Date: 20090416
Docket: A-547-08
Citation: 2009 FCA 116
CORAM: RICHARD
C.J.
EVANS
J.A.
RYER
J.A.
BETWEEN:
IRVING SHIPBUILDING INC.
and FLEETWAY INC.
Appellants
and
THE ATTORNEY GENERAL OF CANADA
and CSMG INC.
Respondents
REASONS FOR JUDGMENT
EVANS J.A.
A. INTRODUCTION
[1]
Public
contracts lie at the intersection of public law and private law. The question
raised in this appeal is whether a subcontractor of an unsuccessful bidder for
a government procurement contract may apply for judicial review to challenge
the fairness of the process for awarding the contract when the unsuccessful
bidder decides not to litigate.
[2]
This is an
appeal from a decision of the Federal Court in which Justice Harrington
(“Applications Judge”) dismissed an application for judicial review by Irving
Shipbuilding Inc. and Fleetway Inc. (“appellants”) to set aside a contract
awarded by the Minister of Public Works and Government Services Canada
(“PWGSC”) to CSMG Inc. (“CSMG”), a company formed by Devonport Management Limited
and Weir Canada Inc. (“Weir”) for the purpose of bidding on this contract.
[3]
The
appellants were subcontractors to BAE Systems (Canada) Inc., the unsuccessful
bidder on a contract to provide in-service support to Canada’s Victoria Class submarines (“the
submarine contract”). If the submarine contract had been awarded to BAE, which
is not a party to this litigation, the appellants’ contract with BAE would have
entitled them to 50% of the revenue and 50% of the work from the submarine contract.
The potential total value of the submarine contract is said to be approximately
$1.5 billion over 15 years.
[4]
The
Applications Judge held that, unlike BAE, the primary bidder, the appellants
were not “directly affected” by the award of the contract to CSMG and hence
lacked standing under subsection 18.1(1) of the Federal Courts Act,
R.S.C. 1985, c. F-7, to make an application for judicial review. Nonetheless, he
went on to consider the application on its merits. The Applications Judge rejected
the appellants’ argument that the award of the contract to CSMG was vitiated by
procedural unfairness, namely, conflict of interest and reasonable apprehension
of bias. The decision is reported as Irving Shipbuilding Inc. v. Canada (Attorney General), 2008 FC 1102.
[5]
The
appellants say that the Applications Judge erred in law by construing too
narrowly the words “anyone directly affected” in subsection 18.1(1). Since the
termination of their rights under the subcontract to perform work and to
receive remuneration was, the appellants argued, the inevitable and foreseen
consequence of the Minister’s award of the contract to CSMG, they had standing
to challenge the fairness of the procurement process. The appellants’ essential
complaint about the process is that the Minister failed to ensure that no
bidder had an unfair advantage over others. More particularly, they allege, an
employee of Weir, one of the companies that formed CSMG, gained an insight into
the “mindset”, or preferences, of the Department of National Defence (“DND”)
officials who evaluated the bids as a result of having worked, in another
capacity, with those officials in developing the solicitation documents.
[6]
In my
view, the appellants have failed to establish that PWGSC owed them a duty of
fairness. Since they did not tender to PWGSC’s request for proposals (“RFP”),
they cannot claim that the duty was contractual. Nor can they point to
legislation which confers on subcontractors a statutory right to procedural
fairness. While a broad right to procedural fairness is afforded by the common
law to those whose rights, interests or privileges are adversely affected by
administrative action, this public law right has little application, if any, to
an essentially commercial relationship governed for the most part by the law of
contract. Accordingly, I would dismiss the appeal.
B. FACTUAL BACKGROUND
[7]
On March
30, 2004, PWGSC solicited letters of interest for the submarine contract and
received requests for information from, among others, Peacock Inc. (which later
became Weir), Irving, Fleetway, and BAE. Irving and Fleetway are affiliated.
[8]
Weir
administered, through its marine engineering services division, the Naval
Engineering Test Establishment (“NETE”) which is a government-owned, but privately
operated organization. NETE provides independent and impartial test and
evaluation services to the Canadian Navy. When Weir was awarded the contract to
manage NETE in 1999, it undertook to take steps to ensure that it would not
gain any real or perceived unfair competitive advantage in its other dealings
with DND as a result of its management of NETE.
[9]
In March
2005, PWGSC issued an industry solicitation requesting feedback on the proposed
Statement of Work (“SOW”), developed by NETE, which was to be incorporated into
the RFP for the submarine services. In the following months, the SOW was discussed
at both public and closed-door meetings with the interested companies, as a
result of which changes were made to the SOW.
[10]
On
September 22, 2005, PWGSC issued its first RFP soliciting bids for the
submarine contract. Bids were submitted by three parties, including CSMG and
BAE. As already noted, CSMG was formed for the purpose of bidding on the
submarine contract and Weir was one of its two shareholders.
[11]
Rather
than form a new corporation or enter into a joint venture, BAE acted as the
sole primary bidder and prepared its bid with the cooperation of subcontractors;
collectively they referred to themselves as “Team Victoria”. The appellants and other subcontractors
entered into agreements with BAE, which they called the “teaming agreements”.
The appellants’ teaming agreement provided, among other things, for the
creation of a steering committee, through which the appellants would have a 50%
say in any management decisions taken in the preparation of the bid and, if
successful, the execution of the submarine contract. The teaming agreement also
explicitly stated that Team Victoria was not a joint venture between the
appellants and BAE, which remained the sole primary bidder on the submarine
contract.
[12]
Before
submitting the Team Victoria bid, BAE raised concerns with PWGSC about Weir’s
role in developing the SOW and requested that it ensure that no conflict of
interest arose. In response, PWGSC assured BAE that it had taken all necessary
steps and informed it that any bid submitted would constitute an acknowledgment
of this. Team Victoria submitted a bid.
[13]
On June 1,
2006, PWGSC informed BAE that the bidding process was cancelled as none of the
bidders met all the mandatory requirements. On July 21, 2006, a second RFP
was issued, and both CSMG and BAE again submitted bids. On January 10, 2007,
PWGSC informed BAE that, although its bid was compliant, CSMG would be awarded
the submarine contract because it had received a higher score for the technical
aspects of the bid.
[14]
The
appellants brought an application for judicial review in the Federal Court to
challenge the validity of the award of the contract to CSMG. Since the contract
concerns national security, the Canadian International Trade Tribunal has no
jurisdiction over complaints arising from its award.
C. DECISION OF THE FEDERAL COURT
[15]
The
Applications Judge held that the appellants had no standing to seek judicial
review because, as subcontractors of the unsuccessful bidder, they were not
“directly affected” by the award of the contract to CSMG within the meaning of
subsection 18.1(1) of the Federal Courts Act. Relying by way of analogy
on actions in tort purely economic loss, he held (at para. 22) that “direct”
means “without intermediaries”, and that, as the primary bidder on the
submarine contract, BAE was an “intermediary”. He relied also (at para. 28) on Design
Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737 (“Design
Services”), where subcontractors of an unsuccessful bidder failed to
establish that PWGSC owed them a duty of care in tort not to award a contract
to a non-compliant bidder.
[16]
Finally,
the Applications Judge held (at paras. 52-54) that, even if the appellants had
the requisite standing, he would have dismissed their claim on its merits,
because they had only established a “possibility of mischief”, and not a
“probability of mischief”, as a result of any failure by PWGSC to prevent CSMG
from benefiting from an unfair advantage based on Weir’s involvement in the
development of the RFP. The facts of this case, the Applications Judge
concluded, did not give rise to a reasonable apprehension that PWGSC was biased
in its evaluation of the bids.
[17]
Accordingly,
the Applications Judge dismissed the appellants’ application for judicial
review.
D. ISSUES AND ANALYSIS
(i) Jurisdiction
[18]
The
parties do not dispute that the award of the submarine contract can be the
subject of an application for judicial review as an exercise of power conferred
by an Act of Parliament on a federal board, commission or other tribunal. I
agree with the parties for the following reasons.
[19]
The
relevant provisions of the Federal Courts Act provide as follows.
|
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.
|
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.
|
|
2. "federal
board, commission or other tribunal" means any body, person or persons
having, exercising or purporting to exercise jurisdiction or powers conferred
by or under an Act of Parliament or by or under an order made pursuant to a
prerogative of the Crown, …. ;
|
2. «office fédéral »
Conseil, bureau, commission ou autre organisme, ou personne ou groupe de
personnes, ayant, exerçant ou censé exercer une compétence ou des pouvoirs
prévus par une loi fédérale ou par une ordonnance prise en vertu d’une
prérogative royale, …
|
[20]
The
Minister of Public Works and Government Services Canada has broad statutory
responsibilities for the acquisition of goods and services for the Government
of Canada. The following statutory provisions are of particular relevance to
the present case.
Department of Public Works and
Government Services Act,
S.C. 1996, c. 16
|
6.
The powers, duties and functions of the Minister extend to and include all
matters over which Parliament has jurisdiction, not by law assigned to any
other department, board or agency of the Government of Canada, relating to
(a)
the acquisition and provision of articles, supplies, machinery, equipment and
other materiel for departments;
(b)
the acquisition and provision of services for departments;
…
(e)
the construction, maintenance and repair of public works, federal real property
and federal immovables;
…
|
6. Les pouvoirs et fonctions du ministre s’étendent d’une façon
générale à tous les domaines de compétence du Parlement non attribués de
droit à d’autres ministères ou organismes fédéraux et liés à :
a)
l’acquisition et la fourniture d’articles, d’approvisionnements, d’outillage,
d’équipements et autre matériel pour les ministères;
b)
l’acquisition et la fourniture de services pour les ministères;
[…]
e) la
construction, l’entretien et la réparation des ouvrages publics et des
immeubles fédéraux et des biens réels fédéraux;
[…]
|
Defence Production Act, R.S.C. 1985 c. D-1
|
16.
The Minister may, on behalf of Her Majesty and subject to this Act,
(a)
buy or otherwise acquire, utilize, store, transport, sell, exchange or
otherwise dispose of defence supplies;
…
|
16. Le ministre peut, au nom de Sa Majesté et sous réserve des
autres dispositions de la présente loi :
a) acheter ou
acquérir par tout autre moyen, utiliser, entreposer ou transporter du
matériel de défense, ou en disposer, notamment par vente ou échange;
|
In
my view, these provisions include a power to contract for the maintenance and
servicing of submarines
for the DND.
[21]
The fact
that the power of the Minister, a public official, to award the contract is statutory,
and that this large contract for the maintenance and servicing of the Canadian
Navy’s submarines is a matter of public interest, indicate that it can be the
subject of an application for judicial review under section 18.1, a public law
proceeding to challenge the exercise of public power. However, the fact that
the Minister’s broad statutory power is a delegation of the contractual
capacity of the Crown as a corporation sole, and that its exercise by the
Minister involves considerable discretion and is governed in large part by the private
law of contract, may limit the circumstances in which the Court should grant
relief on an application for judicial review challenging the legality of the
award of a contract.
[22]
This Court
reached a similar conclusion in Gestion Complexe Cousineau (1989) Inc. v. Canada (Minister of Public Works and
Government Services), [1995]
2 F.C. 694 (C.A.) at paras. 7-17 (“Gestion Complexe”). The Court held that
the exercise by a Minister of a statutory power to call for tenders and to
enter into contracts for the lease of land by the Crown could be the subject
of judicial review under the former paragraph 18(1)(a) of the Federal
Court Act as a decision of “a federal board, commission or other
tribunal”.
[23]
Although
not addressing the particular issue in dispute in the present case, Justice
Décary, writing for the Court, also emphasized the difficulties facing an
applicant in establishing a ground of review that would warrant the Court’s intervention
in the procurement process through its judicial review jurisdiction. Thus, he
said (at para. 20):
As
by definition the focus of judicial review is on the legality of the federal
government's actions, and the tendering procedure was not subject to any
legislative or regulatory requirements as to form or substance, it will not be
easy, in a situation where the bid documents do not impose strict limitations
on the exercise by the Minister of his freedom
of
choice, to show the nature of the illegality committed by the Minister when in
the normal course of events he compares the bids received, decides whether a
bid is consistent with the documents or accepts one bid rather than another.
[24]
This view
of the Court’s jurisdiction is consistent with that generally adopted by other
courts in Canada: see Paul Emanuelli, Government
Procurement, 2nd ed. (Markham, Ontario: LEXISNEXIS, 2008) at 697-706, who concludes (at 698):
As a general
rule, the closer the connection between a procurement process and the exercise
of a statutory power, the greater the likelihood that the activity can be
subject to judicial review. Conversely, to the extent that the procurement
falls outside the scope of a statutory power and within the exercise of
government’s residual executive power, the less likely that the procurement
will be subject to judicial review.
English authorities on public contracts and judicial review
are considered in Harry Woolf, Jeffrey Jowell and Andrew Le Sueur, de
Smith’s Judicial Review, 6th ed. (London: Sweet & Maxwell Ltd., 2007), 138-45, where
courts generally require an “additional public element” before concluding that
the exercise by a public authority of its contractual power is subject to
judicial review, even when the power is statutory.
[25]
Consequently,
on the basis of both authority and principle, I agree that the award of the
submarine contract by the Minister of PWGSC is reviewable under section 18.1 of
the Federal Courts Act as a decision of a “federal board, commission or
other tribunal” made in the exercise of “powers conferred by or under an Act of
Parliament” (section 2).
(ii) Standard of review
[26]
The principal
issue that I need to decide in order to dispose of this appeal is whether the
appellants had a right to procedural fairness in the process by which PWGSC
awarded the submarine contract to CSMG. This is a question of law to be determined
on a standard of correctness: Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R.
190 (“Dunsmuir”), at para. 129.
Issue 1: Are the appellants
“directly affected” by the award of the submarine contract to CSMG?
[27]
The
parties made lengthy submissions on the question of whether the appellants had
standing to challenge the award of the submarine contract to CSMG as a result
of the loss of both their contractual rights as subcontractors and significant
potential revenue from the work to be performed under that contract. In
particular, the argument focussed on whether the appellants’ losses made them “directly
affected” by PWGSC’s decision to award the submarine contract to CSMG so as to
enable them to make this application for judicial review under subsection
18.1(1) of the Federal Courts Act.
[28]
In my
view, the question of the appellants’ standing should be answered, not in the
abstract, but in the context of the ground of review on which they rely,
namely, breach of the duty of procedural fairness. Thus, if the appellants have
a right to procedural fairness, they must also have the right to bring the
matter to the Court in order to attempt to establish that the process by which
the submarine contract was awarded to CSMG violated their procedural rights. If
PWGSC owed the appellants a duty of fairness and awarded the contract to CSMG
in breach of that duty, they would be “directly affected” by the impugned
decision. If they do not have a right to procedural fairness, that should
normally conclude the matter. While I do not find it necessary to conduct an
independent standing analysis, I shall briefly address two issues that arose
from the parties’ submissions.
[29]
First, I
do not accept the respondents’ contention that, in providing in subsection
18.1(1) of the Federal Courts Act that “anyone directly affected by the
matter in respect of which relief is sought” may make an application for
judicial review, Parliament intended litigants challenging federal
administrative action to have more limited access to the Federal Courts than
that typically available to those challenging in provincial superior courts
administrative action taken by provincial statutory authorities.
[30]
Indeed,
prior to the 1992 amendments to what was then the Federal Court Act, the
words “directly affected” only applied to standing to bring an application for
judicial review in the Appellate Division of the Federal Court of Canada under
the former section 28 with respect to a decision or order of a tribunal to
which that section applied. Since standing to bring judicial review proceedings
in the Trial Division was left undefined, it was determined on the basis of the
common law. As a result of the 1992 amendments, the statutory application for
judicial review was extended to the administrative law jurisdiction of both
Federal Courts. It seems to me implausible that, by retaining the words
“directly affected” in subsection 18.1(1), Parliament thereby intended to narrow
litigants’ access to the Federal Court from that which litigants previously had
to the Trial Division of the Federal Court.
[31]
The
principal purpose of the administrative law aspects of the Federal Court Act
when enacted in 1970 was to transfer from the superior courts of the provinces
to the Federal Court of Canada an almost exclusive supervisory jurisdiction
over federal administrative action: Canada (Minister of Citizenship and
Immigration) v. Khosa, 2009 SCC 12 (“Khosa”) at para. 34. Indeed, far
from restricting judicial review, former paragraphs 28(1)(b) and (c)
of the Act expanded it somewhat, by removing the common law requirement that
any error of law by the tribunal must be apparent on the face of its record,
and by including error of fact as a discrete ground of review, even when it
could not be said to have been based on “no evidence”. The 1992 extension of
the application for judicial review as the procedural vehicle for challenging
federal administrative action in both Federal Courts was designed to modernize
and facilitate judicial review not to restrict access to the Federal Court.
[32]
To attach
the significance urged by the respondents to Parliament’s choice of the words
“directly affected”, rather than any of the common law standing requirements (“person
aggrieved” or “specially affected”, for example) would, in my view, ignore the
context and purpose of the statutory language of subsection 18.1(1). As the
Supreme Court of Canada said recently in Khosa (at para. 19):
… most if not all judicial review
statutes are drafted against the background
of the common law of judicial review.
Even the more comprehensive among
them ... can only sensibly be interpreted
in the common law context …
[33]
Moreover,
since all these terms are somewhat indeterminate, Parliament’s choice of one
rather than another should be regarded as of relatively little importance. See
also Thomas A Cromwell, Locus Standi: A Commentary on the Law of Standing in
Canada (Toronto: Carswell, 1986) at 163-64 (“Locus Standi”), especially
his apt description (at 163) of the “semantic wasteland” to be traversed by a
court in attempting to apply the various “tests” for standing, both statutory
and common law. Although directed at differences between the French and English
texts of subsection 18.1(4) of the Federal Courts Act, the following statement
in Khosa (at para. 39) seems equally apt in the interpretation of the
words “directly affected” in subsection 18.1(1):
A blinkered
focus on the textual variations might lead to an interpretation at odds with
the modern rule [of statutory interpretation] because, standing alone,
linguistic considerations ought not to elevate an argument about text above the
relevant context, purpose and objectives of the legislative scheme.
[34]
The
interpretation of the standing requirement in subsection 18.1(1) was addressed
by this Court in Sunshine Village Corporation v. Canada (Minister of Canadian
Heritage)
(1996), 202 N.R. 132 (F.C.A.) at paras. 66-8. Writing for the Court, Desjardins
J.A. concluded that it was not intended to preclude the Court from granting
public interest standing to persons who were not directly affected. The
appellants in the present case do not rely on public interest standing.
[35]
Second, I
do not necessarily agree with the appellants’ argument that standing is
determined by the quantum of an applicant’s loss. Attempting to determine
whether a loss is big enough to confer standing would tend to be arbitrary and
productive of undue uncertainty, although a de minimis loss may be
regarded as no loss at all. At least as important as the quantity of any loss
sustained by an applicant for judicial review is its relationship to the
administrative action impugned, and whether it falls within the range of
interests protected by the enabling legislation.
Issue 2: Did the appellants
have a right to procedural fairness?
[36]
The
appellants argue that the Applications Judge was “distracted” by the
“contractual matrix” of this litigation. They say that he should have applied
the test for the application of the duty of fairness used with respect to administrative
action taken pursuant to the exercise of a statutory power, namely, whether it affects
the rights, privileges or interests of individuals: see, for example, Cardinal
v. Kent Institution, [1985] 2 S.C.R. 643 at 653.
[37]
I do not
agree. In my view, the fact that this case involves the award of a contract
provides the essential context in which it must be determined if a duty of
fairness is owed to the appellants. On the facts of this case, a duty of
fairness may arise in one of three ways: contract, legislation, and the common
law.
(i) contract
[38]
A tender
in response to an RFP creates a contract (“contract A”) governing the
conduct of the party calling for tenders: Ontario v. Ron Engineering & Construction
(Eastern) Ltd.,
[1981] 1 S.C.R. 111. The terms of contract A may include a promise,
express or implied, that the contract for which tenders were requested
(“contract B”) will be awarded in a procedurally fair manner and bidders
will be treated equally: Martel Building Ltd. v. Canada, 2000 SCC 60, [2000]
2 S.C.R. 860, at para. 88.
[39]
In the
present case, BAE could have relied upon contract A with PWGSC to allege
that contract B was awarded to CSMG in breach of the duty of fairness
implicit in contract A. Whether BAE would have succeeded, either on an
application for judicial review or in an action for damages for breach of
contract, is, of course, another question.
[40]
However, BAE
has elected not to initiate judicial review proceedings, or an action for
breach of contract, in order to establish that the contract was awarded to CSMG
in breach of the duty of fairness and should be set aside for procedural
unfairness or PWGSC should pay damages for breach of contract A. As subcontractors
of BAE who have no contractual relationship with PWGSC, the appellants may not
rely on contract A between BAE and PWGSC as the source of any legal duty
owed to them.
[41]
It would
have been different if the appellants had entered into a joint venture with BAE
to bid for the submarine contract or, together, they had formed a company for
the purpose of bidding on the contract. In either of these events, the
appellants would have had the benefit of contract A with PWGSC. However,
having elected to be subcontractors of BAE, and thus not to expose themselves
to potential contractual liability to PWGSC, the appellants cannot now claim
the benefit of contract A between PWGSC and BAE because they were not a
party to it.
(ii) statute
[42]
In the
course of oral argument, counsel for the appellants submitted that legislation
conferred on them rights to procedural fairness. Counsel relied on the
following provisions.
Financial Administration Act, R.S.C. 1985. c. F-11
|
40.1 The Government
of Canada is
committed to taking appropriate measures to promote fairness, openness and
transparency in the bidding process for contracts with Her Majesty for the
performance of work, the supply of goods or the rendering of services.
|
40.1 Le gouvernement
fédéral s’engage à prendre les mesures indiquées pour favoriser l’équité,
l’ouverture et la transparence du processus d’appel d’offres en vue de la
passation avec Sa Majesté de marchés de fournitures, de marchés de services
ou de marchés de travaux.
|
[43]
Legislation may, of
course, impose a
duty of fairness on PWGSC in its conduct of the procurement process, and
specify its content. However, I am not persuaded that the above provision
assists the appellants. The phrase “The Government of Canada is committed to
taking appropriate measures to promote the fairness … of the
bidding process…” is not sufficiently precise to impose an immediate legal duty
of procedural fairness enforceable by a bidder, let alone by a subcontractor.
Rather, it sets a goal and only commits the Government to take future, unspecified
steps to ensure that the procurement process is fair.
(iii) common law
[44]
The
appellants argue that, as persons adversely affected by the award of the
submarine contract to CSMG, they are entitled to challenge the fairness of the
process by which it was awarded. They say that their right to procedural
fairness arises from the common law in respect of administrative action,
namely, the award of the contract to CSMG, because it ended their legal rights
under their contract with BAE and caused them substantial financial loss. I do
not agree.
[45]
The common
law duty of fairness is not free-standing, but is imposed in connection with
the particular scheme in which the impugned administrative decision has been
taken. In my opinion, it cannot be assumed that a duty imposed on the exercise
of administrative action taken in the performance of a statutory, governmental
function applies in the case of a decision to purchase goods and services where
the legal relations of the parties are largely governed by the law of contract.
[46]
The
context of the present dispute is essentially commercial, despite the fact that
the Government is the purchaser. PWGSC has made the contract pursuant to a
statutory power and the goods and services purchased are related to national
defence. In my view, it will normally be inappropriate to import into a
predominantly commercial relationship, governed by contract, a public law duty
developed in the context of the performance of governmental functions pursuant
to powers derived solely from statute.
[47]
First, judicially
imposed procedural duties in favour of subcontractors would undermine the right
of a bidder for a procurement contract to determine what, if any, steps it
should take in the event of an apparent breach of contract A. The law should
normally not override the decision of an unsuccessful bidder to do nothing
because, for example, of a fear that the institution of litigation would
jeopardise its prospects of obtaining a contract in the future, or of its desire
not to be involved in costly and time-consuming litigation. See also Locus
Standi, at 171, where Justice Cromwell notes that the law generally defers
to the decision of “the more obvious plaintiff” not to institute legal
proceedings and therefore does not confer standing on a person less affected by
the impugned administrative action.
[48]
Second, while
also serving the public interest in good government, procedural rights are, to
a large extent, personal to those whose substantive rights or interests they
protect. For example, in most cases, a person who has waived a right to
procedural fairness may not subsequently challenge an administrative decision
on the ground that it was made in breach of the duty of fairness: for
the relevant authorities, see Donald J.M. Brown and John M. Evans, Judicial
Review of Administrative Action in Canada (Toronto: Canvasback Publishing)
at 11:5500.
[49]
The
decision in Re Ratepayers of the School District of the New Ross
Consolidated School (1979), 102 D.L.R. (3d) 586 (N.S.S.C.T.D.) is anomalous
in conferring standing on a ratepayers’ group challenging the dismissal of a
school principal on the ground that he had not been afforded a fair hearing,
even though he himself had not litigated the matter: see David J. Mullan and
Andrew J. Roman, “Minister of Justice of Canada v. Borowski: The Extent
of the Citizen’s Right to Litigate the Lawfulness of Government Action” (1984),
4 Windsor Y.B. Access to Just. 303 at 339-41 and 349.
[50]
Third, the
logic of the appellants’ argument that they are entitled to procedural fairness
opens the alarming possibility of a cascading array of potential procedural
rights-holders. What, for example, of employees of unsuccessful bidders or
their subcontractors who lose their employment as the result of the award of
the contract to another bidder? The adverse impact on such employees may be
just as serious to them as the loss of the subcontract is to the appellants. It
would be unduly formalistic to say that the appellants’ position is
distinguishable because their contract provided that their right to share the
revenue terminated if the submarine contract was not awarded to BAE.
[51]
Fourth, the
appellants say that to confer upon them a right to procedural fairness would
advance the public’s interest in obtaining value for money by protecting the
fairness of the procurement process; an unfair process may discourage bidders
from tendering to future RFPs. However, since those who bid in response to an
RFP have contractual rights to ensure that their tenders are evaluated
accurately and fairly, the protection of the public interest in the integrity
of the process does not require a judicial extension of procedural rights to
subcontractors. Moreover, if a free-standing right to procedural fairness
existed it would not have been necessary for the courts to have implied it as a
term of contract A.
[52]
Fifth, the
public interest in the efficiency of the tendering process may well be
compromised by an extension of the right to procedural fairness in the manner urged
by the appellants. To extend the right to procedural fairness to subcontractors
and, possibly, to others who have been adversely affected by a contract award, can
only complicate the procurement process and introduce new levels of uncertainty
into essentially commercial relationships.
[53]
To
supplement the contractual safeguards with the common law duty of fairness
would thus frustrate the parties’ expectations. A duty of fairness based on the
common law would presumably also include a right for subcontractors, and
others, to participate in the procurement process by making representations
before the contract was awarded. As already noted, the appellants could have
brought themselves within the protection of contract A if they had so
chosen, including any duty of fairness arising from it.
[54]
Sixth, once
a contract has been awarded, the public has an interest in the avoidance of
undue delays in its performance, and in ensuring that government is able promptly
to acquire the goods and services that it needs for the discharge of its
responsibilities. The normal remedy for breach of contract is a simple award of
damages, which does not delay the performance of the contract by the winning
bidder. In contrast, the more intrusive public law remedy sought by the
appellants is that the contract awarded to CSMG be set aside, so that the
tendering process can start again. Governments’ recent resort to funding
“shovel-ready” infrastructure projects as part of a strategy for promoting
economic recovery vividly illustrates that delays in getting publicly financed work
underway may be detrimental to the public interest.
[55]
Two recent
decisions of the Supreme Court of Canada support the conclusion that a duty of
fairness was not owed to the appellants with respect to the procurement
process: Design Services and Dunsmuir.
[56]
The facts
of Design Services are similar to those of the present case. The
appellants were the subcontractors of an unsuccessful bidder on a government
contract. As in our case, the appellants in Design Services could have
entered into a joint venture with the unsuccessful bidder, but did not. The subcontractors
and the unsuccessful bidder sued the Government for damages on the ground that
it had awarded the contract to a non-compliant bidder. However, on settling its
claim, the unsuccessful bidder discontinued its action.
[57]
The
question for the Court was whether the subcontractor had an action in
negligence against the Government for awarding the contract to a non-compliant
bidder. In giving the judgment of the Court dismissing the appeal, Justice
Rothstein said (at para. 56):
… 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 would be to allow
for an unjustifiable encroachment of tort law into the realm of contract.
[58]
The
appellants argue that Design Services is distinguishable because the concern
of the Court in that case was that the imposition of a duty of care would
increase the Crown’s exposure to potential financial liability far beyond the
contractual arrangements: paras. 59-66. But in the present case, they say, no
claim for damages is being made and, once granted, the remedy sought, namely
the quashing of the award of the contract, can only be granted once. In my
view, however, this is too narrow a reading of Design Services.
[59]
In Dunsmuir
the Court considered (at paras. 102-17) the appropriateness of
imposing a duty of fairness prior to the dismissal of a Crown employee and
office holder. The Court decided that, as a general rule, a duty of procedural
fairness, and remedies other than damages for breach of contract, have no place
in the legal relationship between the Crown on the one hand, and office holders
and employees on the other, when their relationship is rooted essentially in
contract.
[60]
Admittedly,
the facts of our case are different from those in Dunsmuir because the
appellants have no contractual rights against PWGSC. Nonetheless, the broader
point made by both Design Services and Dunsmuir is that when the
Crown enters into a contract, its rights and duties, and the available
remedies, are generally to be determined by the law of contract.
[61]
Finally,
if a case arose where the misconduct of government officials was so egregious
that the public interest in maintaining the essential integrity of the
procurement process was engaged, I would not want to exclude the possibility of
judicial intervention at the instance of a subcontractor. However, given the
powerful reasons for leaving procurement disputes to the law of contract, it
will only be in the most extraordinary situations that subcontractors should be
permitted to bring judicial review proceedings to challenge the fairness of the
process.
[62]
In my
view, the facts of this case fall far short of the kind of extraordinary
circumstances in which the Court might intervene at the instance of a subcontractor.
The appellants do not allege, for example, fraud, bribery, corruption or other
kinds of grave misconduct which, if proved, would undermine public confidence
in the essential integrity of the process. Indeed, in careful reasons, the
Applications Judge explained why he was not persuaded that, even if the
appellants had standing, they had established a breach of the duty of fairness,
including a reasonable apprehension of bias, on the part of PWGSC in its
conduct of the procurement process.
E. CONCLUSIONS
[63]
For these
reasons, I would dismiss the appeal with costs.
“John M. Evans”
“I
agree
J.
Richard C.J.”
“I
agree.
C. Michael Ryer J.A.”
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