Docket: T-1208-02
Ottawa, Ontario, this 26th day of November, 2004
Present: THE HONOURABLE MR. JUSTICE von FINCKENSTEIN
BETWEEN:
1243573 ONTARIO INC.
Plaintiff
and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
Defendant
REASONS FOR ORDER AND ORDER
[1] This is an action by a corporate real estate developer for breach of contract. The Plaintiff claims that the Defendant breached the contract, its duty of care, and acted in bad faith, when it invited tenders for the lease of office space, rejected the Plaintiff's tender for non-compliance, and then accepted the tender of another party for a property that the Plaintiff claims was outside of the geographic area stipulated by the Defendant.
FACTS
[2] The facts are precisely set out in the Agreed Statement of Facts which for convenience are here reproduced.
1. On or about November 14, 2001, the Defendant published in Windsor Star an advertisement titled "Information Requested on Space Available for Lease Windsor, Ontario" (the "Request for Information").
2. Public Works and Government Services Canada required approximately 2,140 usable square meters of "basic office space" for occupancy by Citizenship and Immigration Canada in Windsor, Ontario.
3. The basis office space was required for occupancy by approximately May 1, 2003 for a lease term of five years with two options to renew for one year each on the same terms, conditions and rent.
4. The Request for Information specified that the accommodation must be in an area "bounded by":
North of Grand Marais Road East
South of Riverside Drive East
East of Dougall Avenue
West of Walker Road
5. On December 11, 2001, the Plaintiff delivered to the Defendant a general proposal in response to the Request for Information. The property proposed by the Plaintiff was in the geographic area specified.
6. On or about February 27, 2002, the Tender Lease Documentation Package (the "Bid Package") was provided to the 14 companies/individuals, including the Plaintiff, who were invited to submit a tender.
7. At all material times, the Plaintiff carried on business as a developer.
8. Michael Cervi is the sole officer, director and shareholder of the Plaintiff. Michael Cervi, is a lawyer with a real estate, corporate commercial and estate practice and carries on business as a developer.
9. The tender closed on April 9, 2002. In addition to the Plaintiff's tender, the Defendant also received tenders f rom 7 other parties.
10. The Plaintiff's tender disclosed that the lands proposed by the Plaintiff for use by the Defendant were zoned M1.1 (light manufacturing).
11. M1.1 zoning does not list basis or general "business office" as a "permitted use".
12. In Windsor, the zoning designations that provides for basic office space ("business office") as a "permitted use" are C1, C2, CD1 or CD2 designations. All of the properties proposed in the tenders received, except the Plaintiff's were zoned C1, C2, CD1 or CD2.
13. The City of Windsor's by-law exempts "public authorities" from its application generally but the federal Crown is not included in the definition of "public authority".
14. On April 26, 2002,t he Building Commissioner for the City of Windsor, Mr. E. J. Link wrote to Mr. Cervi to advise that the "Federal Government is allowed to occupy a building construction on (the Plaintiff's) site".
15. During the tender evaluation process, the second lowest tenderer, Mr. Farhi, on his own behalf and through counsel expressed the view the City of Windsor could not issue a building permit for this use as the zoning by-law clearly does not permit government office use for these lands and that the Plaintiff's bid should be disqualified because it did not provide for "appropriate zoning" as at the time of the tender closing.
16. The Building Commission's view was that while the by-law does not specifically list a (federal or provincial) government office as a permitted use as of right, his department has, on the advise of their solicitors, issued permits for the construction of both provincial and/or federal facilities notwithstanding the apparent absence of government offices as listed permitted uses in the zoning districts in which they are located. The Building Commissioner also expressed the view that he has the power to revoke a permit, which is based on mistaken, false or incorrect information.
17. During the evaluation process, Karen Archer, on behalf of PWGSC advised one of the bidders (not the Plaintiff) that PWGSC interpreted the "proof os zoning" requirement in the Tender Documents to mean that the appropriate zoning must be in place when a proponent submits their bid. Aside from the information contained in the Tender Documents themselves, neither Ms. Archer nor PWGSC, publicly communicated to the other bidders this interpretation either prior to the competition or during the evaluation process.
18. On June 3, 2002, the Defendant wrote to the Building Commissioner to seek assistance in clarifying whether the uses under the current zoning for the Plaintiff's proposed property would permit the construction of a general purpose office building which would in whole or in part be occupied by Federal Departments, Agencies or Crown Corporations and assignees that may or may not be Federal Government entities "is permitted use under the current zoning".
19. On June 6, 2002, the Building Commissioner responded to the Defendant and indicated
That the present zoning of the property will permit the office of an architect, engineer and certain building contractors. Offices of the federal government are not specifically listed in this zoning district. It is my understanding that our Planners chose not to include general regulations which would permit federal or provincial offices as of right in any zoning district, as municipalities could not regulate the senor levels of government. The federal government may assign a lease toa private sector firm provided the use is contained under the current zoning by-law.
20. On June 26, 2002, the Defendant wrote to the Plaintiff and advised:
After evaluating the bid you submitted it was found to be non-compliant. We are of the opinion the present zoning on the property submitted Pursuant to Part 1, Section 8, clause .3 sub-clause (i) does not permit the office use as specified at Part 2, Section 4 fo the Invitation to Tender.
21. If one ignores the compliancy consideration, the Plaintiff's tender was the most favourable proposal to the Crown on a financial basis. Had the Plaintiff complied with all of the conditions prescribed by the Crown, the Plaintiff's proposal did not satisfy the zoning condition.
22. The Albamor Investments Inc. Tender accepted by the Defendant was for a proposed site on the east side of Walker Road in Windsor, Ontario, zones CD2.1 which includes "business office" as a permitted use.
23. Albamor Investments Inc. was the third lowest bidder, the second lowest bidder, Mr. Farhi, was disqualified on the basis that he did not have control of the lands that he proposed for the project.
24. The Plaintiff's deposit was returned to the Plaintiff, as required by the Tender Documents.
25. The Plaintiff acknowledges that the Crwon is obliged to reject all non-compliant tenders and that if the Plaintiff's bid was non-compliant it would have been proper to reject it (Cervi Exam. Q159-161)
26. The Plaintiff acknowledges that the Crown had an obligation to treat all bids consistently and to apply assumptions evenly (Q159-161).
ISSUES
[3] There are two essential issues arising in this case:
1. Was the Plaintiff's tender wrongfully rejected as being non-compliant?
2. Did the Defendant award the tender to a non-compliant tenderer?
ISSUE 1 - Was the Plaintiff's tender wrongfully rejected as being non-compliant?
[4] Whether or not the Plaintiff's tender was compliant turns on the zoning. It is undisputed that the land was zoned M1.1 (Light manufacturing). This does not include office use, however, it permits an engineering and/or architectural office.
[5] The call for tender did not list as one of its requirements that the premises to be leased be zoned for office use. The requirements in Part 1, Section 3.1 merely stated
"The Premises must meet the provisions contained in this Lease Tender Documentation Package."
Furthermore s. 8(3) of Part 1 of the call for tender called for the offer to include "proof of zoning".
[6] The Plaintiff argues quite correctly that the municipal zoning laws do not apply to the Federal crown. Furthermore, it points to the letter from the Building Commissioner of the City of Windsor dated April 16, 2002, that the Federal government is allowed to occupy a building on the land owned by Plaintiffs. He also points to the letter of the Building Commissioner dated May 21, 2002, wherein the Commissioner states that on the basis of legal advice he has in the past issued permits for the construction on provincial and federal office buildings on M1.1 zoned lands.
[7] Accordingly, the Plaintiff argues the building does comply with zoning requirements and premises being occupied by the Federal crown are not subject to zoning requirements.
[8] This argument cannot succeed for two reasons. First of all, Part 2 of the Lease Tender Documentation Package contains a sample lease wherein section 8(1) provides "APPLICABLE LAWS":
"The offer represents that the Lands, Building in which the Leased Premises is located, and the Leased Premises, and the Lessee's intended use thereof, comply in all respects with the requirements of all applicable laws." (underlining added)
[9] Neither the leased premises, nor the lessee's intended use thereof will comply with the relevant zoning laws. It is true that the zoning laws do not apply to the Federal crown, but there is a difference between 'not applying' and 'comply in all respects' as s. 8.1 demands.
[10] Secondly, the Call for Tender contains a privilege clause. Clause 11 of Part 1 reads as follows:
11. EVALUATION
1. The evaluation of Offers received is an on-going process and the Lessee reserves the right to terminate any further consideration of any Officer at any time during the Acceptance Period for any reason whatsoever without any notice thereof.
2. The Offeror shall permit the Lessee's employees, servants, agents and contractors reasonable access tot he Leased Premises and Building, or Lands on which the Leased Premises are located, for the purpose of making assessments with respect to the Premises offered including Building systems and environmental assessments which the Lessee deems appropriate. Such assessments shall not constitute a taking of possession by the Lessee.
3. An Offer may not be subject to further evaluation if, in the sole opinion of the Lessee, the Offer fails to meet or comply with the provisions, requirements or standards as set forth in this Lease Tender Documentation Package.
4. An Offer will not be subject to further evaluation if, in the sole opinion of the Lessee, the Offer is conditional or qualified in any matter.
5. In carrying out the evaluation of the Offer:
(a) The Lessee will take into consideration the rent and parking fees, additional rent, as they occur over the original term fo the Lease, and the front end costs. For the purpose of this subclause, the front end costs shall mean those costs which will be estimated by the Lessee including, but will not be limited to, those related to the Lessee's Improvements, moving, signage, screens, consultants, and any similar costs which may be incurred by the Lessee. The types of costs and the estimations made by the Lessee related thereto shall be determined at the sole discretion of the Lessee.
(b) The Lessee may take into consideration inducements and allowances offered by the Offeror, but the value, if any, attributed to such inducements and allowances will be determined at the sole discretion of the Lessee.
(c) Cash flows will be depicted as a net present value as of the commencement date of the Lease.
(d) In cases where the Leased Premises offered are currently under lease by the Lessee and it is determined by the Lessee that a temporary relocation of the occupants or any other costs could become necessary to allow for the completion of any portion of the improvements to be made to the Leased Premises (including the improvements to be completed by both the Offeror and the Lessee), the Lessee may include in the evaluation of the Offer those costs expected to be incurred by the Lessee connected thereto at the sole discretion of the Lessee.
(e) For the purposes of the evaluation, the measurements quoted in the Offer will be utilized and all costs calculated or estimated by the Lessee shall be final.
6. Notwithstanding the above, the Lessee reserves the unqualified right to carry out a comparative evaluation of all or any of the Offers and evaluate them based on considerations which in the sole opinion of the Lessee would yield to the Lessee the best value. This evaluation may be on such matters as, but not limited to, the quality of Leased Premises, the efficiency of the Leased Premises offered, building design and access, the degree to which the requirements are already met, or the time within which all requirements will be met. (Underlining added)
[11] Here the Defendant 'in her sole opinion' came to the conclusion that the tender was not compliant because the zoning is light industrial, not commercial. This was communicated to the Plaintiff by letter of Karen Archer dated June 26, 2002.
[12] It is well established tender law that:
a) unless there is a privilege clause, the bid will go to the lowest tender (see CPR Hotels Ltd v. Bank of Montreal [1987]1 S.C.R. 711);
b) notwithstanding a privilege clause (except as provided in (d) below) there is an implied term that tenders will be only awarded to compliant bids (see M.J.B. Enterprises Ltd v. Defense Construction (1951) Ltd., [1999] 1 R.C.S. 619 );
c) notwithstanding a privilege clause, there is an implied term that all tenderers will be treated fairly (see The Queen v. Martel Building (2000) 193 D.L.R (4th) 1); and
d) a privilege clause may provide that the issuer reserves the right to awarded tenders to non- compliant bids. However, in such an instance there is no longer a situation of call for tender and bid but rather a situation of offer and counteroffer (see Kinetic Construction Ltd v. Comox- Strathcona [2003] B.C.J. No 2533 affirmed at [2004] B.C.J. No 2247.)
[13] Here, the Crown acted fairly toward all tenderers. It used its privilege clause and awarded the bid to the second highest tenderer. It used "its sole opinion" to find that the Plaintiff's bid was non-compliant by reason of zoning. In no way can this action be characterized as lacking in good faith. In light of the less than categorical letters by the Building Commissioner of the City of Windsor, the Defendant could in good faith come to the conclusion that the Plaintiff would not be able to comply with the applicable laws clause found in s. 8(1) of Part 2 of the Lease Tender Documentation Package.
[14] ISSUE 2 - Did the Defendant award the tender to a non-compliant tenderer?
[15] The Defendant awarded the tender to Albamor Investments, which owns a property on Walker Road but on the east side of Walker Road. The Lease Tender Documentation Package stated at section 3(2) of Part 1:
"Leased premises shall be located in a building in the area bounded by:
North: Riverside Drive east
South; Grand Marais Road East
East: Walker Road
West: Dougall Avenue"
[16] The Defendant takes the position that Walker Road includes both sides of the street and that accordingly, a property located on the east side would qualify.
[17] Unfortunately, this argument cannot succeed. An area bounded by four sides, by definition, does not include anything outside the boundaries demarcated.
[18] The Lease Tender Documentation Package qualifies as a contract of adhesion. Tenderers either take it or leave it as is. They have no opportunity to negotiate the terms; they are unilaterally set by the issuer. Consequently, the contract will be constructed using the contra preferentem rule: i.e. where the words leave some doubt or ambiguity they will be interpreted against the writer of the contract. In this case, even if clause 3.2 is capable of the interpretation preferred by the Defendant, the rule demands that it be interpreted in favour of the Plaintiff. Accordingly, I find that the Defendant did not award the lease to a compliant tenderer. Such an award violates the implied requirement of all calls for tender (other than those reserving a right to make award to non-compliant tenderers) to treat all tenderers fairly (see The Queen v. Martel Building supra).
ORDER
THIS COURT FINDS that:
1. The Defendant did not breach the contract contained in the Lease Tender Documentation Package when it ruled that the Plaintiff's tender was non-compliant.
2. The Defendant did breach the contract contained in the Lease Tender Documentation Package when it awarded the lease to Albamor Investments, a non-compliant bidder.
3. As the parties have split the issues of liability and damages, there is no need at this point to make a finding in respect of appropriate damages. I would like to take this opportunity to commend counsel on having agreed on a statement of facts and providing the Court with very able and concise arguement. Both these factors greatly added to the prompt disposition of this matter.
Judge
FEDERAL COURT
Names of Counsel and Solicitors of Record
DOCKET: T-1208-02
STYLE OF CAUSE: 1243573 ONTARIO INC.
Plaintiff
- and -
HER MAJESTY THE QUEEN IN RIGHT
IN RIGHT OF CANADA Defendant
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: TUESDAY NOVEMBER 23, 2004
REASONS FOR ORDER
AND ORDER BY: von FINCKENSTEIN, J.
DATED: November 26, 2004
APPEARANCES BY: Mr. Myron W. Shulgan,Q.C.
For the Plaintiff
Ms. Jacqueline Dais-Visca
For the Defendant
SOLICITORS OF RECORD: Mr. Myron W. Shulgan, Q.C.
Wilson Walker LLP
Barristers & Solicitors
300 - 443 Ouellette Avenue
P.O. Box 1390
Windsor, Ontario
N9A 6R4
For the Plaintiff
Morris Rosenberg
Deputy Attorney General of Canada
For the Defendant
FEDERAL COURT
Date: 20042311
Docket: T-1208-02
BETWEEN:
1243573 ONTARIO INC.
Plaintiff
- and -
HER MAJESTY THE QUEEN IN
RIGHT OF CANADA
Defendant
REASONS FOR ORDER
AND ORDER