Triton Hardware Limited Plaintiff/APPLICANT And: Torngat Regional Housing Association Defendant/RESPONDENT, 2020 NLSC 72

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Triton Hardware Limited v. Torngat Regional Housing Association , 2020 NLSC 72 Date : May 11, 2020 Docket : 201808G0087 Between: Triton Hardware Limited Plaintiff/APPLICANT And: Torngat Regional Housing Association Defendant/RESPONDENT Before: Justice Frances J. Knickle Place of Hearing: Happy Valley-Goose Bay, Newfoundland and Labrador Date of Hearing: June 19, 2019

Summary: The Applicant (Plaintiff) made application for a

summary trial under Rule 17A against the Respondent (Defendant) for breach of contract. The Applicant alleged the Respondent wrongly denied awarding a tender contract to the Applicant even though the Applicant was the lowest compliant bidder. The Respondent asserted the matter was not appropriate for determination by way of

summary trial as there was an absence of necessary facts to permit the Court to decide the issues, nor had the Applicant established that there was no genuine issue for trial. Finally, the Respondent asserted the Applicant failed to properly quantify alleged damages. The Court was satisfied the record was adequate to determine liability and found the Respondent liable. The Applicant was awarded damages representing 15% profit it would have expected if it had been awarded the contract. Appearances:

David L. Hearn Appearing on behalf of the Applicant Robert R. Bradbury Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: L.H.E. v. D.H.E., 2019 NLCA 66; Marco Ltd. v. Newfoundland Processing Ltd., (NL SC),[1995] 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld. S.C. (T.D.)); Swain v. Vickers, 2019 NLSC 17; Pomerleau Inc. v. Newfoundlandand Labrador (Minister of Transportation and Works), 2014 NLTD(G) 19; R. v. Ron Engineering, (SCC), [1981] 1S.C.R. 111; M.J.B. Enterprises Ltd v. Defence Construction

(1951) Ltd, (SCC), [1999] 1 S.C.R. 619; Martel BuildingLtd. v. R., 2000 SCC 60; R.J.G. Construction Ltd. v. Newfoundland & Labrador (Transportation and Works), 2016 NLTD(G) 40;Johnson Construction Ltd. v. Newfoundland and Labrador (2000), (NL SC), 185 Nfld. & P.E.I.R. 106, 1 C.L.R. (3d)313 (Nfld. C.A.)); Health Care Developers Inc. v. Newfoundland (1996), (NL CA), 141 Nfld. & P.E.I.R. 34, 136D.L.R. (4th) 609 (Nfld. C.A.); Coady Construction & Excavating Limited v. Conception Bay South (Town), 2018 NLSC 115; CougarEngineering and Construction v. Newfoundland and Labrador, 2015 NLCA 45; Chinook Aggregates Ltd. v.

Abbotsford (MunicipalDistrict) (1989), (BC CA), 35 C.L.R. 241, [1990] 1 W.W.R. 624 (B.C.C.A.); Murphy v. Alberton (Town) (1993), (PE SCTD), 114 Nfld. & P.E.I.R. 34, 44 A.C.W.S. (3d) 1217 (Nfld. C.A.); Naylor Group Inc. v. Ellis-Don ConstructionLtd., 2001 SCC 58 , [2001] 2 S.C.R. 943; George Wimpey Canada Ltd. v. Hamilton Wentworth Regional Municipality (1997),34 C.L. (2d) 123, 73 A.C.W.S. (3d) 941 (Ont. Gen. Div.). RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. STATUTES CONSIDERED: Judgement Interest Act, R.S.N.L. 1990 c. J-2.

REASONS FOR JUDGMENT Knickle, J.: INTRODUCTION [1] This is an application by the Plaintiff, Triton Hardware Limited (“Triton”), for

summary trial and judgment under Rule 17A ofthe Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. Triton alleges it has suffered damages at the hands of the Defendant,Torngat Regional Housing Corporation (“TRHC”). Triton submits that after requesting bids to supply materials for the construction ofhouses, TRHC wrongly failed to award Triton the contract even though Triton was the lowest compliant bidder. By failing to award thecontract to Triton, Triton alleges it was deprived of the benefit of earning an expected profit of $126,852.14 under the contract.

Tritonalso claims damages for the cost of preparing the tender bid in the amount of $10,900. [2] Triton submits proceeding by way of

summary trial is appropriate in the circumstances. The facts are straightforward and thelegal principles are not in dispute. Triton submits there is little further evidence that might be called beyond what is already before theCourt on the application. [3] In contrast, TRHC submits the evidentiary record put forward by Triton is insufficient to determine the merits of the allegedclaim by way of

summary trial. In particular, TRHC submits whether or not Triton’s bid was compliant is a genuine issue for trial andcannot be resolved based on the information or record before the Court. TRHC further submits that even if the Court was satisfied thatTriton has established that it was the lowest compliant bidder, TRHC was entitled to rely on the “privilege clause” in the Instructions toBidders to decline awarding Triton the contract, and the claim for breach of contract should be dismissed. TRHC further submits Tritonhas failed to provide an adequate evidentiary basis to support the damages alleged. TRHC submits the application for

summary trialunder Rule 17A be dismissed and the matter proceed to trial in the ordinary course. BACKGROUND FACTS [4] In April 2018, TRHC issued a request for tender bids to provide materials for the construction of eight houses (“the Project”). The closing date of submissions was April 26, 2018. The Applicant filed a copy of the Instructions to Bidders and a completed copy ofits tender bid with this application. [5] The Instructions to Bidders is a two-page document explaining the bid requirements.

There is an attached inventory ofmaterials for one house, of which the bidder is instructed to complete, citing the cost of each item described in the inventory. Theinventory for a single house comprises 28 pages and lists everything from the nails to be used, to the wiring to wood to paint andwindows; essentially everything that is needed to build one four bedroom unit with the dimensions of 28 by 42. (Presumably this is a

measurement in feet, although the tender document does not so state.) There is a further page attached to the Instructions to Bidders entitled Notes to Tender. This is a one page document with a list of fifteen different items specifying the materials that must be used. For example, under item six all paint must be of a specific type.

Under item nine all bathtubs must be “moulded acrylic”. [ 6 ] Included in the Instructions to Bidders was the following clause in bold type; commonly referred to as a privilege clause: The awarding of the contract will be based on the lowest average price for quality material. *The Lowest of Any Quotes Will Not necessarily Be Accepted. [ 7 ] There was no further elaboration of the privilege clause in the Instructions to Bidders.

The Instructions also stated: The suppliers are to include the total price for the material adjacent to each item stated in each package. … The supplier is to include all costs to deliver the material, taxes and wharf charges F.O.B. to the wharf in the designated communities. Emphasis added [ 8 ] According to Aubrey Budgell, the director of Triton, Triton prepared a bid to supply the materials. Triton asserts the bid was prepared in accordance with all the terms of the Instructions to Bidders. The cost of Triton’s bid, if accepted by TRHC, was $1,118,412.99.

This amount included the cost of the harmonized sales tax (HST). [ 9 ] On May 3, 2018 the bids were opened. There were three bidders. Triton, White’s Construction Limited (WCL), and Notre Dame Agencies limited. Triton’s bid was the lowest of the three bidders. However, on May 8, 2018, when Triton contacted TRHC they were told that the contract was awarded to WCL. [ 10 ] TRHC did not provide a reason why Triton was not awarded the contract. Triton’s legal counsel contacted TRHC a second time to inquire as to why Triton was not awarded the contract.

At that time, TRHC advised Triton’s counsel they were relying on the privilege clause (cited above) to support the decision to award the contract to WCL. The affidavit filed by Margaret Fox in this application on behalf of TRHC confirmed that TRHC relied on the privilege clause to award the contract to WCL, stating: …it was the understanding of the board members that they were permitted to consider factors other than the total amount of the tender bids when evaluating the tenders and awarding the contract.

This understanding was based on the express language of the instructions to bidders which stated: The awarding of the contract will be based on the lowest average price for quality material. * The Lowest of Any Quotes Will Not necessarily be Accepted . Emphasis added [ 11 ] Ms. Fox further stated in her affidavit that while the Triton bid was lower than the WCL bid, the Board was of the view the difference was “negligible” (of less than $1,000 per house). As previous such contracts had been awarded to WCL, and the Board of TRHC was “very satisfied” with WCL’s past performance, Ms.

Fox stated that “on this basis” the Board relied on the privilege clause to award the contract to WCL. Nowhere in Ms. Fox’s affidavit is it stated that Triton’s bid was non-compliant with the terms of the Instructions for Bidders. [ 12 ] Triton filed its statement of claim in June 2018 and TRHC filed its defence in July 2018. In the statement of defence TRHC specifically denies that Triton’s bid was compliant with the terms of the Instructions for Bidders, or the lowest bid.

The statement of defence does not explain how or why Triton’s bid was non-compliant. [ 13 ] Upon further review of disclosure by TRHC, Triton determined that WCL’s bid was non-compliant because WCL failed to include HST on the complete package, as did Triton in their bid. Triton filed a further application to amend its statement of claim to include the assertion that WCL’s bid was non-compliant and they should have been disqualified from competing for the contract. In Triton’s view, if WCL had been disqualified, this would have left Triton as the successful bidder.

The statement of claim was amended by consent to include this new allegation. In December 2018, Triton served interrogatories on TRHC. As of the filing of the application for

summary judgment in February 2019, the interrogatories had not been answered by TRHC. [ 14 ] At the hearing of this application, Mr. Budgell, on behalf of Triton was cross-examined on his response to interrogatories of October, 2018. In response to one of the interrogatories as to what documents were used or relied upon in calculating the costs to build one house, Mr. Budgell had responded that he did not rely on “any documents”. On cross-examination he explained that his employee,

Derek Winsor, determined the cost of all the items by either looking up the prices on their computer inventory system, or, if they wouldneed to purchase the items from an outside supplier, by telephoning that supplier for the information. Mr.

Budgell explained there wereno “documents” in the sense of a paper item, but he agreed that the computer database of inventory listing prices might constitute a“document” for the purposes of disclosing from where he received his information. [15] In calculating his costs, he confirmed he added HST for the total contract. [16] To calculate the damages he suffered, he relied on a further 15% per house as representing an estimate of what he would haveexpected to clear if he had been awarded the project. This profit margin had been included in the cost to TRHC.

THE ISSUES [17] The issues can be described as follows: 1. Is this a matter that is appropriate to be determined by way of

Summary Trial Procedure under Rule 17A? 2. Was Triton the lowest compliant bidder? 3. Was TRHC entitled to rely on the privilege clause as stated in the Instructions to Bidders in the circumstances? 4. The proper assessment of damages. ANALYSIS Issue 1: Is this a matter that is appropriate to be determined by way of

Summary Trial Procedure under Rule 17A? [18] The use of

summary trial proceedings under Rule 17A may be an efficient and economical way for parties to resolve disputes. Where facts are not in dispute or are easily ascertained by the Court, the Court may decide both factual and legal issues by way ofsummary trial proceedings (See L.H.E. v. D.H.E., 2019 NLCA 66 at paragraphs 9-11). As stated in Marco Ltd. v. NewfoundlandProcessing Ltd., (NL SC), [1995] 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld.

S.C. (T.D.)), at paragraph 76; 76 The object of Rule 17A is to promote the general objective of the Rules of Court of providing an expeditious and inexpensivedetermination of proceedings on their merits, by screening out claims that cannot survive the “good hard look”. [19] Rule 17A.03, states: 17A.03.

(1) Where the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant

summaryjudgment accordingly.

(2) Where the Court decides that there is a genuine issue with respect to a claim or defence, a judge may nevertheless grant judgment infavour of any party, either upon an issue or generally, unless (

a) the judge is unable on the whole of the evidence before the Court on the application to find the facts necessary to decide thequestions of fact or law; or (

b) it would be unjust to decide the issues on the application.

(3) Where the Court is satisfied that the only genuine issue is the amount to which a party is entitled, the Court may order a trial of thatissue or grant judgment with a reference to determine the amount.

(4) Where the Court is satisfied that the only genuine issue is a question of law, the Court may determine the question and grantjudgment accordingly.

(5) Where a party claims an accounting and the responding party fails to satisfy the Court that there is a preliminary issue to be tried, theCourt may grant judgment on the claim with a reference to take accounts. [20] The efficacy in proceeding under Rule 17A must not be at the expense of the parties’ right to fully and fairly present their case. For this reason, before proceeding with a hearing the court must be satisfied of the appropriateness of using the

summary process in the

circumstances, beyond the merits of the application itself. This approach to the use of Rule 17A is well established. In L.H.E., supra, themajority for the court stated: 12. An application under rule 17A engages a two-step process. The analysis begins with a threshold question, that is, “whether thecase is appropriate for

summary adjudication” (Young v. Noble, 2016 NLCA 58, 1 C.A.N.L.R. 197, 411 D.L.R. (4th) 223, at paragraph23). [21] The majority went on to explain that the threshold question may be considered prior to or at the same time that the merits of theapplication are heard (L.H.E. at paragraph 13); however whether the threshold has been met must be determined before the merits of theapplication are decided. [22] If the Court is satisfied the matter can be determined by way of the

summary trial proceedings under Rule 17A, the Courtproceeds to assess the claim on its merits. In assessing the application on its merits, the burden upon the Applicant is twofold. Marco framed the onus this way: The burden is on the applying party to satisfy the court that: (

a) There is no genuine issue for trial”, or, (

b) If there is a genuine issue, the record before the court enables the court to find the facts necessary to decide that issue and it wouldnot be unjust to the responding party to do so. [23] Where the Applicant is the Plaintiff, as is the case in these circumstances, he or she must “provide a sufficient evidentiary basis,which if considered alone would provide each element of the cause of action” (Marco, supra).

In assessing the evidentiary basis, thecourt considers not only the affidavit or other documentary evidence provided by the Applicant, including “admissions frominterrogatories, or discoveries”, but the “results of any cross-examination” that is permitted (see Swain v. Vickers, 2019 NLSC 17). [24] As the Applicant, the legal onus is on Triton to provide an adequate evidentiary basis to establish the elements of its claim.

Ifthe Applicant meets the above evidentiary threshold, then the burden falls to the Respondent (in this case, the Defendant), todemonstrate that “there is a genuine issue for trial” (Marco, supra). In meeting this onus, the Respondent is not entitled to simply rely onits pleadings. As stated in Marco, supra: The argument on a Rule 17A application takes place at a level below the pleading within the forums of evidence and legal argument.

Theresponding party must therefore “put his best foot forward” since failure to do so may lead the court to conclude that there is in fact nogenuine issue for trial. [25] Even if there is a genuine issue for trial, the Court may proceed with a determination on the merits, if it is satisfied theevidentiary record is “sufficient for adjudication” (see Pomerleau Inc. v. Newfoundland and Labrador (Minister of Transportation andWorks), 2014 NLTD(G) 19).

This determination includes a consideration of, but is not limited to, “whether there are conflicts in theevidence that can be resolved with reference to the other known facts”, “whether there are issues of credibility that” can be resolved, orwhether there is material evidence that has not been provided (Marco, supra). [26] As per the words of Rule 17A, the court must consider “the whole of the evidence before it”, to decide the issues.

If there isimportant material missing, it may be “unjust” to decide the issues on the record that is before the court. [27] Applying the above framework, I am satisfied in these circumstances that the matter is appropriate for determination by way ofsummary trial proceedings under Rule 17A and it would not be unjust to proceed in this manner. [28] With respect to liability, I agree with the Applicant that the facts are not complicated and are generally agreed upon by theparties.

There was a call for tenders to supply materials for the construction of eight houses by TRHC, and Triton was one of threeresponding bidders. It is not disputed that Triton was the lowest bidder, and that Triton was not awarded the contract. There is also nodispute that TRHC advised Triton that it relied on the privilege clause in the Instructions to Bidders to justify awarding the contract toWCL, and not Triton. [29] The only disagreement between the parties on the facts is that TRHC now asserts Triton was not a compliant bidder. TRHC haspresented no evidence to explain why this is so.

There was oral argument that Triton may have been non-compliant because it includedHST in its tender bid. TRHC submitted that it may be that either WCL was non-compliant because it failed to include HST, or Tritonwas, because it did include HST in its bid. This argument was not pursued with vigour, and given the test for compliance, as discussedbelow, I am satisfied that the issue can be decided based on the record before me. [30] The parties are also in agreement as to the applicable legal principles. The cause of action alleged is breach of contract.

Toestablish each element of breach of contract, Triton must establish that there was a contract between it and TRHC, and that TRHC failedto comply with the terms, both express and implied, in that contract. [31] In the tendering context, the general principle is - subject to the application of any privilege clause which will be discussedbelow - that upon supplying the lowest compliant bid, a contract between the party who invited the bids (the owner), and the party whohas supplied the lowest compliant bid (the bidder) may arise as per R. v. Ron Engineering, (SCC), [1981] 1 S.C.R. 111,and as interpreted in M.J.B.

Enterprises Ltd v. Defence Construction

(1951) Ltd, (SCC), [1999] 1 S.C.R. 619 andMartel Building Ltd. v. R., 2000 SCC 60 (See also RJG Construction Ltd. v. Newfoundland, 2016 NLTD(G) 40, at paragraph 19 andPomerleau, supra at paragraphs 29 and 31). [32] The contract that arises upon supplying the lowest compliant bid is commonly known as Contract A. [33] In M.J.B., the Supreme Court of Canada reviewed the contract principles as they relate to the tendering process. At paragraph

19, Iacobucci, J. stated: 19 What is important, therefore, is that the submission of a tender in response to an invitation to tender may give rise to contractualobligations, 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 termsare governed by the terms and conditions of the tender call. [34] Recognizing that each case needs to be assessed on its own facts, it is not the case that Contract A will automatically arise, butthat a contract may arise between the owner and the lowest compliant bidder. [35] M.J.B. established that it is an implied term of Contract A that only compliant bids will be considered. There is no resultingobligation from the owner if the bid supplied is not compliant with the tender requirements.

To hold otherwise would render the tenderprocess meaningless and arguably contrary to the presumed intention of the parties (see M.J.B., at paragraph 30, Pomerleau at paragraph30, Johnson Construction Ltd. v. Newfoundland and Labrador (2000), (NL SC), 185 Nfld. & P.E.I.R. 106, 1 C.L.R.(3d) 313 (Nfld. C.A.)). [36] In Health Care Developers Inc. v. Newfoundland (1996), (NL CA), 141 Nfld. & P.E.I.R. 34, 136 D.L.R.(4th) 609 (Nfld. C.A.), the Newfoundland and Labrador Court of Appeal had occasion to address an alleged breach of contract in thetendering context.

Although the issues in Health Care Corporation involved a complex tender in the context of provincial governmentcontracts, Cameron, J., speaking for the Court, provided a helpful review of the applicable principles. At paragraph 33, Cameron, J.stated: It is, however, possible to discern certain generally accepted principles from the cases decided since Ron Engineering. The trial judgeadopted those enumerated by Jenkins J. of the Prince Edward Island Supreme Court, in Murphy v. Alberton (Town) (1993), (PE SCTD), 114 Nfld. & P.E.I.R. 34 (T.D.) at 43.

Jenkins J. stated: . . . . . upon contract A coming into being: a. there arises at law rights and obligations of the parties that are consistent with the protection and promotion of the integrity of thebidding system where under the law of contracts it is possible to do so. b. the owner owes a general duty to treat all bidders fairly. c. an owner has the right to include in the tender documents stipulations and restrictions on the rights of bidders and to reserve privilegesto the owner. d. an owner does not have the right on consideration of competing bids to rely upon undisclosed terms and conditions. e. “Lowest or any tender not necessarily accepted” reserves conditionally to the owner the privilege to decide not to proceed with thework at all, but does not allow the owner to: (

i) choose comparatively among the bidders based on criteria that has not been disclosed tothe bidders; or (ii) to award to another bidder or another person something other than contract B. f. general custom in bidding, and particular local customs, can result in implied contractual rights. g. an owner does not have the right to pass over properly filed bids and enter into contract B with a bidder whose bid is informal, orinvalid. h. where there is a breach of contract A, the measure of damages can include (

i) the cost of preparation of the bid; and (ii) upon the lowbidder proving he would have obtained the contract, the estimated loss of profit on the work. I, too, would adopt the

summary of Jenkins J. of principles enunciated by the cases since Ron Engineering. [37] The parties agree that the principles established in M.J.B., Martel and Ron Engineering govern whether or not a contractexisted in these circumstances. [38] The lack of dispute with respect to the law and the facts supports proceeding by way of Rule 17A. As stated, the one factualdispute is whether or not Triton was a compliant bidder. I am satisfied all the issues, including this factual issue, can be resolved on thebasis of the record before me.

Issue 2: Was Triton the lowest compliant bidder? [39] Whether or not Triton was a compliant bidder must be resolved in order to determine the claim on its merits. Whether or notTriton was a compliant bidder is fundamental to establishing that there was a contract with TRHC. There is no dispute that there can beno breach of contract if Contract A did not exist between the parties. [40] In these circumstances, there was no dispute by TRHC that if Triton was the lowest compliant bidder, Contract A was formedbetween TRHC and Triton.

Both parties agreed it was their intention that Contract A would arise. [41] Upon review of the record before me, in particular the Instructions to Bidders, and the affidavits of both Margaret Fox andAubrey Budgell, I too am satisfied that it was the intention of the parties to give rise to Contract A once TRHC received a compliant bid. In so finding, I have considered the reasoning in M.J.B. at paragraph 23, in which Iacobucci, J. stated: As I have mentioned, whether or not Contract A arose depends upon whether the parties intended to initiate contractual relations by the

submission of a bid in response to the invitation to tender. 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 not an insignificant cost to the appellant accompanied by the bid security. [ 42 ] Similarly, in the present circumstances, I am satisfied that TRHC made an offer through a formal process for the invitation for tenders (albeit a less complex invitation than in M.J.B. ), and that Triton accepted this offer in the submission of its tender. [ 43 ] While there is no dispute Triton was the lowest bidder, TRHC asserts Triton was non-compliant.

Unfortunately, apart from the argument as to the significance of including HST in its bid, TRHC has provided no evidence as to why or how Triton was non-compliant. [ 44 ] The test for whether or not a tender bid is compliant is that of “substantial compliance” (see Coady Construction & Excavating Limited v. Conception Bay South (Town) , 2018 NLSC 115 , at paragraph 25 ). “Substantial compliance” requires that “all material conditions” of a tender, determined on an objective standard, must comply with the tender call, supra. The test is “substantial compliance”, not “strict compliance” (see also R.J.G.

Construction Ltd. v. Newfoundland & Labrador (Transportation and Works) , at paragraph 23). In Cougar Engineering and Construction v. Newfoundland and Labrador , 2015 NLCA 45 , the Newfoundland and Labrador Court of Appeal affirmed this test, at paragraph 25, noting that: Canadian courts have recognized that few tender calls are free from errors or omissions of one type or another and that a bid should not be declared defective unless unless the error or omission is material. [ 45 ] I am satisfied Triton complied with “all material conditions” of the tender call as per Coady Construction .

The completed bid speaks for itself. Upon review of the bid there is nothing on its face that suggests there were any irregularities or errors that resulted in Triton’s bid not complying with the requirements of the Instructions for Bidders, including the fact that Triton provided the cost of HST in its bid. [ 46 ] Nor did TRHC point to any deficiency in the completed bid or present evidence as to how the bid was non-compliant, except that Triton’s inclusion of HST may have been in error.

TRHC did not explain how the inclusion of HST was in error. [ 47 ] In my view, the argument that Triton was non-compliant because of including HST is illogical given the wording of the Instructions to Bidders. The wording of the Instructions to Tenders is that the costs shall include the “total cost” and “all taxes”. In my view, the requirement that the bidder include the “total cost” of the materials is reasonably interpreted to mean the inclusion of taxes, which would include HST.

This would mean that Triton was compliant by including the HST as part of the “total cost”. [ 48 ] For this reason, I do not accept TRHC’s argument that the fact that Triton included HST meant its bid was non-compliant. It is not logical on the wording of the Instructions to Bidders which required a “total cost” to be included. [ 49 ] There being no evidence or other argument from TRHC as to why Triton was non-compliant, the evidence supports that Triton was the lowest compliant bidder. As stated in Marco , it is incumbent upon the Respondent to put their best foot forward.

It is insufficient for TRHC to rely on its pleadings to establish that Triton was not compliant. [ 50 ] Further, the initial explanation given by TRHC for not awarding the contract to Triton was not because Triton failed to comply with the bid requirements, but because TRHC relied on the privilege clause to award the contract to someone other than the lowest compliant bidder. [ 51 ] While I accept that TRHC’s reliance on the privilege clause is not direct evidence that Triton was a compliant bidder, it is evidence from which there is a compelling inference that Triton was a compliant bidder.

There is a compelling inference from TRHC’s reliance on the privilege clause that Triton was compliant, because if Triton was not compliant, there would be no need to rely on the privilege clause to refuse awarding the contract to Triton. [ 52 ] In the circumstances, I am satisfied that Triton has provided more than sufficient evidence of a prima facie case that it was not only the lowest bidder, but the lowest compliant bidder, and I so find. [ 53 ] The issue then is whether or not TRHC was entitled to rely on the privilege clause to deny awarding the contract Triton.

Issue 3: Was TRHC entitled to rely on the privilege clause as stated in the Instructions to Bidders in the circumstances? [ 54 ] There is no dispute, once Contract A is established, that TRHC was obliged to award the contract for supplying the materials (Contract “B”) to Triton - subject to TRHC’s ability to rely on the privilege clause as per M.J.B ., and Martel . [ 55 ] Triton submits that while the privilege clause may have permitted TRHC to decline awarding a contract to the lowest compliant bidder, it did not give TRHC the ability to award the contract to another bidder on the basis that the other bidder had previously done similar work for TRHC.

If TRHC wanted to have the flexibility to choose a contractor whom TRHC had previously hired, TRHC needed to make this clear in the Instructions to Bidders so that all bidders knew that contractors who had previously been hired may be given preference. I agree. The nature of privilege clauses in contracts arising m the tendering process [ 56 ] The Supreme Court of Canada discussed the nature of a privilege clause in the tendering process in M.J.B. , supra.

While a privilege clause may enable the party who issued the tender the ability to decline awarding a tender to a lowest compliant bidder (for example, where the issuing party decides not to proceed with a contract), a privilege clause cannot operate to permit the owner to choose a successful bidder on the basis of criteria not disclosed in the tender documents. In M.J.B. , at paragraph 50, the court stated:

50. For example, a number of lower court decisions have held that an owner cannot rely on a privilege clause when it has not madeexpress all the operative terms of the invitation to tender: see Chinook Aggregates Ltd. v. Abbotsford (Municipal District) (1987), 28C.L.R. 290 (B.C. Co. Ct.), aff’d (1989), (BC CA), 35 C.L.R. 241 (B.C. C.A.); Kencor Holdings Ltd. v. Saskatchewan, (SK KB), [1991] 6 W.W.R. 717 (Sask. Q.B.); Fred Welsh Ltd. v. B.G.M. Construction Ltd., (BCSC), [1996] 10 W.W.R. 400 (B.C. S.C.); George Wimpey Canada Ltd. v. Hamilton-Wentworth (Regional Municipality) (1997), 34C.L.R. (2d) 123 (Ont. Gen.

Div. [Commercial List]); Martselos Services Ltd., supra. Similarly, a privilege clause has been held not toallow bid shopping or procedures akin to bid shopping: see Twin City Mechanical v. Bradsil

(1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont.Gen. Div.), and Thompson Bros. (Const.) Ltd. v. Wetaskiwin (City) (1997), (AB KB), 34 C.L.R. (2d) 197 (Alta.Q.B.). [57] In Martel Building Ltd. v. R., the Supreme Court of Canada had further occasion to discuss the application of a privilege clausein the tendering context. Although the central issue in Martel was whether the tort of negligence should extend a duty of care to contractnegotiations, the Court also reviewed in detail the obligations of both parties in the tendering process, including the impact of a privilegeclause on those obligations.

The Court re-affirmed that while the privilege clause may relieve the owner from awarding a contract to thelowest compliant bidder, the privilege clause must work “harmoniously” with the rest of the terms of the contract. [58] Further, referring to Chinook Aggregates Ltd. v.

Abbotsford (Municipal District) (1989), (BC CA), 35 C.L.R.241, [1990] 1 W.W.R. 624 (B.C.C.A.), the Supreme Court in Martel stated that there is an implied obligation in such contracts that theowner will treat all bidders fairly and equally (paragraph 84 to 85), including to not give preferential treatment to other bidders that is notdisclosed in the tender documents. The Supreme Court stated at paragraph 84: 84 Various appellate courts have found the need to imply a contractual term into Contract A to treat all bidders fairly and equally.Best Cleaners & Contractors Ltd. v. Canada, (FCA), [1985] 2 F.C. 293 (Fed.

C.A.) , is often referred to as one of theearlier cases suggesting such a duty. Also, in Chinook Aggregates Ltd. v. Abbotsford (Municipal District) (1989), (BCCA), 35 C.L.R. 241 (B.C.

C.A.) , the British Columbia Court of Appeal unanimously held at p. 244 that the party calling for tenders wasunder a duty to “treat all bidders fairly and not to give any of them an unfair advantage over the others.” Legg J.A., speaking for theCourt, concluded that the owner had breached this implied contractual obligation by adopting a policy of preferring local contractorswhose bids were within 10 percent of the lowest bid in awarding the contract, when that preference was not revealed by, nor stated in, thetender documents.

The tenderers were not notified of this policy to avoid alerting local contractors to the fact that they were afforded apreference. It was held that the privilege clause did not give the owner the right to attach an undisclosed condition to its offer. [59] In Health Care Developers v. Newfoundland, speaking for the Court of Appeal, in reference to the duty to act in good faith, atparagraph 35, Cameron, J. stated that good faith includes that an owner, in considering competing bids, not rely on terms that are notdisclosed to all bidders. This was one of the principles also made clear in Murphy v.

Alberton (Town) (1993), (PESCTD), 114 Nfld. & P.E.I.R. 34, 44 A.C.W.S. (3d) 1217 (Nfld. C.A.), referred to by Cameron, J., at paragraph 33. [60] The above comments in Martel and Health Care Corporation are apposite here.

The above supports that in adhering to the dutyto act in good faith, a party issuing the call for tenders cannot rely on a privilege clause to consider criteria not known to all bidders (seeHealthCare Developers Inc. also at paragraphs 40 to 42, and 47). [61] In the present circumstances, there was nothing in the Instructions to Bidders advising the bidders that previously hiredcontractors may be given preference over the lowest compliant bidder.

The Instructions to Bidders was specific that the contract will beawarded to the “lowest average price for quality materials”, subject to the privilege clause that the “lowest bid may not be accepted”. [62] The affidavit of Margaret Fox is also clear. TRHC relied on the privilege clause to not award the contract to Triton, and thereason the contract was awarded to WCL was because in TRHC’s view, the cost difference between Triton and WCL was “negligible”and TRHC had contracted with WCL in the past.

In other words, TRHC preferred WCL over Triton because of WCL’s previoussuccessful history with TRHC. [63] In my view, the scope of the privilege clause as worded cannot extend to preference for previous contracted suppliers. At most,the wording supports that the intention of TRHC was to award the contract to the lowest compliant bidder or not award the contract atall. If TRHC intended to take into consideration preference for previously hired suppliers, as per Martel and Health Care Corporation,it was incumbent upon TRHC to make clear to all bidders of this preference.

This TRHC did not do. [64] In failing to make this criteria for awarding the contract known to all bidders, I am satisfied that TRHC did not treat the bidderswith fairness in being open about how the bids were to be assessed.

While I have no difficulty in accepting that TRHC could rely on theprivilege clause to deny awarding the contract to anyone, I do not accept that the privilege clause as worded, and when considered withthe Instructions to Bidders as a whole, also entitled TRHC to award the contract to bidders who were not the lowest compliant bidder onthe basis of preference for contracting with previous suppliers. Such an

interpretation is not “harmonious” with the privilege cause asworded, or when taken with the whole document. [65] In my view, the Instructions to Bidders is clear that the contract will be awarded to the lowest compliant bidder; subject to theprivilege clause to allow TRHC to not award the contract at all. There is no possible way to construe the Instructions to Bidders toinclude the ability of TRHC to award the contract to a bidder who was not the lowest compliant bidder on the basis that it had contractedwith that bidder in the past.

The failure to advise all bidders of the possible consideration of preference for previously contractedsuppliers means that TRHC has awarded the contract on a basis that is not disclosed in the Instructions to Bidders. [66] For these reasons, TRHC cannot rely on the privilege clause to support this decision. [67] I am also not persuaded by the statement in Margaret Fox’s affidavit that the difference between TRHC and Triton’s in theirprice estimates was “negligible” because the difference in the cost per house between Triton and WCL was less than $1,000, and thatthis permitted reliance on the privilege clause.

Firstly, the Instructions to Bidders does not advise the bidders that if bids arecomparable, there may be preference for the previously hired supplier; nor is there any qualification in the privilege clause. As stated byCameron, J. in Health Care Corporation, at paragraph 44:

The whole point of requiring fair treatment is to ensure that everyone is bidding on the same contract and that there are no hiddenpreferences. [68] Secondly, I do not accept that the difference in the prices between Triton and WCL was negligible, give that WCL’s costs didnot include HST. [69] I am satisfied that based on the above, TRHC breached the contractual obligation that arose with Contract A upon Triton’slowest compliant bid, to not award the Contract to WCL but to award the contract to Triton to supply the material. [70] I am also satisfied that the record is adequate to assess damages.

Issue 4: The proper assessment of damages [71] TRHC submits that Triton has inadequately articulated the damages it has suffered. Whether or not some or all of the issuescan be resolved by way of the

summary trial process is a legitimate consideration in determining the “appropriateness” of proceeding inthis fashion. [72] According to the Supreme Court of Canada in Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58 , [2001]2 S.C.R. 943 at paragraph 73, the measure of damages for breaching a tender contract is to put the plaintiff: “… in as good a position, financially speaking, as it would have been in had the appellant performed its obligations under the tendercontract.

The normal measure of damages in the case of a wrongful refusal to contract in the building context is the contract price less thecost to the Respondent of executing or completing the work, i.e., the loss of profit: M.J.B. Enterprises Ltd., supra, at p. 650; Twin CityMechanical v. Bradsil

(1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont. Gen. Div.), at pp. 225-26; S.M. Waddams, The Law of Damages,(3rd ed. 1997), at para. 5.890; H. McGregor, McGregor on Damages (16th ed. 1997), para. 1154.” [73] Similarly, in George Wimpey Canada Ltd. v. Hamilton Wentworth Regional Municipality (1997), 34 C.L. (2d) 123, 73A.C.W.S. (3d) 941 (Ont. Gen.

Div.) at paragraph 32, the court stated: The plaintiff is entitled to receive the difference between the revenue it would have received had it been awarded the contract and thecost it would have incurred in performing the work if economically and skillfully done: Tercon Contractors Ltd. v. British Columbia(July 12, 1994) Doc. Vancouver C915190 (B.C.S.C.) citing J.A. McIlwee & Sons v. Foley Brothers (1917), [1918] 1 W.W.W. 222(B.C.C.A.); affirmed (1918), (UK JCPC), [1919]1 W.W.R. 403 (Privy C.) and Sound Contracting Ltd. v. Nanimo(City) (July 10, 1997), Doc.

Nanimo S04330 (B.C.S.C.). [74] TRHC argues Triton has provided inadequate evidence to ascertain what would put Triton in the position it would have been inhad it been awarded the contract. In contrast, Triton asserts that the calculation of the damages it has suffered is straightforward. [75] Triton submits it would have expected 15% profit on the total cost of the project as supplied in its tender bid. Aubrey Budgelltestified that he calculated that his profit would have been 15% of the total cost to TRHC as listed in Triton’s tender bid. [76] Triton included that 15% calculation in the total cost.

In the tender bid supplied by Triton, there is a breakdown of the cost ofeach house as being $115,566.63 before HST is added. For eight houses, (before HST) the total cost is $924,533.04. Other costsincluded in the tender bid were freight at $40,000, travel at $8000, and HST at $145,879.95. The total cost to TRHC would have been$1,118,412. While there is no breakdown in the tender documents showing the added 15% profit, Triton asserts this is a straightforwardmatter of calculation and has calculated that amount to be $126,852.14.

I agree. [77] While it would have been helpful for an explicit breakdown showing the profit as derived from the cost, I am satisfied the $126852.14 represents 15% profit on the costs of the materials for eight houses, $924,533.04, $40,000 for freight, and $8,000 for travel costs. The costs incurred in preparing the tender bid are not an appropriate matter for damages [78] However, I agree with TRHC that Triton’s claim for the cost of preparing the bid is not appropriate (See Health CareDevelopers Inc. at paragraphs 84 to 85, and Wimpey at paragraph 33).

The cost of preparing the tender bid was a cost that would havebeen incurred by Triton whether or not it was the successful bidder. Given this, these costs cannot be considered “damages” incurred asa result of TRHC’s breaching its contractual obligations towards Triton. This is not money that would put Triton in the same position itwould have been in if the contract had been honoured; but money that Triton expended as part of the tendering process – whether or notit was awarded the contract. All bidders incurred the cost of preparing and filing the tender. I dismiss the claim for damages of this kind.

CONCLUSION [79] I am satisfied that the matter is appropriate for determination by way of

summary trial under Rule 17A. There is an adequateevidentiary basis to resolve both the factual and legal issues on liability, and I see no unfairness in determining the issue by way of Rule17A. [80] For the reasons discussed above, I find that TRHC is liable to Triton for breaching the contract between TRHC and Triton inrespect of their obligation to award Triton the contract.

Triton supplied the lowest compliant bid, and while TRHC was entitled denyawarding the contract altogether, given the presence of the privilege clause, it was not entitled to rely on the privilege clause to proceedand award the contract to WCL. [81] With respect to the proper measure of damages I am satisfied the Court has been provided with an adequate basis to award the

quantum of damages in the amount asserted by Triton. I am satisfied the damages should be the measure at a percentage of the cost of the tender bid of 15% which has been calculated to be $126,852.14, plus judgment interest under the Judgement Interest Act, Judgement Interest Act, R.S.N.L. 1990 c. J-2 . [ 82 ] Triton shall have their costs on the usual scale under column three of the Rules of the Supreme Court , 1986, S.N.L. 1986, c. 42, Sch. D . [ 83 ] Judgment accordingly. _____________________________ Frances J. Knickle Justice