Date: 20011123
Docket: T-2034-91
Neutral Citation: 2001 FCT 1282
BETWEEN:
TREVOR NICHOLAS CONSTRUCTION CO. LIMITED
Plaintiff
- and -
HER MAJESTY THE QUEEN AS REPRESENTED BY
THE MINISTER FOR PUBLIC WORKS CANADA
Defendant
REASONS FOR JUDGMENT
SIMPSON J.
[1] These reasons follow a two day trial in which the plaintiff, Trevor Nicholas Construction Limited (the "Plaintiff"), claimed that the defendant ("Public Works") treated its lowest bid unfairly during the tender process for a marine construction project in Meaford, Ontario.
[2] The Plaintiff began its lawsuit in 1991 and was represented for many years by its President, Mr. John Susin. However, two weeks before the trial, the Plaintiff retained a lawyer. Accordingly, both parties had trial counsel.
The Issues
[3] On May 12, 2000 Public Works moved for summary judgment before Mr. Justice Pelletier (the "Motion"). He concluded that a contract was formed when the Plaintiff submitted its tender in response to Public Works' invitation to tender. He also concluded that, because the tender documents contained a privilege clause which stated that Public Works was not obliged to accept the lowest or any tender, Public Works did not breach its contract with the Plaintiff when it rejected its lowest bid.
[4] Following the Motion, Pelletier J. ordered[1] that only the following issues would be tried:
1. Does the contract between the defendant and the plaintiff include an implied term that the plaintiff is to be treated fairly?
2. If it does, has that term been breached?
3. If it has, what if any damages are recoverable as a result of the breach?
However, only two issues were actually considered at trial. Since Public Works conceded that it was obliged to treat the Plaintiff fairly, only issues two and three remained outstanding.
[5] During the trial, the Plaintiff moved unsuccessfully to amend its statement of claim to plead negligence. I concluded that the amendment was unnecessary because the question of fairness, which would be raised in a negligence action, was already before me in the context of the action for breach of contract.
The Evidence
[6] The Plaintiff's evidence was given by Mr. John Susin. Since completing high school, he has worked in the construction industry, both with others and on his own, for approximately 30 years. In 1978, he formed Trevor Nicholas Construction as a private Ontario corporation.
[7] Mr. Elwood Wurts testified for Public Works. He is now retired but, from 1987 to 1995, he was the Manager of the Marine Division, Architectural and Engineering Services Branch, Public Works Canada. In that position, he supervised the work of Mr. Shenkman, a Project Manager, and the work of Mr. Grossi, the Senior Marine Engineer for dredging projects. Mr. Wurts in turn reported to Mr. Owen Corkum who was the Ontario Regional Director of Architectural and Engineering Services for Public Works' Marine Division.
The Facts
[8] The marine construction project in Meaford Ontario involved dredging 16,700 square metres of material from a marine basin, constructing a service dock and undertaking some shore protection work (the "Meaford Project"). The Meaford Project was tendered by Public Works at the request of its client, the Small Crafts Harbour Branch of the Department of Fisheries and Oceans. In response to an advertisement in the Daily Commercial News, the Plaintiff obtained the specifications and plans for the Meaford Project and submitted its tender in the amount of $322,018.00 on October 18, 1990 (the "Plaintiff's Tender"). It was the lowest tender received by Public Works. However, it was ultimately rejected by a letter dated November 16, 1990 which read:
Thank you for submitting a tender for the above mentioned project, however, I must advise you that your tender has not been found to be the most favourable to the Department.
Enclosed please find your bid security.
[9] Wilson & Somerville Ltd. was awarded the contract for the Meaford Project. It had submitted a tender in the amount of $326,395.00.
[10] On October 15, 1990, three days before tenders closed for the Meaford Project, the Plaintiff was sent a letter by Mr. Veinot who was an Assistant Deputy Minister of Public Works in the Department's Headquarters in Ottawa (the "By-pass Letter"). It expressed Public Works' concern about the Plaintiff's capacity to perform dredging works and it read as follows:
Re: PWC Marine Construction and Dredging Projects - Tenders
During the past year, we have received tenders from your Company on a number of marine projects in our Ontario Region.
On two dredging projects, your company's tenders were the lowest. The capacity of your Company to perform the specified work was examined by the Department and was found to be inadequate and consequently your tenders were by-passed. In both cases, the recommendation to by-pass was based upon your previous unsatisfactory work and apparent incapacity to perform the work tendered upon.
This is therefore to advise you that it is the intention of the Department to continue to recommend by-pass of tenders from your Company until such time as you can demonstrate competence to perform the work
The evidence disclosed that the previously by-passed projects described in paragraph two of the By-pass Letter were on the St. Clair River in 1989 and at Amherstberg in June of 1990.
[11] Mr. Wurts testified that, at the relevant time, a lowest tender could only be by-passed with the approval of Treasury Board. He further testified that, in order to secure the necessary approval, Public Works was required to make a formal submission and recommendation for Treasury Board's consideration. However, when faced with Public Works' recommendation to by-pass the Plaintiff's Tender for the Meaford Project, Treasury Board decided not to consider it and directed instead that the tender be disqualified. A disqualification could be handled by Public Works' Toronto regional office without Treasury Board approval.
[12] In spite of the By-pass Letter, the Plaintiff's Tender was not automatically recommended for a by-pass. Instead, it was evaluated by Public Works in its Toronto Regional Office. This evaluation was criticized by the Plaintiff who alleged that it was unfair because it was performed by employees at Public Works who had already formed a negative view of the Plaintiff's ability to perform dredging contracts.
[13] In this regard, Mr. Wurts acknowledged that, when Public Works evaluated the Plaintiff's Tender, its employees were aware that Public Works had not been satisfied with the Plaintiff's work on three previous projects: a repair project at Daults Bay, a breakwater construction project at Keswick in the late 1980s and a dredging project at the Treasure Island Marina in Kingston, Ontario (collectively the "Previous Projects").
The Plaintiff's Tender
[14] Public Works'specification for the Meaford Project (the "Specification") described it as a dredging project and Mr. Susin acknowledged that dredging involves underwater excavation. The Specification therefore asked those submitting tenders to list on Appendix 4 the "Dredges and other Floating Plant" which would be used to perform the work. The Plaintiff listed the "Seneca" as the dredge for the Meaford Project. On Appendix 3, which deals with additional equipment, the Plaintiff listed an hydraulic backhoe, a caterpillar loader, and rented trucks. On its face, the Plaintiff's Tender appeared to comply with the Specification in the sense that it indicated that the Plaintiff intended to perform underwater dredging.
[15] However, when Mr. Grossi of Public Works contacted the Plaintiff to obtain additional information about its plans, he learned that Mr. Susin did not actually intend to dredge. Rather, he proposed to build a watertight dyke using a dragline. Mr. Susin described these changes as "converting" a dredging project into an excavation project. Mr. Susin testified that the dyke was to run from the marina's west breakwater to its east breakwater and along the inside of the east breakwater to land to create a watertight enclosure around the area to be deepened. The area would then be drained with pumps and excavated in the dry.
The Plaintiff's Allegations
[16] Against this background, I will now deal in turn with the Plaintiff's specific allegations of unfair conduct. They are as follows:
1. It was unfair of Public Works to have the Plaintiff's Tender evaluated by employees in the Toronto Regional Office who had been dissatisfied with the Plaintiff's work on the Previous Projects.
2. It was unfair of Public Works to exaggerate the problems it experienced at the project at the Treasure Island Marina in Kingston, Ontario ("the "Treasure Island Project").
3. It was unfair of Public Works not to contact the Plaintiff to discuss its tender once concerns had been identified.
4. It was unfair of Public Works to evaluate the "Seneca" and also unfair of Public Works to retain one of the Plaintiff's former competitors to conduct the evaluation.
5. It was unfair of Public Works to award the contract for the Meaford Project to an inexperienced company.
Discussion and Conclusions
1. Biased Evaluation
[17] Appendix 1 to the Specification made it clear that Public Works would consider its prior experience with a tendering party when it considered a tender. This, by necessary implication, meant that, if those evaluating the tender did not have personal knowledge of a bidder's prior performance, they would inform themselves. I have therefore concluded that it did not matter that Messrs. Grossi, Corkum, Wurts and Shenkman were involved in evaluating the Plaintiff's Tender. Even if they had not been personally aware of Public Works view that the Plaintiff's performance on the Previous Projects had been unsatisfactory, they would have made inquiries and would have been fully informed about Public Works' negative view and the By-pass Letter.
[18] In my view, based on Appendix 1 to the Specification, the Plaintiff had no reason to expect that its tender would receive an evaluation which was isolated from its reputation. As well, based on the By-pass Letter, it is clear that Public Works was not required to evaluate the Plaintiff's Tender, yet it did conduct an evaluation. Moreover, Public Works contacted the Plaintiff to obtain the specifics of his proposal and continued the evaluation even once it was discovered that dry excavation, rather than dredging, was planned. In my view, this conduct demonstrates that Public Works' treatment of the Plaintiff's Tender, from a procedural point of view, was more than fair.
2. The Treasure Island Project
[19] This project involved deepening a marina basin in Kingston, Ontario. The Plaintiff was the lowest bidder and "converted" the dredging methodology contemplated in the project's specification into a draining and dry excavation process. The project, including clean-up operations, was to conclude by March 16, 1999. However, the excavation was not completed because it was stopped by Public Works early in March when cracks developed in an adjacent causeway. The overall project did not go smoothly and it ended with litigation between the Plaintiff and Public Works. Eventually, the case was settled and, as I indicated at trial, I do not intend to consider the merits of the parties' respective positions regarding the alleged problems. All I am prepared to examine is whether, when it evaluated the Plaintiff's Tender for the Meaford Project, Public Works could fairly take the view that the Plaintiff's performance on the Treasure Island Project had been unsatisfactory.
[20] In this regard the following facts about the Treasure Island Project were not disputed:
· The Ministry of the Environment stopped the Plaintiff's pumping operation for a short time on four occasions because of the unsatisfactory quality of the pumped water. The water was too cloudy because particles from the lake bottom were being sucked into the pump. However, each time the Plaintiff was allowed to raise its pump and continue work.
· The Plaintiff began work in December of 1988 without providing Public Works with a work plan for the project.
· The Plaintiff did not finish all the required excavation.
· Several subcontractors complained to Public Works about not being paid by the Plaintiff.
· Neighbouring property owners complained to Public Works because, 15 months after the Plaintiff stopped work in March 1989, it had failed to complete the required clean-up and repairs.
· In June 1990, when the Plaintiff refused to undertake the clean-up and repair work until August 1990, the contract for the Treasure Island Project was taken away from the Plaintiff.
[21] The Plaintiff alleged that Public Works mistakenly believed that the Plaintiff had been twice charged and convicted of offences associated with pumping poor quality water at the Treasure Island Project and that this mistaken belief tainted Public Works' evaluation of the Plaintiff's Tender for the Meaford Project. During Mr. Wurts' examination for discovery, Public Works undertook to provide evidence of the convictions. But, no such proof was provided before or at trial. I have, therefore, disregarded Mr. Wurts' evidence about the convictions. However, even if Public Works was wrong about the existence of the convictions and even if it exaggerated some of the Plaintiff's failings, it is my view, based on the undisputed facts, that its conclusion about the Plaintiff's poor performance on the Treasure Island Project was nonetheless fair.
3. Failure to contact the Plaintiff
[22] Mr. Grossi of Public Works contacted the Plaintiff after tenders closed to discuss Mr. Susin's plans for the Meaford Project. At that time, he learned that Mr. Susin intended to convert the project from dredging to draining followed by dry excavation. This was the methodology the Plaintiff had used at the Treasure Island Project. According to Mr. Susin, Mr. Grossi's memo of November 24, 1990 improperly described the dyke the Plaintiff proposed to build because it neglected to mention that, after joining the east and west breakwaters, the dyke was to continue to shore along the inside of the east breakwater to create a watertight enclosure.
[23] Mr. Wurts testified that Public Works found the methodology described in the Grossi memo a bit vague but said that it was obvious that a dyke which only ran between the breakwaters would not have created an area that could be dewatered. In my view, this evidence shows that it was clear to Public Works that the Plaintiff's proposed dyke had to be longer than the one described in Mr. Grossi's memorandum. Since I am not persuaded that the memorandum caused any material confusion, I have concluded that there was no need to seek further information from the Plaintiff.
4. The Seneca
[24] As noted above, the Plaintiff's Tender was initially misleading in that it listed the Seneca as the floating plant which would be involved in the dredging work for the Meaford Project even though Mr. Susin never intended to dredge. In fact, the Seneca was listed because Mr. Susin thought he might want it to serve as a base for constructing the dyke. However, regardless of why it was listed, it was reasonable for Public Works to have considered whether the Seneca was seaworthy. Public Works had a report on the Seneca dated June 24, 1985 which indicated that, although its deck plates were buckled, it could be used if the recommended repairs were undertaken. Four years later, after the Seneca had sat partially submerged on a lake bottom for some time, Public Works hired an independent consultant to perform a fresh evaluation of the Seneca's seaworthiness. The consultant, Colin B. Fairn, had worked in marine construction for many years with a company known as Canadian Dredge & Dock. He prepared a report dated August 16, 1989 which was highly critical of the Seneca.
[25] At trial, Mr. Susin testified that, in his view, it was unfair of Public Works to have relied on Mr. Fairn's opinion because, before he began his consulting business, his former employer had been one of the Plaintiff's competitors. However, even if I accept that Mr. Fairn was employed by a company which operated in competition with the Plaintiff, this fact alone, without any evidence suggesting that Mr. Fairn would have reason to be untruthful about the Seneca, is insufficient to satisfy me that it was unfair of Public Works to rely on Mr. Fairn's opinion.
[26] Mr. Susin also testified that he felt that it was unfair of Public Works to have considered the Seneca in its evaluation of the Plaintiff's Tender once it became clear that a dragline rather than the Seneca was going to be used on the Meaford Project. However, since the Seneca was listed on the Plaintiff's Tender, the Plaintiff remained entitled to use it and Mr. Susin could have changed his mind again about the equipment he intended to use to construct the dyke. In these circumstances, I have concluded that it was not unfair for Public Works to factor the Seneca's seaworthiness into its assessment of the Plaintiff's Tender.
5. The award to Wilson & Somerville Ltd.
[27] Lastly, the Plaintiff said that it was unfair of Public Works to have awarded the Meaford Project to a less experienced company. However, the evidence disclosed that, although Wilson & Somerville Ltd. did not have marine experience, it had hired a senior employee who was known to the staff at Public Works as a man with extensive dredging experience. As well, Wilson & Somerville Ltd. intended to dredge and to perform the contract with its own personnel and equipment. In contrast, the Plaintiff was unwilling to dredge and its only other dewatering project (the Treasure Island Project) had not been a success from Public Works' perspective. Further, in his dewatering proposal Mr. Susin intended to use a dragline and although he initially testified at trial that he had experience in its use, he later changed his evidence and said that, although he had observed a dragline in operation, he had never used one himself. He therefore planned to hire an operator with the equipment.
[28] Considering all these circumstances, I can find no unfairness in Public Works' award of the Meaford Project to Wilson & Somerville Ltd.
Decision
[29] For these reasons the Plaintiff's action will be dismissed with costs.
"Sandra J. Simpson" JUDGE
Ottawa, Ontario
November 23, 2001
[1]Trevor Nicholas Construction v. Canada (Minister of Public Works), [2000] F.C.J. No. 635 (QL) (T.D.).
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