Canada (Attorney General) v. Envoy Relocation Services, 2007 FCA 176

Date: 20070503

Docket: A-243-06

Citation: 2007 FCA 176

 

CORAM:       RICHARD C.J.

                        EVANS J.A.

                        RYER J.A.

 

BETWEEN:

THE ATTORNEY GENERAL OF CANADA

Applicant

and

ENVOY RELOCATION SERVICES

Respondent

 

 

 

Heard at Ottawa, Ontario, on March 28, 2007.

Judgment delivered at Ottawa, Ontario, on May 3, 2007.

 

REASONS FOR JUDGMENT BY:                                                                                EVANS J.A.

CONCURRED IN BY:                                                                                               RICHARD C.J.

 

DISSENTING REASONS BY:                                                                                          RYER J.A.

 

 

Date: 20070503

Docket: A-243-06

Citation: 2007 FCA 176

 

CORAM:       RICHARD C.J.

                        EVANS J.A.

                        RYER J.A.

 

BETWEEN:

THE ATTORNEY GENERAL OF CANADA

Applicant

and

ENVOY RELOCATION SERVICES

Respondent

 

 

REASONS FOR JUDGMENT

 

EVANS J.A.

A.        INTRODUCTION

[1]               This is an application for judicial review by the Attorney General of Canada to set aside a revised decision of the Canadian International Trade Tribunal (“CITT”), dated April 26, 2006. In that decision, the CITT recommended that Envoy Relocation Services be awarded half the cost of preparing its unsuccessful bids for two government contracts.

 

[2]               The Attorney General says that a decision to recommend that any compensation should be paid to Envoy, other than the cost of making its complaint to the Tribunal, would be patently unreasonable. The mistake made by Public Works and Government Services Canada (“PWGSC”) in evaluating section 2.2.4.2 of Annex “D” of Envoy’s proposals did not result in its failing to obtain the contracts. Consequently, since PWGSC’s breach of a contractual term in the Requirement for Proposals (“RFP”) caused Envoy no loss, it was not entitled to compensation for the cost of preparing its bids, an expense which unsuccessful bidders have to bear as part of the normal cost of doing business.

 

[3]               In my opinion, the CITT’s decision cannot be said to be patently unreasonable, in light of the broad remedial discretion conferred by statute, not only to do justice between the parties, but also to support its regulatory role in the procurement process. Nor am I persuaded that the CITT committed any reviewable error in its interpretation of its enabling legislation. I would dismiss the application for judicial review.

 

B.        BACKGROUND OF THE APPLICATION

[4]               This matter has a substantial history which it will be helpful to explain briefly. The two contracts in question were for the provision of relocation services to the Canadian Forces, and to the Royal Canadian Mounted Police and the Government of Canada. According to Envoy, the assessed value of these two contracts is over $563 million, while PWGSC puts their value at only just over $154 million. On November 2, 2004, PWGSC awarded both contracts to Royal LePage Relocation Services Limited.

[5]               On February 18, 2005, Envoy filed a complaint with the CITT under subsection 30.1(1) of the Canadian International Trade Tribunal Act, R.S.C. 1985 (4^th Supp.), c. 47 (“CITT Act”), alleging three errors in the bid evaluation process. The only complaint that the CITT accepted was that PWGSC had breached the RFP by deducting points when it evaluated section 2.2.4.2 of Envoy’s proposals, because the information provided by Envoy in section 2.2.4.2 of its proposal for one contract was not consistent with that which it provided in the same section of its proposal for the other contract. Section 2.2.4.2 carried a maximum of 80 points out of a total of 1,000.

 

[6]               In a decision dated May 16, 2005, the CITT upheld Envoy’s complaint, on the ground that the RFP did not contemplate that the evaluation of proposals would be based on a comparison of the proposals made by a bidder for the contracts. To remedy the breach, the CITT recommended, pursuant to subsections 30.15(2) and (3) of the CITT Act, that section 2.2.4.2 of all bidders’ proposals be re-evaluated by a new evaluation team. It explained its rationale in its reasons as follows.

34.  In this case, although the evidence does not indicate a lack of good faith, a serious breach of evaluation procedures did occur, and the consequences of that breach potentially affected the award of two contacts, thus potentially prejudicing all parties involved in the solicitation.  PWGSC, though the drafting of the Statement of Work and the selection of the specific clauses of the RFP, is able to determine the detailed rules that govern each procurement process beyond the general contracting framework established by the trade agreements.  When it does not follow its own rules, it prejudices the integrity of government procurement as a whole.

…

 

36.  The Tribunal does not grant Envoy’s request for costs relating to the preparation of its proposals. In recommending the [re-evaluation of section 2.2.4.2 in all bidders’ proposals], the Tribunal’s objective is to put Envoy in the position where its proposals receive the benefit of the evaluation process that it contemplated when it incurred the costs of preparing its proposals.

[Emphases added]

 

[7]               Allowing an application for judicial review by the Attorney General, this Court upheld the CITT’s finding that there had been a breach of the RFP in the evaluation of section 2.2.4.2 in Envoy’s proposals. However, it set aside the remedy recommended by the CITT: Canada (Attorney General) v. Envoy Relocation Services, 2005 FCA 13.

 

[8]               The Court reasoned that, since the only error identified by the CITT was in the evaluation of section 2.2.4.2 of Envoy’s proposals, there was no justification for requiring the re-evaluation of this same section in other bidders’ proposals. Moreover, since a re-evaluation of this section in Envoy’s proposals would still leave Royal LePage with more points than Envoy, a re-evaluation of section 2.2.4.2 in Envoy’s proposals would serve no purpose. As a result, the Court said (at para. 3):

… the scope of the remedy must be limited to the monetary relief sought by Envoy in its complaint.

 

Accordingly, the Court set aside the CITT’s order and remitted the matter for a re-determination of the remedy in accordance with the above reasons.

 

[9]               The monetary relief requested by Envoy in its complaint comprised compensation for loss of profits, reimbursement of its bid preparation costs (including experts and lawyers), and the costs of preparing and proceeding with the complaint.

 

C.        DECISION UNDER REVIEW

[10]           After setting out the submissions of the parties, the CITT reiterated (at para. 24 of its reasons) the finding in its earlier determination (at para. 34) that “there had been a serious breach of evaluation procedures that prejudiced the integrity of the government procurement system as a whole”, factors that the CIT must consider under paragraphs 30.15(3)(a) and (c), and that “the remedy should reflect the seriousness of the impact of PWGSC’s breach.”

 

[11]           In the decision now under review, the CITT noted (at para. 25) that this Court’s decision prevented it from recommending a remedy “that gives Envoy the benefit of the evaluation process that it expected when it prepared these proposals …”. Instead, the CITT stated that it would pursue “the alternative approach of trying to put Envoy into the same position in which it would have been if it had known how PWGSC was going to evaluate section 2.2.4.2 …”: at para. 26.

 

[12]           The CITT concluded that, in view of the heavy weighting (75%) given to the technical aspects of the proposals, including section 2.2.4.2, Envoy would reasonably have taken this section very seriously, not knowing if the evaluation of it would make the difference between winning or losing the contracts. Further, the CITT held that, if Envoy had known that its bids would be compared by the evaluators in breach of the RFP, it would still have bid on the contracts, but would have avoided the appearance of inconsistency, either by structuring its proposals differently or submitting only one.

 

[13]           The CITT summarized its decision as follows (at para. 30):

… given the seriousness of the breach of evaluation procedures, which deserves significant compensation, the Tribunal considers that an amount equal to 50 percent of Envoy’s bid preparation costs is an appropriate amount.

 

Reasonable costs were to be determined after the parties had had an opportunity to file submissions with the CITT. Counsel for Envoy indicated at the hearing before us that his client estimated that it had spent a total of $1.4 million on its bid preparation. In addition, the CITT awarded $500 to Envoy for the costs of preparing for the re-consideration of the original decision.

 

D.        LEGISLATIVE FRAMEWORK

[14]           The remedial powers of the CITT relevant to this case are contained in section 30.15 of the CITT Act.

 

E.        ISSUES AND ANALYSIS

1. Standard of review

[15]           Questions of statutory interpretation not within the CITT’s area of expertise are subject to judicial review on a standard of correctness: Canada (Attorney General) v. McNally Construction Inc., 2002 FCA 184 at para. 16. I shall assume for the purpose of this application that the CITT’s  interpretation of subsections 30.15(2) and (3) are reviewable on this standard.

 

[16]           However, patent unreasonableness is the standard of review applicable to the CITT’s findings of fact (Federal Courts Act, R.S.C. 1985, c. F-7, paragraph 18.1(4)(d)) and to other matters within its expertise: see, for example, Siemens Westinghouse Inc. v. Canada (Minister of Public Works and Government Services), 2001 FCA 241 at para. 15.

 

[17]           A specialist tribunal’s exercise of a broad grant of remedial discretion falls directly within the area of its expertise: see Royal Oak Mines Inc. v. Canada (Labour Relations Board), [1996] 1 S.C.R. 369 at para. 58. In my opinion, this is also true of the CITT.

[18]           It is trite that an applicant has a heavy burden to discharge in order to satisfy a reviewing court that the decision of a specialist administrative tribunal is patently unreasonable. This standard of review, Iacobucci J. said in Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247 at para. 52, connotes an administrative decision “so flawed that no amount of curial deference can justify letting it stand.”

 

2. Was the CITT’S decision patently unreasonable?

[19]           Counsel for the Attorney General submitted that, because there was no causal connection between PWGSC’s “inconsequential” breach of the RFP and any loss suffered by Envoy, the recommendation of any compensation (other than the costs of the complaint) would represent a windfall to Envoy. Consequently, it was patently unreasonable for the CITT to recommend that PWGSC compensate Envoy for half of the substantial sum that it had spent on the preparation of its bids.

 

[20]           The argument, in effect, is that, as a matter of law, the CITT could only award “compensation” under subsection 30.15(2) for any loss caused to Envoy by PWGSC when it failed to evaluate section 2.2.4.2 of its proposals in accordance with the RFP. Since, except for the modest cost of pursuing its complaint, Envoy had suffered no loss attributable to PWGSC’s breach, the CITT should not have recommended any compensation.

 

[21]           I do not agree. Counsel’s argument assumes that, in recommending monetary relief, the CITT must determine the amount payable, if any, by reference to common law principles applicable to the award of damages for breach of contract. However, this argument overlooks the fact that, like many other specialist tribunals, the CITT performs a regulatory role in the administrative process. In order that an agency may discharge the mandate entrusted to it in the public interest, reviewing courts should not assume that the legislature intended the agency under review to exercise its remedial powers on exactly the same bases as those on which courts exercise analogous powers to resolve disputes governed exclusively by private law.

 

[22]           Although performing essentially adjudicative functions when it inquires into complaints by disappointed bidders on government contracts that they were unfairly treated, the CITT must exercise its powers with a view to, among other things, maintaining potential bidders’ confidence in the integrity of the procurement system. An erosion of confidence would have a detrimental impact on the competitiveness of bidding. Hence, it should not be assumed that the CITT’s power to recommend compensation is exercisable exclusively on the basis of common law principles.

 

[23]           It is relevant in this context that Parliament used the generic word “compensated” in subsection 30.15(2), not the more distinctively legal term “damages”. Nor did it specify that a complainant is only to be “compensated” for a loss caused to it by breaches of contract, or other improper conduct, by PWGSC.

 

[24]           Further, Parliament directed the CITT, when recommending the appropriate relief listed in subsection 30.15(2), to take into consideration all the relevant circumstances, including the non-exhaustive list of considerations in subsection 30.15(3). In the present case, this Court had already determined that monetary relief was the appropriate remedy. Thus, when the matter was remitted to the CITT for a re-determination of the remedy, it only had to quantify the award.

 

[25]           In quantifying the compensation, the CITT was engaged in recommending “an appropriate remedy under subsection 30.15(2)” and was thus obliged to consider the factors listed in subsection 30.15(3). The “appropriate remedy” as described in paragraph 30.15(2)(e) is that the complainant be compensated “by an amount specified by the [CITT]”.

 

[26]           The factors to be considered under subsection 30.15(3) bear little resemblance to the principles on which courts award damages for breach of contract, in the sense that, in recommending the appropriate remedy, the CITT must have regard, not only to the prejudice of the complainant, but also to systemic concerns.

 

[27]           It is particularly evident from paragraph (c) of subsection 30.15(3) that the CITT must fashion its relief with a view to, among other things, ensuring that potential bidders are not deterred from incurring the non-recoverable costs of preparing bids in response to future RFPs. This paragraph requires the CITT to have regard to “the degree to which the integrity and efficiency of the competitive bidding process was prejudiced” by the deficiency in the procurement process.

 

[28]           In my view, other factors, namely the seriousness of the deficiency (paragraph 30.15(3)(a)), prejudice to other interested parties (paragraph 30.15(3)(b)), and the good faith of the parties (paragraph 30.15(3)(d)), also indicate an approach to the recommendation of an appropriate remedy

different from the principles motivating the choice of the appropriate relief at common law, including damages, for remedying a breach of contract. This is not to say, of course, that when a complainant alleges a loss of profit or opportunity the CITT should not also have regard to principles familiar in the private law of contract in order to quantify the compensation appropriate: see the CITT’s Procurement Compensation Guidelines.

 

[29]           Nor was Envoy altogether unscathed by the erroneous evaluation. It had invested its resources in preparing bids in reliance on the RFP, and had the reasonable expectation that they would be evaluated in accordance with the terms of the RFP. It was denied this expectation as a result of PWGSC’s error and this Court’s decision that the CITT’s recommendation of a re-evaluation of section 2.2.4.2 in all bidders’ proposals was not appropriate. That the loss of this expectation would not be compensable in damages at common law does not necessarily mean that the CITT cannot recommend that Envoy be compensated. In the exercise of its remedial powers, the CITT requires flexibility to enable it to respond to the particular problem before it.

 

[30]           Counsel submitted that the CITT’s decision cannot be supported on the basis of the statutory criteria. In particular, he said, given that the deficiency in the procurement process was unrelated to Envoy’s failure to win the contracts, there was no basis in the evidence for the CITT’s conclusion that the deficiency was “serious” for the purpose of paragraph 30.15(3)(b).

 

[31]           I disagree. While its reasons are not very full, the CITT maintained since its original decision that the breach of the evaluation procedure in this case was serious. It noted in its earlier

decision (at para. 34) that the breach was potentially capable of affecting the award of the contracts: the wrongly evaluated section represented 8% of the total points, a percentage which, in other situations, could well determine the outcome of a competition. Moreover, the error occurred at the core of the evaluation process.

 

[32]           In other words, PWGSC’s failure to comply with the RFP was the kind of error which, if left substantially uncompensated, might reasonably be regarded as deterring bidders from responding to future RFPs. As the CITT concluded in its earlier decision (at para. 34), the error identified in the evaluation process “prejudices the integrity of government procurement as a whole.” In my opinion, the fact that Envoy may not, in fact, have lost the contracts because of the breach does not necessarily make it patently unreasonable for the CITT to have concluded that the breach was serious.

 

[33]           Nor, in the circumstances of this case, am I persuaded that it was patently unreasonable for the CITT, when considering if it was appropriate to recommend the reimbursement of all or part of the bid preparation expense, to ask itself whether Envoy would have submitted a bid if it had known that the error was going to occur.

 

[34]           On the other hand, I do not accept the submission of Envoy that, when this Court remitted the matter to the CITT on the basis that the remedy must be limited to “the monetary relief sought by Envoy” (at para. 3), it was thereby directing the CITT to recommend a monetary award over and beyond the costs incurred by Envoy in making the complaint. The amount of any monetary award was not at issue before the Court at that time: rather, the question was whether bid re-evaluation was an appropriate remedy.

 

[35]           Finally, I note that subsection 30.15(4) confers a power on the CITT to award, and not merely to recommend, the reasonable costs incurred by a complainant in the preparation of its response to an RFP. In exercising this power, the CITT is not required to consider the list of factors in subsection 30.15(3). This power has been used in the past by the CITT to award bid preparation costs to a successful complainant when the procurement has been cancelled and the contract re-tendered: David M. Attwater, Procurement Review: A Practitioner’s Guide, looseleaf (Scarborough Ont.: Carswell, 2001), chap. 2.27.1.

 

[36]           For reasons not apparent to me, the CITT did not base its decision in this case on subsection 30.15(4). Nonetheless, the presence of this specific yet unstructured discretion in the CITT’s remedial arsenal supports me in my conclusion that it was not patently unreasonable or otherwise erroneous in law for it to determine that partial reimbursement of Envoy’s bid preparation costs was an appropriate remedy in the particular and, to date, unique circumstances of this case.

 

F.        CONCLUSION

[37]           For these reasons, I would dismiss the application for judicial review with costs.

 

 

“John M. Evans”

“I agree.

J. Richard C.J.”

 

RYER J.A. (Dissenting)

Introduction

[38]           This judicial review deals with the complaint provisions of the Canadian International Trade Tribunal Act, R.S.C. 1985 (4th Supp.) c. 47 (the “CITT Act”) that relate to the procurement process with respect to contracts for the supply of goods or services that have been or will be awarded by certain government institutions. The relevant provisions of the CITT Act are reproduced in Appendix “A”. Unless otherwise indicated, all statutory references in these reasons are to the corresponding provisions of the CITT Act.

 

[39]        I have had the benefit of reviewing the reasons of Evans J.A. and with respect, I have come to a different conclusion. For the reasons that follow, it is my view that Envoy should only be awarded costs in the amount of $500.

 

[40]           The description of the history of Envoy’s complaint before the Tribunal and this Court has been well summarized in the reasons of Evans J.A.

 

[41]           It is important to note that the subject matter of a complaint pursuant to subsection 30.11(1), such as the complaint made by Envoy in the present circumstances, is inherently contractual in that the complaint must concern aspects of the procurement process that relate to “designated contracts”, as defined in section 30.1. There is no issue as to whether the underlying contracts fell in this case within that definition. If they did not, the complaint could not have been considered by the Tribunal.

 

[42]           As a general proposition, when the Tribunal has made a determination, pursuant to subsection 30.15(2), that a complaint is valid and decides to recommend a remedy, subsection 30.15(3) obligates the Tribunal, in recommending an appropriate remedy pursuant to subsection 30.15(2), to consider all of the circumstances relevant to the procurement that gave rise to the complaint, including those matters discussed under paragraphs 30.15(3)(a) to (e).

 

[43]           In my view, this Court determined the type of remedy that the Tribunal was permitted to grant to Envoy when it stated, in Canada (Attorney General) v. Envoy Relocation Services, 2006 FCA 13 (Envoy 2006), that “the remedy must be limited to the monetary relief sought by Envoy in its complaint”. Accordingly, I disagree with Evans J.A. when he states that in making the decision that is the subject of this application for judicial review the Tribunal was “still engaged in recommending an appropriate remedy for the purposes of subsection 30.15(2)”. It follows, in my view, that because the “appropriate remedy” had already been determined, no further consideration of subsection 30.15(3) was warranted.

 

[44]           The remedy of compensation is contained in paragraph 30.15(2)(e). Evans J.A. appears to agree that paragraph 30.15(2)(e) is applicable to the circumstances under review. However, we appear to disagree as to how the amount of compensation is to be determined.

 

[45]           With respect, I do not agree with Evans J.A. when he states that the term “compensated”, as used in relation to paragraph 30.15(2)(e), is a generic word. In my view, compensated means given compensation and compensation is a term with an established legal meaning. The principles of compensation are well understood in the law relating to damages for breach of contract. In my view, it is appropriate to have general reliance on those principles, since, after all, the procurement process that underlies the complaint in issue is essentially contractual in nature and the complaint at issue relates to “designated contracts”.

 

[46]           Paragraph 1.2 of the Canadian International Trade Tribunal Procurement Compensation Guidelines (the “Compensation Guidelines”), which have been adopted by the Tribunal, states that where the Tribunal has decided to recommend the payment of compensation, neither the CITT Act nor the regulations thereunder provide guidance as to how the precise amount of compensation is to be determined. For that reason, the Tribunal adopted the Compensation Guidelines to inform parties as to the principles that it will adopt in making an award of compensation. While not so stated, the Compensation Guidelines adopt a number of long-standing principles of law that have been developed in the area of contractual damages. Notably absent from the Compensation Guidelines is any indication that the provisions of subsection 30.15(3) are to be relied upon in the determination of the amount of any award of compensation.

 

[47]           While the Compensation Guidelines are not binding upon this Court, in my view, they are a useful tool in the determination of the proper interpretation of the term compensation for the purposes of paragraph 30.15(2)(e), which is the essential issue to be determined in this application for judicial review.

 

 

Standard of Review

[48]           Although Evans J.A. agrees that the construction of subsections 30.15(2) and (3) is reviewable on a correctness standard, he indicates that at issue in this case is a specialist tribunal’s exercise of a broad grant of remedial discretion. He consequently finds that the decision of the Tribunal should be reviewed on a standard of patent unreasonableness.

 

[49]           In my view, the issue in this appeal is the legal characterization of the amount that can be provided under paragraph 30.15(2)(e) to a complainant whose complaint has been found to be valid. This preliminary determination is an extricable question of law that is neither scientific, nor technical and is intrinsic to the general law of remedies. This determination does not fall within the specialized expertise of the Tribunal and is one that has traditionally fallen within the province of the Courts. Consequently, in my view, this determination is reviewable on the standard of correctness (Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., [2001] 2 S.C.R. 100 at paragraph 33).

 

Analysis

 

[50]           It is trite law that statutory interpretation should be done according to the approach adopted by the Supreme Court in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, namely that:

the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

 

[51]           Paragraph 30.15(2)(e) provides the remedy of compensation to a complainant whose complaint has been found to be valid. In paragraph 23 of his reasons, Evans J.A. states:

It is relevant in this context that Parliament used the generic word “compensated” in subsection 30.15(2), not the more distinctively legal term “damages”. Nor did it specify that a complainant is only to be “compensated” for a loss caused to it by breaches of contract, or other improper conduct, by PWGSC.

 

With respect, the suggested interpretation of the term “compensation” ignores the well established meaning of that term at common law. Black’s Law Dictionary defines compensation as follows:

Payment of damages, or any other act that a Court orders to be done by a person who has caused injury to another. In theory, compensation makes the injured person whole.

 

It is clear from this definition that an amount will not constitute a payment of compensation unless the amount can be shown to have been made by the payor to the payee to make the payee whole in relation to an injury that the payor caused the payee to suffer.

 

[52]           This interpretation of the term compensation is consistent with the approach that would be taken by a Court where damages were determined to be the appropriate remedy for a breach of contract at common law. (See Waddams, S.M. The Law of Damages 2nd ed. (Toronto: Canada Law Book Inc., 1991).) This interpretation is also consistent with the Compensation Guidelines, in particular Guidelines 3.1.2 and 3.2.2, which read as follows:

3.1.2 In determining the amount of compensation to recommend, the Tribunal will attempt, insofar as is appropriate in the circumstances and bearing in mind any other relief that it recommended, to place the complainant in the position in which it would have been, but for the government’s breaches.

 

3.2.2. Remoteness of Damages – A complainant may not receive compensation for a loss that is considered too remote by the Tribunal. A breach may cause the complainant to lose some anticipated gain which is not the immediate result of the breach and which arises from a separate transaction. In general, a loss may be considered too remote where it does not flow naturally from the government’s breach or breaches or where the government could not reasonably have been expected to know that a loss of that kind would be suffered by the complainant in the event of the government’s breach of its obligations.

 

Although not binding or determinative in and of themselves, the Compensation Guidelines form part of the legal context in which the subsection operates and therefore are an important factor to consider. In Nowegijick v. R., [1983] 1 S.C.R. 29, Dickson J. of the Supreme Court of Canada stated, at page 37:

Administrative policy and interpretation are not determinative but are entitled to weight and can be an “important factor” in case of doubt about the meaning of interpretation.

 

 

[53]           The case law also supports an interpretation of subsection 30.15(2)(e) that adopts the common law principles with respect to the determination of compensation. The application of the common law principles for remedying a breach of contract can be found throughout the Tribunal’s jurisprudence. For example, the following passage from Conair Aviation, a division of Conair Aviation Ltd. (Re) [1991] C.I.T.T. No. 8, is often included in the Tribunal’s reasons for judgment:

In considering what principles should guide the Tribunal in assessing compensation, reference will be made to those which govern the assessment of damages in the common law. It is evident that damages may be assessed in cases involving tenders, which of course parallel the procurement process at issue in this case.

 

(See also. Mechron Energy Ltd. C.I.T.T. File No. PR-95-001 and Spacesaver Corporation C.I.T.T. File No. PR-98-028.)

 

[54]           Further, in Cougar Aviation Ltd v. Canada (Minister of Public Works and Government Services), [2006] F.C.J. No. 1946, a decision of this Court in an application for judicial review of a decision of the Tribunal, Evans J.A. stated, at paragraph 27 of the decision, that the tendering process for federal government procurement contracts remains in part governed by the private law of contract. At paragraph 42 of that decision, he states the following:

In my opinion, therefore, there is nothing in the nature of the decision-making context to exclude the normal requirement of the common law that those to whom the duty of fairness applies must avoid conduct that gives rise to a reasonable apprehension of bias. And, since the text of the Agreement is capable of being interpreted in a manner consistent with the common law, it should be so construed.

 

 

[55]           In my view, this reasoning is as applicable to the issue under consideration namely, the appropriate interpretation of the term compensation, as it was in relation to the application of the common law duty of fairness in Cougar Aviation. While the Tribunal may well perform a regulatory role in the overall procurement process, there is nothing in subsection 30.15(2)(e) that suggests that the Tribunal has the power to go beyond the provision of the remedy of compensation, as understood in the context of its well understood meaning at common law. Moreover, because the term compensation, the remedy provided by paragraph 30.15(2)(e), is capable of being interpreted in a manner consistent with the common law, as Evans J.A. points out in Cougar Aviation, it should be so construed. Accordingly, it would be a reviewable error on the part of the Tribunal to order the payment of an amount as compensation, pursuant to paragraph 30.15(2)(e), unless all of the common law elements of that term were present. In particular, it would be an error to order a party to pay the amount to a complainant for something other than an actual injury caused by that party to the complainant.

 

[56]           In Envoy 2006, this Court held that while PWGSC had breached one of its obligations in the procurement process, the breach could not possibly have affected the outcome of the bidding process. In other words, the breach by PWGSC did not cause Envoy to lose the contracts that it sought. As a result of its failure to obtain those contracts Envoy, like all the other unsuccessful bidders, was left with nothing to show for the bid costs that it had incurred. However, the award by the Tribunal of half of those bid costs, resulted in Envoy being in a better position than it would have been in if the breach by PWGSC had not occurred. Accordingly, this award went beyond the provision of compensation and was therefore beyond the power of the Tribunal.

 

[57]           The decision of the Supreme Court in Her Majesty the Queen v. The Martel Building Ltd., 2000 S.C.C. 60, is supportive of my conclusion. In that case, the Court held that even though the particular government department, in the course of a tendering process, had breached its duty to treat all bidders fairly, the unsuccessful bidder, Martel, was not entitled to damages. At paragraph 102, the Court stated:

[t]o be recoverable, a loss must be caused by the contractual breach in question. As noted above, the only breach of Contract A is limited to the addition of the security system costs to Martel's bid. However, we conclude that damages for this breach of Contract A are precluded for want of causation. We also find that the Department's breach did not cause Martel to lose a reasonable expectation of receiving Contract B. Even if the costs for a security system were deducted from Martel's bid (or also added to the Standard Life bid), the difference between the two bids would remain significant.

 

It will be recalled that the Tribunal, in Conair Aviation, concluded that tendering cases were similar and relevant to procurement cases that came before the Tribunal. (See paragraph 15 infra.)

 

[58]           A conclusion similar to Martel was reached more recently by Sharlow J.A. in Med-Emerg International Inc. v. Canada (Public Works and Government Services) 2006 FCA 147, which was also a judicial review of a decision of the Tribunal. In that case, the Tribunal found that PWGSC had breached an obligation relating to the procurement process. However, the Tribunal did not grant the complainant a remedy because it concluded that the complainant would not have been able to overcome the successful bidder in any event and therefore would not have been awarded the contract.

 

[59]           Of particular note are the comments of Sharlow J.A. with respect to the alternative remedies that were claimed in Med-Emerg, namely, lost profits and bid preparation costs, which are the remedies that are presently under consideration. At paragraph 29 of her reasons, Sharlow J.A. stated that:

given the CITT’s determination that Med-Emerg was not prejudiced by any of the errors in the procurement process, there would have been no foundation for any of the alternative remedies sought by Med-Emerg.

 

 

[60]           The decisions in Martel and Med-Emerg are supportive of my view that compensation for a breach of a requirement in the procurement process should not be awarded to a complainant who has not suffered a loss as a result of that breach.

 

[61]           In the decision under review, the Tribunal reiterated its belief that the breach of evaluation procedures by PWGSC prejudiced (which I will assume to mean caused harm to) the “integrity of the government procurement system as a whole”. The Tribunal then went on, in paragraph 32 of its decision, to “compensate Envoy”, not for any harm that was done by PWGSC to Envoy, but apparently for the harm that was done by PWGSC to the “integrity of the government procurement system as a whole”. In my view, it is incongruous and therefore patently unreasonable, to provide money to Envoy, a party uninjured by a breach, to redress an injury that the breach apparently caused to the “integrity of the government procurement system as a whole”.

 

[62]           In paragraph 22 of his reasons, Evans J.A. justifies the award on the basis that in so doing, the Tribunal was exercising its powers

with a view to, among other things, maintaining potential bidders confidence in the integrity of the procurement system. An erosion of confidence would have a detrimental impact on the competitiveness of bidding. Hence, it should not be assumed that the CITT’s power to recommend compensation is exercisable exclusively on the basis of common law principles.

 

 

With respect, this appears to say that the compensation is awarded to Envoy to redress a harm to “potential bidders”. To that extent, I disagree that such an award could be properly considered to be an award of compensation.

 

[63]           In my view, the award made by the Tribunal provides Envoy with an amount which exceeds the amount of any loss that Envoy suffered as a result of the breach of bid evaluation procedures that PWGSC was found to have committed. Such an award is, therefore, tantamount to an award of punitive damages.

 

[64]           The nature of punitive damages has been described by McIntyre J. of the Supreme Court of Canada in Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085. At pages 1104 and 1105 he stated:

Problems arise for the common law wherever the concept of punitive damages is posed. The award of punitive damages requires that:

… a civil court … impose what is in effect a fine for conduct it finds worthy of punishment, and then to remit the fine, not to the State Treasury, but to the individual plaintiff who will, by definition, be over-compensated. [Waddams, p. 563.]

…

But all authorities accept the proposition that an award of punitive damages should always receive the most careful consideration and the discretion to award them should be most cautiously exercised. As has been mentioned earlier, punitive damages are not compensatory in nature.

 

And at pages 1107 and 1108, he further stated:

 

Moreover, punitive damages may only be awarded in respect of conduct which is of such nature as to be deserving of punishment because of its harsh, vindictive, reprehensible and malicious nature. I do not suggest that I have exhausted the adjectives which could describe the conduct capable of characterizing a punitive award, but in any case where such an award is made the conduct must be extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment.

 

[65]           Whether or not the Tribunal is empowered to award punitive damages, in my view, the Tribunal did not, in fact, attempt to do so in its decision, and such an award would not have been appropriate in any event. This is so for several reasons. First, as indicated in Vorvis, punitive damages are not “compensatory in nature” and therefore an award of “compensation” could not be said to encompass punitive damages. Secondly, Vorvis illustrates that punitive damages are to be awarded only in relation to conduct that is harsh, vindictive, reprehensible and malicious in nature. In the present circumstances, while the Tribunal indicated that the breach was serious, there was no indication of bad faith on the part of the PWGSC. Accordingly, it would be incongruous to conclude that conduct that did not amount to bad faith was nonetheless harsh, vindictive, reprehensible and malicious in nature. It follows, in my view, that the decision of the Tribunal to award what can only be characterized as punitive damages to Envoy, in the absence of conduct on the part of PWGSC that is worthy of punishment or otherwise harsh, vindictive, reprehensible or malicious in nature, must be patently unreasonable and therefore unsustainable.

 

[66]           Where the Tribunal has concerns with respect to the integrity of the procurement system as a result of what it may believe to be inappropriate conduct on the part of any government procurement agency, the Tribunal is specifically mandated by section 30.19 to express its concerns to a senior official of the applicable government department. That provision reads as follows:

30.19(1) The Tribunal may provide the deputy head of a government institution with its comments and observations on any matter that the Tribunal considers should be brought to the attention of the deputy head in connection with the procurement process.

 

(2) In subsection (1) “deputy head” means

 

(a) where the government institution is a department or ministry

   of state, the person having by law the status of deputy head;

   and

 

(b) where the government institution is any other body or an

    office, the chief executive officer of that body or the person

    holding that office.

 

In my view, in the circumstances under review, it would have been far more appropriate for the Tribunal to express its concerns with respect to the breach of the procurement procedures by PWGSC through the mechanism provided by section 30.19, rather than by awarding an amount to Envoy as compensation for a loss that it did not suffer as a result of that breach.

 

[67]           The action taken by the Tribunal is unfair to other unsuccessful bidders who participated in the same process as Envoy. Moreover, such action may well serve to encourage litigation on the part of unsuccessful bidders who will be motivated to try to demonstrate some slight imperfection in the procurement process, in an attempt to salvage some or all of the costs incurred in the preparation of their unsuccessful bids.

 

[68]           I agree with Evans J.A. that the amount awarded by the Tribunal to Envoy was not an amount determined under subsection 30.15(4). This is apparent from paragraph 32 of the Tribunal’s decision in which the Tribunal states its recommendation “as a remedy, that PWGSC compensate Envoy” for one half of its bid preparation costs. Accordingly, the proper interpretation of subsection 30.15(4) is not a matter that is relevant to this judicial review. However, in my view, the power that is conferred upon the Tribunal under that particular provision does not provide a justification for an interpretation of the term compensation that is inconsistent with the ordinary legal meaning of that term that is discernible from the jurisprudence under the applicable provisions of the CITT Act, the relevant administrative practices of the Tribunal and the common principles with respect to damages for breach of contract.

 

Conclusion

[69]           By awarding Envoy half of its bid preparation costs, the Tribunal erred in law and exceeded the discretion granted to it under subsection 30.15(2)(e). Moreover, if the standard of review of the decision of the Tribunal is not correctness, I conclude that the decision of the Tribunal to award Envoy half of its bid preparation costs is patently unreasonable. Accordingly, I would set aside the decision of the Tribunal and refer the matter back to the Tribunal for a new determination on the basis of these reasons, that is to say, that Envoy should only be awarded the amount of $500 for costs incurred in relation to the submissions made to the Tribunal after the decision of this Court in Envoy 2006.

 

“C. Michael Ryer”

 

 

APPENDIX “A”

 

FEDERAL COURT OF APPEAL

 

NAMES OF COUNSEL AND SOLICITORS OF RECORD

 

 

DOCKET:                                                                      A-243-06

 

 

STYLE OF CAUSE:                                                      THE ATTORNEY GENERAL OF CANADA V. ENVOY RELOCATION SERVICES

 

 

PLACE OF HEARING:                                                OTTAWA, ONTARIO

 

 

DATE OF HEARING:                                                  MARCH 28, 2007

 

 

REASONS FOR JUDGMENT BY:                            EVANS J.A.

 

CONCURRED IN BY:                                                 RICHARD C.J.

 

DISSENTING REASONS BY:                                    RYER J.A.

 

DATED:                                                                        MAY 3, 2007

 

APPEARANCES:

 

Derek Rasmussen	FOR THE APPLICANT
Ronald Lunau Catherine Beaudoin	FOR THE RESPONDENT

 

SOLICITORS OF RECORD:

 

John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario	FOR THE APPLICANT
Gowling Lafleur Henderson LLP Ottawa, Ontario	FOR THE RESPONDENT