Test your understanding of fairness in this recent case from Nova Scotia.

In 2012, the Halifax Regional Municipality (HRM) issued an RFP for the purchase and redevelopment of a surplus elementary school property. Jono Developments Ltd. and several community groups submitted proposals. There is evidence that the HRM closely followed the terms of the evaluation process laid out in the RFP, which allocated 20 percent of the weighting to the financial offer. Following evaluations, the HRM approved sale of the property to Jono.

Around the time the sale to Jono was approved, the community groups discovered that the HRM had passed a “Policy and Procedure for Disposal of Surplus Schools” in 2000. Among other steps, the HRM was required under the policy to first assess and evaluate any proposals from community groups or grant applications and, if none were received or none were supported by the Community Grants and Partnering Program under the HRM, then the HRM was to take steps to seek Council approval to put the property on the market.

Compelling evidence was presented that the HRM had not tested the policy since its inception, and in fact was not aware that it even existed until challenged by the community groups following the approval of the sale to Jono. When the HRM became aware of the policy, which clearly had not been followed in this instance (or in any of the previous disposals of 18 other surplus school properties), the HRM rescinded its decision to sell to Jono, made a motion to rescind the policy and, then, passed a third motion to sell the property to Jono.

The HRM was also enabled under its Municipal Charter to “sell property at market value when the property is no longer required.” The appraised value of the property was listed in the RFP as $4.3 million, based on a valuation report that provided three scenarios:

• Market value of property as is: $1 million
• Prospective market value – maintain old school/redevelop remainder: $3 million
• Prospective market value – demolish all buildings and redevelop: $4.3 million

Jono had submitted an unconditional financial offer of $3 million for the property “as is,” to be increased by increments of $75,000 over the highest bid to a maximum of $4 million. In other words, Jono offered to pay $3 million if there were no competing bids, and up to $4 million if there were. Jono also provided a slightly higher option that was conditional on certain development approvals. 2 Several community groups also submitted proposals, each offering a purchase price of less than $3 million. The HRM approved the $3 million offer from Jono. As shown by the HRM’s evaluation process, Jono had received the highest score in the RFP process, in part because of its financial proposal.  

• Pursuant to a Judicial Review application by the community groups, in 2012, the N.S. Supreme Court set aside the sale to Jono on the basis that the HRM had breached its duty of fairness to the community groups by not following its own policy, and further, that the HRM’s interpretation of “market value” was unreasonable, so the HRM had breached the Charter by selling the property below market value. The Court also ordered Jono to pay a portion of the costs awarded. Jono appealed the decision, and the matter was heard by the N.S. Court of Appeal in May 2014.
• In the HRM’s view, “market value” is the price the market will offer, so it therefore believed that it was complying with the Charter. 

What would you decide in this case?

Reprinted from The Legal Edge Issue 112, October – December 2015

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.

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