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Construction Law - Bidding process - Breach of tender

Thursday, September 01, 2016 @ 8:00 PM  


Appeal by the contractor from the award of damages for breach of contract and cross-appeal by the owner from the finding that it was in breach of the contract. The appellant was an unsuccessful bidder on a CCDC-2 Stipulated Price Construction Contract. The Instruction to Bidders and other related documents involved situation specific contract terms. The contract had standard clauses allowing the general contractor to make a claim for additional compensation from the owner due to reasonably unanticipated project conditions. After the project was awarded to another contractor, the appellant commenced a claim for breach of contract asserting that there was a departure from the essence of the bidding process and an improper and unequal treatment of the bids. At trial, the respondent sought to establish that the appellant’s profit margin should be discounted by negative contingencies. It led evidence from the successful bidder that they lost money on the project. The trial judge found that the respondent was in breach of the “Contract A” element of the bidding process by awarding the contract to the other contractor. He found that the appellant could have been awarded the contract had the respondent properly applied its criteria and that its losses were not too remote. He further found that the respondent had not met its onus in proving a discount for uncertainty or the appellant’s avoidance of its loss. However, he concluded that the appellant, like the contractor to whom the contract was awarded, would have suffered heavy financial losses in its performance of “Contract B” and he limited damages accordingly. The respondent claimed that it was entitled to judgment in the amount of its anticipated profit and that there was no reason for the trial judge to discount its lost profit effectively to zero. The respondent cross-appealed, arguing that the appellant should have lost by non-suit and that the expression “sole and unfettered discretion” in the Instruction to Bidders document conferred on it the right to use whatever methodology it saw fit to evaluate criteria after the bids were received.

HELD: Appeal allowed. Cross-appeal dismissed. There was ample evidence for the trial judge’s decision to rebuff the non-suit motion. The appellant had some evidence either directly or by reasonable inference on all elements of its claim as to the breach of Contract A. The language “sole and unfettered discretion” allowed owners considerable room to maneuver when it came to assessing bids. However, it was essential that the integrity of the bidding process be maintained. Accordingly, “sole and unfettered discretion” could not include the right to depart from fundamental contents of the Instruction to Bidders on which bidders properly and reasonably relied upon in composing their bids. The respondent’s actual evaluation of the bids was such a departure from the reasonable expectations of bidders that it constituted a breach of Contract A. The respondent’s defence that the appellant would have suffered the same losses as the successful bidder was neither properly pled nor available to the respondent. The trial judge erred in directly comparing the conclusory summary of the successful bidder’s problems with a reasonable forecast of what the appellant would have experienced had it been awarded the contract. The appellant and the successful bidder had different approaches and different plans as to how to proceed with the construction and they had different personnel and different subcontractors. Furthermore, the successful bidder’s loss was based largely on an undetailed settlement between it and the respondent. There was evidence to the contrary of the lesser costs the appellant would have incurred to have certain work done by a subcontractor. However, the trial judge did not err in concluding that the appellant would have encountered the same problems as the successful bidder with respect to a shared small subcontractor that financially collapsed. The judge further erred in applying a presumptive generalization against evidence when he found that the appellant’s completion schedule would have been delayed due to faulty designs. It was similarly a palpable and overriding error for the trial judge to simply assume that the appellant would have sustained the same loss as the successful bidder following settlement, rather than make a claim under the contract for costs due to unexpected delays.