Date: 20081028
Docket: T-277-07
Citation: 2008 FC 1102
BETWEEN:
IRVING SHIPBUILDING INC. AND
FLEETWAY INC.
Applicants
and
THE ATTORNEY
GENERAL OF CANADA AND
CSMG INC.
Respondents
AMENDED REASONS FOR ORDER
HARRINGTON
J.
[1]
CSMG
Inc. is a corporation formed by Devonport Management Limited and Weir Canada
Inc. for the purpose of bidding on a contract to provide in-service support for
Canada’s Victoria
Class submarines. Its initial bid and the bids of the other two hopefuls were
rejected because not all the mandatory requirements were met. The second time
around both its bid and that of BAE Systems (Canada) Inc. met those
requirements. Public Works then rated the CSMG bid higher technically and
subsequently negotiated with and entered into a contract with it. If optional
extensions are exercised, the value of the contract is said to be approximately
$1.5 billion.
[2]
Two
of BAE’s subcontractors, Irving Shipbuilding Limited and Irving’s affiliate, Fleetway
Inc. – but not BAE itself – seek an order quashing the decision that CSMG’s bid
was technically better and setting aside all that flowed therefrom, including
the subsequent award of the contract to CSMG.
[3]
The
principal ground advanced in support of the application is that the CSMG bid
should not have been considered at all because Weir employees had been involved
in the development of the Statement of Work which led to the Request for
Proposal from Public Works and because at least one of those employees then
formed part of the CSMG bidding team. This gave CSMG an unfair advantage and so
it should have been conflicted out of the bidding process.
[4]
A
second ground is that CSMG did not meet the mandatory requirement with respect
to available shipyard facilities.
[5]
The
application has been strongly contested by the Attorney General and CSMG. They
raise a number of issues including:
a.
Lack of Standing
Subsection
18.1(1) of the Federal Courts Act provides:
|
18.1 (1)
An application for judicial review may be made by the Attorney General of
Canada or by anyone directly affected by the matter in respect of
which relief is sought.
[Emphasis
added.]
|
18.1 (1) Une demande de contrôle judiciaire
peut être présentée par le procureur général du Canada ou par quiconque est directement
touché par l’objet de la demande.
[Je souligne.]
|
Irving
and Fleetway did not bid for the contract. Had the contract been awarded to
BAE, they would have been BAE subcontractors. Thus, at best, they are only
indirectly affected by the decision.
b.
No Conflict
As
stated by Mr. Justice de Grandpré in Committee for Justice and Liberty v. National
Energy Board, [1978] 1 S.C.R. 369 at 394, [1976] S.C.J. No. 118 (QL): “an
apprehension of bias must be a reasonable one, held by reasonable and right
minded persons.” The test as framed by the Federal Court of Appeal in that case,
and which he applied, is “what would an informed person, viewing the matter
realistically and practically – and having thought the matter through –
conclude?” According to the respondents, such a person would conclude there was
no reason to be apprehensive because the work done by Weir personnel was
minimal; was substantially revised by the time the bidding documents were made
public; there is no evidence the individual who joined the CSMG bidding team actually
did any work on the CSMG bid; he was taken off the job when requested by Public
Works and, in any event, even if he had worked on the bid, that bid was
unsuccessful. It was only some time later that, on the second round, both CSMG
and BAE met all mandatory requirements.
c.
Waiver
In
any event, even if there were a reasonable apprehension of bias in not
eliminating CSMG on the grounds of conflict of interest, Irving and Fleetway
waived their right to argue that point.
d.
Timebar
An
application for judicial review should be made within 30 days from the time the
decision or order was first communicated. The decision which is really under
attack is the decision of Public Works to refuse BAE’s request to eliminate
CSMG from the bidding. That decision was made almost a year before these
proceedings were filed.
DECISION
[6]
I
have decided that this application should be dismissed because Irving and
Fleetway do not have standing.
[7]
However,
should I be wrong, and although there was an appearance of a conflict of
interest on the first bid, it would be unreasonable to hold that there was an
apprehension of bias arising from this initial conflict which gave CSMG an
unfair advantage on the second bid.
[8]
I
am satisfied that, although Irving and Fleetway waived such rights as they may
have had to complain about the role of Weir employees in the work leading up to
the Request for Proposal, they made no such waiver with respect to any failure
on Weir’s part to impose a cone of silence on those so involved. Their
application in that regard is not out of time.
[9]
There
is no evidence to support the submission that CSMG failed to meet a mandatory
requirement. On the contrary; the only evidence, that of Commander Hallé, is
unassailable.
GOVERNMENT PROCUREMENT
PROCESS
[10]
The
law and practice relating to tenders and the government procurement process is
well known. The courts have developed the concept of a double contract. The
first contract (Contract A) begins with an offer as contained in the Request
for Proposal issued by Public Works and Government Services Canada. The acceptance
is the submission of a compliant bid. There may be several compliant bids and
therefore several contracts A. In this case there are two, one with CSMG and
the other with BAE. Thereafter the compliant bids are analyzed. The winner is
selected and negotiations leading to a formal contract for the work itself are
concluded with it (Contract B) (Ontario v.
Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, [1981] S.C.J. No. 13 (QL); M.J.B. Enterprises
Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, [1999]
S.C.J. No. 17 (QL)).
[11]
When
this application for judicial review was filed, Contract B had not been
concluded with CSMG, but by the time of the hearing it had. This gave rise to a
second application for judicial review issued 29 July 2008 under docket
T-1176-08. That application, which is still at an early stage, seeks an order
quashing the decision to award the contract to CSMG, terminating the contract signed
30 June 2008 and terminating any call-ups and task authorizations issued
thereunder. The application in this case sought an order enjoining the Crown
from awarding a contract to CSMG but, if awarded, then terminating any call-ups
or task authorizations. I accept the submission from counsel for Irving and
Fleetway that the second judicial review was taken out of an abundance of
caution. As a result of the decision in this case, it would appear to be moot.
[12]
The
normal rule is that, pursuant to the Department of Public Works and
Government Services Act, the Minister of Public Works and Government
Services purchases goods and services for all government departments, in this instance
the Department of National Defence. The Minister may, as in this case, solicit
bids by means of a Request for Proposal and set down the terms and conditions thereof
as well as those of Contract B. The integrity of the process, the reasonable expectation
of interested parties, public confidence and basic fairness require that one
bidder not be given an unfair advantage over another (Martel Building Ltd. v. Canada, 2000 SCC 60,
[2000] 2 S.C.R. 860 at paragraphs 83 and following).
[13]
It
may have been open for Public Works to avoid competitive bidding altogether, as
per the Government Contracts Regulations, on the basis that it would not
be in the public interest to solicit bids. Although this was not done, the
national security exceptions provided for in the North American Free Trade
Agreement (NAFTA), the World Trade Organization Agreement on Government
Procurement (WTO-AGP) and the Agreement on Internal Capital Trade
(AIT) were invoked. The reasons given were that the work had to be carried out
at a Canadian shipyard and there were not at least three suppliers capable of
certifying 80% Canadian content for goods and services. The requirement of an
adequate Canadian shipyard obviously severely limited the pool of potential
bidders. The invocation of national security exceptions also ousted the
jurisdiction of the Canadian International Trade Tribunal (CITT) which normally
deals with complaints arising from bid evaluations and the award of federal
government contracts. However, the superintending power of this Court over
decisions of federal boards and tribunals, by way of judicial review, was not
ousted; hence the application to this Court.
[14]
Having
opted for a competitive bidding process, the principles of procedural fairness
and the right to expect the decision-maker to be impartial apply.
STANDING
[15]
The
parties have cited a great many cases, old and new, from this and other
jurisdictions on the vexing issue of standing. It appears to me that in this
Court there are those who have standing as of right and those who are given
standing as a matter of discretion. The latter category is subdivided into
those who successfully invoke the public interest and those who are personally
sufficiently aggrieved that justice demands they be given their day in court.
[16]
It
is difficult to isolate standing from whether or not it is appropriate to grant
the remedy sought, often one of the extraordinary common law remedies such as mandamus
or certiorari. As noted by Thomas (now Mr. Justice) Cromwell in his
book Locus Standi – a Commentary on the Law of Standing in Canada
(Toronto: Carswell, 1986) at page 209: “Courts have often fallen into the trap
of collapsing standing and merits”. Nor should it be forgotten that much has
happened since his book was published in 1986.
[17]
These
cases are fact-driven. Some were final decisions while others were on
preliminary motions to strike. In the latter case, despite the broad language
often used, the issue was whether it was “plain and obvious” that the applicant
lacked standing. Indeed in this very case Prothonotary Tabib dismissed the
Attorney General’s motion to strike and she was upheld on appeal by Madam
Justice Layden-Stevenson (2007 FC 933).
[18]
Care
must also be taken in considering decisions from other courts as the provincial
legislature in question may not have enacted language such as “directly
affected” but rather may have described the applicant as a “person aggrieved”, or
may have simply have recognized the traditional, but extraordinary, common law
remedies (De Smith’s Judicial Review, Sixth ed., (London: Sweet &
Maxwell, 2007) at paragraph 2-055.).
[19]
Section
18.1 of the Federal Courts Act only came into force in 1992. Until that time
the “directly affected” limitation was found in then-section 28(2) of the Act
which dealt with those judicial reviews over which the Court of Appeal had
first instance jurisdiction.
[20]
BAE
and the other unsuccessful bidder were clearly “directly affected”. As derived
from the decision of the Federal Court of Appeal in Canada (Royal Canadian
Mounted Police) v. Canada (Attorney General), 2005 FCA
213, [2006] 1 F.C.R. 53 at para. 56, the phrase “application… may be
made…” is permissive. The wording of the subsection is certainly broad enough
to encompass applicants who meet the test for public interest standing. Irving
and Fleetway do not assert public interest. They assert their private economic
interests, but this in itself is not an automatic bar.
[21]
The
question becomes whether subcontractors of a bidder whom they say should have
been successful are “directly affected” so that they may seek judicial review
as of right. The second question is that if the answer to that is “no”, should
the Court in its discretion nevertheless grant them standing in this case?
[22]
I
am satisfied that Irving and Fleetway were not “directly affected” by the
decision. In context, “direct” means without intermediaries. Although the
analogy is not perfect I find references in the case law to direct damage
arising in claims in tort for pure economic loss to be helpful. In considering
directness in the context of the civil law notion of delict, in Canadian National Railway Co. v. Norsk Pacific Steamship Co.,
[1992] 1 S.C.R. 1021, [1992] S.C.J. No. 40 (QL), at paragraphs 238 and
260 Madam Justice McLachlin (as she then was) noted that the control mechanism
against unlimited liability lies in the determination “whether the loss is a
direct, certain and immediate result of the negligence.” “Distant losses which
arise from collateral relationships do not qualify for recovery.”
[23]
In
Bow Valley Huskey (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997]
3 S.C.R. 1210, [1997] S.C.J. No. 111 (QL), charterers of an oil rig damaged by
fire sued for their resulting economic loss. Their identity was well-known to
the tortfeasor. They argued, much like Irving and Fleetway in this case, that
they were in a “common venture”, albeit not a joint venture in law, with the
rig owner who suffered physical loss, and that the losses of the rig owner were
transferred to them so that they should be able to claim as though they stood
in its shoes. In effect Irving and Fleetway are arguing that they, in fact, are
in a 50/50 venture with BAE.
[24]
The
Bow
Valley action was
dismissed. At paragraph 69 Madam Justice McLachlin noted that the rig owners
and charterers freely organized their affairs the way they did. They could have
organized matters differently before the fire occurred. So it is in this case
as well. The Request for Proposal specifically allowed joint ventures.
[25]
There
were at least two ways Irving and Fleetway could have organized their
affairs prior to the award of Contract A so as to be directly affected by the
decision determining that CSMG’s bid was technically better. Together with BAE
they could have formed a new corporation, such as Devonport and Weir formed
CSMG. They could also have bid as a joint venture or partnership. Any such
arrangement would have required BAE’s consent.
[26]
In
addition, BAE as prime contractor could have stipulated benefits for its
subcontractors. This could be done by way of a “Himalaya Clause” by which BAE
would be contracting on its own behalf, and also as agent or trustee for its subcontractors.
(ITO-International
Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752, [1986] S.C.J. No.
38 (QL); London Drugs Ltd.
v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, [1992]
S.C.J. No. 84 (QL)). However this approach would not only require BAE’s
consent, but also Public Works’. The terms of the Request for Proposal did not
allow a “Himalaya Clause”, or anything like it.
[27]
All
this goes to prove that there were intermediaries in place with the result that
Irving and Fleetway were not “directly affected” by the decision.
[28]
This
leads to the recent decision of the Supreme Court in Design Services Ltd. v.
Canada, 2008 SCC 22, [2008] S.C.J. No. 22. This was an action by
subcontractors of an unsuccessful bidder based on the premise that Public Works
owed them a duty of care in tort not to award a contract to a non-compliant
bidder. The action was dismissed. Among other things, Mr. Justice Rothstein
considered it relevant that the appellants had had an opportunity to form a
joint venture and thus be parties to Contract A. He said there was an
overriding policy reason that tort liability should not be recognized in those
circumstances:
[56]
The fact that the appellants had the opportunity to form a joint
venture, and thereby be parties to the “Contract A” made between PW and
Olympic, is an overriding policy reason that tort liability should not be
recognized in these circumstances. Allowing the appellants to sidestep
the circumstances they participated in creating and make a claim in tort would
be to ignore and circumvent the contractual rights and obligations that were,
and were not, intended by PW, Olympic and the appellants. In essence, the
appellants are attempting, after the fact, to substitute a claim in tort law
for their inability to claim under “Contract A”. After all, the
obligations the appellants seek to enforce through tort exist only because of
“Contract A” to which the appellants are not parties. In my view, the
observation of Professor Lewis N. Klar (Tort Law (3rd ed. 2003), at p.
201) — that the ordering of commercial relationships is usually in the
bailiwick of the law of contract — is particularly apt in this type of
case. To conclude that an action in tort is appropriate when commercial
parties have deliberately arranged their affairs in contract …
[29]
In
my opinion, the same policy considerations apply here. Irving and Fleetway
submit that standing in an application for judicial review cannot be closely
equated with a cause of action in tort. I disagree. If the subcontractors in Design
Services had a “direct interest” pursuant to section 18.1 of the Federal
Courts Act, then their action in tort should have been dismissed as
premature. The Court of Appeal has held in Canada v. Grenier, 2005
FCA 348, [2006] 2 F.C.R. 287 and in Hinton v. Canada (Minister of
Citizenship and Immigration), 2008 FCA 215, [2008] F.C.J. No. 1004, that
it is a condition precedent to an action in damages resulting from a decision
of a federal board or tribunal that an application in judicial review be
launched.
[30]
Indeed,
as stated in Grenier, the decision of the federal board or tribunal
retains its legal force and authority and remains judicially operative and
effective until it has been invalidated. A litigant who seeks to impugn such a
decision is not free to choose between a judicial review and an action in
damages. He must at least launch an application for judicial review as a
condition precedent to an action in damages (see paragraphs 17-20).
[31]
It
would be most peculiar indeed if Irving and Fleetway who, on the basis of Design
Systems, have no claim against Public Works in tort for pure economic loss,
(although BAE might have a claim in breach of contract), could by a roundabout
route set aside the bidding process and the third time around, whether with BAE
or others, succeed. This could lead to a chain of events whereby they would end
up with contract B, something akin to specific performance, while they have no
claim in damages.
[32]
I
do not think that the decision of the Federal Court of Appeal in Moresby
Explorers Ltd. et al. v. Canada (Attorney General) et
al.,
2006 FCA 144, 350 N.R. 101, helps the applicants. In that case, Mr. Justice
Pelletier said:
[17]
Standing is a
device used by the courts to discourage litigation by officious inter-meddlers.
It is not intended to be a pre-emptive determination that a litigant has no
valid cause of action. There is a distinction to be drawn between one’s
entitlement to a remedy and one’s right to raise a justiciable issue.
However, the appellants were within the
intendment of the challenged policy. At paragraph 16 he said: “They do
not have to wait until it causes them a loss to challenge it on jurisdictional
grounds.”
[33]
Indeed,
public interest, even that as a mere taxpayer, may give rise to sufficient
standing to contest the constitutionality of a statute or a regulation (Thorson
v. Attorney General of Canada, [1975] 1 S.C.R. 138, [1974] S.C.J. No. 45
(QL)).
[34]
The
applicants raise no jurisdictional or constitutional issue.
[35]
Nevertheless,
the courts may grant standing even if only to allow an applicant to pursue a
private interest. The decision of the Nova Scotia Court of Appeal in Ogden Martin
Systems of Nova Scotia Ltd. v. Nova Scotia (Minister of the Environment)
(1995), 130 D.L.R. (4th) 326, [1995] N.S.J. No. 504 (QL), is a good example.
Another is the decision of Mr. Justice Strayer in Western Pulp Inc. v.
Roxburgh, [1990 ] 39 F.T.R. 134, [1990] F.C.J. No. 1043 (QL), maintained in
appeal, (1990), 122 N.R. 156, [1990] F.C.J. No. 1140 (QL). In that case, Mr.
Justice Strayer said at paragraph 7:
There is a broad discretion in the Court to grant standing to seek
certiorari even to a "stranger", particularly where the issue is one
of jurisdiction to make the order under attack. "Persons aggrieved"
by an order automatically have standing and I am satisfied that the applicant
is a "person aggrieved".
[36]
However,
as a result of the subsequent introduction of section 18.1 of the Federal
Courts Act, “persons aggrieved” no longer automatically have standing
unless they are also “directly affected”.
[37]
A
decision which appears to be squarely on point and which, at first glance, favours
the applicants is Socanav Inc. v. Northwest Territories (Commissioner),
(1993) 16 Admin. L.R. (2d) 266, [1993] N.W.T.J. No. 85 (QL), an interlocutory
decision of the Northwest Territories Supreme Court. Socanav was the potential
subcontractor of an unsuccessful bidder on a fuel supply contract. It sought an
order in the nature of certiorari or, alternatively, a declaration and
possibly damages. The Court refused certiorari but did grant standing on
the grounds that it had a direct interest as per the guidelines set out by the
Supreme Court in Finlay v. Canada (Minister of Finance), [1986] 2 S.C.R.
607, [1986] S.C.J. No. 73 (QL). However, as aforesaid, the real issue was
whether it was “plain and obvious” that Socanav did not have standing. Furthermore,
I do not see how Finlay assists as it held that Mr. Finlay met criteria set
down for the discretionary recognition of public interest standing. It also
precedes Design Systems and I do not agree that it has current value.
[38]
To
conclude on this point, I am not persuaded that Irving and Fleetway should be,
as a matter of discretion, given standing. They, unlike those in other cases,
such as Western Pulp, could have organized their affairs so as to give
them standing as of right. There were advantages and disadvantages in what they
did. One advantage is that they could not have been sued directly by Public
Works for breach of contract. They should not be allowed to sidestep
circumstances of their own making.
NO CONFLICT
[39]
As
I may have erred in holding that Irving and Fleetway lack status as of right to
launch this judicial review and as my refusal to exercise my discretion to
allow them standing may have been exercised on wrong principles or a
misapprehension of the facts, it is necessary to determine whether there is a
reasonable apprehension of a conflict of interest on the second Request for
Proposal which opened in July 2006 and closed in October 2006.
[40]
Although
I am concerned with the first round of bidding, I have come to the conclusion
that there is no reasonable apprehension of conflict on the second bid, in the
sense of CSMG being able to use Weir’s insider knowledge to its advantage.
a. The Evidence
[41]
The
evidence consists of affidavits from W. Brent Holden, General Manager – Ottawa, for
Fleetway Inc. and Commander Marcel Hallé, the officer commanding the Class Desk
for submarines, as well as cross-examinations thereon. Much of the record is
taken up by information Irving and Fleetway obtained through Access to
Information and by the record produced by the Attorney General pursuant to rule
317 of the Federal Courts Rules.
[42]
The
potential for conflict arises from Weir’s participation in the Naval
Engineering Test Establishment (NETE), a government-owned contractor-operated
organization which is one of the Navy’s principal consulting engineering
resources. Its purpose is to provide independent and impartial test and
evaluation services. In accepting this contract, Weir undertook to ensure that
its results would not be biased or perceived to be biased by a conflict of
interest with the other work it undertook, that it would not be provided with
an unfair competitive advantage over other bidders by virtue of the NETE
contract through insider knowledge, and that personnel conducting, reviewing
and approving test and evaluation work as part of NETE would not be involved
with other non-NETE work for the Department of National Defence.
[43]
Weir,
previously known as Peacock Inc., has held the NETE contract for more than 50
years. The last time the contract was put up for bid was in 1999.
[44]
The
project manager is a full-time position. The other positions are part-time. At
relevant times there were a total of 10 Weir personnel involved with NETE, six
of whom worked on tasks relating to the Victoria Class submarines statements of
required work.
[45]
The
following timeline may be helpful:
a. The four Victoria
Class submarines in question, which were purchased from the United
Kingdom,
were imported in 2001. Various commercial enterprises, including BAE and Irving,
were contracted over the next few years to carry out various works in relation
thereto.
b. Public Works
issued a public “Letter of Interest” in March 2004 titled Victoria Class In-Service
Support. The letter indicated that the intention was to consolidate
outsourcing which was to be detailed later in a Request for Proposal. The
successful contractor would provide maintenance support, act as the Department
of National Defence’s technical records agent, provide engineering support and
perhaps some goods and services, including repair and overhaul.
c. In accordance
with the Letter of Interest, there was an industry day meeting 23 April 2004.
The NETE manager, an employee of Weir, was present. Others in attendance
included BAE, Irving and Fleetway. Some concern was expressed in Public Works,
at least internally, of a potential conflict involving Weir.
d. July 2004 -
February 2005: NETE was given various tasks with respect to the Victoria Class
In-Service Support. It worked
on a draft Statement of Work and its conversion to a Performance Work Statement
Structure as well as some Data Item Descriptions (DID).
e. 24 April
2005: a second industry day was held, to be followed by private briefings if
requested.
f.
16
May 2005: one of the six Weir personnel, Robert Dunlop, who was part of the NETE
group working on early stages of the Statement of Work, left NETE.
g. 19 May 2005: Public
Works and National Defence met with Weir as a potential bidder. Mr. Dunlop was
in attendance. The reactions within Public Works and National Defence ranged
from very concerned to not concerned at all.
h. 3 August
2005: Public Works met with Weir concerning Mr. Dunlop’s involvement. Weir
pulled him off the job and issued a letter 10 August agreeing to abide by DND’s
post-employment restrictions, i.e. a cooling-off period of one year.
i.
22
September 2005: issue of the Request for Proposal with a closing date of 28
February 2006, later extended to 27 April 2006.
j.
December
2005: BAE, and another, met with Public Works and verbally made allegations
regarding Weir’s involvement in the Request for Proposal.
k. Late 2005: BAE,
Irving and Fleetway, by way of Access to Information, gathered particulars of NETE’s
involvement with the Statement of Work, but not of Mr. Dunlop’s transfer from NETE
to the bidding team.
l.
January-April
2006: BAE, with the knowledge and consent of Irving and Fleetway, wrote to
Public Works to request that Weir, or any entity in which Weir participated, be
conflicted out of the bidding. Public Works refused and invited BAE to file an
application for judicial review sooner rather than later. BAE decided not to,
and submitted a bid.
m. 1 June 2006:
BAE was informed that the bidding process was cancelled as no bidder met all
the mandatory requirements.
n. 21 July 2006:
the second Request for Proposal was issued, closing date September, later
extended to 10 October 2006.
o. 10 January
2007: Public Works wrote to BAE stating that although it met all mandatory
requirements, the successful party was CSMG.
[46]
The
parties agree that in pith and substance the first and second Request for
Proposal were the same. We do not have benefit of either of CSMG’s bids as they
were kept out of the record by way of order of Prothonotary Tabib based upon
section 30 of the Defence Production Act. Therefore, although CSMG
obviously improved its proposal as regards the mandatory items, we do not know
whether it took advantage of the opportunity to improve its technical
proposals. Indeed, the record only contains BAE’s second proposal so that a
comparison with its first is not possible either.
b. The Legal Principles
[47]
In
determining whether Weir, as a result of its management of NETE, had insider
knowledge which gave it an unfair advantage so that the CSMG bid should have
been discarded, the following inter-related questions come to the fore:
a. What insider
information did the Weir employees at NETE have?
b. Was that
information shared with the CSMG bidding team?
c. Did this
insider information give the CSMG bidding team an unfair advantage?
d. Should
findings of fact (including those by way of inference) be based on the balance
of probabilities, or on some other standard?
[48]
Six
Weir employees with NETE were very much involved in the early stages of the Statement
of Work which led to the first Request for Proposal issued months later on 22
September 2005.
[49]
There
were two routes through which that information could have been shared with the
bidding team. It is possible that any of the members of the NETE team working on
the Statement of Work could have passed it on. Despite the subsequent
assurances and certificates issued by Weir, there is no evidence that employees
associated with NETE were instructed not to discuss their work with others at
the company. The confidentiality agreements, in three different forms, which
were in place prohibit an employee from using Weir’s company information to the
company’s detriment. It may be that one, but only one, of the forms, the
Independent Consultant Services Agreement, was adequate but it was a form
signed by only two of the six Weir employees or consultants, and Mr. Dunlop was
not one of them.
[50]
There
is no evidence as to what Mr. Dunlop did during his two and a half months with
the bidding team, but the circumstances are such I infer on the balance of
probabilities that Mr. Dunlop shared his insider information. People who work
together are presumed to share confidences (MacDonald Estate v. Martin, [1990]
3 S.C.R. 1235, [1990] S.C.J. No. 41 (QL)). Reasonable measures had not been
taken to ensure no disclosure on his part. In the light of this finding, I do
not consider it necessary to consider the likelihood that the five other NETE
members involved in the Victoria Class Submarines Statements of Work may also
have shared information.
[51]
The
next question is whether this insider information gave the CSMG bidding team an
unfair advantage. It must be kept in mind that just about every bidder, or
subcontractor, had advantages in one aspect or another over others. BAE was the
incumbent custodian of the technical documents, and it was Irving who had been
retained to repair the HMCS Chicoutimi after her disastrous fire in October
2004. Commander Hallé’s evidence is strong. He points out that some six months
had passed from the time NETE was working on Statements of Work to the issuance
of the first Request for Proposal and that there had been many changes. For
instance, following the industry day in April 2005, many of the prospective
bidders made suggestions which were incorporated and only two of the 12 DIDs NETE
worked on were actually incorporated in the Request for Proposal.
[52]
It
is not possible to make a conclusive finding as to whether Weir’s insider
information worked to its advantage. The possibility is certainly there. For
instance the fact that it knew Public Works considered it unnecessary to
incorporate 10 of the DIDs may have given CSMG insight. As counsel for Irving
and Fleetway put it, he who helps the teacher set the exam has an advantage
when sitting the exam. CSMG’s scoring was augmented by its better
understanding, perhaps an understanding of what not to say.
[53]
However,
with all deference to Commander Hallé, we are dealing with perception, not
necessarily reality. Canadians in general, and bidders in particular, should
have confidence in the bidding system.
[54]
In
my view the standard is that of “probability of mischief” and not “possibility
of mischief”. The “possibility of mischief” standard applies to lawyers (MacDonald
Estate, supra). However, lawyers, with their fiduciary relationships and
the requirement that justice not only be done but be seen to be done, are held
to a higher standard. In Committee for Justice and Liberty, above, the
Court applied the “probability of mischief” standard to whether the Chairman of
the National Energy Board should have been conflicted out of a hearing due to
his previous involvement with one of the parties. The Court noted that the Board
discharged some quasi-judicial duties. While not so in this case, the bidding
process requires fairness. Public Works cannot be held to a standard higher
than that of a board exercising quasi-judicial functions and so I opt for the
“probability of mischief” standard.
[55]
Mr.
Dunlop rubbed shoulders on a weekly basis with the overall evaluation manager
and three of the four technical team leaders. It is reasonable to infer that he
had insight into their states of mind, their likes and dislikes. Nevertheless,
the fundamental point is this: CSMG’s bid was rejected. By the time the second
proposals were due, more than a year had passed since Mr. Dunlop had left NETE;
the cooling-off period had expired and he may possibly have rejoined the CSMG’s
bidding team. The record is silent. However, by then Fleetway had employed
three ex-Department of National Defence personnel and another BAE subcontractor
had employed another. As Commander Hallé put it “…and list goes on, all of these
folk have had some exposure to VISSC prior to their change to industry from
having been in uniform”.
[56]
The
evidence is to the effect that there is only a small pool of organizations in
position to bid as prime contractor or as important subcontractors. The
workforce is mobile, and those entitled to take retirement from the Department
of National Defence are courted by private industry. The passage of time is the
most important factor and, in reality, each bidder had some insight, and some
advantage, over the others due to prior involvement with the submarines, such
as the fact that BAE acted as guardian of the technical records and Irving had
considerable hands-on experience in repairing the Chicoutimi.
NO WAIVER
[57]
In
January 2006, BAE wrote to Public Works, on behalf of itself and its
subcontractors Irving and Fleetway, to express concern over their understanding
that Weir intended to submit a bid in response to the Request for Proposal
either alone or with a joint venture or partners. The letter focuses on Weir’s
involvement with NETE and alleges that it performed a variety of significant
tasks leading to the preparation of the solicitation documents for the then-current
Request for Proposal. Those tasks were said to include in-depth assessment and development
of the Statement of Work and the preparation of bid evaluation criteria (the
record shows they were involved in early versions of the Statement of Work, the
significance of which has been debated, but that they were not involved in the
preparation of bid evaluation criteria). Public Works was called upon to
confirm that it would not accept any bid proposal submitted by Weir alone or
with others. The matter was debated over the next few months with Public Works
refusing to accede to BAE’s request and inviting it to seek a judicial review
of that decision sooner rather than later.
[58]
On
7 April 2006, BAE again wrote on behalf of itself, Irving and Fleetway, this
time to say they intended to support Public Works in the continuation of the
Victoria Class In-Service Support and had decided not to
apply for judicial review regarding the conflict of interest surrounding Weir.
The letter continued:
Please be advised that, in making this
decision, we are relying upon your representation and assurance that all
possible steps have been taken by the Crown to avoid conflict of interest at
all times by any party. We therefore confirm we will be submitting a bid by 27
April 2006 and we look forward to working with the Crown in the future.
[59]
As
it turns out, when BAE wrote the letter in January 2006, it had just received
documentation via Access to Information which detailed NETE’s involvement in
the project, but which did not mention that Mr. Dunlop had crossed over from NETE
to the Weir bidding team.
[60]
By
this April 2006 letter, Irving and Fleetway waived any conflict arising from
Weir’s involvement with NETE. However, that was predicated on there being
appropriate firewalls in place, which there were not with respect to at least four
of the six Weir personnel involved in tasks pertaining to the Victoria Class
In-service Support, and certainly cannot be construed to extend to the most
blatant conflict, that of Mr. Dunlop wearing two hats; one immediately
following the other.
[61]
The
respondents argue that since the record shows that someone complained in May
2005 of Mr. Dunlop’s involvement with the Weir bidding team, the Court should
infer that the complaint issued from BAE and so is covered by the waiver. The
complainant was never identified, and could well have been someone within
Public Works, many of whose officials did not see eye to eye with DND on the
issue.
[62]
In Minister of Employment
and Immigration v. Satiacum (1989), 99 N.R. 171 (F.C.A.), [1989] S.C.J. No.
505 (QL), Mr. Justice MacGuigan delineated inference and conjecture as follows:
[34] The
common law has long recognized the difference between reasonable inference and
pure conjecture. Lord Macmillan put the distinction this way in Jones v.
Great Western Railway Co. (1930), 47 T.L.R. 39, at 45, 144 L.T. 194, at
202, (H.L.):
“The
dividing line between conjecture and inference is often a very difficult one to
draw. A conjecture may be plausible but it is of no legal value, for its
essence is that it is a mere guess. An inference in the legal sense, on the
other hand, is a deduction from the evidence, and if it is a reasonable
deduction it may have the validity of legal proof. The attribution of an
occurrence to a cause is, I take it, always a matter of inference.”
[35] In R. v. Fuller
(1971), 1 N.R. 112, at 114,
Hall, J.A., held for the Manitoba Court of Appeal that "[t]he tribunal of
fact cannot resort to speculative and conjectural conclusions".
Subsequently a unanimous Supreme Court of Canada expressed itself as in
complete agreement with his reasons: [1975] 2 S.C.R. 121 at
123; 1 N.R. 110, at 112.
[63]
If
I were to speculate at all, I would think that Irving and Fleetway were not
aware in April 2006 that in May 2005 Mr. Dunlop had joined Weir’s bidding team.
As this is the most blatant example of a conflict, one would assume that that
fact would have been front and centre in any complaint.
[64]
It
was only through the subsequent productions as ordered by Prothonotary Tabib
pursuant to rule 317 that Mr. Dunlop’s involvement came to light.
NO TIME BAR
[65]
It
follows that the decision of Public Works in March 2007 is not relevant and is
not the real decision under review.
[66]
In
summation, this application for judicial review shall be dismissed on the
grounds that the applicants lack standing and that, in any event, there is no
reasonable apprehension of bias tainting the decision of Public Works on or
about 10 January 2007 that CSMG achieved the highest final score under the
evaluation methodology described in the Request for Proposal.
CONFIDENTIALITY
[67]
The
above reasons were issued 1 October 2008 under seal and were accompanied by the
following direction:
The confidential reasons for
order have been issued under seal as, given the confidentiality orders in
place, the parties requested they be given an opportunity to inform the Court
if they consider any portion of the reasons should be deleted or modified in
the public version thereof. The parties have until Wednesday, 22 October 2008
to do so.
[68]
All
the parties have now informed the Court that there is no need to delete or
modify any portion of the reasons in the public version.
“Sean Harrington”
Ottawa, Ontario
October
28, 2008
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