Olympic Construction Ltd. v. Eastern Regional Integrated Health Authority, (2014) 348 Nfld. & P.E.I.R. 141 (NLCA)

• Judge: Rowe, White and Hoegg, JJ.A.
• Court: Court of Appeal (Newfoundland)
• Case Date: April 09, 2014
• Jurisdiction: Newfoundland and Labrador
• Citations: (2014), 348 Nfld. & P.E.I.R. 141 (NLCA);2014 NLCA 20

Olympic v. Health Authority (2014), 348 Nfld. & P.E.I.R. 141 (NLCA);

    1082 A.P.R. 141

MLB headnote and full text

Temp. Cite: [2014] Nfld. & P.E.I.R. TBEd. AP.031

Eastern Regional Integrated Health Authority (appellant) v. Olympic Construction Limited (respondent)

(13/09; 2014 NLCA 20)

Indexed As: Olympic Construction Ltd. v. Eastern Regional Integrated Health Authority

Newfoundland and Labrador Supreme Court

Court of Appeal

Rowe, White and Hoegg, JJ.A.

April 9, 2014.

Summary:

Eastern Regional Integrated Health Authority (Eastern) put out public tenders for two separate construction projects. Olympic was the only compliant bidder on the first project and the lowest bidder (of two compliant bidders) on the second. Eastern decided to re-tender the first project and awarded the second project to the higher bidder. Olympic sued for damages for breach of contract. Respecting the first project, the issue was whether Eastern breached contract "A" by not accepting its bid. Respecting the second project, the issue was whether Olympic complied with the bid documents by not attending the first site meeting.

The Newfoundland and Labrador Supreme Court, Trial Division (General), in a judgment reported (2013), 332 Nfld. & P.E.I.R. 131; 1030 A.P.R. 131, dismissed the claim respecting the first contract. Eastern was not obligated to accept the only compliant bid, where it acted in good faith in dealing with a bid that far exceeded its budget. The court allowed the action respecting the second contract, as Eastern should have awarded that contract to Olympic as the compliant preferred bidder with the low bid. Olympic sought solicitor-client costs based on an unaccepted offer to settle. At issue was whether the old or new rule 20A.08 applied and whether the settlement offer had been revoked.

The Newfoundland and Labrador Supreme Court, Trial Division (General), in a judgment reported (2013), 336 Nfld. & P.E.I.R. 308; 1043 A.P.R. 308, held that the old rule 20A.08 applied and the settlement offer had not been revoked. Olympic was awarded solicitor-client costs from the date of service of the settlement offer. Eastern appealed the finding of liability respecting the second contract, the damage award and the prejudgment interest award.

The Newfoundland and Labrador Court of Appeal allowed the appeal in part. The court dismissed the appeal respecting liability and damages, but held that prejudgment interest should have been limited to the period commencing on January 29, 2010, being the halfway point in the life of the contract.

Building Contracts - Topic 1302

Tender calls - General - Duty of care (incl. fairness) - A health authority put out public tenders for a construction project - When only one company attended the mandatory site meeting, the health authority sought out other bidders (including Olympic) to have a competitive process - An addendum to the tender documents extended the tender closing date and set up a second site meeting, which Olympic attended - Olympic's bid was the lowest and under the project budget, but was ruled non-compliant because Olympic failed to attend a mandatory site meeting -The health authority awarded the contract to the other bidder - Olympic sued for breach of contract - The trial judge allowed the claim - The health authority did not act in good faith in extending the tender deadline and imposing another site meeting to encourage Olympic to make a bid, only then to rely on absence from the first site meeting to argue the bid was noncompliant - The health authority breached contract A by failing to award the contract to Olympic as a compliant preferred bidder with the lowest bid - When the tender deadline was extended (to permit Olympic and one other contractor to bid), and Olympic attended the second site meeting, Olympic's bid was compliant - The second site meeting was arranged for the purpose of permitting further compliant bids (first mandatory meeting attended only by one contractor) - The second site meeting was a substitute for the first - The court assessed damages for lost profit as 13% of the bid amount ($684,712.71) - The Newfoundland and Labrador Court of Appeal affirmed liability and damages - The court stated that "The duty of fairness animates the law of public tendering, and to condone Eastern's behaviour in this case would allow Eastern, as the owner in control of the tendering process, and in a position to define the parameters of the compliant bids and bidders, to make the rules and then break them" - There was no error in awarding damages of 13% projected profit on the bid amount without deduction for negative contingencies - Eastern identified no such contingencies - See paragraphs 33 to 51.

Building Contracts - Topic 1302.2

Tender calls - General - Privilege clause - [See Building Contracts - Topic 1302 ].

Building Contracts - Topic 1389

Tender calls - Breach of tender - Damages - [See Building Contracts - Topic 1302 ].

Crown - Topic 1109

Contracts with Crown - Building contracts - Tenders - [See Building Contracts - Topic 1302 ].

Interest - Topic 5105

Interest as damages (prejudgment interest) - Breach of contract - Contracts for work and materials - A contractor was the low compliant bidder on a public tender for a construction contract - The builder breached the contract by finding the bid noncompliant and awarding the contract to the next lowest bidder - The contractor was awarded damages equal to its lost profit on the contract - At issue was entitlement to prejudgment interest - The Newfoundland and Labrador Court of Appeal held that the trial judge erred in awarding prejudgment interest commencing on the date of the breach - The court stated that "prejudgment interest on a damages award for a pecuniary loss of this nature where there has been a wrongful refusal to contract in a building case can be calculated on the basis that the loss accrues regularly and linearly over the course of a contract pursuant to subsection 3(b) of the Act. As long as the award involves a fixed rate of interest and does not involve compound interest ... , the interest on linearly accruing profits over the life of a contract will be equal to the interest that would accrue on the whole sum if it is awarded from the date representing the halfway point in the life of the contract. ... The tender documents in this case provided that the contract was to be substantially performed within 12 months from the date of notification of Contract B [July 29, 2009] ... Accordingly, [the contractor] is awarded prejudgment interest on its damage award from January 29, 2010, which is the date representing the halfway point in the life of the contract." - See paragraphs 52 to 70.

Cases Noticed:

Health Care Developers Inc. v. Newfoundland (1996), 141 Nfld. & P.E.I.R. 34; 443 A.P.R. 34 (Nfld. C.A.), refd to. [para. 17].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 20].

Seadane International Inc. v. Morgan International Marketing Co. et al. (1999), 180 Nfld. & P.E.I.R. 97; 548 A.P.R. 97 (Nfld. C.A.), refd to. [para. 21].

Midnight Marine Ltd. v. Underwriters, Lloyd's, London (2010), 302 Nfld. & P.E.I.R. 85; 938 A.P.R. 85; 2010 NLCA 64, refd to. [para. 21].

Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2010] 1 S.C.R. 69; 397 N.R. 331; 281 B.C.A.C. 245; 475 W.A.C. 245; 2010 SCC 4, refd to. [para. 22].

Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission, [1981] 1 S.C.R. 111; 35 N.R. 40, refd to. [para. 26].

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; 2000 SCC 60, refd to. [para. 27].

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 262 N.R. 285; 2000 SCC 60, refd to. [para. 27].

Murphy v. Alberton (Town) (1993), 114 Nfld. & P.E.I.R. 34; 356 A.P.R. 34 (P.E.I.T.D.), refd to. [para. 28].

Bowater Newfoundland Ltd. v. Newfoundland and Labrador Hydro (1978), 15 Nfld. & P.E.I.R. 301; 38 A.P.R. 301 (Nfld. C.A.), refd to. [para. 29].

Eco-Zone Engineering Ltd. v. Grand Falls-Windsor (Town) (2000), 5 C.L.R.(3d) 55; 2000 NFCA 21, refd to. [para. 31].

Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.), refd to. [para. 31].

Reardon Smith Line Ltd. v. Hansen-Tangen et al., [1976] 3 All E.R. 570 (H.L.), refd to. [para. 31].

London & South Western Railway Co. v. Blackmore (1870), L.R. 4 H.L. 610, refd to. [para. 31].

Hill v. Nova Scotia (Attorney General), [1997] 1 S.C.R. 69; 206 N.R. 299; 157 N.S.R.(2d) 81; 462 A.P.R. 81, refd to. [para. 31].

Cahill (G.J.) & Co. (1979) Ltd. v. Newfoundland and Labrador (Minister of Municipal and Provincial Affairs) et al. (2005), 250 Nfld. & P.E.I.R. 145; 746 A.P.R. 145 (N.L.T.D.), refd to. [para. 36].

Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943; 277 N.R. 1; 153 O.A.C. 341; 2001 SCC 58, dist. [para. 43].

Maritime Excavators (1994) Ltd. v. Nova Scotia (Attorney General) (2000), 183 N.S.R.(2d) 236; 568 A.P.R. 236 (S.C.), dist. [para. 44].

Starco Enterprises Ltd. v. Stephenville Airport Corp. (2005), 246 Nfld. & P.E.I.R. 140; 731 A.P.R. 140; 2005 NLTD 63, refd to. [para. 47].

National Containers and Recycling Ltd. v. Gerrard-Ovalstrapping Ltd. (1995), 34 C.P.C.(3d) 330 (Man. Q.B. Master), refd to. [para. 58].

Young v. Dawe (1998), 160 Nfld. & P.E.I.R. 233; 494 A.P.R. 233 (Nfld. T.D.), refd to. [para. 63].

Envoy Relocation Services Inc. et al. v. Canada (Attorney General), [2013] O.T.C. Uned. 2622; 2013 ONSC 2622, refd to. [para. 67].

Statutes Noticed:

Judgment Interest Act, R.S.N.L. 1990, c. J-2, sect. 3(1), sect. 3(3), sect. 4 [para. 53].

Counsel:

David Buffett, Q.C., for the appellant;

John French and Kimberley MacKay, for the respondent.

This appeal was heard on December 4, 2013, before Rowe, White and Hoegg, JJ.A., of the Newfoundland and Labrador Court of Appeal.

On April 9, 2014, Hoegg, J.A., delivered the following judgment for the Court of Appeal.