Judgments

Decision Information

Decision Content

T-1155-92
J.G. Morgan Development Corporation (Applicant)
v.
Minister of Public Works, 926260 Ontario. Ltd., Thomas N. Hammond & Associates Ltd., Cohole Development Corporation, Clifford 0.0/A Ventures 2000 & Grant Development Corporation and Garth Aselford Developments Limited & J. Walton Developments Limited (Respondents)
INDEXED AS: 1G. MORGAN DEVELOPMENT CORP. V. CANADA (MINISTER OF PUBLIC WORKS) (TD.)
Trial Division, Denault J.—Ottawa, June 29 and Sep- tember 30, 1992.
Crown — Contracts — Leased accommodation — Tenders
Lowest bidder on second tender process unable to post required security bond — Department of Public Works con tracting with second lowest bidder without resorting to third tender process as more than one year passed since beginning of process — Unsuccessful bidder's motion for certiorari denied for undue delay (3 months) in bringing motion and as granting motion would prejudice DPW and contractor — Court without jurisdiction to review DPW's decision to award contract as contract not negotiated pursuant to powers con ferred by Act of Parliament but to powers incidental to Crown's inherent right to contract and following principles of agency — Inherent right to contract recognized by doctrine and case law in Canada and other common law jurisdictions.
Federal Court jurisdiction — Trial Division — Department of Public Works inviting bids for contract to lease office space — Lowest bidder on second tender process unable to post required security bond — DPW contracting with second lowest bidder without resorting to third tender process as more than one year passed since beginning of process — Certiorari denied for undue delay in bringing motion and as granting motion would prejudice DPW and contractor — Issue of Court's jurisdiction to review decision to award contract under tender not resolved as contract not awarded pursuant to tender process but as result of direct negotiations — Court without jurisdiction to review DPW's decision to award contract as contract negotiated pursuant to powers incidental to Crown's inherent right to contract and not, as required for jurisdiction under Federal Court Act, pursuant to powers conferred by or under Act of Parliament — Exception to obligation to use
tender process in conformity with Government Contract Regu lations where, given nature of work, not in public interest to solicit bids — Given all circumstances herein, not in public interest to engage in another tender process — Presence of exceptional circumstance set out in Government Contract Reg ulations, s. 6 taking negotiations outside ambit of Regulations and into Crown's inherent right to contract, over which Court without judicial review jurisdiction — Motion dismissed with out costs as permitted Court to clarify issue of jurisdiction.
Construction of statutes — Government Contract Regula tions, s. 6 — Difference between French, English texts noted English text speaking of "nature of the work": French text "nature du marché" — "Marché" defined therein as "con- struction, goods or service contract" or "lease" — In context, "work" much broader than "contract" — Interpretation issue not resolved as raised by Court, not counsel.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, ss. 2 (as am. by S.C. 1990, c. 8, s. 1), 18 (as am. idem, s. 4).
Federal Court Rules, C.R.C., c. 663, R. 1618 (as enacted by SOR/92-43, s. 19).
Financial Administration Act, R.S.C., 1985, c. F-11, s. 41. Government Contract Regulations, SOR/87-402, ss. 5, 6. Public Works Act, R.S.C., 1985, c. P-38.
CASES JUDICIALLY CONSIDERED
APPLIED:
Verreault (J.E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41; (1975), 57 D.L.R. (3d) 403; 5 N.R. 271; Attorney General of Quebec v. Labrecque et al., [1980] 2 S.C.R. 1057; (1980), 81 CLLC 14,119.
REFERRED TO:
Hawker Pacific Pty Ltd v Freeland (1983), 52 ALR 185 (F. Ct. Aust.).
AUTHORS CITED
Dussault, René and Borgeat, Louis. Administrative Law: A Treatise, 2nd ed., vol. 1, Toronto: Carswell Co. Ltd., 1985.
Griffith, J. A. G. and H. Street. Principles of Administra
tive Law, 3rd ed., London: Pitnam Publishing, 1963. Hogg, Peter W. Liability of the Crown, 2nd ed., Toronto:
Carswell Co. Ltd., 1989.
APPLICATION for certiorari quashing a decision of the Minister of Public Works to award a contract for leased accommodation. Application dismissed.
COUNSEL:
Martin W. Mason for applicant.
Peter M. Southey for respondent Minister of
Public Works.
James H. Smellie for respondents.
SOLICITORS:
Gowling, Strathy & Henderson, Ottawa, for
applicant.
Deputy Attorney General of Canada for respon
dent Minister of Public Works.
Osler, Hoskin & Harcourt, Ottawa, for respon dents.
The following are the reasons for order rendered in English by
DENAULT J.: The applicant seeks an order by way of certiorari quashing the decision of the Minister of Public Works to award a contract for leased accom modation to numbered company 926260 Ontario Ltd. The contract was for the lease of office space in Kirk- land Lake, Ontario, which was to be occupied by the Department of Veterans Affairs.
This motion was heard on an urgent basis on June 29, 1992. The urgency was due to the fact that 926260 Ontario Ltd. (hereinafter 926260) had already engaged in steps towards the execution of its con
tract.
I rejected the applicant's motion for certiorari on the grounds that there was undue delay by the appli cant in bringing the motion and that the issuance of
such an order under the circumstances would prejudice both Public Works Canada and 926260.
During the course of the proceedings, counsel for Public Works Canada (hereinafter PWC) took issue with this Court's jurisdiction to entertain an order for certiorari in this case. Given my decision to reject the motion on the ground of undue delay, it was not necessary for me to deal with the merits of his objec tion at that time and I indicated to counsel that I would provide more detailed written reasons on the issue of this Court's jurisdiction at a later date.
BACKGROUND
In December of 1990, the respondent companies were invited by PWC to submit bids for the contract to lease office space for the Department of Veterans Affairs (hereinafter DVA). One of the conditions required of tenderers was to provide "proof of correct zoning" and the closing date for bids was January 3, 1991.
However, the evidence discloses that none of the respondent companies were in a position to satisfy this condition and consequently PWC disqualified each of them.
On February 1, 1991, PWC called upon the same respondent companies to submit new tenders again with proof of correct zoning. This second tender pro cess specified that the respondents had to provide proof of correct zoning by March 31, 1991. On request from the respondent companies PWC later agreed to extend this date to May 31. The date was again extended on a few occasions and finally, on June 21, 1991, the contract was awarded to Cohole Development Corporation (hereinafter Cohole). The net present value of all four bids are as follows:
Cohole Development Corporation $9.3 million
926260 Ontario Limited $10.2 million
Thomas N. Hammond
& Associates Ltd. $10.8 million
J.G. Morgan Development
Corporation $12.6 million
On June 28, the unsuccessful bidders, including the applicant, were informed of the decision and their security deposits were returned to them.
On November 27, 1991, it became clear to PWC that Cohole would be unable to post the $2,000,000 security bond required under the contract and as a result, PWC was forced to terminate the contract.
Following this decision, PWC entered into direct negotiations with 926260 which had been the second lowest bidder in the second tender process of Febru- ary 1, 1991. On December 12, 1991, the applicant was expressly advised that these direct negociations had been entered into.
PWC enquired as to whether 926260 was able to perform the contract pursuant to the same terms and conditions as stated in its previous bid. After having received the proper assurances, PWC awarded the contract to 926260 on February 25, 1992.
The applicant was informed shortly thereafter of this decision. Notwithstanding the fact that it knew of these contractual negotiations as of December 1991 and was later promptly informed of the ultimate deci sion, it waited until May 21, some three months later, to bring its motion for certiorari. For the reasons expressed earlier, this motion was rejected on the grounds that there was undue delay on the part of the applicant and that granting the order in the circum stances would prejudice both PWC and 926260. It is important to underline that the only transaction which was in issue here was the contract awarded to 926260, the calls to tender of December 1990 and February 1991 were not here in question.
IS SUES
I shall deal with the contest to this Court's jurisdic tion raised by counsel for PWC. Counsel submits that there are two questions which this Court must deter mine:
1. Does this Court have jurisdiction to judicially review the decision of the Minister of Public Works to award a contract under a tender?
2. Does this Court have jurisdiction to judicially review the decision of the Minister, of Public Works to contract directly with a third party?
Obviously the first question is predicated on the assumption that the contract awarded to 926260 was offered pursuant to the tender process. I believe that assumption is wrong. The evidence clearly shows that the second tender process was closed at the moment when the contract was awarded to Cohole and that no other call to tender was issued. The con tract awarded to 926260 was awarded as a result of direct negotiations between both parties.
I agree that in contacting the second lowest bidder from the second tender process it might be said that there is the appearance that the tender process was on-going, however, in examining the more objective evidence, it is clear that that process had come to an end much earlier and that the negotiation leading to 926260's contract constituted a very separate process. The first question thus becomes purely hypothetical and it is not necessary for the Court to deal with it at this time.
Therefore, the only remaining question is whether it was open to PWC to enter into direct negotiations with 926260 and if so, whether the decision to award the contract to 926260 is one which can be reviewed by this Court.
RESPONDENT'S ARGUMENT
The respondent [PWC] argues that in evaluating bids and recommending a bid to the Treasury Board, the Minister is acting on behalf of the Queen's Privy Council and for the benefit of the Crown at large and not pursuant to any specific statutory power accorded by Parliament. Indeed, the respondent argues that neither the Public Works Act, R.S.C., 1985, c. P-38 nor the Financial Administration Act, R.S.C., 1985, c. F-11 and the Government Contract Regulations
(SOR/87-402), confer an authority or capacity on the Crown to contract and therefore, the power to do so is reposed in the Governor in Council. That being the case, the respondent submits that this Court cannot review the decision to contract under section 18 of the Federal Court Act [R.S.C., 1985, c. F-7 (as am. by S.C. 1990, c. 8, s. 4)] because according to sub section 2(1) [as am. idem, s. 1] of the Act, the Minis ter does not come within the definition of "federal board, commission or other tribunal" in that it is not a "body or any person or persons having, exercising or purporting to exercise jurisdiction or powers con ferred by or under an Act of Parliament". [Under- lining added.]
ANALYSIS
I have reviewed the legislation to which counsel refers and I am unable to find an express grant of authority to contract. In Verreault (J.E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41, the question of whether, in the absence of any statu tory restriction, a minister is capable of contracting in the name of the government was raised. Mr. Justice Pigeon adopted this passage from Griffith and Street, Principles of Administrative Law [at pages 269-270] as the correct statement of the law [at page 47]:
It is submitted that the law is as follows: a contract made by an agent of the Crown acting within the scope of his ostensible authority is a valid contract by the Crown....
Then he made the following comments [at page 47]:
Her Majesty is clearly a physical person, 1 and I know of no principle on the basis of which the general rules of mandate,
1 Professor Hogg in Liability of the Crown, 2nd ed. (1989, Carswell), at chapter 8 takes some issue with the "monarch as a natural person" concept and suggests that it would be more "realistic to think of each government representing the Crown as a common law corporation with all the powers of a natural person to enter into contracts" [at pp. 163-164]. See also Dus- sault & Borgeat, Administrative Law: A Treatise, (1985), vol. 1, part one, at pp. 54-55. This dispute however has no determi- native effect on the conclusion in the present case.
including those of apparent mandate, would not be applicable to her.
In Attorney General of Quebec v. Labrecque et al., [1980] 2 S.C.R. 1057, Mr. Justice Beetz followed much the same reasoning and concluded that it is an aspect of the rule of law that the Crown is a Sover eign, a physical person who, in addition to the pre rogative, enjoys a general capacity to contract in accordance with the rule of ordinary law.
It is worth noting that this principle recognizing that there is an inherent right to contract has been rec ognized in other common law jurisdictions. 2
Therefore, in concluding the contract with 926260, PWC was, following the principles of agency, agent for the Crown and the contract entered into is binding upon the Crown.
This right to contract however is subject to restric tions. The Governor in Council has enacted regula tions that direct the conduct of its agents in certain situations.
The Government Contract Regulations which were enacted pursuant to section 41 of the Financial Administration Act provide the instructions upon which government contracts are to be negotiated. Sections 5 and 6 of the Regulations provide as fol lows:
Bids
5. Before any contract is entered into, the contracting authority shall solicit bids therefor in the manner prescribed by section 7.
6. Notwithstanding section 5, a contracting authority may enter into a contract without soliciting bids where
(a) the need is one of pressing emergency in which delay would be injurious to the public interest;
(b) the estimated expenditure does not exceed
(i) $30,000,
(ii) $100,000, where the contract is for the acquisition of architectural, engineering and other services required in
2 Hawker Pacific Ply Ltd y Freeland (1983), 52 ALR 185 (F. Ct. Aust.), at p. 189, where Fox J. stated:
The power to contract is an inherent prerogative or governmental power....
respect of the planning, design, preparation or supervision of the construction, repair, renovation or restoration of a work, or
iii) $100,000, where the contract is to be entered into by the member of the Queen's Privy Council for Canada responsible for the Canadian International Development Agency and is for the acquisition of architectural, engi neering or other services required in respect of the plan ning, design, preparation or supervision of an interna tional development assistance program or project;
(c) the nature of the work is such that it would not be in the public interest to solicit bids; or
(d) only one person is capable of performing the contract.
I should want to point out that there is a difference in the French and English texts in regards to para graph 6(c). While the English text speaks of "nature of the work" the French text speaks of nature du marché. This latter term is defined in the Regulations as is the term "contract" in English. The term "work" as in "nature of the work" however is not defined.
This of course raises questions with respect to stat utory interpretation. The term contract which appears as the equivalent of marché is defined as being (a) a construction contract; (b) a goods contract; (c) a ser vice contract or (d) a lease. The legislator however chose the term "work" in drafting paragraph 6(c). Had the term "nature of the contract" been used instead of "nature of the work" the interpretation may have been different. However, in choosing the term "work", the legislator is taken to have intended that term to be used. Neither counsel raised this point and no representations were made and as a result I shall not deal with this question further except to say that the term "work" in this context is much broader than
the term "contract".
Before discussing whether or not the decision made by PWC is reviewable I would think that an enquiry should be made to determine whether there was compliance with the provisions of the Regula
tions.
There can be no doubt that there is a duty to solicit bids unless it can be shown by the contracting author ity that one of the exceptions of section 6 exists. In the present case, PWC argues that considering the nature of the work it was not practicable nor was it in the public interest to engage a third tender process. This argument is founded on paragraph (c) of section 6.
It is important at this stage to consider all the cir cumstances concerning the nature of the work in order to appreciate whether the public interest required a different approach than the one provided for in the Regulations.
As stated earlier, the first call to tender was made in December of 1990 and had to be cancelled on the grounds that none of the respondent companies satis fied the express condition with respect to zoning. In February of 1991, PWC tried again to solicit bids, the due date for bids was extended on a few occasions and finally, some 5 months after the first call to tender was made, the contract was awarded. PWC was again confronted with problems and conse quently had to terminate the contract at the end of November 1991. This represented close to a one-year delay in concluding a contract.
I agree that the subsequent decision by PWC to contact the company that had submitted the second lowest bid in the previous tender process and to con tract directly with it was motivated by the need to get the project under way therefore making up for a con siderable loss of time and expense. Given all of these circumstances, I am of the view that it was not in the public interest to engage in yet another tender pro cess.
The subsequent direct negotiations with 926260 were conducted pursuant to the Crown's inherent right to contract and not pursuant to the Government Contract Regulations and this is a critical point in terms of this Court' s jurisdiction.
With the introduction of the Government Contract Regulations the Governor in Council chose to define
the conduct required of its • "agents" (otherwise referred to as the contracting authorities) when seek ing to contract. These Regulations only operate to direct the conduct where the contracting authority actually solicits bids. However, when, as is the case here, the contracting authority does not engage in that process because of the existence of one or several of the exceptional circumstances found in section 6 of the Regulations, the subsequent contractual negotia tions are undertaken pursuant to the Crown's inherent right to contract. In other words, the presence of one of the exceptional circumstances takes the subsequent contractual negotiations outside the ambit of the Reg ulations and the negotiations are thus viewed from the point of view of the Crown's inherent right to contract.
In this situation, the Court must refer to section 18 and section 2 of the Federal Court Act which provide as follows:
18. (1) Subject to section 28, the Trial Division has exclu sive original jurisdiction
(a) to issue an injunction, writ of certiorari, writ of prohibi tion, writ of mandamus or writ of quo warranto, or grant declaratory relief, against any federal board, commission or other tribunal ...
2.(1)...
"federal board, commission or other tribunal" means any body or any person or persons having, exercising or purporting to exercise jurisdiction or powers con ferred by or under an Act of Parliament or by or under an order made pursuant to a prerogative of the Crown ...
It might be argued that the two tender processes were entered into by a "person ... exercising .. . powers conferred by ... an Act of Parliament" and are therefore open to judicial review however, as I indicated earlier this is a question which must be left to some other more appropriate time.
What can be said is that the subsequent negotia tions and the final decision to award the contract to 926260 were not pursuant to powers conferred by an Act of Parliament but rather were incidental to the Crown's inherent right to contract.
For the aforementioned reasons, I find that this Court does not have jurisdiction to review PWC's decision to award the contract to 926260.I would add that had my decision on this point been different I would have had no difficulty in finding that PWC acted fairly towards all parties during the entire period in question.
During the hearing on June 29, counsel for the respondent asked that the motion be rejected with costs. I indicated at that time that I would make a finding on this question concurrent with reasons on the issue of jurisdiction. Rule 1618 [Federal Court Rules, C.R.C., c. 663 (as enacted by SOR/92-43, s. 19)] provides that no order for costs will be made with respect to a request for judicial review unless the Court is satisfied that special reasons exist for grant ing the order. Although this motion was dismissed on the grounds of undue delay and in that connection the respondent might be entitled to costs, the motion did allow this Court to clarify certain aspects with respect to its jurisdiction in these matters and as a result I would dismiss the motion without costs to the Minis ter of Public Works.
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