Judge awards $10M more to victim of ‘outrageous’ Canadian government misconduct

Judge awards $10M more to victim of ‘outrageous’ Canadian government misconduct by Kathryn May, May 7, 2013, Ottawa Citizen
An Ontario Superior Court judge awarded an additional $10 million in lost profits, interest and costs to the losing bidder of a relocation contract, chastising the “reprehensible,” “outrageous” and “shocking” misconduct of the federal government for rigging the deal and trying to deceive the court. In a hard-hitting decision, Justice Peter Annis took the extraordinary step of awarding Envoy Relocation Services full costs in its legal battle to prove bureaucrats intentionally turned a blind eye to the rigging of the 2004 contract, which helped give Royal LePage Relocation Services a monopoly on moving thousands of military, RCMP and bureaucrats to new postings.

All told, the government has been ordered to pay Envoy $40 million. “(The) court reaction expressed in terms of its shock or intensity of feeling caused by the misconduct of the party is a factor in the award costs on an elevated scale,” Annis wrote. “As indicated, I have no difficulty concluding that the defendant’s conduct was outrageous, reprehensible and worthy of chastisement. Indeed, I would have ordered punitive damages but for the overriding factor of concluding that such an award would have served the purpose of denunciation or deterrence.”

On the heels of Annis’ latest ruling on costs, the government filed Monday a notice to appeal his original decision, which dealt a devastating blow to the integrity of the government’s procurement system. Last month, Annis concluded Envoy should have won the five-year deal in 2004 that bureaucrats rigged to go to RLRS, their preferred supplier.

For Envoy’s Bruce Atyeo, the judge’s ruling on costs was another victory in a legal dispute that has wound its way through channels of hearings, investigations and audits before unfolding in last year’s lengthy trial. The government’s decision to appeal, however, could add years and millions of dollars more to the fight. “An appeal doesn’t change the evidence that’s on the table. It will never go away and people can draw their own conclusions,” Atyeo said. “The decision on costs is even more important because he identified the egregious conduct and distilled what he considered reprehensible conduct.” Envoy sued the government for $62 million in lost profits and damages over its handling of the 2002 and 2004 contracts after a bombshell report in 2006 by then-auditor general Sheila Fraser concluded the 2004 bidding process favoured RLRS.

Annis originally ordered the government pay Envoy $30 million to cover lost profits, plus costs and interest, for two contracts — one for relocating the military and the other for moving RCMP and bureaucrats to new postings. On Friday, he released his ruling on the costs and interest owing to Envoy and increased Envoy’s lost profits award to $32 million, plus $3 million for interest and $4.7 million for costs. Envoy’s actual costs were more than awarded but the judge didn’t fully compensate for the time its lawyers spent pursuing issues around an internal Public Works investigation during the trial. Full costs are awarded in rare cases to send the message of the court’s disapproval. Annis said he felt the government deserved to be chastised for its misconduct in handling of the deal, as well as its conduct during litigation.

Annis found that bureaucrats allowed RLRS, as incumbent, to use its inside knowledge when it bid zero for property management services, which hardly any transferees used. The volumes for these services used in the bid documents were 250 times higher than actually used, and gave RLRS an advantage worth $48 million over Envoy, its closest rival. These inflated volumes were in both the 2002 and 2004 contracts. Evidence showed that RLRS then charged transferees for the service it promised to do for free. Internal documents, which the government initially concealed, showed the key bureaucrats managing the process in Public Works and Treasury Board not only knew about, but “authorized” the charges. Annis also found this preference for RLRS to win in 2004 was also behind selection criteria that heavily weighted technical merit over price, which favoured RLRS as the incumbent with a system already up and running. But Annis said the misconduct continued when the lawsuit began and government failed to turn over documents that would have routinely been made available in normal court procedures. Annis argued the government deserved to chastised for concealing documents, particularly some email exchanges and the commitment forms for third-party services and their pricing, which proved to be critical evidence on which the case turned. It revealed that key bureaucrats knew that RLRS was charging for property management.

Annis said that withholding the documents, which were only turned over when he ordered them produced, were an attempt to deceive the court. “The concealment of crucial evidence that played a major role in the outcome of the case and misled the court is grave misconduct. Moreover, this conduct was intended to conceal significant deliberate reprehensible conduct prior to litigation.” As a result, Annis said the case met many of the tests for an award of full costs: the “grave” misconduct; the case would not have gone to court if it were not for that misconduct; the misconduct forced Envoy to exhaust all legal avenues; the misconduct misled or deceived the court; and the matter involved a “scurrilous attack on the administration of justice.” Annis said he would add to the list a “sentiment” that the court is so shocked by the “gravity of the misconduct or degree of deception” that it needs “an extra dose of chastisement” to show its disapproval.

But Annis said he was particularly taken aback that public servants, who should be defenders of fairness and public interest, were the “perpetrators of the misconduct.”

“Canadians count on our public service acting honestly, fairly and with the utmost integrity … When it does not adhere to fundamental principles of good governance and fairness in important matters such as the procurement of goods and services, the courts and the public are shocked, breeding cynicism and lack of respect for our institutions.“

Annis said the government’s misconduct also reshaped Canada’s relocation industry — RLRS is now Brookfield Global Relocation Services and is one of the biggest firms of its kind in the world. He said the government showed “contempt” for Envoy by favouring RLRS and “all the untruthfulness” to hide this preference for six years while letting Envoy fight. He argued that the government also betrayed its own employees who were being transferred by charging them for a service that should have been free. “There is also no argument that the issues raised in this action were important to the law of procurement in Canada. The case involved a significant contract that negatively affected the relocation industry in Canada and exposed a serious lack of oversight and misconduct on the part of government officers who acted in a contemptuous fashion.” [Emphasis added]

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