Judge made “palpable and overriding errors” in decision on $28.5M City Hall expansion lawsuit, according to appeal

In setting aside allegations of bias and unfairness in a $28.5 million lawsuit against the City of Brampton over a City Hall expansion, the judge made serious errors in law that were not backed up by the evidence at trial, claims Inzola Group in its appeal filed last week after January’s Ontario Superior Court decision.

The suit was launched in 2011 by John Cutruzzola, owner of Inzola Group, which had been disqualified the previous year from bidding on the Southwest Quadrant project and other work meant to transform the city’s historic Main Street area. The lawsuit sought $27.5 million as damages for breach of contract and negligence and a further $1 million in punitive damages.

After nearly eight years in the legal system, culminating with a nine-week trial this past spring and summer, Justice John Sproat ruled in favour of the City of Brampton, dismissing the arguments made by Inzola.

Sproat’s ruling dismissed allegations made by Cutruzzola that former senior staff members and the mayor at the time, Susan Fennell, were biased against him and his company and did not want them to succeed in the competition, which followed a procurement process that had never been tried before in Canada.

The ruling was welcome news to the City of Brampton.

“The City of Brampton is pleased with Justice Sproat’s decision, ruling in favour of the City in the procurement process for the construction of the Southwest Quadrant," said a statement issued by the city in response to the ruling. "Justice Sproat found the City not to be liable and dismissed the action against the City. The City’s procurement process and the conduct of the RFP were upheld and found to have been undertaken fairly and in good faith. The City is committed to the integrity of its procurement process, one that satisfies the City’s economic and functional interest and is open and transparent to bidders. The City is looking forward to moving ahead with further plans for downtown Brampton.”

The City’s contention of a fair process, and Sproat’s agreement, were challenged in appeal documents filed last week to the Court of Appeal of Ontario. Lawyers representing Inzola are looking for Sproat’s decision to be set aside and for Inzola to be awarded the $28.5 million, plus interest and legal costs.

At the crux of the matter, Inzola claims it was wrongfully disqualified from bidding on the city hall expansion project. In June of 2010, the City disqualified the company citing a violation of the communications protocol in the RFP, which served as the agreement for the bidding process.

That alleged violation stems from Inzola Group CEO John Cutruzzola attempting to speak to council and speaking to the press in April of 2010 in regard to concerns he had about the city’s confidentiality request in connection with the RFP process. The City had indicated in the RFP that once prospective builders submitted a bid in response to the RFP, which outlined the scope of the project and the rules of the process, a confidentiality agreement would have to be signed, but that agreement was not included in the RFP. After submitting its bid Inzola was asked to sign a confidentiality agreement that would have prevented it from ever revealing to the public the cost of its proposed project. Inzola, at the time, and during trial contended that such a requirement, to effectively muzzle the company by preventing it from ever telling the public what its cost was, had no basis in standard procurement and tendering practices. The trial revealed that Inzola’s $110 million cost was $95 million less than the $205 million the City agreed to pay Dominus Construction, which was awarded the contract. There are no allegations of wrongdoing against Dominus in Inzola’s case.

“The trial judge erred in law, and made palpable and overriding errors of fact and of mixed fact and law, in finding that Inzola breached the RFP by not signing the Confidentiality Agreement in circumstances where the City did not purport to disqualify Inzola on that basis at the time and did not seek to justify its disqualification decision on that basis at trial,” the appeal reads.

The appeal states that Inzola had a “limited purpose” in seeking to communicate with staff and council about the disagreement over the terms of the confidentiality agreement and that the City did not use its discretion fairly when taking such a dramatic step to disqualify over a matter that could have been resolved.

In trial, evidence was shown that suggests there is no clause or specific wording in the RFP agreement that says a respondent would be disqualified for trying to communicate to resolve a disagreement over the RFP and evidence showed Inzola attempted to follow the communication protocol to resolve the confidentiality issue, but the City was not willing to address the company’s concerns.

A key piece of Inzola’s lawsuit was the assertion that the city failed to treat Inzola fairly and equally compared to the other two proponents who responded to the RFP, Dominus and Morguard (there are no allegations in the case against either Dominus or Morguard).

The appeal argues that while Inzola was disqualified, at the City’s discretion, for a minor issue, Dominus was not disqualified for a significant breach of the RFP agreement.

“The trial judge’s determination that the City complied with its duty to Inzola is contrary to and cannot be reconciled with the uncontested evidence that Dominus violated the rules of the RFP by including in its final offer a material misrepresentation the false statement that it had an option on 20 George Street North,” the appeal reads.

The appeal states that staff were obligated to disqualify Dominus for stating in its final offer that the property, which was required for the company’s proposal, was secured when it was not, and that failing to do so showed one set of rules was being used for Inzola while another was used for Dominus, a violation of the understanding that the procurement would be carried out fairly and equally.

The appeal also highlights how senior staff misled council, when telling members in a written report before a crucial vote in March of 2011 and verbally right before the vote was taken that Dominus had secured the 20 George Street property, even though staff knew Dominus had not secured the property.  

This evidence is particularly significant, according to the appeal, as testimony from former councillor John Sprovieri indicated that if he had known Dominus did not have the option to build on the property, it would have changed his vote in awarding the project to the company. The vote to approve Dominus carried 6-5. So, if council had the proper information, the result of the vote could have been different, Inzola alleges in the appeal, citing the judge’s alleged error in not properly considering the evidence.

In Sproat’s final decision, Inzola’s appeal alleges that the judge failed to consider a number of other key factors, including evidence that city staff were providing information in regards to the RFP process to “friendly” councillors, those in favour of the Dominus proposal, and excluding “unfriendly councillors”, and most significantly, that in accepting the Dominus proposal, the city was violating its own RFP terms by accepting a bid they knew to contain false information.

In its final offer, Dominus claimed to have an option for the George Street land, an adjacent property to City Hall that the construction firm planned to build a library on in Phase II of the project. The appeal points out evidence at trial that showed the City would be funding the eventual option that was secured for $480,000, after suggesting to council that Dominus had paid to secure the property. In a staff report to council prior to the March 2011 vote staff wrote that Dominus had paid to secure the property. This was incorrect, and staff was informed before the meeting that Dominus did not have the property secured, however it’s unclear if staff knew at the time that the City was planning to pay for it. When staff eventually authorized the payment to Dominus and the $480,000 was released from City accounts in October of 2011, council was never informed of the transaction or the use of public funds to pay Dominus so it could enter into an option agreement for the required property.

The appeal questions why staff never informed the “Fairness Advisor” hired by the same staff to ensure a fair process, of these breaches of the RFP agreement and why the judge didn’t consider this in his decision.

The appeal also alleges Sproat made a key error in agreeing that former senior staffer Julian Patteson did not state at a meeting that council would be allowed to see details of the proposed bids by the three companies (council was never allowed to see the details). Sproat accepted Patteson’s claim despite evidence by others at the meeting that he had made the statement and despite the official minutes of the meeting that are still the city’s official record of the meeting and still show that Patteson made the statement. The appeal questions why Sproat disregarded the evidence, but accepted Patteson’s contradictory claim.

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