Date: 20040521
Docket: T-906-04
Citation: 2004 FC 747
Ottawa, Ontario, this 21st day of May, 2004
Present: The Honourable Mr. Justice Mosley
BETWEEN:
H B LYNCH INVESTMENTS INCORPORATED
Applicant
and
THE MINISTER OF PUBLIC WORKS FOR HER MAJESTY
THE QUEEN IN RIGHT OF CANADA as represented by
PUBLIC WORKS AND GOVERNMENT SERVICES CANADA
Respondent
REASONS FOR ORDER AND ORDER
[1] This is an application, filed on May 7, 2004, for judicial review of a decision to reject as non-compliant, two offers to lease premises in Sydney, Nova Scotia tendered by the applicant in response to an invitation extended by the respondent department. A preliminary motion for an interim interlocutory injunction to prevent the respondent from issuing a contract to a deemed compliant bidder was heard by Justice Snider at Halifax on May 12, 2004. Justice Snider determined at that hearing that the nature of the controversy between the parties was narrow and that the application could be heard and decided on an expedited basis prior to the date of the expiry of the offers on May 25, 2004. Accordingly, with consent, she deferred a decision on the interim injunction motion and directed that this application be heard by video conference on May 19th. The hearing was conducted on that date with the parties appearing by counsel in Halifax and the Court presiding in Ottawa. The applicant seeks a declaration that its bids were compliant with the terms of the invitation, an order of certiorari quashing the respondent's decision of April 26, 2004 disqualifying its two offers as non-compliant or an order of mandamus to compel the respondent to consider the two offers with all other compliant bids and its costs in these proceedings.
BACKGROUND
[2] The Department of Public Works and Government Services Canada ("PWGSC"), represented by Mr. Brian Livingstone, a Senior Leasing Officer, is responsible for obtaining office facilities in Sydney for another federal department, Human Resources Development Canada ("HRDC"). The lease for the facilities currently occupied by HRDC in Sydney expires on December 16, 2004. Accordingly, PWGSC began early in the year to canvass the availability of office space for HRDC to occupy following that date. A request for expressions of interest was issued to which the applicant responded with two potential sites which it owned. PWGSC conducted a preliminary screening and determined that the two sites were suitable for HRDC's leasing purposes. Mr. Livingstone invited the applicant in writing on March 15, 2004 to submit offers in response to a forthcoming invitation to tender.
[3] To this stage, PWGSC had been dealing with Mr. Hugh B. Lynch who is, as indicated in an extract from the Nova Scotia Registry of Joint Stock Companies filed in these proceedings, the President, Secretary, Treasurer and sole Director of the applicant corporation. Mr. Lynch had shown the properties in question to Mr. Livingstone and other PWGSC representatives. In March, the applicant engaged the services of a Halifax based consulting firm, Partners Global Corporate Real Estate Inc. ("Partners Global"), represented by Mr. Larry Sowerby, to assist it in the tendering process. Mr. Sowerby wrote to Mr. Livingstone on March 12th to advise that he was to receive the documentation in respect of the applicant's properties and he included an authorization to that effect endorsed on behalf of the applicant by Mr. Lynch.
[4] On March 30th, Mr. Livingstone provided the invitation to tender entitled "Lease Documentation Package for Lease Project Number 521013" (the "tender package") to Mr. Sowerby. The deadline for submission of offers established by the tender package was 2 PM on April 22, 2004, and the date for expiry of the offers was set at May 25, 2004.
[5] The applicant's offers to lease on both properties were submitted shortly before the deadline on April 22nd. By letter dated April 26th, Mr. Livingstone informed the applicant that PWGSC would not consider either bid because "the Offers failed to comply with the instructions contained in the Lease Documentation Package, in regard to 'Execution of the Offer'". In the
ensuing days there were discussions and exchanges of correspondence between the two parties
and efforts to return the security deposits submitted with the bids. H B Lynch complained that PWGSC had not properly exercised its discretion in disqualifying both of its offers for being non-compliant and that it was not accorded fair treatment in the tender process. PWGSC gave the applicant's representations further consideration but ultimately decided to hold to Mr. Livingstone's decision. When counsel were engaged, the respondent agreed not to proceed with the issuance of the leasehold contract until the final date that the offers were to remain open, May 25th, to allow the applicant to seek relief in this Court.
[6] In total, seven bids were submitted in response to the invitation to tender including the two on behalf of the applicant. One offer, on behalf of Harbour Royale Developments Limited ("Harbour Royale"), was deemed compliant with the requirements of the tender package. Coincidentally, Harbour Royale is the current holder of the lease for the premises occupied by HRDC.
[7] Section 11(c) of Part 1 of the tender package set out the following condition:
An Offer may not be subject to further evaluation if, in the sole opinion of the Lessee, the Offer fails to meet or comply with the provisions, requirements or standards as set forth in this Lease Documentation Package.
[8] Section 14(a) of Part 1 of the tender package set out the execution instructions for bidders:
Corporation or Joint Stock Company- The signatures of the authorized signatories shall be affixed and their names and titles typed or printed in the space provided and the corporate seal should be affixed. If the corporate seal is not affixed to the Offer, the signatures shall be witnessed and proof of signing authority shall accompany the Offer.
[9] The applicant claims that the tender package did not provide further elaboration of what was meant by "proof of signing authority", nor any indication as to how such proof was to accompany the offer. The president and directing mind of H B Lynch, Hugh B. Lynch, personally signed both offers, but did not affix a corporate seal. Mr. Lynch identified himself in handwriting as "president" of H B Lynch and his signature was witnessed on both offers by Mr. Sowerby.
Motion by Harbour Royale for Status in this Proceeding
[10] Harbour Royale sought and was granted intervenor status by Justice Snider for the limited purpose of appearing on the interim injunction motion. In her Order of May 12th, Justice Snider directed that Harbour Royale would be allowed to serve and file a motion for participation in this application with evidence and submissions on the merits. Harbour Royale accordingly served and filed a motions record with supporting affidavit evidence and written submissions on May 18th seeking joinder as a respondent or leave to be added as an intervenor.
[11] Harbour Royale's motion was opposed by the applicant and supported by the respondent. At the outset of the hearing on May 17th, I heard from counsel for Harbour Royale on its motion and from counsel for the respondent. Having read the written submissions of Harbour Royale and the parties and having heard oral submissions on the motion, I concluded that a sufficient basis had not been made out for the exercise of the Court's discretion to either join Harbour Royale as a respondent or permit it to intervene in the proceedings on the merits of the controversy.
[12] On the question of joinder pursuant to Rules 104(1)(b) and 303(1)(a) of the Federal Court Rules, 1998, SOR/98-106, I was satisfied that Harbour Royale would not be directly, adversely affected by the Order sought in the application and that joinder is not necessary in the interests of fairly deciding this matter: Reddy-Cheminor Inc. v. Canada (Attorney General) (2001), 212 F.T.R. 129, aff'd (2002), 291 N.R. 193 (F.C.A.) and Nu-Pharm Inc. v. Canada (Attorney General) (2001), 211 F.T.R. 181, aff'd (2002), 17 C.P.R. (4th) 288 (F.C.A.). I am satisfied that ensuring the effective and complete determination of the issues in dispute in this application does not require that Harbour Royale be added as a respondent.
[13] Regarding intervenor status, I considered whether the participation of Harbour Royale would assist the Court in determining a factual or legal issue in this application: Apotex Inc. v. Canada (Minister of Health) (2000), 4 C.P.R. (4th) 421 (F.C.T.D.). Having regard to the narrow scope of the controversy between the parties and being satisfied that there were no evidentiary gaps to be filled and that the respondent would deal with the issues Harbour Royale wished to address, I concluded that I could hear and decide the proceedings on the basis of the existing parties' evidence and submissions. Accordingly, the motion for participation by Harbour Royale was denied.
ISSUES
[14] 1. What is the appropriate standard of review in this case?
2. Did the respondent make any reviewable error in determining that the applicant's bid was non-compliant?
ANALYSIS OF THE PARTIES' POSITIONS
Standard of Review
[15] Counsel for both parties put forward positions on the standard of review that should be applied by the Court in this case. Both referred to the well-established pragmatic and functional approach that is to be applied and the recent adoption with approval of this approach by the Supreme Court of Canada in Dr. Q. v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226. In my opinion, the appropriate standard of review to be applied in this case is reasonableness simplicter.
[16] The applicant submitted that correctness or reasonableness simpliciter should be applied, since the leasing officer has no particular expertise in contract analysis and is only required to complete the "mechanical act" of comparing bids to the instructions for tenders and the issues in this case relate purely to questions of law.
[17] The respondent, in contrast, submitted that a higher degree of judicial deference is warranted in this case. Counsel characterized the decision of PWGSC as a discretionary one involving questions of mixed fact and law, that is to be afforded "broad deference"; namely the standard of patent unreasonableness.
[18] The pragmatic and functional approach directs that four factors must be considered by the Court in determining the appropriate standard of review for a particular administrative decision: (1) the purpose(s) of the legislation as a whole and the provisions at issue in particular, (2) the nature of the question; being law, fact or mixed fact and law, (3) the expertise of the tribunal relative to that of the reviewing court in regards to the question at issue, (4) the existence of any privative clause or statutory right of appeal. See: Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, Dr. Q., supra, and Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982. As stated by the Supreme Court of Canada in Pushpanathan, supra, at paragraph 26, the central inquiry in the standard of review analysis is determining the degree to which Parliament intended the administrative decision under review to be subject to judicial scrutiny.
[19] First, the legislation under which the leasing officer had the authority to consider tenders for prospective lease agreements was the Federal Real Property and Federal Immovables Act, S.C. 1991, c. 50, in combination with the Department of Works and Government Services Act, S.C. 1996, c. 16. The purpose of these statutes is to grant public officers representing the Crown the authority to enter into contractual arrangements on behalf of the Crown. These statutes do not modify the fundamental principles of contract at common law and in particular, the freedom to contract and structure the tendering procedure in a manner that suits the Crown's needs: Gestion Complexe Cousineau (1989) Inc. v. Canada (Minister of Public Works and Government Services), [1995] 2 F.C. 694 (C.A.). This factor points to less deference.
[20] Second, I prefer the respondent's characterization of the nature of the question. While legal principles involving the common law of contracts and implied and express authority of individuals representing corporations are involved, they are to be applied and interpreted in the context of the language of the particular instructions in the tender package at issue in this case, and the factual circumstances surrounding the tendering process. Therefore, questions of mixed fact and law are in play; a factor pointing to a medium level of deference.
[21] Third, the government decision-maker in this case, Mr. Livingstone, holds the position of Senior Leasing Officer, Real Property Services, of the Atlantic Region of PWGSC. In his affidavit filed in this proceeding, he attests that he is responsible for arranging and acquiring leased facilities for all federal Crown departments in the four Atlantic provinces. In my view, based on this description of his experience, even though it does not refer to the length of time he has held such position and been responsible for leasing arrangements, Mr. Livingstone is to be regarded as having a zone of expertise in interpreting bidding requirements and tenders for leasing contracts. However, he cannot be viewed as having more experience, relative to the Court, in analysing the common law principles of contract formation and applying any standards that may exist from the common law to the particular language of the tender package. Therefore, this factor militiates in favour of a medium level of deference. Finally, there is no privative clause or statutory right of appeal. This factor is neutral in the analysis.
[22] While not undertaking an analysis of the factors set out in the pragmatic and functional approach, Justice Rouleau of this Court characterized the standard of review to be applied in judicial review applications concerning the bidding process for federal government contracts at paragraphs 24-25 of Halifax Shipyard Ltd. v. Canada (Minister of Public Works and Government Services) (1996), 113 F.T.R. 58 as follows:
The standard of review in cases of this nature is well established by the jurisprudence. It is not the role of the Court to embark on a substantive review of the Minister's interpretation of the tender documents, but rather to review the decision in order to determine whether the manner in which it was made was fair.
... [quotation from Gestion Complexe Cousineau, supra]
In order for a judicial review remedy to be available therefore, it must be demonstrated that the respondent acted in an unfair, unreasonable or arbitrary manner; based its decision on irrelevant considerations; or, acted in bad faith. The issue is the legality of the actions, not the wisdom of the decision rendered and the burden of proof on the applicant is a substantial one.
In my view, applying the standard of reasonableness simpliciter is in line with the standard envisioned by Justice Rouleau above.
Interpretation of the Tendering Instructions
[23] The applicant has urged that this Court accept its submission that the Leasing Officer, Mr. Livingstone, in essence fettered his discretion by too narrowly construing the tender instructions and contrary to the common law of contract formation, required "strict compliance" with the tender instructions, rather than starting from the viewpoint that "substantial compliance" was necessary. The applicant argued that the standard of strict compliance may only be employed in evaluating tenders if there are express and clear mandatory requirements in the tender instructions- in such a case the actual language of the tender instructions and requirements would "pull" the bidding process out of the de facto position at common law of an applicant having to demonstrate "substantial compliance" with tendering requirements. The applicant relies on Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111 in support of this argument, as well as Martell Building Ltd. v. Canada, [2000] 2 S.C.R. 860 in arguing that PWGSC in inviting the applicant to submit tenders, had an implied duty to treat all bids fairly and equally.
[24] In the alternative, the applicant argues that even if this Court determines that strict compliance was required, then H B Lynch Investments Inc.'s offers were compliant, since Mr. Lynch signed the offers and wrote that he was the "President" of the company.
[25] The respondent however has argued that the tendering instructions imposed clear requirements on all bidders that it was mandatory that proof of signing authority accompany an offer. The Leasing Officer therefore did not err in law or deal with the applicant unfairly in applying this provision strictly and determining that the applicant's offers were non-compliant.
[26] In my opinion, the tendering instructions were clear and unambiguous that proof of signing authority was an essential requirement for compliant bids. There is simply no room to invoke the common law principle of contra proferentem, where ambiguity in forms or documents is to be construed unfavourably against the drafter. This is evidenced by the language of Clause 14(a) of the tender package, where it is clearly stated that for joint stock companies or corporations, certain mandatory requirements had to be met with regards to proving signing authority, namely:
- the signatures of the authorized signatories; and
- their names and titles typed or printed in the space provided and
- the corporate seal may be affixed, or if no corporate seal is affixed, the signatures shall be witnessed and proof of signing authority shall accompany the Offer.
[27] This language indicates that the Leasing Officer did not erroneously interpret his task in evaluating the bids for compliance. Some proof of signing authority was indeed a mandatory requirement which had to accompany the offer. In interpreting this provision strictly, or from a standpoint of strict compliance, the Leasing Officer did not err in law.
[28] The applicant has argued that the alleged deficiencies cannot be viewed as touching upon an essential requirement of its offers, therefore when evaluating its offers the Leasing Officer unreasonably concluded that there was no "material" compliance with the instructions in the tender package. Having reviewed the case law cited by the applicant in support of this argument, despite counsel's able submissions, I am not persuaded that this interpretation can be accepted in light of the clear and mandatory language of Clause 14(a), the substantial discretion afforded to the lessee by Clause 11, and the common law principle that parties are free to set out contractual terms and conditions as they see fit. The respondent was entitled to set strict requirements with regards to demonstrating authority to bind company to an offer and as I set out below, I am satisfied that the Leasing Officer's conclusion that the applicant failed to meet those requirements was a reasonable one.
[29] Moreover, the implied duty to treat all bids fairly and equally, set out in Martell, supra, was met in this case, as there is no ground upon which to find that the Leasing Officer treated the applicant's offers unfairly or unequally.
Proof of Signing Authority
[30] I accept the respondent's position that there were several ways in which the proof of authority requirement could have been satisfied. That this was not done is, in my view, a result of the applicant's failure to give due care and attention to the preparation of an important commercial document and the consequences of that omission must rest with the applicant. The tender package was in the hands of the applicant's representatives from March 30th and they had some three weeks in which to ensure that the offers were prepared and submitted properly.
[31] The option of using the corporate seal was open to the applicant and if not exercised, the applicant could have affixed other proof to the offers that Mr. Lynch had the necessary authority to bind his company, such as an extract of the corporate minutes or an extract from the Nova Scotia companies register. A simple assertion in handwriting that the signatory is President of the company does not meet that requirement. Despite the effect that this may have at common law, in relation to implied or ostensible authority, the instructions in the tender package are properly viewed as modifying the common law in relation to the particular commercial arrangement that was taking place between the parties. These instructions required in addition to the signature, printed name and title of the signatory, a seal or accompanying proof of signing authority. The applicant did not provide this and there is no remedy available from this Court.
ORDER
THIS COURT ORDERS that this application for judicial review is dismissed. No order as to costs.
"Richard G. Mosley"
F.C.J.
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-906-04
STYLE OF CAUSE: HB LYNCH INVESTMENTS INCORPORATED
AND
THE MINISTER OF PUBLIC WORKS FOR HER
MAJESTY THE QUEEN IN RIGHT OF CANADA
as represented by PUBLIC WORKS AND
GOVERNMENT SERVICES
PLACE OF HEARING: Ottawa, Ontario / Halifax, Nova Scotia
via Videoconference
DATE OF HEARING: May 19, 2004
REASONS FOR ORDER
AND ORDER BY: The Honourable Mr. Justice Mosley
DATED: May 21, 2004
APPEARANCES:
John Keith FOR THE APPLICANT
James Gundvaldsen-Klaassen FOR THE RESPONDENT
Dwight Rudderham FOR THE INTERVENER
SOLICITORS OF RECORD:
JOHN KEITH FOR THE APPLICANT
Cox Hanson O'Reilly Matheson
Halifax, Nova Scotia
MORRIS ROSENBERG FOR THE RESPONDENT
Deputy Attorney General of Canada
Halifax, Nova Scotia
DWIGHT RUDDERHAM FOR THE INTERVENER
Rudderham Chernin
Sydney, Nova Scotia