agreement and began the Competitive Dialogue process. Inzola objected to signing on the basis the Confidentiality Agreement was overly broad. Inzola also took the position that the Respondents should be able to present their Final Offers directly to Council.
[6] Inzola sought an opportunity to appear before City Council and address its concerns. When Inzola was denied this opportunity it sent a letter dated June 1, 2010 to the Mayor and all members of Council setting out its objections to the Confidentiality Agreement and to the process being followed. Acting on the recommendation of the Process and Fairness Advisor the City, by letter dated June 11, 2010, advised Inzola that it was disqualified from further participation in the RFP process.
[7] The position of Inzola can be summarized as follows:
a) City officials promised that the RFP process would be open, fair and transparent and this is reflected in the RFP.
b) The Mayor was biased against Mr. Cutruzzola. The City Manager, who was closely aligned with the Mayor, was also biased against Inzola and partial toward Dominus.
c) The two senior City officials chairing the RFP Evaluation Committee were also biased against Inzola because of public criticisms by Mr. Cutruzzola, prior to the RFP process, suggesting that City staff were intentionally misleading City Council as to the cost of the City Hall expansion.
d) Declining to sign the Confidentiality Agreement, and appealing directly to Council, did not violate the RFP.
e) The decision to disqualify Inzola resulted from personal animus and bias.
f) But for the disqualification of Inzola it would have been successful in obtaining the construction contract and realized a profit of approximately $25,000,000.
[8] The position of the City can be summarized as follows:
a) The City acknowledges a contractual obligation to be fair in administering the RFP process.
b) The Confidentiality Agreement the City requested was reasonable. The position of Inzola that all Respondents should be entitled to present their proposals to Council was inconsistent with the RFP and best procurement practices.
c) The City disqualified Inzola on the advice of the RFP Process and Fairness Advisor. There was no bias against Inzola.
d) In any event, the RFP makes clear the City did not assume any contractual obligation in relation to a construction contract. As such Inzola, at best, is entitled to reliance damages being the cost it incurred participating in the RFP.
[9] At the conclusion of the trial the parties submitted over 450 pages of written argument and made oral submissions. I have considered all the arguments but it is not practicable to address them all. My findings of fact on the major issues would, however, dictate the result on the secondary issues.
II. LIABILITY – EVIDENCE
A. Introduction
[10] In reviewing the witnesses who testified, I will refer to them by the positions they held at the time of the RFP process.
[11] The following witnesses testified for Inzola on the issue of liability:
a) John Cutruzzola and Bill Kanellopoulos - Principals of Inzola.
b) Neil Davis - Counsel to Inzola.
c) Councillors Miles, Moore, Sprovieri and Gibson.
d) John Corbett - Commissioner of Planning, Design and Development and a member of the Evaluation Committee.
[12] The following witnesses testified for the City on the issue of liability:
a) Julian Patteson and Maurice Lewis (chairs), and Dennis Cutajar and Randy Rason (members) - Evaluation Committee.
b) Deborah Dubenofsky – City Manager.
c) Susan Fennell – Mayor.
d) Joe Cordiano – Principal of Dominus Construction.
e) Margaret Knowles – Senior VP Development of Morguard Investments.
f) Andrew McKaig – Consultant from Deloitte.
g) Paul Emanuelli – Expert on public procurement.
[13] I will make certain findings as I proceed through the narrative while reserving my findings of fact on the most contentious issues to a more detailed analysis at the end of my evidence review. All of my findings are, however, based on the totality of the evidence and taking full account of any analysis of the credibility and reliability of witnesses that may come later in my reasons.
B. Background
[14] There was a familiar relationship among Messrs. Cutruzzola and Kanellopoulos, City staff and members of City Council. Messrs. Cutruzzola and Kanellopoulos had been Brampton residents since 1972. They owned a number of properties in downtown Brampton and leased space to the City.
[15] As of 2009-2010 seven of eleven Councillors had served for more than 15 years. From 2003 to 2010, the Mayor, and all but one member of Council, received donations from corporations related to Inzola or its principals. Mayor Fennell, at her first speech to the Brampton Board of Trade, referred to Mr. Cutruzzola as “Mr. Brampton”. Mayor Fennell and her husband attended the weddings of both of Mr. Cutruzzola’s sons.
[16] I am not suggesting there was anything untoward in these relationships. I do, however, find that Inzola perceived itself as having something of a “home field advantage” in relation to decisions made at City Council.
[17] As of 2004 the City needed additional office space. The City issued a Request for Expressions of Interest (“RFEI”) in 2005. The City cancelled this process on October 30, 2007, indicating it was contemplating a significant change in the scope and scale of the development and wanted a “signature” building as opposed to a “functional” building in order to promote downtown revitalization.
[18] A June 17, 2008 report to Council identified the need for an additional 235,000 square feet (“s.f.”) of office space and 757 parking spots by 2031. Technical teams were assembled to consider how best to address this need. A December 10, 2008 report by the Mayor to Council indicated that staff was making progress re-starting the process of acquiring the needed office space.
[19] According to Mr. Patteson and Mr. Lewis, a number of factors made this procurement challenging and, in their experience, unique:
a) The site for the additional space had not been determined.
b) City Council did not want to incur debt or raise taxes.
c) City Council wanted the City to own the additional space.
d) The City was open to a public-private partnership that would see the City requirements paired with other development, such as retail space or a condominium which would contribute to downtown revitalization.
e) The project might include additional elements such as a library.
[20] Mr. Patteson was designated to take the lead in moving the process forward. Brampton was a member of the National Executive Forum on Public Property. In this connection Mr. Patteson had met Professor McKellar who was an advisor to the Forum and a speaker on various topics at its meetings. By letter of March 17, 2009, at the suggestion of Mr. Patteson, the City retained Professor McKellar to provide advice on the procurement process and attend a public meeting.
[21] The City staff who testified all indicated that the 2005 Toronto Computer Leasing Inquiry report of Justice Bellamy, which they referred to as the “Bellamy Report”, was instructive and guided their approach. The Bellamy Report stated, in part:
- Role of Elected Officials
Experts suggest that in best practices jurisdictions – U.S. and Canada, federal, provincial/state, and municipal – elected officials understand the importance of remaining outside of the competitive tendering process. In this regard, it is generally viewed that one of the benefits of having a highly professionalized procurement function is the ability to insulate and protect politicians from allegations of attempting to influence procurement decisions.
Experts suggest that politicians who understand their role and the importance of fairness and equity in procurement would tend to focus on quality assurance, i.e. whether the approved process was followed and used appropriately. Only in the most exceptional circumstances would a staff recommendation be rejected or a competition cancelled. Even more usual [sic] would be for a Council or Standing Committee to ignore a staff recommendation and make an award to another bidder.
Where this kind of understanding does not exist, the political level can often become overly and in the view of many experts, inappropriately involved in the details of the award. This could include wanting to review the RFP in detail, wanting to see the actual bid documents, scrutinizing individual evaluations, meeting with individual vendors, etc. At its most extreme – and in terms of the integrity of the process, highest risk – this could involve a Council or Standing Committee beginning to engage in re-evaluating the bids and making its own decision about the outcome.
[22] The Bellamy Report contained the following specific recommendations:
City Council should establish fair, transparent, and objective procurement processes. These processes should be structured so that they are and clearly appear to be completely free from political influence or interference.
Councillors should separate themselves from the procurement process. They should have no involvement whatsoever in specific procurements. They have the strongest ethical obligation to refrain from seeking to be involved in any way.
Members of Council should not see any documents or receive any information related to a particular procurement while the procurement process is ongoing.
[23] Mr. Rason, a City employee with nearly 30 years of construction experience, prepared cost estimates for the City Hall expansion which were supported by two independent cost consultants. Public meetings were held April 27, May 20 and June 1, 2009 at which Mr. Cutruzzola criticized the City’s cost estimates, stating they were far too high and did not make sense.
[24] On June 24, 2009, Council passed a resolution instructing staff to issue a proposal call by October 30, 2009. City staff scrambled to meet that deadline. A September 16, 2009 Status Report to Council makes no reference to Competitive Dialogue. It did indicate that staff would continue to develop the RFP and provide Council with a “preview” of the RFP prior to October 31, 2009. It was not until October that the Technical Team working on the RFP, at the suggestion of Professor McKellar, decided to recommend the Competitive Dialogue process.
[25] Professor McKellar prepared an October 16, 2009 draft for discussion regarding Competitive Dialogue and there was Power Point presentation to Council in closed session on October 21, 2009. The Power Point included the following:
a) The Evaluation Committee would be comprised of subject matter experts and would focus on technical criteria;
b) Professor McKellar would be the Process and Fairness Advisor; and
c) A Preferred Respondent would be identified and recommended by the Evaluation Committee to City Council for approval.
[26] On October 29, 2009, Mr. Patteson sent Council and the Senior Management Team a key messages document that also indicated that it would be senior staff that would evaluate responses to the RFP, undertake Competitive Dialogue and recommend the Preferred Respondent to Council.
[27] The Evaluation Committee consisted of:
Maurice Lewis (Chair) Commissioner of Financial Services and Treasurer
Julia Patteson (Vice Chair) Commissioner of Buildings and Property Management
Dennis Cutajar Commissioner of Economic Development and Communications
John Corbett Commissioner of Planning, Design and Development
Randy Rason Director of Facility Services, Building Design and Construction
Peter Honeyborne Director, Treasury Services and Deputy Treasurer
C. The RFP
[28] The October 30, 2009 RFP described the process leading to a construction contract as follows:
a) Respondents would provide a Submission which would be evaluated against weighted criteria by the Evaluation Committee comprised of senior City officials. The RFP specified the Submission requirements in some detail, however, there was no requirement to specify a price;
b) Two or three Respondents would be invited to participate in the Competitive Dialogue process leading to each Respondent being asked to submit a Final Offer, including price;
c) The Evaluation Committee would select a Preferred Respondent who would be recommended to City Council for approval; and
d) Submissions were due on February 11, 2010. The RFP Timetable anticipated that Competitive Dialogue with the Respondents would occur in March and April, leading to Final Offers by April 22, 2010, and the recommendation of a Preferred Respondent by August 11, 2010.
[29] The RFP included the following:
a) A4 – Principles of fairness and equity will be adhered to throughout the Competitive Dialogue process.
b) A4 – An Independent Process and Fairness Advisor will monitor the RFP process and report to City Council on the fairness, equity and transparency of the process.
c) I1 – “Any Respondent who has questions with regard to the RFP process, requirements or other aspects of the RFP shall communicate solely through Purchasing Division…” to the attention of Ms. Oliveira.
d) J7 – “Respondents are required to sign and submit a Confidentiality Agreement in a form and substance prescribed by the City… prior to the Competitive Dialogue process.”
e) Legal Matters - Respondents agree that delivering a Submission constitutes an unqualified acceptance of the terms of the RFP.
f) K4 – Respondents shall not make any public announcement or disclosure to the media relating to the RFP process or the Project.
g) K8 – Each Respondent agrees to conduct itself in good faith and in accordance with the RFP.
h) K12 – This “RFP does NOT constitute an offer by the City of Brampton to contract. Neither does this RFP nor will any Submission, constitute such an offer or create any contractual or other obligations whatsoever… Only the execution and delivery of a contract between the City of Brampton and a Respondent will obligate the City of Brampton in accordance with the terms and conditions contained in such a contract.”
i) Addendum 1 - the Evaluation Committee may, in its sole discretion, disqualify a Respondent for a failure to comply with any of the terms and conditions of the RFP.
[30] The RFP itself, and the information provided to Council prior to October 30, 2009, made it clear that senior City officials would constitute the Evaluation Committee, which would evaluate the initial proposals, engage in Competitive Dialogue and recommend a Preferred Respondent to Council for approval.
[31] In early November, 2009 the City retained Andrew McKaig of Deloitte who had prior experience with Competitive Dialogue procurements in the U.K. Deloitte provided a manual and training to all participants. Technical teams utilizing outside experts, were assembled to report to the Evaluation Committee. Weighted criteria were identified to guide the evaluation process. I was generally impressed by what I would describe as a well-defined and detailed evaluation process.
[32] By letter dated November 26, 2009 Inzola raised a number of fundamental concerns and asked that the RFP be amended. These concerns included:
a) “In our opinion, it is of the utmost importance that this RFP process be seen to be, and be transparent in every respect. By only opening the submissions in public to reveal the names of those who submitted, but not allowing the public to see and hear a presentation of the actual submissions, we believe the Council and the public are disadvantaged and not part of the process.”
b) “Under the Evaluation section, and particularly Financial/Ability to Deliver the Plan, we find it extremely unusual that, as a basis for a fair selection, there was no request that a dollar value be attached to each presentation. Personal preferences and subjective decision making are the likely result and will open the City up to a real potential for criticism and lack of fairness.”
c) “Surely, it should be possible to simplify the whole process by allowing each respondent’s submission, with price attached, to be opened and presented to a Committee of Council on February 11th. Each submission would then undergo detailed and confidential analysis, further discussion as appropriate for clarifications, and a final selection made and recommended by the Committee to Council all within 60 days at the most, and subject only to working out an agreeable contractual arrangement.”
[33] The City did not amend the RFP and did not otherwise accede to Inzola’s requests.
[34] On February 11, 2010 Inzola delivered its Submission. As contemplated by the RFP, Inzola’s proposal was largely conceptual. Inzola’s 150 page Submission devoted about five pages to describing what it proposed to build.
[35] The 2005 RFEI process had included some members of Council on the Evaluation Committee. This created an expectation on the part of some Council members that they would get to see the Submissions and the Final Offers of all Respondents in their entirety.
[36] At the Council meeting on February 24, 2010, Mr. Patteson indicated staff would report to Council and provide sufficient information to enable Council to understand the staff recommendations. Councillors Moore and Gibson indicated they wanted to see the Submissions. Mr. Patteson responded that he would consult Professor McKellar about whether the Submissions could or should be made available to Council.
[37] By email dated March 12, 2010, Professor McKellar advised as follows:
The RFP is very clear on the issue of selection, as outlined on Page 10, and I quote:
“The Evaluation Committee will evaluate the Final Offers and identify and subsequently recommend the Preferred Respondent to Council for approval.” The process itself is depicted in Appendix 2 and again this is very clear as to the role of Council.
In response to your enquiry, and according the explicit provisions of the RFP:
(A) Council will not see all three submissions. I cannot account for any misunderstanding on this point by any Council member given the clarity of the wording in the RFP. The obvious response would be to draw Council’s attention to the RFP if such misunderstandings persist.
(B) Council will make the final decision. This responsibility is distinct from Council doing the actual evaluation. Council will make the final decision and can either approve or reject the Preferred Respondent based on the recommendation of the Evaluation Committee.
The Evaluation Committee has an obligation to prepare a recommendation for Council and this recommendation would contain the basis for selecting the Preferred Respondent. There is a clear obligation by Council to adhere to the provisions of the RFP.
I am free Monday morning if you want to discuss, however, I am not sure what there is to discuss other than remind Council to review the RFP. [Bold lettering in original]
[38] Mr. McKaig testified that he agreed with Professor McKellar’s advice.
[39] Professor McKellar sent a further email dated March 17, 2010 confirming his view and explaining what material Council would be entitled to see as follows:
- Recommendation to City Council
“The Evaluation Committee will evaluate the final offers and subsequently recommend the Preferred Respondent to Council for Approval.” (Page 10, Selection Process). The selection process is also depicted in Appendix 2 – RFP Process on the CD accompanying the RFP.
Council will make its decision on the basis of the recommendation of the Evaluation Committee. Council will not review all submissions. Council must understand that the Evaluation Committee recommendation is based upon a thorough and detailed evaluation process sanctioned by City Council and includes a process of Competitive Dialogue carried out under adherence to principles of commercial confidentiality (page 3, A.4. The RFP Process). However, it will be incumbent on the Evaluation Committee to provide City Council with the information they require to make a decision. This recommendation should contain the following information.
Summation of:
• The Evaluation process through to start of Competitive Dialogue;
• The Competitive Dialogue process; and
• The Call for Final Offers;
Recommended Preferred Respondent, with respect to:
• Details of the Final Offer including price;
• Ability meet the City’ requirements;
• Financial strength and ability to deliver;
• Commitment Letter;
• Delivery Schedule
Fairness Report
• An Independent assessment by the Process and Fairness Advisor.
Next Steps
• Schedule and details for negotiating Agreement Documents […]
[40] A March 19, 2010 staff Report to Council tracked the language of Professor McKellar’s March 17, 2010 email as to what Council would see at the end of the process.
[41] On March 19, 2010, Mr. Lewis sent Mr. Patteson an email stating, “Just to be clear when the question is asked ‘will or when will Council get a chance to see the 3 proposals’, the answer is ‘NO’.” The March 24, 2010 Council minutes, however, record that:
Mr. Patteson clarified that the RFP process provides that Council would be given an opportunity to view each proposal at the Final Offer stage of the process.
[42] Mr. Patteson testified that at the March 24, 2010 Council meeting he referred to the fact that the RFP allowed for the display of design panels at the Final Offer stage but he did not make the statement recorded in the minutes. Mr. Lewis testified that he did not recall Mr. Patteson making this statement and does not believe he did because it was contrary to all the advice they had received. Other witnesses said they recalled the statement or expressed confidence that the minutes would be accurate. The minutes were circulated and no one corrected the statement attributed to Mr. Patteson.
[43] I find that Mr. Patteson did not make this statement. It was completely at odds with the advice he had received. If he had made the comment, the members of the Evaluation Committee would certainly have noticed. Mr. Patteson would have been criticized and there would probably be emails or minutes reflecting such criticism.
[44] In any event, Mr. Patteson asked Professor McKellar for a letter to Council to address this issue as Council did not seem to be satisfied with the explanations of staff. Professor McKellar’s letter to Council dated April 6, 2010 included the following:
Council can accept or reject the recommendation of the Evaluation Committee, but Council does not have the option of reviewing all Final Offers received, selecting elements from among the Final Offers, or substituting a different or unspecified evaluation process to arrive at a decision based on these offers.
D. Events leading to the Disqualification of Inzola on June 11, 2010
[45] In the back and forth dialogue leading to the disqualification of Inzola there are recurring themes:
a) Inzola maintained the position it took on November 26, 2009 that Council members should review all three Final Offers and the Respondents should be permitted to present them in person to Council.
b) Some Councillors expected to be able to review the Submissions and the Final Offers in their entirety. In Professor McKellar’s opinion the RFP did not allow for this.
c) Professor McKellar maintained the position that Inzola must sign the Confidentiality Agreement as drafted and refrain from communicating directly with Council. His further position was that Inzola should be disqualified for failing to sign the Confidentiality Agreement and communicating directly with Council.
d) City staff considered or made recommendations as to how Inzola might be accommodated and for a considerable time resisted Professor McKellar’s recommendations.
[46] The Evaluation Committee determined that Inzola, Dominus and Morguard were all qualified Respondents and on March 19, 2010, decided to invite all three to participate in the Competitive Dialogue.
[47] On April 7, 2010, the City provided the Respondents with the Confidentiality Agreement. Dominus and Morguard signed and returned the Confidentiality Agreement. Mr. Cordiano and Ms. Knowles testified that they had experience in relation to RFPs and forms of confidentiality agreements and saw nothing unusual or concerning in the Confidentiality Agreement required by the City.
[48] On April 14, 2010, Mr Davis wrote to Ms. Oliveira advising that Inzola intended to participate in the Competitive Dialogue process but was not prepared to sign the Confidentiality Agreement without clarification of the nature of the confidential information the City believed would be provided to the Respondents. Inzola suggested it would still participate in the first Competitive Dialogue meeting, given that it was to be a presentation by Inzola that would not involve the disclosure of confidential information.
[49] While Ms. Oliveira was the sole point of contact for Respondents to the RFP, the letters she sent were approved by the Evaluation Committee. On April 15, 2010, Ms. Oliveira wrote to Mr. Davis, based on advice from Mr. McKaig, advising that Inzola had to sign the Confidentiality Agreement prior to the initial presentation meeting, as that meeting was part of the Competitive Dialogue process.
[50] By letter dated April 19, 2010, Mr. Davis questioned what proprietary and commercially sensitive information the City would be providing that should not be made public and the indefinite duration of the confidentiality obligation. Mr. Davis also stated:
We believe Council deserves and must be provided an unfiltered opportunity to see and hear presentations from all three (3) proponents of their submissions with their pricing known and to ask questions directly of each proponent.
[51] By email dated April 21, 2010 Mr. Lewis put Mr. Davis’ question to Mr. McKaig of Deloitte: “…what information would the City be sharing with the proponent that would be or should be confidential other than the City expressing an interest to expropriate property.” Mr. McKaig responded, “Pretty much all of it”, explaining that if the procurement fell through information about what the City was considering, what it would do and how could prejudice the City obtaining a fair deal in the future.
[52] By email to the City dated April 24, 2010, Professor McKellar stated in relevant part:
The City had deemed it necessary to request information of proponents that is both confidential in nature and commercially competitive. Without this information the process of competitive dialogue cannot work and the City could not put forward its recommendations to Council with the level of confidence it must have in the data it has collected. The Confidentiality Agreement is not part of the Competitive Dialogue process, it is a prerequisite to the process and a mandatory requirement. A respondent has the right not to sign and thereby withdraw from the process. Two respondents have signed, without question, so the problem is not with the Submission requested by the City. To open up this matter to discussion would require that the City abandon the RFP. The option of beginning a three party negotiation on the confidentiality Submission is not possible. This requirement is clearly stated in the RFP Section K3, page 23.
[53] By letter dated April 26, 2010, Ms. Oliveira advised Mr. Davis that if Inzola did not sign the Confidentiality Agreement by May 4, 2010, the City would deem Inzola to have withdrawn from the process.
[54] By letter dated April 29, 2010, Mr. Davis advised Ms. Oliveira that Inzola would not sign the Confidentiality Agreement, but was prepared to meet and discuss what would be an acceptable form of agreement. Mr. Davis also gave permission for his letter to be circulated to the other Respondents and Council.
[55] By email dated April 30, 2010, Professor McKellar advised Mr. Lewis as follows:
In response to your enquiry and having reviewed the contents of the letter from Davis Webb, dated April 29, 2010, in my capacity as Process and Fairness Advisor to Brampton City Council, I would advise as follows:
The request to meet with representatives of the Inzola Group should not be granted. Such a meeting, if held, would violate of the terms and conditions of the RFP.
This letter cannot be circulated to other proponents and Council as suggested by Davis Webb. Circulation of material prepared by one Respondent to other Respondents, or otherwise made public, would violate the terms and conditions of the RFP.
The only recourse to accommodate this request is for the City of Brampton to withdraw the existing RFP and proceed with a new RFP.
[56] By letter dated April 30, 2010, Ms. Oliveira advised Mr. Davis that, after consulting the Process and Fairness Advisor, the position of the City remained that Inzola was required to sign the Confidentiality Agreement prior to its first Competitive Dialogue meeting scheduled for May 4, 2010.
[57] By letter dated May 4, 2010, Mr. Davis maintained the position of Inzola and asked that its correspondence be made available to Council and to the two other Respondents.
[58] The City consulted Professor McKellar. By email dated May 7, 2010, he advised that:
a) Inzola through its own actions had withdrawn from the process, given that the City had given Inzola a May 4 deadline and advised it would deem Inzola to have withdrawn from the process if it did not respond by that time.
b) Inzola should not be given a “second chance” as that would raise fairness issues in relation to the other Respondents who had adhered to the rules.
c) The Evaluation Committee should have no discussion with Mr. Davis on behalf of Inzola.
[59] The City did not take Professor McKellar’s advice and indicated some willingness to give Inzola a second chance. By letter dated May 10, 2010, Ms. Oliveira wrote to Mr. Davis asking him to advise as to:
…what specific revisions to the Confidentiality Agreement that you would propose, and we will consider whether the proposed revisions could be accommodated within the terms of the RFP.
[60] Mr. Davis responded on May 12, 2010. He did not propose any specific revisions, but suggested:
Surely the City can give some limiting scope to this definition based on a test of being necessary and appropriate to be kept from the public, potentially forever.
[61] Mr. Davis further stated that Inzola wanted an assurance that all proponents could present their final proposals to Council:
Lastly, we have been asking for assurance that our client, together with the other Proponents, will be permitted to present publicly, to Council, their submission and their final submission with pricing as such may have evolved from the Competitive Dialogue process. We are assuming that the City expects information shared with the Proponents is intended to influence the final responses from each Proponent and that Final Submissions that use information supplied by the City to such end is not be considered Confidential Information as the submissions will be publicly presented and available. Again, please confirm as it is crucial that Proponents not be prohibited from presenting or disclosing their submission with pricing that will be incorporating information the City has shared to shape such submissions arising from the Dialogue.
Since we expect the Council and public expect the opportunity to see all submissions, we don’t understand why paragraph 9(c) would need to protect Confidential Information indefinitely, ie. forever. Maybe if the nature of the kind of information that the City wants to protect from any public disclosure, potentially forever, is explained this would become more clear.
[62] By email of May 13, 2010, Professor McKellar advised the City that he was concerned about perceived unfairness to Dominus and Morguard and for that reason the City should make a decision as to the status of Inzola.
[63] By letter dated May 18, 2010, Ms. Oliveira wrote to Mr. Davis advising that, on the advice of the Process and Fairness Advisor, the Confidentiality Agreement was required and the RFP did not contemplate the Respondents presenting directly to Council. Ms. Oliveira further advised Inzola that if it did not sign the Confidentiality Agreement by May 21, 2010 it could not participate in the Competitive Dialogue process.
[64] By letter dated May 21, 2010 Mr. Davis wrote to Ms. Oliveira advising that the Confidentiality Agreement was overly broad; that Council should be entitled to see each of the three proposals and that Inzola had no option but to approach Council directly. Mr. Davis enclosed a deputation request and asked that his letter be circulated to Council and the other proponents.
[65] By email of May 25, 2010, Professor McKellar advised that allowing Inzola to make submissions to Council would be a “fatal breach” of the RFP and would contravene “principles of fairness and equity”. Mr. Patteson responded to Professor McKellar on May 26, 2010 indicating the Evaluation Steering Committee had discussed the issue the day before and came to the same conclusion.
[66] Mr. Davis emailed the City clerk on May 26, 2010, regarding Inzola’s proposed deputation to Council, stating:
The request would be to discuss an impasse that has been reached with respect to the RFP process specifically surrounding the scope and duration of the Confidentiality Agreement tendered for execution prior to commencement of the Competitive Dialogue Process and the opportunity for each Proponent to present Final Submissions with pricing to Council.
[67] Mr. Cutruzzola left a message with the City clerk on May 28, 2010 indicating that Inzola wanted to appear before Council and “Either we do it in Council or do it through the press.”
[68] By letter dated May 31, 2010, Ms. Oliveira maintained the City’s position and advised Mr. Davis that:
While the Respondent will not participate in the dialogue stage, the Respondent has not been excluded from the RFP. In due course the Evaluation Committee will determine, after completion of dialogue with Respondents who are participating in the dialogue stage of the RFP, whether the Respondent will be asked to submit to a Final Order.
[69] By letter dated June 1, 2010, Mr. Davis advised Ms. Oliveira that Inzola would be communicating with all members of Council seeking a fair resolution of the issues. By further letter of June 1, 2010, Mr. Davis wrote to the Mayor and members of Council attaching the record of correspondence with the City and maintaining the position of Inzola that the Confidentiality Agreement was overly broad and:
… that each Proponent present their Final Submissions with pricing directly to Council, so that Council could hear an unfiltered presentation by each Proponent and be entitled to ask any and all questions of clarification that Council members may have about any of the 3 submissions.
[70] Mr. Cutruzzola was not allowed to make a presentation to the Committee at the Council meeting on June 2, 2010. He then gave an interview that day to the Brampton Guardian outlining the concerns expressed by Mr. Davis and stating that Inzola would never be part of a secret process.
[71] On June 3, 2010, Mr. Cordiano emailed Ms. Oliveira as follows:
Diane,
We are concerned about the matter conveyed in your fax to me dated June 2nd.
We are frankly unclear about the impact of the attempt made by the respondent, the Inzola Group Ltd., to circumvent the protocols set out in the RFP for communications. The fact that the Respondents’ delegation was not formally received by the Committee of Council does not negate the fact that an inappropriate attempt to communicate with Council was made. This appears to be a direct violation of the rules set out in the RFP which strictly prohibits this type of engagement. We respectfully request further clarification and a ruling on this matter.
Regards,
Joseph Cordiano
[72] The City asked for Professor McKellar’s advice. By email dated June 6, 2010 he advised that, in his opinion, Inzola was in violation of numerous provisions of the RFP and that its actions:
…have the potential to seriously jeopardize the entire RFP process and at great costs to the City, its taxpayers and the other two Respondents.
[73] Professor McKellar further suggested that the Evaluation Committee was obligated to immediately determine the status of Inzola, stating:
My concern at this point is with the integrity of the RFP process going forward in light of the actions of Inzola Construction Limited. There is a pressing need for the City to be seen by the two remaining Respondents as committed to a good faith process and to their own principles of fairness and equity.
[74] The RFP provided that the Evaluation Committee was responsible to determine whether a Respondent should be disqualified. For reasons that are not clear, the Evaluation Committee members understood that any disqualification decision was the responsibility of Mr. Lewis, as the Commissioner of Finance. Inzola, quite reasonably, did not make an issue of this misunderstanding. The evidence was clear that all members of the Evaluation Committee were apprised of the issues raised by Inzola, the City response, and the advice of Professor McKellar. All Evaluation Committee members, with the exception of Mr. Corbett, agreed that disqualification was appropriate. Mr. Corbett testified that his role on the Evaluation Committee was limited to addressing planning related issues.
[75] By letter dated June 11, 2010, Ms. Oliveira advised Mr. Davis that Inzola was disqualified from the RFP process having breached the sole point of contact, confidentiality and media releases – public disclosure provisions of the RFP.
[76] By letter dated July 14, 2010, Mr. Chernos, by then counsel for Inzola, wrote to the City enclosing a Confidentiality Agreement signed by Inzola, amended so that the words “of a commercial nature” were added to the definition of “confidential information”. By letter dated July 27, 2010, Ms. Oliveira advised that the City would not reinstate Inzola.
E. Testimony as to the Reasons for Disqualification
[77] I will start by reviewing the evidence of Inzola, which was directed at demonstrating that the Mayor and City staff had an animus toward Inzola and in particular Mr. Cutruzolla.
[78] Mr. Cutruzolla testified that at three public meetings in 2009 to discuss the City Hall expansion he criticized City staff’s cost estimates as far too high. Inzola was also critical of the RFP and wanted to communicate directly with Council concerning the Confidentiality Agreement.
[79] Mr. Cutruzolla believed that Mayor Fennell, Ms. Dubenofsky, Mr. Patteson and Mr. Lewis and were all biased against him.
[80] Mr. Cutruzzola testified that he has known Mayor Fennell since 1990. Until 2008 they had a good relationship and Inzola contributed to her campaign and supported her gala evening and golf tournament. In 2009 he became concerned about the Mayor’s conduct. Inzola nonetheless participated in the Mayor’s golf tournament in 2009 and the Mayor attended an Inzola gala party on February 14, 2010.
[81] In an October 12, 2010 Brampton Guardian article concerning the fact that the Mayor’s charity was not registered, Mr. Cutruzzola was quoted as saying he had stopped donating to the Mayor’s events in 2010 because he wanted to know where the money was going. Mr. Corbett testified Mayor Fennell told him that she was upset about the accusations made by Mr. Cutruzzola and others.
[82] I do not think that Mr. Cutruzzola would have gone public with criticisms of the Mayor while Inzola was hoping to be approved by Council as the Preferred Respondent. The Brampton Guardian article was four months after Inzola was disqualified. Mr. Corbett recollected Mayor Fennell being upset with Mr. Cutruzzola because of his public statements.
[83] I, therefore, find that Mr. Cutruzzola still had a positive relationship with Mayor Fennell as of the time Inzola was disqualified.
[84] Mr. Kanellopoulos confirmed the evidence of Mr. Cutruzolla regarding how the process unfolded and indicated that he shared the concerns regarding the transparency of the process, the scope of the Confidentiality Agreement and the inability to submit directly to Council. He could not, however, add anything in terms of whether there was anti-Inzola animus.
[85] Mr. Davis testified that he attended public meetings concerning the proposed City Hall expansion and heard Mr. Cutruzzola criticize the staff cost estimates. He thought that staff were disturbed by the comments. Mr. Davis believed staff inflated the cost estimates to attempt to dissuade the City from building space it would own. In cross-examination, Mr. Davis agreed that he had dealt with City staff for many years and had generally been treated respectfully. Mr. Davis also agreed that the principal concern about the Confidentiality Agreement was that it would preclude presenting Inzola’s proposal directly to Council or the public.
[86] Councillor Miles testified that there was animosity between Mayor Fennell and Councillors Moore and Sanderson that pre-dated the City Hall expansion process. In Councillor Miles’ opinion, Councillors Moore, Gibson and Sanderson were closely aligned with Mr. Cutruzzola.
[87] Councillor Gibson believed that Ms. Dubenofsky was carrying out the Mayor’s agenda and that the Mayor did not want Inzola to be successful. Councillor Moore regarded Ms. Dubenofsky as closely aligned with the Mayor.
[88] Councillor Sprovieri testified that prior to the RFP the Mayor would praise Mr. Cutruzzola and she never gave any indication that her positive opinion of him changed. Councillor Sprovieri testified that when he received Mr. Davis’ letter of June 1, 2010 he made a note that Inzola, “does not like the rules and wants to derail the process”.
[89] The fact that there were factions on Council and perceptions as to who was aligned with whom is not surprising and does little to suggest anti-Inzola animus. In any event, the Councillors were not privy to what took place at the Evaluation Committee.
[90] Mr. Corbett’s testimony was quite critical of City staff and he suggested there was animus toward Mr. Cutruzzola and partiality toward Dominus. I will, therefore, review it in some detail.
[91] Mr. Corbett joined the City in 1985. From 2007-2011 he was the Commissioner of Planning, Design and Development and served on the Evaluation Committee. He was the Chief Administrative Officer of the City from 2012-2015, having been appointed after Ms. Dubenofsky’s contract was not renewed.
[92] In chief, Mr. Corbett testified that:
a) By the start of the 2009 RFP process there had been a distinct change in the relationship between the Mayor and Mr. Cutruzzola over his criticism with respect to the Mayor’s charitable fund. The Mayor told Mr. Corbett she was upset by the allegations of Mr. Cutruzzola and others.
b) Mr. Patteson and Mr. Lewis were upset at being criticized by Mr. Cutruzzola over the cost estimates for the City Hall expansion.
c) Ms. Dubenofsky viewed her role as carrying out the Mayor’s agenda and not the will of Council.
d) Ms. Dubenofsky would typically meet with Mr. Patteson and Mr. Lewis before and after Evaluation Committee meetings. Mr. Corbett believed that Ms. Dubenofsky was directing the evaluation process, including issues to do with the Confidentiality Agreement.
e) Ms. Dubenofsky, Mr. Patteson and Mr. Lewis discussed the fact that Inzola might get disqualified if it did not sign the Confidentiality Agreement or if Mr. Cutruzzola lobbied Council directly.
f) It was understood “from Ms. Dubenofsky’s dialogue” that Dominus should become the Preferred Respondent.
g) At the March 31, 2011 Evaluation Committee meeting, after Dominus was approved as the Preferred Respondent, Mr. Lewis said Council had sent a message that, “Inzola is not the big guy in this town anymore”.
h) Ms. Dubenofsky indicated that the Negotiating Committee needed to complete the RFP process so that Inzola could not be involved in a subsequent process.
i) Ms. Dubenofsky, Mr. Patteson and Mr. Lewis would often mimic Mr. Cutruzolla’s accent and make fun of his perceived egocentricity.
[93] Mr. Corbett’s recollection was no doubt influenced to some extent by his background and experience, which included:
a) Near the end of Ms. Dubenofsky’s contract, when there was discussion of Mr. Corbett becoming the City Manager, she placed him on administrative leave. He believed she did so in order to “bring out some allegations against me” so he would not be appointed City Manager.
b) The City terminated him as City Manager.
c) After leaving the City Mr. Corbett established a consulting business. Mr. Cutruzzola contracted him and they discussed the possibility of him doing consulting work for Inzola. They had a brief discussion about the Inzola lawsuit, leading Mr. Cutruzzola to ask Mr. Corbett to meet with Inzola’s lawyers. (Mr. Corbett never did any consulting work for Inzola).
d) The City took the position that Mr. Corbett was prohibited from consulting on projects in Brampton and he believed he could have sued the City for imposing this restriction.
[94] In cross-examination, Mr. Corbett agreed that:
a) Staff should make the City Manager aware of any issues that might be controversial, attract publicity or impact on significant projects.
b) The falling out between the Mayor and Mr. Cutruzzola was around the time of the October 12, 2010 Brampton Guardian article quoting Mr. Cutruzzola’s criticisms of the Mayor.
[95] There were a number of aspects of Mr. Corbett’s evidence that caused me to question his objectivity and the reliability of his recollection.
[96] Mr. Corbett testified regarding an incident in November, 2009, in which City staff initially refused to provide Mr. Cutruzzola with a copy of a report regarding flood plain mapping in the downtown area. Mr. Corbett suggested the report was routine and public and that if it was anyone else the report would have been handed out at the counter. Inzola cited this as an example of bias against Inzola.
[97] In cross-examination, Mr. Corbett acknowledged he had been consulted regarding whether the report should be released. The issue for staff was whether the report should be issued as an addendum to the RFP with an explanatory note. In fact, Mr. Corbett sent an email on November 25, 2009 indicating that he had discussed the issue with Mr. Patteson and they believed the report should be provided with an addendum to be drafted. By email of December 3, 2009, Mr. Corbett indicated that he had drafted the explanatory note which should go with the report.
[98] Mr. Corbett offered the explanation that, in addition to emails, there were conversations in which he favoured immediate release of the report. I do not find this explanation convincing, given Mr. Corbett’s own email stating “we” believe a note is required. I find the delay in providing this report was reasonable and is not evidence of bias.
[99] Mr. Corbett testified that he never saw Ms. Dubenofsky, Mr. Patteson or Mr. Lewis attempt to find a solution to the Confidentiality Agreement issue. This, however, ignores the fact that the City backed off from deadlines given to Inzola. Further, in the face of strong recommendation from Professor McKellar that Inzola be disqualified and not be given a “second chance”, the City by letter dated May 10, 2010 wrote to Inzola asking, “what specific revisions to the Confidentiality Agreement that you would propose…”.
[100] Mr. Corbett indicated that he did not believe Professor McKellar should have been providing staff with drafts of his reports. Mr. Corbett, however agreed that he had commented on a draft report from Professor McKellar. Mr. Corbett testified that he never suggested at the time that it was inappropriate for staff to review draft reports because “it was not my place”. Surely, if he believed this was wrong he would have at least questioned it at an Evaluation Committee meeting.
[101] On September 9, 2014, after his appointment as City Manager, Mr. Corbett recommended that George Rust D’Eye be appointed as the City’s Auditor General, under s. 223.19 of the Municipal Act, 2001, to conduct a review of alleged negligence and wrongdoing in relation to the RFP process. In his report to Council Mr. Corbett noted that staff would be interviewed and then stated:
It is our expectation that this investigation will show that staff followed the process and conducted themselves with integrity and transparency.
[102] In cross-examination, Mr. Corbett agreed that was his view at the time.
[103] In re-examination Mr. Corbett said his report to Council was “extremely well vetted” by the legal and human resources departments and that the statement quoted above was a product of those discussions and directed to protecting the position of the City in litigation.
[104] I do not find this explanation convincing. Presumably, as a key participant, Mr. Corbett anticipated being interviewed. It makes no sense to me that he would go so far out on a limb extolling the integrity of the process if he had in mind at the time to tell the Auditor-General about the examples of bias and prejudice he referred to in his examination in-chief.
[105] I also note that after Mr. Corbett became City Manager he promoted Mr. Patteson.
[106] I turn now to the witnesses called by the City. I will review the background and experience of City staff in some detail as it has some relevance to the allegation that they acted unethically to rig the process. While there are always some exceptions, public institutions generally strive to promote based on merit, which includes the reputation of an individual for honesty and integrity.
[107] Deborah Dubenofsky is the Vice President, Finance and Administration, at Laurier University. She has a BA from the University of Toronto and a Masters in Public Administration from Queens. She has worked as a Senior Policy Advisor with the Government of Ontario, and as the Director of Policy and Government Relations for the Association of Municipalities of Ontario. She was the Deputy Chief of Staff – Policy in the Premier’s office. From 1997- 2000, she was a Government Relations Consultant. She was then recruited as the City Manager in Brampton starting in November 2007. Her employment ended in September 2012.
[108] As City Manager, Ms. Dubenofsky was the head of the administration and so had a close relationship with the Mayor. She was responsible for implementing the directions of Council. The Senior Management Team consisted of seven commissioners. She expected the commissioners to update her on important initiatives that might affect the reputation of the City or attract media interest.
[109] Ms. Dubenofsky:
a) Knew Mr. Cutruzzola as he had taken her to lunch after she joined the City and told her about building the existing City Hall and his passion for the City.
b) Had no knowledge of Dominus, but knew Mr. Cordiano by name as he had been an MPP.
c) Knew that Morguard owned the Bramalea City Centre.
[110] Ms. Dubenofsky testified that:
a) She expressed the view that the Evaluation Committee should be comprised of staff members, but did not provide input as to who should be on the Evaluation Committee.
b) She was kept advised of the correspondence with Mr. Davis concerning the Confidentiality Agreement.
c) She played no role in the evaluation and was not provided with any details about the Submissions. She did not have any preference among the Respondents.
d) She was not involved in the decisions to retain Professor McKellar and Mr. McKaig.
e) She left the City in 2012, as her contract was not renewed.
[111] In cross-examination, Ms. Dubenofsky was directed to answers she gave on May 31, 2016 when she was summoned by Inzola as a witness on a summary judgment motion brought by the City. Ms. Dubenofsky acknowledged a number of errors such as that she said she only reviewed the final draft of staff reports to Council; that she had not seen drafts of Professor McKellar’s reports; and that she only learned of Inzola’s disqualification after the fact. Ms. Dubenofsky said that she was relying on her memory, and had not reviewed the relevant documentation, when she answered those questions.
[112] Mr. Lewis became a Chartered Accountant in 1983. He worked for the Town of LaSalle for 15 years and left as the Treasurer. He was then the CAO of an amalgamated municipality for two years. He became the Treasurer of the Town of Oakville in 2000 where he had procurement responsibilities. He left after five years to go to the City of Toronto as the Director of Accounting Services. In the summer of 2008 he came to Brampton as the Commissioner of Finance and Information Services. He retired from Brampton in August 2013. Later in 2013 he assumed an interim position as Commissioner of Corporate Services and Finance with Niagara Region. He stayed there for approximately two years, and at one point served as the acting CAO.
[113] Mr. Lewis testified that the standard in Brampton, and in other places he had worked, was that Council was not involved in evaluating tenders or proposals. That was a key Bellamy Report recommendation. It was also standard that the actual proposals or bids that were received did not go to Council. Council got a report setting out who submitted, the process, the scoring matrix if it was a RFP and the staff recommendation to either accept the low bid or, on a RFP, accept the best score. It was also standard that Respondents were not allowed to delegate to Council.
[114] Mr. Lewis had no prior dealings with Inzola, although he knew that Inzola had constructed the existing City Hall and that Mr. Cutruzzola and Mr. Kanellopoulos had a high profile in the community. He knew Morguard was the largest property taxpayer in Brampton and he knew nothing about Dominus.
[115] Mr. Lewis indicated that the Evaluation Committee decided how to respond to correspondence from Inzola regarding the RFP process based upon advice from Professor McKellar. Ms. Dubenofsky reviewed the draft letters, but did not provide input on the substance. The Evaluation Committee wanted Ms. Dubenofsky to understand not only what the letters said, but why they were sent, as she would need to answer any questions raised by Council.
[116] In his opinion, Inzola violated the RFP by attempting to delegate to Council, by corresponding directly with Council and by the statements Mr. Cutruzzola made to the Brampton Guardian on June 2, 2010. After receiving advice from Professor McKellar, Mr. Lewis decided Inzola should be disqualified. All members of the Evaluation Committee agreed.
[117] Mr. Lewis believed that Mr. Cutruzzola was criticizing the competence of staff. Staff members were trying to do their best but as human beings were offended by unfair criticism. Mr. Patteson was upset by the criticism.
[118] Mr. Lewis thought that since Inzola had agreed to the RFP by responding to it, Inzola should abide by it and not criticize it. He felt that if Inzola did not like the RFP, it should not have participated. He regarded the positions advanced by Inzola as contrary to the RFP and the Bellamy Report.
[119] In cross-examination, Mr. Lewis testified he heard Ms. Dubenofsky make unprofessional comments regarding Mr. Cutruzzola. Mr. Patteson also made negative comments. Mr. Lewis felt staff were under siege by Mr. Cutruzzola and by Council. The situation was emotionally charged, and City staff members did the best they could.
[120] Mr. Patteson joined the City in 2004 as Director, Physical Plant and Real Property Services. In 2008 he was appointed as the Commissioner, Buildings and Property Management. While at the City he oversaw $1.5 billion of capital construction.
[121] Mr. Patteson testified that at a February 10, 2009 meeting at the Board of Trade, Mr. Cutruzzola suggested that Mr. Patteson had a vested interest in the City Hall project. He was taken aback at this.
[122] Mr. Patteson agreed that he interpreted statements by Mr. Cutruzzola reported in a May 20, 2009 Brampton Guardian article, as suggesting that City staff had provided deliberately inflated cost numbers to deter Council from proceeding with the project. He believed these comments were unfair and untrue.
[123] Further, at a June 1, 2009 Stakeholder and Public Input Forum, Mr. Cutruzzola criticized the estimated construction costs. Mr. Patteson regarded this as questioning the competence of staff. The cost numbers had been validated by two outside consultants. In Mr. Patteson’s experience, it was normal to face criticism on high-profile projects.
[124] Mr. Patteson testified that approximately 45 interested parties attended the November 27, 2009 site meeting at which City staff outlined the RFP process. At that meeting, Mr. Cutruzzola repeated the points made in his November 26, 2009 letter, including that Inzola wanted a simplified process allowing each Respondent to present its proposal to Council on February 11, 2010, with Council determining the successful Respondent. Mr. Patteson believed that Mr. Cutruzzola was attempting to disrupt the RFP process that Council had approved.
[125] Mr. Patteson did not know anyone at Morguard, but knew it was a significant property owner in Brampton. Mr. Patteson had never heard of Dominus.
[126] Mr. Patteson described Mr. Davis’ letter of April 19, 2010 as “pure mischief making” because it continued to advance the position that Council should receive an unfiltered presentation from Inzola, Dominus and Morguard. He believed the City had made it clear that was not the process, so for Inzola to continue to press that point distracted from advancing the RFP process. The Evaluation Committee wanted Inzola to remain in the RFP process as it was preferable to be able to deal with three Respondents.
[127] Mr. Patteson testified that the members of the Evaluation Committee agreed that Professor McKellar was the most qualified to opine on whether Inzola should be disqualified and they agreed with his recommendation.
[128] Mr. Patteson testified that the only negative comment he made to colleagues was that, while Mr. Cutruzzola claimed to be a master builder, the brick work on the Inzola built City Hall was falling off. He never imitated or mocked Mr. Cutruzzola.
[129] In cross-examination he agreed that, in discussions with colleagues, he poked fun at Mr. Cutruzzola because he made extravagant claims such as that he was a master builder at age 12 and a prodigy like Michelangelo.
[130] Mr. Cutajar was employed by the City for 27 years. At the relevant time he was the Director of Economic Development and Communications and a member of the Evaluation Committee. As of 2009, he had dealt with Inzola and described it as well-respected. He described Mr. Cutruzzola as a leader in the community and as a supporter of the arts and said he had a positive relationship with him. He also had a positive relation with Morguard and no relationship with Dominus.
[131] At Senior Management Team, and at Evaluation Committee meetings he never heard any disparaging or mocking comments made by anyone about Inzola or Mr. Cutruzzola. He never heard anything that raised any concern about the fairness of the process. He never observed any attempt to influence the opinions of Professor McKellar. When he saw the draft letters from Professor McKellar he reviewed them in terms of format, grammar and fact checking. He did not try to revise or redraft the opinion and is not aware of anyone else doing that.
[132] Mr. Rason has a Diploma in Business Management from Ryerson, a Degree from York in Administrative Studies and a Master Certificate from York in Municipal Studies. He worked for the City of Toronto in a Design Construction capacity and was responsible for 1,200 properties. The largest project he was responsible for was the Old City Hall restoration in 2000 that cost $55 million.
[133] Mr. Rason met Mr. Cutruzzola on two occasions prior to the RFP. He was impressed by Mr. Cutruzzola, his accomplishments and his pride in the City. Mr. Rason had little exposure to Morguard prior to the RFP and knew nothing about Dominus. Mr. Rason testified that at the November 27, 2009 site meeting, Mr. Cutruzzola expressed concern that members of the Evaluation Committee, would be making decisions for the City. Mr. Cutruzzola asked for a show of hands as to which members lived in the City.
[134] Mr. Rason did not hear any mocking comments about Mr. Cutruzzola at the Evaluation Committee meetings. He did not observe any attempt to influence Professor McKellar’s opinions.
[135] He agreed that it made logical sense that after disqualification, the only way Inzola could get the contract was if the RFP process failed, however, he had not thought of that at the time.
[136] Professor McKellar testified that he is the Associate Dean External of the Schulich School of Business and the Director of the Brookfield Centre of Real Estate and Infrastructure, which is part of the Schulich School. He has graduate degrees in Architecture and City Planning. His consulting work is exclusively for public sector clients in relation to the procurement and management of public assets.
[137] Professor McKellar served on the Board and was the Acting Chair of the Ontario Realty Corporation, which is the second largest owner of real estate in Canada. He co-founded the National Executive Forum on Public Property to assist government bodies to share best practices. He has written a book on the management of public real estate assets and is now working on a book on public infrastructure. He is 76 years old and so has a wealth of experience.
[138] Professor McKellar had no personal relationship with anyone at the City. He had never heard of Inzola or Dominus and did not know anyone at Morguard. Professor McKellar has an impeccable resume in terms of his academic background and having occupied a number of senior and responsible positions.
[139] Professor McKellar testified that City staff never asked him to modify any of his opinions. City staff never suggested that any particular Respondent should be favoured. He did not perceive that staff wanted to disqualify Inzola.
[140] In addition to the opinions he expressed in the correspondence I have cited, Professor McKellar testified that:
a) When an RFP fails there is a stigma and diminished private sector interest in participating in a second RFP.
b) It was “clear cut” from the RFP that Council would not be provided with information concerning the Submissions or their evaluation until the staff report which recommended the Preferred Respondent. Council would not be provided with the actual Submissions or the Final Offers.
c) The limited role of Council just described was appropriate given there was no point in the Competitive Dialogue or evaluation phase when a political decision was required. Providing information to Council prior to the recommendation of a Preferred Respondent would simply invite Council to substitute its own decision without regard to the selection criteria in the RFP.
d) Private sector proponents can get nervous if they perceive that a procurement process has become political. Professor McKellar advised Brampton staff of a RFP in Kitchener in which a respondent (he believed it was Morguard) walked away after Council involved itself in the selection process.
e) He wanted to keep three Respondents in play as that would maximize the ability to access private sector creativity.
[141] Mr. McKaig has a Ph.D. in Finance from Aberdeen University. From 2003 to 2009 he worked in Scotland with Grant Thornton, and later Deloitte, on public sector procurements that utilized Competitive Dialogue. Mr. McKaig was retained in November 2009 after the RFP was issued. He prepared a detailed framework to evaluate responses to the RFP and conducted two mandatory training sessions for the Evaluation Committee.
[142] Mr. McKaig testified that he was impressed by the professionalism and diligence of the City staff. Mr. McKaig received input from Deloitte real estate experts in relation to comparing the Dominus and Morguard bids. Mr. McKaig described the financial analysis that he was part of as “rigorous” and stated he was confident that the scoring was correct.
[143] Mr. Cordiano of Dominus testified that he was interested in the RFP because there was a merit-based process in which decisions were made by professionals. He would have been concerned if the decision was going to be based on local politics. He wanted to know that Dominus had a fair chance. The fact that there was to be a Fairness Commissioner was a positive feature. When Mr. Cordiano learned that Inzola had communicated with Council he wrote to Ms. Oliveira taking the position that this communication constituted a “direct violation of the rules set out in the RFP which strictly prohibits this type of engagement”.
[144] Ms. Knowles of Morguard testified that Inzola’s attempt to delegate to Council during the process caused her to be concerned that the whole process might be abandoned as a result.
[145] For oral reasons given during the trial, I ruled that Mr. Emanuelli could give expert evidence as to industry norms in Canadian public procurement. From 2000 to 2008 Mr. Emanuelli was an Ontario government lawyer with extensive involvement in public procurement. Since January 2009, he has been the Managing Director and General Counsel of the Procurement Law Office specializing in providing legal and training services to public institutions across Canada. He has written books entitled, Government Procurement and The Laws of Precision Drafting, A Handbook for Tenders and RFPs. He also publishes a quarterly electronic newsletter, The National Tendering Law Update. He has authored approximately 150 articles in business and other publications on public procurement. His resume lists, on a no-names basis, approximately 250 seminars, training sessions and speeches that he has presented to various federal, provincial and municipal governments and public agencies.
[146] Mr. Emanuelli testified that in public sector procurement “fairness” is understood to mean that there is a consistent process for all competitors. “Openness” means there is a public notification of the competition which is different than a process in which selected companies are invited to participate. “Transparency” means that the process rules and the evaluation rules are disclosed and the outcome is announced. “Fairness”, “openness” and “transparency” do not suggest the direct involvement of politicians.
[147] Mr. Emanuelli testified that as of 2009, the definition of confidential information in the Confidentiality Agreement was a standard one that he had seen “countless times”. He was asked why the definition could not be limited to commercial information. He said it would be very difficult to define what is or is not commercial and, in any event, commercial information may not cover all that needs to be protected. He also testified that the standard practice is that confidentiality obligations are perpetual or indefinite. If the protection was time-limited, it would not really protect confidentiality.
[148] In cross-examination it was pointed out that the form of Confidentiality Agreement was not provided to Inzola until after it had responded to the RFP. Mr. Emanuelli agreed that if the Confidentiality Agreement was not consistent with the RFP the City could have amended the agreement.
F. After-the-Fact Evidence
i. Introduction
[149] The decision to disqualify Inzola was communicated to Inzola on June 11, 2010 and was effectively confirmed when the City refused to reinstate Inzola after it submitted an amended, signed Confidentiality Agreement on July 14, 2010. It remains that after-the-fact conduct is relevant. If City officials acted in bad faith toward Inzola after the disqualification that is circumstantial evidence relevant to the issue of whether the bad faith existed at a prior time. In considering the significance of after-the-fact evidence it is necessary to consider whether the conduct is explained by something other than the alleged bad faith.
[150] Inzola further submits that after-the-fact evidence is relevant even if I determine that Inzola was properly disqualified. Inzola argues, that if the City had conducted the RFP properly, City Council would not have accepted the recommendation of a Preferred Respondent or approved a construction contract. In that event there would have been a new process which Inzola would have had a chance of winning.
[151] While my findings are based on the totality of the evidence, I will discuss the principal issues raised by Inzola under headings which track the Inzola submissions.
ii. Role of Mayor Fennell and Ms. Dubenofsky
[152] Mayor Fennell and Ms. Dubenofsky testified that they did not intervene in the evaluation process. Messrs. Patteson, Lewis, Cutajar and Rason testified that Mayor Fennell and Ms. Dubenofsky did not seek to influence their work. Professor McKellar and Mr. McKaig did not detect any bias or impropriety. Morguard was unsuccessful but Ms. Knowles had no complaint regarding City staff.
[153] Inzola’s evidence of bias from Mr. Cutruzzola and several City Council members was for the most part anecdotal and subjective. In contrast, the City evidence was direct and corroborated to some extent by independent witnesses such as Professor McKellar and Mr. McKaig. I have previously explained my reservations regarding Mr. Corbett’s evidence.
[154] I, therefore, find that:
a) While Mayor Fennell was disturbed by Mr. Cutruzzola’s accusations in October, 2010 she did not attempt to influence the Evaluation Committee against Inzola.
b) Ms. Dubenofsky did not attempt to influence the Evaluation Committee against Inzola.
iii. Bias in Favour of Dominus
[155] Inzola submits that the City was biased in favour of Dominus in a number of respects and for a number of reasons, as follows:
a) The City funded acquiring an option on 20 George St., which Dominus required if at some time in the future the City decided to proceed with Phase Two of the Dominus proposal. The City could have, but did not, disqualify Dominus for the false statement in its December, 2010 Final Offer that it had an option on 20 George St.
b) Staff misled Council about the cost of the Dominus Final Offer.
c) Dominus and its principals had close connections to the Conservative party. Inzola argued that Mayor Fennell and Ms. Dubenofsky were inclined to favour Dominus for that reason.
d) The City did not allow Morguard to approach Inzola with a view to acquiring 65 and 69 Queen, which were lands Morguard proposed to build on.
[156] I start with the role City staff played in securing the option on 20 George St.
[157] The Dominus Final Offer dated December 9, 2010 included Phase 1, which was the City Hall expansion, and a Phase 2 which included a library to be constructed at 20 George St. The Final Offer stated that Dominus had an “option” to purchase 20 George St.
[158] On the evening of March 28, 2011, Council was considering whether to approve Dominus as the Preferred Respondent to construct the Phase 1 City Hall expansion. That afternoon, the City emailed Dominus asking it to confirm the status of the option. Dominus responded by email that, given that the City had deferred consideration of Phase 2, Dominus had not extended the option. Dominus indicated that it had a business relationship with the owner of the property and so was confident it could acquire 20 George St. This response was forwarded to Messrs. Patteson and Lewis that afternoon.
[159] At the Council meeting that evening, Councillor Moore inquired as to the status of the option and Mr. Lewis responded:
…they have an option on the property that is correct, I can tell you that. I can’t tell you when it expires but I can tell you that they know that as part of the delivery of Phase 2 […] it is incumbent on them to make sure that land is available.
[160] Councillor Moore observed it might take ten years to make a decision on Phase 2. Mr. Grant of the City Legal Department then suggested it would be reasonable for Dominus to have a decision from the City on Phase 2 before committing to a long-term option.
[161] Councillor Moore was entitled to a straight answer to her question and she did not get it. Having said that, I have no doubt that Mr. Lewis believed Mr. Cordiano’s assurances that Dominus could acquire 20 George St., and that Mr. Lewis regarded the option as a red herring given that building a library on 20 George St. was many years into the future, if at all. Mr. Cordiano testified that he had a “firm verbal commitment” that Dominus could acquire 20 George St.
[162] Dominus was approved by Council as the Preferred Respondent. The City and Dominus then commenced contract negotiations.
[163] A July 29, 2011 staff report to Council indicated that Dominus had secured 20 George St. to demonstrate its commitment to Phase 2. In fact, 20 George St. was not secured at that time and Dominus had made it clear to the City that it was not prepared to pay for an option on 20 George St. given that Phase 2 might never proceed. On August 10, 2011, the day on which Council approved the Dominus contracts, Dominus concluded an agreement allowing it to purchase 20 George St. during the 3 year period commencing October 30, 2011. The option fee was $480,000, and if it was not paid by October 30, 2011, the agreement ended without obligation. By agreement dated October 12, 2011, Mr. Lewis, on behalf of the City, agreed that the City would pay the option fee and acquire the right to purchase 20 George St. Mr. Lewis approved the payment pursuant to an authority delegated by Council to staff to make strategic land purchases.
[164] Mr. Patteson testified this agreement made sense for the City as it had an interest in acquiring 20 George St. back to 2003 and at one point had initiated its expropriation. In 2005-2009 it was identified as the possible location for a transportation hub or university campus.
[165] As the option was approaching its expiry, a July 25, 2014 report to Council from Mr. Corbett, also signed by Mr. Patteson, recommended the purchase of 20 George St. Council agreed and the purchase was completed.
[166] Inzola cited the City dealings with Dominus and 20 George St. as evidencing a continuing bias against Inzola. Inzola submitted that the City provided assistance to Dominus, which it never would have provided to Inzola, to ensure that Dominus would succeed. Inzola submitted the City did this because if the RFP failed, Inzola could participate in a future process.
[167] I do not agree. By August, 2011, City staff had been working hard for approximately 14 months to gain approval for a much needed City Hall expansion. Testimony and emails show City staff working at all hours of the day and night and on weekends. Professor McKellar testified that a failed RFP can stigmatize a City and deter future respondents. So too could a second failed RFP stigmatize the senior staff members who were driving the process. I am satisfied that the assistance offered to Dominus had nothing to do with Inzola and everything to do with staff wanting to complete the project successfully to meet the needs of the City and to be recognized for that accomplishment. The dealings with 20 George St. do not, therefore, support Inzola’s contention that bias against Inzola was a factor in its disqualification.
[168] Inzola also submitted that City staff misled Council by stating in the March 21, 2011 report to Council that annual payments to Dominus would not exceed $8.2 million, when in fact the Dominus Final Offer contained an interest adjustment provision. Mr. Lewis testified that in the negotiations that followed the City took the position that its payments would not exceed $8.2 million. While an interest adjustment provision was ultimately agreed to he believed it highly unlikely that it would ever be applicable.
[169] If there was any fault in not providing Council with a detailed explanation of the interest adjustment provision, I find that this was motivated by a desire to obtain approval of what staff believed was the best option and not due to any animus against Inzola.
[170] Inzola pointed out that a number of parties were connected to the Progressive Conservative (“PC”) party:
a) Mr. Cordiano of Dominus had been a PC, M.P.P. and Cabinet Minister.
b) Dominus had a relationship with, and ultimately sold its interest in the City Hall project to, Fernbrook.
c) Fernbrook was owned by or associated with Mario and Nick Cortellucci who were prominent donors to the PC party.
d) Ms. Dubenofsky was the Chief of Staff for a PC Cabinet Minister in 1997-1998. In 1998 she joined the Premier’s office.
e) Nick Cortellucci donated to the Mayor’s Gala in 2005 and 2010. The Mayor scheduled an appointment with Mario Cortellucci in 2007 and may have met with him in 2011.
[171] Inzola asks that I infer that the Mayor and Ms. Dubenofsky, “… believed that the selection of Dominus as the winning Respondent would do more to further their political careers than an award to Inzola or Morguard”. In my opinion it would be speculative to draw much if anything from these connections. On the evidence many developers knew, and donated to, many politicians. With one exception all Brampton Councillors and the Mayor received donations from Inzola and its principals in 2003-2010.
[172] In any event, the fact that these connections existed does not establish cause and effect. Deloitte devised a rigorous process for evaluating the Final Offers which included weighted scoring of various criteria. Deloitte was deeply involved in the financial analysis. Mr. McKaig testified that he was confident the scoring was correct. The Financial team scored Dominus 480 to 327 for Morguard. The Technical team scored Dominus 404 to 262 for Morguard. I, therefore, find that Dominus was selected as the Preferred Respondent based on the merits of its Final Offer and not by reason of any political interference or partiality.
[173] By letter dated June 28, 2010, the City advised Morguard that, based on advice from Professor McKellar, it should not contact Inzola regarding securing 65 and 69 Queen St. The letter referred to the fact that land assembly options would be discussed in the Competitive Dialogue.
[174] Mr. Knowles testified that the City never expressed reservations on the basis that Morguard did not control 65 and 69 Queen St. This was presumably because if Morguard was successful, the lands could be secured by expropriation. Ms. Knowles testified that she had no criticism of how the City conducted the RFP process.
[175] I, therefore, find that the advice that Morguard should not contact Inzola had nothing to do with bias against Inzola or partiality toward Dominus.
iv. Staff Review and Revisions to Professor McKellar’s Draft Reports to Council
[176] Professor McKellar provided his reports to Council in draft form for City staff to review. There was certainly nothing covert about this. The draft reports were circulated to the members of the Evaluation Committee and a member of the City legal department.
[177] Professor McKellar testified that it was normal when he did work for a City to let staff review his draft reports. This permitted any factual errors to be corrected. He observed that there can be different expectations as to the style of a report and staff can advise in that regard. Professor McKellar said that he would never sign anything unless he could stand behind every word.
[178] Mr. McKaig testified that, in his experience, advisors often provide drafts to staff. He did not observe any attempt by staff to influence Professor McKellar.
[179] I find that there was nothing inappropriate in Professor McKellar submitting draft reports to City staff for comment. He was working with staff. As Professor McKellar testified, he did not regard himself as having an adversarial relationship with City staff.
v. Alteration of Records
[180] Inzola’s position was that City staff “sanitized” and “purged” records relating to the RFP process in an effort to “obscure the truth” that the process was biased against Inzola. I do not agree, as I will explain.
[181] First, while some changes were made there was no attempt to delete the records that had been widely circulated. City staff were certainly alive to the fact that documents can come to light through freedom of information requests. City staff knew that amending the records would not conceal anything in the event of litigation. Secondly, on March 29, 2010, Mr. Patteson emailed Mr. Lewis and Mr. Honeyborne with the sensible suggestion that Evaluation Committee minutes should “capture less of the verbatim discussions and more on the decided outcomes…”. A number of the changes reflect this approach.
[182] As I will explain, in this context I do not view the changes made as sinister or particularly significant. City staff understandably wanted to avoid a record that might be misleading, incomplete or misinterpreted. I will canvass several of the amendments Inzola objected to.
[183] The minutes of the March 31, 2011 Evaluation Committee meeting, following Council approval of Dominus as the Preferred Respondent, recorded a remark by Mr. Lewis that Council had sent a message to Inzola that it, “is not the big guy in this town anymore”. The draft minutes were circulated May 24, 2011 and then, for reasons that are not clear, re-circulated on August 30, 2011 to five Committee members. Mr. Lewis replied on August 31, 2011 that this quote should be deleted. I see nothing sinister in that. This was a comment that had nothing to do with issues decided at the meeting or to be acted upon.
[184] Evaluation Committee draft minutes of April 27, 2010 were amended to delete a summary of a briefing with the City Manager, which contained references to the City Manager encouraging the Committee to keep the RFP process moving; to keep Council informed as much as possible and to address concerns around confidentiality and transparency. These references are innocuous in my opinion.
[185] The May 11, 2010 Evaluation Committee minutes were supplemented to indicate that the City letter of May 10, 2010 asking Inzola to specify the revisions it wanted to the Confidentiality Agreement was “so consideration could be given to whether such revisions could be accommodated within the words of the RFP…”. In fact the May 10, 2010 City letter itself stated that, “we will consider whether the proposed revisions could be accommodated within the terms of the RFP”. As such I view this addition as fair and accurate.
vi. Other Evidence
[186] In September, 2011, the City took the position that it had a right of way over the lane adjacent to the City Hall expansion site and demanded that obstructions and encroachments be removed. Mr. Davis contacted the City on behalf of the owner of the property. This led to the Deputy City Solicitor writing to Mr. Davis on September 27, 2011 taking the position that he had a conflict in that he was a Director of Inzola; Inzola was suing the City and representations were being made to Council to cancel the City Hall project. While not stated expressly, the suggestion appeared to be that Inzola was making such representations and would benefit from Council cancelling the project. While I am not opining on the conflict issue, I can certainly see that Inzola had an interest in anything that might impede the project from proceeding. In any event, in my view it would require speculation to infer that the position of a City lawyer in 2011 had any relevance to discerning the intent of City officials in 2010.
[187] Inzola also refers to what it characterizes as “the holdup on Hurontario St.”. In late 2011, Inzola sought an encroachment agreement to allow the installation of tie-backs under City land adjacent to a construction site on Hurontario St. Mr. Patteson instructed City officials to attend a December 13, 2011 meeting and take the position that the City would only agree if the Inzola affiliate that owned 65 and 69 Queen St. agreed to enter a similar encroachment agreement with Dominus. Mr. Patteson testified that when Inzola objected he sought advice and immediately retracted the City’s position. Mr. Patteson testified that his involvement in this issue was over in one day. I find that this was an error in judgment by Mr. Patteson, in linking the two projects, which he promptly corrected. It does not evidence bias against Inzola.
[188] Inzola submitted that the manner in which the City conducted the action, including unsupported allegations against Mr. Cutruzzola, constituted further evidence of bias. I have no evidence as to who provided counsel with the information that is pleaded and why counsel decided to make the allegations which were withdrawn prior to trial. In addition, it would infringe on solicitor and client privilege for this evidence to be provided. In my opinion, it would be highly speculative to reason that the pleadings advanced by former lead counsel in 2013 shed any light or the intent of City officials and staff in 2010.
III. LIABILITY – LAW
[189] In Chippewas of Mnjikaning First Nation v Chiefs of Ontario, 2010 ONCA 47 the Court explained the difference between a tender and an RFP process as follows:
(3) An RFP Process
186 An RFP process differs from a tender process. As noted above, the Contract A/Contract B analysis may not always be triggered. It depends upon whether the parties intend to initiate contractual relations by the submission of a bid in response to the invitation to tender: M.J.B. Enterprises, at para. 23. In some cases, depending upon the wording of the request for proposals, the successful proponent may acquire a contract with the party calling for tenders on some matters, and the right to negotiate with the owner on others. In other cases, the only effect of being selected as winning bidder is to position the bidder as a negotiating party, with the content of the winning proposal serving simply to outline the bidder's opening negotiating position Authors Paul Sandori and William M. Pigott explain these principles as follows in Bidding and Tendering: What is the Law?, 2d ed. (Toronto: Butterworths, 2000), at p. 239:
The owner that wants submissions from interested parties but does not wish to create Contract A,10 may choose to issue a request for proposals (RFP). Properly drawn, an RFP asks parties for expressions of interest and sets out the owner's intention to consider those expressions of interest and then to undertake negotiations with one or more parties whose proposal(s) appeal to the owner.
187 This statement was adopted by the Manitoba Court of Appeal in Mellco Developments Ltd. v. Portage la Prairie (City) (2002), 2002 MBCA 125, 222 D.L.R. (4th) 67, at para. 72; leave to appeal to S.C.C. refused, [2002] S.C.C.A. No. 502. Gordon Baker, who testified on behalf of MFN, has considerable expertise in the area of RFPs, having written academically on the subject. He agreed in cross-examination that in many instances the RFP and the bid are essentially the starting negotiating positions of the parties.
[190] Inzola and the City both rely on Mellco Developments Ltd. v. Portage la Prairie (City), 2002 MBCA 125, cited in Chippewas, which was the first case to recognize that a duty of fairness applied in an RFP. Context is, however, important.
[191] In Mellco the RFP provided that proposals would be evaluated on specified criteria. Mellco was an experienced land developer and submitted a proposal that addressed all of the requisite criteria such that it would have scored 97 of 99 on the criteria the City had identified. The Lion’s Club made a proposal which did not comply with the requirements of the RFP in a number of important respects. Notwithstanding the non-compliance, two senior City officials reviewed both proposals and preferred the Lion’s Club proposal on the basis that it was innovative and provided greater detail.
[192] In Mellco the Court concluded that, even in the case of an RFP
[…]there was, in my opinion, an obligation on the part of the city to conduct itself fairly and in good faith. Without some fairness in the system proponents could incur significant expenses in preparing futile bids which could ultimately lead to a negation of the process. In circumstances such as those before us, there must be enough fairness and equality in the procedures to ensure its integrity and openness.
[193] The Court, however, concluded that the defendant City had acted fairly and in good faith even though it deviated from the stated requirements of its RFP. It is clear, therefore, that the Mellco obligation of fairness and equality does not require strict adherence to the letter of the RFP. Put differently in Mellco, the City was found to have acted fairly and in good faith notwithstanding it said it would evaluate proposals on specified criteria and then failed to do so.
[194] The RFP refers to process being fair, equitable and transparent, and obliges Respondents to act in good faith. I find that it is implied that the City will act in good faith. I interpret the RFP, at its highest, to impose upon the City the same good faith obligation identified in Mellco and not some higher or more exacting standard.
IV. LIABILITY – ANALYSIS AND CONCLUSION
A. Did Inzola Breach the RFP?
[195] The position of Inzola was that:
a) The City breached the RFP by requiring an overly broad Confidentiality Agreement;
b) The RFP sole point of contact provision did not preclude Inzola taking “process” issues to Council for determination; and
c) Inzola did not make a public announcement as Mr. Cutruzzola only responded to media questions.
[196] The position of the City was that:
a) Inzola breached the RFP by failing to sign the Confidentiality Agreement;
b) Inzola breached the RFP sole point of contact provision by appealing directly to Council; and
c) Mr. Cutruzzola breached the RFP prohibition on making public announcements or public disclosure in the media related to the RFP process.
[197] The RFP refers to the process being conducted fairly, equitably and transparently. The City acknowledges that it had a duty to conduct the RFP process in good faith, as defined in Mellco.
[198] Inzola argued that to determine the legal obligations of the City I should also consider assurances given to Inzola by City staff and Councillors that the process would be fair, open and transparent. Inzola submitted that these assurances were relied on by Inzola and that the City is estopped from denying them.
[199] It does not make sense to me that the rights of a Respondent, based on the language of the RFP, can be added to or subtracted from by prior assurances they happen to have received. Obviously individual Councillors and staff members cannot speak for the City. If Inzola is correct every Respondent could have different legal rights. In any event, and most importantly, I see no material difference between the provisions of the RFP and the statements made by City staff and Councillors. I, therefore, do not think that evidence that public statements were made by City officials about the process being fair, open and transparent adds anything to Inzola’s rights.
[200] Under the RFP Inzola was “required to sign a Confidentiality Agreement in a form and substance prescribed by the City”. I do not agree that the fact that the RFP contained two references to protecting “commercial confidentiality” precluded the City from asking for the form of Confidentiality Agreement it did. I also agree with Mr. Emanuelli’s point that it would be extremely difficult to determine what confidential information was commercial and what was not.
[201] I do not agree that the Confidentiality Agreement was overly broad. The agreement was drafted by external counsel. Mr. Emanuelli testified that as of 2009 the definition of confidential information in the agreement was a standard one that he had seen “countless times”. He also testified it was standard practice to make confidentiality obligations of indefinite duration. Dominus and Morguard were familiar with confidentiality agreements, had the Confidentiality Agreement reviewed by counsel and signed without question.
[202] Inzola submitted that Mr. Emanuelli’s evidence should be discounted because Competitive Dialogue had not been used before in Canada so there can be no industry norm related to it. I do not agree. Mr. Emanuelli testified, and I accept, that Competitive Dialogue is the same or similar to other RFP processes that as of 2009 were commonly used on complex projects in Canada.
[203] While I have referred to the evidence of Mr. Emanuelli it is not essential to my decision. Leaving aside his evidence, the evidence that the Confidentiality Agreement was drafted by external counsel and signed by Morguard and Dominus supports the conclusion that the language was not overly broad or contrary to the RFP.
[204] In any event Inzola’s real concern about the Confidentiality Agreement was that it would preclude Inzola from presenting its proposal and pricing directly to Council. In my opinion, this was not a legitimate concern. I agree with Professor McKellar and interpret the RFP as not allowing Respondents to present their Final Offers directly to Council.
[205] As such, I find that Inzola breached the RFP by not signing the Confidentiality Agreement.
[206] I now turn to whether Inzola breached the sole point of contact provision. All City witnesses agreed that the 2005 Bellamy Report was highly persuasive, if not authoritative, as to procurement best practices. The Bellamy Report makes the following points regarding the role of elected officials:
a) Elected officials should remain outside of the competitive process and should focus on quality assurance being whether the approved process was followed.
b) Elected officials should, therefore, not be involved in reviewing actual bid documents, meeting with bidders and making its own evaluation.
[207] I recognize that there are differences between tenders and an RFP process but accept that the Bellamy Report recommendations still apply with considerable force to an RFP. A direct appeal to Council would have been contrary to the Bellamy Report recommendations.
[208] Turning to the Section I1 Communication Protocol, the RFP provided that any Respondent that communicates with the City other than through the Purchasing Supervisor may be disqualified. Inzola clearly breached the RFP by having Mr. Davis write to the Mayor and Council on June 1, 2010 effectively asking Council to intervene in the process.
[209] Inzola advances what I regard as highly technical arguments. Inzola submits that a “purposive” interpretation of the Section I1 Communication Protocol, in light of the “factual matrix”, is that the sole point of contact requirement applies only to “questions” about the RFP and not to “concerns or complaints about the City’s conduct of the RFP process”.
[210] I agree with the following submissions of the City:
An interpretation of section I1 that required the content and nature of a communication to be interpreted as being substance or process-related before determining if the Communications Protocol applied would be entirely unworkable and would wreak havoc on the procurement process. Debates distinguishing the nature of the communications would arise. There would be disagreements.
To the extent that delegations to Council were permitted where the Communications Protocol did not apply would further frustrate and undermine the integrity and proper functioning of the procurement process. Delays would arise to permit Council’s involvement. Bringing Council into these disputes would defeat the policy objective outlined in the Bellamy Report of keeping the politicians separated from specific procurements. Further, it is entirely unclear what value Council could bring to such disputes. It has no special skills or expertise to address or resolve the types of concerns that can arise during procurements. Given the nature of the Council body, the decisions would be political rather than founded in policy.
[211] I, therefore, do not accept Inzola’s argument that the RFP sole point of contact requirement did not prevent it from taking “concerns or complaints about the City’s conduct of the RFP process” to Council. Inzola submitted that Council should have, in effect, served as a court of appeal for the RFP process. Council should have heard submissions about the process and made a decision. Inzola’s position obviously was that Council should have required that the Confidentiality Agreement be amended and that Respondents be allowed to present their Final Offers to Council. Utilizing Council as a court of appeal during the RFP process is antithetical to the Bellamy Report recommendations.
[212] As such, I conclude that Inzola also breached the sole point of contact provision in the RFP.
[213] I now turn to whether Inzola breached the RFP K4 Media Releases, Public Disclosure and Public Announcement provision. Again, Inzola advances highly technical arguments as follows:
a) The City cannot rely upon the June 2, 2010 Brampton Guardian article “City Not Playing Fair”, because it was not specifically referred to in the City’s June 11, 2010 disqualification letter. Inzola takes the position that this is a post hoc reason despite the fact that it was specifically referred to in Professor McKellar’s advice letter of June 6, 2010 and the City’s June 1, 2010 disqualification letter referred to the, “events of the week of May 31, 2010.”
b) The K4 Media Releases, Public Disclosure and Public Announcement provision does not apply. On June 1, 2010, Mr. Cutruzzola did not make an announcement he simply responded to an inquiry by a Brampton Guardian reporter.
c) The same purposive interpretation leads to the conclusion that the RFP restrictions on communication were simply to prevent Respondents from lobbying Council and from disclosing confidential information.
[214] I see no reason why the City cannot rely upon Mr. Cutruzzola’s comments reported in the June 2, 2010 Brampton Guardian. This article was clearly a factor in the City’s decision as it was cited in Professor McKellar’s letter of June 6, 2010 advising the City to disqualify Inzola. I see no relevant distinction between an announcement or press release and a response to a media inquiry. I also note that on May 28, 2010 Mr. Cutruzzola left the City Clerk a message indicating that if he was not allowed to speak to Council he would “do it through the press”.
[215] As such, I also find that Inzola breached the RFP prohibition on making public announcements or disclosure to the media.
B. Was the Decision to Disqualify Inzola Unfair or Made in Bad Faith?
[216] I find that, with some justification, Inzola perceived that it had a “home field advantage” due to the fact that it constructed the original City Hall and dealt with City staff and Council on an ongoing basis. I further find that Inzola perceived that the greater the involvement of Council, the greater the advantage to Inzola.
[217] There is much to be admired in the life stories of Mr. Cutruzzola and Mr. Kanellopoulos. They came to Canada as young men, worked hard, achieved great success and contributed to the community. My overall assessment, however, is that they played hardball, and engaged in brinkmanship, throughout this process. There is nothing wrong with that and sometimes it achieves the desired result. In this regard:
a) Mr. Cutruzzola wanted to get the City Hall expansion back on track and went so far as to suggest at public meetings that staff were deliberately overstating the likely costs.
b) Inzola’s position that it fundamentally disagreed with the RFP and wanted a very different process was made clear in Mr. Davis’ letter to the City of November 26, 2009. Despite that, Mr. Cutruzzola took the opportunity to raise the same issues at the November 27, 2009 site meeting in front of approximately 45 potential Respondents. Mr. Cutruzzola criticized the central role of staff in the RFP process and went so far as to ask senior staff for a show of hands as to who actually lived in Brampton. I think Mr. Patteson is probably correct that this dissuaded some potential Respondents.
c) Inzola responded to the RFP, which was an “unqualified acceptance” of the RFP terms, but continued to press for a completely different process which would allow it to submit its Final Offer directly to Council.
d) Inzola disregarded the RFP and took its dispute to Council. There were a number of possible consequences that would benefit Inzola:
i) Council could agree to amend the RFP as requested.
ii) Council could decide to cancel the process as being flawed for the reasons Inzola identified.
iii) Morguard and/or Dominus could decide to withdraw from the process because it was politicized.
[218] Appealing to Council was a risky, but calculated, move by Inzola. It did not work.
[219] In this context, I have no doubt that City staff were frustrated at Inzola’s criticisms and its continuing efforts to change or scuttle the RFP process. I have no doubt that some derogatory or disparaging comments were made regarding Mr. Cutruzzola. The City witnesses probably minimized the nature and extent of the comments made. Mr. Corbett probably exaggerated the comments made.
[220] For a number of reasons, I do not view any comments made to be of great significance. The comments were made out of the understandable frustration that Inzola seemed to be intent on derailing the RFP process designed by the City. Most importantly, actions speak louder than words. I will therefore, address what the City in fact did.
[221] To put this in context, Inzola’s argument was that by the time the RFP was issued the Mayor, Ms. Dubenofsky, Mr. Lewis and Mr. Patteson had already decided Inzola should not be the Preferred Respondent. Ms. Dubenofsky, on behalf of the Mayor, wanted Dominus to become the Preferred Respondent.
[222] If Inzola was correct one would expect these City officials to rig the process so that they could dictate the result. In fact they did just the opposite. Mr. McKaig was retained in November, 2009 to help structure the process. He developed a detailed framework, with weighted scoring, to evaluate responses to the RFP and later the Final Offers. Completeness Review, Technical Review and Financial Review teams were assembled to actually analyze and score the submissions received. The role of the Evaluation Committee was to engage in Competitive Dialogue, receive the analysis and scores from the technical teams and decide whether to recommend, and if so who to recommend as, a Preferred Respondent.
[223] To a very considerable extent the process adopted reduced the influence of Messrs. Patteson and Lewis. This makes little sense if the goal from the outset was that they influence the process and determine the result.
[224] The RFP referred to selecting “two, and perhaps three…” Respondents to engage in Competitive Dialogue. As I will detail later, Inzola was the lowest ranked Respondent. If the goal was to exclude Inzola, this could have been done prior to Competitive Dialogue. The voluminous documents produced reflect that this was not even discussed. The Evaluation Committee instead approved Inzola to proceed to Competitive Dialogue.
[225] On April 26, 2010 the City took the position that if Inzola did not sign the Confidentiality Agreement by May 4, 2010, it would be deemed to have withdrawn from the process. It was the Evaluation Committee headed by Messrs. Lewis and Patteson, acting contrary to advice from Professor McKellar, which backed down from the May 4 deadline. It was the Evaluation Committee which decided to give Inzola an opportunity to suggest revisions to the Confidentiality Agreement.
[226] The Evaluation Committee did not do this out of affection for Mr. Cutruzzola. I think the Committee members recognized that the disqualification of Inzola could have major political and legal repercussions. I also find that Messrs. Patteson and Lewis, and indeed the entire Evaluation Committee, wanted to keep Inzola in the process as that would enhance the Competitive Dialogue.
[227] I appreciate that post-disqualification there are references in Evaluation Committee minutes to the fact that a failure of the process could benefit Inzola. I do not find these references surprising. From the perspective of City staff, Inzola was continuing to try to scuttle the RFP. I agree. In May, 2011, Mr. Cutruzzola was attending public meetings and giving interviews suggesting that the process be stopped and that Council could still pick Inzola over Dominus. It is no wonder that Inzola would still be a topic of discussion. I can also appreciate why City staff would not look forward to Inzola participating in a future process.
[228] I also do not see anything wrong in Mr. Patteson and Mr. Lewis updating the City Manager as to the status of the RFP and with respect to issues, such as the potential disqualification of Inzola, which could be controversial or attract public and media attention. The Evaluation Committee minutes of May 25, 2010 confirmed that Messrs. Patteson and Lewis were authorized to brief the City Manager concerning the RFP. There was nothing covert about these briefings and obviously none of the members of the Evaluation Committee saw anything wrong with it.
[229] As I have already explained I do not accept the submission of Inzola that after-the-fact evidence supports the argument that the decision to disqualify Inzola resulted from bias.
[230] Inzola submitted that in determining whether the City fairly exercised its discretion to disqualify Inzola I should consider how the City treated breaches of the RFP by Dominus and Morguard. While I agree this has some relevance, the breaches by Inzola could not have been more fundamental. Inzola wanted Council to intervene and effectively sanction a new process whereby Inzola would get to make an unfiltered presentation of its proposal to Council.
[231] I do not accept the Inzola submission that there was something wrong in the Evaluation Committee requesting a letter to Council in late March, 2010 and Professor McKellar providing his letter of April 6, 2010 to Council. City staff had previously tracked the language of Professor McKellar in their report to Council as to the materials that would be provided to Council. Some Councillors continued to want to see the complete Submissions so it made sense to request a direct report from Professor McKellar which might carry more weight.
[232] I now come to the central role of Professor McKellar. He has vast real estate experience and impressive credentials. Professor McKellar also had firm and consistent views regarding the RFP. I completely accept the evidence of Professor McKellar that the views he expressed to the City were his own views and that he was not influenced to any degree by the views of staff. I also accept his evidence that he never heard staff express a preference for or against any Respondent.
[233] The City based its conclusion that Inzola had breached the RFP on advice from Professor McKellar. By letter dated June 6, 2010, Professor McKellar noted that he had reviewed the history of correspondence with Inzola, and was aware of the attempt to delegate to Council on June 1, 2010 and the interview which Mr. Cutruzzola gave to the Brampton Guardian resulting in the “City not Playing Fair” article on June 2, 2010. Professor McKellar advised the City that in his view Inzola had violated the RFP by:
a) Section I1 – contacting the City other than through the Purchasing Supervisor;
b) Section J7 – failing to sign the Confidentiality Agreement tendered by the City;
c) Section K4 – making a media release and public statement related to the RFP process; and
d) Section K8 – not conducting itself in good faith.
[234] Professor McKellar concluded the letter by expressing his concern for the integrity of the RFP process and the “pressing need” to assure Dominus and Morguard the City was conducting a good faith process.
[235] Professor McKellar held the view that fairness required the disqualification of Inzola and the Evaluation Committee reluctantly agreed. I say reluctantly because I find that the Evaluation Committee members, particularly Messrs. Patteson and Lewis, knew that the blow back in disqualifying Inzola would probably far exceed any passing satisfaction that Inzola would no longer be a thorn in their sides.
[236] Put somewhat differently, I am sure that if Professor McKellar had recommended amending the Confidentiality Agreement, or the RFP process itself, to accommodate Inzola the City would have done so. The members of the Evaluation Committee were certainly not going to stick out their necks to disqualify Inzola in the face of Professor McKellar’s recommendation to the contrary.
[237] In any event, I agree with Professor McKellar’s recommendation. Context is important. Professor McKellar was concerned that appearing to favour Inzola or politicize the process might cause Dominus or Morguard to withdraw. Mr. Cordiano of Dominus, and Ms. Knowles of Morguard, expressed concern about possible politicization of the process by Inzola. I also note that both in their testimony commented favourably on the RFP process conducted by City staff.
[238] Even if Inzola is correct and the Confidentiality Agreement tendered by the City was overly broad, and even if on a purposive interpretation of the RFP it was not violated, I do not think that the disqualification of Inzola constitutes a breach of the good faith and fairness obligation discussed in Mellco. That obligation does not require strict adherence to an RFP. It does require fundamental fairness. I find that the decision to disqualify Inzola, based upon the strong recommendation of Professor McKellar, an admittedly impartial expert, clearly satisfies the Mellco obligation of fairness and good faith.
[239] Assuming, as I have found, that Inzola was properly disqualified on June 11, 2010, I do not see how the Mellco standard of fairness imposes any obligation on the City to reconsider the disqualification after Inzola signed and submitted an amended Confidentiality Agreement on July 14, 2010. If there was any obligation, I conclude that the City acted reasonably in not reinstating Inzola as that would have presented a heightened risk of withdrawal by Dominus and Morguard.
[240] The City did not breach its obligations to Inzola and the decision to disqualify Inzola was not the result of bias against Inzola.
[241] In its Reply Closing Argument, Inzola submitted that it was not required to prove bias and could succeed in its claims based upon a reasonable apprehension of bias. I do not agree. First, reasonable apprehension of bias is a basis upon which to quash the decision of a statutory decision maker. In part that is because there is often no ability to question the decision maker and prove actual bias. In our case all of the decision makers testified and were cross-examined and I have found that there was no bias. Secondly, in my view, reasonable apprehension of bias is not a basis upon which breach of contract damages can be awarded.
[242] The City is not liable and the action must be dismissed on that basis.
V. DAMAGES – LAW
A. Introduction
[243] For the sake of completeness, and should I be wrong in concluding the City has no liability, I will address damages.
[244] Inzola’s first argument is that if it had not been disqualified it would probably have been awarded the construction contract. As such, expectation damages should be awarded on the basis it was awarded the contract.
[245] Inzola’s alternative argument is that it has established that it had a meaningful chance of being awarded the contract and that expectation damages based upon a loss of chance should be awarded. Inzola suggests two loss of chance scenarios:
a) the Court determines that Inzola was improperly disqualified. If Inzola had remained in the process it had a chance to be awarded the contact; and
b) even if the Court determines that Inzola was properly disqualified, if the City had proceeded with a fair, open RFP process, there either would have been no Pfeferred Respondent or Council would have voted against awarding any contract. In that event Inzola had a chance to be awarded the contract at some future time in a new RFP or other process.
[246] Inzola, however, submits that an RFP is functionally equivalent to a Contract A / Contract B bid process that contains a “privilege” clause whereby the owner is not obliged to award Contract B to the successful bidder. Inzola relies upon case law awarding expectation damages in such cases.
[247] The position of the City is that Inzola is restricted to reliance damages based upon the cost it incurred in responding to the RFP. The City submits that a breach of an obligation created by the RFP cannot result in damages calculated on the basis of a construction contract that never existed, given that:
a) the RFP did not constitute an agreement to negotiate a construction contract. Even if it did, such an agreement is unenforceable and cannot give rise to damages in relation to the construction contract.
b) In any event the “minimum performance principle”, that in calculating damages the court deems the party in breach to have elected to proceed in the least onerous manner, is applicable. In this case the City would be deemed to have declined to enter a construction contract.
[248] I will, therefore, first address the legal nature of the RFP; make brief reference to the settled law that an agreement to agree or negotiate is not enforceable; and then discuss the minimum performance principle. This will set the stage for my analysis and conclusion.
B. The Nature of RFPS in General and this RFP in Particular
[249] In Chippewas, discussed in Part III above, the Ontario Court of Appeal endorsed the proposition, stated by aurthors Sandori and Pigott in Bidding and Tendering: What is the Law?, 2d ed. (Toronto: Butterworths, 2000), at p. 239, that:
Properly drawn, an RFP asks parties for expressions of interest and sets out the owner's intention to consider those expressions of interest and then to undertake negotiations with one or more parties whose proposal(s) appeal to the owner. [emphasis in original]
[250] In my opinion the City had a “properly drawn” RFP. This is supported by provision K12 of the RFP which states:
This RFP does NOT constitute an offer by the City of Brampton to contract. Neither does this RFP, nor will any Submission, constitute such an offer or create any contractual or other obligations whatsoever. Issuance of this RFP, the Respondent’s preparation of a Submission, and the subsequent receipt and evaluation of the Submission by the City of Brampton does not obligate or commit the City of Brampton in any manner whatsoever, including awarding a contract to any Respondent(s). Only the execution and delivery of a contract between the City of Brampton and a Respondent will obligate the City of Brampton in accordance with the terms and conditions in such a contract.
[251] This conclusion is also supported by the surrounding circumstances. In the RFP the City only provided the most general description of its wants and needs, which left much to be negotiated. In addition, it was common ground that the Respondents to the RFP assumed no obligations and could have walked away at any time during the Competitive Dialogue process.
[252] I also note that it was common ground that the RFP process did not create a “Contract A” between Inzola and the City. In a Contract A/Contract B tender process, Contract A typically has appended the form of Contract B which has a defined scope of work. Contract A obliges the owner and the low bidder to enter into Contract B.
C. Agreements to Negotiate or to Agree Are Not Enforceable
[253] Justice Pattillo’s analysis in Georgian Windpower Corporation et al. v. Stelco Inc. 113 O.R. (3d) 81, 2012 ONSC 3759 accurately states the law:
[121] It has long been held that agreements to agree or negotiate are not enforceable: Walford v. Miles, [1992] 2 A.C. 128, [1992] 1 All E.R. 453 (H.L); Cedar Group Inc. v. Stelco Inc., [1995] O.J. No. 3998, 59 A.C.W.S. (3d) 1096 (Gen. Div.), affd [1996] O.J. No. 3974, 66 A.C.W.S. (3d) 867 (C.A.). As Lord Ackner stated in Walford, at p. 138 A.C., “The reason why an agreement to negotiate, like an agreement to agree, is unenforceable, is simply because it lacks necessary certainty.”
(3) Essential terms
[122] In order for there to be a binding contract, the parties must agree on all of the essential terms of the agreement: see Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., [2007] O.J. No. 1663, 2007 ONCA 324, 223 O.A.C. 330 (C.A.), at para 81. The rationale is similar to that in respect of agreements to agree or negotiate. An agreement which lacks the essential terms is too uncertain to be enforceable.
[123] Where the essential terms have not been settled or agreed upon or where the contract is too general or uncertain to be valid, the agreement is not valid. Similarly, where the undertaking or intention of the parties, even where there is no uncertainty as to the terms of the agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the initial agreement is not binding: see Bawitko Investments Ltd. v. Kernals Popcorn Ltd., 1991 CanLII 2734 (ON CA), [1991] O.J. No. 495, 53 O.A.C. 314 (C.A.), at para.21.
D. The Minimum Performance Principle
[254] In Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 SCR 303, the plaintiff had a 36 month contract with the defendant to be its agent for the sale of product in Japan. The contract allowed the defendant the unconditional right to terminate the contract after the commencement of the 19th month on three months’ notice. The defendant terminated the contract alleging cause on the basis that the plaintiff had acted dishonestly. The trial judge found that the defendant did not have cause to terminate and awarded damages based on the payments the plaintiff would have received to the end of the 36 months, discounted to reflect the possibility that the defendant might have decided at some point to terminate without cause. The Supreme Court of Canada held that the plaintiff’s recovery should be limited to the three month minimum notice period. The Court rejected what it referred to as the trial judge’s tort-like analysis, which focused on what would likely have transpired if the defendant had not wrongfully repudiated the contract.
[255] Arbour J., for the Court. stated:
13 The general principle was explained by Scrutton L.J. in Withers v. General Theatre Corp., [1933] 2 K.B. 536 (C.A.), at pp. 548-49:
Now where a defendant has alternative ways of performing a contract at his option, there is a well settled rule as to how the damages for breach of such a contract are to be assessed. . . . A very common instance explaining how that works is this: A. undertakes to sell to B. 800 to 1200 tons of a certain commodity; he does not supply B. with any commodity. On what basis are the damages to be fixed? They are fixed in this way. A. would perform his contract if he supplied 800 tons, and the damages must therefore be assessed on the basis that he has not supplied 800 tons, and not on the basis that he has not supplied 1200 tons, not on the basis that he has not supplied the average, 1000 tons, and not on the basis that he might reasonably be expected, whatever the contract was, to supply more than 800 tons. The damages are assessed . . . on the basis that the defendant will perform the contract in the way most beneficial to himself and not in the way that is most beneficial to the plaintiff…
14 Notwithstanding the broad acceptance of the general principle, the appellant in this case advocates another approach – the one employed by Wilkins J. at trial. This approach involves an inquiry into how the defendant would likely have performed his or her obligations under the contract, hypothetically, but for his or her repudiation. This, the appellant argues, is the true test of the position the plaintiff would have been in had the contract not been repudiated.
15 This tort-like analysis proposed by Hamilton is not an established part of Canadian law. There are compelling reasons for this. Contractual obligations are voluntarily assumed by parties and given effect to by the courts. The failure to perform certain promised positive contractual obligations in contract law is conceptually distinct from the breach of unpromised negative obligations to not harm another’s interests in tort law: see G.H.L. Fridman, The Law of Torts in Canada (2nd ed. 2002), at p. 11.
16 In a successful tort claim for damages, unliquidated damages are awarded to a plaintiff on the basis that the plaintiff has suffered a loss through some wrongful interference by the defendant. The plaintiff in such cases has legally protected interests that have been found by a court to be unduly compromised. In tort cases, it is widely recognized that the inquiry into what would have been but for the tort is appropriate, since the plaintiff’s interest is in being restored to (or at least awarded compensation in respect of) the position the plaintiff would otherwise be in. See Fridman, supra, at p. 2; A.M. Linden, Canadian Tort Law (7th ed. 2001), at p. 4, (“[f]irst and foremost, tort law is a compensator”); J.G. Fleming, The Law of Torts (9th ed. 1998), at p. 5; and R.F.V. Heuston and R.A. Buckley, Salmond and Heuston on the Law of Torts (21st ed. 1996), at pp. 8-9.
17 However, under the general principle applicable in breach of contracts with alternative performances enunciated above, it is not necessary that the non-breaching party be restored to the position they would likely, as a matter of fact, have been in but for the repudiation. Rather, the non-breaching party is entitled to be restored to the position they would have been in had the contract been performed.
18 In this case, the relevant contractual duties have been expressly set out by the parties in the agreement. Hamilton is entitled to OWB’s performance of these voluntarily assumed duties. Hamilton has no compensable interest in the advantages she might have expected under any particular performance of the contract, since the contract itself provided for alternative methods of performance at the election of the defendant. If Hamilton wanted to secure herself the benefits associated with a given particular method of performance, she should have contracted for only that method of performance.
[256] The City submits that under the RFP it had the right to end the process at any time, and so had no obligation to enter a construction contract. As such, in accordance with Hamilton, the Court should deem the City to have ended the process and not entered a construction contract. On the City argument, there can, therefore, be no damages in relation to the construction contract.
[257] In Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460 Purina entered into an agreement granting Raywalt Feed Sales the exclusive right to sell Purina livestock feed in a defined territory. The agreement contained a provision giving Purina the unconditional right to cancel the agreement on 60 days’ notice. Purina then breached that agreement, and acted in bad faith, by selling directly to competitors of Raywalt which caused it to lose money and go out of business. Goudge J. rejected the argument that the Hamilton principle did not apply because Purina acted in bad faith.
[258] In Atos IT Solutions v. Sapient Canada Inc., 2018 ONCA 374, Brown J.A. recognized that the minimum performance principle constituted an exception to the rule that expectation damages are usually recoverable, stating:
31 The common law places several limits on the expectancy principle: see McCamus, at pp. 877-882; and Swan & Adamski at p. 471. One limit is the minimum performance principle. The principle has been expressed in several different ways. In Open Window Bakery, at paras. 11 and 20, the Supreme Court of Canada expressed the principle this way: in cases where the defaulting party had alternative modes of performing the contract, damages are calculated on the basis of the mode of performance least burdensome to the defaulting party and least profitable to the non-breaching party.
E. Analysis – Expectation Damages Are Not Appropriate
[259] As the City has acknowledged that, as defined in Mellco, it had a contractual duty of fairness in administering the RFP it follows that the City can be liable for breach of contract damages. The position of the City is that only reliance damages can be awarded. The evidence of Inzola was that it incurred $200,000 in expenses responding to the RFP. While Inzola provided little detail of this expense, the City did not challenge it and I accept that Inzola incurred this expense.
[260] The City arguments focused on the legal relationship described by the RFP. Inzola placed reliance on the RFP as well as language used by external counsel for the City in 2011 referring to the RFP as a contract.
[261] Inzola’s position was as follows:
The City’s argument with respect to damages misconstrues the legal basis for Inzola’s claim. The City’s legal theories are directed at a different contract from the one that Inzola is suing on. Inzola is not suing for breach of an agreement to agree or an agreement to negotiate. Cases such as WN Hillas, Courtney & Fairbairn, Walford v. Miles, and the Ontario cases cited by the City on the issues of contract formation, agreements to negotiate, and the agreements to agree accordingly have no application to this case.
This case also does not present the issue addressed in Hamilton v. Open Window Bakery, Agribrands, and Atos IT Solutions. Those cases deal with a defendant’s repudiation or breach of a contract that is capable of alternative or multiple modes of performance. Those cases and the “minimum performance” principle that they describe do not apply here because the contract on which Inzola is suing is only capable of one means of performance. Inzola is suing for breach of the contract that the City’s lawyer at Bennett Jones described in his letters to Inzola and Mr. Bejnar in 2011 – the contract under which “the City agreed to treat each of those proposals in a fair and evenhanded manner and to assess those proposals in accordance with the process described in “the RFP Document”. There was only one way for the City to fulfill that obligation: by conducting the RFP process in a manner that treated Inzola fairly and equally.
[262] In my view letters sent by a lawyer for the City in 2011 are of no assistance in determining the legal relationship between the parties. RFPs have a generally accepted meaning and this 27 page RFP contained 5 pages devoted to “Legal Matters”. In considering what obligations the parties undertook, it makes no sense to me to depart from the 2009 RFP and place any reliance on the particular words a lawyer chose to use in a letter in 2011. I also do not see any factual basis for Inzola’s argument that it relied upon the lawyer’s characterization such that the City is estopped from denying it. Given the array of arguments advanced at trial by Inzola its decision to sue the City had little, and probably nothing, to do with having received the lawyer’s letter.
[263] Inzola could not cite any case in which breach of an RFP gave rise to damages calculated on the basis that a contract had been awarded. Inzola, however, argued by analogy to Contract A/Contract B tender cases. Inzola cited Thompson Bros.(Const.) Ltd. v. Wetaskiwin (City), [1997] A.J. No. 822 (Q.B). in which the City entered a Contract A with each tenderer. As Murray J. stated:
In this case such a contract came into being between the City and the Plaintiff as well as all others who submitted tenders, including Central. The terms and conditions of contract B are also included in the Information and Invitation to Tenderers, documents therein included by reference and as implied by law. If a qualified tender is accepted then the parties have the obligation to enter into a contract containing those terms and conditions. The refusal to do so is a breach of contract A.
[264] The Invitation to Tender, however, included a “privilege clause” stating that the lowest or any tender would not necessarily be accepted. Inzola argued that Thompson Bros. was analogous to our case because a Contract “A” with a privilege clause was the functional equivalent of a RFP. Inzola then noted that Murray J. rejected the argument that only reliance damages should be awarded because the City, according to the privilege clause, had no obligation to accept any tender.
[265] While I take no issue with the result in Thompson Bros., I think it is clearly distinguishable. As noted by Arbour J. in Hamilton, the essence of contract law is the voluntary assumption of obligations. In this regard Thompson Bros. is quite different from our case. In Thompson Bros. the parties entered into Contract A which had appended the terms of Contract B that the City was required to sign with the successful tenderer. It was, therefore, clear that the parties voluntarily assumed contractual obligations in relation to Contract B.
[266] In Thompson Bros. the court concluded that the City could not rely on the privilege clause. As such, all that was left was Contract A, which the City breached by failing to award Contract B. It, therefore, made perfect sense that expectation damages would be awarded based on the plaintiff’s entitlement to Contract B.
[267] In contrast in our case, the City made it crystal clear in the RFP that it was not entering into, or assuming any contractual obligation in relation to, a construction contract. As the caselaw refers to, the City was asking for “expressions of interest” which might lead it to “undertake negotiations” with a party.
[268] Inzola also relied upon Smith v. Knudson, 2004 BCCA 613, in which expectation damages were awarded to the plaintiff who was deprived of the opportunity to participate in a procurement process. That was, however, a tort case. The plaintiff was struck by a truck. The plaintiff owned a manufacturing company and claimed that his injuries prevented him from preparing a “quality tender offer for a major contract”. The court agreed that the plaintiff was entitled to claim expectation damages based upon the chance he would have been the successful bidder.
[269] I agree that Smith was decided correctly based upon basic tort law principles. I conclude, however, that it is distinguishable. I paraphrase Arbour J. in para. 14-18 of Hamilton quoted above. In Smith the plaintiff was injured by the wrongful act of the defendant and was entitled to be restored to the position he would otherwise have been in. Inzola is not entitled to be restored to the position it would have been in but for the disqualification. Inzola is only entitled to be restored to the position it would have been in if the RFP had been performed in the manner least onerous to the City.
[270] Inzola advances the argument that if the City had acted honestly and in good faith, it would not have been disqualified. As a result, Inzola asks that I embark on a hypothetical inquiry as to how the Competitive Dialogue would have unfolded and how the construction contract would have been negotiated and performed. In my view this is precisely the tort-like analysis rejected in Hamilton.
[271] Inzola also advances the following policy argument:
Accepting the City’s position on remedies would conflict with well-settled remedial principles and send the law in a perverse direction. It would convey the message to municipalities and other public bodies that the only price to be paid for breaching their duty of fair and equal treatment in an RFP process is the modest one of refunding the price of admission to a respondent that complains. By the same token, it would convey to a respondent that has been treated unfairly that it should not seek to vindicate its right of fair and equal treatment because the value of that right is minimal, and much lower than the costs of litigation.
[272] While there is some force to the Inzola policy argument, in my view there are countervailing policy considerations that are much more compelling.
[273] As a preliminary point, I note that damages are not the only means of deterring a purchasing institution from breaching its obligations. An institution that breached its obligations would soon find that contractors were no longer interested in their RFPs.
[274] There was nothing unusual about the City’s RFP that would give Inzola special rights and expectations. If Inzola can claim expectation damages based upon the RFP it would turn the law on its head. Anyone issuing an RFP would be exposed to damages based upon the ultimate contract. This would effectively eliminate the well-recognized distinction between a RFP and a tender process. Put differently if the City’s RFP provision, that only the execution of a contract will create an obligation in relation to the construction contract, does not protect the City from a claim for expectation damages then I do not see what language would.
[275] If Inzola is correct there is no doubt that RFPs would become more complex and expensive. An RFP in any significant project could not be left to purchasing specialists. Lawyers would be required at every stage. Purchasers, in this case ultimately the taxpayers of the City, could be burdened by multi-million dollar damage claims based upon the mishandling of a process that was simply directed to obtaining expressions of interest.
[276] If Inzola is correct there will be more, and more expensive, litigation. When you have a Contract A by definition you know all the terms of Contract B. Calculation of damages is fairly straight forward. In the case of an RFP, and particularly in this RFP that called for Competitive Dialogue, determining expectation damages requires a highly speculative process of attempting to determine how a negotiation process would have unfolded. Proof of such damages takes a lot of time at trial as this case demonstrates.
[277] I also note that the RFP contains references to both the City and Respondents acting in good faith. If Inzola is correct, presumably institutions issuing a RFP can sue a respondent who failed to act in good faith. The measure of damages would be the difference between the amount the respondent would have contracted for and any greater amount the institution had to pay. Again more, and more expensive, litigation.
[278] In conclusion, I agree with the City that awarding damages based upon the not yet negotiated construction contract offends the principle that agreements to negotiate are not enforceable.
[279] I also agree with the City that the Hamilton minimum performance principle is applicable. Under the RFP the City, and Inzola, had the right to walk away without obligation. On the authority of Agribrands, the minimum performance principle applies even if the City acted in bad faith.
[280] I conclude that, as a matter of law, if Inzola had established liability it could only have recovered reliance damages of $200,000.
VI. DAMAGES – EVIDENCE AND ANALYSIS
A. Introduction
[281] For the sake of completeness, if I am in error and Inzola is entitled to expectation damages, I will quantify these damages. This requires me to assess:
a) The likelihood that Inzola would have been awarded the contract; and
b) The profit Inzola would have realized had it been awarded the contract.
[282] In broad strokes, Inzola’s approach to damages was:
a) To base its revenue on a sealed bid it submitted on March 21, 2011, proposing to build 140,000 s.f. and 600 parking spots in consideration of $43 million and Inzola retaining ownership of retail space having a value of $7.5 million; and
b) To base its costs on Inzola’s experience, and particularly the costs incurred building the TD building on Hurontario St.
[283] In fact the Competitive Dialogue process resulted in the City agreeing to a building costing approximately $94 million.
[284] The City’s approach was to:
a) Calculate revenue based on Inzola’s sealed bid; and
b) To calculate Inzola’s cost based on Morguard’s floor plans and Dominus’ detailed drawings because the City’s expert quantity surveyor indicated he would not quantify costs based upon Inzola’s original Submission as it was lacking in detail.
[285] As I will explain, I conclude that the better approach is on the basis that:
a) To be successful, Inzola would probably have had to propose a building comparable to Dominus and Morguard having a construction cost of approximately $94 million, and
b) Inzola would have realized a profit margin comparable to the profit margin Dominus was able to realize.
B. The Likelihood that Inzola Would Have Been Awarded the Contract
[286] The variables as to the likelihood that Inzola would become the Preferred Respondent and approved by Council include:
a) Whether and to what extent the Inzola proposal would have evolved during Competitive Dialogue.
b) Whether Inzola would have been able, and prepared, to assume liability for any cost overages as Dominus did.
c) How Inzola’s Final Offer would have compared to those of Dominus and Morguard.
d) How the technical teams would have evaluated Inzola’s Final Offer on criteria such as “architectural design/urban quality”, “healthy environment”, “economic impact” and “long term vision”.
[287] There are so many variables that I can only provide what I would characterize as a rough and ready assessment.
[288] Unless the Competitive Dialogue failed it would result in the recommendation of one Preferred Respondent. Dominus and Morguard were formidable opponents. Dominus had built a $500 million condominium project in Mississauga, which was internationally recognized for its design, as well as the $900 million Pier 27 project in Toronto. Morguard had approximately $14 billion in real estate assets, which included the Bramalea City Centre, and so had considerable experience, expertise and financial resources.
[289] Inzola successfully completed the original City Hall and two condominium projects at a cost of $55 million and $62 million. Inzola had some advantage in that it owned 65 and 69 Queen St., which would enhance efficiencies.
[290] At the first stage the Technical Evaluation Team scored the respondents as follows:
a) Morguard – 72.1
b) Dominus – 67.3
c) Inzola – 64
[291] The Financial Evaluation Team rated Inzola as “Satisfactory (Weak)”, while Dominus was rated “Satisfactory (Strong)” and Morguard was rated “Very Good”.
[292] Final Offers were submitted December 9, 2010. Dominus estimated its construction cost at $94 million. Morguard’s solution, which was most comparable to the Dominus and Inzola proposals, was estimated to cost $93.3 million.
[293] When the City cancelled the 2005 RFEI process it explained it wanted a “signature building” as opposed to a “functional” building. The March 21, 2011 staff Report to Council cited Dominus’ “signature and place making architectural elements”. The outcome of Competitive Dialogue was that the City staff recommended a signature building, with upgraded features. I proceed on the basis that Inzola would have had to propose such a building to succeed.
[294] The evidence was that Inzola Construction sub-contracted 90% of its work. I do not see how Inzola could have a lower construction cost than Dominus and Morguard. If anything, I would expect their larger scale of projects would give them more leverage in dealing with labour and material suppliers.
[295] Morguard, like Inzola, premised its proposal on being able to utilize 65 and 69 Queen St. As such, Morguard’s cost estimate took into account the efficiencies of utilizing these lands. As such, I conclude that if successful, Inzola would have construction costs comparable to Dominus and Morguard, on the order of $94 million.
[296] I further find that the most reasonable assumption is that Council would probably have accepted the staff recommendation as to the Preferred Respondent.
[297] Taking all these factors into account, I believe that Inzola was fighting an uphill battle to become the Preferred Respondent. Its chances were, therefore, not one in three. My finding is that Inzola had a 20% chance of becoming the Preferred Respondent.
C. Inzola’s Profit if Awarded the Contract
[298] Dominus was approved by Council as the Preferred Respondent on March 28, 2011. The Evaluation Committee was then re-named the “Negotiating Committee” and embarked upon negotiating the contractual arrangements.
[299] As part of the negotiation process, the City retained an independent consultant to verify Dominus’ cost of construction. Deloitte then did an analysis of value for money, looking at the estimated construction cost and the profit that Dominus would realize. Deloitte then provided an opinion that Dominus’ estimated profit was within a reasonable range for a public project of this nature.
[300] I find that Inzola would not have been successful unless Deloitte similarly concluded that Inzola’s estimated profit was within a reasonable range. Mr. McKaig did not define that range. Mr. Cordiano was asked about Dominus’ profit margin and he expressed reluctance to answer on the basis of commercial confidentiality. We took a break and counsel met with Mr. Cordiano. On resuming Mr. Svonkin indicated the issue had been resolved and that Mr. Cordiano was agreeable to providing an answer to one question. Mr. Cordiano then agreed with the suggestion that, while not all of its project costs had been finalized, Dominus expected a profit margin of at least 10%. In closing, Inzola submitted that Mr. Cordiano had acknowledged a construction profit margin of approximately 10%. I agree with this interpretation of his evidence as the only remaining variable was any cost not yet finalized which, given the passage time, must have been relatively insignificant.
[301] Inzola would have had to negotiate a contract with an anticipated profit of approximately 10%. Otherwise Deloitte would have opined that Inzola was not providing good value for money which would probably have resulted in a failed negotiation or a “no” vote at Council. In addition, Dominus was an experienced developer so I conclude that Inzola would not have bettered the profit margin Dominus was able to negotiate.
[302] My conclusion, therefore, is that Inzola’s profit margin would have been the same as Dominus’ which I take to be roughly 10%. As discussed, I proceed on the basis that Inzola would have had a construction cost of $94 million. As such I conclude that, if successful, Inzola would have realized a construction profit of $9.4 million ($94 million x 10% = $9.4 million).
[303] For the sake of completeness, I will explain briefly why this approach to assessing damages based upon the construction of a $94 million building is more favourable to Inzola than basing my assessment on Inzola’s estimated construction profit. Inzola estimated its construction cost as $63 million and its construction profit as $15.716 million being a 25% profit margin. If I worked from Inzola’s numbers, I would increase Inzola’s cost substantially and the result would be less favourable to Inzola.
[304] Inzola’s expert on damages was Peter Steger, a well-qualified Chartered Business Valuation and Chartered Professional Accountant. Mr. Steger, however, had no expertise in construction costs. Mr. Steger worked from cost estimates provided by Inzola and then endeavored to test their reasonableness by reference to the Altus Cost Guide and the actual experience of Inzola Construction, which included building the seven-story, 78,000 s.f. TD Building on Hurontario St.
[305] Mr. Kanellopoulos testified that he and Mr. Cutruzzola prepared cost estimates for Mr. Steger based upon their experience. Inzola’s response to the RFP listed its project team which included nine firms with architectural, engineering and design experience. None of them provided input to the cost estimates.
[306] Mr. Kanellopoulos and Mr. Cutruzzola impressed me as honest, intelligent businessmen. Common sense and experience, however, indicate that witnesses’ perception and judgment are to some extent coloured by self-interest. They certainly recognized that every dollar saved in construction cost was a dollar to be added to the damage claim. I think it is inevitable that they erred on the side of minimizing construction difficulties and costs. I will give some examples.
[307] First, the RFP stated the City’s 140,000 s.f. requirement in terms of “net leasable space” as defined by the Building Owners and Managers Association (“BOMA”). In fact BOMA does not use the term “net leasable” and instead defines “usable” and “rentable” space. “Usable” excludes vertical penetrations such as elevators and stairwells; common areas such as lobbies and washrooms; and circulation spaces such as hallways. “Rentable” excludes only vertical penetrations.
[308] Inzola calculated its costs based on providing “rentable” space. Mr. Steger used a gross-up factor of 1.16 which was supported by Inzola’s experience and floor plate drawings done by Tom Kanellopoulos, Bill’s son, who is an experienced architect who has worked on other Inzola projects.
[309] The City’s expert on damages was Gerard McCabe, a well-qualified quantity surveyor with extensive experience in estimating construction costs.
[310] Mr. McCabe reviewed the Morguard and Dominus Final Offers submitted after Competitive Dialogue and concluded that they were interpreting the City requirement to be for “usable space” which would require a higher gross-up. Following the Competitive Dialogue process the Morguard gross-up was 1.35 and the Dominus gross-up was 1.32. I find that it is reasonable to conclude that the City requirement was for “usable space” and use the gross-up on the building the City in fact accepted. The additional gross-up is, therefore, .16 (1.32 Dominus gross-up minus 1.16 Inzola gross-up = .16). The additional space Inzola would have to build would, therefore, be 0.16 x 140,000 s.f. = 22,400 s.f. On Inzola’s estimated $168.21 per s.f. construction cost this would increase Inzola’s cost by $3,767,904 (22,400 s.f. x $168.21 = $3,767,904). (This does not account for the increased cost associated with the additional retail space that was constructed.)
[311] Secondly, the Altus Guide gave a range of $75 - $130 per s.f. as the cost to construct underground parking. Mr. Steger used $80 per s.f., explaining that he based this on input from Inzola and the assumption that there were no adverse soil conditions and no impediments to accessibility.
[312] Mr. McCabe testified that he could not estimate construction costs based upon Inzola’s response to the RFP because it was so lacking in detail. He, therefore, estimated the cost to construct parking as $109 per s.f. based upon floor plan drawings that Morguard had prepared.
[313] The mid-point of the Altus range of $75-$130 is $102.50. I find this to be a more reasonable estimate of Inzola’s cost taking into account the evidence of Mr. McCabe. If Mr. Steger had used the mid-point instead of $80 Inzola’s cost would increase by $4,725,000 ($22.50 x 210,000 s.f. equals $4,725,000).
[314] In summary, if working from Inzola’s estimated construction profit, I would have reduced it as follows:
Inzola’s estimated profit $15,716,000
Additional gross-up space cost $ (3,767,904)
Additional parking cost $ (4,725,000)
Net profit: $ 7,223,096
[315] In any event, as explained earlier, in assessing damages I will proceed on the basis of Inzola contracting a $94 million building and having a $9.4 million construction profit.
[316] I now turn to financing profit which is the difference between the interest rate Inzola could borrow at and the higher interest rate embedded in the annual payments by the City. Mr. Steger’s calculation of a financing profit of $11,627,000 assumed Inzola could borrow at 5% and charge the City an embedded interest rate of 7.69%. Under the agreement actually concluded with Dominus, the City agreed to pay an embedded interest rate of 7.03%. I find that Inzola would not have been able to charge an embedded interest rate higher than Dominus was able to negotiate being 7.03%.
[317] Inzola’s financing profit would also depend on its cost of borrowing. Mr. Steger used 5%, as he understood that Inzola borrowed at that rate from Sun Life on another project. In fact, that borrowing was by Kallo Investments. There was no evidence as to the precise terms of that financing. It stands to reason that the interest rate might depend to some extent on whether the City or Inzola was responsible for cost overruns. The project would be riskier, and one would think the interest rate charged by the borrower would increase, if Inzola was liable for all cost overruns.
[318] In calculating damages I would, therefore, use the somewhat higher interest rate of 6%. As such the interest rate spread, which Mr. Steger calculated to be 2.69% (7.69% - 5% = 2.69%) would in fact be 1.03% (7.03% - 6% = 1.03%). 1.03% is 38% of the 2.69% interest rate spread that Mr. Steger used. I, therefore, reduce the financing profit to $4,418,260 ($11,627,000 x 38% = $4,418,260).
[319] I, therefore calculate Inzola’s profit as follows:
Construction profit: $ 9,400,000
Financing profit: $ 4,418,260
Total $13,818,260
[320] If, contrary to my conclusion above, Inzola is entitled to loss of chance damages, I calculate such damages to be $2,763,652 ($13,818,260 x 20% = $2,763,652).
VII. CONCLUSION
[321] As I expressed at the close of final argument, this trial was conducted professionally, skillfully and efficiently by all counsel. I thank counsel for their assistance.
[322] The action is dismissed.
[323] If the parties cannot agree the City shall provide me with its written cost submissions within 30 days. Inzola shall respond within 20 days of receipt of the City submissions. Reply submissions, if any, by the City within 10 days of receipt of the Inzola submissions.
Sproat J.
Released: January 11, 2019
COURT FILE NO.: ~
DATE: 2018MMDD
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Inzola Group Limited
Plaintiff
- and -
The Corporation of the City of Brampton
Defendant
REASONS FOR JUDGMENT
Sproat J.
Released: January 11, 2019