Design Services Ltd. v. Canada, 2005 FC 890

Date: 20050623

Docket: T-219-00

Citation: 2005 FC 890

Ottawa, Ontario, dated this 23^rd day of June, 2005

Present:           The Honourable Mr. Justice Richard Mosley                                 

BETWEEN:

DESIGN SERVICES LIMITED,

G.J. CAHILL & COMPANY LIMITED,

PYRAMID CONSTRUCTION LIMITED,

PBH GROUP INC.

CANADIAN PROCESS SERVICES INC.

METAL WORLD INCORPORATED INC.

Plaintiffs

and

HER MAJESTY THE QUEEN

Defendant

REASONS FOR JUDGMENT AND JUDGMENT

Nature of the dispute

[1]                This case arises out of a request for proposals and a tendering process for the construction of a naval reserve building, HMCS Cabot, in St. John's, Newfoundland. The defendant, Public Works and Government Services Canada ("PWGSC"), requested the proposals and handled the tendering process. The plaintiffs were originally Olympic Construction Limited ("Olympic"), a general contractor and the proponent of a tender for the design and construction of HMCS Cabot; PHB Group Inc., an architectural practice; Design Services Limited, a structural consultant; G.J. Cahill & Company Limited, an electrical contractor; Pyramid Construction Limited, a civil contractor; Canadian Process Services, a mechanical contractor; and Metal World Incorporated Inc., a structural trade contractor.

[2]                Prior to trial, a tentative settlement was reached between the defendant and Olympic. On November 17, 2004, following the hearing in this matter, with consent of the defendant, Olympic discontinued its action against Her Majesty. These reasons and order for judgment reflect this change in the parties.

[3]                The architect, structural consultant, and contractors had all agreed to work with Olympic in developing and presenting the tender as part of a "design-build team." In the traditional tendering model, as described in the evidence, bids are solicited to construct an owner-designed structure. The owner retains architects and engineers to develop a precisely defined project. All of the bid proponents submit prices to build the same design. Subcontractors may submit prices to several general contractors bidding on the project through a bid-depository system.

[4]                In a design-build tendering process, interested parties are invited to submit initial proposals that include detailed designs and supporting documentation to meet the owner's requirements. In this case, PWGSC had retained an architectural firm to prepare conceptual drawings that outlined the floor plans, exterior elevations and performance specifications that each submitted proposal had to meet.

[5]                A feature of the design-build approach followed by PWGSC in this instance was pre-qualification of the design-build team, including the subcontractors, to ensure that only those teams that had demonstrated ability and a history of solid performance entered the field for the selection of the successful bid.

[6]                The Olympic design-build team was pre-qualified by PWGSC, but their bid was not accepted. Instead, a bid from Westeinde Construction Limited ("Westeinde") was successful. Olympic and a number of its design-build team members then brought this action on the basis that Westeinde's proposal was noncompliant. A number of questions, both factual and legal, were settled prior to trial.

[7]                For the purposes of this decision, the parties agree that I am to assume that Westeinde was noncompliant and that Olympic should have received the contract to construct HMCS Cabot. The issue before me is whether the remaining plaintiffs have any standing in law to also benefit in the claim against the defendant, in contract, tort, or both, to recover their costs or fees and the opportunity lost to share in the profits of the enterprise. I have only to determine a relatively narrow question:

Did PWGSC owe a duty, in contract or in tort, to the other members of the Olympic design-build team?

Background

[8]                The parties presented at the hearing an "Agreed Statement of Facts", which is substantially reproduced below:

Statement of qualifications stage

[9]                In May 1998, PWGSC issued a Request for Statement of Qualifications ("Request for SOQ") for pre-qualification of Design-Builders for project number 101596, described in Annex "A" of the Request for SOQ as a "major capital construction project," for construction of a new building to house HMCS Cabot.

[10]            The stated purpose of the Request for SOQ was to identify design-build entities and teams that would be interested in being considered for the Request for Proposals (RFP) stage of the process. The architect, structural consultant, and subcontractors proposed by Olympic participated in a design-build team assembled by Olympic. Their Reply to SOQ was submitted on June 24, 1998.

[11]            Except for Canadian Process Services Inc. ("CPSI"), each of the Plaintiffs were named by Olympic as part of Olympic's design build team in the Reply to the SOQ submitted to PWGSC by Olympic as the "Proponent", [defined in the SOQ as the entity submitting the statement: see glossary attached as section 1 of Appendix "A"]. The architect, structural consultant and subcontractors were also named, along with others, as members of the design-build team in the Reply to RFP submitted to PWGSC by Olympic as proponent, also as defined in the RFP.

[12]            Olympic required its architect, consultants and subcontractors to enter into a confidentiality and non-disclosure agreement, a copy of which is reproduced as follows:

CONFIDENTIALITY AGREEMENT

Design/Build Proposal for HMCS Cabot, Southside

St. John's, NF

The undersigned hereby acknowledges that the Architects, Engineers, Olympic Construction Limited and its associates have spent significant time in the preparation of preliminary drawings related to the above-noted project. I/We hereby acknowledge that we will provide a quotation to the Olympic Construction Limited Design/Build Group based on the design drawings and specifications provided herewith and that this quotation, along with the contents of the documents provided, will remain totally confidential and not be provided to other bidders. As a caution, we note that as this is a proposal, all other bidders should have their own design drawings related to this project for you to price, or they should not be given a price.

I/We hereby certify that I/we will maintain the confidentiality requested.

On Behalf of:

[Company, Name, Date]

[13]            Olympic's SOQ Reply was accepted by the PWGSC as one of the top four Replies and Olympic's team proceeded to the RFP stage. On June 29, 1998, proponents who had responded to the SOQ were notified of the four proponents from whom responses to the RFP were being invited, one of which was a Joint Venture as defined in the SOQ. They were also notified of a mandatory briefing session and site visit to take place on July 10, 1998.

[14]            PWGSC provided RFP documentation to the four proponents. This documentation included a description of the project, a glossary of terms, a number of required forms, an explanation of the evaluation process, performance specifications and drawings, a copy of the articles of agreement (a standard form contract), and labour conditions requirements.

Mandatory briefing

[15]            At both the SOQ and RFP stages, PWGSC had no direct dealings with any of the plaintiffs. However, Charlie Henley of the Plaintiff PHB Group Inc. ("PHB"), along with

Carl Mallam of Olympic and Eric Paulson of Paulson Engineering Limited (Olympic's marine consultant) attended at the mandatory briefing session and site visit on July 10, 1998.

[16]            All four finalists had representatives at the mandatory briefing session and site visit. Some of the finalists had three people attend, and one finalist had only one person attend. Significant questions asked at the mandatory briefing session and site visit were minuted and written responses to those questions were issued as addenda to the RFP and forwarded to all four finalists.

Request for proposal stage

[17]            The RFP was delivered to Olympic on July 2, 1998. The Plaintiffs participated in preparing Olympic's RFP Reply, which was submitted on August 12, 1998. The RFP Reply was made up of two volumes. Volume 1 contained financial materials, including a proposal price form, detailed cost breakdown, financial security documents, and a list of optional or separate prices. Volume 2 contained the technical portion of the RFP Reply, including a design brief, design drawings, code compliance documents, and project management information.

[18]            All four proponents who were invited to reply submitted RFP Replies. The Proposals were evaluated and PWGSC awarded the Design-Build Contract for the HMCS Cabot project to Westeinde.

[19]            Except for what was set out in the SOQ, RFP, Olympic's SOQ Reply and Olympic's RFP Reply, the PWGSC had no knowledge of the agreements or arrangements made between Olympic and the plaintiffs. The bonding and evidence of financial capability required by the SOQ and RFP were provided by Olympic. Nevertheless, the parties accept that the following arrangements were made between Olympic and the other team members:

Design Services Limited

[20]            Design Services Limited ("DSL") was invited by Olympic to be the structural consultant

as part of the Olympic design-build-team for the HMCS Cabot project. DSL was responsible to Olympic for structural engineering. DSL provided structural engineering design and consulting services for the Building's structural steel, concrete, and pile foundation to Olympic. At the Reply to SOQ stage, DSL provided details of its qualifications to Olympic.

[21]            At the Reply to RFP stage, DSL completed preliminary design work and structural analysis to Olympic for the Project. DSL formulated structural components, attended meetings of the Olympic design-build team, coordinated with PHB and Metal World Inc. ("Metal World"), provided sketches to Olympic and ensured compliance with the structural design and engineering with the specifications set out in the RFP.

[22]            DSL had no input into whom the other members of the Olympic design-build team would be. DSL's fee was derived from the fee scale recommended by the Association of Professional Engineers and Geoscientists - Newfoundland and Labrador and was agreed upon with Olympic. No member of the Olympic design-build team, including the Architect or any subcontractor had any input into the price submitted by DSL to Olympic and DSL did not have input into the prices submitted by other Olympic design-build team members to Olympic. DSL provided a price quotation to Olympic and to no other proponents (as defined in the RFP). Olympic did not seek bids from alternate structural engineers to compete with DSL.

G.J. Cahill

[23]            G.J. Cahill and Co. Limited ("G.J. Cahill") was invited by Olympic to be the electrical

subcontractor for the Olympic design-build team. G.J. Cahill was to supply and install electrical systems for the project and to coordinate that work with the electrical engineer for Olympic. At the Reply to SOQ stage, G.J. Cahill provided details of its qualifications to Olympic.

[24]            At the Reply to RFP stage, G.J. Cahill reviewed the design drawings provided by the electrical engineer and the Architect, priced the supply and installation of electrical systems, liaised with the electrical engineer, ensured "workability" of the design, ensured technical compliance with the RFP requirements for electrical work, and attended Olympic design build team meetings.

[25]            No member of the Olympic design-build team, including the Architect, structural consultant, or any other subcontractor had any input into the price submitted by G.J. Cahill to Olympic and G.J. Cahill did not have input into the prices submitted by other Olympic design-build team members to Olympic. G.J. Cahill provided a price quotation to Olympic and to no other potential proponents (as defined in the RFP). Olympic did not seek bids from alternate electrical system supply and installation contractors to compete with G.J. Cahill.

Pyramid Construction

[26]            Pyramid Construction Limited ("Pyramid") was invited by Olympic to be the civil subcontractor for the Olympic design-build team. Pyramid was responsible to Olympic for civil engineering works, including demolition, site development, excavation, water main, and provision of aggregates and paving.

[27]            At the Reply to SOQ stage, Pyramid provided details of its qualifications to Olympic. For the Reply to RFP, Pyramid participated in Olympic design-build team meetings, assisted with the design for the work it was to complete for Olympic, and prepared pricing for its portion of the work it would perform for Olympic.

[28]            No member of the Olympic design-build team, including the Architect, structural consultant, or any subcontractor had any input into the price submitted by Pyramid to Olympic and Pyramid did not have input into the prices submitted by other Olympic design-build team members to Olympic. Pyramid provided a price quotation to Olympic and to no other potential proponents (as defined in the SOQ and later, the RFP). Olympic did not seek bids from alternate civil engineering works firms to compete with Pyramid.

PHB Group Inc.

[29]            PHB was invited by Olympic to be part of the Olympic design-build team for the HMCS

Cabot Project. PHB was the Architect as defined in the SOQ and later, the RFP.    PHB agreed with Olympic that it was to be paid a lump sum for its work and would be paid if Olympic was the successful proponent. At the Reply to SOQ stage, PHB provided to Olympic information regarding its qualifications.

[30]            At the Reply to RFP stage, PHB took the drawings provided with the RFP and developed 33% working drawings detailing the Building for use by other members of the Olympic design build team in preparing Olympic's Reply to the RFP. PHB participated in Olympic design build team meetings and coordinated the activities of Olympic design build team members. PHB had several sub-consultants, including A Day in the Life Company, responsible for kitchen layout, and Tract Consulting, a landscape design firm. In addition, PHB retained CADDRAFT, a company that provides technical support and working drawings to architectural firms.

[31]            PHB had no input into the prices or fees submitted by the structural consultant, the subcontractors or any other members of the Olympic design-build team, and no other member of the Olympic design-build team had any input into establishing PHB's fee. PHB had no input into the prices submitted by other consultants to Olympic (other than its own subconsultants) and subcontractors to Olympic (other than its own subcontractors). Conflict of Interest and Confidentiality provisions of the Code of Professional Conduct of the Newfoundland and Labrador Association of Architects would preclude an architect from acting for two proponents in a Design-Build process. PHB provided a price quotation to Olympic and to no other potential proponents. Olympic did not seek bids from alternate architects to compete with PHB.

Canadian Process Services Inc.

[32]            Canadian Process Services Inc. ("CPSI") were invited by Olympic to be the mechanical

subcontractor for the Olympic design-build team. CPSI was to supply and install mechanical systems for the project for Olympic. CPSI is a wholly-owned subsidiary of G.J. Cahill. At the Reply to SOQ stage, CPSI provided details of its qualifications to Olympic.

[33]            At the Reply to RFP stage, CPSI reviewed the design drawings provided by the mechanical engineer and the Architect, priced the supply and installation of mechanical systems, ensured "workability"of the design, ensured technical compliance with the RFP requirements for electrical work, and attended Olympic design build team meetings.

[34]            No member of the Olympic design-build team, including the Architect, structural consultant, or any other subcontractor had any input into the price submitted by CPSI to Olympic, and CPSI did not have input into the prices submitted by other Olympic design build team members to Olympic. CPSI provided a price quotation to Olympic and to no other potential proponents (as defined in the RFP). Olympic did not seek prices from other mechanical system supply and installation contractors to compete with CPSI.

Metal World Inc.

[35]            Metal World was invited by Olympic to be the structural subcontractor for the Olympic design-build team. Metal World provided a price and expertise to Olympic in structural steel fabrication and erection. Metal World also submitted a price to Olympic for "miscellaneous metals."

[36]            At the Reply to SOQ stage, Metal World provided details of its qualifications to Olympic. At the Reply to RFP stage, Metal World reviewed the design drawings provided by the structural engineer and the Architect, priced the supply and installation of structural steel to Olympic, and attended Olympic design build team meetings.

[37]            No member of the Olympic design-build team, including the Architect, structural consultant, or any subcontractor had any input the price submitted by Metal World to Olympic, and Metal World did not have input into the prices submitted by other Olympic design-build team members to Olympic. Metal World provided a price quotation to Olympic and to no other proponents (as defined in the SOQ and later the RFP). Olympic did not seek bids from alternate

structural steel suppliers to compete with Metal World.

Others

[38]            Other firms who are not parties to this action were consultants and members of the Design-Build Team assembled by Olympic. These companies are Paulson Engineering Ltd, (Marine Work), H.T. Kendell & Associates Ltd (Civil Engineering Site Work), Newton Engineering Ltd. (Mechanical Engineering), Provincial Consultants Ltd, (Electrical Engineering) and MNC Business Management Ltd (Quality Assurance and Quality Control). The Olympic design-build team members who are not parties to this action represent 3.9% of the total price submitted by Olympic in Olympic's Reply to RFP.

[39]            Olympic obtained prices and quotations from other smaller subcontractors and suppliers

who are not members of the Olympic design-build team, including, but not limited to, Apex Building Supplies, Trico Limited, Mercury, Craft, Interex (closet designers), Otis Elevator, Whittle Painting, Viking Fire Protection, Overhead Doors, and O'Brien's Masonry. Olympic used these prices in preparing its price.

[40]            Superior Masonry Limited submitted a price to Olympic for the masonry work for the HMCS Cabot Project. Superior also submitted a price to Westeinde Construction Limited and performed the masonry subcontract for Westeinde.

Request for SOQ documentation

[41]            The Request for SOQ documentation provided a glossary of terms, an invitation and explanation of the process, a section describing the limitation of submissions, licencing and eligibility requirements, a requirement for financial statements, security requirements, proposal and contract financial security requirements, insurance requirements, requirements for completion and submission of statement of qualifications, and how submissions were to be received. The Request for SOQ also contained an Annex "A" setting out the description of the HMCS Cabot project, and more detail on how the SOQ and RFP would be evaluated. Reproduced as Appendix "A" are the key portions of the Request for SOQ document.

RFP documentation

[42]            The Request for Proposal package contained the RFP document, which provided for: a glossary of terms, a limitation of submissions, performance evaluation, the completion of the proposal, signing procedures, the submission, revision and acceptances of proposals, contract financial security, insurance, enquiries and addenda, and a briefing and site visit. Annex "A" to the RFP contained evaluation criteria. In addition, a Design-Build Standard Form of Contract and a sheet of required labour conditions were part of the package of RFP documentation. Reproduced as Appendix "B" are the key portions of the RFP documentation.

VIVA VOCE EVIDENCE

[43]            In addition to the jointly presented facts as recited above, several witnesses testified at the hearing.

[44]            Mr. Carl Mallam, Professional Engineer and President of Olympic Construction Limited, testified as to the practices followed in the construction industry relating to tendering bids for contracts in both the traditional or regular manner and in the design-build approach. He had been with the firm since 1977 and had been involved in several prior design build projects for the private sector and for the Newfoundland Government. This was their first bid as "proponent" on a design-build project for the federal government.

[45]            Mr. Mallam described design-build as offering certain advantages to the owner: it usually took less time to complete and posed less risk that the project would go over budget as the bids offered a "package" deal and lump sum price covering everything from the design to final inspection and "turnkey" operation.

[46]            The pre-qualification process in this instance was "fairly unusual," according to Mr. Mallam. His firm had been asked to pre-qualify before, but in those circumstances they had merely filled out a standard Canadian Construction Association document of three or four pages to describe their project experience. Nothing would be included about the other participants in their bids - the designers and major sub-trades.

[47]            Mr. Mallam was surprised by the amount of detail required by PWGSC, especially the extent to which information about the other members of the design-build team had to be provided. Details were required about the role each firm would perform in the project development, their relationship to each other, the firms' experience with other projects and history of working with each other. The principals of each firm that would be involved in the project had to be named. None of this was customary in the tendering process, according to Mr. Mallam. Assembling that information took "a lot of work" by himself and the other principals involved. Writing the proposal was chiefly the responsibility of himself and Charles Henley of PHB Group, but all of the principals met regularly over the course of three to six weeks to complete the submission.

[48]            One requirement Mr. Mallam found particularly unusual was that the proponents could not change any of the consultants and major sub-trades named unless authorized to do so by PWGSC before a decision was made on which teams could bid in response to the request for proposals.

[49]            When the Olympic bid was selected as one of the four to move to the next stage, the team members were required to produce what Mr. Mallam describes as a "fairly complete design" in order to arrive at their lump sum price. He estimated, for example, that the structural engineer, Design Services Limited, had to do 80-90% of the final design for the steel pile foundation and steel structure in order for their steel subcontractor to give them a price. Similar effort was required of the mechanical and electrical consultants and with the architect, PHB Group, they had to "scramble" to pull it all together between June and August 1998.

[50]            The RFP documentation also precluded changing the team members under the heading "Limitation of Submissions":

The proposal must be made in the same name or joint venture as the entity named as the proponent in the Statement of Qualifications. Proponents must utilize in the preparation of their proposal the same architect, consultants, firms and individuals named in their Statement of Qualifications and in the same roles and with the same responsibilities as set out therein unless a change to the proponent's team has been authorized in advance in writing by Public Works. Public Works will not unreasonably withhold such authorization if the request for the authorization is accompanied by a good cause explanation and if, in the sole opinion of Public Works, such change will not diminish the value of the proposal to Public Works.

[51]            Included in the documentation required by PWGSC for the response to the RFP was a written declaration signed by the principals of the key design build team members stating that they had been involved in the preparation of the drawings and plans, had discussed them with all of the members of the team and certifying that they would produce the listed requirements as a minimum. Mr. Mallam said that he had never before seen such a certificate.

[52]            A further certificate, also signed by the principals, dealt with the production of deliverables, that is work plans, drawings and specifications, including a quality assurance plan and quality control plan. In addition, an organization chart was required, listing all of the key personnel essential to the timely and orderly completion of the work. For each of the members of the team, terms of reference were required to be prepared and signed, acknowledging the scope of the work they would be responsible for. All of this, Mr. Mallam described as very unusual. He had never been involved in a project that required the individual consultants and subcontractors to commit to perform the work in accordance with individual terms of reference.

[53]            For the successful bidder, PWGSC required attendance at a "partnering session" between their project manager and all of the "project management staff, prime consultants, all disciplines and principal trade contractors." Again Mr. Mallam said this was unusual as such meetings normally involved only the owner's representative and the general contractor.

[54]            Although Mr. Mallam described his role and that of Olympic in this process as the "front man" for the design-build team, he acknowledged on cross-examination that the Statement of Qualifications and the reply to the RFP was submitted by Olympic as the "proponent" of the project, as defined in the documentation. No consideration had been given to submitting a proposal from the team as a formal joint venture. Had they been awarded the contract, Olympic would have entered into subcontracts with each of the other members of the team, as well as with other suppliers of goods and services, to complete the work.

[55]            The total price submitted by Olympic to PWGSC was $10, 518,000, of which $8, 624, 187 represented the costs of the goods and services to be provided by the subcontractors, including their profits, and the balance is what Olympic would receive for the cost of its work on the project and its profit.

[56]            Mr. Mallam conceded that the standard forms used for tendering bids to the province of Newfoundland and to PWGSC included provisions for the subcontractors to be listed. Similarly, he acknowledged that the standard PWGSC contract form provided for the subcontractors to be listed and if listed, they could be changed with the consent of the owner. However, in his experience the names of the subcontractors were rarely required. If required, the owner might specify on the form that it wanted the names of certain of the sub-trades, such as the mechanical or electrical contractor. But this was not common and he had never seen a requirement to list all of the key consultants and contractors.

[57]            Olympic alone was required to submit a confidential financial statement to confirm its capability to perform the work required by the contract bid.

[58]            Charles Henley, architect and principal of the PHB Group, testified as to his experience participating in the traditional model stipulated lump sum price contracts, and in design-build projects. In the traditional model, the architectural firm would prepare a full array of documentation for the owner to go to tender, would review the tendering process and the construction process on behalf of the client, and would be paid either a negotiated fee or a percentage on the construction cost. In design-build projects, in his experience with the private sector, they would contribute their services to a proponent, usually a general contractor, on speculation of being paid if the contract were awarded to that proponent.

[59]            In this case, Mr. Henley said, the requirements were much more onerous than he had encountered in previous projects. Considerably greater detail was required. The architectural firm had to work with all of the major subcontractor groups involved and sign off on all of the drawings submitted by the other consultants. Two architects and two or three technologists were involved over several months. He had never previously been required to certify that all drawings and project plans had been discussed with the entire design team and principal sub-trades, nor provide a detailed point-form terms of reference or certification to produce deliverables. Further, the drawings his firm submitted for the reply to the RFP were required to be stamped and certified as if they were providing final design drawings for construction. He estimated that their fees would have been about $250, 000 for their participation in the project.

[60]            Mr. Henley never considered entering into a formal joint venture with Olympic to submit the bid, notwithstanding that he regarded it as a team effort. Indeed it was Henley's firm that had spotted the opportunity on the federal government's online procurement notice system and suggested to Olympic that they form the team to make a bid. Nonetheless, he understood that his firm would not be paid a fee unless the contract was awarded to Olympic and incurred a financial risk in contributing to the bid. He dealt with several subcontractors, such as a kitchen design firm and a quality control consultancy, on the same basis.

[61]            Similar evidence was provided by Roy Pieroway, owner of Design Services Ltd., the structural consultant. He had been involved with design build projects in the private sector for more than twenty years, and with a number of projects of the same scale as HMCS Cabot. In most of the bids he had been involved with, his firm was guaranteed its fee as it was a small office and could not afford to lose the opportunity to do other work. It was very rare to have put this amount of effort into trying to get a project. He had never previously had to sign a certificate that the technical information and drawings had been discussed in detail with the entire team nor to provide signed terms of reference about the work they were prepared to do on the project. He identified a number of specific commitments that they were required to make that were novel in his experience. It was unusual to be required to certify drawings prior to the construction phase.

[62]            On cross-examination, Mr. Pieroway conceded that his firm could not often afford to take the risk they would not get paid for their services but decided to do so in this instance. He stressed that when they decided to take that risk, they did so "with the idea that we are going to be treated fairly." He did not believe he was free to do work for the other proponents but would not have done so in any case.

[63]            He testified that the drawings prepared by his firm for the RFP amounted to about 15-20% of what would be employed in the construction phase but represented about 25% of the total design work required.

[64]            James Brown, vice-president operations for G.J. Cahill & Company, mechanical and electrical contractors, described the role of that company and Canadian Process Services ("CPSI") a wholly owned subsidiary, in the development of the design-build proposal. In the response to the RFP, the terms of reference and certifications for the electrical work were signed by Mr. Cahill as principal of his company and an employee of CPSI signed for the mechanical work. Mr. Brown coordinated their input on both types of work. He described a significant amount of effort, costing the firms about $40, 000 to $50, 000 to submit their plans and specifications. He had no expectation, assuming the competition was held fairly, to recover their costs if the Olympic team's bid was not successful.

[65]            Ivan Butler, President of Metal World, steel fabricators and erectors, testified that the involvement of his firm in this RFP process was much greater than in the normal lump sum tendering situation. They had considerable input into the structural design because of their expertise, with a view to achieving the most economical and practical results. Prior to this occasion, over thirty years of experience, Mr. Butler had never been required to sign terms of reference and certification as he was in this competition. Had the building been pre-designed by the owner, his firm would likely have submitted prices to the various contractors making bids.

[66]            Michael Sparrow, Chief Engineer of Pyramid Construction, provided similar evidence about their involvement in the bid process. His firm would have been responsible for the water mains, storm and sanitary sewers, asphalt paving, curb work and any mass excavation required. There was contaminated soil on the site that had to be removed. The plans for this work had to be coordinated with the other elements. Thus, there were extensive meetings and discussions in preparing the RPF reply. The value of the work Pyramid would have done, had the bid been successful, was in the order of a million dollars of which $200,000 would have been profit.

[67]            Messrs Pieroway, Brown, Butler and Sparrow testified that they did not feel they were free to offer their services to any of the other proponents in the competition because of their participation in the Olympic team, for ethical and practical reasons. They were all bound by confidentiality agreements with Olympic. Mr. Henley was constrained from offering a price for his firm's services to the other proponents under the rules of the Newfoundland and Labrador Association of Architects.

[68]            Darryl Benson, testified for the defendant as the PWGSC project manager for the HMCS Cabot project. He was a member of the board that evaluated the SOQ submissions, he helped prepare the RFP documents and was a member of the RFP evaluation board. This was the first large scale design build undertaking managed by the PWGSC office in St. John's, but they had gained some experience with two smaller projects.

[69]            Mr. Benson said that it was expected that for each bid the architect, general contractor, prime consultants and the principal trade contractors would all spend time together as a team in putting together an overall design and price to perform the work. But as far as PWGSC was concerned, the proponent was responsible for each bid and the contract would be issued solely to the proponent. That could include a proponent that was a joint venture between team members. He agreed that each team would have to develop their designs to the extent that the members could make a firm price for their component of the work. PWGSC required each of the team members to certify that they were familiar with the plans and specifications and had met as a team to review them.

ARGUMENT

Plaintiffs' position

[70]            The plaintiffs contend that the defendant invited not just a general contractor to participate in the design-build competition but the contractor together with a group of designers, consultants and major trade contractors to come together as a team, spend a considerable amount of effort to prepare designs and plans and submit a price. The defendant stood to gain a great deal through this process in minimizing its exposure and obtaining a building constructed in the most practical and economical fashion. It is unconscionable and contrary to the integrity of the bidding system to allow the defendant to limit its liability to the general contractor alone where it has clearly breached a duty of fairness to the team as a whole.

[71]            All of the plaintiffs were pre-qualified as a "Design Build Team" (as defined in the SOQ issued by the defendant) prior to the submission of the bid. This was a rigorous exercise which required the team to convince the defendant that the entire group was capable of performing the job. In doing this, the plaintiffs' argue, the defendant established a relationship with all of the key members of the design-build team.

[72]          The plaintiffs argue that the evidence is clear that the terms of the SOQ and RFP issued by PWGSC in this case extend Contract A, as understood in the tendering case law, to the design-build team as a whole. Thus, they were contracting parties to whom a duty of fairness was owed that was breached when the defendant awarded the contract to a noncompliant bidder.

[73]            Alternatively, the Plaintiffs say that PWGSC owed a duty of care to the Plaintiffs because of the proximity of relationship that PWGSC had created, which duty was breached when it awarded the work to a noncompliant bidder. PWGSC knew exactly whom it was dealing with because they had required that each of the key members of the team be identified and pre-qualified and insisted that the team members remain in place for the response to the RFP, subject to being changed on consent.

[74]            In those circumstances, losses by the team members arising from the breach were readily foreseeable and the class of victims easily ascertained as it was defined by the defendant in the SOQ documents. There is nothing in any of the SOQ or RFP documents to expressly preclude recovery in tort. Public policy would be served by extending liability to the plaintiffs, not by restricting it.

Defendant's position

[75]            The defendant's position is that Olympic, but not the plaintiffs (and not the Design Build Team) submitted the formal proposal. The Design Build Team had no legal status in the process. If Olympic and the plaintiffs wanted to submit a proposal as a "Team", the option was available to them to submit a SOQ and RFP Reply as Joint Venturers. They did not.

[76]            The defendant submits that there was no Contract A as understood in contract tendering terms between the plaintiffs and the PWGSC. Under the doctrine of privity of contract, the plaintiffs cannot claim the benefit of the Contract A which existed between Olympic and the defendant and the plaintiffs have no claim in contract against the defendant. There is an implied duty of care to treat bidders fairly, not every person who may be adversely affected by the breach of a contract.

[77]            The defendant submits that the plaintiff's claims are for pure economic loss. Subcontractors do not have claims in tort against an owner for breaches or non-enforcement of the terms of the contract between the owner and contractor. To hold an owner liable to subcontractors for mistakenly awarding a contract to a noncompliant bidder would result in indeterminate liability by opening the door to the claims of sub-sub-contractors, suppliers and their employees. The defendant submits that subcontractors do not need to have a right to a claim in tort against owners in the tendering process where they have the opportunity to submit their prices and offer their goods and services to all proponents. On the basis of the test reviewed and established in Cooper v. Hobart, [2001] 3 S.C.R. 537, there is no proximity between the plaintiffs and PWGSC upon which the court should extend the categories of economic loss to include the claims of the plaintiffs. This case is not such that a new category of duty of care should be established.

ANALYSIS

Was there a breach of contract as between the Plaintiffs and PWGSC?

[78]            The defendant has conceded that PWGSC breached its duty of fairness by awarding the contract to a noncompliant bidder and in failing to award the contract to Olympic. It is undisputed that, had the contract been awarded to Olympic, the plaintiffs would have been paid for their work on the project, including the costs of preparing the bid documents. The professional consultants would have received fees for their services. The subcontractors would have shared in the profits proportionate to the value of their contribution to the enterprise.

[79]            Having breached its duty of fairness, can the defendant limit the scope of its liability to the losses suffered by Olympic, excluding those losses incurred by the other members of the design-build team?

[80]            Each of the principals of the firms that entered into this design-build competition was fully aware that any effort they put into the process was at risk if they did not succeed. This was a large scale project and they faced stiff competition. But as James Brown and Roy Pieroway put it during their testimony, they also assumed that they would be treated fairly. They were all experienced and capable firms. If they met the technical requirements and their price was competitive, they had a reasonable prospect of being awarded this contract. And as it has now been established, their bid was in fact superior and they should have succeeded.

[81]            Does this case cry out for a remedy? The plaintiffs' submit that it does and that it is unconscionable for the defendant, having failed to treat the bid fairly, to now say "but we have no liability to you people because you failed to put yourselves together as a joint venture."

[82]            The defendant argues there can be no remedy for breach of a contract where there is no privity of contract.

[83]            Olympic is entitled to claim against the defendant because a contract arose between Olympic and the defendant when the bid was submitted under the Contract A and B theory adopted by the Supreme Court of Canada. The question is whether the Plaintiffs can recover for a breach of the same Contract A.

Contract A and B Analysis

[84]            Justice Binnie reviewed the origins of the theory in Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 43, at paragraphs 34-36 as follows:

For the last 20 years, the legal effect of tendering arrangements has been approached with the Contract A/Contract B analysis adopted in Ron Engineering, supra per Estey J, at p.119:

There is no question when one reviews the terms and conditions under which the tender was made that a contract arose upon the submission of a tender between the contractor and the owner whereby the tenderer could not withdraw the tender for a period of 60 days after the date of opening of the tenders. Later in these reasons the initial contract is referred to as Contract A to distinguish it from the construction contract itself which would arise in the acceptance of a tender, and which I refer to as Contract B.

Subsequently, in MJB Enterprises Ltd. v. Defence Construction (1951) Ltd. [1999] 1 S.C.R. 619, the Court allowed the appeal of an unsuccessful bidder against the award of a prime contract to an unqualified bidder, contrary to an implied term of Contract A. The court took the opportunity to affirm that Contract A does not automatically spring into existence upon the making of a tender, and if it does, its terms must be ascertained as with any other contract, and not be derived from some abstract legal paradigm. ¼

Both Ron Engineering and MJB Enterprises dealt with owners and prime contractors. The present appeal raises an issue at a lower level of the cascade. Nevertheless, as those decisions made clear, the Contract A/Contract B approach rests on ordinary principles of contract formation, and there is no reason in principle why the same approach should not apply at the lower level. The existence and content of Contract A will depend on the facts of the particular case.

[85]            Naylor dealt with the relationship between a general contractor, Ellis-Don, and a subcontractor where the bid depository system was employed in a tendering process. Ellis-Don had agreed to carry Naylor's bid for the electrical component of the project but reneged when the prime contract was awarded. The labour relations board required that the project use only union labour. Naylor Group was not unionized. The Supreme Court held that this was insufficient reason to discard the bid depository rules agreed to by both parties. In other words, a Contract A had arisen between the general contractor and the subcontractor and was breached when the work, Contract B, was awarded to another subcontractor. Naylor recovered damages for its lost expectation of profit.

[86]            The plaintiffs argue that there is no reason why the Contract A principles described in Naylor, cascaded down from the level of the owner and bidders to that of contractor and subcontractor by the Supreme Court, could not equally apply as between an owner and the members of a design-build team.

[87]            There is some evidence in this case to support the plaintiffs' contention that PWGSC created a situation whereby a Contract A arose between them and the defendant. Under the terms of the SOQ, the proponent had to name its team in order to pre-qualify. PWGSC insisted that the design-build team be described in great detail. It required the team members to certify that they had reviewed the proposed design and to commit to do their share of the work if the contract was awarded. It evaluated the strength of the proponent's qualifications and bid based largely on the contributions to be made by the other team members. Between the SOQ and RFP and after the bid was presented, no member of the team could be changed without approval on pain of disqualification of the proponent. Proponents could also be disqualified if any of their team members were ineligible under the terms set out in the SOQ requirements.

[88]            It is apparent from the evidence that the plaintiffs and Olympic viewed themselves as a team throughout their involvement with this project and that is how Olympic referred to them in its correspondence with PWGSC. However, the parties cannot be permitted to unilaterally modify the terms of the SOQ and RFP midway through the competition: London Drugs Ltd. V. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299 per Iacobucci J. at 423. While the terminology employed is a strong indication of the intentions of the plaintiffs and Olympic, such an intention cannot be attributed to the Defendant absent evidence that it turned its mind to and accepted this framework.

[89]            The terms of the SOQ and RFP are also clear that PWGSC was inviting design-build proponents to put together teams capable of doing the work. The effect of the rigorous pre-qualification phase, the plaintiffs argue, was that Olympic was submitting a bid on behalf of all of them and that extended the contractual relationship that arose with PWGSC to the rest of the design-build team. The defendant intended to bind the team through the RFP process, not just the proponent. Thus, the Contract A obligation must extend to all team members.

[90]            Another way of looking at the design-build process employed in this instance is that PWGSC recognized that, while conceivable, it was unlikely that any general contractor interested in submitting a bid to build HMCS Cabot would have sufficient resources to complete the project without relying on other firms to perform major elements of the work. Thus its insistence that each proponent's team must be defined and qualified, and that the members commit to the project was simply a practical approach to the realities of the construction marketplace. PWGSC was careful in defining the SOQ and RFP to make it clear that while teams had to be qualified, the bids were to be submitted by the proponents and not by the teams, unless they formed themselves into a joint venture as defined in the documents. One team in fact did submit a bid as a joint venture.

[91]            The invitation to participate read as follows:

Public Works and Government Services Canada (PWGSC) intends to retain a Design-Builder to provide the services required to design and construct the project as described in Annex "A" attached hereto. A two-stage selection procedure will be used, following which PWGSC intends to enter into a Design-Build contract with the successful Proponent.

STAGE I. This Request for Statement of Qualifications initiates Stage I of the selection procedure. The objective is to identify, evaluate and rate accomplishments of design-build entities and teams interested in being considered for this requirement. Proponents are asked to provide evidence of their accomplishments and the capabilities, qualifications and experience of the key individuals within their proposed Design-Build Team who would be responsible for the delivery of services for this project if the Proponent were to be successful. After review, evaluation and rating of submissions by a PWGSC Screening Board, a short list of a maximum of four of the most highly-rated Proponents is established as the list of Finalists which will be invited to submit Proposals in Stage II. Only the information asked for in this Request for Statement of Qualifications is to be submitted in Stage I. THIS IS NOT A REQUEST FOR PROPOSAL (RFP).

STAGE II. Following completion of Stage I, Finalists are invited to submit formal Proposals for evaluation and rating leading to the selection of a Design-Builder and Design-Build team. This second stage employs a two envelope procedure, in which Proponents submit the technical component of the Proposal in one envelope and the proposed price of the design and construction services in a second envelope. Technical proposals are reviewed, evaluated and rated by a PWGSC Evaluation Board in accordance with pre-established criteria, and technical scores are determined. Cost envelopes are not opened until the evaluation of the technical proposal has been completed. Total scores are established by adding the technical scores and cost scores, and the Finalist with the highest total score is invited to enter into a contract for the project provided funding availability. [emphasis added]

[92]            "Proponent" is defined in the glossary of terms as the entity which submits a SOQ. "Design-build team" is the proponent, its Architect and proposed major consultants and trade contractors. "Design-builder" is the proponent selected by PWGSC and which has signed a contract for the project.

[93]            The invitation provides that while there was no requirement for firms to participate in the procurement in a joint venture, firms might elect to do so if they saw fit. Joint ventures were defined as:

an association of two or more parties which combine their money, property, knowledge, skills, time or other resources in a joint business enterprise agreeing to share the profits and the losses and each having some degree of control over the enterprise. Joint ventures may be carried on in a variety of legal forms divided into three categories:

(a) the incorporated joint venture;

(b) the partnership venture;

(c) the contractual joint venture where the parties combine their resources in the furtherance of a single business enterprise without actual partnership or corporate designation.

[94]            The SOQ further specifies that "an arrangement whereby Canada contracts directly with a Design-Builder which may retain an Architect, Consultants, and subcontractors to perform portions of the services is not a joint venture arrangement."

[95]            In oral argument, the plaintiffs suggested that the court could find that the Olympic design-build team met the definition of joint venture as set out in the SOQ. However, the evidence before me was clear that there was no agreement among the members of the Olympic design-build team to constitute themselves as a joint venture. It wasn't considered, the principals who testified stated. Further, it was Olympic that required the other members to enter into confidentiality agreements and Olympic alone that took the financial risk in submitting the bid.

[96]            There was no evidence before me that the plaintiffs had constituted themselves as an incorporated joint venture, a partnership or by contract had agreed to combine their resources in furtherance of the enterprise. There was no agreement to share in a percentage of the overall profits or to accept responsibility for a share of any losses should the project run into trouble. I find, therefore, that the Olympic bid was not submitted as a joint venture bid. However, it is also clear that on the Naylor principles, a Contract A arose when the bid was submitted and Olympic would have been bound by its implied terms had it received the award.

[97]            While there may be situations in which a Contract A arises between a tendering authority and subcontractors, the evidence in this case falls short in my view, for several reasons. First, I am not satisfied that there was any agreement between the plaintiffs and the defendant that could be construed as a contractual relationship. While PWGSC insisted that the capacity of the members of the team to build the project be demonstrated and, that when qualified, they commit to perform their share of the work and remain part of the team pending the outcome of the RFP process, those were demands made of the proponent. It was the proponent Olympic's bid that stood to be disqualified if it did not meet PWGSC's requirements. And it was the proponent Olympic that was bound by the terms of the RFP until the contract award was decided.

[98]            Further, the responsibility to demonstrate the financial capability to perform the work, as required in both the SOQ and RFP documents was that of Olympic alone. Only Olympic had to submit a financial reference and statements in order to qualify and only Olympic had to submit contract security with its bid. All of the documentation was submitted to PWGSC solely in Olympic's name.

[99]            Thus there was clearly a Contract A with Olympic under which the defendant owed a duty to treat Olympic fairly in the bidding process when the bid was accepted for consideration in the RFP process. But the plaintiffs were not owed such a duty as they were not parties to that contract. It was open to them to arrange their affairs in such a way that they would all be parties to the contract, but they did not do so. Consequently, they cannot claim in contract from the breach of the Contract A between the defendant and Olympic.                      

Was there a duty of care in tort?

[100]        The plaintiffs say that the defendant owed them a duty of care as members of the design build team when assessing bids submitted on this project. They argue that the content of that duty included an obligation to ensure that noncompliant bids would be rejected.

[101]        In Martel Building Limited v. Canada, [2000] 2 S.C.R. 860 the Supreme Court of Canada dealt with a tendering case in which the Federal Court of Appeal had found a breach of a duty of care under tort principles. The Crown was alleged to have negotiated in bad faith on renewal of a leasing arrangement and to have been negligent in the tendering process. Claims in contract and negligence had been dismissed at trial. The Court of Appeal found that the call for tenders gave rise to an implied contractual obligation to treat all bidders fairly. That obligation placed the parties in sufficient proximity to give rise to a duty of care. The Crown had breached that duty through negligence in the pre-tender negotiations and in the evaluation of the bids and thus deprived Martel of a reasonable expectation of being awarded the contract under a fair and proper tendering process. The Supreme Court, in granting the Crown's appeal, held that any prima facie duty of care in the circumstances of this case was outweighed by the deleterious effects that would result from an extension of a duty of care into the conduct of negotiations. The Court of Appeal had also erred in finding a duty in tort in relation to the tendering process. Any duty that existed was subsumed under the contractual relationship and the Crown's breach of the duty did not result in the loss of the contract opportunity.

[102]        In addressing the question of whether tort liability could attach to the tendering process, Justices Iacobucci and Major had this to say at paragraph 108 of the judgment:

Finally, we note that Desjardins J.A. relied on two cases to support the view that a duty to treat all bidders fairly and equally has been recognized in the context of tort claims. However, we note that both cases have subsequently been reversed by appellate courts: Twin City Mechanical v. Bradsil (1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont. Ct. (Gen. Div.)), rev'd (1999), 43 C.L.R. (2d) 275 (Ont. C.A.); Ken Toby Ltd. v. British Columbia Buildings Corp. (1997), 34 B.C.L.R. (3d) 263 (S.C.), rev'd (1999), 62 B.C.L.R. (3d) 308 (C.A.). In addition, reliance in tort was necessary because both cases involved situations where a subcontractor sought redress against the tender calling authority who had received bids from the general contractor. Since there was no privity of contract between the subcontractor and the owner, liability could only be founded in tort. In both cases, the appellate courts refrained from deciding whether or not a duty of care was owed in such situations, and preferred to limit their decisions to the fact that a breach could not be established. We believe that the issue of whether a duty of care can arise between a subcontractor and an owner must be left to a case in which it arises. [emphasis added]

[103]        The plaintiffs argue that the Supreme Court has thus left the door open to the recognition of liability in tort by owners to subcontractors in the tendering process and that the facts of this case meet the required standard. It is clear that this is, as yet, an undeveloped area of the law and there is little support for the plaintiff's position in the jurisprudence. As noted in the quote from Martel, supra, while duties of care to subcontractors were found in Twin City Mechanical v. Bradsil and Ken Toby Ltd. v. British Columbia Buildings, both decisions were overturned at the appellate level on the ground that no breach had been established.

[104]        In Puddister Shipping v. Nfld. (2000), 189 Nfld. & P.E.I.R. 325 (N.S.C.T.D.) a duty of care was found to arise where a government agency conducted a tendering process for a ferry operation. The plaintiffs sought certiorari to have the contract quashed for having been awarded to a non-compliant bidder. The plaintiffs were not owed a duty of care in contract as they had been, themselves, disqualified from the competition for the same reasons the winner was non-compliant. They hoped for a second chance on equal terms. While certiorari was declined as contrary to the public interest in the particular circumstances - it would disrupt the operation of the ferry service - the court held that as the tendering process was conducted by a government agency, there was an obligation to ensure that the decision was made in a procedurally fair manner: Cardinal v. Kent Institution, [1985] 2 S.C.R. 643; [1979] 1 S.C.R. 311">Nicholson and Haldimand Norfolk Regional Board of Commissioners of Police, [1979] 1 S.C.R. 311.

[105]        The plaintiffs argue that Puddister stands for the proposition that damages for economic loss can be recovered in tort when a duty of fairness has been breached by a public agency. I read it, rather, as recognizing that such decisions can be judicially reviewed and overturned where procedural fairness has been denied.

[106]        As the defendant stressed in argument, the common law has traditionally not allowed recovery of pure economic loss where a plaintiff has suffered neither physical harm nor property damage by the actions of another. For one reason, economic losses often arise in a commercial context in which they are an inherent business risk and there are other means to safeguard against loss. There are also public policy reasons. Recovery in tort could result in a multiplicity of inappropriate lawsuits and indeterminable liability. In the context of this case, how far should liability extend - to all of the subcontractors and suppliers who contributed prices to Olympic?

[107]        A number of exceptions to the common law rule against recovery for pure economic loss have been developed in the jurisprudence and were categorized by La Forest J. in Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021 as follows at 1049:

1. The Independent Liability of Statutory Public Authorities;

2. Negligent Misrepresentation;

3. Negligent Performance of a Service;

4. Negligent Supply of Shoddy Goods or Structures;

5. Relational Economic Loss

[108]        The plaintiffs' claims do not fit squarely within any of these exceptions. As noted by Justices Iacobucci and Major in Martel, supra, at paragraph 39, that alone should not preclude recovery on a new basis as the categories are not exhaustive. The framework for establishing new grounds of tort liability for economic loss begins with the test established by the House of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728, recognized and applied by the Supreme Court of Canada in Martel, and several other decisions.

[109]        In Cooper v. Hobart, supra, Chief Justice McLachlin and Justice Major described the application of the Anns test in the Canadian context in these terms:

At the first stage of the Anns test, two questions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant's act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here? The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant. These factors include questions of policy, in the broad sense of that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care.

[110]        I accept the plaintiffs argument that it was reasonably foreseeable in the circumstances of this case that the defendant's negligence in issuing the contract to a non-compliant bidder would result in financial loss to the plaintiffs. However, as Justice Major notes at paragraph 42 of Cooper, mere foreseeability is not enough to establish a prima facie duty of care. The plaintiffs must also show proximity - that the defendant was in a close and direct relationship with them - making it just to impose a duty of care upon the defendant to the plaintiffs.

[111]        As used in the Anns test, "proximity" means that the circumstances of the relationship between the plaintiff and the defendant are of such a nature that the defendant may be said to be under an obligation to be mindful of the plaintiff's legitimate interests in conducting his or her affairs: per Justice La Forest in Hercules Management Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 24.

[112]        In Cooper, supra at paragraph 34, the Supreme Court instructed that defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved - factors that allow the court to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.

[113]        At paragraph 36 of Cooper, the Court noted that among the categories in which proximity has been established are cases where the relationship between the claimant and the property owner constitutes a joint venture. When a case falls within that situation or an analogous one and reasonable foreseeability is established, a prima facie duty of care may be posited.

[114]        Notwithstanding my finding that Olympic and its team members had not constituted a formal joint venture as defined by the SOQ and RFP, the process adopted by the defendant in this case is analogous, in my view, to a joint venture. The PWGSC's intent was to create a form of "partnership" between the owner and the successful design-build team in which to build HMCS Cabot. I note, for example, that the team and the owner were required to meet in a "partnering" session following the contract award. In addition, the lead-up to the award of the contract was designed to evaluate whether the subcontractors would be appropriate partners, and then whether they would be the best partners for PWGSC , together with the general contractor, to perform the services required.

[115]        I find that PWGSC's requirements in the pre-qualification and tendering process created a relationship between it and the plaintiffs that meets the proximity standard.

[116]        Under the second branch of the Anns test, are there other reasons that tort liability should not be recognized here? The defendant argues that the principal policy consideration should be that defendants would be exposed to "liability in an indeterminate amount for an indeterminate time to an indeterminate class": per Cardozo C.J. in Ultramares Corp. v. Touche Niven & Co., 174 N.E. 441 (U.S.C.A. 1931) at 444.

[117]        The defendant contends that to hold an owner liable to subcontractors for negligently awarding a contract to a noncompliant bidder would open the door to claims of sub- subcontractors, suppliers and their employees. I agree with the defendant that this would be an undesirable result and reason to preclude a general extension of liability in tort to claims by subcontractors against owners.

[118]        In this case, however, I do not accept that liability would be indeterminate because of the particular - and according to the evidence before me, unique - approach adopted by the defendant in the tendering process. The defendant defined the class of the members of the design build team whose qualifications would be examined, who had to provide terms of reference, review the plans and drawings, had to certify that they would perform the work and could not be substituted without approval by the defendant. Those obligations did not extend to the broad range of sub-subcontractors, suppliers and employees. The scope of the liability is also readily ascertainable by quantifying the plaintiffs' reasonable expectation of lost profits or fees.

[119]        I conclude, therefore, that this is a case that cries out for a remedy. By reason of its close management of the participation of the plaintiffs in the tendering process, the defendant owed the plaintiffs a duty of care in tort not to award the contract to a non-compliant bidder. Providing a remedy does not raise the risk of indeterminate liability because of the particular facts of this case.

[120]        The quantum of damages was, by agreement of the parties, not addressed before me. If the parties are unable to come to an agreement, they may apply to this Court for a determination as to quantum.

JUDGMENT

IT IS THE JUDGMENT OF THIS COURT that:

1. The plaintiff, Olympic Construction Limited, is to be removed from the style of cause.

2. The defendant owed the remaining plaintiffs no duty in contract;

3. The defendant owed the remaining plaintiffs a duty of care in tort not to award the contract to a non-compliant bidder;

4. Costs of the action are awarded to the remaining plaintiffs on the ordinary scale.

" Richard G. Mosley "

F.C.J.

APPENDIX "A"

1           GLOSSARY OF TERMS

In this Request for Statement of Qualifications (SOQ), the following words or phrases have the corresponding meanings:

Architect:                    The prime architectural firm or Architects in Joint Venture which will provide the architectural services for the project. Referred to as the "Designer" in the ensuing contract

Consultant:                 Any professional engineer or architect (other than the Architect) proposed by the Proponent to be part of the Proponent's Design-build Team

Design-Build Team: During the Statement of Qualifications stage, the Proponent, its Architect and proposed major Consultants and Trade Contractors.

Design-Builder:         The Proponent selected by Public Works and Government Services (PWGSC) and which has signed the Design-Build Contract for the project.

Finalist:                       A Proponent selected by PWGSC to be invited to submit a Proposal in response to the Request for Proposal for the project.

Key Personnel           Staff from Design-Builder, Architect, and major Consultants to be assigned to this project.

Proponent:                 During the Statement of Qualifications Stage, the entity which submits a Statement of Qualifications

2          INVITATION

1)         Public Works and Government Services Canada (PWGSC) intends to retain a Design-Builder to provide the services required to design and construct the project as described in Annex "A" attached hereto. A two-stage selection procedure will be us ed, following which PWGSC intends to enter into a Design-Build contract with the successful Proponent.

2)         STAGE I      This Request for Statement of Qualifications initiates Stage I of the selection procedure. The objective is to identify, evaluate and rate accomplishments of design-build entities and teams interested in being considered for this requirement. Proponents are asked to provide evidence of their accomplishments and the capabilities, qualifications and experience of the key individuals within their proposed Design-Build Team who would be responsible for the delivery of services for this project if the Proponent were to be successful. After review, evaluation and rating of submissions by a PWGSC Screening Board, a short list of a maximum of four of the most highly-rated Proponents is established as the list of Finalists which will be invited to submit Proposals in Stage II. Only the information asked for in this Request for Statement of Qualifications is to be submitted in Stage I. THIS IS NOT A REQUEST FOR PROPOSAL (RFP).

3)           STAGE II.      Following completion of Stage I, Finalists are invited to submit formal Proposals for evaluation and rating leading to the selection of a Design-Builder and Design-Build team. This second stage employs a two-envelope procedure, in which Proponents submit the technical component of the Proposal in one envelope and the proposed price of the design and construction services in a second envelope . Technical proposals are reviewed, evaluated and rated by a PWGSC Evaluation Board in accordance with pre-established criteria, and technical scores are determined. Cost envelopes are not opened until the evaluation of the technical proposal has been completed. Total scores are established by adding the technical scores and cost scores, and the Finalist with the highest total score is invited to enter into a contract for the project provided funding availability.

3          LIMITATION OF SUBMISSIONS

1) While there is no requirement for firms to participate in this procurement in joint venture, firms may elect to do so if they see fit. However, only one submission per firm will be accepted, whether it is submitted by the firm as an individual Proponent or as part of a joint venture Proponent. If more than one submission is received from a firm acting either individually or in joint venture, all such submissions shall be rejected and no further consideration shall be given to the firm or to any joint venture Proponent of which the firm forms part.

2) A joint venture is defined as an association of two or more parties which combine their money, property, knowledge, skills, time or other resources in a joint business enterprise agreeing to share the profits and the losses and each having some degree of control over the enterprise. Joint ventures may be carried on in a variety of legal forms divided into three categories:

(a) the incorporated joint venture;

(b) the partnership venture;

(c) the contractual joint venture where the parties combine their resources in the furtherance of a single business enterprise without actual partnership or corporate designation.

3) An arrangement whereby Canada contracts directly with a Design-Builder which may retain an Architect, Consultants, and sub-contractors to perform portions of the services is not a joint venture arrangement.

4) An Architect shall associate itself with, and be nominated by, only one Proponent in its Statement of Qualifications. If an Architect is named by more than one Proponent, each such Proponent shall be disqualified from further participation in the procurement process.

5) A Consultant (sub-consultant or specialist consultant) may be proposed as part of a Design-Build Team by more than one Proponent.

6) A Proponent may not substitute or delete, in Stage II, any key members of the Design-Build Team proposed in Stage I unless a change has been authorized in advance, in writing, by PWGSC. PWGSC shall not unreasonably withhold such authorization if the request for the authorization is accompanied by a good cause explanation and if, in the sole opinion of PWGSC, such change will not diminish the value of the Proposal to PWGSC.

[...]

5          FINANCIAL STATEMENTS

1) In order to confirm a Proponent's financial capability to perform the services required, each SOQ submission will be accompanied by details of the Proponent's financial capability to perform the work. The information provided will be in the form of:

(a) an appropriate financial reference from a financial institution, or

(b) the Proponent's most recent audited financial statements, or

(c) financial statements certified by the Proponent's chief financial officer.

2) Should the Proponent provide the requested information in confidence while indicating that the disclosed information is confidential, then the Crown will treat the information in a confidential manner as provided in the Access to Information Act.

3) In the event that a Proponent is considered NOT to be financially capable of performing the work, the Proponent shall be notified and shall be permitted to make representations within two (2) days after receipt of notification and prior to any final decision being made.

[...]

8          PROPOSAL AND CONTRACT FINANCIAL SECURITY

1) Proponents should note that Finalists will be required to provide acceptable Proposal financial security with their formal Proposal and the successful Finalist will be required to provide appropriate contract financial security. The precise financial security requirements will be set out in the RFP documentation issued to Finalists.

9          INSURANCE REQUIREMENTS

1) Proponents are advised that the successful Finalist will be required to furnish proof of appropriate insurance coverage at the time a contract is entered into. The precise insurance requirements will be set out in the Request for Proposal documentation issued to Finalists.

Annex "A"to the SOQ Request

A.2 OVERVIEW OF DESIGN-BUILD PROCESS AND SCHEDULE

STEP #1 - STATEMENT OF QUALIFICATIONS (25 days)

- A short list maximum (4) of the most qualified proponents is prepared, based on a comparison of qualifications against the following criteria, including weight factors.

- The information will be rated from 1 to 10 for each category. The rating is then multiplied by the weight factor shown to produce a weighted rating. The score is obtained by dividing the total of the weighted rating by 10.

- The four top ranked Proponents are pre-qualified and only submissions from these Proponents will be accepted at the second stage, request for proposal.

Weight Factor

1- Overall Project Management:

Design Build Methodology                                                                           10

Explain the Design Build Process for this project                                                 10

Define the Design Build Team                                                                    10

Define the team members' terms of reference for this project                 15

Provide CV's of key team members                                                                       5

2- Previous Experience                                                                                40

(Maximum of 10 for previous work together & maximum of 30

for strength of experience)

3- Quality Control/ Quality Assurance                                                         30

4 - Project Scheduling                                                                                  30

Total:                                                                                                               150

STEP #2 - REQUEST FOR PROPOSAL

- The short-listed proponents are requeste d to submit design-build proposals which are then evaluated against the criteria to be identified in the request for proposal package.

[...][Actual criteria found in the RPF documentation, below]

STEP #3 - DESIGN AND CONSTRUCTION

A.3 DETAILED REQUIREMENTS FOR STATEMENT OF QUALIFICATIONS

A.3.1 General

Statements of Qualifications shall be submitted bound in two separate

volumes as follows:

Volume 1 - Technical:

·            This package shall be signed by the principal(s) representing the Proponent and shall contain all information described in this section. Submit six bound copies.

Volume 2 - Supplementary Material:

·            This volume may include "off-the shelf" promotional literature, illustrations and/or photographs of previously completed projects. This is not a mandatory requirement. Submit six bound copy. [emphasis in original]

Indicate the name of the Proponent, address, and prime contact person on the front of each volume, together with the project number and description and the date and time for receipt of submissions.

A.3.2 Description of Proponent Firm

What we are looking for

A description of who you are.

Information to be Supplied

(i) Provide a brief corporate history, including a description of current size and organizational make-up. If a joint venture, provide this information for each component of the joint venture and provide also a description of the proposed legal and working relationships within the joint venture.

(ii) Provide a financial statement as described in clause 5.                               pass/fail

(iii) Evaluation Criteria Responses. Provide documentation which responds to each of the following topics:

Weight factor

1- Overall Project Management:

Design Build Methodology                                                                           10

Prepare a statement, no longer than one page in length,

explaining Design Build as a project delivery option

Explain the Design Build Process for this project                                                 10

Tailor the Design Build process for this project.

Explain how project specific characteristics will

be dealt with in this case.

Define the Design Build Team                                                                    10

Present a organization chart which clearly presents

the organization of the team for this project.

Define the team members' terms of reference for this project                 15

Prepare a terms of reference for the principal

team members and explain their inter-relationships with

reference to the organization chart that has been presented

Provide CV's of key team members                                                                        5

2- Previous Experience                                                                                40

(Maximum of 10 for previous work together & maximum of 30

for strength of experience)

If your team has worked together on previous projects[emphasis in original] provide the following information for two or three previous projects:

Design Builde r:

Project Architect:

Construction Value at Award:

Construction Value at Contract Close: (Explain variances)

Planned BOD:

Final: BOD: (Explain variances)

Client Contact Point:

If your team has not worked together on previous projects[emphasis in original] provide the following information on two or three projects each:

Builder

Similar facilities

Construction Value at Award:

Construction Value at Contract Close: (Explain variances)

Planned BOD:

Final BOD: (Explain variances)

Client Contact Point:

Design Professionals

Similar facilities

Construction Value at Award:

Construction Value at Contract Close: (Explain variances)

Planned BOD:

Final BOD: (Explain variances)

Client Contact Point:

Trade Contractors

Similar facilities

Construction Value at Award:

Construction Value at Contract Close: (Explain variances)

Planned BOD:

Final BOD: (Explain variances)

Client Contact Point:

3- Quality Control/ Quality Assurance                                                         30

State your QC/QA approach. Explain the nature of the QC/QA

plan which will be put in place for this project to cover the design,

construction and commissioning portions of the project. Provide

some evidence of the success your projects have had.

4 - Project Scheduling                                                                                  30

Provide an assessment of the projected schedule. Provide a

preliminary schedule showing key milestones on the process.

Total:                                                                                                                150

APPENDIX "B"

1           INVITATION

1)          Public Works and Government Services Canada (PWGSC) invites Finalists identified in the Statement of Qualifications stage of this procurement to submit Proposals in response to this Request for Proposal (RFP). Project specific instructions and requirements are contained in Annex "A".

2           GLOSSARY OF TERMS

In this RFP, the following words or phrases have the corresponding meanings:

Architect:                      The prime architectural firm or Architects in Joint Venture which will provide the architectural services for the project. Referred to as the "Designer" in the contract documents.

Consultant:                    Any professional engineer, architect or other specialist (other than the Architect) engaged by the Design-Builder or Architect in connection with the project.

Design-Build Team:      During the RFP stage, the Proponent, Architect and all firms and individuals included in the formal Proposal.

Design-Builder: The Proponent selected by PWGSC and which signs the Design-Build Contract for

the project.

Key Personnel Staff from Design-Builder, Architect, and major Consultants, to be assigned to this project.

Proponent:                    During the RFP stage, the entity which submitted a Statement of Qualifications in Stage I of the procurement process and was selected as a Finalist by PWGSC eligible to submit a formal Proposal for the required design and construction services.

3           LIMITATION OF SUBMISSIONS

1)          Proposals will be accepted only from Proponents selected as Finalists by PWGSC following the evaluation and rating of their submissions at the Statement of Qualifications stage of the procurement. Unsolicited Proposals will be returned unopened.

2)          Only one Proposal per Proponent will be accepted. If more than one submission is received from a Proponent all such submissions shall be rejected and no further consideration shall be given to that Proponent.

3)          The Proposal must be made in the same name or joint venture as the entity named as the Proponent in the Statement of Qualifications. Proponents must utilize, in the preparation of their Proposal, the same Architect, Consultants, firms and individuals named in their Statement of Qualifications, and in the same roles and with the same responsibilities as set out therein, unless a change to the Proponent's team has been authorized in advance, in writing, by PWGSC. PWGSC shall not unreasonably withhold such authorization if the request for the authorization is accompanied by a good cause explanation and if, in the sole opinion of PWGSC, such change will not diminish the value of the Proposal to PWGSC.

4)          A Consultant, firm or individual (other than the Architect) may be proposed as part of the Design-Build Team by more than one Proponent.

4           PERFORMANCE EVALUATION

1)          The proponent shall take note that the performance of the Design-Build during and upon the completion of the work shall be evaluated by Canada. The evaluation will be based on the quality of workmanship; timeliness of completion of the work; and the Design-Builder's overall management of the work in relation to the level of effort required of Canada's servants in administering the contract. Should the Design-Builder's performance be considered unsatisfactory, the Design-Builder's privileges to complete [sic] on future work may be suspended indefinitely.

[...]

7           COMPLETION OF PROPOSAL

1)          The Proponent shall

(a)         base the Proposal on the Request for Proposal documents contained herein;

(b)         ensure the submission is complete in all respects;

(c)         sign the Proposal Form and the Proposal Price Form in accordance with the signing procedures set out herein;

(d)         provide Proposal financial security as specified herein.

2)          Any alteration to the Proposal Form or Proposal Price Form, or any condition or qualification placed on these forms may render the Proposal liable to disqualification. Alterations, corrections, changes or erasures made to statements or figures in the Proposal or entered on the Proposal Price Form by the Proponent shall be initialled by the person or persons signing the form.

8           SIGNING PROCEDURES

1)          The Proposal Form and the Proposal Price Form shall be signed in accordance with the following requirements:

(a)         Corporation - The signatures of the authorized signatories shall be affixed and their names and titles typed or printed in the space provided and the corporate seal may be affixed. If the corporate seal is not affixed to the document, the signatures shall be witnessed and proof of signing authority shall be provided. In the Province of Quebec signatures must be witnessed and, except when a director signs the document, proof of signing authority shall be provided whether or not a corporate seal is affixed.

(b)         Partnership - The signatures of the partners shall be affixed and their names typed or printed in the space provided. The signatures shall be witnessed, and if not all of the partners sign or if the signatory is not a partner then a certified true copy of the agreement signed by all partners authorizing such person or persons to execute the document on their behalf shall accompany the submission. An adhesive coloured seal shall be affixed next to each signature except in the Province of Quebec.

(c)         Sole Proprietorship - The signature of the sole proprietor shall be affixed and the name typed or printed in the space provided. The signature shall be witnessed. In the event that the signatory is not the sole proprietor then a certified true copy of the agreement signed by the sole proprietor authorizing such person or persons to execute the document shall accompany the submission. An adhesive coloured seal shall be affixed next to the signature except in the Province of Quebec.

(d)         Joint Venture - The signatures of the authorized signatories of each member of the joint venture shall be affixed and their names and titles typed or printed in the space provided. Each of the participating signatories shall sign the document in the manner applicable to their particular business arrangement which is more particularly described in subparagraphs 1)(a) to 1)(c) above.

11         PROPOSAL FINANCIAL BID SECURITY

1)          The Proponent shall provide Proposal financial bid security with its Proposal in the form of a security deposit or a bid bond and

(a)         if the Proposal price is $250,000.00 or less, the Proposal bid security shall be equal to not less than 10% of the Proposal price;

(b)         if the Proposal price is greater than $250,000.00, the Proposal bid security shall be equal to not less than $25,000.00 plus an amount that is equal to not less than 5% of that part of the Proposal price that exceeds $250,000.00, up to a maximum of $250,000.

2)          A bid bond referred to in paragraph 1) shall be in an approved form and shall be issued by an approved company whose bonds are acceptable to the Government of Canada.

[...]

5)          Proposal financial security shall be forfeited in the event that the Proponent refuses to execute the Articles of Agreement.

6)          Proposal financial security shall be returned to unsuccessful Proponents upon award and execution of the Articles of Agreement by the successful Proponent and PWGSC. The disposition of Proposal financial security provided by the successful Proponent will be dependent upon the type of contract financial security provided by the successful Proponent.

12 SUBMISSION OF PROPOSAL

1)          Financial Envelope. The duly completed and signed Proposal Price Form together with the required Proposal financial security shall be placed and sealed in the Financial Envelope, which shall be clearly and conspicuously marked "Financial" and shall show the Project Number and description, the Proposal closing date and the name of the Proponent.

2)         Technical Envelope. The technical envelope shall contain the specified number of copies of, the duly signed Proposal Form and technical documents. The envelope shall be clearly marked "Technical" and shall show the Project Number and description, the Proposal closing date, and the name of the Proponent.

3)          Both the financial envelope and the technical envelope shall be submitted "Confidential", which shall clearly and conspicuously show on the outside of the a one package, marked the package.

(a)         Name and Address of Proponent

(b)         Name of Proponent's prime contact person

(c)         Project number and description

(d)         Date and time for receipt of submissions

4)          Failure to comply with paragraphs 1) to 3) above may render the Proposal liable to disqualification.

13 REVISION OF PROPOSAL

1)          A Proposal submitted in accordance with these requirements may provided the revision is received at the office designated for the receipt be revised by letter or facsimile provided the revision is received at the office designated for the receipt of Proposals, on or before the date and time set for the closing of Proposals. The facsimile must be on the Proponent's letterhead or bear a signature that identifies the Proponent and include the Project Number and description, and closing date and time. It may be sent to the attention of the Bid Receiving Unit, (709) 772-4603.

14 ACCEPTANCE OF PROPOSAL

1)          Canada may accept any Proposal, whether it is the lowest or not, or may reject any or all Proposals. Evaluation of Proposals shall be based on best value to the Crown in accordance with the criteria and procedures set out in Annex "A".

2)          Without limiting the generality of paragraph 1), Canada may reject any Proposal based on an unfavourable assessment of the adequacy of the Proposal Price to permit the proposed work to be carried out and, in the case of a Proposal providing unit prices or a combination of lump sum and unit prices, whether each such price reasonably reflects the cost of performing the part of the work to which that price applies.

[...]

15 PROPOSAL EVALUATION

1)          Proposals which meet all mandatory requirements contained herein, in Annex "A", and in any other documents forming part of this Request for Proposal shall be evaluated by a PWGSC Evaluation Board in accordance with the criteria, weighting and rating factors set out in Annex "A".

[...]

18 CONTRACT FINANCIAL SECURITY

1)          The successful Proponent will be required to provide Contract financial security in accordance with the General Conditions of Contract, GC 9.

19 INSURANCE

1)          The successful Proponent will be required to provide insurance in accordance with the General Conditions of Contract, GC 10.

20 ENQUIRIES AND ADDENDA

1) Any questions or requests for clarification must be submitted in writing prior to seven (7) days of the closing date by the prime contact of the Proponent, and answers and corresponding questions will only be sent by PWGSC to the prime contact of the Proponent who will be responsible for further internal distribution as required. Questions and Answers will be issued to prime contacts of Proponents incorporation of formal Addenda in to the RFP.

21         BRIEFING AND SITE VISIT

1) In order to clarify required services, and to answer proponent queries, there will be a mandatory briefing session and site visit at 0900, July 10, 1998 at the John Cabot Building, St. John's, NF. Attendance at this briefing session will be limited to a maximum of three (3) persons consisting of the proponent's project manager, a lead consultant representative and one other. Proponents will be required to complete the enclosed Certification of Mandatory Site Briefing Form at this session. Proponents who, for any reason, cannot attend the mandatory briefing session at the specified time and date will I1Qt be given an alternative appointment and their proposals, therefore, will be-rejected as non-compliant. NO EXCEPTIONS WILL BE MADE. Significant questions will be minuted and, together with written answers, issued as an addendum to this document. Proponents should contact Darryl Benson at (709) 772-2533 prior to the briefing session to confirm attendance.

[...]

Design-Build Standard Form of Contract

A3 Agreements and Amendments

1) The contract supersedes all negotiations, representations, or agreements, either written or oral, relating in any manner to the Work, that were made prior to the date of the Contract, and the express agreements therein contained and made by Canada are the only agreements upon which any rights against Canada are to be founded.

2) The failure of either party at any time to require performance by the other party of any provision hereof shall in no way affect the right thereafter to enforce such provision. Nor shall the waiver by either party of any breach of any covenant, condition or proviso hereof be taken to be held to be a waiver of any further breach of the same covenant, condition or proviso.

3) The Contract may be amended only as provided for in the Contract Documents.

General Conditions of Contract

CG1.1.2 Definitions

In the Contract:

[...]

"Construction Documents" means the plans, drawings and specifications for Construction of the Work prepared by or on behalf of the Design-Builder and that are accepted and signed by the Project Manager and the Design-Builder after the execution of the Contract;

"Contract" means the Contract Documents referred to in the executed Agreement;

[...]

"Design-Builder" means the person or entity contracting with Canada to provide or furnish all designs, professional services, Construction Documents, labour, Material and Plant for the execution of the Work, and includes the Design-Builder's authorized representative as designated in writing to the Project Manager;

"Design Services" means the professional services for design and construction administration performed by the Designer, or consultants coordinated by the Designer, under the terms of the Contract;

"Designer" means the Architect, Professional Engineer or entity, licensed to practice in the province or territory of the Work, and forming the professional component of the Design-Builder to provide the Design Services and other services required under the terms of the Contract, and includes the Designer's authorized representative as designated to the Project Manager in writing.

[...]

"Project" means the total design and Construction for which the Design-Builder is responsible, including all Design Services and the Completion of the Work";

[...]

"Project Requirements" means the statement included in the Request for Proposal detailing the technical and other requirements of Canada which are to be met by the successful proponent, and which are to be addressed in the Proposal;

"Proposal" means the proposal of the Design-Builder submitted in response to a Request for Proposal;

"Request for Proposal" means the documentation issued by Canada requesting the submission of proposals and detailing the Project Requirements;

"Subcontractor" means a person or entity, other than the Designer, having a direct contract with the Design-Builder, subject to GC3.6 SUBCONTRACTING, to perform a part or parts of the Work, or to supply Material worked to a special design for the Work;

[...]

"Supplier" means a person or entity having a direct contract with the Design-Builder to supply Plant or Material not worked to a special design for the Work.

GC 1.2.1 General

[...]

3) Nothing contained in the Contract Documents shall create a Contractual relationship between Canada and an Subcontractor or Supplier or the Designer or their agents or employees.

GC1.2.2 Order of Precedence

1) In the event of any inconsistency or conflict in the contents of the following documents, such documents shall take precedence and govern in the following order:

(a) Executed Articles of Agreement,

(b)Supplemental General Conditions,

(c) These General Conditions,

(d) The Request for Proposal and any qualification in the Proposal expressly accepted by Canada,

(e)The Proposal

(f)Construction Documents.

Later dates shall govern within each of the above categories of documents.

2) In the event of any inconsistency or conflict in the information contained in the Construction Documents, the following rules shall apply:

(a) Specifications shall govern over plans;

(b) Dimensions shown in figures on a plan shall govern where they differ from dimensions scaled from the same plan;

(c) Plans of larger scale govern over those of smaller scale.

[...]

GC1.3 STATUS OF THE DESIGN-BUILDER

1) The Design-Builder shall be engaged under the Contract as an independent contractor.

2) The Design-Builder and any employee of the Design-Builder are not engaged by the Contract as an employee, servant or agent of Canada.

3) For the purposes of the Contract the Design-Builder shall be solely responsible for any and all payments and deductions required to be made by law including those required for Canada or Quebec Pension Plans, Unemployment Insurance, Worker's Compensation, provincial health or insurance plans, and Income Tax.

GC1.4 RIGHTS AND REMEDIES

1) Except as expressly provided in the Contract documents, the duties and obligations imposed by the Contract Documents and the rights and remedies available thereunder shall be in addition to and not a limitation of any duties, obligations, rights and remedies otherwise imposed or available by law.

[...]

GC1.6 INDEMNIFICATION BY DESIGN-BUILDER

1) The Design-Builder shall pay all royalties and patent fees required for the performance of the Contract and, at the Design-Builder's expense, shall defend all claims, actions or proceedings against Canada charging or claiming that the services or any part thereof provided or furnished by the Design-Builder to Canada infringe any patent, industrial design, copyright trademark, trade secret or other proprietary right enforceable in Canada.

2) The Design-Builder shall indemnify and save Canada harmless from and against all claims, demands, losses, costs, damages, actions, suits, or proceedings by whomever made, brought or prosecuted and in any manner based upon, arising out of, related to, occasioned by or attributable to the activities of the Design-Builder, the Designer, servants, agents, Subcontractors and sub-Subcontractors in performing the Work.

3) For the purposes of paragraph 2), "activities" includes any act improperly carried out, any omission to carry out an act and any delay in carrying out an act.

[...]

GC3.2 PROJECT DESIGN AND ROLE OF THE DESIGNER

2) The Design-Builder shall employ or otherwise engage the architects, professional engineers and other consultants required to provide the Design Services to be performed by the Designer under the Contract.

[...]

9) The Design-Builder shall cause the Designer to

(a) review the design, when required, with those public authorities having jurisdiction in order that the necessary consents, approvals, licences and permits referred to in GCI.8 LAWS, PERMITS AND TAXES may be applied for and obtained;

(b) on an ongoing basis, provide any required assurances to those authorities respecting conformance of the Work with the design approved for the issuance of any building permit;

(c) review the Work at intervals appropriate to the progress of Construction to determine and verify that the Work is proceeding in conformance with the Contract Documents;

(d) estimate and certify the amounts owing to the Design-Builder from time to time in accordance with the provisions of GC5 TERMS OF PAYMENT and provide such estimates in writing to the Project Manager,

(e) prior to the issuance of an Interim Certificate of Completion, review the Work and provide the Project Manager with a written declaration describing those parts of the Work that, in the Designer's professional opinion, are completed in conformance with the Contract Documents, and listing those parts of the Work that, in the designer's professional opinion, are not completed in conformance with the Contract Documents;

(f) prior to issuance of a Final Certificate of Completion, review the Work and provide the Project Manager with

(i) a written declaration attesting to the completeness of the Work, and

(ii) if the Work or a portion of the Work is subject to a Unit Price Arrangement, a certificate of measurement of the final quantities of the Work.

[...]

GC3.4 EXECUTION OF THE WORK

[...]

2) The Design-Builder shall provide or furnish, and pay for, all professional services, Design Services, labour, Plant, Material, tools, construction machinery and equipment, water, heat, light, power, transportation, and other facilities and services necessary for the performance of the Work in accordance with the Contract.

[...]

GC3.6 SUBCONTRACTING

1) Subject to the provisions of this clause and any limitations established by the Construction Documents, the Design-Builder may subcontract any part of the Work.

2) The Design-Builder shall notify the Project Manager in writing of the Design-Builder's intention to subcontract.

3) A notification referred to in paragraph 2) shall identify the part of the Work, and the Subcontractor with whom it is intended to subcontract. 4) The Project Manager may object to the intended subcontracting by notifying the Design-Builder in writing within six (6) days of receipt by the Project Manager of a notification referred to in paragraph 2).

5) If the Project Manager objects to a subcontracting, the Design-Builder shall not enter into the intended subcontract.

6) The Design-Builder shall not change or permit to be changed the Designer, a Subcontractor engaged by the Design-Builder in accordance with this clause, or a person or entity named in the Design-Builder's Proposal and accepted by Canada as part of the Design-Builder's Proposal, without the written consent of the Project Manager.

7) All the terms and conditions of the Contract that are of general application shall be incorporated in every other contract issued as a consequence of the Contract, except those contracts issued solely to Suppliers for the supply of Plant or Material.

8) Neither a subcontracting nor the Project Manager's consent to a subcontracting shall be construed to relieve the Design-Builder from any obligation under the Contract or to impose any liability upon Canada.

[...]

GC9.1 OBLIGATION TO PROVIDE CONTRACT SECURITY

1) Within 14 days after the date that the Design-Builder receives notice that the Design-Builder's Proposal was accepted by Canada, the Design- Builder, at the Design-Builder's expense, shall obtain and deliver Contract Security to the Project Manager in one or more of the forms prescribed in GC9.2 TYPES AND AMOUNTS OF CONTRACT SECURITY.

2) If the whole or a part of the Contract Security provided is in the form of a security deposit, it shall be held and disposed of in accordance with GC5.14 RETURN OF SECURITY DEPOSIT and GC7.4 SECURITY DEPOSIT -FORFEITURE OR RETURN.

3) If a part of the Contract Security provided is in the form of a labour and material payment bond, the Design-Builder shall post a copy of that bond at the site of the Work.

[...]

GC1O.1 INSURANCE

1) The Design-Builder, at the Design-Builder's expense, shall obtain and maintain, or shall cause to be obtained and maintained, insurance contracts in respect of the Work, and in accordance with the requirements of this General Condition.

2) Within thirty (30) days after acceptance of the Design-Builders Proposal, unless otherwise directed in writing by the Project Manager, the Design-Builder shall deposit with the Project Manager an Insurer's Certificate(s) of Insurance substantially in the form displayed in this document and, if requested by the Project Manager, the originals or certified true copies of all contracts of insurance maintained by or on behalf of the Design-Builder and the Designer as might be applicable pursuant to the insurance coverage requirements contained in the Contract.

[...]

10.8 PROFESSIONAL LIABILITY

1) The Design-Builder shall ensure that the Designer and other consultants engaged in the performance of the Work each obtain and maintain professional liability insurance coverage for the services required in the performance of the Work, and supplementary liability insurance which may be specifically required elsewhere in the Contract Documents, and that they shall, if required, furnish evidence satisfactory to the Project Manager of such insurance coverage and any renewals thereof.

                                     FEDERAL COURT

                              SOLICITORS OF RECORD

DOCKET:                  T-219-00

STYLE OF CAUSE: DESIGN SERVICES LIMITED,

G.J. CAHILL & COMPANY LIMITED,

PYRAMID CONSTRUCTION LIMITED,

PHB GROUP INC.,

CANADIAN PROCESS SERVICES INC.,

METAL WORLD INCORPORATED

AND

HER MAJESTY THE QUEEN

PLACE OF HEARING:                                 St. John's, NL

DATE OF HEARING:                                   October 25, 26, 27, 2004

REASONS FOR ORDER

AND ORDER :         The Honourable Mr. Justice Mosley

DATED:                     June 23, 2005

APPEARANCES:

Michael F. Harrington, Q.C.                                          FOR THE PLAINTIFFS

Christine Healy

Ronald S. Noseworthy, Q.C.                                         FOR THE DEFENDANT

SOLICITORS OF RECORD:

MICHAEL F. HARRINGTON, Q.C.               FOR THE PLAINTIFFS

CHRISTINE HEALY

Stewart McKelvey Stirling Scales

St. John's, NL

RONALD S. NOSEWORTHY, Q.C.              FOR THE DEFENDANT

French, Dunne & Associates

St. John's, NL