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Aquatech Canadian Water Services v H2O Innovation Inc, 2018 ABCA 140

Under the the Comprehensive Economic and Trade Agreement (“CETA”) and Canadian Free Trade Agreement (“CFTA”), there are provisions requiring owners to provide ‘rapid interim relief’ – that is, a stop contract process – where there is a legitimate challenge and no overriding adverse consequences. Because of these new agreements, reviewing the three-part test for injunctive relief in the context of a losing bidder trying to stop a contract award is both useful and timely.

In Aquatech Canadian Water Services v H2O Innovation Inc, 2018 ABCA 140, H20 Innovation Inc (“H2O”) and Aquatech Canadian Water Services (“Aquatech”) both responded to an RFP for a five-year contract in Kananaskis providing the daily operation, monitoring, and maintenance of water and wastewater systems. The project was scheduled to begin on April 1, 2018. H2O’s bid was successful and the contract was awarded to them on October 25, 2017. However, Aquatech argues that H2O’s bid was non-compliant and should have been rejected at the initial screening stage.

On February 9, 2018, Aquatech applied for judicial review, seeking, among other remedies, an order stopping the award of the contract to H2O. H2O was not named as a party to that proceeding, which was set to be heard at the end of March 2018. On March 15, H2O sought the parties’ consent to participate as an ‘intervenor’ in the application to stop the contract. The Minister consented, but Aquatech refused. H2O filed its application for intervenor status on March 19. On March 22, the judge granted H20 intervener status noting that the impact of the potential decision on H2O was significant. Because the judge felt H2O’s participation was essential, H2O was granted intervenor status for both of Aquatech’s applications (for judicial review and to stop the contract until the judicial review was determined).

On March 23, 2018, Aquatech appealed the chamber judge’s decision to allow H2O intervenor status, and also applied for an interim order to delay the contract award. Aquatech based its claim in part on an allegation that using H2O’s services was a risk to public health and safety. Both H2O and the Minister contested this application, although the Minister was not named as a respondent.

The test for an interim order to delay a decision pending appeal has three components, first articulated in RJR-MacDonald v Canada (Attorney General), [1994] 1 SCR 311:

  1. Is the matter a serious question as opposed to a frivolous and vexatious one?
  2. Would the applicant suffer irreparable harm – that is, harm difficult to compensate by monetary damages – if the delay is refused?
  3. If the delay is refused, will the applicant suffer greater harm than the respondent would suffer if the delay was granted?

The First Requirement

The judge concluded that Aquatech had met the first requirement deomonstrating there was an arguable issue to be determined in this case.

The Second Requirement

For the next step, Aquatech was required to show that it would suffer irreparable harm unless the awarding of the contract to H2O was delayed. Aquatech argued that without a stay, the contract performance would begin, as the March 28 date for the hearing of the interim stay application would have passed and that harm will have occurred to Aquatech by April 1. Aquatech argued further that two of its certified operators had been hired by H2O and that it could lose more staff – there are a limited number of certified operators in Alberta. Finally, Aquatech argued that it would lose market share and suffer harm to its reputation.

H2O argued that irreparable harm to its interests would occur if the stay were granted, an important aspect of the third requirement, and noted that had Aquatech consented to H2O’s intervenor status, this delay would not have occurred. Aquatech countered by arguing that H2O caused delay by not bringing its intervenor application earlier.

The Minister also argued that Aquatech created this situation by delaying its application for judicial review and by refusing to consent to H2O’s intervenor status. The Minister argued further that Aquatech was in the wrong for not naming the Minister as a party to this application and for failing to give the Minister notice.

The judge held that Aquatech’s evidence of harm was speculative at best, and that their further claim of a risk to public health and safety was entirely unsupported.

The Third Requirement

Aquatech argued that any prejudice to H2O would be minimized because the Minister had cross-examined Aquatech’s witnesses with H2O’s counsel present. Aquatech abandoned its argument concerning public health and safety risks.

The judge noted that Aquatech’s contract was set to expire on its own terms on March 31, 2018 and H2O’s to begin on April 1. Given that the argument concerning risks to the public was unsupported by evidence, the judge held that the balance of convenience favoured maintaining that status quo.

Final Notes on Equity

The judge concluded this case by restating the well-known principle that one who seeks equity must also do equity. In the judge’s view, Aquatech had not acted in a fair manner either procedurally or substantively, which would have been enough for the judge to deny Aquatech’s application on its own.

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.