This article is an extract from the 5th edition of Government Procurement.
In its April 2021 decision in Di Sarra v. Ontario Assn. of Architects, the Ontario Superior Court of Justice – Divisional Court dismissed an appeal from a decision of the Discipline Committee of the Ontario College of Architects which found an architect guilty of misconduct due to a conflict of interest.
As the court summarized, the architect was found to be in a conflict of interest because he provided millwork drawings used by his client to solicit quotes for a home renovation and at the same time acted as the owner of a company that submitted a quote for that same work:
B. FACTUAL BACKGROUND
There were no facts in dispute with respect to this matter. The Discipline Committee made its decision based on an Agreed Statement of Facts filed by the parties.
Mr. Di Sarra carries on his architectural practice through Frankfranco Architects Inc., a corporation of which he is the principal architect and owner. Mr. Di Sarra is also a part owner in Capoferro Inc. (“Capoferro”), a company that provides various construction and construction management services, including millwork.
The owner of a home in Mississauga retained Mr. Di Sarra to provide architectural services for a planned renovation project. Capoferro also did some construction work on the project, with disclosure to the owner of Mr. Di Sarra’s ownership interest in that company. The regulation requires that such disclosure be in the contract documents. At the discipline hearing, there was an issue as to whether that disclosure had been adequate to comply with the regulation, given that it had been done by text messages. The Discipline Committee found that this was sufficient, although recommending that in future such communications should be done in a clear and professional manner in contractual documents, rather than in the casual manner used by Mr. Di Sarra. There is no appeal with respect to this aspect of the Committee’s decision.
One of the architectural services provided by Mr. Di Sarra was the preparation of drawings for the millwork on the project. These were provided to the owner so that she could solicit quotes from contactors for the millwork. It is this aspect of the project that gave rise to the finding of professional misconduct.
The property owner provided the millwork drawings to various contractors she sought out herself and invited them to provide quotes for the work. Mr. Di Sarra also sent the drawings to a number of millwork companies for the same purpose.
There was no formal process established governing the selection of a contractor to perform the millwork. Deposits were not required from any contractor submitting a bid. Any offers received were subject to negotiation and required a contract to be agreed upon between the owner and the millwork contractor. The parties agreed that in these circumstances, the submission of an offer did not create a contractual relationship between the owner of the property and the contractor making the offer.
Capoferro submitted an offer to perform the work set out in the millwork drawings. A number of other companies also submitted offers, some of those from sources who received the drawings from Mr. Di Sarra, and some of which were sourced by the owner herself. The owner did not select Capoferro to do the work. She awarded the contract to a company she had sourced herself.
The discipline committee found that this conduct breached the professional regulations that prohibit an architect from submitting bids or tenders on a project when that architect is also providing architectural services for that same project.
As the court noted, the case, which was the first decision to interpret the provision in question, turned on the meaning of “tenders or bids” in the governing regulation, and on the question of whether the price quote submitted by the architect fell within the meaning of those terms so as to be captured by the conflict of interest prohibitions:
There are no facts in dispute. The Discipline Committee’s decision on this point turns entirely on its interpretation of the words “tenders or bids” in s. 43(1)(f) of the Regulation, which is also the sole issue before this Court. This is a pure question of law. The Committee is required to be correct. We were advised in the course of argument that this is a case of first impression; there are no cases interpreting this provision since its enactment in 1984.
The court confirmed that the disclosure of a conflict by an architect to a client does not cure the conflict when a project involves tenders or bids:
E. THE LEGISLATIVE FRAMEWORK
The current provisions relating to conflicts of interest came into force in 1984. Prior to that, and dating back to 1977, the conflict of interest provisions were considerably broader in scope and more general in nature. Under s. 37(b) of the previous regulation, an architect was prohibited from having any direct or indirect interest in any entity “which contracts for any construction with the owner of a building project with respect to which project the member is providing architectural services.” In short, under the prior scheme, an architect on a building project was simply prohibited from having an interest in any company doing other work on that project.
In the 1984 amendment, a different approach was taken. Section 43(1) lists six scenarios that would constitute a conflict of interest. There are then three subsections which set out circumstances in which these scenarios would not constitute a conflict of interest, operating as a sort of exception to the general proposition. The Regulation states:
43(1) A member or holder has a conflict of interest where the member or holder or an officer, director, partner or employee of the member or holder,
a) has a direct or indirect financial or other interest in any material, device, invention or service used on a building project with respect to which the member or holder provides architectural services;
b) makes use of any service offered by a contractor, subcontractor or manufacturer or supplier of building materials, appliances or equipment, that may adversely affect the judgment of the member or holder as to any question that arises on a building project with respect to which the member or holder provides architectural services;
c) has a direct or indirect financial or other interest, whether personal or otherwise, in or with a person, firm, partnership or corporation that is the owner, contractor, subcontractor, construction manager, design-builder or project manager of a building project with respect to which the member or holder provides architectural services;
d) has a direct or indirect financial or other interest in a contract or transaction, other than the agreement between the architect and the client, to which the owner, contractor, subcontractor, construction manager, design-builder or project manager is a party on a building project with respect to which the member or holder provides architectural services;
e) has a direct or indirect financial or other interest, whether personal or otherwise, that may adversely affect the judgement of the member or holder as to any question that may arise on a building project with respect to which the member or holder provides architectural services; or
f) has a direct or indirect financial or other interest, whether personal or otherwise, in or with any person, firm, partnership or corporation that submits or has submitted tenders or bids on a building project with respect to which the member or holder provides architectural services.
(2) Clause (1) (a) does not apply to create a conflict of interest where the interest is disclosed in the contract documents and the consent in writing of the client is obtained.
(3) Clause (1) (c) or (d) does not apply to create a conflict of interest where the interest is disclosed in the contract documents.
(4) Subsection (1) does not apply to create a conflict of interest in the provision of architectural services with respect to a building project of which the member or holder is a substantial owner or that is controlled by the member or holder where the interest is disclosed in the contract documents.
Of particular relevance to the case at hand are subsections 43(1)(c) and (f). Under the prior regime, if an architect simply had an interest in a company that provided construction services, that construction company could not provide services on any project in which the architect was retained. However, under the new scheme the general prohibition of such a potential conflict is removed by s. 43(3) if the architect’s interest in the construction company is disclosed in the contract documents.
There is no such exemption for s. 43(1)(f). If the stipulated circumstances arise (i.e., if a company in which the architect has an interest “submits or has submitted tenders or bids” on a building project with respect to which he or she is providing architectural services), that is deemed to be a conflict of interest. Disclosure to the owner of the architect’s interest, even an explicit consent or waiver by the owner, does not change that conclusion. It is a conflict of interest.
As the court noted, the discipline committee determined that the meaning of “tenders or bids” should not be limited to a Contract A bidding process and should instead be interpreted broadly to include other types of solicitations. According to the discipline committee, this broad interpretation was necessary to better ensure the integrity of the process, to guard against unfair advantage during the bidding process, and to protect against the ongoing conflicts that would arise if the architect who oversaw a tendered project had an interest in the awarded contract:
F. THE DECISION OF THE DISCIPLINE COMMITTEE
The Committee held that the conflict of interest scenario described in s. 43(1)(f) is not limited to a formal tendering process of the type contemplated in Ron Engineering. The Committee noted that Mr. Di Sarra, in his role as the architect of record, prepared “design and contract documentation required for tender drawings to be competitively tendered to various millwork companies,” while at the same time his company Capoferro “used the tender drawings for the purpose of submitting a millwork price” to the owner. The Committee described the millwork drawings and specifications prepared by Mr. Di Sarra as being part of the owner’s “tender package” and stated that the “purpose of the millwork tender was to receive competitive bids from the marketplace and ensure there was no perceived advantage by one or any of the millwork bidders.”
The Committee discussed the role of a tendering process in its industry, stating that it “is considered one of fairness and transparency that ensures integrity in the design and construction industry.” The Committee expressed two concerns about Mr. Di Sarra’s company submitting a bid for the millwork. First, Mr. Di Sarra had an “unfair advantage over other bidders by having this pre-tender knowledge of the requested scope of millwork services.” Second, if Mr. Di Sarra’s company had been awarded the contract, Mr. Di Sarra would be placed in a “continued conflict of interest as both the Architect of Record and the owner of the millwork company providing the millwork, making it difficult for him to remain impartial to the client.” The Committee ruled:
The Committee finds that ss. 43(1)(f) is directed at these concerns of unfair advantage in a bidding process and continued conflict of interest if a business in which an architect has an interest is awarded a contract – concerns that apply even if the tender or bid process does not include the formalities described, for example, in paragraph 12 of the Agreed Statement of Facts. In the Committee’s view, this interpretation of ss. 43(1)(f) is consistent with the fact that its provisions are not subject to the ss. 43(3) exception, since these concerns remain even where a conflict of interest is disclosed.
In coming to its conclusion, the court agreed with the discipline committee’s broad interpretation of “tenders or bids” and rejected the architect’s narrower interpretation since the architect was unable to show why the conflict of interest prohibitions should be restricted to Contract A bidding processes to the exclusion of others types of tenders or bids:
Legislative Intention
The appellant submits that the language in ss. 43(1)(f) flows directly from the decision in Ron Engineering and was enacted with the intention that it would apply only in a Contract A/Contract B scenario as set out in that case. There is nothing to support that contention apart from the possible coincidence of timing; Ron Engineering was decided in 1981 and the amendments creating the Regulation, including ss. 43(1)(f), were enacted in 1984. Neither the word “tender” nor the word “bid” was defined in Ron Engineering, nor was there a definitive set of criteria for what would constitute a Contract A/Contract B scenario.
Counsel for the appellant argued in this court that there was a specific purpose for having a separate provision dealing with tenders or bids, without allowing an exception for when the architect has made disclosure of his potentially conflicting interest. That purpose arises, it was said, because in many tender situations, the identity of the party tendering is kept confidential to ensure a completely fair process, and there would therefore be no possibility of warning the owner about the architect’s interest until after the owner had already found themselves party to Contract A. I agree that is a real concern. However, there are many tender situations that give rise to the Ron Engineering Contract A/Contract B in which the names of the parties making the bids are not withheld. If the purpose of this provision was to protect those situations in which the identity of those making bids is not known, I would expect the legislation to say so explicitly. If the intention was to protect the owner in this distinct situation, there would be no need to cast the net so broadly.
A provision that applies only to situations in which Contract A and Contract B are created within the meaning of Ron Engineering, without specifying what those situations would be, is virtually incomprehensible. How is an architect to know what this means without some kind of specific direction? Even if an architect knew that the provision encompassed only Ron Engineering scenarios, would he or she need a legal opinion as to whether the particular situation they are facing fits within the Supreme Court of Canada’s decision? Such a meaning would be difficult to understand, difficult to enforce, and far from the plain and simple meaning of the words used. Indeed, it is a highly specialized meaning that would require reading in a substantial amount of contract law principles in order to discern when the provision did or did not apply.
In the absence of some evidence that this was in fact the intention of the Legislature (and there was none), applying such an interpretation unduly stretches the meaning of the words used and is contrary to the fundamental principles of statutory interpretation.
I reject this aspect of the appellant’s argument.
The court found that the discipline committee’s broader interpretation was consistent with the legislative intent of the conflict provisions and the public interest objective of preventing bias and unfair advantage in a bidding process:
Purpose of the Legislation
The Committee held that the “process of tendering is considered one of fairness and transparency that ensures integrity in the design and construction industry.” The Committee also found that Mr. Di Sarra had an “unfair advantage over other bidders by having this pre-tender knowledge of the requested scope of millwork services.” There can be little doubt that these findings informed the Committee’s interpretation of s. 43(1)(f). The appellant argues that in doing so the Committee failed to interpret the provisions in a manner consistent with the purpose of the legislation itself, which is the protection of the public, not the protection of other contractors.
The Architects Act states that the “principal object” of the Ontario Association of Architects is to regulate the profession of architecture “in order that the public interest may be served and protected.”9 If an owner of property decides to accept multiple bids on work to be carried out on the property, surely it is in the public interest for there to be fair competition amongst the bidders for the work. This may also be in the best interests of the other firms involved in the bidding process, but that does not take the matter outside the public interest. It cannot be in the best interests of an owner who, having elected to have a competitive process for a project, to be now faced with one of the bidders having an unfair advantage over the others. That is particularly the case where the bidder with the advantage obtained that edge because of his prior and ongoing relationship with the owner. Further, as noted by the Committee, the owner is no longer able to get an unbiased opinion from the architect on the project as to the merits of the various bids, given that the architect would have a personal interest in favouring one of those bidders.
In my view, the Committee’s observations in this regard are fully consistent with the purpose of the legislation, the public interest in protecting the rights of persons who contract with an architect, and with the importance of preserving the integrity of the profession of architecture in the eyes of the public.
As this case illustrates, in addition to potentially breaching the general rules that regulate a bidding process, architects who act for an owner on a project and then bid on that same project also run the risk of breaching the regulatory standards that govern their profession. This serves to further underscore the importance of maintaining a clear division between those who work on behalf of an owner on a project and those who work for parties who are bidding on that same project.
