This article is an excerpt from Government Procurement, which is available for purchase.
In its October 2015 decision in Bank of Montreal v. Renuka Properties Inc., the British Columbia Supreme Court ordered a retendering process after rejecting the bank’s application for the approval of a receivership sale. While the court found that the initial bidding process was adequately publicized, it also found that the bidding process failed to attract sufficiently high bids given the discrepancy between the highest timely bid and a higher late bid:
38 The disparity between the current high bid and the amount one of the interested parties is apparently willing to pay is of great concern. The difference is $474,000, or 46 percent higher using the face amount of the high bid, or $402,000 or 37 percent higher if the value of the high bid is to include the extra costs that have been borne by Royal Med.
39 This is a substantial difference, and it tends to show that the sale process has failed to garner full market value for the assets. It is difficult to discern an identifiable aspect of the sale process that would account for this disparity, but two of the prospective bidders identified both the short sale period and the perceived unfairness of the high bidder having assisted the receiver with the sale and, as general manager for the debtor companies, having an advantage over outside bidders.
Citing concerns over the fairness and integrity of the initial bidding process, the court ordered a new bidding process to allow existing bidders and new bidders the opportunity to submit new bids. As this case illustrates, the implied duty to award to the best bid is subject to exceptions if the best bid is considered insufficiently competitive and gives rise to questions about the fairness of the bidding process.
