2013 ONSC 4001, 2013 ONSC 4001

CITATION : Asco Construction Ltd. v. Epoxy Solutions Inc. , 2013 ONSC 4001 COURT FILE NO.: 11-1744 DATE: 2013/06/12 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: Asco Construction Ltd., Appellant AND Epoxy Solutions Inc., Respondent BEFORE: Valin, MacDougall and Rady JJ. COUNSEL: Stéphane Bond, for the Appellant Angela Assuras, for the Respondent HEARD: June 10, 2013 ENDORSEMENT [ 1 ] The appellant is a general contractor. It sued the respondent, a subcontractor, for damages for breach of contract. The respondent counterclaimed for damages for loss of profit and surveying costs.

The trial judge dismissed the appellant’s action and granted judgment to the respondent on the counterclaim. This is an appeal from that judgment. Background [ 2 ] The City of Kingston is the owner of the Grand Theatre. It hired the appellant as the general contractor to undertake substantial renovations to that facility. The appellant invited tenders for concrete topping and repair and epoxy finish (the “work”). To assist potential bidders, the appellant provided details of the requirements and scope of the work, together with a sketch which purported to contain existing slab elevations.

A revised sketch was also provided before tenders closed. [ 3 ] On December 16, 2006, the respondent submitted a bid for the work in the amount of $72,500.00. On December 21, 2006, the appellant sent a letter of intent to the respondent confirming that the appellant had awarded the subcontract for the work to the respondent for the submitted price of $72,500.00.

That letter described the scope of the work and informed the respondent that the date of the letter of intent was to constitute the date of the subcontract award. [ 4 ] The appellant invited the respondent to sign and return the letter of intent to confirm its agreement of the contract amount and scope of the work. The respondent complied with that request. The appellant also provided the respondent with a contract agreement. That document was never signed. [ 5 ] The respondent’s work was supposed to begin after the scaffolding had been removed.

There were significant delays in the project, none of which were attributable to the respondent. [ 6 ] On or about September 27, 2007, the respondent informed the appellant that it could not commence the work prior to reviewing the findings of a surveyor it had retained. The appellant informed the respondent in writing that the respondent was required to start its work as its failure to do so was delaying the project.

The appellant also informed the respondent that if, while performing the work, the respondent found that there was an extra charge that should be submitted, the appellant would deal with such a claim at that time. [ 7 ] The respondent ultimately retained the firm of Grange W. Elliott Limited. On October 2, 2007, Mr.

Peter Allen, an Ontario Land Surveyor employed by that firm, reported to the respondent in writing that the architect’s sketch forming part of the tender documents contained insufficient information, that requests to the appellant and the architect for additional information had gone unheeded and that it was therefore necessary to conduct an as built survey to calculate accurately the quantities of concrete necessary to perform the work. [ 8 ] By letter dated October 4, 2007, the respondent advised the appellant that its surveyor had determined that the elevations listed in the tender documents were inaccurate and that further work and additional material needed to be supplied at an additional cost of $32,150.00 plus GST, over and above the bid price for the work.

The respondent informed the appellant that it would not start the work without first receiving confirmation that it would be paid that additional amount. [ 9 ] The appellant sent a fax to the respondent that evening demanding detailed calculations of the cost overages the respondent was claiming and further demanding that the matter be resolved with the approval of the architect within 24 hours, failing which the appellant would find a new subcontractor for the work. [ 10 ] By letter dated October 5, 2007, the appellant repeated its request that the respondent start its work to avoid more delays. The

appellant also requested supporting documentation from the respondent with respect to the additional amount claimed and to the alleged variance in the elevations that had been provided by the city. The letter stipulated that the appellant had grounds to terminate the subcontract, but proposed a meeting with the architect on October 9, 2007 to negotiate. [ 11 ] The respondent did not provide the requested supporting documentation. It did not respond to the appellant’s letter of October 5, 2007.

As a consequence, there was no meeting scheduled with the architect that day. [ 12 ] On October 9, 2007, the appellant sent the respondent a notice of default under its subcontract agreement. On October 11, 2007, counsel for the respondent sent a letter to the appellant, advising that the respondent was willing to provide reasonable information to support the additional costs being requested. [ 13 ] The appellant did not receive any such information from the respondent.

It reopened the tender process for the work and ultimately contracted with the firm which had been the second lowest bidder after the respondent when they both tendered for the work in 2006. The appellant ultimately paid that subcontractor the sum of $90,300.00 plus taxes for the work, an increase in price in the amount of $17,800.00 plus taxes. That subcontractor performed the work to the satisfaction of the appellant and the owner, without requesting any extras.

However, the trial judge concluded that the subcontractor did not follow the specifications for the work, that it used cheaper materials, and that it sanded the floor rather than sandblasting it. [ 14 ] The appellant claimed that the respondent breached the contract and sought damages in the amount of $17,000.00 to account for the costs of hiring the second lowest bidder to carry out the work that the respondent allegedly failed to perform.

The respondent counterclaimed against the appellant for its loss of profit, and the surveying costs, labour and travel expenses it incurred in preparing for the job. [ 15 ] The trial judge dismissed the appellant’s claim and awarded damages to the respondent on its counterclaim in the amount $25,678.00, plus pre-judgment interest in the amount of $4,521.57, and costs in the amount of $47,509.81. Standard of Review [ 16 ] The standard of review on a question of law is correctness.

The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a palpable and overriding error. Where the trier of fact has considered all the evidence that the law requires him or her to consider and still comes to the wrong conclusion, then this amounts to an error of mixed law and fact and is subject to the more stringent standard of review of palpable and overriding error. [1] Law and Analysis [ 17 ] The Supreme Court of Canada has established principles of law applicable to contracts resulting from the tender process.

The first contract (Contract

A) is formed when the offer, being the invitation to tender on a project, is accepted by the subsequent tendering or bid by a contractor or subcontractor. The offer (invitation to tender) and the lowest bid provided (acceptance) results in the formation of Contract A. The bid or tender constitutes an offer to enter into Contract B. A letter from a general contractor notifying the successful bidder that its bid has been accepted amounts to a binding acceptance of the offer, resulting in Contract B.

If the owner or general contractor accepts the tender, the primary obligation of the bidder is to enter into Contract B on the terms tendered. [2] [ 18 ] Counsel for the appellant argued that the trial judge made contradictory findings regarding the contractual relationship between the parties. On the one hand, he found that the respondent had successfully tendered a bid for the work specified for the price of $72,500.00 and that the appellant had provided the respondent with a letter of intent to which the respondent confirmed its acceptance and signed.

On the other hand, the trial judge found that there was an absence of a formal contract between the parties. [ 19 ] Although the trial judge did not specifically refer to Contract A or Contract B in his reasons for judgment, it is clear he was aware of a contractual relationship between the parties that gave rise to respective obligations. The fact that the parties did not enter into a formal contract was an accurate observation and not one that can reasonably be construed as being contradictory. [ 20 ] It is not necessary to analyse that argument further.

There is authority for the proposition that tender documents compiled by an owner or general contractor constitute an implied representation to compliant bidders that the work described in the tender documents can be built as described. Contractors and subcontractors bidding on projects are entitled to rely on the accuracy of design information prepared by the owner or its engineers, rather than being compelled to duplicate design analysis prior to submitting bids. [3] [ 21 ] The trial judge qualified Mr. Allen as an expert witness.

Based on his testimony, the trial judge found that the respondent had established that the elevations shown on the sketch which formed part of the tender documents and specifications were inaccurate in that an extra 200 cubic feet of floor were required. Counsel for the appellant argued that the trial judge failed to qualify Mr. Allen as an expert and to provide the appellant with an opportunity to cross-examine him on his qualifications. Counsel for the appellant also complained that the 60 pages of calculations that Mr.

Allen relied on in expressing his opinion were not tendered in evidence. [ 22 ] We find that the trial judge properly qualified Peter Allen as an expert witness. Beyond his qualifications as a graduate of Queen’s University in Engineering, he is an Ontario Land Surveyor with several years of experience. In addition, prior to being hired by the respondent, he had surveyed the entire theatre for the owner. It should also be noted that, while the appellant claimed it had been denied the opportunity to cross-examine Mr.

Allen on his qualifications, its counsel never requested permission from the trial judge to do so. [ 23 ] We agree with counsel for the respondent that Mr. Allen was amply qualified to give reliable and helpful assistance to the Court on the issue regarding the effect of the mistake or inaccurate information in the sketch that formed part of the tender documents. We therefore conclude that the trial judge properly qualified Mr.

Allen as an expert witness. [ 24 ] The trial judge made adverse findings with respect to the credibility of some of the witnesses who testified on behalf of the appellant, and the reliability of their testimony. He was in the best position to make those findings. His findings were supported by the

evidence. We find no reason to interfere with them. [ 25 ] Ultimately, what occurred here was that both sides reached an impasse; they refused to move from the positions they had adopted. The appellant took the position that the respondent should perform the work it contracted to do without further delay.

The appellant had repeatedly asked for detailed calculations of the significant extra costs claimed by the respondent, but the respondent never disclosed the details of those calculations. [ 26 ] However, the trial judge found as a fact that there were substantial errors in the appellant’s tender invitation documents. The respondent was not aware of those errors and could not reasonably be expected to have discovered them prior to making its bid. The respondent was under no obligation to investigate the accuracy of the tender invitation documents. The mistake was the fault of the appellant.

The respondent adopted the position that, if a subcontractor performs work without an express agreement that the work will be treated as an extra to the contract, the subcontractor cannot expect that there will be additional compensation for the work. [4] The trial judge agreed with the respondent’s position on that issue. The respondent sought proper assurance from the appellant, in advance of commencing any work, that it would be compensated properly and fully for the cost of the additional work and material required.

The appellant never provided such assurance. [ 27 ] Both parties refused to budge from their positions. By their conduct, they walked away from any contractual obligations they had with each other. The positions they adopted arose from a common mistake. The sketch the appellant provided with the tender documents was not a detailed survey and failed to provide adequate information necessary to calculate accurately the costs of labour and materials required to do the work.

The respondent did not become aware of the mistake until informed by its surveyor, almost ten months after submitting its bid, of the inadequacy of the sketch. We find that the mistake was so fundamental that it renders the contract between the parties void. No damages can flow from a contract that does not exist. [ 28 ] We find that the issue of mistake is a question of law for which the standard of review is correctness.

Although the issue of mistake was not pleaded by either side and does not appear to have been addressed or argued at trial, we find it was the issue which should have determined the outcome of the trial. For that reason, the judgment of the trial judge cannot stand. Conclusion [ 29 ] The appeal, insofar as it requests judgment in favour of the appellant, is dismissed. The balance of the appeal is allowed.

The judgment of the trial judge in favour of the respondent, and the attendant award of costs, is set aside. [ 30 ] Having regard to the issue of costs, in the circumstances of this case, we find that the appropriate order is no order as to costs at trial or on this appeal. Mr. Justice G. Valin Mr. Justice B. MacDougall Madam Justice H. Rady Date: June 12, 2013 CITATION : Asco Construction Ltd. v. Epoxy Solutions Inc. , 2013 ONSC 4001 COURT FILE NO.: 11-1744 DATE: 2013/06/12

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT RE: Asco Construction Ltd., Appellant AND Epoxy Solutions Inc., Respondent BEFORE: Valin, MacDougall and Rady JJ. COUNSEL: Stéphane Bond, for the Appellant Angela Assuras, for the Respondent ENDORSEMENT Valin J. MacDougall J. Rady J. Released: June 12, 2013