Design Services Ltd. et al. v. Canada, (2008) 374 N.R. 77 (SCC)

• Judge: McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 09, 2007
• Jurisdiction: Canada (Federal)
• Citations: (2008), 374 N.R. 77 (SCC);2008 SCC 22;165 ACWS (3d) 952;55 CCLT (3d) 1;64 CCLI (4th) 159;[2008] SCJ No 22 (QL);EYB 2008-132987;69 CLR (3d) 1;293 DLR (4th) 437;[2008] 1 SCR 737;374 NR 77;JE 2008-985;[2008] ACS no 22

Design Services Ltd. v. Can. (2008), 374 N.R. 77 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2008] N.R. TBEd. MY.003

Design Services Limited, G.J. Cahill & Company Limited, Pyramid Construction Limited, PHB Group Inc., Canadian Process Services Inc. and Metal World Incorporated Inc. (appellants) v. Her Majesty The Queen (respondent)

(31618; 2008 SCC 22; 2008 CSC 22)

Indexed As: Design Services Ltd. et al. v. Canada

Supreme Court of Canada

McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ.

May 8, 2008.

Summary:

Public Works and Government Services Canada (PW) launched a "design-build" tendering process for the contruction of a naval reserve building. PW awarded the contract to a non-compliant bidder. The subcontractors to the contractor which should have been awarded the contract claimed against PW for the economic loss they suffered.

The Federal Court, in a decision reported at 275 F.T.R. 183, held that PW owed the subcontractors no duty in contract. However, the court held that PW owed the subcontractors a duty of care in tort not to award the contract to a noncompliant bidder. PW appealed, asserting that it did not owe a duty to the subcontractors in tort.

The Federal Court of Appeal, in a decision reported at 352 N.R. 157, allowed the appeal. The court held that a new duty of care between the owner and subcontractors should not be recognized in these circumstances. The subcontractors appealed.

The Supreme Court of Canada dismissed the appeal. The court held that the subcontractors' claims did not fit within one of the preexisting categories of duty of care for pure economic loss and that the recognition of a new duty of care between an owner and subcontractors in the context of a tendering process was not justified.

Building Contracts - Topic 1302

Tender calls - General - Duty of care (incl. fairness) - Public Works and Government Services Canada (PW) launched a "design-build" tendering process for the construction of a naval reserve building - The tendering documents indicated that proponents could bid on the contract alone or in conjunction with other entities as a joint venture - PW awarded the contract to a non-compliant bidder - The subcontractors to the contractor (Olympic) which should have been awarded the contract claimed against PW for the economic loss they suffered - The Supreme Court of Canada held that the subcontractors' claims did not fit within one of the preexisting categories of duty of care for pure economic loss and that the recognition of a new duty of care between an owner and subcontractors in the context of a tendering process was not justified - The subcontractors failed to satisfy the first stage of the Anns test justifying a finding of a prima facie duty of care - The fact that the subcontractors chose not to take the opportunity to form a joint venture with Olympic, and thereby be parties to the "Contract A" made between PW and Olympic, was an overriding policy reason that tort liability should not be recognized in these circumstances - Even if a prima facie duty of care had been found at the first stage of the Anns test, it would have been negated at the second stage because of indeterminate liability concerns.

Crown - Topic 1012

Contracts with Crown - General principles - Tenders - Duty of Crown - [See Building Contracts - Topic 1302 ].

Damages - Topic 531

Limits of compensatory damages - Remoteness - Torts - Recoverable damages - Purely economic loss - [See Building Contracts - Topic 1302 ].

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - [See Building Contracts - Topic 1302 ].

Torts - Topic 79

Negligence - Duty of care - Factors limiting or reducing scope of duty of care - [See Building Contracts - Topic 1302 ].

Cases Noticed:

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 262 N.R. 285; 2000 SCC 60, refd to. [para. 23].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 24].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 24].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Edwards et al. v. Law Society of Upper Canada et al., [2001] 3 S.C.R. 562; 277 N.R. 145; 153 O.A.C. 388; 2001 SCC 80, refd to. [para. 24].

Odhavji Estate et al. v. Woodhouse et al., [2003] 3 S.C.R. 263; 312 N.R. 305; 180 O.A.C. 201; 2003 SCC 69, refd to. [para. 24].

Childs v. Desormeaux et al., [2006] 1 S.C.R. 643; 347 N.R. 328; 210 O.A.C. 315; 2006 SCC 18, refd to. [para. 24].

Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), refd to. [para. 25].

Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), appld. [para. 26].

Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission, [1981] 1 S.C.R. 111; 35 N.R. 40, refd to. [para. 28].

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Co. et al., [1999] 1 S.C.R. 619; 237 N.R. 334; 232 A.R. 360; 195 W.A.C. 360, refd to. [para. 29].

D'Amato et al. v. Badger et al., [1996] 2 S.C.R. 1071; 199 N.R. 341; 79 B.C.A.C. 110; 129 W.A.C. 110, refd to. [para. 30].

Canadian National Railway Co. et al. v. Norsk Pacific Steamship Co. and Tug Jervis Crown et al., [1992] 1 S.C.R. 1021; 137 N.R. 241, refd to. [para. 31].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, refd to. [para. 31].

Caltex Oil (Aust.) Pty. Ltd. v. Dredge Willemstad (1976), 11 A.L.R. 227 (H.C.), refd to. [para. 35].

Morrison Steamship Co. v. Greystoke Castle (Cargo Owners), [1947] A.C. 265 (H.L.), refd to. [para. 36].

Ultramares Corp. v. Touche (1931), 174 N.E. 441 (N.Y. Ct. App.), refd to. [para. 60].

Authors and Works Noticed:

Anson, William R., The Law of Contract (28th Ed. 2002), p. 24 [para. 39].

Feldthusen, Bruce, Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow (1990-91), 17 Can. Bus. L.J. 356, pp. 357 [para. 31]; 358 [paras. 31, 32].

Fridman,Gerald HenryLouis, TheLaw of Torts in Canada (2nd Ed. 2002), p. 320 [para. 49].

Hepburn, Samantha J., Principles of Property Law (2nd Ed. 2001), p. 21 [para. 39].

Klar, Lewis N., Tort Law (3rd Ed. 2003), p. 201 [para. 56].

Linden, Allen M., and Feldthusen, Bruce, Canadian Tort Law (8th Ed. 2006), pp. 304 [para. 26]; 441, 442, 443 [para. 30]; 444 [para. 54]; 477 [para. 33].

Counsel:

Geoffrey E.J. Brown, Q.C., and Gerry R. Fleming, for the appellants;

Christopher Rupar, for the respondent.

Solicitors of Record:

Stewart McKelvey, St. John's, Newfoundland, for the appellants;

Attorney General of Canada, Ottawa, Ontario, for the respondent.

This appeal was heard on November 9, 2007, before McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ., of the Supreme Court of Canada. The following judgment of the Supreme Court of Canada was delivered in both official languages by Rothstein, J., on May 8, 2008.