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Featured Article,
September 2009
Coco Paving (1990) v. Ontario (Transportation)
2009 ONCA
503
© 2009 Matthew R. Alter
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Late Bid Not Compliant with
Electronic Tender Call
Coco
Paving (1990) v. Ontario (Transportation), Ontario Court of
Appeal, 2009
Overview
On June 19, 2009 the Ontario Court of
Appeal, on an expedited appeal, overturned a declaratory order
by Nolan J. of the Ontario Superior Court of Justice, on the
grounds that the lower court judge had misinterpreted the
relevant provisions of a Ministry of Transportation for Ontario
(“MTO”) tender call and had erred in law.
The lower court decision had declared a
bid by the applicant, Coco Paving (1990) Inc. (“Coco”), to be
compliant with the terms of the MTO’s tender call, despite the
undisputed fact that it was submitted late – after the
prescribed “Tender Closing” deadline. MTO had determined that
the late Coco bid was non-compliant with the terms of the tender
call and had, therefore, excluded it from consideration. Coco
brought an application in the Superior Court of Justice to have
its bid declared to be compliant on the basis that the timely
receipt of its bid had been prevented by a computer system
failure emanating from the MTO.
On the application, Nolan J. reasoned
that the cause of Coco’s late bid submission was a failure on
the part of MTO to provide assistance to Coco when Coco was
unable to submit its bid through the prescribed MTO electronic
on-line bidding system. On appeal, that reasoning was rejected
by a panel comprised of Cronk, Gillese and Armstrong JJ.A. The
Court of Appeal unanimously dismissed Coco’s application,
finding that Coco’s bid was not compliant with MTO’s prescribed
terms for bid submissions. In making its ruling, the Court of
Appeal applied accepted principles of tendering law and found
that MTO’s tender documents could not be construed to allow it
to accept for consideration a bid submitted after the deadline
specified in the tender call.
As a consequence of the Court of Appeal’s
decision, the Bot Group of companies (“Bot”), which was a party
intervenor on Coco’s application, and the Appellants on the
appeal, became the lowest compliant bidder, and has since been
awarded the MTO road construction contract that was the subject
of the Coco application.
Lower Court Ruling
On May 4, 2009, on short notice, Coco
brought a motion for an interim injunction. That motion came
before Ducharme J. and was adjourned to May 14th to
be heard on a priority basis, as an application, with the relief
sought, changed from an injunction to a declaration. On May 5th,
Coco commenced the application that was ultimately the subject
of the appeal, seeking the following relief:
·
a declaration that the bid submitted by Coco was
submitted in compliance with the terms prescribed in MTO’s
tender documents, and
·
a declaration that the MTO ought to accept the
Coco bid and list the Coco bid on MTO’s posted bidder’s list
(with the other three compliant bids).
Although Bot was not served with Coco’s
initial motion for injunctive relief, nor a party to the
submissions for the adjournment, it was served with Coco’s
revised application materials and Bot’s General Counsel attended
at the return of the application before Nolan J., and obtained
an order allowing Bot party intervenor status (an order that
proved critical to Bot’s ultimate success), but was not allowed
to file any affidavit materials.
Coco’s application ultimately came before
Nolan J. on May 15th at Windsor, Ontario. Both MTO
and Coco filed affidavits, but neither conducted any
cross-examinations. On May 19th (amended on May 25th)
Nolan J. granted the declaration sought by Coco.
MTO’s tender call required bids to be
submitted electronically to an MTO website. The prescribed
“Tender Closing” was April 29, 2009. The evidence on the
application was that Coco, which was familiar with MTO’s
electronic tendering system, had experienced a problem
submitting its bid before the submittal deadline. The evidence
was not conclusive on why MTO was unable to receive Coco’s bid
electronically, as MTO was able to receive the bids of three
other bidders, including Bot, before the Tender Closing
deadline. Here, Justice Nolan stated:
[para 5] In my view, it is not necessary
to determine conclusively whether the computer system failure,
which resulted in the bid from Coco not being received by the
MTO, was the product of a malfunction of the former’s computer
system or the latter’s computer system.
Nolan, therefore, held as follows:
I find that this is an appropriate case
in which to make the declaration sought. In coming to this
determination, the MTO is only directed to consider the Coco bid
along with the other bids received by the MTO prior to 3 p.m. on
April 29, 2009. This declaration does not interfere with the
right of the MTO, found in Article 11.1 of the Instructions to
Bidders, to not be required to accept any, including the lowest
Bid.
Bot’s Stay Motion to the Court of
Appeal:
MTO chose not to appeal Nolan J.’s
judgment, so on May 24th, Bot, the otherwise lowest
compliant bidder, in its capacity as a party intervenor,
commenced an expedited appeal to the Ontario Court of Appeal and
on May 25th Bot brought a motion before a single
judge of the Court of Appeal to stay the lower court’s
declaratory judgment pending the determination of the appeal.
Since the tender irrevocability period was to expire 30 days
from the Tender Closing date of April 29th, Bot
sought to have the Court of Appeal hear the stay motion on or
before May 28th. In the meantime, Bot and the other
two bidders whose bids had been received by MTO before Tender
Closing, wrote to MTO extending the irrevocability period for
their bids for a further 30 days or until such time as the Court
of Appeal could render a decision. Coco did not similarly
extend its bid past the 30-day period from the Tender Closing.
Bot’s stay motion came before Cronk J.A.
on May 28th and in a brief endorsement released on
May 28th at approximately 2:30 pm, with further
reasons subsequently released, her honour granted a stay of
Nolan J.’s order and ordered that an expedited appeal be heard
by the Court of Appeal on June 18th.
In reaching her decision, Cronk J.A. was
satisfied that Bot had met all of the required criteria for a
stay, namely: (i) that there were serious questions of law and
issues to be determined on the appeal, (ii) that the denial of a
stay would result in irreparable harm to Bot, and (iii) that the
balance of convenience favoured the granting of a stay.
On the serious issue test, Cronk J.A.
found, among other things, that the events giving rise to the
litigation called into question the integrity of the MTO’s
electronic tender and bidding system.
On the irreparable harm test, Cronk J.A.
accepted that if the stay was not granted, Bot would suffer
irreparable harm as it could reasonably be anticipated that
Coco, as the lowest bidder, would be awarded the contract, which
the evidence showed was worth approximately $60 million. In
support of its argument, and in response to Coco’s contention
that Bot’s remedy, if any, was in damages, Bot referred to the
following provision in MTO’s Instructions to Bidders, by which
MTO sought to immunize itself from damages:
The Ministry shall not be liable for any
costs, expenses, loss or damage incurred, sustained or suffered
by any bidder prior, or subsequent to, or by reason of the
acceptance or the non-acceptance by the [MTO] of any Tender, or
by reason of any delay in the acceptance of a Tender, except as
provided in the tender documents.
Bot also adduced evidence of MTO’s
reliance on the identical provision in its defence of a current
Ontario Superior Court of Justice action by an unsuccessful
bidder on another MTO tender. Cronk J.A. accepted Bot’s
argument, stating:
[20] If the requested stay is not
granted, and Coco secures the Contract, irreparable harm to the
Bot Group may well result. I note, in this regard, that an
inability to collect damages if a stay is not granted was
recognized in RJR-Macdonald at para. 64 as giving rise to
irreparable harm.
On the balance of convenience issue, both
MTO and Coco argued that timely performance of the construction
project could be imperilled if MTO were delayed in awarding the
Contract. However, Justice Cronk found the following
considerations tipped the scales in favour of granting the stay
in Bot’s favour:
(1) notwithstanding MTO’s affidavit evidence filed on the
day of the motion identifying numerous alleged difficulties if
the Contract was not awarded by May 28th, such
difficulties were prospective possibilities only. Moreover, the
record indicated that MTO had already twice agreed to extend the
Contract award deadline, and as such, a stay order, for a short
time, would simply result in a further extension of that
deadline;
(2) Bot and the other 2 compliant bidders’ agreement to
make their bids irrevocable for an additional 30 days or such
further time as may be required for the determination of the
appeal, which undercut MTO’s concerns over potential financial
penalties to be shouldered by the successful bidder;
(3) Bot’s willingness to expedite the appeal and argue it
as soon as possible;
(4) the industry-wide concerns raised by the decision on
Coco’s application, and the importance of affording those
concerns, beyond the litigants, to be assessed by the court; and
(5) finally, that a stay of the declaratory relief would
not legally prevent MTO from awarding the Contract, although
that might be the practical effect.
Ontario Road Builders Association
(“ORBA”) Intervenes
On the return of the motion for the stay
and expedited appeal, the Ontario Road Builders Association (“ORBA”)
brought a motion to be allowed intervenor status on the appeal.
ORBA’s motion was adjourned to be heard by the Chief Justice, at
which time it was granted.
Court of Appeal Decision
The expedited appeal was heard on June
18, 2009, with the Court of Appeal releasing its reasons on the
following day. The Court set aside the decision of the court
below and granted judgment dismissing Coco’s application.
The Court of Appeal’s reasons provide
strong support for the sacrosanct nature of tender deadlines in
the competitive tendering process, absent clearly expressed
language to the contrary. In this regard, the Court held that
the specific language in MTO’s tender documents, that no bids
received after the deadline would be accepted for consideration,
was sufficient to preclude an implied basis for the acceptance
of late bids. Referencing the decisions of the Alberta Queens
Bench and Alberta Court of Appeal in NAC Constructors Ltd. v.
Alberta (Capital Region Wastewater Commission), the Court of
Appeal held that a general discretion provision in MTO’s tender
documents allowing it to “waive formalities” with respect to bid
submissions could not be construed to allow MTO to accept late
bids. Further, citing its decision in the Bradscot (MCL)
Ltd. v. Hamilton-Wentworth Catholic District School Board
case, the Court of Appeal stated:
[12]Moreover, the timing of bid delivery
is not a mere formality in the tendering process. As emphasized
by the appellants, bid closing time is sacrosanct in the
competitive tendering process.
In support of these determinations, the
Court emphasized the need for strict rules to prevent unfairness
to other bidders:
[13] Strong public policy considerations
underlie these controlling principles. Confidence in the
integrity of government bidding processes is a matter of
considerable public importance. The Ontario Road Builders’
Association, an intervenor in this proceeding, put it aptly in
is factum ... The Association said:
The tendering
process is, and must always be, a carefully controlled process,
since the opportunity for abuse or distortion is ever present.
Even in the absence of abuse or distortion, the process must
nonetheless be and be seen to be fair to all bidders.
…
[A] bidder who
submits its bid even a few minutes late has the potential to
obtain a tremendous advantage over his competitors if it can
obtain a last-minute lower bid from a subcontractor.
In reaching its decision, the Court of
Appeal emphasized that the onus was on Coco, not MTO, to ensure
that its bid was received on time. On the facts of the case this
was important because there was no conclusive evidence as to the
cause of the electronic tendering difficulties. Accordingly, it
was impossible to determine whether it was Coco or MTO’s
computer system at fault in frustrating the timely submission of
Coco’s bid, or alternately whether the bid was simply held up in
an Internet ‘traffic jam.’ In these circumstances the Court of
Appeal reasoned as follows:
[23] …we agree with the Bot Group’s
submission that, unlike other bidders, Coco took a calculated
risk in deciding to delay accessing the MTO electronic bidding
system until [less than 30 minutes before the deadline for bid
submission]. It was open to Coco, as it was to the other
bidders, to submit its first bid well in advance of Tender
Closing and to update it thereafter. Unlike the other bidders,
Coco chose not to avail itself of this opportunity.
…
[25] As we have said, there is no
evidence before us, nor any finding by the application judge, as
to the origins of the computer difficulties experienced by Coco.
Nor is there evidence of what happened to the bid that Coco
attempted to send on-line before 3:00 p.m. It may simply have
been lost or stalled in ‘cyberspace’. In any event, on this
record, it is speculative to conclude that Coco’s bid entered
MTO’s information system before 3:00 p.m. Under the tender
requirements, which repeatedly emphasized the time of the MTO’s
receipt of a bid, this was critical. Merely ‘sending’ a
bid does not establish receipt by the MTO.
Finally,
the Court of Appeal did not agree with the lower court Judge’s
finding that a provision in MTO’s tender documents (section 4.6)
impliedly required MTO to render assistance to Coco when it was
unable to submit its bid electronically, and that MTO’s failure
to have done so justified a declaration that Coco’s bid was
compliant. Section 4.6 of MTO’s Instructions to Bidders, in
part 4.0 “Electronic Bid Submission Procedures”, read as
follows:
4.6. Upon submitting an on-line Summary
Bid Submission Form, bidders will receive an on-line receipt
notifying that the Ministry has successfully received the
Summary Bid Submission Form. Bidders not receiving an on-line
receipt must contact the Ministry’s Help Desk….
The Court of Appeal found that nothing in
section 4.6 relieved against the stipulation that bids had to be
received by MTO before the stated Tender Closing deadline.
Here, the Court of Appeal stated:
Section 4.6 is merely directed at
ensuring that a bidder who submitted an on-line Summary Bid
Submission Form and did not receive confirmation of receipt of
that form from the MTO had the means to obtain such confirmation
(an MTO receipt) by contacting the MTO's help desk. Although we
agree with the application judge's implicit suggestion that the
language of s. 4.6 would benefit from clarification, especially
concerning its interplay with Article 5 of the tender documents,
there is nothing in s. 4.6 to support the conclusion that it is
intended to override the specific provisions of the tender
documents relating to the deadline and process for the MTO's
receipt of bid submissions.
Conclusion
Owners and bidders, alike, should take
note of the Coco Paving decision. Its emphasis on the
criticality of the bid closing deadline, in the absence of a
clearly expressed overriding provision, is advantageous to all
parties in ensuring fairness in the competitive tendering
process.
Here, the procedural approach adopted by
the appellants was critical in the circumstances, and involved:
(1) intervention by Bot, as the lowest compliant bidder,
allowing it to initiate the appeal, when the tendering authority
(MTO) elected not to do so; (2) the immediate obtaining of a
stay order; which effectively prevented MTO from awarding the
contract to Coco; (3) the obtaining of an order for an expedited
appeal, in combination with the voluntary extension of the bids
of the compliant bidders, which assisted the Court of Appeal
with its determination on the balance of convenience test for a
stay; and (4) the intervention of the relevant trade association
(ORBA) to provide important context to the court in regards to
the public policy considerations.
Christopher D. Bredt and CCCL Fellow
Matthew R. Alter, of the Toronto offices of Borden Ladner
Gervais LLP, were the lawyers of record at the Ontario Court of
Appeal for the successful Appellants, The Bot Group.
© 2009
Matthew R. Alter
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