This article is an extract from the 5th edition of Government Procurement.
In its March 2017 decision in Kaymar Rehabilitation Inc. v. Champlain Community Care Access Centre, the Ontario Superior Court of Justice rejected a lost profit claim by an unsuccessful incumbent supplier. After bidding on a therapy services Request for Proposals (RFP), the losing bidder sued the community care centre, alleging unfairness in consensus scoring and bias on the evaluation team. While the Court recognized the duty to avoid conflict of interest, bias, and unfair advantage, it dismissed the claim since the plaintiff was unable to prove its case. However, in a subsequent June 2017 decision, the Court awarded the successful defendant only $1.7 million of the $2.8 million incurred in legal costs.
That decision was appealed by the losing bidder, but in its January 2018 decision, the Court of Appeal for Ontario upheld that court ruling; however, like the trial court, the Court of Appeal failed to fully compensate the successful defendant for all of its legal costs and only awarded a partial indemnity for those costs:
Determining a fair and reasonable amount for the costs of an action following a trial requires a holistic consideration of the factors set out in rule 57.01(1), together with the history of the action. Kaymar’s action spanned almost a decade. The trial lasted 34 days. It was hard-fought litigation, with Kaymar challenging the fairness of numerous aspects of the RFP process. In its Amended Statement of Claim, Kaymar levelled a very serious allegation that Champlain had “rigged” the process for evaluation of responses to the 2003 RFP to ensure Kaymar would be wholly unsuccessful. The trial judge rejected all of Kaymar’s allegations that the RFP process was unfair.
Given the length of the proceeding, the serious nature of the allegations, the complexity of the issues, the length of the trial, and Champlain’s unqualified success at trial, we conclude that a fair and reasonable award of partial indemnity costs of the action to Champlain is $1,675,000.00, inclusive of disbursements and all applicable taxes.
As this case illustrates, even after successfully defending a decade-long legal dispute, the public institution was still not compensated for over $1 million in legal expenses, let alone the other sunk costs such as lost staff time, incurred defending against the protracted lawsuit. The fact that this is what winning looks like in a Contract A process contract defence should give public institutions pause before attorning to that bidding system when other lower-risk options remain readily available.
By contrast, in its October 2017 decision in Adlair Aviation (1983) Ltd. v. Nunavut, the Nunavut Court of Justice summarily dismissed a lawsuit against the government after finding that the challenged air ambulance RFP did not create the Contract A process contract. As the Court noted, the RFP clearly stated that the government was not seeking bids that would give rise to a tendering contract and was instead seeking proposals. The Court also noted that the RFP terms were clear that “no equitable or legal rights accrued to a proponent until a contract was signed” and that any award would be subject to negotiations. In dismissing the case, the Court also ordered solicitor-client costs against the plaintiff and its lawyer. This result illustrates how avoiding a Contract A bidding process altogether is a far better risk mitigation strategy when compared to defending against a lost profit Contract A claim, which, even if successful, can result in significant unrecoverable costs.
