Docket: A-106-14
Citation:
2015 FCA 96
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CORAM:
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NADON J.A.
WEBB J.A.
BOIVIN J.A.
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BETWEEN:
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ATTORNEY
GENERAL OF CANADA
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Appellant
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and
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RAPISCAN
SYSTEMS, INC.
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Respondent
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REASONS FOR
JUDGMENT
BOIVIN J.A.
[1]
This is an appeal from a decision of Mr. Justice
Annis of the Federal Court (the judge) dated January 21, 2014. The judge
allowed the judicial review application made by the respondent, Rapiscan
Systems Inc. (Rapiscan), of a decision of the Canadian Air Transport Security
Authority (CATSA) to award a procurement contract to Smiths Detection Montreal
Inc. (Smiths), one of Rapiscan’s commercial competitors in the field of security
screening equipment.
[2]
The Attorney General of Canada (the appellant)
now appeals the judge’s decision essentially arguing that the judge erred in
finding that the decision of CATSA’s Board of Directors (CATSA’s Board) was
flawed. In response, Rapiscan maintains that the procurement process at issue
was unfair and anti-competitive and seeks declaratory relief to that effect.
[3]
For the reasons that follow, I would dismiss the
appeal.
I.
Factual Background
[4]
CATSA, a Crown corporation, was created in 2002
pursuant to the Canadian Air Transport Security Authority Act, S.C.
2002, c. 9, s. 2 [CATSA Act]. As part of its mandate, CATSA oversees passenger
and baggage screenings at airports across Canada for security purposes. To this
end, CATSA purchases the equipment required to conduct such screenings,
including replacement equipment when necessary. The purchase of CATSA’s
security screening equipment is made through procurement processes.
[5]
In September 2009, CATSA announced that it
awarded a non-competitive sole-source procurement to Smiths for the purchase of
multi-view x-ray equipment used to screen passengers’ baggage at security
checkpoints in airports across Canada. CATSA’s management assured CATSA’s Board
that this non-competitive approach remained an exception and future purchases
would be done using an open procurement process (Briefing Note to the Board of
Directors dated June 18, 2009, appeal book, volume 4, tab 16-S at 1046).
[6]
About a year later, on August 16, 2010, CATSA
initiated another procurement process in the form of a Request for Submission
(RFS) in order to purchase multi-view x-ray screening equipment. The RFS was
posted on MERX, an electronic tendering service, inviting prospective suppliers
to submit information on their respective products, including pricing.
[7]
The RFS at issue was designed as a multi-phased
process, the first being a Request for Information (RFI) which could lead to
either (i) entering directly into a Standing Offer Agreement (SOA) with one or
more suppliers, or (ii) a further phase allowing suppliers to present their
proposed equipment or (iii) the cancellation of the RFS.
[8]
Rapiscan was not amongst the list of suppliers
who initially responded to the posting on MERX but was later invited by CATSA
to participate in the RFS. In total, CATSA received submissions from four (4)
suppliers in response to its RFS, including submissions from Smiths and
Rapiscan.
[9]
On October 4, 2010, CATSA’s Board awarded the
SOA exclusively to Smiths. It did so on the recommendation of CATSA’s
management, which had determined that Smiths was the only supplier able to
perform the contract for the required multi-view x-ray screening equipment.
[10]
Unsatisfied with CATSA’s handling of the
procurement process, Rapiscan filed an application in the Federal Court on
November 5, 2010 seeking judicial review of CATSA’s Board’s decision to award
the SOA to Smiths. Following, inter alia, protracted exchanges over
document production, the hearing took place on June 12 and 13, 2013 and July
26, 2013.
II.
The Judge’s Decision
[11]
As part of his decision, the judge provided a
detailed review of the facts at issue including a description of CATSA’s mandate,
its Contracting Policy and Procedures, the background leading to the 2010
procurement process and the Board’s decision. The judge also noted CATSA’s
equipment purchase history from Rapiscan’s main competitor, Smiths. On the
standard of review applying to procurement cases such as the one at issue, he
determined that the applicable standard was reasonableness (judge’s reasons at
paras. 47 and 127).
[12]
The first issue considered by the judge was
whether the present case could fall within the purview of public law. The judge
expressed the view that this case “turns on whether there are sufficiently
significant issues pertaining to the good governance of CATSA to permit a
public law remedy in respect of those issues in a matter that is based on a
commercial procurement contract” (judge’s reasons at para. 4).
[13]
In this regard, the judge referred to our
Court’s decision in Irving Shipbuilding Inc. v. Canada (Attorney General),
2009 FCA 116, [2010] 2 F.C.R. 488 at paragraph 1 [Irving Shipbuilding],
noting that “Public contracts lie at the intersection of public law and private
law”. In Irving Shipbuilding, our Court refused in principle the
application of public law over a procurement decision. In the present case, the
judge distinguished this finding on the basis that the issue in Irving
Shipbuilding was the availability of judicial review for sub-contractors
in a public procurement process whereas this case relates to direct
suppliers (bidders). On the basis of that distinction, the judge concluded
that public law could apply in the present procurement context.
[14]
The judge then turned his mind to the
“public-private” factors set out by this Court in Air Canada v. Toronto Port
Authority Et Al, 2011 FCA 347, [2013] 3 F.C.R. 605 and concluded that they
applied “to colour the present matter with a public element” and, as such,
bring the matter within the purview of public law and that a “public law remedy
would be useful” (judge’s reasons at para. 52). Relying further on Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62, [2010] 3 S.C.R.
585, the judge added the additional factor of “setting the requirements for a
fair process in the future” in determining whether public law remedies should
apply in this case (judge’s reasons at para. 121).
[15]
Ultimately, the judge accepted Rapiscan’s
contention that CATSA’s Board was so significantly misled by CATSA’s management
that it undermined the integrity of the government procurement process. This,
in itself, he held, would be sufficient to ground a public law remedy. He also
added that the RFS explicitly ousted the usual contractual remedies contained
in “Contract A”, thus opening the door to grounding a complaint about the
fairness of CATSA’s procurement process in public law (judge’s reasons at paras.
124-126).
[16]
Specifically, the judge found that in making its
procurement decision, CATSA’s Board failed to consider relevant factors,
namely: that the RFS was not an open process; neither was it authorized by
CATSA’s Contracting Policy and Procedures; that the requirement that the
equipment have a minimum of three view generators was not disclosed in the RFS,
and that Rapiscan’s model costs significantly less than Smiths’. On this basis,
the judge found that the RFS was therefore an unfair procurement process. Moreover,
given his finding that CATSA’s management deliberately misled the Board on
these factors, the judge further concluded that CATSA acted in
bad faith.
[17]
Accordingly, the judge allowed the application
for judicial review in public reasons issued on February 6, 2014, subject to
receiving submissions on the appropriate remedy in order to avoid jeopardizing
CATSA’s operational requirements. On April 4, 2014, the judge issued his Order
and declared that the decision of CATSA’s Board dated October 4, 2010 awarding
the SOA to Smiths was “procedurally unlawful and unfair”.
A.
Issues
[18]
There are three substantive issues before this
Court, as well as one preliminary procedural issue regarding the admissibility
of an affidavit. These issues are as follows:
- Is the
Affidavit of Mr. Peter Kant admissible?
- Did CATSA fail to follow its Contracting Procedures?
- Did CATSA breach a duty of procedural
fairness?
- Did CATSA act
in bad faith?
B.
Standard of review
[19]
In an appeal from a judicial review decision,
the role of this Court is to determine first, whether the judge identified the
appropriate standard of review and, second, whether he applied it correctly (Agraira
v. Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, [2013] 2
S.C.R. 559; Canada Revenue Agency v. Telfer, 2009 FCA 23).
[20]
In the present case, the judge correctly
identified the standard of review when he found that “[i]n review of
procurement cases, deference is owed to the decision-maker other than on
questions of jurisdiction; the appropriate standard of review is thus
reasonableness” (judge’s reasons at para. 47).
[21]
However, as part of his decision, the judge also
made a large number of findings of fact which is unusual in a judicial review
application. Findings of fact and of mixed fact and law of the judge are
reviewable under the standard of palpable and overriding error (Housen v.
Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 [Housen]).
III.
Analysis
(1) Preliminary issue: Is the Affidavit
of Mr. Peter Kant admissible?
[22]
In support of its application for judicial
review, Rapiscan served upon the appellant an affidavit from Mr. Peter Kant, a
Rapiscan executive, (the Kant affidavit) on May 23, 2012 and subsequently filed
it with the Court as part of its application record on August 31, 2012. The
application record containing the Kant affidavit was also served on the
appellant the same day.
[23]
Before the judge, the admissibility of the Kant
affidavit was challenged. An exchange ensued between counsel as to whether the
proper procedure would be to bring a separate motion prior to the hearing,
which would have required an adjournment or whether it was better to raise the
issue of striking the affidavit at the hearing. Counsel for the appellant
stated that “we are content that you [the judge] look at it [Kant affidavit]
and give it little or no weight” (appeal book, volume 6, tab 28 at 1678).
[24]
The suggestion by counsel for the appellant was
accepted by the judge (ibid at 1681 and 1690) who then proceeded with
counsel for the parties to consider the affidavit, in particular the portions
of which were challenged. Towards the end of the hearing, the appellant
requested that the judge make a ruling in this regard and the judge agreed to
do so (appeal book, volume 8, tab 31 at 2135-2136). At that point, the
affidavit could accordingly be considered as forming part of the record.
[25]
However, the ruling requested by the appellant
was never formally made by the judge. There is no reference to such ruling in
the judge’s reasons, nor do his reasons indicate the weight he gave to the Kant
affidavit. In fact, the Kant affidavit is never mentioned in the judge’s
decision. The appellant submits that the judge erred in failing to make any
determination regarding the Kant affidavit and it should accordingly be found
inadmissible.
[26]
I cannot accept the appellant’s submission on
the Kant affidavit. The appellant challenges its admissibility on the basis of
an alleged failing on the part of the judge, yet between the time that the Kant
affidavit was served and filed in 2012 and the hearing before the judge in
2013, close to one year elapsed. During this entire period, the appellant chose
not to cross-examine Mr. Kant on the content of his affidavit nor did the
appellant submit an affidavit in response. Had the appellant wished to
challenge the Kant affidavit, it had ample time to do so by filing a proper
motion in accordance with the Federal Courts Rules, SOR/98-106, to
strike portions of the Kant affidavit prior to the hearing. In failing to bring
such a motion, I am of the view that it is not open to the appellant to argue
that the affidavit should now be deemed inadmissible merely because it was not
mentioned by the judge.
[27]
In sum, although it would have been preferable for
the judge to expressly address the Kant affidavit in his decision, I am
satisfied that in the context of the present case, the judge did not err in any
way in this regard.
[28]
I now turn to the first substantive issue which
I consider to be central in this appeal.
(2) Did CATSA fail to follow its
Contracting Procedures?
(a) Overview
of CATSA’s Contracting Procedures
[29]
In essence, the mandate of CATSA is to conduct
passenger and baggage screenings at airports for security purposes and to
purchase the equipment necessary to do so. This appeal concerns the procurement
responsibilities which form part of CATSA’s mandate.
[30]
In fulfilling its procurement responsibilities,
CATSA is governed by subsection 8(5) of the CATSA Act which states the
following:
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The Authority must
establish policies and procedures for contracts for services and for
procurement that ensure that the Authority’s operational requirements are
always met and that promote transparency, openness, fairness and value for
money in purchasing.
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L’Administration
établit les règles et méthodes à suivre concernant les contrats de fourniture
de biens et de services qui garantissent l’importance primordiale de ses
besoins opérationnels et qui favorisent la transparence, l’ouverture,
l’équité et l’achat au meilleur prix.
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[31]
This provision thus expressly imposes upon CATSA
a statutory duty to establish policies and procedures applicable to its
procurement process. These policies and procedures must, inter alia, “promote
transparency, openness, fairness and value for money in purchasing”.
[32]
In accordance with subsection 8(5) of the CATSA
Act, CATSA’s Contracting Policy was adopted on July 1, 2009 and its Contracting
Procedures were adopted on December 22, 2009. The central issue raised by this
appeal concerns the latter.
[33]
For the purpose of this appeal, the relevant
portions of CATSA’s Contracting Policy and Procedures are reproduced here:
CATSA Contracting Policy (July 1,
2009)
6.6 Competition in Procurement Contract.
An open process appropriate to the nature of a Procurement Contract will be used
unless:
[…]
(ii) Directed Contract. After
conducting its evaluation of the market, CATSA has determined that only one
person or firm is capable of performing the contract:
[…]
Notwithstanding the foregoing exclusions
transparency, fairness and value for money will be promoted in all Contracts.
CATSA Contracting Procedures (December
22, 2009)
1.1
These procedures apply to all Contracts and
contracting activities conducted by CATSA. They are created in furtherance of
the CATSA Contracting Policy approved by the Board.
[…]
2.1 Definitions
[…]
“Evaluation Criteria”
means the specifications and other factors that
have been established by CATSA prior to an Open Procurement Process and which
are used to evaluate quotes, bids and proposals made by potential contractors
in response to an Open Procurement Process.
[…]
“Non-competitive
Contract” means a Contract which is or will be
established under one of the exceptions in Section Section [sic] 5.6
(Exceptions Approvable By Other Approval Authorities) which will not be or has
not been preceded by an Open Procurement Process.
[…]
“Request for
Information” and “RFI” mean an Open Procurement
Process under which CATSA requests information from the market in accordance
with these procedures.
[…]
5.1 Openness in Contracting
CATSA uses Open Procurement Processes to
promote openness, transparency and fairness and to assist in obtaining and
demonstrating that it obtains value for money in Procurement Contracts. Open
Procurement Processes should be used in accordance with these procedures unless
excepted in accordance with these procedures.
[…]
5.3 Evaluation Criteria in Open Procurements
Evaluation Criteria in any procurement shall
be established prior to seeking the applicable approval to proceed with a procurement
and the results of that evaluation shall be made available to the applicable
Approval Authority as part of any approval request. Evaluation Criteria shall
not knowingly be drafted where the effect of the Evaluation Criteria would
unreasonably give preference to potential bidders. Evaluation Criteria should
typically not be limited to only price but should be drafted to determine
overall value for money and the ability for CATSA to meet its operational
objectives.
[…]
5.6 Exceptions Approvable By Other
Approval Authorities
[…]
5.6.1 Public Interest. The nature
of the work or the circumstances surrounding the requirement is such that it
may be prejudicial to the public interest or national security to solicit open
submissions. This exception is normally reserved for dealing with security,
safety or other considerations potentially prejudicial to passengers;
[…]
5.7 Transparency, Fairness and Value
for Money Not Excepted
Subject to Section 5.6.1 exceptions to an
Open Procurement Process shall not limit CATSA’s statutory and policy
obligations of transparency, fairness or value for money.
(b) Whether
CATSA failed to follow its Contracting Procedures in the context of awarding
the procurement contract at issue
[34]
In bringing its application for judicial review,
Rapiscan maintained, as it does on appeal, that CATSA did not adhere to its
Contracting Procedures in this case. It is recalled that the procurement
decision at issue is the result of a RFS, which led to the procurement contract
being awarded to Smiths.
[35]
Rapiscan emphasizes that CATSA’s Contracting
Procedures provide for a number of authorized procurement vehicles. For
instance, “Open Procurement Process” is defined as “a contracting process
involving any of an RFI (Request for Information), RFQ (Request for Quotation),
RFP (Request for Proposal), RFSO (Request for Standing Offer), tender, Third
Party Standing Offer, or a procurement process in which ACAN is used and not
validly challenged”.
[36]
However, as noted by Rapiscan, the RFS
procurement process used by CATSA is remarkably absent from CATSA’s Contracting
Procedures. Indeed, this prompted the judge to find that “[t]he RFS did not
comply from its very conception with any authorized procurement process under
the Contracting Procedures. An “RFS” was not included among the several
authorized procurement processes in the list of Open Procurement Processes” (judge’s
reasons at para. 65).
[37]
For its part, the appellant argues that the RFS
although not specifically referred to in CATSA’s Contracting Procedures, was
nevertheless a proper procurement vehicle. More particularly, the appellant
submits that the RFS was in fact a combined procurement process first made of
an RFI and followed by a directed contract or further evaluation of submissions
after a presentation or proof of concept (appellant’s memorandum of arguments
at para. 40). The appellant contends that the RFS terminology should therefore
not be given any significant weight.
[38]
With respect, I find the appellant’s submissions
unconvincing.
[39]
The appellant has provided no explanation as to
why the RFS procurement vehicle - which is not part of CATSA’s Contracting
Procedures - was chosen by CATSA’s management instead of another approved
procurement process included in CATSA’s Contracting Procedures. Nor is there any
explanation as to why the RFS procedure was required or on what basis it was
authorized. The judge noted the existing confusion concerning how the RFS came
to be selected as a procurement vehicle when he referred to the testimony of
Mr. Corrigan, CATSA’s Director of Screening Services in 2009-2010. Mr. Corrigan
admitted in cross-examination that “he did not know how the [procurement]
process came to carry the RFS label” (judge’s reasons at para. 75). Moreover, not only does the alleged choice on the part of CATSA’s
management to combine the procurement vehicles of a RFI and a directed contract
remain unexplained, this combination is also not contemplated by the
Contracting Procedures.
[40]
If the RFS consists in fact of a merging of an
RFI and a directed contract, as argued by the appellant, evaluation criteria
would have been required pursuant to the Contracting Procedures to ensure that
the said RFS process would be considered an open and valid procurement vehicle.
Indeed, if the first step of the RFS is to be understood as an RFI, the RFI is
by definition an “Open Procurement Process” and requires evaluation criteria. This
is made abundantly clear at Section 5.3 of the Contracting Procedures which
states that “Evaluation Criteria in any procurement shall be established
prior to seeking the applicable approval to proceed with a procurement
and the results of that evaluation shall be made available to the applicable
Approval Authority as part of any approval request.” [Emphasis added.]
[41]
However, in the present case, evaluation
criteria were nowhere to be found in the RFS. Absent evaluation criteria, it
would be difficult, if not impossible, for suppliers to know and satisfy the
needs of CATSA. This is more so for Rapiscan, the only party submitting who was
not an existing supplier of CATSA. Upon receipt of the suppliers’ information,
CATSA’s management was thus in a position to pick and choose which suppliers
met its needs and eliminate suppliers who failed to meet undisclosed
requirements known only by its officers.
[42]
In short, the information – or lack thereof –
conveyed by CATSA’s management to CATSA’s Board could reasonably have led it to
believe that CATSA’s management ran an open procurement process when, in
fact, CATSA’s management never did and ultimately proceeded by way of directed
contract. The judge observed the following at paragraph 76 of his reasons:
There is no indication that the Board was aware that management had
conducted a procurement process that did not fall within the definition of an
open procurement process or come close to replicating the detailed procedures
for an open, transparent, competitive and fair procurement process which are
described in the [Contracting] Procedures. There is similarly no indication
that the Board was aware that the process had provided no statement of
requirements or evaluation criteria that related to the factors used to award
the contract, or that the RFS contained provisions exempting CATSA from any
duty of fair and equal treatment of suppliers and that it advised suppliers
that it would not be required to follow a competitive process and could award
the contract on any basis without limitation of its acquisition of information
from undisclosed sources.
[43]
I would also add that I remain unconvinced by
the appellant’s argument that a mere reference to section 6.6 of the
Contracting Policy in the Approval Request submitted to the Board was
sufficient to allow the Board to reasonably understand how the procurement
process was defined prior to providing its approval and how transparency,
fairness and value for money was promoted (appeal book, volume 3, tab D at 712).
Further, CATSA’s management also failed to inform the Board that Smiths’
equipment costs were substantially higher than Rapiscan’s equipment. As a
result, I agree with the judge that the Board was not provided with the
information allowing it to exercise “its oversight function” (judge’s reasons
at para. 77). In the end, through no apparent fault of its own, the Board could
not arrive at a reasonable conclusion.
[44]
In support of the submission that CATSA was
entitled to define the procurement process as it did, the appellant insists
that the Contracting Procedures need to be applied with flexibility and that
CATSA requires a “freedom to manoeuvre”. That is so, argues the appellant,
because CATSA’s screening equipment must constantly adjust to meet evolving
international standards. The appellant contends that the judge’s approach, in
that respect, was too rigid.
[45]
In my opinion, CATSA’s submissions on this point
defeat the very purpose of implementing the Contracting Procedures. What would
be the objective of the Contracting Procedures if CATSA could ignore,
arbitrarily and without justification, its own rules as required by and
pursuant to the CATSA Act? I can only agree with Rapiscan that such a result is
contrary to common sense and flies in the face of CATSA’s duty to promote
transparency, fairness or value for money pursuant to CATSA Act and CATSA’s
Contracting Policy and Procedures (Subsection 8(5) of the CATSA Act; sections
5.6.1, 5.7 of the Contracting Procedures and section 6.6 of the Contracting
Policy).
(c) Three
view generators issue
[46]
This last point results from the appellant’s
argument that there was no requirement for three view generators when the RFS
went to market. The appellant submits that the judge erred when (i) he found
that the RFS contained an undisclosed requirement that the x-ray equipment
sought by CATSA have three view generators and (ii) that this requirement was
known to CATSA at the time that the RFS went out to suppliers.
[47]
It is to be recalled that when CATSA approved a
non-competitive award of a contract to Smiths for the purchase of multi-view
x-ray screening equipment in 2009, “three view generators” was a requirement. Rapiscan
was eliminated in the 2009 process because its equipment model (620 DV-AT)
failed to meet the minimum requirement of “three view generators” (Briefing
Note to Board of Directors dated June 18, 2009, appeal book, volume 4, tab S
at 1061).
[48]
A year later, when the RFS was issued in 2010,
it did not contain any requirement of a minimum number of view generators. On
that basis, Rapiscan made a submission for its equipment comprising two view
generators (620DV-AT). However, in the end, Rapiscan’s submission was
eliminated on the basis that CATSA required three or more view generators
(Briefing Note to the Board of Directors dated October 4, 2010, appeal book, volume
4, tab 16-S at 1046).
[49]
The judge found that since the three view
generators was a requirement in 2009 when the contract was awarded to Smiths,
the three view generators requirement was still a minimum requirement for the
procurement process in 2010. In making his finding on the three view generators
requirement, the judge relied on two documents: i) the Briefing Note to the
Board of Directors dated October 4, 2010 (appeal book, volume 4, tab 16-S at
1046); and ii) the Briefing Note to the Board of Directors dated June 18, 2009
(appeal book, volume 4, tab 16-S at 1062) (judge’s reasons at paras. 84-87).
[50]
Although the appellant admits that equipment
with three view generators was a minimum requirement in the 2009 procurement
process which was awarded to Smiths, it maintains that the judge had no basis
for inferring that the same minimum requirement was also adopted during the
2010 RFS procurement process.
[51]
In light of the deference which this Court owes
to a lower court’s findings of fact in accordance with Housen, I
disagree with the appellant.
[52]
The 2010 Briefing Note refers back to the 2009
procurement process and states that “For this requirement [in 2009], the
multi-view X-ray machines required 3 or more views which is again a factor in
this year’s evaluation” (judge’s reasons at para. 39).
[53]
Although the Briefing Note may be read to say
that the quality of an equipment having three or more views was simply one
among several factors to be weighed, it may also be read to say that the three view
requirement was again a critical factor in the 2010 procurement process that
could exclude certain equipment. The judge’s preference for the latter
interpretation does not, in my view, amount to a palpable and overriding error.
[54]
The judge also found that CATSA’s management’s
representations regarding Smiths’ products and its high performing technology
could not be reasonably justified and that CATSA had further failed to inform
the Board that Rapiscan’s equipment’s costs were substantially less and thus
more competitive.
[55]
On the basis of the evidence adduced, the judge
came to the conclusion that the Board was not aware that management conducted
the procurement process the way it did. This resulted in the Board being unable
to exercise its oversight function. In my view, this finding was open to the
judge and he did not commit any error which would warrant the intervention of
this Court.
[56]
For the above reasons, because I find that
CATSA’s decision was reached through a flawed process, I can only conclude that
CATSA’s decision derived from that process is equally flawed and unreasonable. This
finding is, in and of itself, sufficient to dispose of the case and dismiss the
appeal. I feel it necessary however to briefly address the two remaining
issues.
(3) Did CATSA breach a duty of
procedural fairness?
[57]
An important feature in a procurement process is
the established and notional contract known as “Contract A” that is created
when a bidder responds to the purchaser’s tender call and submits a tender (Ontario
v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111). It is settled law that the formation of the said
“Contract A” in a procurement process will create implied rights and
obligations arising out of the said process (e.g. a duty of fairness), which is
distinct from the contract to be awarded at the conclusion of the bidding
process (“Contract B”).
[58]
Pursuant to M.J.B. Enterprises Ltd. v.
Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 [M.J.B.
Enterprises], the Supreme Court of Canada established that upon submission
of a tender, “Contract A” will not necessarily arise. The creation of a
“Contract A” will depend on the intention of the parties - as with the
formation of any contract - and the terms and conditions established in the
tendering documents (M.J.B. Enterprises; Martel Building Ltd. v.
Canada, 2000 SCC 60, [2000] 2 S.C.R. 860 and Naylor Group
Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R.
943). In the event that no “Contract A” is created, it follows that, in
principle, the parties are governed by the traditional law of contracts and the
rights and obligations implied in a “Contract A” do not arise. (Paul Emanuelli,
Government Procurement, 3d ed. (Lexis, 2012) at page 68).
[59]
The judge was alive to the notion of “Contract
A” and was also concerned that the present case involved a unique aspect
because the RFS explicitly excluded “Contract A”. In his opinion, the result
of this exclusion was to deny “any duty of fair and equal treatment owed to the
bidding parties” (judge’s reasons at para. 122). He was of the view that even
if a satisfactory remedy in the traditional law of contract was available to Rapiscan,
he nonetheless felt compelled given the circumstances of the case, to find a
public law remedy for breach of procedural fairness (judge’s reasons at paras.
125-126). In so finding, he concluded that CATSA had breached its duty
of procedural fairness vis-à-vis Rapiscan and a remedy was accordingly warranted
to maintain the integrity of the governmental procurement process.
[60]
However, in finding a public law duty of
procedural fairness, the judge seems to have conflated the issue of whether CATSA’s
decision was reasonable with the issue of whether CATSA breached a duty of
procedural fairness. This is evident when the judge states that “[t]he Board
authorized an award of a contract that resulted from an unfair and
non-competitive procurement process” (judge’s reasons at para. 4). [Emphasis
added.] The issues of fairness and reasonableness are expressly joined together
where he describes CATSA’s decision as “unfair, unreasonable, arbitrary and
made in bad faith” (judge’s reasons at para. 131; see also paras. 127 and 129).
[61]
The root of the judge’s reasoning can be found
in his reliance on GDC Gatineau Development Corp v. Canada (Minister of
Public Works and Government Services), 2009 FC 1295 at paragraph
24 [GDC Gatineau], which purported to affirm earlier Federal Court
jurisprudence, which stands for the questionable proposition that a tendering
decision is unreasonable where “tendering authority acted in an unfair,
unreasonable or arbitrary manner, based its decision on irrelevant
considerations, or acted in bad faith.” By proposing that reasonableness
should be measured in part in terms of fairness, the GDC Gatineau test
clearly runs contrary to the well-established distinction between substantive
review and procedural fairness and the resulting rule that procedural fairness
is reviewed separately on a correctness standard (Khela v. Mission
Institution, 2014 SCC 24, [2014] 1 S.C.R. 502 at para. 79).
[62]
It is also to be recalled that in Irving Shipbuilding,
our Court restricted access to public law remedies to situations involving
grave misconduct such as fraud, bribery or corruption (at para. 62). The judge,
at paragraph 115 of his reasons, inferred that the threshold of grave
misconduct referred to in Irving Shipbuilding “must have been directed at
the particular situation involving subcontractor’s rights” as opposed to direct
bidders. A priori, I am not prepared to distinguish Irving
Shipbuilding on this ground.
(4) Did CATSA act in bad faith?
[63]
Although the issue of bad faith was mentioned at
the hearing before the judge, Rapiscan did not suggest that the Board acted in bad
faith (appeal book, volume 6, tab 28 at 1726). Before our Court, Raspican
further confirmed that it did not “press” the bad faith argument before the
judge. This was not denied by the appellant.
[64]
Despite Rapiscan’s position, the judge
nonetheless embarked on an analysis which led him to find that CATSA acted in
bad faith. In reaching this conclusion, the judge inferred that CATSA acted in
bad faith but failed to ground his finding in the evidence. Not only did the
judge find bad faith on a “reasonable inference”, but he further questioned his
own inference at paragraph 94 of his reasons:
In the circumstances, including CATSA’s tendering history, it would
appear to be a reasonable inference that the minimum requirement was
adopted to prevent the Board from carrying out a fair and a proper evaluation
by limiting its access to information on the significant cost advantage offered
by Rapiscan’s equipment. Whether or not that was the intention, that was the
result.
[Emphasis added.]
[65]
In light of the foregoing, I can only observe
that the judge’s finding on bad faith was unsupported and improper.
IV.
Conclusion
[66]
For the above reasons, I find that the Board’s
decision is unreasonable and unlawful. I would accordingly dismiss the appeal
with costs. I would also declare that CATSA failed to follow its Contracting
Procedures enacted pursuant to the CATSA Act with respect to the 2010
procurement process which awarded the contract to Smiths and I would vary the
judge’s order accordingly.
“Richard Boivin”
“I agree
M. Nadon J.A.”
“I agree
Wyman W. Webb J.A.”
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