This article is an excerpt from Government Procurement, which is available for purchase.
In its February 2014 judgment in Inzola Group Ltd. v. Brampton (City), the Ontario Superior Court of Justice dismissed a motion brought by a winning bidder seeking to limit the disclosure of business information it submitted during a bidding process. The case involved an RFP for the construction of public buildings, including new municipal offices and a public library, as part of a downtown renewal project in Brampton, Ontario. The contract was awarded to Dominus Capital Corporation. Inzola Group, an unsuccessful competing bidder, brought an action against Brampton claiming $27.5 million in damages and an additional $1 million in punitive damages. The material submitted by Dominus during that bidding process was sought by Inzola as part of its lawsuit. Dominus brought the motion for a protective order that would limit the public distribution of the information in question:
1 D.K. GRAY J.:– This is a motion by Dominus Capital Corporation, a non-party, for a protective order respecting certain documents that the defendant, the City of Brampton, is required to produce in this action. Dominus claims that the documents are highly confidential, and disclosure will be prejudicial to its interests. Dominus seeks an order prohibiting disclosure of such documents to any third party; an order that they be disclosed only to counsel and experts retained by the parties; and a sealing order for the documents.
2 The action itself arises out of a major project in the City of Brampton involving the renewal of the south west quadrant of the Brampton downtown core. Brampton issued a request for proposals (“RFP”) for the construction of key public buildings, including new municipal offices and a public library. Inzola, who is the plaintiff in this action, and Dominus, delivered submissions in February, 2010 in response to the RFP.
3 Inzola alleges serious misconduct on the part of the City in dealing with the submissions. Fundamentally, Inzola alleges that the fix was in, and that Dominus was targeted to be selected regardless of what proposal Inzola submitted. Inzola alleges political interference in the selection, and alleges that City staff did not follow basic principles of fairness and openness in considering the proposals.
4 Justice Donohue, by order dated November 4, 2013 ordered the City to produce a number of documents, including the documents for which Dominus now seeks a protective order. In paragraph five of her order, Donohue J. directed that Dominus be served with the material relating to the motion before her, and ordered that if Dominus wished to seek a protective order it could do so.
As part of its claim, Inzola challenged Brampton’s requirement that prospective bidders sign a confidentiality agreement during the bidding process, alleging that its bid was ultimately disqualified since it refused to accept the process restrictions imposed by the non-disclosure agreement:
7 As noted, Brampton issued an RFP for the construction of some key public buildings, including new municipal offices and a public library, in connection with the renewal of the south west quadrant of the Brampton downtown core. Three parties, including Inzola and Dominus, delivered submissions in response to the RFP in February 2010. Ultimately, Dominus was the successful bidder, and its proposal was accepted.
8 As part of the requirements in the RFP, Brampton required the execution of a confidentially agreement by each bidder. Inzola refused to sign such a confidentially agreement, and it is alleged by Inzola that that was Brampton’s pretext for declining to give effect to Inzola’s bid. Inzola asserts that the confidentiality agreement itself was improper as it was important that the bidding process be open and transparent. The confidentiality agreement would have permitted Brampton to keep secret all of the discussions and submissions from each bidder, contrary to the public interest.
9 Inzola asserts that the real reason for Inzola’s disqualification was bias on the part of individuals within the City administration. It is alleged that those officials improperly controlled the outcome by, among other things, providing incomplete, false and misleading information and representations to City Council. Thus, accordingly to Inzola, the process was a secretive, biased process, and Dominus’ unduly expensive and non-compliant proposal was pushed through City Council by improper means, while Inzola’s less expensive and better proposal was improperly disqualified.
10 Inzola pleads that it had complained about improper, secretive processes in the past, and for this reason, among others, senior City representatives were biased against Inzola. Inzola pleads that it had been assured that the RFP process in this case would be open and transparent.
11 Inzola pleads that notwithstanding these assurances, the City conducted a process that was far from being open and transparent. It began with the confidentiality agreement, which Inzola characterizes as a secrecy agreement. Inzola pleads that during the RFP process, senior City staff improperly persuaded City Council that the RFP forbade members of Council from seeing the proposals or being involved in the process.
12 Inzola pleads that its proposal was superior to and less expensive than the other proposals, and particularly the proposal submitted by Dominus. Inzola pleads that had the proposals been assessed properly, Inzola’s proposal would have been selected.
13 Inzola pleads that City staff prepared summaries of the proposals that were false and misleading, that wrongly portrayed the Dominus proposal as being comparatively better priced, and as being priced in accordance with prevailing market pricing for comparable buildings. Inzola pleads that there were other aspects of the conduct of City staff that resulted in false and misleading information being given to members of City Council who made the ultimate decision.
14 Inzola pleads that certain members of City staff allowed political considerations to interfere with RFP process. Among other things, it is pleaded that extending RFP timelines precluded a decision on a preferred candidate being made before the fall municipal elections of 2010. It is pleaded that Dominus was the favoured respondent among a select group of Brampton politicians with whom City staff had close relationships. It is pleaded that Inzola was unpopular among that select group of Brampton politicians. It is pleaded that certain members of City staff actively lobbied some councillors in order to influence Council votes so as to promote the secrecy that certain members of staff sought.
In its defence, Brampton denied Inzola’s allegations and maintained that the confidentiality protocol was required to prevent lobbying of elected officials during the bidding process:
15 In its statement of defence, Brampton denies the allegations of impropriety. Brampton pleads that the plaintiff and its principal, John Cutruzzola, are part of a faction who wish to remove from office Susan Fennell, the mayor of Brampton, by tarring her reputation so that she may be replaced with someone more amenable to Inzola’s style of doing business. Brampton pleads that the court process is being used to cast aspersions upon the mayor and the reputation and good character of the City and its staff. Brampton pleads that Neil G. Davis, a prominent lawyer in Brampton, and his firm, Davis Webb LLP, are politically involved and represented Inzola throughout the RFP process.
16 Brampton pleads that throughout its history, Inzola has done business in Brampton by lobbying politicians and influential residents of the City to secure projects and changes in zoning.
17 Brampton pleads that the RFP process in this case was structured to preclude this type of lobbying by anyone. Each submission would be evaluated with a view to securing the best solution and best value-for-money for the City and its citizens. Brampton pleads that lobbying, privilege and corruption were not to be part of the process.
18 Brampton pleads that Inzola recognized that a fair and equitable process, without the ability to use political influence, would significantly impair Inzola’s ability to secure the project. It is pleaded that Inzola and Cutruzzola continually objected to the process because it precluded Inzola from lobbying politicians and using political influence to secure the project. Brampton pleads that the competitive dialogue procurement process, used in this case, was a fair, open, transparent and impartial process removed from the political arena and the lobbying process.
Given the factual issues that had to be addressed in the proceedings, Brampton was ordered to provide Inzola certain documents that had been collected from Dominus during the bidding process. Dominus challenged this disclosure, maintaining that it was assured that the information it provided during the bidding process would be kept confidential. Dominus also asserted that the public disclosure of this information would cause it serious financial harm since its competitive position in the market would be prejudiced by allowing access to its financial information by its competitors. It argued that because it was a privately held company, this information was not otherwise publicly known. While Dominus agreed to allow Inzola to have access to the information, it sought a protective order to restrict access to that information by others or use by Inzola for any purposes other than the legal proceedings.
As the court noted, Dominus relied on the principles from the Supreme Court of Canada’s leading case on protective orders, Sierra Club of Canada v. Canada (Minister of Finance):
71 First, the risk in question must be real and substantial, in that the risk is well-grounded in the evidence and poses a serious threat to the commercial interest in question.
72 Second, he stated that an “important commercial interest” cannot merely be specific to the party requesting the order; the interest must be one which can be expressed in terms of a public interest in confidentiality. If exposure of information would cause a breach of a confidentiality agreement, then the commercial interest can be characterized as the general commercial interest of preserving confidential information. Further, courts must be cautious in determining what constitutes an “important commercial interest.”
73 Finally, the term “reasonably alternative measures” requires the judge to consider not only whether reasonable alternatives to a confidentiality order are available, but also to restrict the order as much as is reasonably possible while preserving the commercial interest in question.
74 In the particular case, Iaobucci J. held that both branches of the test had been satisfied, and a confidentiality order was justified.
75 While Sierra Club involved a protective order as it related to a direct party to the proceedings, the principles discussed in that case are applicable to any case in which a confidentiality or protective order is sought, including one sought by a non-party.
However, in considering the legal test, the court ultimately rejected the request for a protective order, finding that Dominus had not established that the information in question was particularly sensitive. In support of its conclusion, the court noted that the information in question did not appear to be treated as confidential in the industry and that Dominus and Inzola did not appear to be true competitors:
81 First, I am not persuaded that the documents themselves are particularly sensitive. Essentially, they relate to the financial position of Dominus. I do not think members of the public or Dominus’ competitors would be particularly surprised to learn that Dominus earns a profit, or that it charges customers for its services and incurs expenses in earning its profit. Nor do I think it would be particularly damaging for members of the public or competitors to know how much Dominus bills for its services, how much its debts are, how it finances projects, what properties it owns, how much it bids on projects, how much its expenses are, and how large is its profit. While Dominus would prefer to keep this information private, I do not think it is particularly deleterious to Dominus’ interests if this information is made public.
82 This is particularly so, in my view, since the information relating to 2010 and 2011 is now dated, and by the time of trial it will be even more dated.
83 The second reason is that information of this sort does not appear to be overly confidential among competitors in the construction industry. Inzola has sworn that this is so. Furthermore, neither Inzola nor Morguard, the third bidder, has sought any kind of protective order, and, as noted, Inzola does not object to its financial information as it relates to this project being furnished to Dominus.
84 I recognize that in the RFP documents, bidders were assured that this information would not be disclosed without their consent. However, this was expressly subject to disclosure being required by law. Each bidder was thus aware that if litigation ensued, the normal processes of the Court may well require that documents might be disclosed.
85 The third reason is that I am not convinced that Dominus and Inzola are truly competitors. The only project specifically mentioned by Mr. Cordiano on which they both competed is the one at issue in this action. He says “I believe that we will likely compete against Inzola for other public-private partnership (“P3″) mandates as well as for institutional and commercial developments work in the GTA. We may also compete with Inzola to engage sub-trades on future P3 projects.” This is less than compelling.
In considering the application of the Sierra test, the court concluded that Dominus was unable to show how the disclosure of the information in question would result in a serious risk to Dominus and that, on balance, the public interest in the transparency of legal proceedings prevailed over any such potential risk:
87 In the final analysis, I am not persuaded that Dominus has shown that disclosure of the documents to Inzola will result in a serious risk to an important interest of Dominus.
88 Even if Dominus could satisfy the first branch of the Sierra Club test, I am not satisfied that it can satisfy the second.
89 Generally speaking, the open court principle is of fundamental importance. It should only be abrogated when absolutely necessary. In this particular case, I am convinced that it is manifestly important that the open court principle be observed without exception.
90 A cursory examination of the pleadings discloses that there are allegations of serious impropriety on all sides. There are allegations of favouritism and political influence. It is alleged that impropriety included unwarranted secrecy. In my view, the public has a strong interest in ensuring that the conduct of this case is open and transparent, and that there is no suggestion that there will be any secrecy in the way in which the case is conducted. It is important that the public ultimately have access to all of the evidence that may bear on the matters in dispute.
91 In this case, it is alleged that Inzola’s bid was actually superior to the bid submitted by Dominus, and it is alleged that Dominus’ bid was selected for improper reasons. It is important that the public, as well as the Court, be in a position to assess those allegations.
92 While Dominus is technically a stranger to the litigation, it cannot claim to be a stranger to the dispute. It is important that Dominus’ conduct, and the material it filed with the City, be open to scrutiny in the same way as the conduct and material of the direct parties to the litigation will be open to scrutiny.
93 In my view, in this particular case the public interest in open and accessible court proceedings must prevail over any potentially salutary effects of a confidentiality order.
The court therefore dismissed the motion, thereby compelling the disclosure of the requested information to Inzola. To balance that disclosure, the court also ordered that Brampton disclose to Dominus the equivalent documents that Inzola had submitted during that contested bidding process. As this case illustrates, the confidentiality protocols that are established during a competitive bidding process will not necessarily shield information from the disclosure duties that arise in post-bid legal disputes. While pre-award confidentiality is often required to protect the integrity of the bidding process, public interest considerations tend to favour transparency in the post-award phase of that process, particularly when legal challenges are launched against the contract award decision.
