Matthew DiBerardino, Summer Student
Overview & Facts
In Triton Hardware Limited v. Torngat Regional Housing Association, 2020 NLSC 72, Triton Hardware Limited (“Triton”) was an unsuccessful bidder that participated in a Torngat Regional Housing Corporation (“TRHC”) tender process for the construction of eight houses. The tender documents included a privilege clause that stated that “The Lowest of Any Quotes Will Not necessarily Be Accepted [sic]”. The instructions to bidders stated that bids were to include “the total price for the material adjacent to each item” and that this included “all costs to deliver the material, taxes and wharf charges”. Notwithstanding that Triton was the lowest bidder, TRHC awarded the contract to another bidder with whom they had contracted with in the past, White’s Construction Limited (“WCL”). In awarding the contract to WCL, TRHC stated that it relied on the privilege clause included in the tender documents, that the cost difference between Triton and WCL was negligible (less than $1,000 per house), and that Triton’s bid was non-compliant. Triton applied to the Newfoundland and Labrador Supreme Court (“NLSC”) for summary trial claiming that by awarding the construction contract to WCL, TRHC breached the terms of tender Contract A. In awarding damages to Triton, the NLSC determined that: (i) the matter was appropriate to be determined by way of summary trial and judgment, (ii) Triton was the lowest compliant bidder, and (iii) that TRHC was not entitled to rely on the privilege clause to award the contract to WCL.
(i) Application for Summary Trial and Judgment
The NLSC allowed Triton’s application for summary trial under Rule 17A of the Rules of the Supreme Court, 1986, SNL 1986, c 42, Schedule D (similar, but not identical, to Rule 20 of Ontario’s Rules of Civil Procedure). At the NLSC, summary trial proceedings may be used to decide factual and legal issues where the facts are not in dispute or are easily ascertained by the Court: LHE v. DHE, 2019 NLCA 66. Where there is a genuine issue for trial, the Court may still proceed by way of summary trial where it is satisfied that the evidentiary record is “sufficient for adjudication”: Pomerleau Inc v. Newfoundland and Labrador (Minister of Transportation and Works), 2014 NLTD(G) 19. Triton and TRHC were in agreement that the fundamental principles of Canadian tendering law applied. The only disagreement was whether Triton’s bid was factually compliant since it included HST in the bid prices. However, the NLSC concluded that this issue could be decided based on the evidentiary record put before it.
(ii) Contract A, Mandatory Compliance – Substantial Compliance
Upon submission of its bid, Triton entered into Contract A with TRHC. Contract A requires that the owner must not accept a bid that is not compliant with the terms of the tender documents: MJB Enterprises Ltd v. Defence Construction (1951) Ltd, [1999] 1 SCR 619. No evidence was given regarding whether the tender documents included a discretion clause (e.g. “the owner will have the right to waive minor errors, omissions or irregularities”). However, the NLSC held that the prevailing test for tender bid compliance is substantial compliance and not strict compliance: Coady Construction & Excavating Limited v. Conception Bay South (Town), 2018 NLSC 115; Cougar Engineering and Construction v. Newfoundland and Labrador, 2015 NLCA 45. The TRHC claimed that Triton’s bid was non-compliant with the tender call because it included HST in the bid prices. However, this argument was rejected because the instructions to bidders expressly required the submission of “total prices” which included “all costs to deliver the material, taxes and wharf charges”. Accordingly, the NLSC held that Triton’s bid was compliant with all material conditions of the tender call. In so doing, the NLSC noted that “TRHC’s reliance on the privilege clause… is evidence from which there is a compelling inference that Triton was a compliant bidder.”
(iii) Contract A, Mandatory Compliance – Privilege Clauses
Privilege clauses generally stipulate that an owner need not accept the lowest or any tender. A well-drafted tender document package will tell the bidder which criteria the owner will consider in determining which bidder it will enter into Contract B with. An owner must take care to ensure that any privilege clause included is clear, concise and congruent with the tender documents. This is important because privilege clauses do not permit the owner to select a successful bidder on the basis of undisclosed criteria: MJB Enterprises Ltd v. Defence Construction (1951) Ltd, [1999] 1 SCR 619. Privilege clauses do not operate independent of the tender documents: Martel Building Limited v. R, 2000 SCC 60, para 82.
In Triton, the tender documents expressly stated that “[t]he awarding of the contract will be based on the lowest average price” and that “The Lowest of Any Quotes Will Not necessarily Be Accepted [sic]”. There was no indication in the tender documents of any bid evaluation criteria other than price. The NLSC stated that “[a]t most, the wording [of the privilege clause] supports that the intention of TRHC was to award the contract to the lowest compliant bidder or not award the contract at all.” Illustrating the importance of clear drafting, the NLSC helpfully stated that “[i]f TRHC wanted to have the flexibility to choose a contractor whom TRHC had previously hired, TRHC needed to make this clear in the Instructions to Bidders”. In addressing the claim made by TRHC that the cost difference between the Triton and WCL bids was negligible, the NLSC reiterated that if TRHC wanted the ability to choose from a pool of comparable bids, it should have made that clear in the tender documents. Consequently, it was held that TRHC could not rely on the privilege clause to award to the contract to WCL, and in doing so, TRHC breached its Contract A obligations to Triton.
Calculation of Damages
In assessing damages, the NLSC upheld the long-standing principle that the normal measure of damages for an owner’s breach of Contract A is the bidder’s lost profit: MJB Enterprises Ltd v. Defence Construction (1951) Ltd, [1999] 1 SCR 619, paras 59–60; Naylor Group Inc v. Ellis-Don Construction Ltd, 2001 SCC 58, para 73. Triton, however, also claimed damages for the cost of preparing its bid. In striking down this portion of Triton’s claim, the NLSC held that awarding damages for the cost of bid preparation is “not money that would put Triton in the same position it would have been in if the contract had been honoured”.
Conclusion
Summarily, Triton underlines the importance of drafting clear and concise tender documents. In order for a privilege clause to permit an owner to select a bidder based on criteria other than price, those other evaluation criteria must be made clear in the tender documents. Otherwise, a standard privilege clause will only permit the owner to: (i) award Contract B to the lowest compliant bidder, or (ii) not award Contract B at all. In the absence of clear and concise tender documents, an owner faces the risk of incurring re-tendering costs if it does not wish to enter into Contract B with the lowest compliant bidder. When determining bid compliance issues that arise solely from the interpretation of the tender documents, the Court may proceed by way of summary trial where the relevant tender documents and bids have been entered into evidence.