ONTARIO SUPERIOR COURT OF JUSTICE

Transcription

1 Court File No. 842/12 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: ONTARIO LIMITED o/a Highland Bus Services, BARR BUS LINES LIMITED, CLARK BUS & MARINA LIMITED, HEALEY TRANSPORTATION LIMITED, PREMIER BUS LINES INC., VALLEY BUS LINES LIMITED, and WHITTEKER BUS LINES LIMITED Plaintiffs and STUDENT TRANSPORTATION OF EASTERN ONTARIO Defendant MOVING PARTIES' FACTUM November 22, 2012 LAX O'SULLIVAN SCOTT LISUS LLP Counsel Suite 2750, 145 King Street West Toronto, Ontario M5H 1J8 Jonathan C. Lisus LSUC#: 32952H Tel: (416) Daniel A. Schwartz LSUC#: 52381V Tel: (416) Virginia Greer LSUC#: 58587U Tel: (416) Matthew Law LSUC#: 59856A Tel: (416) Fax: (416) Lawyers for the Plaintiffs

2 TO: KEEL COTTRELLE LLP 36 Toronto Street, Suite 920 Toronto, ON M5C 2C5 Robert G. Keel LSUC#: 16875A Patricia Harper LSUC#: 56795D Jasmeet Kala LSUC#: 60988K Tel: (416) Fax: (416) Lawyers for the Defendant

3 TABLE OF CONTENTS PART I INTRODUCTION...1 PART II THE FACTS...3 The Plaintiffs...3 STEO...4 Unique Procurement for a Unique Industry...4 Existing Methods of Procurement...5 Changes to Procurement Process: RFPs Not Required...6 Independent School Bus Operators Association...6 Destruction of Small Business by Unfair RFP: A Matter of Public Interest...6 ISBOA Engages Honourable Coulter Osborne to Review RFP Process...7 Moratorium and Task Force...7 Task Force Mandate...8 Task Force Identifies Serious Problems with RFPs...9 Mr. Osborne Records Consensus on Key Issues...10 STEO Fails to Follow Task Force Recommendations or Ministry Instructions...11 Refusal to Consult Operators...12 Representations Made by STEO...13 RFP Released With Serious Deficiencies...14 RFP Designed to Remove Smaller Operators...16 STEO Ignores Ministry Directive and Operators Request for Assistance...17 Tri-Board Injunction...18 Expert Evidence...19 Student Transportation is a Unique Industry...19 Risk from RFPs Avoidable...20 Alternatives Available But Not Considered...20 The RFP is Materially Deficient and Unfair...21 Evaluation Criteria Not Clear or Transparent...21 Complexity and Changes Require an Extension...21 Route Assignment is Unfair and Unreasonable...22 Monopoly Concerns...23 The Process Since the Release of the RFP...23 Unfair RFP Forcing Operators out of Market...23 PART III - STATEMENT OF ISSUES, LAW & AUTHORITIES...24 I. Interlocutory Injunction...24 Five Serious Issues to Be Tried...25 STEO Breached its Duty of Care...26 STEO Made Negligent Misrepresentations...29 STEO Breached its Duty of Good Faith and Fairness...30

4 STEO Breached its Duties of Natural Justice and Procedural Fairness...33 STEO Breached its Duty of Confidence...36 The Plaintiffs will Suffer Irreparable Harm...39 The Balance of Convenience Favors Granting an Injunction...40 II. Motion to Strike...40 The Test on a Motion to Strike Cannot Be Met in this Case...41 The Proper Interpretation of the BPSAA...43 STEO Not Entitled to Immunity...44 Scope of Immunity Limited...46 Legislative Intent...48 Structure of the BPSAA...49 Principles of Statutory Interpretation...51 Conclusion on Scope of Immunity...52 Judicial Review Not Ousted...53 Procedural Argument...54 PART IV - ORDER REQUESTED...55

5 Court File No. 842/12 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: ONTARIO LIMITED o/a Highland Bus Services, BARR BUS LINES LIMITED, CLARK BUS & MARINA LIMITED, HEALEY TRANSPORTATION LIMITED, PREMIER BUS LINES INC., VALLEY BUS LINES LIMITED, and WHITTEKER BUS LINES LIMITED Plaintiffs and STUDENT TRANSPORTATION OF EASTERN ONTARIO Defendant MOVING PARTIES' FACTUM PART I - INTRODUCTION 1. This is a motion for an interlocutory injunction restraining the closing of an RFP issued by the Defendant, Student Transportation of Eastern Ontario ( STEO ), for the procurement of student transportation services (the RFP ). The RFP is to close on November 26, The Plaintiffs are independent school bus operators who have served Lanark, Leeds, Grenville, Stormont and Dundas counties for decades. The evidence is un-contradicted that the RFP is fundamentally flawed. It is biased against small and medium sized local operators and contravenes the consensus recommendations of the Honourable Coulter Osborne s Task Force Report on Student Transportation. It violates the requirements of fairness, non-discrimination and transparency established by the Broader Public Sector Accountability Act, the Broader Public

6 2 Sector Procurement Directive and the express requirements of the Ministry of Education (the Ministry ) for fairness in RFP procurement. 3. The Plaintiffs have done everything they can to avoid asking this Honourable Court to exercise its inherent equitable jurisdiction to intervene in a procurement process that is manifestly unfair. They have incurred great expense in identifying, with specificity and supported by expert evidence, the unfairness of the RFP. They have communicated these concerns to STEO in writing and asked it to suspend the RFP so that they can be addressed. STEO has ignored their requests. 4. The requirements for an injunction in the RJR-MacDonald test are easily met. The evidence of a breach of common law and statutory duties of fairness is unchallenged. The Plaintiffs have provided cost effective and excellent service to STEO and its school board members for decades and are under contract to do so until the end of STEO is not required to impose an RFP. There is no prejudice or inconvenience to STEO or any other party to the RFP if the RFP is extended to permit the evidence of the Plaintiffs to be properly considered at an expedited trial. On the other hand, if the RFP closes, businesses that have operated for decades and which have employed dozens of local employees will be lost. 5. In the face of this evidence, the only response of STEO is that its conduct is immune from judicial scrutiny by virtue of section 22 of the Broader Public Sector Accountability Act ( BPSAA ). STEO returns a Rule 21 motion asserting that this Court has no jurisdiction to ensure fairness in public procurement. This, it is respectfully submitted, is an astonishing proposition. 6. Section 22 of the BPSAA only purports to provide immunity in so far as acts taken by STEO and other organisations are in accordance with the BPSAA and the Broader Public Sector Procurement Directive ( BPS-Directive ). STEO has violated the mandatory requirements of the

7 3 statute and the BPS-Directive as they relate to fairness, openness, accountability, non-discrimination and adherence to the common law of procurement processes. Section 22 of the BPSAA is therefore not available to shield STEO from liability for its actions. Moreover, section 23 of the Act expressly provides that actions based on common law duties owed during a procurement process, the very duties at issue in this case, are not barred. 7. The Plaintiffs submit that STEO s Rule 21 motion is manifestly unsupported by the jurisprudence. The Court should deal with this motion on Friday November 23, 2012, and thereafter grant an interlocutory injunction and set an expedited schedule for the trial of this action. 8. The Plaintiffs will commit to have this matter tried before a Justice of this Court on an expedited schedule. This will allow the adjudication of their rights, provide guidance to all stakeholders and prevent the loss of businesses which have served this community for generations and the attendant economic consequences. In these circumstances, it is just and convenient that the Court restrain the closing of the RFP and permit the adjudication of these issues. PART II THE FACTS The Plaintiffs 9. The Plaintiffs provide student transportation services for students attending schools in the Upper Canada District School Board ( UCDSB ) and the Catholic District School Board of Eastern Ontario ( CDSBEO ) (collectively the School Boards ) They are family owned, multi-generational, small or medium sized companies and sole proprietorships. They service urban and rural school bus routes safely, punctually, and efficiently. 1 Affidavit of Frank Healey ( Healey Affidavit ), Plaintiffs Motion Record ("PMR"), Tab 3, p. 1, para. 2.

8 4 Their facilities, drivers, mechanics, support staff, and suppliers live and work in the communities they serve. 2 STEO 11. STEO was established by the School Boards as an unincorporated association in STEO was incorporated on October 25, 2011 in response to a directive by the Ministry that formal consortia for procurement of student transportation services be established. When it was incorporated, STEO replaced the two School Boards as the sole party with whom operators would contract STEO s membership comprises the School Boards. STEO s General Manager and Chief Administrative Officer is Ron Cotnam. 5 Unique Procurement for a Unique Industry 13. School boards in Ontario annually procure services and equipment from a variety of different vendors for a variety of different supplies and services. In most cases, school boards are not these vendors only customers and they can supply their goods and services to a wide range of other school boards and other customers, public and private, across the province and beyond The procurement of student transportation contracts is a unique exception to this general rule. The Plaintiffs have no customers for their services other than STEO and their businesses are not mobile. They must be completely available to STEO at all times. Their busses, equipment and facilities must be located in the same geographic area as the students they serve. Their equipment 2 Healey Affidavit, PMR, Tab 3, p. 6, paras. 15 and References to STEO should be taken to include references to the School Boards prior to STEO s incorporation, unless noted otherwise. 4 Healey Affidavit, PMR, Tab 3, p. 3, para Healey Affidavit, PMR, Tab 3, p. 10, para Healey Affidavit, PMR, Tab 3, p. 4, para. 11.

9 5 cannot be used for other services. Their bus routes must be in the vicinity of their drivers homes or their yards. They are captive vendors of STEO. 7 Existing Methods of Procurement 15. In the past, operators servicing the School Boards collectively negotiated contracts with them and later with STEO (the Contracts ) The negotiations established how much profit STEO s operators could earn each year and set a schedule of remuneration for expenses including wages paid to drivers, fuel and equipment. They also regulated when operators had to purchase new busses and other equipment, and over how many years they could expect to recoup such investments During the negotiations, STEO was provided with operators confidential business information which it used in order to structure the most favourable rates for the School Boards The Contracts were always renewed. In many years, changes were implemented and services provided without new formal contracts being drawn up. Although the language of the Contracts describes them as annual agreements, there were periods of time when the operators continued to provide services without agreements in place. The most recent contract is still in force and continues until the end of the 2013 school year. 19. The Contracts and STEO s existing procurement process have resulted in an efficient use of taxpayers money. Operators returns have consistently lagged the rate of inflation Healey Affidavit, PMR, Tab 3, p. 5, paras. 13 and Healey Affidavit, PMR, Tab 3, p. 10, para Healey Affidavit, PMR, Tab 3, p. 10, para Healey Affidavit, PMR, Tab 3, pp , paras Healey Affidavit, PMR, Tab 3, p. 15, para. 56.

10 6 Changes to Procurement Process: RFPs Not Required 20. In late 2008, the Ministry directed that school boards and transportation consortia begin considering new processes for the procurement of student transportation contracts. Although an RFP was identified as one possible approach, the Ministry made it clear that an RFP may not be appropriate when an analysis of local market conditions reveals that it is not feasible, not cost effective, or when the value achieved is below an established policy threshold Between January 2009 and March 2011 a variety of pilot RFPs were conducted throughout the province. There were severe problems with these pilot RFPs and numerous small and medium sized operators lost their businesses. 13 Independent School Bus Operators Association 22. The Independent School Bus Operators Association ( ISBOA ) was formed in 2008 in eastern Ontario by operators, including many of the Plaintiffs, because of concern about the destruction of small and medium sized operators caused by the pilot RFPs and about the potential domination of the industry by large bus conglomerates ISBOA and its members support competitive procurement in the school bus industry. ISBOA has demonstrated by way of expert evidence that student transportation contracts currently are and have always been procured on a competitive and cost-efficient basis. 15 Destruction of Small Business by Unfair RFP: A Matter of Public Interest 24. The unfair manner in which STEO and other consortia are imposing RFPs in breach of government directives and duties of fairness is a matter of significant concern in rural and smaller 12 Healey Affidavit, PMR, Tab 3, p. 16, para Healey Affidavit, PMR, Tab 3, p. 17, paras Healey Affidavit, PMR, Tab 3, p. 16, para Affidavit of Karen Cameron ( Cameron Affidavit ), PMR, Tab 4, p. 3, para. 8.

11 7 municipalities. Support for the school bus operators is widespread throughout their communities. Members of Provincial Parliament, municipal councils and mayors, as well as other stakeholders, have contacted the government expressing their serious concern. Several MPPs have addressed the Ontario Legislature during Question Period. 16 ISBOA Engages Honourable Coulter Osborne to Review RFP Process 25. Throughout the winter and spring of 2011, ISBOA reached out to various stakeholders in an effort to educate them about the flawed RFP process and its impact on operators ISBOA wanted all stakeholders operators, government, school boards and consortia to have the benefit of a review of the procurement process so that all stakeholders could understand whether the RFP process that was being imposed was in fact fair, competitive and transparent ISBOA retained the Honourable Coulter Osborne, former Associate Chief Justice of Ontario and former Integrity Commissioner for the Province of Ontario, to review the RFP process and the fairness of the manner in which these RFPs were being imposed. ISBOA met with Mr. Osborne through the spring of 2011 and provided him with background information to the procurement issue. 19 Moratorium and Task Force 28. In response to the significant harm caused by RFPs and the rallies that operators were holding across the province, on June 23, 2011, the Ministry: Cameron Affidavit, PMR, Tab 4, p. 7, paras. 28 and Cameron Affidavit, PMR, Tab 4, p. 10, para. 31; see also Healey Affidavit, PMR; Tab 3, p. 19 at para Cameron Affidavit, PMR, Tab 4, p. 10, para Cameron Affidavit, PMR, Tab 4, p. 10, para Cameron Affidavit, PMR, Tab 4, p. 10, para. 34.

12 8 (a) (b) imposed a further six month moratorium on compliance with the BPS-Directive regarding the procurement of student transportation contracts; and committed that a task force would be convened to report on the serious problems that had occurred with RFPs to date, paying specific attention to their fairness, transparency, accountability and whether taxpayers receive value for money (the Task Force ). 29. Despite the Ministry s commitment, the Minister took no action to convene the Task Force. ISBOA continued its demonstrations. 30. The ISBOA reported to the industry that Mr. Osborne was going to issue an interim report in September 2011 describing his preliminary findings on the fairness of the process. In response, the Ministry approached ISBOA and asked if it would release Mr. Osborne from his engagement so that he could act as chair of the Task Force. The Ministry also asked operators to stop holding rallies during the election. ISBOA agreed to release Mr. Osborne so that he could chair the Task Force on the basis that the government and school boards would participate in and abide by the recommendations of the Task Force. 21 Task Force Mandate 31. The mandate of the Task Force was to review the serious problems that had occurred with RFPs to date and to review RFPs as a competitive procurement process paying specific attention to their fairness, transparency, accountability and whether taxpayers receive value for money The Terms of Reference state that the Task Force was created in response to operator and community concerns with the move to competitive procurement and ensure that this process 21 Cameron Affidavit, PMR, Tab 4, p. 11, paras Cameron Affidavit, PMR, Tab 4, p. 12, para. 40.

13 9 remains fair, open, transparent, accountable and provides value for money The task force will allow time to consider the issues that have been raised as a result of the pilot processes The Task Force was formed expressly to review the competitive processes used to procure student home to school transportation, paying specific attention to their openness, fairness, accountability, and value for money and report to the Minister of Education in December The Task Force is the first and only in-depth study of the fairness and appropriateness of RFPs for the student transportation industry. The Task Force had representatives from school boards, the Ministry, ISBOA, the Ontario School Bus Association and transportation consortia. It also had its own procurement advisor. Task Force Identifies Serious Problems with RFPs 35. Mr. Osborne released the Task Force Report to the Ministry and Task Force members on January 25, The Task Force concluded that: 25 there are serious problems with imposing RFPs as a one size fits all approach; as a result of these problems there have been casualties caused by the RFP process, especially among small rural operators; the current approach runs a risk of creating monopolies which will cause costs of student transportation to inevitably rise (the role of monopolies was previously identified by the Auditor General) contrary to the public interests; value for money is an important, but not the only consideration in student transportation procurement, and RFPs have not established that they can provide this to taxpayers; and 23 Cameron Affidavit, PMR, Tab 4, p. 12, para Cameron Affidavit, PMR, Tab 4, p. 12, para Healey Affidavit, PMR, Tab 3, p. 20, paras ; see also Cameron Affidavit, PMR, Tab 4 at p. 13 paras

14 10 additional study of the industry and alternatives are required to limit or eliminate unfairness, particularly as related to mainly smaller, rural service providers such as the Plaintiffs. Mr. Osborne recommended: the moratorium on RFPs be extended beyond the current deadline of September 2013; an independent, third party expert be retained by the Ministry to review the RFP process and provide specific advice to the Ministry, school boards and transportation consortia, to ensure that the process is fair, transparent, accountable and that taxpayers receive value for money; and the review should be independent and comprehensive. Mr. Osborne Records Consensus on Key Issues 36. Mr. Osborne also reported that although the Task Force members disagreed on many points, there was consensus on a number of very important issues, including: 26 the need to consult with operators before RFPs or new procurement methods are imposed; RFPs must be clearly written documents; there must be clarity in the scope of work, how proponents proposals will be evaluated, and what a proponent is required to provide in response to the RFP if the proponent chooses to submit a proposal; in regards to route bundling, there must be flexibility, pre-rfp consultation, and clear identification of routes in bundles; and where amendments are complex or result in fundamental changes, the schedule should be extended. 37. None of Mr. Osborne s recommendations has been followed by STEO. All of the consensus points described above have been breached by this RFP. 26 Healey Affidavit, PMR, Tab 3, p. 22, para. 82.

15 11 STEO Fails to Follow Task Force Recommendations or Ministry Instructions 38. On March 29, 2012, the same day it released the Task Force Report, the Ministry released a memo directing school boards to move forward with procurement of student transportation. Notably the Ministry emphasized that the decision of which procurement method is most appropriate is one for school boards to make themselves, in the context of their local environment (the B8 Memo ) The Ministry specifically directed school boards to adopt the following best practices: 28 (a) (b) (c) (d) (e) (f) garner a comprehensive understanding of local market conditions and an awareness of risks and opportunities before selecting a procurement process; the selection of the most appropriate procurement option must be an informed decision; the evaluation criteria must be clear and not discriminate or lead to preferential treatment; clear route information and appropriate route bundling must be established; advanced notice must be provided to operators of procurement activities; and the procurement process chosen should be well-managed and ensure that operators have sufficient time to learn and participate. 40. STEO has breached all but one (advance notice) of these directives. STEO made no effort to understand local market conditions. It made no assessment of risks and opportunities for operators or the consortium before imposing an RFP. STEO did not evaluate any other procurement method. STEO s evaluation criteria are confusing and vague as is the information concerning route bundling. 27 Healey Affidavit, PMR, Tab 3, p. 22, para Cameron Affidavit, PMR, Tab 4, p. 19, para. 65; see also: 2012:B8 Memo and attachment; Affidavit of Denis Chamberland ( Chamberland Affidavit ), Plaintiffs Supplementary Motion Record ( PSMR ), Tab 1-K, pp

16 12 Refusal to Consult Operators 41. Since the release of the Task Force Report in January, the Plaintiffs and ISBOA have continually asked STEO to consider alternative procurement methods that comply with industry best practices, the Ministry s instructions and the Broader Public Sector Directive (the BPS-Directive ). 42. The Plaintiffs have provided detailed information on such methods, including information and advice from eminent procurement experts. 43. STEO has refused to consider this information, refused to meet, and refused to discuss any changes to the procurement process The procurement process that STEO has followed in the past is competitive and transparent and has delivered outstanding value for money In early May 2012, STEO announced to operators that it had decided to use an RFP based approach and that it had hired PPI Consulting Inc. ( PPI ) as a consultant to design the RFP. PPI are the same consultants that the Ministry retained to develop the template RFP documents and to manage the failed pilot RFPs (see paragraph 21 above). 31 They are heavily invested in RFPs because they are in the business of assisting transportation consortia and school boards to use them On May 30, 2012, STEO and PPI provided an information session to operators on STEO s upcoming RFP; it provided little information and failed to address many of the operators 29 Healey Affidavit, PMR, Tab 3, p. 24 paras Ibid. 31 Healey Affidavit, PMR, Tab 3, p. 24, para Healey Affidavit, PMR, Tab 3, p. 18, para. 67.

17 13 questions. Instead, PPI recommended that operators take classes, hire professional writers, and seek legal advice in order to participate in the RFP Because STEO was refusing to engage with operators, ISBOA contacted P1 Consulting Inc., the company retained by STEO to act as Fairness Commissioner for the RFP. The Fairness Commissioner also refused to engage with operators, stating instead that its responsibility was limited to ensuring that the requirements set out in the procurement documents are consistent with the regulatory framework, that they are adhered to, including addressing matters of non-compliance, and that they are applied in a fair, open and transparent manner. ISBOA wrote again to the Fairness Commissioner to address these points, but never received a response. 34 Representations Made by STEO 48. STEO represented to the Plaintiffs that their investments were secure, that any new procurement process implemented would treat them fairly and equitably, and that their interests would be considered when changes were made. 49. The Plaintiffs reasonably relied on these representations. They continued to make investments in their businesses and to commit their resources to servicing STEO. This reliance was encouraged by STEO, which needed a secure, reliable source of student transportation. These representations were made negligently and/or recklessly as to their truth. 33 Healey Affidavit, PMR, Tab 3, pp. 26-2,7 paras Cameron Affidavit, PMR, Tab 4, p. 23, para. 77.

18 14 RFP Released With Serious Deficiencies 50. STEO released the RFP on September 24, Despite the fact that contracts do not need to be in place until September 2013, the RFP closes on November 26, The RFP is complex and difficult to understand. It is unclear to the Plaintiffs what responses will achieve favorable results or which elements or evaluation criteria are more important than others There are numerous areas of the RFP that are fundamentally unfair to small and medium sized operators, including: 37 (a) (b) (c) unfair allocation of bus routes large operators and those without any current operations in STEO have an unfair advantage; there is an unfair cost shifting small and medium sized operators are unable to fairly compete with large multinationals who can afford to lose money for five years while the smaller operators go out of business; vehicle specifications in the RFP are not compatible with the vehicles currently owned by operators notwithstanding STEO s awareness of the specifications of operators fleets (see paragraph 17 above), the RFP was drafted such that most smal1 and medium sized operators will have to dispose of existing equipment and purchase new equipment; (d) the refusal to guarantee the accuracy of any information contained within the RFP information could, after routes are awarded, be subject to change; and (e) the right not to select any proposal STEO can choose not to accept any or all operator proposals or any portion thereof, for any or no reason. 53. Furthermore, the RFP s evaluation methodology for the allocation of points is not transparent and understandable and is subject to the unguided discretion of the evaluation 35 Healey Affidavit, PMR, Tab 3, p. 29, para Healey Affidavit, PMR, Tab 3, p. 32, para Healey Affidavit, PMR, Tab 3, p. 32, paras

19 15 committee. It is unclear what responses will achieve favorable results or what elements or evaluation criteria are more important than others There have also been numerous significant amendments to the RFP, which have only added to the confusion and disadvantage faced by small and medium sized operators who do not have the resources to devote significant time and expense to the RFP process On October 2, 2012, STEO held an informational meeting about the RFP. In the morning, Jack Senechal of Dijon Group, a consultancy, gave a PowerPoint presentation to operators on how to respond to the RFP. Because Mr. Senechal s presentation was arranged by the Ontario School Bus Association and not advertised by STEO, many operators were unaware of it and they did not attend During his presentation, Mr. Senechal voiced a number of criticisms of the RFP including that: 41 (a) (b) (c) it is a very messy RFP ; the evaluation criteria and scoring are flawed; and investments in safety are penalized because a proponent with a low bid price could fail in areas of student safety and maintenance but still be awarded routes. 57. After Mr. Senechal s presentation finished, Bob Barker of PPI and Mr. Cotnam of STEO held a short informational meeting. Operators alerted Mr. Barker to a number of apparent errors in 38 Healey Affidavit, PMR, Tab 3, p. 32, para Healey Affidavit, PMR, Tab 3, p. 36, para Healey Affidavit, PMR, Tab 3, p. 29, para Healey Affidavit, PMR, Tab 3, p. 29, para. 114.

20 16 the RFP documents. Mr. Barker agreed that errors had been made. He was also unable to answer basic questions about the RFP. 42 RFP Designed to Remove Smaller Operators 58. The RFP is designed to remove, and has already removed, smaller operators from the market The website ( Biddingo ) is the only place where operators are permitted to obtain the RFP documents and it records who has done so. At least ten current small operators in STEO have not picked up the RFP documents. If operators do not pick up the RFP they cannot participate in it. Accordingly, those operators are effectively out of the student transportation business Biddingo also identifies a number of large, national and international companies who have picked up the RFP documents: First Student Canada, Landmark Student Transportation Inc., Pacific Western Transportation Ltd., Sharp Bus lines, Stock Transportation, Student Transportation Canada, Switzer-Carty Transportation Services and Tokmakjian Inc. These companies (with the exception of Stock and First Student) currently operate no routes for STEO STEO intends to use the RFP to take away market share from small and medium sized operators. 42 Healey Affidavit, PMR, Tab 3, p. 30, paras Healey Affidavit, PMR, Tab 3, p. 30, para Healey Affidavit, PMR, Tab 3, pp , paras Healey Affidavit, PMR, Tab 3, p. 31, para. 120.

21 17 STEO Ignores Ministry Directive and Operators Request for Assistance 62. On November 2, 2012, Plaintiffs counsel wrote to Mr. Cotnam identifying serious problems with the RFP and the process leading to STEO choosing an RFP. STEO was asked to suspend the RFP to allow for meaningful consultation with operators on a BPS-Directive compliant procurement method recognizing the unique nature of the student transportation industry On November 8, 2012, STEO s counsel responded refusing to suspend the RFP. Two letters were included with the response. The first letter is from PPI ostensibly defending the RFP and failing to substantively address the deficiencies identified. PPI states that: 47 (a) (b) (c) (d) (e) it is a niche consulting organization suggesting that it has impressive credentials and self-qualifying itself as a prominent expert in RFPs; it was retained by the Ministry to develop the template RFP documents used by the Ministry to run the failed pilot RFPs which caused many casualties amongst small and medium sized operators; the contracts and processes used for the STEO RFP are substantially the same as were used in the failed pilot RFPs; it is involved with approximately 20 other engagements with respect to the procurement of student transportation in Ontario; and the value of a potential contract to operators is high and uses actual numbers, undermining a process by which pricing is supposed to be confidential. 64. The second letter is from P1 Consulting Inc., the Fairness Commissioner, who also provides a defence of the RFP. Such a defence is not within the proper role of a Fairness Commissioner. 46 Healey Affidavit, PMR, Tab 3, p. 37, para Cameron Affidavit, PMR, Tab 4, p. 27, para. 90.

22 Thereafter, STEO took the unusual step of posting its responses and the responses of PPI and the Fairness Commissioner on Biddingo. This was designed to intimidate operators and to convey to them that there is no point in challenging the RFP and that their concerns would not be considered On November 9, 2012, Plaintiffs counsel wrote to STEO s counsel demanding that these letters be removed from Biddingo. The letters remain on the website Instead, on November 14, 2012, STEO s counsel wrote to Plaintiffs counsel stating that the letters from PPI and P1 had been posted on Biddingo in the spirit of continued openness and transparency On November 15, 2012, Plaintiffs counsel wrote to STEO s counsel requesting that, in the spirit of openness and transparency, STEO post on Biddingo the instructions it had given to the Fairness Commissioner in respect of its letter, and describe the results of any investigations conducted by the Fairness Commissioner into the concerns raised in Plaintiffs counsel s November 2, 2012 letter. 51 No response has been provided and nothing further has been posted on Biddingo. 52 Tri-Board Injunction 69. On October 12, 2012, fifteen operators in Belleville commenced an action against the transportation consortium Tri-Board Student Transportation Services ( Tri-Board ). A motion for an interlocutory injunction was sought restraining the closing of Tri-Board s RFP until a trial 48 Healey Affidavit, PMR, Tab 3, p. 37, para Healey Affidavit, PMR, Tab 3, p. 37, para Healey Affidavit, PMR, Tab 3, p. 37, para Healey Affidavit, PMR, Tab 3, p. 38, para Healey Affidavit, PMR, Tab 3, p. 38, para. 146.

23 19 could be held on the merits of the operators claims. 53 Tri-Board returned with a motion to strike based on the BPSAA on the same basis as STEO seeks in this proceeding. The two motions were returnable on October 18, Justice Scott advised that both motions would be heard together and directed the parties to agree on a schedule. 54 Instead of setting a schedule, Tri-Board advised the operators that it was willing to cancel the RFP, to negotiate new contracts for the 2013/14 school year, to allow the action to proceed, and to have its motion to strike adjourned sine die. The operators agreed and Justice Scott issued a consent order. On November 21, 2012, Tri-Board revived its motion to strike. It is now returnable February 21, Expert Evidence 70. The Plaintiffs expert, Denis Chamberland, was retained to provide this Court with an opinion on the RFP process undertaken by the Defendant. Mr. Chamberland was also asked to address the specific RFP issued by STEO. As set out in his affidavit, he is a commercial lawyer with extensive experience in public procurement matters in Canada. He was retained by the Ministry of Finance to advise on many aspects of the Supply Chain Guideline, the predecessor to the current BPS-Directive. Mr. Chamberland also made submissions to the Task Force. An overview of his report follows. 1. Student Transportation is a Unique Industry 71. Mr. Chamberland notes in his report that one of the most important distinguishing features of the student transportation industry in Ontario is that the majority of operators have only one customer, the relevant school board. This results in a market in which operators are unable, for the 53 Cameron Affidavit, PMR, Tab 4, p. 24, para Cameron Affidavit, PMR, Tab 4, p. 25, para Cameron Affidavit, PMR, Tab 4, p. 26, para. 85.

24 20 most part, to transfer their services between regions, and in which they are therefore unable to survive if they lose their route This single-customer model also leaves open an opportunity for a large and well-capitalized investor to drive down prices for services, effectively eliminate all competition, and then use its new-found monopoly position to raise prices. This is a very real risk that may have already materialised in the Sudbury region Risk from RFPs Avoidable 73. Mr. Chamberland also considers that the risk to operators from an RFP is entirely avoidable. The Government, he notes, has repeatedly emphasised that individual school boards are free to develop and employ their own approaches to the BPS-Directive. Moreover, the system widely in place prior to the RFPs is itself compliant with the BPS-Directive. There is simply no need for school boards and their transportation consortia to resort to an RFP Alternatives Available But Not Considered 74. Mr. Chamberland s uncontradicted opinion is that RFPs are not the only way to conduct a competitive procurement under the BPS Directive. Alternatives include: (a) (b) (c) (d) multiple award RFPs; supply arrangements; a benchmarking model; and a subcontractor model. 56 Chamberland Affidavit, PSMR, Tab 1-B, p Chamberland Affidavit, PSMR, Tab 1-B, p Chamberland Affidavit, PSMR, Tab 1-B, pp. 2-3.

25 These different methods are described more fully in his report. 59 There is no evidence before this Court that any of these alternatives were considered by STEO. 4. The RFP is Materially Deficient and Unfair 76. Mr. Chamberland examined the RFP and opined that it was materially deficient in several respects. i) Evaluation Criteria Not Clear or Transparent 77. Mr. Chamberland found that the evaluation criteria in the RFP give rise to significant fairness concerns because they are not transparent They fail to give guidance on what specifically is considered of value within each element, and to make clear the relative allocation of points within each category. This is directly at odds with the Task Force recommendations, whose members unanimously agreed that RFPs should: 61 (a) (b) (c) (d) be clearly written; provide clarity concerning the scope of work and the evaluation criteria; be both clear and flexible in relation to route bundling; and provide for an extension of the deadline where amendments are complex or result in fundamental changes. ii) Complexity and Changes Require an Extension 79. The multiple and significant changes to the business model suggest, according to Mr. Chamberland, that the RFP was issued prematurely, and this has resulted in significant confusion. 59 Chamberland Affidavit, PSMR, Tab, 1, pp Chamberland Affidavit, PSMR, Tab 1-C, p Chamberland Affidavit, PSMR, Tab 1-C, p. 2.

26 It is normal, he opines, in these situations for the RFP deadline to be extended in order to allow potential proponents to deal with the changes. 81. Yet STEO has refused to do so. Not only is this not standard practice, it is contrary to the recommendations of the Task Force that deadlines should be extended where there are material changes to the RFP According to Mr. Chamberland the RFP is extraordinarily complex and therefore does not comply with the Task Force s emphasis on clearly written documents that make it easy to understand what a potential proponent is obliged to do if he or she is to be successful Mr. Chamberland concludes that as a result of these deficiencies, STEO will be unable to provide a systematic, rigorous and satisfactory explanation of its evaluation of the proposals submitted by proponents. 64 iii) Route Assignment is Unfair and Unreasonable Mr. Chamberland was troubled by STEO s sole discretion to award routes as it sees fit, and emphasizes that submission by a bidder of a proposal signifies agreement with the process. This type of 'forced agreement' imposed on the bidders, Mr. Chamberland opines, is always questionable, especially in circumstances such as these, where most of the operators have a single customer. 62 Chamberland Affidavit, PSMR, Tab 1-B, pp. 8 and Chamberland Affidavit, PSMR, Tab 1-B, p Chamberland Affidavit, PSMR, Tab 1-C, p Chamberland Affidavit, PSMR, Tab 1-C, pp

27 23 iv) Monopoly Concerns A related issue is the contract award formula for allocating the routes in the RFP, which could be heavily tilted in favour of the larger bus operators. 86. Mr. Chamberland found that while the route assignment formula is much too complex to be clear, understandable and predictable, with its 35% cap on the number of routes that can be allocated to a single successful bidder, it appears to leave open the possibility that the largest bidder-operators together could aggregate up to 65% of the total number of routes. 87. Given the fact that a number of operators in the area have decided not to pick up the RFP and not to submit a response, it is a legitimate question whether the application of route assignment formula could accelerate further the demise of a larger number of the remaining smaller operators. v) The Process Since the Release of the RFP 88. Mr. Chamberland expressed concern that correspondence between counsel was posted by the STEO on Biddingo (see paragraph above). 67 He found that STEO s decision to post the correspondence before the closing of the RFP, in the context of a legal dispute between STEO and the Plaintiffs, could only have been intended to intimidate, not only the Plaintiffs, but all prospective proponents in the RFP competition. Mr. Chamberland concluded that the posting of the letters reflected a poor procurement practice and vitiated the integrity of the RFP process. 68 vi) Unfair RFP Forcing Operators out of Market 89. Mr. Chamberland noted that many operators have not picked up the RFP (see paragraph 59 above). By not picking up the RFP, these operators are effectively exiting a market that they have 66 Chamberland Affidavit, PSMR, Tab 1-C, p Chamberland Affidavit, PSMR, Tab 1-C, p Chamberland Affidavit, PSMR, Tab 1-C, p. 17.

28 24 been in for decades. Mr. Chamberland was troubled that many operators have exited the market due to their perception that STEO is purposely conducting an unfair RFP process. Based on Mr. Chamberland s experience, it is highly unusual in a procurement competition for so many prospective proponents to abandon the competition for lack of confidence in the good faith of the issuer of the RFP. 69 PART III - STATEMENT OF ISSUES, LAW & AUTHORITIES 90. There are two issues before this Court. First, the Court must consider whether it is just and convenient to grant an interlocutory injunction preserving the status quo, preventing irreparable harm, and allowing the Plaintiffs legitimate claims to be heard at trial. Second, the Court must consider STEO s motion to strike. I. Interlocutory Injunction 91. An interlocutory injunction is intended to preserve the status quo pending trial. They are appropriate where a plaintiff faces irreparable harm that will render a remedy after trial meaningless. 92. This Court is empowered to grant an interlocutory injunction where it appears to a judge of the court to be just or convenient to do so The Supreme Court established the test for an interlocutory injunction in RJR-MacDonald: (a) (b) Is there a serious issue to be tried? Is the plaintiff likely to suffer irreparable harm? 69 Chamberland Affidavit, PSMR, Tab 1-C, pp Courts of Justice Act, R.S.O. 1990, c. C.43, s. 101.

29 25 (c) Does the balance of convenience favour granting an injunction? 94. While this test provides courts with guidance, it is not meant to be rigidly followed. The object is to achieve a just and equitable result. It is not necessary that a plaintiff mechanically satisfy each element of the test. 71 The elements are not to be treated as watertight compartments. The strength of one may compensate for the weakness of another. 95. As McLachlin J.A. (as she then was) noted: 72 Having set out the usual procedure to be followed in determining whether to grant an interlocutory injunction, it is important to emphasize that the judge must not allow himself to become the prisoner of a formula. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case. A. Five Serious Issues to Be Tried 96. The threshold for a serious issue is low the action must be neither frivolous nor vexatious. It is not necessary for the plaintiff to prove that it has a strong case or a case that is likely to succeed. It is respectfully submitted that the fact and expert evidence before this Court establishes a strong prima facie case, which is much more than required. 97. The Plaintiffs raise five serious issues to be tried. First, STEO has breached the duty of care that it owes the Plaintiffs. Second, the Plaintiffs determinately relied on STEO s negligent and/or deliberate misrepresentations. Third, STEO has breached the duty of good faith and fairness that it owes the Plaintiffs. Fourth, STEO has breached duties of confidence it owes the Plaintiffs. Finally, STEO has breached the duties of natural justice and procedural fairness owed in a public procurement process. 71 Bell Canada v. Rogers Communications Inc. (2009), 76 C.P.R. (4th) 61 (Ont. S.C.), at paras British Columbia (Attorney General) v. Gitanmaax Band (1986), 9 B.C.L.R. (2d) 333 (C.A.), at para. 51.

30 In addition, in so far as STEO asserts that s. 22 of the BPSAA gives it blanket immunity for any and all actions it takes, there is also a serious issue to be tried concerning STEO s breach of the mandatory requirements of the BPS-Directive, which breaches disentitle its from relying on s. 22 of the BPSAA. i) STEO Breached its Duty of Care 99. There is a serious issue to be tried whether STEO breached the duty of care it owes the Plaintiffs in acting in the unlawful manner that it did There is a well-established two stage test to assess whether a cause of action for breach of duty may be available: 73 At the first stage of this test, the question is whether the facts disclose a relationship of proximity in which failure to take reasonable care might foreseeably cause loss or harm to the plaintiff. If this is established, a prima facie duty of care arises and the analysis proceeds to the second stage, which asks whether there are policy reasons why this prima facie duty of care should not be recognized The Ontario Court of Appeal has said the following regarding proximity: 74 (a) (b) (c) The relationship must be sufficiently close and direct to render it fair and reasonable to require that the defendant, in the conduct of its affairs, be mindful of the plaintiff s legitimate interests; The actions of the alleged wrongdoer have a close or direct effect on the victim, such that the wrongdoer ought to have had the victim in mind as a person potentially harmed; Certain factors routinely take a central role in the proximity analysis including: (i) (ii) any representations made by the defendant, especially if made directly to the plaintiff, and reliance by the plaintiff on the defendant s representations; the nature of the plaintiff s property or other interest engaged; 73 Taylor v. Canada (Attorney General), 2012 ONCA 479 at para. 72 [ Taylor ]. 74 Ibid. at paras

31 27 (iii) (iv) the specific nature of any direct contact between the plaintiff and the defendant; and the nature of the overall relationship existing between the plaintiff and the defendant (d) Where proximity is grounded in specific conduct, interactions, and representations, such as it is here, courts should not close the courtroom door and determine whether a duty of care arises without allowing a matter to proceed to trial These factors are all present in this case. In this regard the uncontroverted evidence before this Court on the proximity between STEO and the Plaintiffs is that: (a) (b) (c) (d) (e) (f) (g) (h) The Plaintiffs are a captive vendor of STEO; STEO requires, and the Plaintiffs have provided to STEO, on an ongoing basis, their confidential business information; The Plaintiffs have been in a long term contractual and economic relationship with STEO; STEO requires the Plaintiffs to be completely available to them at all times; STEO exerts control over all material aspects of the Plaintiffs businesses; STEO has required the Plaintiffs to make substantial capital investments to purchase busses and equipment in furtherance of their long standing relationship and to service STEO s plans and objectives; STEO represented that the Plaintiffs would recover these investments and earn a reasonable return; and The representations made by STEO to the Plaintiffs that their investments were secure, that the new procurement process would treat operators fairly and equitably, and that the Plaintiffs interests would be considered when changes were made, were relied upon by the Plaintiffs It is reasonably foreseeable that the unilateral changes made by STEO in imposing the RFP without consultation, without due regard for the dependence and vulnerability of the Plaintiffs, and without regard to their legitimate interests in and expectations of a long term relationship, would 75 Ibid. at paras

32 28 cause the Plaintiffs harm. It is reasonably foreseeable that imposing an RFP that unfairly discriminates against the Plaintiffs and that fails to put them on a fair playing field with large multinational operators will cause the Plaintiffs harm Based on the foregoing, the Plaintiffs respectfully submit that they have established, at a minimum, that there is a serious issued to be tried as to whether STEO owes them a duty of care The content of STEO s duty of care includes the duty: (a) (b) (c) (d) (e) To take the Plaintiffs legitimate interests and reasonable expectations into account when fundamentally changing the procurement process that has always been in place and that the Plaintiffs depend on for their survival; To consult with the Plaintiffs regarding the unique features of their businesses, created by the historic demands and requirements of STEO and the School Boards, such as routes and capital investments, which the RFP, as described herein, entirely disregards; To fully consider alternative procurement methodologies that also comply with BPS-Directive and procurement best practices and that would not cause irreparable harm to the Plaintiffs; To comply with the recommendations or at least to meaningfully and in good faith consider the recommendations of the Task Force; and Not to implement an RFP that it knows or ought to know will destroy the Plaintiffs businesses The Plaintiffs submit that STEO has breached the duty of care that it owes the Plaintiffs by: (a) (b) Moving to an RFP process without consulting with the Plaintiffs, knowing of the damages that it would cause them and in the face of false and misleading misrepresentations that the Plaintiffs legitimate interests would be properly considered; Imposing an RFP process that manifestly breaches the standards of fairness and transparency required by the B8 Memo;