This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2020 decision in Australian Education City Pty Ltd v. Victorian Planning Authority, the Supreme Court of Victoria dismissed a legal action after finding that a Cabinet decision to cancel a tendering process was not subject to judicial review. As the Court summarized, the dispute dealt with a Request for Expressions of Interest (REOI) for the acquisition and development of the East Werribee Major Development Parcel (referred to as the Precinct), which includes the site of the former State Research Farm, is comprised of more than 400 hectares of land, and was earmarked by the Victorian Government for residential and commercial development. The plaintiff, Australian Education City Pty Ltd (AEC), an Australian-owned, special purpose vehicle, which incorporated for the purpose of tendering for the development of the Precinct, submitted its initial bid in response to the REOI in July 2014.
As the Court noted, the resulting Request for Proposals (RFP) did not create a tendering process contract and was therefore not subject to commercial lost profit claims:
The tender process spanned nearly five years. On 31 October 2014, the MPA informed AEC that it had been shortlisted to participate in the next stage of the selection process, being the Request for Proposal (‘RFP’) stage. Following this letter, on 3 November 2014, the MPA provided a document to AEC outlining the RFP process (‘RFP documentation’). The RFP documentation provided, among other things, as follows:
11.1 RFP is Not an Offer
This RFP does not constitute an offer. Respondents acknowledge that the lodgement of a Proposal or other action pursuant to this RFP does not create any legal rights or obligations (including any process contract), with the exception of any formal contractual documents executed with the Successful Respondent).
However, the plaintiff advanced an administrative law-based judicial review application to challenge the Cabinet’s decision to cancel the process. The government brought an application for summary dismissal, arguing that the cancellation decision was not subject to judicial review:
The State’s submissions
In its outline of submissions filed on 31 January 2020, the State submitted that the decision to terminate the tender process was a decision of Cabinet, which is not amenable to judicial review. Accordingly, AEC’s claims in this proceeding have no real prospect of success.
The State submitted that as a general principle, decisions of Cabinet are not amenable to judicial review, and referred to a number of features of the decision to end the tender process which reinforced its contention that the decision to terminate the tender process was not amenable to judicial review, including:
a) the decision did not involve any exercise of statutory power;
b) the decision was a large-scale commercial decision relating to the acquisition and development of a parcel of land which engaged a range of policy and budgetary considerations for the State, and required significant co‑investment by the State; and
c) the decision was made in the context of an exchange of detailed tender documents and correspondence which governed the rights of the parties in relation to the tender process. At no time did AEC have anything more than a hope that negotiations might crystallise into a right at some future point in time.
As the Court noted, the Australian courts have historically been reluctant to interfere in the Cabinet’s decision-making process:
The State submitted as follows (citations omitted):
Decisions of Cabinet are inherently political and generally involve matters of high public policy or political significance. As Bowen CJ said in Minister for Arts, Heritage and Environment v Peko-Wallsend Ltd, “[i]t is to Cabinet that the highest decisions of policy affecting Australia are brought”, which questions often “involve intense conflict of interests or of opinion in the community”.
In Peko-Wallsend, the Full Court of the Federal Court of Australia held that a decision of Cabinet, to nominate certain land for inclusion on the World Heritage List, was not justiciable. This was despite the decision of Cabinet having consequences for the plaintiff company that held mineral leases over the land. The Court emphasised that Cabinet decisions were inapt for judicial review because they concern complex policy issues and because Cabinet is political accountable for its decisions.
The Chief Justice considered it would be “inappropriate” for the Court to “intervene to set aside a Cabinet decision involving such complex policy considerations…even if the private interest of the [lease-holders] was thought to have been inadequately considered”. Emphasising the role of Cabinet in the political system, Sheppard J said:
the Cabinet being essentially a political organisation…not usually referred to in any statute, there is much to be said for the view that the sanctions which bind it to act in accordance with the law and in a rational matter are political ones with the consequence that it would be inappropriate for the court to interfere with what it does.
Similarly, in Acquista Investments Pty Ltd v Urban Renewal Authority, a majority of the Full Court of the Supreme Court of South Australia held that a Cabinet decision concerning the sale of public land – like the Decision – was not amenable to judicial review. The Court held that such decisions are “quintessentially” for the Government, and that the electorate is the “final arbiter” Important to the Court’s conclusion was the fact that the impugned decision was “complex, multifactorial and policy based” and was a “commercial decision involving wider policy considerations of the kind commonly taken by governments and government instrumentalities.
As the Court further summarized, the government asserted that the rules of the RFP process did not create an expectation that the plaintiff would ultimately be awarded the right to develop the project:
The State referred to a number of acknowledgments and disclaimers included in the RFP documentation and other documents created during the course of the tender process, which the State submitted made it plain that AEC had no right or expectation that it would ultimately be awarded the right to develop the Precinct. These documents included:
a) the statements in the REOI issued in June 2014 that:
This REOI…does not create any legal rights or obligations (including any process contract) (cl 7.6);
The MPA reserves the right to elect not to proceed with the process at any time, and will not be liable for any loss or damage suffered by any respondent as a result (cl 7.7(d));
The MPA reserves the right to not provide respondents with any reason for any actions or decisions it may take in relation to this REOI process (cl 7.7(f)).
b) in its initial response to the REOI in July 2014, AEC stated that it ‘unconditionally waive[d] any right to claim costs or to appeal against decisions arising from this process’;
c) on 3 November 2014, AEC was provided with documentation which included the following terms and conditions:
Respondents acknowledge that the lodgement of a Proposal or other action pursuant to this RFP does not create any legal rights or obligations (including any process contract), with the exception of any formal contractual documents executed with the Successful Respondent (cl 11.1) MPA reserves the right to …withdraw, suspend or terminate the RFP process at any time; …terminate the further participation of any Respondent or decline to select a Successful Respondent (cl 11.13(e) and (f)) Respondents are not entitled to enquire into the basis of the State’s decision to accept or reject any Proposal (cl 11.17).
d) by lodging a proposal in response to the REOI, AEC warranted that it ‘will not make any claim against MPA, its employees or consultants, or any person involved in the RFP process in relation to the selection of a successful Respondent or any other matter in connection with the RFP … ‘;
e) in a letter to AEC dated 27 October 2015, the Minister for Finance said:
The appointment of AEC as the preferred bidder…does not fetter the State’s rights whatsoever from acting in accordance with the terms set out in the Request for Expression of Interest and Request for Proposal documentation. The State makes no commitment to proceed with the sale or enter any legally binding documentation with AEC following the further due diligence period.
f) in a letter to AEC dated 15 August 2016, the Minister for Finance said:
As previously stated, the State has not made any commitment to enter into any agreement with AEC in relation to the Major Development Precinct. Nothing in this letter or conveyed during the milestone framework fetters the State’s absolute discretion to determine how it wishes to proceed with AEC and the Major Development Precinct process, and is all subject to relevant Government approvals.
g) in a letter to AEC dated 15 August 2016, the Minister for Finance said:
If the State and AEC do not achieved (sic) mutual resolution of the threshold and other commercial matters within three months, and a detailed terms sheet which is capable of being converted to a development agreement within the exclusivity period, the State reserves its rights including to elect to withdraw from the sales process (in its absolute discretion). Finalising a terms sheet and entering into the development agreement remain subject to Government approvals typical for this type of transaction.
h) further, the terms sheet provided by AEC to the State on 3 November 2017:
(i) contemplated that the State may not approve the transaction and that the Minister and State ‘will not be under any obligation to proceed with the Project, or to enter into any formal legally binding contracts in respect of the Project’;
(ii) contained an acknowledgement by AEC that ‘it has no claim (including without limitation as to costs) if the Minister and the State do not proceed with the Project or enter into formal legally binding contracts or if the parties’ negotiations in relation to the Terms Sheet end; and
(iii) recognised that for the development of the Precinct to succeed, the project required ‘Government approvals’.
Furthermore, the government asserted that Cabinet decisions were not regulated by statute, and therefore did not constitute judicially reviewable statutory decisions:
The State submitted that Cabinet is not a body recognised by statute, in contrast with the Governor-in-Council or the Executive Council, upon which many statutes confer powers and duties. Further, it was not necessarily the case that a decision made following the deliberation of Cabinet must necessarily ultimately be a decision of the Governor-in-Council or the holder of a recognised office. The State contended that the relevant decision was taken collectively by the Cabinet, and no statute conferred any role or powers upon the Governor-in-Council or any Minister in relation to the tender process. The State submitted that the courts have traditionally been deferential to the decision making process of Cabinet, which is private and collective, compared with, say, decisions made by a Minister under an enactment.
The State submitted that, while in some limited contexts a decision made in the exercise of statutory power following a recommendation or advice of Cabinet has been subject to judicial review, such review is not appropriate in the present case, as:
a) the decision was made by Cabinet as opposed to another entity following the advice or a recommendation from Cabinet; and
b) the present case does not involve any of the special features present in those other contexts, including that:
(i) the decision does not involve the exercise of statutory power regarding the personal liberty of an individual; and
(ii) the decision does not involve the exercise of a statutory power with respect to an extant proprietary interest.
The government also argued that “it was not necessary for the State to claim a blanket immunity for decisions of Cabinet” since “it is sufficient to show that the decision in question is not amenable to judicial review” and that “the question is whether the decision to end the tender process is subject to the supervisory jurisdiction of this Court.” In considering the applicable case law authorities, the Court ultimately agreed with the government, concluding that there was a close-to-zero chance that the Cabinet decision would be subject to judicial review:
In my view, there are negligible prospects of there being any further information able to be produced by the State which would cause me to alter my view that AEC’s claims in this proceeding have no real prospects of success. For present purposes I am prepared to accept, contrary to the submissions of the State, that Cabinet decisions are reviewable, albeit only in very limited circumstances. However, critically, I consider that the nature of the decision is such that the prospects of the Court intervening to overturn the decision to terminate the tender process is, if not zero, close enough. As noted by Allsop P in Stewart v Ronalds, ‘central to the identification of the kinds of decisions amenable to review by the courts is the suitability of the subject for judicial assessment and, in particular here, whether the assessment of the legitimacy or otherwise of the decision depends on legal standards or by reference to political considerations’.
The Court found that the decision to cancel was ultimately a political decision involving the expenditure of public funds and was therefore not judicially reviewable:
That the decision to terminate the tender process may have been based upon recommendations of a particular Minister, or other government officials or statutory bodies does not alter the fundamental character of the decision, or its inherently political nature. While the decision to end the tender process is not political in the partisan sense, it is political in the sense that it involves significant policy choices regarding land use, educational and employment priorities, and the allocation of public funds. The courts are not well equipped to evaluate those policy choices. The reasons of the majority in Acquista are particularly salient to the current application. Their Honours stated as follows:
It is not the role of this Court, nor is this Court equipped to adjudicate on the validity of the reasons which motivated the Cabinet to approve the proposal. As mentioned, we cannot assume that all the material before the Cabinet or the arguments made for and against the proposal are before this Court. In our opinion a court is not well placed to assess a decision which is a commercial one but which involves wider questions of policy and strategy. The inability of this Court to assess the decision in all its aspects tends towards a conclusion that the decision to enter into the contract was not one susceptible of judicial review, at least on account of legal unreasonableness.
The Court also agreed that the decision in question was not governed by statute, and was therefore not subject to judicial review:
In the current case, the decision to end the tender process was not governed or empowered by statute: the State is empowered to deal with the land owned by it in the Precinct unconstrained by any statutory preconditions or requirements.
…
Further, I also disagree with AEC’s submission that it is inappropriate to grant summary judgment, because the question of whether the State’s decision to end the tender process is justiciable should be determined at a trial, when all of the relevant material is before the Court about what was the operative decision, and who made it. I do not see how the provision of additional information would assist, or even be available to assist, AEC in the current case. While the Committee may have received advice from Ministers or other officials, ultimately the decision was that of the Committee. The correspondence makes it clear that the proposal for the development of the Precinct attracted the attention of the highest level of the State Government, such that it is unsurprising that the final decision was made by a committee of Cabinet.
The Court confirmed that a political decision should therefore not be judged by legal standards and that none of the case law authorities presented by the plaintiff changed that conclusion:
Accordingly, none of the decisions relied upon by AEC detract from the fundamental principle that the amenability of a decision to judicial review is dependent upon its nature and subject matter, and decisions involving broader policy considerations rather than the particular circumstances of individuals are to be judged by political considerations, rather than assessed in accordance with legal standards.
Since any information relied on by Cabinet in making its decision would likely be protected as confidential under the Cabinet’s public interest immunity, and since the plaintiff was not entitled to procedural fairness due to the political nature of the decision, the Court concluded that the plaintiff was not entitled to be provided the reasons behind the cancellation decision:
Accordingly, if, in arriving at the decision to end the tender process, the Committee is not required to afford AEC procedural fairness, the Committee cannot be compelled to give reasons. The obligation to give reasons is inextricably linked with the question of justiciability.
The Court therefore granted the government’s application for summary dismissal of the plaintiff’s challenge and, in so ruling, stressed that its “conclusion that the decision to end the tender process is not amenable to judicial review is based upon the nature of the decision itself, rather than the identity of the decision maker.” In summary, the Court concluded that the plaintiff failed to make the case to establish that the cancellation decision was judicially reviewable and that, even if it had made that case, the likelihood that the Court would grant a remedy still remained slim:
Taking, for example, AEC’s claim that the State failed to afford AEC procedural fairness prior to making the decision to end the tender process, AEC would need to establish:
a) a decision of Cabinet is reviewable (which would only be found in limited circumstances);
b) the subject matter of the decision is reviewable (unlikely, because of the strategic, commercial and policy considerations involved);
c) that AEC had a legitimate expectation that conferred upon it a right to be heard, notwithstanding the fact that it held no existing licence or privilege over and above being a preferred tenderer, the decision to end the tender process did not involve the exercise of a statutory power, and against the face of the various acknowledgements and disclaimers in the REOI, the RFP documentation and the terms sheet;
d) even if AEC did have a right to be heard, that it was not precluded from seeking judicial review by reason of the various acknowledgements and disclaimers in the tender documents; and
e) even if all of the above hurdles could be overcome, the likelihood of the Court exercising its discretion to provide AEC with a remedy which was of any commercial utility would, in all of the circumstances, be quite slim.
The Court therefore granted a summary judgment in favour of the government and dismissed the plaintiff’s application. In the final analysis, the outcome did not turn on the fact that the cancellation decision was made by Cabinet. Instead, it turned on the fact that the cancellation decision was political, rather than statutory, and was therefore not reviewable. As this nuance illustrates, while not all Cabinet decisions are automatically immune from judicial review, political decisions made outside of a statutory context, regardless of whether the decision-maker is Cabinet or presumably another government body making policy decisions, would typically be not reviewable. At the same time, if the decision was not political but rather made under a statutory power, even if was made by Cabinet, it could presumably be reviewable.
As this case illustrates, shielding tendering decisions from commercial lost profit claims is a relatively straightforward drafting exercise requiring the purchasing institution to clearly express its intention not to create a tendering process contract. However, dealing with the judicial reviewability of that same tendering process under administrative law principles is far less straightforward since the jurisdiction of the courts to review government decisions is governed by the nature of the decision and the context within which it is made, rather than simply by the expressed intentions of the purchasing institution. Stated more simply, while public institutions can contract out of tendering-process lost profit claims risks, they cannot contract out of judicial review since the reviewability of their decisions is inherent in the nature of those decisions, rather than based on the terms of their tendering process.
