Transport Lavoie Ltée. v. Canada Post Corp., 2002 FCT 612

Date: 20020528

Docket: T-2032-98

Ottawa, Ontario, May 28, 2002

Before: Nadon J.

BETWEEN:

TRANSPORT LAVOIE LTÉE

Plaintiff

and

CANADA POST CORPORATION

Defendant

ORDER

The plaintiff's action is dismissed with costs.

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

Date: 20020528

Docket: T-2032-98

Neutral citation: 2002 FCT 612

BETWEEN:

TRANSPORT LAVOIE LTÉE

Plaintiff

and

CANADA POST CORPORATION

Defendant

REASONS FOR ORDER

NADON J.

[1]        On April 29, 1998 the defendant awarded a transportation contract to Transport Y.N. Gonthier Inc. Alleging inter alia bad faith by the defendant and illegality of the procedure used by the defendant in awarding the transportation contract, the plaintiff claimed the sum of $144,009.00 from the latter as damages.^[1] Further, the plaintiff asked the Court to make the following rulings:

-          declare to be illegal the bid process initiated and followed by the defendant for delivery of mail and packages between Québec and Mont-Joli;

-          cancel and/or rescind any decision or resolution adopted by the defendant to award the service contract as a result of the bid process;

-          cancel and/or rescind any service contract awarded by the defendant pursuant to the bid process.

[2]        The relevant facts are not complicated and may be summarized as follows. On March 20, 1998 the defendant sent 28 transportation businesses a request to tender for transportation of mail and/or packages in the Québec/Mont-Joli corridor.

[3]        The tender request sent to the businesses included the necessary information from which they could prepare their bids. At pp. 1 and 2 of the tender request there was the following:

[TRANSLATION]

Special notice to respondents

Respondents are urged to familiarize themselves with the content of the DDP file (including the information below) and in particular the description of services before submitting their bids.

From the tenders it receives the Canada Post Corporation (hereinafter referred to as "the CPC") will select one or more respondents for the purpose of further negotiation (hereinafter referred to as "negotiating respondents").

Contracts will be awarded to the lowest competent respondents who in the opinion of the Canada Post Corporation, and in its sole discretion, are able to perform the contractual undertakings. The CPC may award a single contract for all services or one contract for each service. However, the CPC reserves the right to reject any bid, even the lowest, if in its opinion it is contrary to the public interest or to its own interest.

By filing its bid a respondent acknowledges that the CPC will not be responsible for any costs whatever borne by the respondent in preparing its bid and that it undertakes to prepare the bid entirely at its own risk, in the knowledge that no contract will be issued as the result of filing a bid or of any negotiation resulting from that bid, but solely as a consequence of the conclusion of a written contract between the two parties.

The CPC may at any time, and without being in any way liable therefor, terminate its plans to award the contract or change the nature of the services to be provided in connection with the contract.

[...]

The contract(s) will be for a period of five years.

Services will begin on July 1, 1998.

[4]        In response to the defendant's request, 14 businesses, including the plaintiff, responded to the call in April 1998. On April 16, 1998, when the bids were opened, it was found that the plaintiff was the next lowest bidder.

[5]        The defendant accordingly contacted the four lowest bidders, namely Les Services JAG Inc., the plaintiff, Transport Y.N. Gonthier Inc. and Transport D.S.D. Inc, thus initiating the second stage of the procedure leading to awarding of the transportation contract.

[6]        Following review of the bids of the four aforementioned businesses by the defendant - the review being based on an internal document prepared by the defendant's employees and titled [TRANSLATION] "Bid Analysis" - the defendant awarded the contract to Transport Y.N. Gonthier Inc., the bidder placing first.

[7]        The document titled [TRANSLATION] "Bid Analysis", on which the defendant relied in assessing the 4 bids, included 23 questions about the bidder and its bid application. A "weighted" rating was assigned to each question. Based on the total number of points awarded to the bidders (maximum: 712), the defendant calculated the [TRANSLATION] "Bid cost/weighted rating = cost/points", to determine the ranking of each of the 4 bidders. The points awarded to each of the 4 lowest bidders were the following:

Transport Y.N. Gonthier Inc.                  697

Transport Lavoie Ltée              614

Transport D.S.D. Inc.                              605

Les Services JAG Inc.              598

Under the heading "Bid cost/weighted rating = cost/point", the bidders were assessed as follows:

Transport Y.N. Gonthier Inc.                  $2,633.38

Les Services JAG Inc.              $2,879.48

Transport Lavoie Ltée              $2,948.19

Transport D.S.D. Inc.                              $3,162.90

[8]        At the bottom of the "Bid Analysis" for Transport Y.N. Gonthier Inc. were the following comments, under the heading [TRANSLATION] "Recommendation of responsible officer", by Alain Larouche, an employee of the defendant and the officer supervising the bids:

[TRANSLATION]

Place of bidder based solely on price: 3

Place after analysis (evaluation): 1

Award of contract to this contractor: best quality/price ratio

This document is dated April 21, 1998.

[9]        Alain Larouche testified for the defendant. He explained that the bids had to be received by April 15, 1998 at the latest and that the first stage was to select the short-listed candidates based only on the amount of the bid. He explained that the defendant had received 14 bids and that they were opened by Germain Blouin, another employee of the defendant, and himself on April 16, 1998.

[10]      A document titled [TRANSLATION] "Evaluation Questionnaire - Highway Services" (Exhibit P-4) was then sent to the four short-listed bidders. This document, prepared by Messrs. Blouin and Larouche, contained 12 questions, the purpose of which was to check certain of the information supplied by the bidders in their bids and see whether the suggested prices were negotiable or final. According to Mr. Larouche, the purpose of this document was also to collate the information received.

[11]      Mr. Larouche spoke to Yvan Lavoie, the plaintiff's secretary-treasurer, about this questionnaire. Following receipt of Exhibit P-4 and his conversation with Mr. Larouche, Mr. Lavoie wrote Mr. Larouche on April 20, 1998 to tell him [TRANSLATION] "about our comments on your evaluation questionnaire for highway services". Mr. Lavoie wrote the following concerning question 11 of the evaluation questionnaire on highway services:

[TRANSLATION]

11.           We clearly understood that service G-483 is a one-way service only. Also, we will not increase our prices to allow for the change made by you to service G-486.

                 In response to your question as to whether the proposed rate is negotiable, we would say it is negotiable provided you authorize transportation of goods on the return journey for service G-483.

[12]      On the same day Mr. Lavoie again wrote Mr. Larouche telling him that [TRANSLATION] "we are reducing the bid price for the remainder at the following rate . . .". Mr. Lavoie attached to his letter a document indicating proposed [TRANSLATION] "amended" prices. Mr. Larouche explained that he did not receive the document setting out the plaintiff's amended prices until 2:30 p.m. on April 21, 1998, after completing Exhibit P-18, the document titled "Bid Analysis". Accordingly, the "Bid Analysis" for the plaintiff did not take its revised prices into account. Additionally, Mr. Larouche explained that he had looked at the impact of the plaintiff's new prices anyway in order to see whether the prices altered the classification at which he had arrived. Mr. Larouche testified that the plaintiff's revised prices did not in any way alter the results obtained. Despite its revised pricing, the plaintiff still came third.

[13]      As a result of the amendment of its prices the bid submitted by Transport Lavoie went from $1,810,188.64 to $1,802,063.62. I note that Transport Y.N. Gonthier Inc. also amended the price of its bid, reducing the latter from $1,872,000.00 to $1,853,464.00.

[14]      Mr. Larouche explained that the purpose of the assessment was to determine which of the bids offered the best quality-price ratio. According to Mr. Larouche, following the assessment he made of the four bids, that by Transport Y.N. Gonthier Inc. was the one which best met this requirement. Consequently, Mr. Larouche recommended to his superiors that the contract be awarded to Transport Y.N. Gonthier Inc.

[15]      The plaintiff's position was quite straightforward. It argued that as the defendant's call for tenders was a "public" call, the latter could not undertake a negotiating process with certain bidders following the opening of the bids. Needless to say, the plaintiff vigorously challenged the defendant's right to proceed, as it did, with an assessment of the bids and bidders in order to determine which of the bidders would be awarded the contract.

[16]      The defendant's position was that it complied in all respects with the conditions clearly set out in its [TRANSLATION] "call for tenders" dated March 25, 1998. The defendant referred the Court to certain of the conditions contained in its document, and in particular the following:

-          the fact that on opening the bids it could select one or more "respondents" for negotiating purposes;

-          the fact that the contract would be awarded to the "respondent" who, in its opinion and in its sole discretion, was the "lowest and able" to perform its contractual undertakings;

-          the fact that it reserved the right to reject any bid, even the lowest, if it considered that it was in the public interest or in its own interest to do so.

[17]      In my opinion, the defendant's arguments are valid. I come to this conclusion for the following reasons.

[18]      At para. 20 of its statement of claim, the plaintiff alleged fault by the defendant in awarding the transportation contract for which it requested bids. First, the plaintiff alleged that the defendant acted in bad faith. Secondly, the plaintiff alleged that the defendant was at fault in undertaking negotiations with four of the bidders following the opening of the bids. This allegation is contained in para. 14 of its statement of claim and reads as follows:

[TRANSLATION]

14.           Without limiting the generality of the foregoing, the plaintiff respectively submits that the plaintiff exceeded its powers and erred by inviting certain of its bidders to review the prices contained in their original bids, as this is clearly contrary to the requirements of good faith which should govern any contractual relationship and which infringes the rules of equality between bidders which among other things should govern relations between any businesses and Crown corporations such as the defendant.

[19]      Since there is no evidence of bad faith by the defendant, the plaintiff's first allegation must be dismissed. The second allegation can only succeed if the plaintiff is right in saying that the defendant engaged in a public bidding process. In my opinion, based on the evidence, and in particular Exhibit P-1, the [TRANSLATION] "Call for tenders" dated March 25, 1998, which the defendant sent to 28 transportation businesses, there can be no question that the defendant did not in any way engage in a public call for tenders procedure. In an article titled [TRANSLATION] "Awarding bids by calls for tenders",^[2] Pierre Daviault explains this type of procedure, adding that where there are no legislative or regulatory provisions requiring it, a public body may proceed in some other way:

[TRANSLATION]

2.1          Principle

                 The purpose of a public call for tenders is to simultaneously contact everyone who wishes to deal with the governmental authority. The idea is to obtain a wide range of competent persons who have the necessary expertise, and to create greater competition: hence the need to publish a notice in the newspapers. This procedure thus has two consequences for the public authority's contractual freedom, since it both affects the choice of those with whom it wishes to offer to contract and that of the contracting party. Consequently, in view of the importance of contractual freedom in the common law of contracts, if there are no legislative or regulatory provisions requiring it, the public authority is not required to proceed by public bidding. It may opt for a call for tenders by invitation, that is, choose to invite only certain persons to bid. [My emphasis]

[20]      Before going any further, it is worth noting that the defendant's enabling legislation, the Canada Post Corporation Act, R.S.C. 1985, c. C-10, does not require the defendant to proceed by public calls for tenders. Consequently, the defendant could in its discretion proceed by a call for tenders by invitation, as it did in the case at bar.

[21]      There was no ambiguity in the invitation to bid sent to the transportation businesses by the defendant on March 20, 1998. The document provided that on opening the bids the defendant could undertake a negotiating process with one or more of the bidders. The document further provided that the defendant could reject any offer, including the lowest, if in its opinion the public interest or its own interest required this. Finally, the document provided that the contract would be awarded to the bidder which, in the defendant's opinion and in its sole discretion, was in the best position [TRANSLATION] "to perform its contractual undertakings". Consequently, I have absolutely no doubt that the procedure used by the defendant in the case at bar was not a public call for tenders. Accordingly, the defendant had complete contractual freedom to award the contract to the bidder which, in its opinion, was best able to perform its contractual obligations.

[22]      Case law and academic opinion have unanimously supported a public authority's power, where there are no legislative or regulatory provisions requiring that it proceed by public bidding, to proceed as if it were a private business. In Arneg Canada Inc. v. La Fédération des Commissions scolaires du Québec, Superior Court of Quebec, No. 200-05-006651-975, dated May 14, 1999, Blanchet J. said the following at pp. 5 to 7 of his reasons:

[TRANSLATION]

DECISION

In implementing the project for which it was made responsible, the Fédération had no duty to use a public bidding procedure or even a procedure of calling for tenders by invitation. It was free, like a private business, to require a specific product and to contract with the supplier of its choice, even by mutual agreement.

In Contrats des organismes publics québécois, the writers Girous and Lemieux note that:

Under the rule of contractual freedom, a public authority which is not subject to any duty to proceed by a call for tenders in awarding a contract has the widest possible discretion in selecting its contractor, and if necessary may choose to have recourse to a call for tenders.

Citing consistent case law, the writers added:

If it chooses to proceed by a call for tenders, it will not necessarily be subject to the rules that would otherwise apply if the call for tenders were imposed upon it. This is true of the provisions regarding the content of the notice, the time lapse between the notice and the bid deadline, the opening of the bids and even the rule that the contract be awarded to the lowest bidder . . . since the procedure is then left in the discretion of the public authority as if it were a private business.

Accordingly, in the case at bar the Fédération had an untrammelled right to disregard even the rule of awarding to the lowest bidder applicable to public bidding, and it did this by the unambiguous notation on the first page of the "Instructions to bidders":

The FECQ does not undertake to accept either the lowest or any of the bids received and opened. It reserves the right to accept all or part thereof . . .

The legality of a reservation of this kind, even in the strictest circumstances of a public bidding procedure, has long been established in our law.

Accordingly, assuming that the plaintiff had itself filed the lowest acceptable bid, which is not the case here, the Fédération would still have been completely free to use its discretion in awarding the contract to the bidder which in its view offered the best product and the best guarantees. The reservation included in the call for tenders placed it beyond the reach of any action by any bidder, unless there was evidence clearly establishing that it had discriminated or exercised bad faith in respect of anyone or that its choice was based on arbitrary, wrongful or fraudulent grounds.

In the case at bar, aside from the fact that the plaintiff did not itself file any bid with the Fédération, it appeared that the bid by its distributor Aubin Réfrigération was in the second and last place among the bids received under this heading in the call for tenders, and by a significant margin, even after a weighted adjustment made to take into account the percentage of Quebec content in its product.

[...]

Finally, apart from the allegations in the action and the testimony by the plaintiff's representative, who claimed he was "shoved aside" by the Fédération, there is nothing in the evidence to suggest or even insinuate that the choice made by the Fédération and its representatives could have been dictated by considerations other than the best interests of the school boards represented and their taxpayers.

[23]      In an article titled L'Adjudication des contrats municipaux par voie de soumissions,^[3] the author André Langlois makes the following comment, at pp. 87 and 88 of his article, on a public authority's duty to proceed by a public call for tenders:

[TRANSLATION]      

As this type of contract is not covered by the duty to use bidding, the municipal authority does not have to obtain leave from the Minister of Municipal Affairs to award the contract to someone other than the party which submitted the lowest or highest bid, depending on the circumstances: it thus has a broad discretion in selecting its contractor. It could even undertake negotiations with one of the bidders.

[24]      Finally, in Groupe Sofidal Inc. v. Commission scolaire de St-Eustache, S.C. Terrebonne, 700-05-002097-917, a decision rendered on November 27, 1991, Roland Durand J. of the Quebec Superior Court, citing academic opinion, concluded that, unless a public authority is obligated by its enabling legislation, it is not subject to the strict rules of calls for tenders. At pp. 10 and 11, Durand J. said the following:

[TRANSLATION]

The Commission was not required to go to tenders, but since it voluntarily did so, is it subject to the strict rules of such a call? The answer is no.

In his text Contrat des organismes publics québécois, Prof. Giroux writes:

Under the rule of contractual freedom, a public authority which is not subject to any duty to proceed by a call for tenders in awarding a contract has the widest possible discretion in selecting its contractor, and if necessary may choose to have recourse to a call for tenders. If it chooses to proceed by a call for tenders, it will not necessarily be subject to the rules that would otherwise apply if the call for tenders were imposed upon it. This is true of the provisions regarding the content of the notice, the lapse between the notice and the bid deadline, the opening of the bids and even the rule that the contract should be awarded to the lowest bidder. [references omitted] . . . since the procedure is then left in the discretion of the public authority as if it were a private business.

[25]      I am persuaded that in the case at bar the defendant complied in all respects with the conditions in its [TRANSLATION] "Call for tenders". Since there is nothing in the evidence to lead me to conclude that the defendant acted "illegally" or committed any fault in awarding the transportation contract to Transport Y.N. Gonthier Inc., the plaintiff's action will be dismissed with costs.

[26]      I hasten to add that, moreover, the plaintiff did not satisfy me that it would have obtained the contract but for the wrongful act which it alleges the defendant committed. In its statement of claim, at para. 21, the plaintiff only alleged that its bid [TRANSLATION] "might have been . . . accepted at the conclusion of process P-1". Accordingly, in my opinion the plaintiff did not establish a causal link between the alleged fault and the damages claimed.

[27]      In view of the possibility of an appeal from my decision, I will now consider the damages sought by the plaintiff. As I indicated earlier, the plaintiff claimed the sum of $144,009.00, which it calculated as follows:^[4]

Year 1                  Year 2                  Year 3                      Year 4                      Year 5                      Total

Revenue                  356,602                   358,385                 360,177                   363,779                     367,416                      1,806,359

Costs of operation:

- Trailer

   rental                    106,200                   106,200                 106,200                   106,200                     106,200                         531,000

- Salaries and

   fringe

   benefits              104,680                   104,680                 104,680                   104,680                     104,680                         523,400

- Gasoline              51,250                     51,250                   51,250                     51,250                       51,250                         256,250

- Maintenance

   and repairs           57,340                     57,340                   57,340                     57,340                       57,340                         286,700

- Insurance              7,000                       7,000                     7,000                       7,000                         7,000                           35,000

- Licences                 6,000                       6,000                     6,000                       6,000                         6,000                           30,000

                                 332,470                   332,470                 332,470                   332,470                     332,470                      1,662,350

Loss of

profit                        24,132                     25,915                   27,707                     31,309                       34,946                         144,009

[28]      Each of the parties called an expert witness. Marc Bélanger, a chartered accountant, filed for the plaintiff a report in reply, dated November 6, 2001, on which he testified. For the defendant, Laurent Després, also a chartered accountant, filed two reports, the first dated July 10, 2000 and the second April 9, 2001. Additionally, at the hearing Mr. Després filed a final calculation of the damages which in his submission the plaintiff sustained, namely Exhibit D-26. According to Mr. Després, the loss of profits suffered by the plaintiff amounted to $14,194.00.

[29]      The dispute regarding the damages sought by the plaintiff resulted chiefly from the fact that the plaintiff made no deduction under [TRANSLATION] "Operating costs" for its administrative expenses. In his calculation of the plaintiff's damages (Exhibit D-26), Mr. Després allocated an amount of $108,382.00 for this item for the period of the contract, five years. At pp. 10 and 11 (para. 4.3) of his report of July 10, 2000, Mr. Després explained why he arrived at this amount:

[TRANSLATION]

No administrative costs were considered by the plaintiff in calculating its claim. In the summary of the calculation of its bid (undertaking No. 2), we find that an amount of $20,000 per annum, corresponding to about 6% of the contract, was applied for costs due to fixed administrative costs such as taxes (other than sales taxes), sureties, rental and other administrative charges. Accordingly, the plaintiff considered that obtaining this contract would result in an increase in its administrative costs. We therefore considered these costs on the same basis of calculation as that used by the plaintiff in calculating its bid.

The amounts attributable to administrative costs are the following:

[30]      As Mr. Després indicated, the plaintiff in calculating its bid took into account an amount of $20,000.00 per annum for its administrative costs, that amount representing about 6% of the revenue which the defendant's contract would have generated.

[31]      Mr. Bélanger, the plaintiff's expert witness, disagreed with Mr. Després. In his submission, obtaining the defendant's contract would not have produced an increase in the plaintiff's administrative costs as the management of the contract was so uncomplicated. In support of his argument, Mr. Bélanger noted that the plaintiff's administrative costs were diminishing despite an increase in its turnover.

[32]      In my opinion, an amount representing about 6% [TRANSLATION] "of the contract" is not in any way unreasonable. Firstly, this is what the plaintiff considered reasonable in calculating the bid which it submitted to the defendant. Secondly, the revenue which the defendant's contract would have produced would have represented about 7% of the plaintiff's total revenue. Consequently, I feel that the sum of $108,390.00 assigned to administrative costs by Mr. Després is entirely reasonable, and I accept it.

[33]      This deduction accordingly reduces the plaintiff's claim to the sum of $35,627.00. Since Mr. Després concluded that the plaintiff is entitled to the sum of $14,194.00, the difference between the parties is only $21,433.00.

[34]      As I indicated earlier, the calculation of the claim which I reproduced in para. 27 of my reasons was not done by Mr. Bélanger. The latter in his report of November 6, 2001 adopted the plaintiff's calculation and that of Mr. Després and concluded that there had been a loss of profit of $152,380.00. In his report Mr. Bélanger responded inter alia to Mr. Després' report dated April 9, 2001. In his report, on the back of p. 4, Mr. Després reproduced the calculation made by the plaintiff and his own calculation (Table 2). On April 9, 2001 Mr. Després concluded that if the plaintiff had obtained the defendant's contract it would have suffered a financial loss of $153,741.00.

[35]      At the trial Mr. Després filed a new calculation, amending the one he did in his report of April 9, 2001. In this calculation (new Table 2, Exhibit D-26), the plaintiff's loss of profit came to $14,194.00. After Exhibit D-26 was filed, the expert witnesses disagreed only as to the items for gasoline, maintenance and repairs and administrative costs.

[36]      I have already disposed of the item for "administrative costs", and that only leaves "gasoline" and "maintenance and repairs". For "gasoline", Mr. Bélanger considered that the actual cost amounted to $301,121.00, that is an amount of $30,527.00 less than that calculated by Mr. Després ($331,648.00). On "maintenance and repairs", Mr. Bélanger considered that the actual cost amounted to $245,845.00, $725.00 more than the cost calculated by Mr. Després.

[37]      The difference of opinion on the "gasoline" item is quite straightforward. Mr. Després calculated this expense, as Mr. Bélanger explained, using an average ratio between the cost of gasoline and the turnover taken from the financial statements, which he weighted for 1996 to 1999. Mr. Després arrived at a ratio of 18.36%. Mr. Bélanger also used the method of a percentage of turnover, but for 1998 and 1999 only. He accordingly arrived at a percentage of 16.67%. Since the contract was to begin on July 1, 1998 and terminate on June 30, 2003, I prefer Mr. Bélanger's approach, of using the years 1998 and 1999 rather than taking 1996 and 1997 into account. Consequently, I accept the percentage suggested by Mr. Bélanger, 16.67%

[38]      I accordingly conclude that the damages the plaintiff sustained amount to $35,627.00.

O T T A W A, Ontario

May 28, 2002

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

                                                    FEDERAL COURT OF CANADA

                                                                 TRIAL DIVISION

                                                          SOLICITORS OF RECORD

FILE:                                                                               T-2032-98

STYLE OF CAUSE:                                                     TRANSPORT LAVOIE LTÉE v. CANADA POST CORPORATION

PLACE OF HEARING:                                                QUÉBEC

DATE OF HEARING:                                                  NOVEMBER 26 and 27, 2001

REASONS FOR ORDER BY:                                    NADON J.

DATE OF REASONS:                                                  MAY 28, 2002

APPEARANCES:

MARCEL GERVAIS                                                        FOR THE PLAINTIFF

FRANÇOIS BIENJONETTI                                           FOR THE DEFENDANT

SOLICITORS OF RECORD:

BROCHET, DUSSAULT, LAROCHELLE                   FOR THE PLAINTIFF

Québec, Quebec

HEENAN, BLAIKIE, AUBUT                                       FOR THE DEFENDANT

Québec, Quebec