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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