Law Times

PAGE 10 FOCUS JUNE 9, 2008 / LAW TIMES Recent decisions could reduce trend to litigate L Court battles common around tendering process for large contracts BY HELEN BURNETT Law Times in construction law, but several recent decisions provided clarity in this area that could decrease the trend — while another may have the potential to end it alto- gether, says a lawyer in the field. There has been a lot of litigation happening around the bidding for large contracts, says Glen Grenier, a lawyer with Lang Michener LLP in Toronto. But, he adds, it's calm- itigation has been com- mon around the tendering process for large contracts ing down, as due to a number of court decisions it has been decided that the courts are (generally speak- ing) going to carefully scrutinize the allegations of unhappy bidders against the owner. One of those cases was the Supreme Court of Canada's de- cision in Double N Earthmovers Ltd. v. Edmonton (City), hand- ed down in January 2007. The case dealt with the compliance of the winning bidder with the terms of the bid after the con- tract had been awarded. In the case, the city's contract for the supply of equipment and Presented by Insight Information TECHNOLOGY FORUM November 17-18, 2008 Metro Toronto Convention Centre (South Building), Toronto CANADIAN LAW & Insight Information | ALM Events is proud to introduce this unique Canadian legal technology event. Discover the latest products and network with the industry's most prominent leaders! Sponsors operators was awarded but it turned out that, in fulfilling the bid, the chosen contractor used equipment that was older than specified in the tender docu- ments. The second-lowest bidder sued, saying this was a breach of the obligation of the owner to treat the bidders fairly. The Supreme Court ruled that as far as contract A and con- tract B analysis, contract A im- poses a duty of fairness of all the bidders, and that contract ends when contract B is awarded. "Bids, particularly for large proj- ects and for government contracts, are hotly contested . . . because there's a significant benefit, and bidders are always looking at each other to make sure that they com- ply with the rules," says Grenier. "I view this as a decision that at least assists and protects the own- ers in a situation where you've got an unsuccessful bidder trying to get at them and the court giving them a bit of protection or at least not giving unsuccessful bidders yet another inroad into being able to sue an owner," he says. "At the end of the day, build- tender process," notes Ackerley. This was consistent with a very recent Supreme Court decision from last month, in Design Ser- vices Ltd. v. Canada, he says. The case, which came up through the Federal Court, concerned a fed- eral government tender process for a facility that was going to be built on a design-build basis. According to the decision, Glenn Ackerley says a decision with the potential to be a 'tender case killer' is Tercon Contractors Ltd. v. British Columbia (Trans- portation and Highways). Marketing Partners From the Publishers of For exhibition and sponsorship opportunities please contact: Daniel Moskowitz 1-866-456-2020 ext. 6130 | DMoskowitz@insightinfo.com Register Today! 1-888-777-1707 | www.insightinfo.com ings have to get built, projects have to be done, government contracts have to be fulfilled, and it's got to be done in a commercially reasonable man- ner with some sense of, one, finality and, two, being able to act with common sense, and reasonably, they're not going to make an owner simply afraid to move whichever way and freeze things up," says Grenier. "I think a bidder who is un- successful, given the decisions that have come down over the last few years, is going to be fair- ly reticent, or at least their coun- ntitled-4 1 6/2/08 10:09:38 AM sel is going to be fairly reticent, unless they think that there is a slam dunk," he says. "I think that you've got to demonstrate as a bidder that the owner clearly breached its own rules before you're going to get the ear of the court," he says. Glenn Ackerley of Weir- Foulds LLP says that Double N has been considered in more re- cent cases and is starting to be picked up, but is more quoted from in terms of the standard principles that it reiterates. The decision clearly identified the fact that contract A comes to an end when contract B is award- ed, providing more certainty in that area, he says. "What is interesting about Dou- ble N is it shows . . . that the major- ity were reluctant to open the door to greater potential . . . obligations, duties imposed on owners in the O'BRIEN'S INTERNET: Experience the phenomenal power and flexibility of ... O'BRIEN'S Now you can access and e-mail forms faster and more efficiently than ever! Now available on the Internet: Why limit yourself? O'Brien's Coming soon: Available in print only: Encyclopedia of Forms, Eleventh Edition Internet access FREE with your print subscription O'Brien's er, concluded that a new duty of care should not be recognized, which the Supreme Court agreed with, noting, "The subcontrac- tors' claims do not fall within a pre-existing category in respect of which a duty of care has been recognized. "The recognition of a new duty of care between an owner and subcontractors in the con- text of a tendering process is not justified," said the court. "Here, the fact that the sub- contractors had the opportunity to form a joint venture, and there- by be parties to the 'contract A' made between PW and O, which would have entitled them to claim in contract, is an overriding policy reason that tort liability should not be recognized in these circum- stances," it added. Ackerley says that the court also had concern about the inde- terminate nature of the liability, in terms of the fact that owners would not only face claims from bidders, but everybody down the food chain, including con- tractors and suppliers. "An owner would have no idea going in who they may be poten- tially exposed to," he says. "Here they're saying we're not going to extend the obligations in tendering beyond that direct relationship," he says. "In some ways that's consistent going back to Double N," he adds. "Similar to Double N, it's going interested parties could bid on the contract alone or in conjunc- tion with other entities as a joint venture. In this case, the contract was eventually awarded to a non- compliant bidder. The contractor who should have been awarded the contract, and the subcontrac- tors associated with it, sued. The contractor eventually settled with the government, but the subcontractors contin- ued with the litigation. The trial judge found that the government owed a duty in tort, but not in contract, to the subcontractors. The Court of Appeal, howev- to provide some certainty as far as what the rules are . . . and, in terms of providing guidance or looking ahead, I think it will actually in some ways dampen what might otherwise be the enthusiasm for certain cases in this area," he says. Ackerley says he hasn't seen a decrease in litigation follow- ing this decision, as the facts in Double N were particular. One decision to watch for, O'Brien's www.canadalawbook.ca www.lawtimesnews.com O'BRIEN'S INTERNET (LT 1-3x4).indd 1 6/4/08 9:29:10 AM LT0514 however, which he says has the potential to be a "tender case killer" is Tercon Contractors Ltd. v. British Columbia (Transporta- tion and Highways) in B.C. "This, to me, is the one that has the potential to kill 25 years of tender litigation," he says. Ter- con, another call for design-build See Leave, page 12

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