Naylor Group v. Ellis-Don Constr., 2001 SCC 58

• Judge: McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.
• Court: Supreme Court (Canada)
• Case Date: January 22, 2001
• Jurisdiction: Canada (Federal)
• Citations: 2001 SCC 58;(2001), 153 O.A.C. 341 (SCC);JE 2001-1790;[2001] 2 SCR 943;17 BLR (3d) 161;[2001] SCJ No 56 (QL);10 CLR (3d) 1;108 ACWS (3d) 284;EYB 2001-25835;277 NR 1;204 DLR (4th) 513;[2001] ACS no 56;153 OAC 341

Naylor Group v. Ellis-Don Constr. (2001), 153 O.A.C. 341 (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: [2001] O.A.C. TBEd. SE.046

Ellis-Don Construction Ltd. (appellant/respondent on cross-appeal) v. Naylor Group Inc. (respondent/appellant on cross-appeal)

(27321; 2001 SCC 58)

Indexed As: Naylor Group Inc. v. Ellis-Don Construction Ltd.

Supreme Court of Canada

McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.

September 27, 2001.

Summary:

Ellis-Don submitted a bid for the prime contract for the construction of a hospital addition. Naylor submitted a bid to Ellis-Don for the subcontract for the electrical work. Meanwhile, the Ontario Labour Relations Board ruled that Ellis-Don could not subcontract to companies not affiliated with the I.B.E.W. Naylor had a collective agreement with a union not affiliated with the I.B.E.W. Ellis-Don did not award the subcontract to Naylor. Naylor sued Ellis-Don for damages for breach of contract and unjust enrichment. Ellis-Don submitted that no contract was ever formed or, alternatively, that any such contract was frustrated.

The Ontario Court (General Division), in a decision reported at 13 O.T.C. 141, dismissed the contractual claim, but provisionally assessed the damages that would have been awarded if the claim had succeeded. The court allowed the unjust enrichment claim. Naylor appealed.

The Ontario Court of Appeal, in a decision reported at 119 O.A.C. 182, allowed the appeal and set aside the quantum meruit award. The court allowed the cross-appeal and set aside the trial judge's assessment of $730,286 damages and awarded $182,500 damages. Ellis-Don appealed on the issue of liability alone. Naylor cross-appealed on the issue of quantum of damages.

The Supreme Court of Canada dismissed the appeal and allowed the cross-appeal.

Building Contracts - Topic 1304.1

Tender calls - General - Naming subcontractor in tender - Effect of - Ellis-Don submitted a tender for the prime contract for the construction of a hospital addition Naylor submitted a bid to Ellis-Don for the subcontract of the electrical work - Ellis-Don's tender included Naylor's bid - Ellis-Don's tender was accepted by the hospital - Under the Standard Form Construction Contract someone other than the named subcontractor could be employed if there was a reasonable objection to the proposed subcontractor - The Supreme Court of Canada held that Ellis-Don breached its contract with Naylor by failing to award the subcontract to Naylor without establishing that its objection to Naylor was reasonable - See paragraphs 39 to 72.

Contracts - Topic 1267

Formation of contract - Tender calls - Acceptance of - [See Building Contracts Topic 1304.1 ].

Contracts - Topic 3826

Performance or breach - Frustration or impossibility - Application of doctrine - Ellis-Don submitted a bid for the prime contract for the construction of a hospital addition, including Naylor's bid for the subcontract for the electrical work - Meanwhile, the Ontario Labour Relations Board (OLRB) ruled that Ellis-Don could not subcontract to companies not affiliated with the I.B.E.W. - Naylor had a collective agreement with a union not affiliated with the I.B.E.W. - Ellis-Don did not award the subcontract to Naylor - Naylor sued Ellis-Don for damages - The trial judge found, inter alia, that if there was a contract, it was frustrated - The Supreme Court of Canada stated that the doctrine of frustration was inapplicable - The OLRB decision was not a supervening event relieving Ellis-Don of its obligations - See paragraphs 52 to 60.

Contracts - Topic 4023

Remedies for breach - Damages - Extent of liability - Losses attributable to breach - Ellis-Don submitted a bid for the prime contract of the construction of a hospital addition, including Naylor's bid for the subcontract for the electrical work - Meanwhile, the Ontario Labour Relations Board ruled that Ellis-Don could not subcontract to companies not affiliated with the I.B.E.W. - Naylor had a collective agreement with a union not affiliated with the I.B.E.W. - Ellis-Don's tender was accepted by the hospital - Ellis-Don did not award the subcontract to Naylor - The trial judge allowed Naylor's unjust enrichment claim The appeal court affirmed Ellis-Don's unjust enrichment - However, it was more appropriate to assess damages on the basis that Ellis-Don breached its preliminary contract with Naylor - The Supreme Court of Canada affirmed that the appeal court was entitled to substitute its own view of a proper award, where the trial judge failed to consider relevant problems and made an incorrect assessment of damages - The court affirmed the appeal court's assessment of Naylor's loss of profit, but held that the appeal court erred in reducing the damages for speculative labour relations problems - See paragraphs 73 to 91.

Restitution - Topic 62

Unjust enrichment - General - What constitutes - Ellis-Don submitted a bid for the prime contract of the construction of a hospital addition - Naylor submitted a bid to Ellis-Don for the subcontract for the electrical work - Meanwhile, the Ontario Labour Relations Board ruled that Ellis-Don could not subcontract to companies not affiliated with the I.B.E.W. - Naylor had a collective agreement with a union not affiliated with the I.B.E.W. - Ellis-Don's tender was accepted by the hospital - Ellis-Don did not award the subcontract to Naylor - The trial judge allowed Naylor's unjust enrichment claim - The appeal court affirmed that Ellis-Don was unjustly enriched at Naylor's expense - However, it was more appropriate to assess damages on the basis that Ellis-Don breached its preliminary contract with Naylor - The Supreme Court of Canada affirmed that Naylor was entitled to recover damages for breach of contract and found it unnecessary to examine the alternative ground of unjust enrichment relied upon by the trial judge - See paragraph 92.

Restitution - Topic 124

Unjust enrichment - Remedies - Damages - [See Restitution - Topic 62 ].

Cases Noticed:

Ellis-Don Ltd. v. Labour Relations Board (Ont.), [2000] 1 S.C.R. 221; 265 N.R. 2; 140 O.A.C. 201, refd to. [para. 17].

Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission, [1981] 1 S.C.R. 111; 35 N.R. 40; 119 D.L.R.(3d) 267; 13 B.L.R. 72, refd to. [para. 29].

Northern Construction Co. v. Gloge Heating and Plumbing Ltd. (1985), 67 A.R. 150; 19 C.L.R. 281 (C.A.), refd to. [para. 29].

Aluma Systems Canada Inc., Re, [1994] O.L.R.D. No. 4398 (O.L.R.B.), refd to. [para. 31].

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; 237 N.R. 334; 232 A.R. 360; 195 W.A.C. 360, refd to. [para. 35].

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 282 N.R. 285, refd to. [para. 35].

Peddlesden (M.J.) Ltd. v. Liddell Construction Ltd. (1981), 128 D.L.R.(3d) 360 (B.C.S.C.), refd to. [para. 39].

Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; 77 N.R. 161; 21 O.A.C. 321, refd to. [para. 49].

Peter Kiewit Sons Co. v. Eakins Construction Ltd., [1960] S.C.R. 361, refd to. [para. 53].

Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 (H.L.), refd to. [para. 53].

Hydro-Quebec v. Churchill Falls (Labrador) Corp., [1988] 1 S.C.R. 1087; 86 N.R. 3, refd to. [para. 55].

McDermid et al. v. Food-Vale Stores (1972) Ltd. (1980), 25 A.R. 301; 14 Alta. L.R.(2d) 300 (Q.B.), refd to. [para. 55].

O'Connell v. Harkema Express Lines Ltd. (1982), 141 D.L.R.(3d) 291 (Ont. Co. Ct.), refd to. [para. 55].

Petrogas Processing Ltd. v. Westcoast Transmission Co. (1988), 89 A.R. 321; 59 Alta. L.R.(2d) 118 (Q.B.), refd to. [para. 55].

Victoria Wood Development Corp. v. Ondrey (1972), 92 D.L.R.(3d) 229 (Ont. C.A.), refd to. [para. 55].

Marathon-Delco Inc., Re, [2000] O.L.R.D. No. 542, refd to. [para. 62].

Twin City Mechanical v. Bradsil (1967) Ltd. and Ontario (1996), 27 O.T.C. 1; 31 C.L.R.(2d) 210 (Gen. Div.), refd to. [para. 73].

Lang v. Pollard, [1957] S.C.R. 858, refd to. [para. 80].

Woelk v. Halvorson, [1980] 2 S.C.R. 430; 33 N.R. 232; 24 A.R. 620; [1981] 1 W.W.R. 289; 14 C.C.L.T. 181; 114 D.L.R.(3d) 385; 7 Alta. L.R.(2d) 1, refd to. [para. 80].

Andrews et al. v. Grand & Toy (Alberta) Ltd. et al., [1978] 2 S.C.R. 229; 19 N.R. 50; 8 A.R. 182; [1978] 1 W.W.R. 577; 83 D.L.R.(3d) 452; 3 C.C.L.T. 225, refd to. [para. 80].

Laurentide Motels Ltd. et al. v. Beauport (Ville) et al., [1989] 1 S.C.R. 705; 94 N.R. 1; 23 Q.A.C. 1, refd to. [para. 80].

Widrig v. Strazer, [1964] S.C.R. 376, refd to. [para. 80].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Contract in Canada (4th Ed. 1999), pp. 677, 678 [para. 55].

Halsbury's Laws of England (4th Ed.), vol. 12, p. 437 [para. 85].

McGregor, McGregor on Damages (16th Ed. 1997), para. 1154 [para. 73].

Pitch, H.D., and Snyder, R.M., Damages for Breach of Contract (2nd Ed. 1989), 15¶5 [para. 80].

Waddams, S.M., The Law of Damages (3rd Ed. 1997), para. 5.890 [para. 73]; ¶13,420 [para. 80].

Counsel:

Earl A. Cherniak, Q.C., Kirk F. Stevens and Sandra L. Coleman, for the appellant/respondent on cross-appeal;

Alan A. Farrer and Leah K. Bowness, for the respondent/appellant on cross-appeal.

Solicitors of Record:

Lerner & Associates, London, Ontario, for the appellant/respondent on cross-appeal;

Thomson, Rogers, Toronto, Ontario, for the respondent/appellant on cross-appeal.

This appeal and cross-appeal were heard on January 22, 2001, before McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ., of the Supreme Court of Canada. Binnie, J., delivered the decision of the court in both official languages on September 27, 2001.