Date: 20000512
Docket: T-2034-91
Ottawa, Ontario, this 12th day of May 2000
PRESENT: THE HONOURABLE MR. JUSTICE PELLETIER
BETWEEN:
TREVOR NICHOLAS CONSTRUCTION CO. LIMITED
Plaintiff
- and -
HER MAJESTY THE QUEEN
AS REPRESENTED BY THE MINISTER FOR PUBLIC WORKS CANADA
Defendant
REASONS FOR ORDER AND ORDER
PELLETIER J.
[1] The Defendant, Her Majesty the Queen, as represented by the Minister of Public Works Canada ("the Crown") brings a motion for summary judgment, seeking to dismiss the action of the plaintiff, Trevor Nicholas Construction Co. Limited ("Trevor Nicholas"). Trevor Nicholas sued the Crown when it was not awarded a construction contract for which it submitted the lowest tender. This motion requires consideration of the decision of the Supreme Court of Canada in Ontario v. Ron Engineering and Construction (Eastern) Ltd. [1981] 1 S.C.R. 111, (1981) 35 N.R. 40, in the light of the Supreme Court"s more recent treatment of the same issue in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. [1999] 1 S.C.R. 619, [1999] S.C.J. No. 17.
[2] Trevor Nicholas is a relatively small contractor whose directing mind is John Susin. Mr. Susin represented Trevor Nicholas by special leave of the Court. Trevor Nicholas submitted a tender for the dredging and construction of a marine service dock at Meaford, Ontario. The project was tendered upon standardized terms and conditions, which will be set out presently. The competition was to close October 18, 1990. On October 24, 1990, an official of the Crown had a telephone conversation with each of the bidders to discuss their proposed construction methods. As a result of this and other information in the hands of the Crown, the decision was made to award the contract to the second lowest bidder. Trevor Nicholas then launched this action, relying upon the analysis contained in Ron Engineering, supra, and those cases which followed it.
[3] The tender documents consisted of an Invitation to Tender, a Notice to Tenderers, Instructions to Tenderers, a Tender Form including four appendices, a copy of the form of contract to be entered into by the successful candidate, the General Conditions of the Contract and applicable special conditions, the Contract Specifications and the Geophysical Investigation of the site. The Invitation to Tender advised that tenders would be received for the project as described at the time and place set out in the Invitation. The Invitation concluded with the following sentence: "The lowest or any tender not necessarily accepted".
[4] The Instructions to Tenderers contained detailed instructions to tenderers and potential tenderers as to the preparation and content of their tender. It stipulated, among other things:
| - the tender must be submitted on the form provided. No substitutes would be accepted. |
| - the tender must be received at the office designated for receipt of tenders on or before the date set for tender closing. Late tenders would be returned. |
| - the tender can be revised providing the revision is received prior to the time set for the tender closing. |
| - where materials are specified by trade names or manufacturers" name, the tender is to be based upon those materials, unless alternate materials are approved and the particulars made known to all tenderers by addendum. |
| - dredges and other floating plant must be of Canadian registry or be the subject of a certificate of qualification from Industry Science and Technology Canada. The certificate must accompany the tender. |
| - the lowest or any tender not necessarily accepted ("the privilege clause"). |
[5] The balance of the contract documents were relatively standard. Nothing turns upon their particular terms.
[6] When the tenders were opened, the low tender was submitted by Trevor Nicholas in the amount of $322,018. The second lowest bid was in the amount of $326,395. The Departmental official responsible for assessing the bids recommended that the contract be awarded to the second lowest tender which is what ultimately occurred.
[7] In recommending that the contract be awarded to the second lowest tenderer, the Crown relied upon its evaluation of Trevor Nicholas"s tender. That evaluation was critical of the Trevor Nicholas" tender for the following reasons:
| - the barge shown as being used by Trevor Nicholas was considered to be in poor condition and questions existed as to its ability to do the job. |
| - the methodology proposed by Trevor Nicholas was not consistent with that contemplated by the Crown. The Crown assumed that the harbour would be dredged and the material hauled away. Trevor Nicholas proposed to construct a dyke across the mouth of the basin, pump the basin dry and excavate the basin in the dry. The Crown doubted that the dyke contemplated by Trevor Nicholas would be sufficient to allow the basin to be pumped dry and kept dry. |
| - John Susin, the directing mind of Trevor Nicholas was considered to have little dredging experience and had another contract taken away from him in that construction season. |
[8] Trevor Nicholas" position is that the evaluation of its bid was seriously flawed for the following reasons:
| - its proposal contemplated the construction of a watertight dyke and not a stone breakwater as described by the Crown. The dyke would be adequate to permit effective dewatering of the basin. |
| - Trevor Nicholas" proposal did not depend upon the use of the barge shown in its tender documents as a dragline and operator would be hired to construct the dyke. |
| - in any event, the barge had been repaired and was capable of doing the job, in the opinion of a marine surveyor. |
| - the Crown ought to have discussed Trevor Nicholas" methodology with John Susin if it was not satisfied that it was practical. |
[9] On August 6, 1991, Trevor Nicholas caused a Statement of Claim to be issued against the Crown alleging that the Crown treated Trevor Nicholas unfairly, that the delivery of a fully qualified tender constitutes a contract between the plaintiff and the defendant, and that the Crown had breached an implied term of that contract, that the contract would be awarded to the lowest qualified bidder. In its defence, the Crown relied upon the privilege clause, put into question Trevor Nicholas" proposed equipment and methodology as well as its competence to do the job.
[10] Both parties rely upon the decision of the Supreme Court of Canada in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. in support of their position. Mr. Justice Iacobucci, writing for the Court, framed the issue in M.J.B., supra in the first paragraph of that case which reads as follows:
| The central issue in this appeal is whether the inclusion of a "privilege clause" in the tender documents allows the person calling for tenders (the "owner") to disregard the lowest bid in favour of any other tender, including a non-compliant one. The leading Canadian case on the law of tenders is R. in Right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, which concerned the obligations of a contractor who submitted a bid in response to a call for tenders. This Court held that, upon the submission of this tender, a contract arose between the contractor and the owner in that case and imposed certain obligations upon the contractor. The contract, referred to as "Contract A", was distinguished from the construction contract, "Contract B", to be entered into if the tender was accepted. Contract A imposed certain obligations upon the contractor. The present appeal instead asks whether Contract A arose in this case and what obligations, if any, it imposes on the owner. It is the contention of M.J.B. Enterprises Ltd. (the "appellant") that in the circumstances of this case Defence Construction (1951) Limited (the "respondent") was obligated to accept the lowest valid tender. The respondent argues that the privilege clause precludes the finding of such an obligation. |
[11] Iacobucci J. began his analysis by reviewing Ron Engineering, supra and concluded that it had been given too expansive a reading in many of the cases which considered it:
| The submissions of the parties in the present appeal appear to suggest that Ron Engineering stands for the proposition that Contract A is always formed upon the submission of a tender and that a term of this contract is the irrevocability of the tender; indeed, most lower courts have interpreted Ron Engineering in this manner ... Therefore it is always possible that Contract A does not arise upon the submission of a tender, or that Contract A arises but the irrevocability of the tender is not one of its terms, all of this depending upon the terms and conditions of the tender call. To the extent that Ron Engineering suggests otherwise, I decline to follow it. |
[12] The result of Iacobucci J."s analysis, and the principle of general application arising from the M.J.B. case supra, is the following:
| What is important, therefore, is that the submission of a tender in response to an invitation to tender may give rise to contractual obligations, quite apart from the obligations associated with the construction contract to be entered into upon the acceptance of a tender, depending upon whether the parties intend to initiate contractual relations by the submission of a bid. If such a contract arises, its terms are governed by the terms and conditions of the tender call. |
[13] It follows then that to determine whether the submission of a tender gave rise to legal rights and obligations between the parties, one must look to the "terms and conditions of the tender call". Such obligations do not arise as a matter of law, nor are the nature of those obligations, if created, found anywhere other than in the "terms and conditions of the tender call".
[14] On the facts before him, Iacobucci J. found that the submission of a tender in response to a call for tenders did give rise to contractual obligations:
| In the present case I am persuaded that this was the intention of the parties. At a minimum, the respondent offered, in inviting tenders through a formal tendering process involving complex documentation and terms, to consider bids for Contract B. In submitting its tender, the appellant accepted this offer. The submission of the tender is good consideration for the respondent's promise, as the tender was a benefit to the respondent, prepared at a not insignificant cost to the appellant, and accompanied by the Bid Security. |
[15] In my respectful submission, the effect of this analysis is to arrive at the same point as did Estey J. in Ron Engineering, supra which is that a contract is formed by the fact of submitting a tender. In any commercial tendering situation, there will be reliance upon complex standardized tender documents and an expense incurred by the tenderer in preparing his/her tender. While this is a matter of fact, as opposed to necessary legal implication, the facts are so ubiquitous that the result is the same1. This result is perhaps driven by the desire to maintain the irrevocability of tenders, a result which can most easily be achieved within a "Contract A" analysis. It may be that irrevocability can only be achieved by an exchange of consideration, a promise for a promise. The tenderer"s promise to not revoke his tender must be supported by consideration from the owner; hence the promise to consider the tenders in Mr. Justice Iacobucci"s analysis.
[16] Having found that a contract was created by the submission of the tender, Iacobucci J. then examined the tender documents to determine the obligations assumed by both parties under that contract. He found that there was no explicit term that the contract would be awarded to the lowest compliant bidder. However, he did find an implied term based on the presumed intention of the parties that the owner would consider only bids which complied with all the requirements of the tender documents. He came to this conclusion after noting the terms of the tender documents which purported to invalidate a tender for non-compliance:
| - tenders received after the specified closing date; |
| - tenders not submitted on the tender form; |
| - tenders consisting of more than the tender form and the bid security; |
| - tender forms which have been altered or not filled in completely; |
| - tenders based upon materials other than those specified. |
[17] Iacobucci J. also considered the effect of the tenderer"s certification that he/she has satisfied himself/herself as to site conditions, and examined the drawings and specifications, acknowledge that their failure to do so will not relieve them from the obligation to enter into a construction contract if their tender is selected.
[18] Iacobucci J. concluded from the terms mentioned above, and others not repeated here, that there was a clear intention to accept only compliant bids, that is bids which complied with the requirements of the tender documents since the repeated references to invalidity would be meaningless if the owner were nevertheless free to select bids which did not comply.
[19] Finally Iacobucci J. examined the relationship of the privilege clause to the implied term that the owner would only consider compliant bids. He found that the privilege clause did not operate to override the implied term as to compliant bids. He found a consistency of purpose in the two terms in that they were both operated to produce standardized bids from which the owner could select that compliant bid which was most advantageous to the owner, taking into account factors other than the bald bid price. He found that while the privilege clause did not require the owner to select the lowest compliant bid, it did not allow the owner to select a non-compliant bid. Support for this conclusion was then found in the evidence adduced at the trial of the action.
[20] As a result, one can say that the law following M.J.B., supra is that it is a question of construction whether the submission of a tender in response to an invitation to tender creates contractual obligations between the parties. If it does, the nature of those obligations is defined by the terms of the tender documents themselves. The effect of the privilege clause is to be determined by reference to those same documents.
[21] Before applying these principles to these facts, I pause to note that this is an application for summary judgment. Summary judgment applications are governed by Rules 213 to 219 of the Federal Court Rules, 1998:
| 213. (1) A plaintiff may, after the defendant has filed a defence, or earlier with leave of the Court, and at any time before the time and place for trial are fixed, bring a motion for summary judgment on all or part of the claim set out in the statement of claim. Where available to defendant (2) A defendant may, after serving and filing a defence and at any time before the time and place for trial are fixed, bring a motion for summary judgment dismissing all or part of the claim set out in the statement of claim. 214. (1) A party may bring a motion for summary judgment in an action by serving and filing a notice of motion and motion record at least 20 days before the day set out in the notice for the hearing of the motion. (2) A party served with a motion for summary judgment shall serve and file a respondent's motion record not later than 10 days before the day set out in the notice of motion for the hearing of the motion. 215. A response to a motion for summary judgment shall not rest merely on allegations or denials of the pleadings of the moving party, but must set out specific facts showing that there is a genuine issue for trial. 216. (1) Where on a motion for summary judgment the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant summary judgment accordingly. (2) Where on a motion for summary judgment the Court is satisfied that the only genuine issue is (a) the amount to which the moving party is entitled, the Court may order a trial of that issue or grant summary judgment with a reference under rule 153 to determine the amount; or (b) a question of law, the Court may determine the question and grant summary judgment accordingly. (3) Where on a motion for summary judgment the Court decides that there is a genuine issue with respect to a claim or defence, the Court may nevertheless grant summary judgment in favour of any party, either on an issue or generally, if the Court is able on the whole of the evidence to find the facts necessary to decide the questions of fact and law. (4) Where a motion for summary judgment is dismissed in whole or in part, the Court may order the action, or the issues in the action not disposed of by summary judgment, to proceed to trial in the usual way or order that the action be conducted as a specially managed proceeding. 217. A plaintiff who obtains summary judgment under these Rules may proceed against the same defendant for any other relief and against any other defendant for the same or any other relief. |
| 218. Where summary judgment is refused or is granted only in part, the Court may make an order specifying which material facts are not in dispute and defining the issues to be tried, including an order (a) for payment into court of all or part of the claim; (b) for security for costs; or (c) limiting the nature and scope of the examination for discovery to matters not covered by the affidavits filed on the motion for summary judgment or by any cross-examination on them and providing for their use at trial in the same manner as an examination for discovery. 219. In making an order for summary judgment, the Court may order that enforcement of the summary judgment be stayed pending the determination of any other issue in the action or in a counterclaim or third party claim. |
213. (1) Le demandeur peut, après le dépôt de la défense du défendeur " ou avant si la Cour l'autorise " et avant que l'heure, la date et le lieu de l'instruction soient fixés, présenter une requête pour obtenir un jugement sommaire sur tout ou partie de la réclamation contenue dans la déclaration. (2) Le défendeur peut, après avoir signifié et déposé sa défense et avant que l'heure, la date et le lieu de l'instruction soient fixés, présenter une requête pour obtenir un jugement sommaire rejetant tout ou partie de la réclamation contenue dans la déclaration. 214. (1) Toute partie peut présenter une requête pour obtenir un jugement sommaire dans une action en signifiant et en déposant un avis de requête et un dossier de requête au moins 20 jours avant la date de l'audition de la requête indiquée dans l'avis. (2) La partie qui reçoit signification d'une requête en jugement sommaire signifie et dépose un dossier de réponse au moins 10 jours avant la date de l'audition de la requête indiquée dans l'avis de requête. 215. La réponse à une requête en jugement sommaire ne peut être fondée uniquement sur les allégations ou les dénégations contenues dans les actes de procédure déposés par le requérant. Elle doit plutôt énoncer les faits précis démontrant l'existence d'une véritable question litigieuse. 216. (1) Lorsque, par suite d'une requête en jugement sommaire, la Cour est convaincue qu'il n'existe pas de véritable question litigieuse quant à une déclaration ou à une défense, elle rend un jugement sommaire en conséquence. (2) Lorsque, par suite d'une requête en jugement sommaire, la Cour est convaincue que la seule véritable question litigieuse est : a) le montant auquel le requérant a droit, elle peut ordonner l'instruction de la question ou rendre un jugement sommaire assorti d'un renvoi pour détermination du montant conformément à la règle 153; b) un point de droit, elle peut statuer sur celui-ci et rendre un jugement sommaire en conséquence. (3) Lorsque, par suite d'une requête en jugement sommaire, la Cour conclut qu'il existe une véritable question litigieuse à l'égard d'une déclaration ou d'une défense, elle peut néanmoins rendre un jugement sommaire en faveur d'une partie, soit sur une question particulière, soit de façon générale, si elle parvient à partir de l'ensemble de la preuve à dégager les faits nécessaires pour trancher les questions de fait et de droit. (4) Lorsque la requête en jugement sommaire est rejetée en tout ou en partie, la Cour peut ordonner que l'action ou les questions litigieuses qui ne sont pas tranchées par le jugement sommaire soient instruites de la manière habituelle ou elle peut ordonner la tenue d'une instance à gestion spéciale. 217. Le demandeur qui obtient un jugement sommaire aux termes des présentes règles peut poursuivre le même défendeur pour une autre réparation ou poursuivre tout autre défendeur pour la même ou une autre réparation. 218. Lorsqu'un jugement sommaire est refusé ou n'est accordé qu'en partie, la Cour peut, par ordonnance, préciser les faits substantiels qui ne sont pas en litige et déterminer les questions qui doivent être instruites, ainsi que : a) ordonner la consignation à la Cour d'une somme d'argent représentant la totalité ou une partie de la réclamation; b) ordonner la remise d'un cautionnement pour dépens; c) limiter la nature et l'étendue de l'interrogatoire préalable aux questions non visées par les affidavits déposés à l'appui de la requête en jugement sommaire, ou limiter la nature et l'étendue de tout contre-interrogatoire s'y rapportant, et permettre l'utilisation de ces affidavits lors de l'interrogatoire à l'instruction de la même manière qu'à l'interrogatoire préalable. 219. Lorsqu'elle rend un jugement sommaire, la Cour peut surseoir à l'exécution forcée de ce jugement jusqu'à la détermination d'une autre question soulevée dans l'action ou dans une demande reconventionnelle ou une mise en cause. |
[22] The intention of the summary judgment rules is to provide a device by which claims which have no reasonable prospect of success can be disposed of without the necessity of a trial with all of the attendant expense and delay. The Federal Court Rules, 1998 go further than many of the provincial superior court rules in that they allow the Court to issue summary judgment even where the facts may be disputed providing that the Court has sufficient material before it to permit it to make findings of fact.
[23] The principles applicable to such an application were set out by Evans J. (as he then was) in F. Von Langsdorff Licensing Ltd. v. S.F. Concrete Technology Inc., [1999] F.C.J. No. 526. Speaking of the question of the factual underpinnings of such applications, Evans J. said this:
| It seems to me that the dominant trend in the jurisprudence of this Court has been to interpret liberally the rules governing summary judgment, so that a motions judge must subject the evidence to a "hard look" in order to determine whether there are factual issues that really do require the kind of assessment and weighing of evidence that should properly be done by the trier of fact. |
[24] It is not sufficient to simply raise a potential factual issue to defeat an application for summary judgment; the judge is entitled to consider the evidence carefully to see if there really is a factual issue which would require the fact finding tools available in a trial.
[25] In this case, the facts necessary to decide the question of the contractual effect of the tender documents and the privilege clause are not contentious and consist primarily of the documents themselves.
[26] Trevor Nicholas" pleading contains three paragraphs which are fundamental to its position:
11. The defendant has treated the plaintiff unfairly.
| 12. The delivery of a fully qualified low tender constitutes a contract between the defendant and the plaintiff. |
| 13. The defendant breached an implied term of that contract, that the contract would be awarded to the lowest qualified bidder. |
[27] I will return to the question of fairness. The allegation in paragraph 12 goes to the question of "Contract A" while the allegation in paragraph 13 goes to the content of "Contract A". If either of these paragraphs is wrong in law, the argument based on "Contract A" fails.
[28] In this case, the Crown invited tenders from contractors using standardized documents of some complexity. While there is no evidence as to the effort or expense involved in the preparation of Trevor Nicholas" tender, it is a matter of inference that it did require an expenditure of effort to complete the tender. The Instructions to Tenderers require that bid security be submitted along with the tender document. Once again, there is no evidence as to the cost of providing that security but it is also a matter of inference that there is a cost associated with it. The facts of the submission of the tender are on all fours with the factors identified by Iacobucci J. in concluding that a contract was formed by the submission of a tender in response to an invitation to tender. On that basis, I believe I must find that a contract arose between the Crown and Trevor Nicholas upon the submission of a tender by the latter in response to the former"s Invitation to Tender.
[29] The next question becomes the content of that contract. Trevor Nicholas says that it includes a term that the contract will be awarded to the lowest qualified bidder. An analysis of the terms of the Invitation to Tender does not lead to that conclusion. The only term of the contract which deals explicitly with the question of the award reserves to the Crown the right not to award the contract to the lowest tender. It may be that there is a qualification to this term with respect to acceptance of non-compliant tenders, as there was in M.J.B. Enterprises, supra, but since there is no question that the tender ultimately chosen was compliant, this is not determinative of the action. It is trite law that one cannot imply a term to contradict an express term of a contract. See B.P. Refinery (Westernport) Pty Ltd. v. Shire of Hastings (1977), 16 A.L.R. 363 (P.C.) at p. 376 cited in London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1990) 70 D.L.R. (4th) 51 (B.C.C.A.) 45 B.C.L.R. (2d) 1 (1990). Since there is no distinction to be drawn between the two bids on the basis of compliance with the terms of the tender, the only implied term which would assist Trevor Nicholas is one which required the Crown to award the tender to the lowest bidder, which would contradict the express term of the contract by which the Crown is not obligated to award the contract to the lowest tender. As a result, the action cannot succeed on this ground.
[30] At the hearing of this motion, Trevor Nicholas requested leave to amend its claim to plead that the defendant had breached "Contract A". I declined to allow the amendment on grounds of timeliness. In the end result, the amendment would not change the outcome since I have decided that there was no term of contract which was breached.
[31] If that were the extent of Trevor Nicholas" plea, the action would have to be dismissed. But Trevor Nicholas has also pleaded that it was treated unfairly. In Northeast Marine Services Ltd. v. Atlantic Pilotage Authority , [1993] 1 F.C. 371 (F.C.T.D), (1992) 57 F.T.R. 81, McNair J. held that the "Contract A" before him in that case contained an implied term that the owner would treat all tenderers fairly. The Federal Court of Appeal came to the same conclusion inMartel Building Ltd. v. Canada, [1998] 4 F.C. 300, (1998) 163 D.L.R. (4th) 504. The terms of the "Contract A" in this case support the finding that there is an implied term that all tenderers will be treated alike. The support for finding such a term is the attempt within the Instructions to Tenderers to standardize the conditions of bidding as much as possible:
| - all tenders to be submitted on the tender form, without alteration of the form; |
| - all tenders to be submitted before the designated closing date; |
| - all tender submissions to be limited to the tender form and the bid security; |
| - all tenders to be based upon specified materials with approved alternates to be made known to tenderers by publication of an addendum. |
[32] The Crown"s attempt to enforce uniformity on the tenderers carries with it the implicit promise that it will deal with all of them on the same basis. It may be that this term extends to an obligation to treat all tenderers fairly.
[33] If so, this engages Trevor Nicholas" plea that it was not treated fairly. This is not a matter which I can decide on the material before me as it was not fully canvassed in argument. As a result, even though the Crown has been largely successful in its motion, it does not dispose of the action. I am therefore prepared to grant summary judgment with respect to the issue of the awarding the contract to the lowest bidder and send it on to trial on the issue of whether there is an implied term as to fair treatment, whether it was breached and if so, the quantum of damages if any. Given the Crown"s success on the motion as argued, it is entitled to its costs in any event of the cause.
[34] Following the argument of this matter, Trevor Nicholas submitted further information including an affidavit with respect to settlement of another action. The Crown objected to this material being considered. The Crown"s position is well founded. The additional material was not referred to by the Court.
ORDER
It is hereby ordered that the allegation contained in paragraph 13 of the plaintiff"s Statement of Claim is dismissed and the matter is to proceed to trial on the following issues:
| 1- Does the contract between the defendant and the plaintiff include an implied term that the plaintiff is to be treated fairly? |
2- If it does, has that term been breached?
3- If it has, what if any damages are recoverable as a result of the breach?
The defendant shall have the costs of the application for summary judgment in any event of the cause.
"J.D. Denis Pelletier"
Judge
__________________1See Fridman, The Law of Contracts (4th Edition, 1999) pp. 38-44