Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), (2010) 397 N.R. 331 (SCC)

• Judge: McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 23, 2009
• Jurisdiction: Canada (Federal)
• Citations: (2010), 397 N.R. 331 (SCC);2010 SCC 4;JE 2010-321;[2010] CarswellBC 296;100 BCLR (4th) 201;65 BLR (4th) 1;[2010] 3 WWR 387;EYB 2010-169491;281 BCAC 245;397 NR 331;315 DLR (4th) 385;86 CLR (3d) 163;[2010] 1 SCR 69;[2010] SCJ No 4 (QL);[2010] EXP 608

Tercon Contractors Ltd. v. B.C. (2010), 397 N.R. 331 (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: [2010] N.R. TBEd. FE.025

Tercon Contractors Ltd. (appellant) v. Her Majesty The Queen in Right of the Province of British Columbia, by her Ministry of Transportation and Highways (respondent) and Attorney General of Ontario (intervenor)

(32460; 2010 SCC 4; 2010 CSC 4)

Indexed As: Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways)

Supreme Court of Canada

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

February 12, 2010.

Summary:

An unsuccessful bidder for a highway construction contract sued the Province of British Columbia for having accepted a bid by a non-compliant bidder and then awarding the contract to that bidder.

The British Columbia Supreme Court, in a decision reported [2006] B.C.T.C. 499, allowed the action. The Province appealed.

The British Columbia Court of Appeal, in a decision reported 249 B.C.A.C 103; 414 W.A.C. 103, allowed the appeal. The unsuccessful bidder appealed.

The Supreme Court of Canada, McLachlin, C.J.C., Binnie, Abella and Rothstein, JJ., dissenting, allowed the appeal.

Building Contracts - Topic 1302

Tender calls - General - Duty of care (incl. fairness) - [See first Crown - Topic 1109 ].

Building Contracts - Topic 1344

Tender calls - The tender contract - What constitutes - [See first Crown - Topic 1109 ].

Building Contracts - Topic 1345

Tender calls - The tender contract - Interpretation - [See second Contracts - Topic 3735 ].

Building Contracts - Topic 1381

Tender calls - Breach of tender - General - [See first Crown - Topic 1109 ].

Contracts - Topic 3735

Performance or breach - Fundamental breach - Effect of exclusionary clause - The Supreme Court of Canada "laid to rest" the doctrine of fundamental breach - The court held that the present state of the law required a series of enquiries to be addressed when a plaintiff sought to escape the effect of an exclusion clause or other contractual term to which it had previously agreed - The first issue was whether, as a matter of interpretation, the exclusion clause even applied to the circumstances established in evidence - If the exclusion applied, the second issue was whether the exclusion clause was unconscionable at the time the contract was made - If the exclusion clause was held to be valid and enforceable, the court could undertake a third enquiry, namely whether the court should nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy that outweighed the "very strong" public interest in the enforcement of contracts - See paragraphs 62, 81, 82, 104 to 123.

Contracts - Topic 3735

Performance or breach - Fundamental breach - Effect of exclusionary clause - An unsuccessful bidder for a highway construction contract (Tercon) sued the Province of British Columbia for having accepted a bid by an ineligible bidder (Brentwood-EAC) and then awarding the contract to Brentwood-EAC - The trial judge allowed the action, holding that the Province had committed a fundamental breach of Contract A - The trial judge found that the Brentwood-EAC bid was from a joint venture and was ineligible where EAC, one of the joint venturers, was ineligible to bid according to the terms of the request for proposals (RFP) issued by the Minister of Transportation and Highways - The RFP had followed a notice of "alternative contracting process" issued by the Minister pursuant to s. 23(1)(c) of the Ministry of Transportation and Highways Act, R.S.B.C. 1996, c. 311, in force at the relevant time - The RFP had limited the bidding to the six proponents, which did not include EAC, who had responded to an earlier request for expressions of interest (RFEI) - The trial judge also refused to apply a clause excluding "any claim for any compensation whatsoever, as a result of participating in this RFP" - The trial judge ruled that the clause was ambiguous and that it was "inconceivable" that the parties intended exclusion for the fundamental breach that occurred here - The decision was reversed on appeal - The Supreme Court of Canada restored it - The court first "laid to rest" the doctrine of fundamental breach (see paragraphs 62, 81, 82, 104 to 123) - The court then interpreted the exclusion clause and ruled that it did not cover the Province's breaches: "A process involving other bidders, as the trial judge found the process followed by the Province to be, is not the process called for by 'this RFP' and being part of that other process is not in any meaningful sense 'participating in this RFP'" - Finally, the court added that if it were wrong in its interpretation of the exclusion clause, it would hold that its language was "at least ambiguous" and had to be interpreted in Tercon's favour according to the contra proferentem principle - See paragraphs 1 to 80.

Contracts - Topic 7433

Interpretation - Ambiguity - Contra proferentem rule - [See second Contracts - Topic 3735 ].

Crown - Topic 1109

Contracts with Crown - Building contracts - Tenders - An unsuccessful bidder for a highway construction contract (Tercon) sued the Province of British Columbia for having accepted a bid by an ineligible bidder (Brentwood-EAC) and then awarding the contract to Brentwood-EAC - The trial judge allowed the action, holding that the Province had committed a fundamental breach of Contract A - The trial judge found that the Brentwood-EAC bid was from a joint venture and was ineligible where EAC, one of the joint venturers, was ineligible to bid according to the terms of the request for proposals (RFP) issued by the Minister of Transportation and Highways - The RFP had followed a notice of "alternative contracting process" issued by the Minister pursuant to s. 23(1)(c) of the Ministry of Transportation and Highways Act, R.S.B.C. 1996, c. 311, in force at the relevant time - The RFP had limited the bidding to the six proponents, which did not include EAC, who had responded to an earlier request for expressions of interest (RFEI) - The trial judge's decision was reversed on appeal - The Supreme Court of Canada restored it - Firstly, the court affirmed that contractual obligations arose, although not in the Contract A-Contract B framework, as a result of Tercon's compliant bid - These obligations included a term that the Province would only entertain bids from eligible bidders - Secondly, there was no fault in the trial judge holding that the Brentwood-EAC bid was from a joint venture that included EAC, an ineligible bidder - "This breached not only the express eligibility provisions of the tender documents, but also the implied duty to act fairly towards all bidders" - See paragraphs 14 to 59.

Crown - Topic 1109

Contracts with Crown - Building contracts - Tenders - [See second Contracts - Topic 3735 ].

Cases Noticed:

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. 17].

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, consd. [para. 89]; refd to. [para. 17].

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 262 N.R. 285; 2000 SCC 60, consd. [paras. 67, 91]; refd to. [para. 17].

Double N Earthmovers Ltd. v. Edmonton (City) et al., [2007] 1 S.C.R. 116; 356 N.R. 211; 401 A.R. 329; 391 W.A.C. 329; 2007 SCC 3, consd. [para. 92]; refd to. [para. 40].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [paras. 62, 81].

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; 2005 NLTD 129, consd. [para. 68].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, consd. [paras. 73, 113].

Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 101 O.A.C. 56; 34 O.R.(3d) 1 (C.A.), refd to. [para. 73].

Hillis Oil and Sales Ltd. v. Wynn's Canada Ltd., [1986] 1 S.C.R. 57; 65 N.R. 23; 71 N.S.R.(2d) 353; 171 A.P.R. 353, refd to. [para. 79].

Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission, [1981] 1 S.C.R. 111; 35 N.R. 40, consd. [para. 87].

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, consd. [para. 90].

Tercon Contractors Ltd. v. British Columbia, [1993] B.C.T.C. Uned. 592; 9 C.L.R.(2d) 197 (S.C.), affd. [1994] B.C.J. No. 2658 (C.A.), refd to. [para. 95].

Karsales (Harrow) Ltd. v. Wallis, [1956] 1 W.L.R. 936 (C.A.), consd. [para. 106].

Domtar Inc. v. ABB Inc. et al., [2007] 3 S.C.R. 461; 369 N.R. 152; 2007 SCC 50, consd. [para. 114].

Millar Estate, Re, [1938] S.C.R. 1, consd. [para. 116].

Plas-Tex Canada et al. v. Dow Chemical of Canada Ltd. et al. (2004), 357 A.R. 139; 334 W.A.C. 139; 245 D.L.R.(4th) 650; 2004 ABCA 309, consd. [para. 119].

Statutes Noticed:

Ministry of Transportation and Highways Act, R.S.B.C. 1996, c. 311, sect. 23(1)(c) [para. 27].

Authors and Works Noticed:

Archibald, Todd L., and Echlin, Randall Scott, Annual Review of Civil Litigation 2007 (2007), p. 1 [para. 116].

Hall, Geoff R., Canadian Contractual Interpretation Law (1st Ed. 2007), p. 243 [paras. 102, 119].

Kain, Brandon and Yoshida, Douglas T., The Doctrine of Public Policy in Canadian Contract Law, in Archibald, Todd L., and Echlin, Randall Scott, Annual Review of Civil Litigation (2007), p. 1 [para. 116].

McCamus, John D., The Law of Contracts (2005), pp. 765 ff. [para. 106]; 774 [para. 119]; 778 [para. 127].

Waddams, Stephen M., The Law of Contracts (5th Ed. 2005),  paras.  478  [para. 106]; 557 [para. 115].

Counsel:

Chris R. Armstrong, Brian G. McLean, William S. McLean and Marie-France Major, for the appellant;

J. Edward Gouge, Q.C., Jonathan Eades and Kate Hamm, for the respondent;

Malliha Wilson and Lucy McSweeney, for the intervenor, the Attorney General of Ontario.

Solicitors of Record :

McLean & Armstrong, West Vancouver, B.C., for the appellant;

Attorney General of British Columbia, Victoria, B.C., for the respondent;

Attorney General of Ontario, Toronto, Ontario, for the intervenor.

This appeal was heard on March 23, 2009, by McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ., of the Supreme Court of Canada. The following decision of the Supreme Court was delivered in both official languages on February 12, 2010, and the following reasons were filed:

Cromwell, J. (LeBel, Deschamps, Fish and Charron, JJ., concurring) - see paragraphs 1 to 80;

Binnie, J. (McLachlin, C.J.C., Abella and Rothstein, JJ., concurring), dissenting - see paragraphs 81 to 142.