H B Lynch Investments Inc. v. Canada (Minister of Public Works and Government Services), 2005 FCA 237

[1] The appellant applied for judicial review of the decision of the leasing officer of the respondent department, alleging essentially that the leasing officer had erred in requiring "strict compliance" as opposed to "substantial compliance" with the tender instructions.

[2] The application for judicial review was dismissed by Mosley J. [2004 FC 747]. He found that the leasing officer had not erred in law in interpreting section 14 "strictly, or from a standpoint of strict compliance" at paragraph 27 and the "the leasing officer's conclusion that the applicant failed to meet those requirements was a reasonable one."

[3] The appellant submitted two tenders to lease premises to the respondent at the latter's invitation. Both were rejected as non-complying with the signing authority requirements of the tender package. The president and directing mind of the appellant corporation had personally signed both offers, but had not affixed the corporate seal, or provided proof of signing authority as required by section 14 of the tender package.

[4] Section 14 sets out the formal execution requirements with respect to the tenders in the following way:

14. EXECUTION OF THE OFFER

The Offer must be executed in accordance with the following:

(a) Corporation or Joint Stock Company - The signatures of the authorised signatories shall be affixed and their names and titles typed or printed in the space provided and the corporate seal should be affixed. If the corporate seal is not affixed to the Offer, the signatures shall be witnessed and proof of signing authority shall accompany the Offer.

(b) Partnership, General Partnership or a Limited Partnership - The signatures of the partners shall be affixed and their names typed or printed in the space provided. The signatures shall be witnessed. If not all of the partners sign or in the event that the signatory is not a partner, then a certified true copy of the agreement signed by all partners authorising any such signatory to execute the Offer on their behalf shall accompany the Offer.

An adhesive coloured seal shall be affixed next to each signature.

(c) Sole Proprietorship or An Individual doing business under a firm name - 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 authorising any such signatory to execute the Offer shall accompany the Offer.

An adhesive coloured seal shall be affixed next to each signature.

[A.B., pp 26-27]

[5] The issue of strict versus substantial compliance confuses the essential nature of the dispute. Tendering is governed by the law of contract, as was made clear by the Supreme Court of Canada in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 at para. 19 . The leasing officer was required to interpret the tender documents, and to apply that interpretation to the tender submitted by the appellant. The first question is a question of law which, as noted above, is how the applications judge treated it.

[6] The determination as to whether the appellant's tender complied with the requirements of the tender package is a question of mixed law and fact which attracts a more deferential standard. When one adds to this the presence of a privilege clause which purports to allow the leasing officer a certain measure of discretion, one concludes that the standard of review is patent unreasonableness. That was the holding of this court in Gestion Complexe Cousineau v. Canada (Minister of Public Works), [1995] 2 F.C. 694 (F.C.A.). See also Halifax Shipyard Ltd v. Canada (Minister of Public Works) (1996), 113 F.T.R. 58 (F.C.). However, since Mosley J. found against the appellant using the standard more favourable to it and since I come to the same conclusion on the more demanding standard, nothing turns on the fact that the wrong standard was applied.

[7] This is not a matter of mere formality, as alleged by counsel for the plaintiff. The issue of capacity to contract is fundamental in contract law. The Minister took great pains to draft a clear, precise and comprehensive clause dealing with the formalities of execution so as to avoid any dispute as to the tenderer's capacity to contract.

[8] Section 14 is a complete code in itself. It attempts to cover all the usual forms of business organizations, namely corporations, partnerships and sole proprietorships. It sets out distinct requirements for each of these categories, including an optional method of compliance. To find that the section was not intended to be strictly complied with would be to add options to those so carefully selected by the Minister.

[9] I would therefore dismiss the appeal with costs in favour of each respondent.

"Robert Décary"

J.A.

"I agree.

M. Nadon, J.A."

"I agree.

J.D. Denis Pelletier, J.A"

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-330-04

APPEAL FROM AN ORDER OF THE FEDERAL COURT DATED MAY 21, 2004, FILE NO. T-906-04.

STYLE OF CAUSE: H B Lynch Investments Inc. v.

MPWC and Harbour Royale

PLACE OF HEARING: Halifax, Nova Scotia

DATE OF HEARING: June 15, 2005

REASONS FOR JUDGMENT: Décary J.A.

CONCURRED IN BY: Nadon J.A.

Pelletier J.A.

DATED: June 20, 2005

APPEARANCES:

John Keith

FOR THE APPELLANT

James Gunvaldsen-Klaasen

FOR THE RESPONDENT MPWC

Dwight Rudderham

FOR THE RESPONDENT Harbour Royale Development Ltd.

SOLICITORS OF RECORD:

Cos Hanson O'Reilly Matheson

Halifax, Nova Scotia

FOR THE APPELLANT

John H. Sims, Q.C.

Deputy Attorney General of Canada

Ottawa, Ontario

FOR THE RESPONDENT MPWC

Rudderham Chernin

Sydney, Nova Scotia

FOR THE RESPONDENT Harbour Royale Development Inc.

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H B Lynch Investments Inc. v. Canada (Minister of Public Works and Government Services), 2005 FCA 237

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2005 FCA 237