Concreate USL Ltd. v. Calgary (City), 2012 ABQB 400

Court of Queen ’ s Bench of Alberta Citation: Concreate USL Ltd. v. Calgary (City), 2012 ABQB 400 Date: 20120615 Docket: 0901 06907 Registry: Calgary Between: Concreate USL Ltd. Plaintiff - and - The City of Calgary Defendant _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice T.F. McMahon _______________________________________________________ [ 1 ] This is an application by the Plaintiff Concreate USL Ltd. ( “ Concreate ” ) for a

Summary Judgment. The Defendant The City of Calgary ( “ the City ” ) brings a cross-application for severance of damages from liability issues. Nature of the Case [ 2 ] Concreate is a contractor in the construction industry in Calgary. In response to a tender call by the City for the construction of the Beddington Trail interchange, Concreate submitted a bid. Tenders closed on October 30, 2007 at 2:00 p.m. There was a public opening of the tenders at one of the City ’ s offices. Three sealed bids were opened in the presence of the tenderers. Concreate had the lowest tender.

When that occurred, a representative of another contractor Graham Construction and Engineering said they had tendered as well. City employees again checked the drawer where the bids had been deposited and found a fourth sealed bid. It was

signed “ Graham Construction and Engineering, a JV ” . It was the lowest bid and so was awarded the contract. Any issues that might arise from this tendering opening scenario are not the subject of this application. The issue upon which this

summary judgment application is based is: 1. Was the contract awarded to an ineligible or non-compliant bidder such that the City is liable in damages to Concreate as the next lowest bidder? Facts 1. The City ’ s tender notice said: “ This tender is open only to pre-qualified bidders. ” 2. The “ form of tender ” (a City-mandated form) upon which the contract was awarded described the tenderer as “ Graham Construction and Engineering, a JV ” . The bid was signed, under that name, by a person described as “ VP Infrastructure ” . There was no corporate seal.

To the left of the signature these instructions appeared: NOTE: If tenderer is a corporation, in addition to signature affix Corporate Seal. If tender is made by natural person, it must be signed by the Tenderer with his/her name typed or clearly printed below the signature. If the tenderer is carrying on business under a firm name and is NOT incorporated, the members of the firm must sign below the firm name and their names must be typed or clearly printed below the signature. 3.

The standard general conditions of the City to which all tenderers have access provide instructions to tenderers in slightly different words: GC 3.1(

a) The tender is to be signed and sealed. If the tenderer is a corporation, the tender should be under its corporate seal. If the tenderer is an individual person, the tender should be under the seal of that person. If the tenderer is an association of persons or a firm not incorporated, each member of the association or firm should affix his seal to the tender. If the tenderer is a co-operative incorporated under the Co-operatives Act, and if the tenderer has a corporate seal the tender should be under the co-operative ’ s seal. 4.

The tender award and the City ’ s Purchase Order were both dated December 10, 2007 and were addressed to Graham Construction and Engineering, a JV. 5. The Memorandum of Agreement with the City dated December 10, 2007 described the contractor in the same way. The signature page, however, described the contractor in this way: Graham Construction and Engineering, a JV, consisting of: Graham Construction and Engineering Inc. Graham Construction and Engineering LP Jardeg Construction Services Ltd. 6. Amongst the City ’ s documents was a “ Master List #3A ” headed “ Bridges - New Construction ” which listed 15 firms.

Concreate was on that list as was Graham Construction and Engineering Inc. Not on that list were Graham Construction and Engineering, a JV; Graham Construction and Engineering LP; and Jardeg Construction Services Ltd. The evidence is unclear as to the nature of this list. Concreate argues that it is a list of pre-qualified contractors and so if a bidder is not

on the list, they are not qualified to bid. The City says that it is merely a contact list of names, phone numbers and fax numbers and if a company operates under multiple names, its name would only appear once on this list. 7. The Standard General Conditions of the City also contained these provisions: G.C.2.9.1 ...

As it is the purpose of The City to obtain a Tender most suitable to the interests of The City and what it wishes to accomplish, The City has the right to waive any irregularity, insufficiency or non-compliance in any Tender submitted and to accept the Tender which is deemed most favorable to the interest of The City. The City reserves the right to determine, in its sole discretion, whether a Bid is compliant, non-compliant, regular or irregular.

G.C.2.9.3 Any liability of The City as a result of or in connection with the acceptance of the Bid of any bidder or the rejection of the Bid of any bidder, or the rejection of all Bids shall be limited to the lesser of the reasonable costs of the preparation of the Bid of the bidder or the bidders claiming damages, or the sum of $250,000 cumulatively in respect of the aggregate of the claims by any and all bidders. G.C.2.9.4 (

a) The City may accept or waive a minor and inconsequential irregularity, or where practicable to do so, The City may, as a condition of bid acceptance, request a Bidder to correct a minor and inconsequential irregularity with no change in bid price. (

b) The determination of what is or is not a minor and inconsequential irregularity, the determination of whether to accept, waive, or require correction of an irregularity, and the final determination of the validity, will be at the sole discretion of the Manager of Supply Management of The City. G.C.3.1 Tenders to be Under Seal (

a) The Tender is to be signed and sealed. If the Tenderer is a corporation, the Tender should be under its corporate seal. If the Tenderer is an individual person, the Tenderer should be under the seal of that person. If the Tenderer is an association of persons or a firm not incorporated, each member of the association or firm should affix his seal to the Tender. If the Tenderer is a Cooperative incorporated under the Cooperatives Act , and if the Tenderer has a corporate seal the Tenderer should be under the Cooperatives ’ corporate seal. (

b) If a corporation or other legal entity does not have a corporate seal, or if the corporate seal is unavailable, the corporation or entity should provide reasonable documentation to confirm that the person signing on behalf of the entity has authority to bind the legal entity. Affidavits of authority and execution will normally constitute reasonable confirming documentation. Positions of the Parties Regarding the

Summary Judgment Application [ 3 ] Concreate advances several interrelated arguments: 1. That the tender accepted by the City was from a non-pre-qualified contractor, given that Graham Construction and Engineering, a JV was not on Master List 3A and had not been pre-qualified as a Joint Venture. 2. That the accepted bid did not comply with Standard General Condition 3.1 as it was not signed by all members of the Joint Venture. 3. Because the City accepted a non-compliant bid from a Joint Venture, the City failed to treat Concreate fairly.

[4] The City argues that: 1. Concreate has not met the burden of showing that there is no defence to its action as required by Rule 7.3. 2. There is evidence that the Master List 3A was an internal contact list and was not was an exclusive or a published list of pre-qualifiedcontractors; that two other bidders for this project in fact bid under names slightly different from the name that appeared on that list. 3. There is evidence that the Joint Venture had in fact been pre-qualified. 4. Standard General Condition 3.1 uses the permissive “should” as opposed to “must” or “shall”.

There is evidence that the choice ofwords was deliberate. 5. Standard General Condition 2.9.1 gives the City the right to waive any irregularity, insufficiency or non-compliance. The Authorities A. As to

Summary Judgment, Rule 7.3 reads: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded. [5] It is accepted that the test for

Summary Judgment has not been altered by this new Rule: Manufacturers Life InsuranceCompany v. Executive Centre at Manulife Place Inc., 2011 ABQB 189. [6] The test is this as enunciated by the Alberta Court of Appeal in Pioneer Exploration Inc. V. Euro-Am Pacific Enterprises,2003 ABCA 298 at paras 18 and 19: 18 First, the plaintiff bears the evidentiary burden of proving its cause of action on a balance of probabilities. Each and every factnecessary to support the claim must be proven: Bank of Montreal v.

Kalin (1992), 1992 ABCA 278 , 131 A.R. 397 (C.A.). 19 After the plaintiff has proved its case on a balance of probabilities, the evidentiary burden shifts to the defendant but the ultimateburden remains, as always, with the plaintiff. The defendant can avoid a

summary judgment in favour of the plaintiff by proving thatthere is a genuine issue for trial. If the defendant meets this evidentiary burden, the plaintiff fails to meet its ultimate burden. It must bebeyond doubt that no genuine issue for trial exists. B. As to tenders: 1. It is settled law that an owner’s invitation to tender is an offer and a tender (or bid as it is often called) submitted is acceptance of thatoffer if the terms of the offer so provide. The result is “contract A” to use the term used by the Supreme Court of Canada in Her Majestyin the Right of Ontario and the Water Resources Commission v. Ron Engineering and Construction (Eastern) Ltd. (SCC), [1981] 1 SCR 111.

Whether a “contract A” arises in a given case depends upon whether the parties intended to initiate contractual relations by submission ofa bid: M.J.B. Enterprises Ltd. V. Defence Construction

(1951) Ltd., (SCC), [1999] 1 SCR 619 at para. 19. Contract B is the formal construction agreement that follows upon Contract A. 2. An owner may accept bids only from eligible bidders. To begin, it is worth repeating that there is no doubt that the Province was contractually bound to accept bids only from eligible bidders.This duty may be implied even absent express stipulation.

For example, in M.J.B., the Court found that an implied obligation to acceptonly compliant bids was necessary to give business efficacy to the tendering process, noting, at para. 41, that a bidder must expend effortand incur expense in preparing its bid and must submit bid security and that it is "obvious" that it makes "little sense" for the bidder tocomply with these requirements if the owner "is allowed, in effect, to circumscribe this process and accept a non-compliant bid". Butagain, whether such a duty should be implied in any given case will depend on the dealings between the parties.

Here, however, there isno need to rely on implied terms. The obligation to consider only bids from eligible bidders was stated expressly in the tender documentsand in the required ministerial approval of the process which they described. Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 , 86 C.L.R. (3d) 163 (SCC). It should be noted that the Tercon decision arose after a trial, not on a

summary judgment application. The facts were unique. TheProvince issued a request for expression of interest for designing and building a highway. Six submissions were received. Later, theProvince issued a Request for Proposals (“RFP”) which expressly provided that only the original six proponents were eligible to tender.One of the six (“Brentwood”), rather than bidding on its own, teamed up with another builder who was not one of the six. The bid wassubmitted in Brentwood’s name and was ultimately awarded the contract.

That became the basis for the eventual judgment against theProvince in damages on the basis that the contract had been knowingly awarded to an ineligible bidder. What distinguishes Tercon from this case is that there was a clear fact finding after a trial that the successful bidder was ineligible. 3. The tendering process requires strict compliance with the invitation to bid. On the other side, the tendering process is, and must always be, a carefully controlled process, since the opportunity for abuse ordistortion is ever present.

While that is not what happened in this case, the process must nevertheless be, and be seen to be fair to allbidders. For that reason, the process is often attacked for technical reasons and the law has accordingly applied strict rules for anyalteration in the process by both bidder and owner. Vachon Construction Ltd. v. Cariboo (Regional District), (BC CA), 28 C.L.R. (2d) 145 at para. 40. Analysis [7] The question here is whether the ineligibility or non-compliance of the Graham bid is so obvious that it can be determinedin a

summary way. On questioning, the City’s employees acknowledged that it was the intention of the City to only award the contract toa pre-qualified tenderer. Thus the duty described by Tercon, supra is accepted by the City. The issue on this application is whether it isbeyond doubt that Graham’s bid was ineligible or non-compliant. [8] In that respect, Concreate relies upon the Master List 3A as being an exclusive list of pre-qualified tenderers. The evidence,however, is unclear.

In a written answer to an undertaking to confirm whether that document was “a complete list or not of the pre-qualified contractors eligible to bid on this project”, the City employee said yes. Yet on questioning on that answer to undertaking, theemployee, referring to the list, said: A Okay. So this is the list of companies that we used to fax out to pre-qualified bidders.

Q Mr. Goodfellow: Yes sir. A In the event ... in the case of, say, companies like PCL or Graham who have multiple, multiple names, this is basically a contact list. So it wouldn ’ t make sense to have six companies listed here with the same fax number and fax them all individual invitations. [ 9 ] There is also affidavit evidence that the other bidders were Aecon Construction and Materials Ltd., which appeared on the list as Aecon Infrastructure ” and GTS Construction Inc. which appeared on the list as “ GTS Road Builders ” .

This evidence may at trial offer some support for the City ’ s position regarding the list – that it is only a contact list. [ 10 ] In addition, the affidavit of the same City employee included these comments: Master List #3A was an open list. It was a “ living ” document in that contractors were added and removed on an ongoing basis. To the best of my knowledge it was originally created in 1996.

It was not the practice of the Construction Group to view Master List #3a as a list of legal entities, but rather it was viewed as a general list of main companies, and entities such as the Alberta Roadbuilders and Heavy Construction Association ( “ ARHCA ” ), who would receive fax notification of a new tender. If a company had more than one variation on the main name all names were not marked separately on the list. The list was not project specific, but related generally to all new construction of bridges.

Master List #3a was a document prepared for the use of officials of the City, and was not made public or distributed outside the City in any way. Bidders could not have used Master List #3a to find out which other companies were bidding on any given project. At the time of Tender No. 07-7168, I considered the Graham companies to be under one corporate umbrella and as members of that group they fell under the prequalification. In our offices, all of the Graham entities were referred to simply as “ Graham ” with no distinction between them.

The City viewed Graham Construction and Engineering, a JV as a prequalified bidder for “ Bridges – New Construction ” , and awarded contracts accordingly if that company was low bidder on a project. [ 11 ] Lastly, in response to an undertaking, the City located some documents relating to “ Graham Construction and Engineering, a JV ” which with further evidence may shed light on whether the joint venture was actually pre-qualified. [ 12 ] Considering all of this evidence, it cannot be said without doubt that Graham Construction and Engineering, a JV was an ineligible bidder.

There is a genuine issue to be tried. [ 13 ] As to whether the bid had to be signed by all members of the joint venture, pursuant to Standard General Condition 3.1, it is the uncontradicted (so far) evidence of a City employee who was himself involved in preparing SGC 3.1 that the choice of “ should ” rather than “ shall ” was deliberate and was intended to convey a request rather than a requirement. In my view, that issue too should be resolved in the context of evidence of the parties intentions. [ 14 ] The City raises the waiver provisions of SGC 2.9.1 and 2.9.4 and its sole discretion to determine compliance.

The effectiveness of those provisions, however, becomes relevant only after determination that the bid of Graham Construction and Engineering, a JV was non-compliant or not from a pre-qualified bidder. [ 15 ] Concreate also argues that the City breached its duty of fairness owed to all tenderers. The trial judge in the Tercon case described the duty this way:

The next question relates to the conduct of the Ministry in performance of the evaluation of the Brentwood proposal. The integrity of thetendering process depends upon no competitive advantage being given to any tenderer. As a result, there is an implied duty of fairnessupon those calling for tenders in relation to their dealings with tenderers which calls for the reasonable expectation of the partiesinvolved in the bidding process to be respected (Martel at para. 88; Stanco at paras. 84-85; Fred Welsh Ltd. v. B.G.M. Construction Ltd.(1996), (BC SC), 24 B.C.L.R. (3d) 52, [1996] 10 W.W.R. 400 (S.C.)).

The scope of the duty is defined in considerationof the terms of contract A so that the fate of proponents is not determined by undisclosed standards (Martel at paras. 88-89; Elite Bailiffat para. 2). Fairness means consistent application of the tender rules without "... any colourable attempt ... to achieve a desired result ..."(Martel at paras. 95 and 100). There can be no special treatment (Martel at para. 96). Requirements cannot be ignored (Martel at para.98). Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2006 BCSC 499, para 127. [16] I agree with that statement of the law.

Fairness is accomplished by strict compliance with the tender process. It appears thatthe City assumed that the Graham joint venture involved only Graham related entities. That in fact may have been the case. However, itcould just as well have not been the case. The joint venture bid may have been a “trojan horse”, involving an ineligible bidder enteringthe competition under the name of an eligible bidder. [17] Joint venture participants need not be related corporately – indeed there is no evidence yet that Jardeg is a Graham relatedcompany. [18] Joint venture participants can also change from project to project.

Thus the importance of adherence to the tender processbecomes apparent. [19] Here, there is evidence that the City recognized the risk and modified its practise some time later. Fairness, however, cannotbe determined until determination of the primary issue of the bid’s compliance.

That is apparent from this later comment of that sametrial judge at para. 139: The defendant breached contract A in two respects: first, it accepted a bid that was incapable of acceptance for non-compliance; second,it treated the plaintiff unfairly in the evaluation process by approving a non-compliant bid as the successful bidder. [20] The result is that Concreate cannot on the evidence so far meet the stringent tests for a

summary judgment. The City’s Cross-claim for Severance [21] The City argues that damage issues raised by Concreate will be complex, costly and lengthy to determine. Concreate’sStatement of Claim claims for loss of gross profits including loss of contribution to overhead and loss of gross profits from expectedchanges in the work. Concreate alleges those damages exceed $5.7 million. It further alleges additional damages because of “theeconomies of scale of having similar projects in the area”; and unspecified damages for loss of opportunity.

The City’s description of thedamage issues is likely accurate. [22] Accordingly the City argues that the damage issues should be severed. In that scenario, two issues would go to trial first: A. The City’s liability to Concreate B. The applicability of Standard General Condition 2.9.3 limiting the City’s damages to $250,000 [23] Concreate argues that a trial on liability alone could be followed by an appeal and so delay a final determination for years.

Itis also argued that settlement discussions are impaired when little is known or revealed about the quantum of damages. [24] The City relied upon several recent trial decisions including Envision Edmonton Opportunities Society v. Edmonton (City),2011 ABQB 29 at para, 47; Nowicki v. Price, 2011 ABQB 133 at para 70; and Re Ponich Estate, 2011 ABQB 33 at para 32.

[25] Each of those decisions held that the former restrictive test for severance was no longer applicable in the face of new Rule7.1. These authorities held that Rule 7.1 is broader in scope, taking into account the foundational rules and in particular Rule 1.2. Use ofprocesses which might reduce litigation time or costs was now encouraged. [26] Concreate relied upon authorities such as Esso Resources Canada Ltd. v. Stearnes Catalytic Ltd. (1991) 1991 ABCA 48, 114 AR 27 (ABCA) at paras 30-34; and Progressive Options Inc. v.

Thunder River Energy Inc. 2011 ABCA 198 at para 5.The latter case affirmed the Esso Resources criteria for determining whether a preliminary trial of an issue is appropriate. [27] Several weeks after oral argument and written briefs were filed, counsel for the City, in the finest traditions of the AlbertaBar, drew my attention to a recent Alberta Court of Appeal decision which severally criticized the rationale of the Envision decisionupon which counsel had relied. That is the decision in Gallant (Litigation Guardian of) v.

Farries 2012 ABCA 98. [28] The Gallant case involved a medical malpractice action in which a Chambers judge had severed the damage issues from theliability issues. Without criticizing the Envision decision on its particular facts, the Court of Appeal quashed any suggestion that the newRules effected any significant change in the law regarding the splitting of trial issues. The Court said that the question remains the same:would a severance of issues save time and money in the particular case?

The Court of Appeal’s preference against severance is apparentin the use of terms such as “splits rarely achieve economy in practice” (para 15); “savings ... have consistently proven to be elusive”(para 15); “splits are not forbidden, and occasionally there is good reason to think that one will save time and money” (para 16)(underlining added) [29] Lastly, “it has always been the presumption in our civil practice that all the issues are decided at once, in one trial orproceeding.

Bitter experience has shown that searching for savings in time and money by chopping litigation up into little pieces simplydoes not work” (para 24). [30] In this case, the poverty of a party which sometimes influences a severance decision is not a factor. Of course, a party neednot be poor in order to want to save time and money in litigation. [31] Here there is no preliminary issue, no limitation period issue, no clear condition precedent to the suit – any of which might besuitable for severance. There is no “neat question of law or the

interpretation of one document” as described in Esso Resources at para30. [32] The liability issues require evidence to determine: 1. Whether the Master List #3A is or is not an exclusive list of eligible bidders, 2. Whether that list was or could properly be relied upon by the Plaintiff, 3. Whether the successful bidder had in fact been pre-qualified, 4. The intent of SGC 3.1, and 5.

Whether the City can rely upon SGC 2.9.1 or 2.9.4 to solely determine compliance. [33] A quantification of damages will involve many of the same witnesses for the Plaintiff, namely senior officers speaking toprofits lost as well as liability issues. The City may be obliged to call the successful bidder on the liability issues and also to damageissues to speak to its actual costs as a measure of the Plaintiff’s claim to losses.

City employees will have to address both issues andseveral are likely to be the same person. [34] The City also urges that prior determination of the effect of SGC 2.9.3 which purports to limit the City’s exposure to$250,000 would save time and money. A similar issue arose in Esso Resources (para 19 and following) and was met with the answerthat the party alleging a limitation on its liability can simply pay this sum into court or make a compromise offer and so reverse the flow

of costs if that party ’ s position is the correct one. [ 35 ] In addition, of course, there is also the possibility of appeals from issues that have been severed which can increase rather than reduce time and money. [ 36 ] In all these circumstances, I am not satisfied that there is a reasonable prospect of a significant saving in time or money to be had by severing the issues. Conclusion [ 37 ] Both the application of Concreate for

summary judgment and the cross-application of the City for a severance of issues are dismissed. Counsel may speak to costs within 15 days if requested. Heard on the 16 th day of April, 2012. Dated at the City of Calgary, Alberta this 15 th day of June, 2012. T.F. McMahon J.C.Q.B.A. Appearances: W. Donald Goodfellow, Q.C. Kelly Smith Goodfellow Law Firm For the Plaintiff Lise Olsen City of Calgary Law Department for the Defendant