Bus and Coach Association (New Zealand) Incorporated v Attorney-General
[2020] NZHC 1559
•26 June 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-321
[2020] NZHC 1559
BETWEEN BUS AND COACH ASSOCIATION (NEW ZEALAND) INCORPORATED
ApplicantAND
ATTORNEY-GENERAL
First Respondent
SECRETARY OF EDUCATION
Second Respondent
Hearing: 26 June 2020 Counsel:
M Chen and C J Saunders for applicant (via AVL)
C J Curran, C M Marks and M W McMenamin for respondents
Judgment:
26 June 2020
Reasons:
3 July 2020
JUDGMENT OF DOBSON J
[Reasons for declining interim orders]
The proceedings
[1] The applicant (BCA) is an incorporated society that represents operators in the bus and coach sector, including those providing school transport services. It claims to represent over 90 per cent of businesses conducting school bus services throughout New Zealand.
[2] On 25 June 2020, BCA commenced proceedings seeking judicial review of a decision it alleges to have been made by both Ministers of Transport and Education to proceed with a round of tenders for provision of school bus services. The provision
BUS AND COACH ASSOCIATION (NEW ZEALAND) INCORPORATED v ATTORNEY-GENERAL [2020] NZHC 1559 [3 July 2020]
of such services is a responsibility assumed by the Ministry of Education (the Ministry). During May 2020, public notice was given of the Ministry’s intention to invite tenders in two separate processes. The first round of tenders is intended to cater for small-scale operators and, after the outcome of that tender is known, a second tender is contemplated for larger-scale operators for the balance of school bus service operations. Operators who entered into an agreement with the Ministry as a result of the first round of tenders would not be eligible to participate in the second round.
[3] Notice of the Ministry’s intention was published on the Government Electronic Tender Service (GETS) website. In or about the third week of May 2020, the Ministry confirmed via GETS that the first round of tenders would open in the week beginning 29 June 2020, allowing those wishing to submit proposals a period of some six weeks in which to do so.
[4] BCA considers the two tender approach to be seriously flawed, and contrary to the interests of its members and the sectors of the public that school bus services are intended to cater for. BCA claims that the design of tenders for the forthcoming contracts for school bus services was intended to be the subject of meaningful consultation with it, but that such consultation has not occurred. Further, that the Ministry is insisting on proceeding with the two tender process despite BCA’s protests at the lack of meaningful consultation and the substantive deficiencies in the design of the tenders.
[5] Having exhausted attempts to persuade the Ministry to reconsider the form of the tenders, or at least defer the commencement of the first round, these proceedings were commenced as a matter of extreme urgency. Interim orders were sought for a declaration under s 15(2)(a) of the Judicial Review Procedure Act 2016 in terms that the Secretary for Education ought not to “go live” to the market in the week beginning 29 June 2020 with the request for proposals for school bus services based on the two tender process, and that the “go live” date should be deferred until the substantive proceedings had been determined.
[6] The proceedings were brought against the Attorney-General, who is sued on behalf of the Minister of Education and the Minister of Economic Development and
Transport in their capacities as the ministers responsible for the decision to adopt and approve the two tender process. The proceedings are also brought against the Secretary for Education, which position is occupied by the chief executive of the Ministry.
[7] BCA pressed for an urgent hearing. Substantial affidavits in support of BCA’s claims, and an extensive response from Mr James Meffan, the project director contracted to the Ministry to supervise school bus procurement, were available to me by the commencement of the hearing at 10.00 am on 26 June 2020.1 After hearing counsel until 1.20 pm, I acknowledged that a decision on the interim orders application was required that day, and at the end of 26 June 2020 I issued a results judgment dismissing the application for interim orders. I now provide my reasons for doing so.
[8] In order to convey my decision to the parties by the end of 26 June 2020, I had to form views on the considerations relevant to a grant of interim orders. These reasons for that decision were still in an embryonic state when I was advised on the morning of 29 June 2020 that the substantive judicial review application would not be pursued, and thereafter the proceeding was discontinued.
[9] Notwithstanding that the application is not proceeding, and in deference to the quality of the arguments marshalled at such short notice, it remains appropriate to record the reasons for dismissing the interim application. In the circumstances, I am doing so inevitably in provisional terms when addressing the pleaded grounds for review.
[10] A material consideration in assessing the competing positions of the parties was that the Court was able to offer a fixture for the substantive hearing of the judicial review application on 8 and, if necessary, 9 July 2020. That would be only part-way through the period provided by the Ministry for responses to the first round of tenders. Counsel indicated their preparedness to have the substantive issues prepared for hearing by that time.
1 The deponents for BCA were Mr Barry Kidd, its former chief executive, Dr Pim Borren, its present chief executive, and Mr Ian Turner, a consultant for the public transport industry who deposed as an expert.
The background to the relationship between the parties
[11] The last nationwide procurement process for school bus services took place between 2006 and 2008, leading to contracts for those services beginning in January 2009. The contracts offered then were for six year terms with two rights of three year renewals. Extensions to them have taken place, to have them expiring at the end of 2021.
[12] Complaints about that process led to a report by the Auditor-General, who considered that consultation had been undertaken with interested stakeholders.
[13] In late 2017, the Ministry started on consultation for the design of a new process for procuring school bus services. A steering committee met regularly between early 2018 and mid-2019. In addition to contributors from various government agencies, the then chief executive of BCA, Mr Barry Kidd, became a member of that steering committee.
[14] By August 2019, a set of proposals had been progressed by the Ministry to a point that gave BCA concerns as to the impact of proposed terms, particularly on small-scale school bus operators.
[15] In September 2019, Mr Kidd met with the Minister of Economic Development and Transport to discuss BCA’s concerns about the proposed terms for the forthcoming tender. After that meeting, Mr Meffan contacted Mr Kidd and stated that the Ministry was keen to gain feedback on a number of changes to the current contractual arrangements that were to be implemented through the forthcoming tender. Proposed contractual terms were discussed by Ministry personnel with industry representatives at workshops in the third quarter of 2019. On 26 September 2019, Mr Kidd recorded with Mr Meffan the industry’s surprise that the Ministry was considering significant changes when no warning of them had been given at the recent workshops, and that the feedback on such changes was not positive.
[16] BCA sought and was granted a meeting with the Minister of Education and the Associate Minister of Transport on 17 October 2019. Mr Kidd and the policy manager at BCA, Ms Anna Cleary, attended that meeting with the Ministers and their officials.
Mr Kidd conveyed BCA’s concerns at various disadvantages if the form of tender process that was then proposed should proceed in the near future.
[17] After the meeting, it became apparent that the previous timetable for the tender had been stopped as no invitations to tender progressed during October 2019. BCA understood that the delay in the process had been in response to the concerns it raised, affording time for other options to be considered.
[18] On 5 November 2019, an update was published on GETS, advising that the Ministry was listening to industry feedback and that it would be in contact with suppliers in due course.
[19] On 29 November 2019, Ms Delaney Myers, the group manager for school transport at the Ministry, wrote to Dr Borren, who had recently taken over from Mr Kidd as chief executive of BCA, about the planned tender for school bus services. The letter included the following:
… We are now taking the time to [reconsider its planned approach to market]. In order to allow for a thorough consultation on a revised procurement design and avoid a rushed process in implementation, we want to extend the current contracts.
[20]A further letter from Ms Myers on 3 December 2019 to Dr Borren included:
I reiterate the Ministry commitment to working with the Association while we plan the procurement of the next school bus contracts. … Due to the industry lobbying, aimed at aspects of the Ministry’s proposed procurement approach, the process has been paused to allow time for a review.
[21] Having received a response from Dr Borren, Ms Myers stated in a further communication on 4 December 2019:
We, too, are committed to rebuilding trust and re-establishing a collaborative relationship working in good faith … [with the BCA].
[22] On 16 March 2020, Dr Borren was given a further assurance in an email from Mr Meffan that there would be engagement on topics relevant to the procurement of school bus services. In early April 2020, Mr Meffan cited the disruption of the
COVID-19 pandemic as a reason for lack of consultation and reiterated the need to re-engage with the industry.
[23] On 8 May 2020, Mr Meffan disclosed to Dr Borren for the first time the two tender approach, which, from BCA’s perspective, was entirely novel. Dr Borren’s initial reaction was that it would cause disquiet and Mr Meffan provided further assurance that there would be further opportunity “to consider the details of our approach and offer feedback in the coming weeks”.
[24] On 18 May 2020, the Ministry provided further details and indicated a provisional tender “go live” date of early June 2020. From that point, BCA protested at the inadequacy of opportunity to consult about the form of the tenders and the Ministry defended the adequacy of the dialogue that had occurred. It transpired that the Ministers of Education and Transport had given approval for a split process for contracts for school transport in March 2020.
[25] Starting with a letter from Ms Chen on 22 May 2020, an exchange of lawyers’ letters then occurred. The Ministry declined to postpone the process any further, on concerns that there would otherwise be inadequate time available to settle new arrangements pursuant to the process it had designed before expiry of the latest extension of the current contract in December 2021.
Extent of consultation
[26] Further levels of detail than those able to be traversed at the urgent hearing would be necessary to consider the Ministry’s response that the two tender proposal was designed in response to concerns raised by BCA for the interests of small and medium-sized operators. If indeed the design was intended to address such concerns, that seems unlikely to be an adequate explanation for the material gap between the extent of consultations contemplated in the assurances provided on behalf of the Ministry, and the lack of warning of this critical feature in information provided to BCA for the extent of engagement that did occur between November 2019 and early May 2020.
[27] For the respondents, Mr Curran rejected any notion that the Ministry could be held to any assurances provided of a materially greater extent of consultation than occurred. I was not persuaded by his point that Ms Myers did not have authority to commit the Ministry to any particular consultation process. She was the author of the November 2019 assurances of consultation relied upon and is the supervisor of Mr Meffan’s work and the person to whom he reported.
[28] In his affidavit, Mr Meffan deposed that it was critical the process had never involved any promise to undertake a formal consultation exercise, and that such was not required under s 139D of the Education Act 1989. He characterises the descriptions of dealings between the parties in Mr Kidd’s and Dr Borren’s affidavits as implicitly accepting that there was no promise or undertaking to conduct a formal consultation exercise. I would not accept that the lack of a commitment to a consultation undertaken on a formal basis would be fatal to BCA’s claim of a breach of a legitimate expectation. Further, I would also have doubts that the complaints could be answered by contending that the two tender process was designed to meet BCA’s earlier concerns, and that the extent of consultation that has occurred was in any event sufficient to meet assurances that consultation would occur.
[29] My provisional view is that BCA clearly had tenable grounds for complaining that the Ministry failed to comply with numerous assurances that it would undertake meaningful consultation on the consequences for BCA members of the terms on which tenders for school bus services were to occur. Meaningful consultation could only occur after BCA representatives were given sufficient detail of what was proposed to consider it and respond.
Would inadequate consultation provide a ground for judicial review?
[30] This is not a circumstance in which there is any statutory obligation on the decision-maker to consult. That distinguishes it from cases where that feature arises.
[31] Mr Curran characterised the relevant conduct as a part of a procurement process on behalf of a Crown agency that is, as a matter of law, free of any public law overlay that might trigger administrative law obligations. He submitted that the Court of Appeal’s analysis in Attorney-General v Problem Gambling Foundation of
New Zealand is a complete answer to any attempt to challenge the conduct of a government agency in a tendering process.2
[32] Ms Chen submitted that the context in which the Problem Gambling application for judicial review arose was distinguishable from the present case. She submitted that the present was a very strong case of legitimate expectation of the conduct of public officials. BCA holds an important position as the industry group representing over 90 per cent of school bus operators. Given the context in which responsible representatives of the Ministry provided explicit assurances of meaningful consultation, BCA and its members were entitled to expect that a decision on the design of the tender process would not be made without meaningful consultation occurring. Ms Chen was inclined to accept the essence of her argument as an analogy with some form of public law estoppel.
[33] In Problem Gambling, the Foundation that was the applicant for review commenced proceedings after a procurement process by the Ministry of Health (MOH) to contract out psycho-social intervention services for problem gamblers had resulted in the Foundation having a substantially reduced contract for the provision of services. Its complaints included that the MOH had not evaluated proposals submitted to it in accordance with the processes and criteria in its request for proposals, which breached the Foundation’s legitimate expectation. The Foundation also claimed that MOH’s evaluation was flawed because it was based on unreliable information and findings, and that it had failed adequately to address conflicts of interest.3
[34] The High Court quashed the decisions on new contracts made by MOH. The Attorney-General appealed to the Court of Appeal, which reversed the outcome on a number of grounds. The Court of Appeal considered the relative scope of review as depending upon context. In that case, the scope was narrow and restricted to intervention for fraud, corruption, bad faith or situations analogous to those. The context was the course of a procurement process by a Crown agency, in which the scope of review would be narrow unless the context indicated a need for broader
2 Attorney-General v Problem Gambling Foundation of New Zealand [2016] NZCA 609, [2017] 2 NZLR 470.
3 At [24]–[25].
review. Such contextual considerations could include the nature of the decision made, the nature of the decision-making body, its statutory setting and the nature of the interests sought to be protected by the applicant for review.
[35] The Court of Appeal held that breach of a legitimate expectation or of mandatory rules for procurement were not available as grounds of review. On the facts, the Foundation could not have a legitimate expectation that their proposal would be evaluated according to certain criteria to which the decision-maker could not be confined. It was relevant that the mandatory rules for procurement applying to Crown agencies had not been breached.
[36] The Court of Appeal adopted criteria from an earlier decision as to the requirements for making out legitimate expectation:4
[112] To found a claim of breach of legitimate expectation, the Foundation had to meet the criteria espoused by this Court in Comptroller of Customs v Terminals (NZ) Ltd:
[125] Where legitimate expectation is raised, the inquiry generally has three steps. The first is to establish the nature of the commitment made by the public authority whether by a promise or settled practice or policy. This is a question of fact to be determined by reference to all the surrounding circumstances. A promise or practice that is ambiguous in nature is unlikely to be treated as giving rise to a legitimate expectation in administrative law terms.
[126] The second is to determine whether the plaintiff’s reliance on the promise or practice in question is legitimate. This involves an inquiry as to whether any such reliance was reasonable in the context in which it was given.
[127] The third, and often most difficult part of the inquiry, is to decide what remedy, if any, should be provided if a legitimate expectation is established.
[37] In challenging the existence of a tenable cause of action, Mr Curran submitted that BCA could not satisfy those three requirements. However, I did consider that there are tenable grounds on which BCA could bring itself within those three requirements. The course of conduct by Ms Myers and Mr Meffan, whose positions within or for the Ministry might reasonably entitle BCA to attribute their statements
4 Attorney-General v Problem Gambling Foundation of New Zealand, above n 2 (footnote omitted).
to the Ministry, and the context in which the assurances of consultation occurred, could arguably constitute a sufficient commitment to meet the first requirement.
[38] The requisite extent of reliance on the assurances of consultation would require further argument. Provisionally, it appeared that members of BCA, whilst having different interests in the preferable form of tender (for example as between small and large-scale operators) were substantially supportive of BCA’s concerns that the sequential two tender process was not the optimum process for either potential providers of the services, or the range of those interested in the quality of services to be provided for school transport.
[39] The matter of remedy, being the third requirement for breach of legitimate expectation, was presented differently to the circumstances of the Foundation in Problem Gambling. There, it was one of a substantial number of potential tenderers which was seeking relief after being disappointed at the outcome of the process. In contrast, BCA is an industry group concerned to have the Ministry consider its views on the preferable format or design of the tender process before it is undertaken. The relief urged by Ms Chen was a further delay in the tendering process until the consultation BCA had contemplated prior to commencement of the tender process had occurred.
[40] During the hearing, I invited Ms Chen to provide authority for the proposition that a Crown agency, once it had given rise to a legitimate expectation of consultation, was precluded from reaching a decision on the form of a tender without carrying out the promised consultation. Shortly after the conclusion of the hearing, I received an informal note from Ms Chen’s firm, setting out a sequence of decisions which BCA would rely on in its substantive argument for relief.5
[41] Some of the decisions cited did not arise in similar contexts where Crown agencies were tendering for procurement of commercial services. Some of the passages cited might support Ms Chen’s argument to distinguish the terms on which
5 Moncrief-Spittle v Regional Facilities Auckland Ltd [2019] NZHC 2399 at [28]–[29]; Skills Active Aotearoa Ltd v Minister of Education [2019] NZHC 2800 at [143]; Te Heu Heu v Attorney-General [1999] 1 NZLR 98 at 126–127; B v Waitemata District Health Board [2016] NZCA 184 at [55]; Waikato Regional Airport Ltd v Attorney-General [2001] 2 NZLR 670 (HC) at [143]–[147].
the Court of Appeal in Problem Gambling excluded the prospect of a legitimate expectation about consultation providing a ground for review of a tendering process undertaken by a Crown agency.
[42] On balance, I considered that BCA had tenable grounds for claiming that assurances of consultation about the form of tender were provided by Ministry personnel and in terms and circumstances that could give rise to a legitimate expectation on BCA’s part.
[43] I also acknowledge some prospect for BCA to distinguish the Court of Appeal’s reasoning in Problem Gambling that would otherwise exclude the prospects of judicial review of the conduct of a Crown agency in its conduct of a commercial procurement undertaking. Whilst tenable, I did not rank this prospect as a particularly strong one.
Preservation of the parties’ present positions
[44] The opinion of Mr Ian Turner, a consultant for the public transport industry with sufficient experience in the operation of school bus services to opine on it, is that the proposed form of tenders will be seriously detrimental to school bus operators, in particular small and medium-sized businesses. I am mindful that the Ministry had no opportunity to present a contrary view to Mr Turner’s, advanced at short notice on behalf of BCA.
[45] More generally, Ms Chen emphasised the extent of wasted effort that would be undertaken if school bus operators have to complete the detailed work required to decide whether they tender for the limited services on offer in the first round of tendering, or hold back for the second round. Small and medium-sized operators would need to consider the prospect of business allegiances with others, and very substantial work on what, at least for some, might be critical to the survival of their business would have to be undertaken. All that work would arguably be unnecessary if substantive relief is granted. It would be speculative to attempt to quantify the extent of work done in the context of the presently proposed tender that would still have utility for prospective tenderers’ response to invitations to tender on different terms.
[46] Mr Meffan assessed the adverse consequences for the respondents if interim orders were made that required a delay in the tendering process on the assumption that the substantive result would not be likely before October 2020. I assessed his concerns against the much shorter period that would have pertained, given my indication to counsel that I would endeavour to provide a prompt substantive decision after a hearing on 8 and 9 July 2020.
[47] Mr Meffan deposed that a relatively lengthy transitional period is desired by the market between final allocation of contracts and their commencement. He stated that market participants looked to a nine month transition to enable them to be well- prepared for commencement of new services. On the current compressed time line, only seven months would be allowed. If that and other steps in the current timetable were delayed, the Ministry would face the need to negotiate yet another extension to existing contracts in circumstances where Mr Meffan implies the Ministry’s negotiating position would be weak. The existing contractors would know that replacements could not be in place and could negotiate for more favourable conditions. He instanced that the existing operators’ bargaining position in December 2019 enabled them to achieve a six per cent uplift in payments for 2021.
[48] Mr Meffan considers it untenable to have a change to new contracts during any school term, so that the least movement of the commencement date would have to be from January to May 2022.
[49] Mr Meffan also cited a wider public interest in being able to negotiate new conditions for contracts as soon as possible. A relevant term from the Ministry’s perspective is the age of buses being used in carrying out the services. The present maximum age of vehicles is 26 years and there are safety and emissions concerns justifying the Ministry’s attempts to reduce that maximum permitted age.
[50] Mr Meffan disputed the extent of wasted effort that would result if contenders for contracts in the first tender round had to complete submissions on a basis that was subsequently altered. He made the point that round two of the tenders is only scheduled to go live in October 2020, and that the majority, at least of medium and large operators, are expected to focus on that second round.
[51] These competing positions on the balance of convenience are relatively finely balanced. In the end, I decided that preservation of the Ministry’s position was marginally more deserving than that of BCA. If BCA obtains substantive relief, then the Ministry would inevitably have to re-take steps that rendered the present timetable unachievable. Granting interim relief would also cause that consequence, which would be out of proportion to the prospects of success, if BCA does not prevail substantively.
[52] On the other hand, the extent of effort expended in the period of, say, four of the six weeks during which the first round tender is to be open, at least parts of which would be rendered unnecessary if substantive relief were granted, weighs somewhat more lightly in the balance.
[53] Accordingly, whilst I entertained the prospect of a prima facie or tenable claim for substantive relief, it was not of sufficient strength to alter my assessment on the balance of convenience, which marginally favoured the Ministry.
[54]For these reasons, I declined the application for interim orders.
[55] I am advised that the discontinuance is to be made on the basis that there is no issue as to costs.
Dobson J
Solicitors:
Chen Palmer, Auckland for applicant
Russell McVeagh, Wellington for respondents
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