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CONTRACTS - Tender contracts – Non-compliant bids

Wednesday, August 09, 2017 @ 8:41 AM  

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Appeal by Region of Huronia Environmental Services Ltd. (Rohe) and Graillen Holdings Inc. (Graillen) from the dismissal of their action for damages for breach of contract. From 2002 to 2010, the appellants provided collection, haulage, storage and disposal services to the respondent Town for its biosolids waste. In 2010, the Town decided to put these services out for tender. It also entered into an agreement of purchase and sale (Agreement) with Graillen to purchase its lagoons for storage of the Town's biosolids waste. The Agreement contained a termination clause that the Town could exercise at its sole discretion after due diligence investigations of the purchase's financial impact and economic viability and advisability. Rohe, a company related to Graillen, responded to the Town’s call for tenders. However, the Town awarded the tender to another company, Entec Waste Management Inc. (Entec). Entec’s bid proposed a new form of dewatering process, which obviated the Town's need for storage of its biosolids waste and the purchase of Graillen's lagoons. Entec's bid was also slightly less expensive than Rohe's bid. The Town terminated the Agreement and requested the return of the $250,000 deposit, which was refused. The appellants alleged that Entec’s bid was non-compliant, as the company failed to include required documents as part of its submission. The appellants commenced a claim alleging that the tender contract was awarded improperly to Entec and that the Town wrongly exercised the termination clause in the Agreement, thereby breaching it. The Town counterclaimed for the return of its deposit. The trial judge dismissed the action and allowed the counterclaim. He found that while the winning bid was non-compliant and the Town’s decision to accept it breached the tendering process, the appellants had not shown that the tender would have been awarded to Rohe if the winning tender had been disqualified. The trial judge concluded that the Town would have instead re-tendered the contract. The trial judge also found that the Town reasonably and in good faith terminated the Agreement and ordered that the appellants return the Town's deposit.

HELD: Appeal dismissed. Accepting that the winning bid was non-compliant, the appellants had not shown that that the contract would have been awarded to Rohe. It was more probable that the Town would have re-tendered the contract. The evidence showed that the Town had preferred the option of waste management proposed by Entec. Furthermore, the evidence showed that Rohe’s tender suffered from similar problems that had led to the re-tendering of the 2005 contract. Moreover, the Town had the time to re-tender, as its contract with the appellants did not expire until the end of November 2010, and the appellants indicated that they were agreeable to an extension beyond that date. In any event, the Town had waste storage capacity until the end of January 2011. The Town reasonably and in good faith terminated the Agreement. Once the Town had decided to adopt the dewatering process, the purchase of the Graillen property was no longer required and did not make economic sense.

Graillen Holdings Inc. v. Orangeville (Town), [2017] O.J. No. 3217, Ontario Court of Appeal, J.M. Simmons, P.S. Rouleau and L.B. Roberts JJ.A., June 21, 2017. Digest No. TLD-August72017004