BUS AND COACH ASSOCIATION (NEW ZEALAND) INCORPORATED v ATTORNEY-GENERAL [2020] NZHC 1559

BUS AND COACH ASSOCIATION (NEW ZEALAND) INCORPORATED v ATTORNEY-GENERAL [2020]NZHC 1559 [3 July 2020]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2020-485-321[2020] NZHC 1559BETWEEN BUS AND COACH ASSOCIATION(NEW ZEALAND) INCORPORATEDApplicantAND ATTORNEY-GENERALFirst RespondentSECRETARY OF EDUCATIONSecond RespondentHearing: 26 June 2020Counsel: M Chen and C J Saunders for applicant (via AVL)C J Curran, C M Marks and M W McMenamin for respondentsJudgment: 26 June 2020Reasons: 3 July 2020JUDGMENT OF DOBSON J[Reasons for declining interim orders]The proceedings[1] The applicant (BCA) is an incorporated society that represents operators in thebus and coach sector, including those providing school transport services. It claims torepresent over 90 per cent of businesses conducting school bus services throughoutNew Zealand.[2] On 25 June 2020, BCA commenced proceedings seeking judicial review of adecision it alleges to have been made by both Ministers of Transport and Education toproceed with a round of tenders for provision of school bus services. The provisionof such services is a responsibility assumed by the Ministry of Education (theMinistry). During May 2020, public notice was given of the Ministry's intention toinvite tenders in two separate processes. The first round of tenders is intended to caterfor small-scale operators and, after the outcome of that tender is known, a secondtender is contemplated for larger-scale operators for the balance of school bus serviceoperations. Operators who entered into an agreement with the Ministry as a result ofthe 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 ElectronicTender Service (GETS) website. In or about the third week of May 2020, the Ministryconfirmed via GETS that the first round of tenders would open in the week beginning29 June 2020, allowing those wishing to submit proposals a period of some six weeksin which to do so.[4] BCA considers the two tender approach to be seriously flawed, and contrary tothe interests of its members and the sectors of the public that school bus services areintended to cater for. BCA claims that the design of tenders for the forthcomingcontracts for school bus services was intended to be the subject of meaningfulconsultation with it, but that such consultation has not occurred. Further, that theMinistry is insisting on proceeding with the two tender process despite BCA's protestsat the lack of meaningful consultation and the substantive deficiencies in the design ofthe tenders.[5] Having exhausted attempts to persuade the Ministry to reconsider the form ofthe tenders, or at least defer the commencement of the first round, these proceedingswere commenced as a matter of extreme urgency. Interim orders were sought for adeclaration under s 15(2)(a) of the Judicial Review Procedure Act 2016 in terms thatthe Secretary for Education ought not to "go live" to the market in the week beginning29 June 2020 with the request for proposals for school bus services based on the twotender process, and that the "go live" date should be deferred until the substantiveproceedings had been determined.[6] The proceedings were brought against the Attorney-General, who is sued onbehalf of the Minister of Education and the Minister of Economic Development andTransport in their capacities as the ministers responsible for the decision to adopt andapprove the two tender process. The proceedings are also brought against theSecretary for Education, which position is occupied by the chief executive of theMinistry.[7] BCA pressed for an urgent hearing. Substantial affidavits in support of BCA'sclaims, and an extensive response from Mr James Meffan, the project directorcontracted to the Ministry to supervise school bus procurement, were available to meby the commencement of the hearing at 10.00 am on 26 June 2020.1 After hearingcounsel until 1.20 pm, I acknowledged that a decision on the interim orders applicationwas required that day, and at the end of 26 June 2020 I issued a results judgmentdismissing 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 hadto form views on the considerations relevant to a grant of interim orders. Thesereasons for that decision were still in an embryonic state when I was advised on themorning of 29 June 2020 that the substantive judicial review application would not bepursued, and thereafter the proceeding was discontinued.[9] Notwithstanding that the application is not proceeding, and in deference to thequality of the arguments marshalled at such short notice, it remains appropriate torecord the reasons for dismissing the interim application. In the circumstances, I amdoing so inevitably in provisional terms when addressing the pleaded grounds forreview.[10] A material consideration in assessing the competing positions of the partieswas that the Court was able to offer a fixture for the substantive hearing of the judicialreview application on 8 and, if necessary, 9 July 2020. That would be only part-waythrough the period provided by the Ministry for responses to the first round of tenders.Counsel indicated their preparedness to have the substantive issues prepared forhearing by that time.1 The deponents for BCA were Mr Barry Kidd, its former chief executive, Dr Pim Borren, itspresent chief executive, and Mr Ian Turner, a consultant for the public transport industry whodeposed as an expert.The background to the relationship between the parties[11] The last nationwide procurement process for school bus services took placebetween 2006 and 2008, leading to contracts for those services beginning in January2009. The contracts offered then were for six year terms with two rights of three yearrenewals. Extensions to them have taken place, to have them expiring at the end of2021.[12] Complaints about that process led to a report by the Auditor-General, whoconsidered that consultation had been undertaken with interested stakeholders.[13] In late 2017, the Ministry started on consultation for the design of a newprocess for procuring school bus services. A steering committee met regularlybetween early 2018 and mid-2019. In addition to contributors from variousgovernment agencies, the then chief executive of BCA, Mr Barry Kidd, became amember of that steering committee.[14] By August 2019, a set of proposals had been progressed by the Ministry to apoint that gave BCA concerns as to the impact of proposed terms, particularly onsmall-scale school bus operators.[15] In September 2019, Mr Kidd met with the Minister of Economic Developmentand Transport to discuss BCA's concerns about the proposed terms for theforthcoming tender. After that meeting, Mr Meffan contacted Mr Kidd and stated thatthe Ministry was keen to gain feedback on a number of changes to the currentcontractual arrangements that were to be implemented through the forthcoming tender.Proposed contractual terms were discussed by Ministry personnel with industryrepresentatives 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 wasconsidering significant changes when no warning of them had been given at the recentworkshops, and that the feedback on such changes was not positive.[16] BCA sought and was granted a meeting with the Minister of Education and theAssociate Minister of Transport on 17 October 2019. Mr Kidd and the policy managerat 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 tenderprocess that was then proposed should proceed in the near future.[17] After the meeting, it became apparent that the previous timetable for the tenderhad been stopped as no invitations to tender progressed during October 2019. BCAunderstood 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 theMinistry was listening to industry feedback and that it would be in contact withsuppliers in due course.[19] On 29 November 2019, Ms Delaney Myers, the group manager for schooltransport at the Ministry, wrote to Dr Borren, who had recently taken over fromMr 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 designand avoid a rushed process in implementation, we want to extend the currentcontracts.[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 weplan the procurement of the next school bus contracts. Due to the industrylobbying, 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 furthercommunication on 4 December 2019:We, too, are committed to rebuilding trust and re-establishing a collaborativerelationship working in good faith [with the BCA].[22] On 16 March 2020, Dr Borren was given a further assurance in an email fromMr Meffan that there would be engagement on topics relevant to the procurement ofschool bus services. In early April 2020, Mr Meffan cited the disruption of theCOVID-19 pandemic as a reason for lack of consultation and reiterated the need tore-engage with the industry.[23] On 8 May 2020, Mr Meffan disclosed to Dr Borren for the first time the twotender approach, which, from BCA's perspective, was entirely novel. Dr Borren'sinitial reaction was that it would cause disquiet and Mr Meffan provided furtherassurance that there would be further opportunity "to consider the details of ourapproach and offer feedback in the coming weeks".[24] On 18 May 2020, the Ministry provided further details and indicated aprovisional tender "go live" date of early June 2020. From that point, BCA protestedat the inadequacy of opportunity to consult about the form of the tenders and theMinistry defended the adequacy of the dialogue that had occurred. It transpired thatthe Ministers of Education and Transport had given approval for a split process forcontracts 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, onconcerns that there would otherwise be inadequate time available to settle newarrangements pursuant to the process it had designed before expiry of the latestextension of the current contract in December 2021.Extent of consultation[26] Further levels of detail than those able to be traversed at the urgent hearingwould be necessary to consider the Ministry's response that the two tender proposalwas designed in response to concerns raised by BCA for the interests of small andmedium-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 theextent of consultations contemplated in the assurances provided on behalf of theMinistry, and the lack of warning of this critical feature in information provided toBCA for the extent of engagement that did occur between November 2019 and earlyMay 2020.[27] For the respondents, Mr Curran rejected any notion that the Ministry could beheld to any assurances provided of a materially greater extent of consultation thanoccurred. I was not persuaded by his point that Ms Myers did not have authority tocommit the Ministry to any particular consultation process. She was the author of theNovember 2019 assurances of consultation relied upon and is the supervisor ofMr Meffan's work and the person to whom he reported.[28] In his affidavit, Mr Meffan deposed that it was critical the process had neverinvolved any promise to undertake a formal consultation exercise, and that such wasnot required under s 139D of the Education Act 1989. He characterises thedescriptions of dealings between the parties in Mr Kidd's and Dr Borren's affidavitsas implicitly accepting that there was no promise or undertaking to conduct a formalconsultation exercise. I would not accept that the lack of a commitment to aconsultation undertaken on a formal basis would be fatal to BCA's claim of a breachof a legitimate expectation. Further, I would also have doubts that the complaintscould be answered by contending that the two tender process was designed to meetBCA's earlier concerns, and that the extent of consultation that has occurred was inany event sufficient to meet assurances that consultation would occur.[29] My provisional view is that BCA clearly had tenable grounds for complainingthat the Ministry failed to comply with numerous assurances that it would undertakemeaningful consultation on the consequences for BCA members of the terms on whichtenders for school bus services were to occur. Meaningful consultation could onlyoccur after BCA representatives were given sufficient detail of what was proposed toconsider 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 thedecision-maker to consult. That distinguishes it from cases where that feature arises.[31] Mr Curran characterised the relevant conduct as a part of a procurementprocess on behalf of a Crown agency that is, as a matter of law, free of any public lawoverlay that might trigger administrative law obligations. He submitted that the Courtof Appeal's analysis in Attorney-General v Problem Gambling Foundation ofNew Zealand is a complete answer to any attempt to challenge the conduct of agovernment agency in a tendering process.2[32] Ms Chen submitted that the context in which the Problem Gamblingapplication for judicial review arose was distinguishable from the present case. Shesubmitted that the present was a very strong case of legitimate expectation of theconduct of public officials. BCA holds an important position as the industry grouprepresenting over 90 per cent of school bus operators. Given the context in whichresponsible representatives of the Ministry provided explicit assurances of meaningfulconsultation, BCA and its members were entitled to expect that a decision on thedesign of the tender process would not be made without meaningful consultationoccurring. Ms Chen was inclined to accept the essence of her argument as an analogywith some form of public law estoppel.[33] In Problem Gambling, the Foundation that was the applicant for reviewcommenced proceedings after a procurement process by the Ministry of Health(MOH) to contract out psycho-social intervention services for problem gamblers hadresulted in the Foundation having a substantially reduced contract for the provision ofservices. Its complaints included that the MOH had not evaluated proposals submittedto it in accordance with the processes and criteria in its request for proposals, whichbreached the Foundation's legitimate expectation. The Foundation also claimed thatMOH's evaluation was flawed because it was based on unreliable information andfindings, 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. TheAttorney-General appealed to the Court of Appeal, which reversed the outcome on anumber of grounds. The Court of Appeal considered the relative scope of review asdepending upon context. In that case, the scope was narrow and restricted tointervention for fraud, corruption, bad faith or situations analogous to those. Thecontext was the course of a procurement process by a Crown agency, in which thescope of review would be narrow unless the context indicated a need for broader2 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 theinterests sought to be protected by the applicant for review.[35] The Court of Appeal held that breach of a legitimate expectation or ofmandatory rules for procurement were not available as grounds of review. On thefacts, the Foundation could not have a legitimate expectation that their proposal wouldbe evaluated according to certain criteria to which the decision-maker could not beconfined. It was relevant that the mandatory rules for procurement applying to Crownagencies had not been breached.[36] The Court of Appeal adopted criteria from an earlier decision as to therequirements for making out legitimate expectation:4[112] To found a claim of breach of legitimate expectation, the Foundationhad to meet the criteria espoused by this Court in Comptroller of Customs vTerminals (NZ) Ltd:[125] Where legitimate expectation is raised, the inquiry generallyhas three steps. The first is to establish the nature of the commitmentmade by the public authority whether by a promise or settled practiceor policy. This is a question of fact to be determined by reference toall the surrounding circumstances. A promise or practice that isambiguous in nature is unlikely to be treated as giving rise to alegitimate expectation in administrative law terms.[126] The second is to determine whether the plaintiff's reliance onthe promise or practice in question is legitimate. This involves aninquiry as to whether any such reliance was reasonable in the contextin which it was given.[127] The third, and often most difficult part of the inquiry, is todecide what remedy, if any, should be provided if a legitimateexpectation is established.[37] In challenging the existence of a tenable cause of action, Mr Curran submittedthat BCA could not satisfy those three requirements. However, I did consider thatthere are tenable grounds on which BCA could bring itself within those threerequirements. The course of conduct by Ms Myers and Mr Meffan, whose positionswithin or for the Ministry might reasonably entitle BCA to attribute their statements4 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, couldarguably constitute a sufficient commitment to meet the first requirement.[38] The requisite extent of reliance on the assurances of consultation would requirefurther argument. Provisionally, it appeared that members of BCA, whilst havingdifferent interests in the preferable form of tender (for example as between small andlarge-scale operators) were substantially supportive of BCA's concerns that thesequential two tender process was not the optimum process for either potentialproviders of the services, or the range of those interested in the quality of services tobe provided for school transport.[39] The matter of remedy, being the third requirement for breach of legitimateexpectation, was presented differently to the circumstances of the Foundation inProblem Gambling. There, it was one of a substantial number of potential tendererswhich was seeking relief after being disappointed at the outcome of the process. Incontrast, BCA is an industry group concerned to have the Ministry consider its viewson the preferable format or design of the tender process before it is undertaken. Therelief urged by Ms Chen was a further delay in the tendering process until theconsultation BCA had contemplated prior to commencement of the tender process hadoccurred.[40] During the hearing, I invited Ms Chen to provide authority for the propositionthat 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 outthe promised consultation. Shortly after the conclusion of the hearing, I received aninformal note from Ms Chen's firm, setting out a sequence of decisions which BCAwould rely on in its substantive argument for relief.5[41] Some of the decisions cited did not arise in similar contexts where Crownagencies were tendering for procurement of commercial services. Some of thepassages cited might support Ms Chen's argument to distinguish the terms on which5 Moncrief-Spittle v Regional Facilities Auckland Ltd [2019] NZHC 2399 at [28]–[29]; Skills ActiveAotearoa 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 legitimateexpectation about consultation providing a ground for review of a tendering processundertaken by a Crown agency.[42] On balance, I considered that BCA had tenable grounds for claiming thatassurances of consultation about the form of tender were provided by Ministrypersonnel and in terms and circumstances that could give rise to a legitimateexpectation on BCA's part.[43] I also acknowledge some prospect for BCA to distinguish the Court ofAppeal's reasoning in Problem Gambling that would otherwise exclude the prospectsof judicial review of the conduct of a Crown agency in its conduct of a commercialprocurement undertaking. Whilst tenable, I did not rank this prospect as a particularlystrong one.Preservation of the parties' present positions[44] The opinion of Mr Ian Turner, a consultant for the public transport industrywith sufficient experience in the operation of school bus services to opine on it, is thatthe proposed form of tenders will be seriously detrimental to school bus operators, inparticular small and medium-sized businesses. I am mindful that the Ministry had noopportunity to present a contrary view to Mr Turner's, advanced at short notice onbehalf of BCA.[45] More generally, Ms Chen emphasised the extent of wasted effort that would beundertaken if school bus operators have to complete the detailed work required todecide whether they tender for the limited services on offer in the first round oftendering, or hold back for the second round. Small and medium-sized operatorswould need to consider the prospect of business allegiances with others, and verysubstantial work on what, at least for some, might be critical to the survival of theirbusiness would have to be undertaken. All that work would arguably be unnecessaryif substantive relief is granted. It would be speculative to attempt to quantify the extentof work done in the context of the presently proposed tender that would still haveutility for prospective tenderers' response to invitations to tender on different terms.[46] Mr Meffan assessed the adverse consequences for the respondents if interimorders were made that required a delay in the tendering process on the assumption thatthe substantive result would not be likely before October 2020. I assessed his concernsagainst the much shorter period that would have pertained, given my indication tocounsel that I would endeavour to provide a prompt substantive decision after ahearing on 8 and 9 July 2020.[47] Mr Meffan deposed that a relatively lengthy transitional period is desired bythe market between final allocation of contracts and their commencement. He statedthat 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 timetablewere delayed, the Ministry would face the need to negotiate yet another extension toexisting contracts in circumstances where Mr Meffan implies the Ministry'snegotiating position would be weak. The existing contractors would know thatreplacements could not be in place and could negotiate for more favourable conditions.He instanced that the existing operators' bargaining position in December 2019enabled 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 anyschool term, so that the least movement of the commencement date would have to befrom January to May 2022.[49] Mr Meffan also cited a wider public interest in being able to negotiate newconditions for contracts as soon as possible. A relevant term from the Ministry'sperspective is the age of buses being used in carrying out the services. The presentmaximum age of vehicles is 26 years and there are safety and emissions concernsjustifying the Ministry's attempts to reduce that maximum permitted age.[50] Mr Meffan disputed the extent of wasted effort that would result if contendersfor contracts in the first tender round had to complete submissions on a basis that wassubsequently altered. He made the point that round two of the tenders is onlyscheduled to go live in October 2020, and that the majority, at least of medium andlarge operators, are expected to focus on that second round.[51] These competing positions on the balance of convenience are relatively finelybalanced. In the end, I decided that preservation of the Ministry's position wasmarginally more deserving than that of BCA. If BCA obtains substantive relief, thenthe Ministry would inevitably have to re-take steps that rendered the present timetableunachievable. Granting interim relief would also cause that consequence, whichwould be out of proportion to the prospects of success, if BCA does not prevailsubstantively.[52] On the other hand, the extent of effort expended in the period of, say, four ofthe six weeks during which the first round tender is to be open, at least parts of whichwould be rendered unnecessary if substantive relief were granted, weighs somewhatmore lightly in the balance.[53] Accordingly, whilst I entertained the prospect of a prima facie or tenable claimfor substantive relief, it was not of sufficient strength to alter my assessment on thebalance 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 noissue as to costs.Dobson JSolicitors:Chen Palmer, Auckland for applicantRussell McVeagh, Wellington for respondents