Court Orders Suspending the Awarding or Performance of a Public Contract: a Risk Worth Considering?

Often, in the heat of the moment, municipalities and other public bodies acting in good faith must quickly make decisions regarding the awarding of a public contract. 

Whether the decision involves the compliance of a bid, the integrity of the contract awarding process, or the outright cancellation of a call for tenders, municipalities and other public bodies generally don’t have the luxury of being able to wait for a court ruling before making such a decision. 

However, disgruntled bidders occasionally try to make time stand still by applying for a safeguard order or provisional injunction from the Superior Court in order to suspend the contract awarding process or the actual performance of a contract. A bidder’s rights will thereby be temporarily preserved, until the Court renders a decision on the merits of its position. 

Such a scenario, which is calamitous for the contract awarding process, cannot be discounted and must be taken into consideration in managing the risks of every file, regardless of the circumstances. 

Criteria the court must consider 

At the provisional injunction stage, the Court’s analysis is limited to the allegations in the motion and in the sworn statements and exhibits in support of it. 

The criteria for issuing such orders are well established: 

1. An appearance of right on the part of the bidder;
2. The bidder will be irreparably harmed if the order is not issued;
3. The balance of inconvenience is in favour of the bidder rather than the public body;
4. Issuing the order is a matter of urgency. 

However, two recent cases involving the City of Montreal suggest that the burden on bidders for obtaining such orders may be easing¹.

Two cases involving the City of Montreal 

These two cases, which were heard together by the same judge, involve a new eligibility condition imposed by the City, to the effect that over the last five years, the bidder must have performed at least two contracts of a similar nature where the cost of the work performed was at least $10,000,000. 

The city’s right to stipulate such a condition is not in doubt². It was owing to the particular circumstances in which it was being applied that the Court decided to intervene. 

In the first of the two cases, the City had rejected the bid of the lowest bidder, Demix Construction (“Demix”) and refused to allow it to supplement its bid with references to additional work of the same nature and of even greater value. Demix had limited its references to work it had performed on projects for the City. 

In the second case, Construction Bau-Val (“Bau-Val”) had been similarly treated by the City when it sought to supplement, with additional references, its bid on the same project on which Demix was the lowest bidder and it was the second lowest, and on two other projects where it was the lowest bidder. In doing so it cited a previous call for tenders in which the City had in fact allowed it to supplement its bid with additional information regarding its experience. The City had thus previously shown some flexibility in such situations. Bau-Val also wanted to add a reference to an ongoing project it was working on for the City, which the City could not plead ignorance of. 

On March 21, 2016 an initial 10-day provisional injunction was issued by Justice Gouin in both cases. On April 1^st, those injunctions were renewed by Justice Champagne for a further ten days, essentially on the same grounds³. 

It is interesting to note that Justice Gouin concluded there was only a possible appearance of right in both cases. Such a finding would thus appear to be sufficient to justify a debate on the merits, which would be in the interest of both the parties and Montreal taxpayers⁴. 

In addition, Justice Gouin acknowledged that, while an action for damages could be brought against the city by the two bidders, that type of proceeding would be more onerous.⁵ 

While this was not, at this stage, an instance of a violation of legislation in the public interest, Justice Gouin was of the view that it would be preferable for the debate to take place now, such that the rules of the game are clear from this point on⁶. 

On May 20, after a hearing on the merits, Justice Jacob granted the motions for a permanent injunction and ordered the City not to award the contracts to any bidder other than Demix and Bau-Val⁷. 

Comments 

In our view, these decisions involving the City of Montreal could be relied on by any dissatisfied bidder. 

However, municipalities and public bodies must vigorously contest any attempt to block the awarding or performance of a contract, pursuant to well-established principles. 

First of all, as the Court pointed out in a recent matter in which our firm was involved, in the absence of a clear right, the presumption of the validity of public decisions applies, such that decisions made by public bodies in the course of the contract awarding process must be considered valid⁸. 

Secondly, courts will only intervene when the intent of the legislature is not being fulfilled⁹. In the absence of a clear violation of the law, a bidder will not be presumed to have suffered serious and irreparable harm¹⁰. 

Finally, as the disgruntled bidder can always claim damages, the harm it suffers will not be considered irreparable. 

With all due respect for the contrary opinion, we are of the view that the amount of money at stake, the existence of a new contractual clause, or the legal interest of the question being raised are not relevant factors for justifying the suspension of the awarding or performance of a public contract. Moreover, courts should not intervene in the contractual processes of public bodies solely on the grounds that they are acting pursuant to a statute of public order such as the Cities and Towns Act and the Act respecting Contracting by Public Bodies, where no clear violation of such a stature can be readily demonstrated by the bidder. 

Finally, in a context where a good number of decisions made in the public contract awarding process involve the exercise of discretion, such as accepting a bid with a minor irregularity, the role of the court is not to substitute its assessment for that of public bodies. 

As the Superior Court has already pointed out: 

That is not the role of the courts. Excessive judicial interference with the discretion of public authorities would not necessarily be in the interests of taxpayers, as it would result in a plurality of legal proceedings that would inevitably delay projects that merit immediate attention.¹¹  

It will thus be interesting to see if these two precedents are followed by the courts.