Double N Earthmovers Ltd. v. Edmonton (City)

Double N Earthmovers Ltd. v. Edmonton (City)
Collection
Supreme Court Judgments
Date
2007-01-25
Neutral citation
2007 SCC 3
Report
[2007] 1 SCR 116
Case number
30915
Judges
McLachlin, Beverley; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise; Rothstein, Marshall
On appeal from
Alberta
Subjects
Contract
Notes
SCC Case Information: 30915
Decision Content
SUPREME COURT OF CANADA
Citation: Double N Earthmovers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, 2007 SCC 3
Date: 20070125
Docket: 30915
Between:
Double N Earthmovers Ltd.
Appellant
and
City of Edmonton and Sureway Construction of Alberta Ltd.
Respondents
Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.
Joint Reasons for Judgment:
(paras. 1 to 75)
Dissenting Reasons:
(paras. 76 to 131)
Abella and Rothstein JJ. (LeBel, Deschamps and Fish JJ. concurring)
Charron J. (McLachlin C.J. and Bastarache and Binnie JJ. concurring)
______________________________
Double N Earthmovers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, 2007 SCC 3
Double N Earthmovers Ltd. Appellant
v.
City of Edmonton and Sureway Construction of Alberta Ltd. Respondents
Indexed as: Double N Earthmovers Ltd. v. Edmonton (City)
Neutral citation: 2007 SCC 3.
File No.: 30915.
2006: June 16; 2007: January 25.
Present: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.
on appeal from the court of appeal for alberta
Contracts — Tenders — City’s tender specifying maximum age of equipment to be used on project — Contract awarded to lower bidder whose equipment was not all 1980 or newer — City informed by rival bidder prior to awarding of contract that lower bidder did not comply with 1980 equipment requirement — Information not investigated by City — Whether City accepted non‑compliant bid — Whether City had duty to investigate if equipment met tender specifications — Whether contract awarded on terms other than those set out in tender documents — Whether City violated its duty to rival bidder by permitting successful bidder to supply pre‑1980 equipment — Whether City’s pre‑award negotiations with bidders amounted to “bid shopping”.
Edmonton’s call for tenders for the supply of equipment and operators stipulated that all equipment be 1980 or newer. The Conditions of Tender provided that the serial number and the City’s licence registration number were to be provided for every piece of equipment, that “failure to [comply] either in whole or in part may invalidate the bid” and that the “City reserves the right to reject any and all Tenders, and to waive any informality”. In its bid, Sureway Construction of Alberta Ltd. listed a 1980 unit as Item 1 and a “1977 or 1980 Rental Unit” as Item 2. The City awarded the contract (Contract B) to Sureway and insisted on compliance with the 1980 requirement. When Sureway subsequently indicated that it would be supplying a 1979 unit, the City did not pursue the matter further. Although Sureway eventually replaced this unit, some of the work was performed by pre‑1980 equipment through the duration of the 30‑month contract. Double N Earthmovers Ltd., a rival bidder, claimed that the City breached the duties owed to it under the bidding contract (Contract A) and sued for the profits it would have realized had it been awarded Contract B. Double N had informed the City that Sureway did not own 1980 or newer equipment before Contract B was awarded but the City did not investigate. It was conceded that Contract A arose between the City and Double N. The trial judge dismissed the action and the Court of Appeal upheld that decision.
Held (McLachlin C.J. and Bastarache, Binnie and Charron JJ. dissenting): The appeal should be dismissed.
Per LeBel, Deschamps, Fish, Abella and Rothstein JJ.: The City did not accept a non‑compliant bid. Although Unit 1 was manufactured in 1979, Sureway promised on the face of its bid to supply a 1980 unit as Item 1, and this is what the City accepted when it issued its Purchase Order. Sureway was obliged under the terms of its bid to supply a 1980 unit and that obligation was enforceable by the City. With respect to Item 2, the Conditions of Tender made bidders aware that not every failure to comply with the tender requirements would invalidate a bid. The absence of licence and serial numbers for the 1980 rental unit in Sureway’s bid was precisely the sort of informality which would not materially affect the price or performance of Contract B. Since the provision of licence and serial numbers was not an essential term of the tender documents in this case, they were capable of being waived by the City. The bidding process represents a commitment to comply with what is bid. The tender documents did not prevent the City from accepting a promise to provide rental equipment or equipment not previously registered with the City. Where an owner accepts only a compliant option offered by a bidder, as the City did in its Purchase Order, there is no breach of any obligation of fairness owed to other bidders. [35] [39] [41‑43]
The City did not breach any duties owed to Double N by failing to investigate Sureway’s bid. Since each bidder is legally obliged to comply if its bid is accepted, there is no reason why bidders would expect an owner to investigate whether a bidder will comply. There was also neither an express nor an implied obligation in the tender documents to investigate the equipment bid prior to the acceptance. To imply such a duty would overwhelm and ultimately frustrate the tender process by creating unwelcome uncertainties. All bids must receive equal treatment to protect the bidding process and, to that end, an owner must weigh bids on the basis of what is actually in the bid and not on the basis of subsequently discovered information. Allegations raised by rival bidders do not compel owners to investigate the bids made by others. [49‑54]
The City’s pre‑award negotiations did not amount to “bid shopping”. The City was specifically entitled by its conditions of tender to negotiate with the lowest compliant bidder after its initial evaluation and its exercising this right was no breach of its Contract A with Double N. The relevant time in the specific condition was any time after the tenders had been opened and the context was the tendering period, not the period after acceptance. [59‑60]
The City did not enter into a contract on terms other than on terms as set out in the bidding documents and accordingly did not violate any duties owed to Double N. At the moment the City communicated its acceptance of Sureway’s bid to Sureway, a 1980 unit was what Sureway promised and was obliged to supply. Although Sureway was subsequently found to be deceitful with respect to Item 1, it was its intentions at the time its bid was accepted that were relevant. Further, since the City did not know of the deceit until after it had accepted Sureway’s tender, there was no collusion between the City and Sureway to disregard tender terms. [65‑67]
The City did not violate its duties owed to Double N under Contract A by permitting Sureway to supply equipment manufactured prior to 1980. The owner’s obligation to unsuccessful bidders, and its implied obligation to treat bidders fairly, does not survive the creation of Contract B with the successful bidder. The conduct Double N complained of — the waiver by the City of the 1980 requirement — occurred after the award of Contract B. Where an owner undertakes a fair evaluation and enters into Contract B on the terms set out in the tender documents, Contract A is fully performed and any obligations on the part of the owner to unsuccessful bidders have been fully discharged. Contract B is a distinct contract; the unsuccessful bidders are not privy to it. [69] [71]
Per McLachlin C.J. and Bastarache, Binnie and Charron JJ. (dissenting): The City breached its obligations to Double N to accept only a compliant bid and to treat all bidders fairly and equally. [126]
The requirement that all units bid be 1980 or newer was a material term of the tender. While there is much merit to the contention that an owner should be entitled to take a submitted bid at face value, the tender documents must be carefully reviewed and considered in their totality. Here, in addition to the year of the unit, the bidder had to provide the serial number and the City registration number for that unit. Given the circumstances of this case, it was not open to the City to ignore these specifications. The City’s casual approach to Sureway’s bid, particularly in light of the warning it received about the bid’s likely non‑compliance, was unfair to other bidders who provided accurate information in accordance with the tender specifications. The obligation to accept only a compliant bid would be meaningless if it did not include the duty to take reasonable steps to ensure that the bid is compliant. Checking the equipment particulars — particulars which the City itself called for — against its own records was one such reasonable step the City was obliged to take in evaluating the bids for compliance. Had it done so, it would have readily uncovered Sureway’s deceit in respect of Unit 1. [111] [114] [116]
With respect to Unit 2, Sureway’s bid was, at best, ambiguous. On its face, it offered to supply a particular 1977 unit or an unidentified 1980 rental unit. The absence of any information about the proposed 1980 rental unit concerned a material condition of the tender and was not a mere informality which the City had the right to waive. The City’s right to insist on compliance could not turn what was on its face a non‑compliant bid into a compliant one. The integrity of the bidding process is not protected by allowing a bidder to submit a bid that is either ambiguous or deliberately misleading but compliant on its face in some respects to get rid of the competition unfairly, and then hash it out with the owner after it has been awarded the contract. By failing to insist on compliance with an essential term of the tender, the City breached its duty under Contract A to treat all bidders fairly and equally. The City cannot escape this fundamental obligation by postponing the fulfilment of its duty under Contract A to a time after Contract B has been entered into and then argue that Contract A is at an end. A variation from the essential requirements of the tender call at the time of awarding Contract B is unfair to the other bidders who could have benefited from such variation earlier in the process. [120‑125]
Cases Cited
By Abella and Rothstein JJ.
Applied: The Queen in Right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, 2000 SCC 60; Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; referred to: Naylor Group Inc. v. Ellis‑Don Construction Ltd., [2001] 2 S.C.R. 943, 2001 SCC 58; Stanco Projects Ltd. v. British Columbia (Ministry of Water, Land and Air Protection) (2004), 242 D.L.R. (4th) 720, 2004 BCSC 1038, aff’d (2006), 266 D.L.R. (4th) 20, 2006 BCCA 246.
By Charron J. (dissenting)
The Queen in Right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, 2000 SCC 60; British Columbia v. SCI Engineers & Constructors Inc. (1993), 22 B.C.A.C. 89; Silex Restorations Ltd. v. Strata Plan VR 2096 (2004), 35 B.C.L.R. (4th) 387, 2004 BCCA 376; Graham Industrial Services Ltd. v. Greater Vancouver Water District (2004), 25 B.C.L.R. (4th) 214, 2004 BCCA 5.
Authors Cited
Goldsmith, Immanuel, and Thomas G. Heintzman. Goldsmith on Canadian Building Contracts, 4th ed. Toronto: Thomson Carswell, 2006 (loose‑leaf updated 2006, release 1).
APPEAL from a judgment of the Alberta Court of Appeal (McFadyen, Russell and Berger JJ.A.) (2005), 41 Alta. L.R. (4th) 205, 363 A.R. 201, 6 M.P.L.R. (4th) 25, [2005] 10 W.W.R. 1, [2005] A.J. No. 221 (QL), 2005 ABCA 104, affirming a decision of Marceau J. (1998), 57 Alta. L.R. (3d) 288, 213 A.R. 81, [1998] 6 W.W.R. 486, [1998] A.J. No. 51 (QL), 1998 ABQB 31. Appeal dismissed, McLachlin C.J. and Bastarache, Binnie and Charron JJ. dissenting.
Brian A. Crane, Q.C., and I. Samuel Kravinchuk, for the appellant.
Darrell Lopushinsky and David Woo, for the respondent the City of Edmonton.
Shauna Miller, Q.C., and Peter D. Banks, for the respondent Sureway Construction of Alberta Ltd.
The judgment of LeBel, Deschamps, Fish, Abella and Rothstein JJ. was delivered by
Abella and Rothstein JJ. —
I. Overview
1 This appeal raises a number of issues relating to the “Contract A/Contract B” framework that has governed the tendering process in Canada since the decision of this Court in The Queen in Right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111.
2 A call for tenders involves a party’s (often referred to as the “owner”) requesting the submission of bids to complete a particular project. Where the parties intend to initiate contractual relations, a submission in response to a call for tenders can lead to the formation of Contract A. The call for tenders is the offer by the owner to consider the bids it receives and to enter into the contract to complete the project where a bid is accepted. A bidder accepts that offer by submitting a bid that complies with the requirements set out in the tender documents. The contractual rights and obligations of the parties to Contract A are governed by the express or implied terms of the tender documents.
3 A bid also constitutes an offer to enter into Contract B. This is the contract to complete the project for which bids were sought. Where a bid is accepted, the terms of the tender and bid documents become the terms and conditions of Contract B.
4 The dispute in this case arises out of circumstances that unfolded 20 years ago following a call for tenders issued by the City of Edmonton. The City sought bids on a 30-month contract to supply equipment and operators to move refuse at a waste disposal site. The tender documents issued by the City required that all equipment be 1980 or newer.
5 The City awarded the contract to Sureway Construction of Alberta Ltd., but permitted Sureway to supply equipment that was manufactured prior to 1980. As a result, Double N Earthmovers Ltd., a rival bidder, sued the City. It argued that the City breached the duties owed to Double N under Contract A in a number of ways and as a result, Double N is entitled to the profits it would have realized had it been awarded the contract.
6 Like the trial and appeal courts below, we find Double N’s arguments unpersuasive.
II. Facts
7 In June 1986, the City issued a call for tenders on a 30-month contract to supply equipment and operators to move refuse at a landfill site. Four pieces of equipment were initially sought; however, ultimately the City only made an award of the contract in respect of the first three pieces of equipment.
8 The tender documents included a four-page Tender Form, dated June 9, 1986, and three pages of equipment requirements, which were referred to in the Tender Form as the “attached specifications”.
9 On the face of the Tender Form, a number of requirements were set out, which may be summarized as follows:
(1) All units had to be 1980 or newer.
(2) Items 1 and 2 had to be a “Caterpillar D8K/D8L and Dozer or equivalent”.
(3) Item 3 had to be a “Caterpillar 627B Motor Scraper or equivalent”.
(4) All equipment had to comply with attached specifications.
(5) Only local City of Edmonton contractors would be considered.
(6) A bid bond of $100,000 was required.
10 The back of the Tender Form set out certain “Conditions of Tender”. The relevant conditions will be referred to later in the analysis.
11 In addition, the attached specifications set out various equipment requirements. The requirement that all equipment be 1980 or newer was repeated. The equipment requirements also required that bids include:
. . . all of the following for EACH and EVERY proposed unit:
a. Make
b. Model
c. Serial Number
d. Year of Manufacture
e. City of Edmonton Registration License Number
f. Cost Per Hour
12 Six bids were submitted. Bids were opened by the City on June 25, 1986. Each proposed an hourly rate for each piece of equipment described in the bid.
13 Sureway’s bid for the first three items was as follows:
Item 1 a) Caterpillar [a bulldozer] $85.84/HR
b) D8K
c) 77V11997
d) 1980
e) D0-0060
Item 2 a) Caterpillar [a bulldozer] $85.84/HR
b) D8K
c) 77V7369
d) 1977 or 1980 Rental Unit
e) D0-261
Item 3 a) Caterpillar [a motor scraper] $124.12/HR
b) 627B
c) 15S1373
d) 1980
e) MS-030
14 With respect to Item 1, although Sureway indicated its Caterpillar bulldozer had a manufacture year of 1980, the serial number and City of Edmonton licence registration number listed in fact corresponded with a Caterpillar bulldozer manufactured in 1979. With respect to Item 2, the serial number and City of Edmonton licence registration number listed in fact corresponded only to a Caterpillar bulldozer manufactured in 1977.
15 After bids were opened, the City assessed the total price of each bid by multiplying the estimated hours each piece of equipment would be used over the life of the contract by the rates set out in the bids. Using this methodology, the four lowest bids, from the lowest to the highest, were Kerna Construction Ltd., Twin City Equipment Ltd., Sureway, and Double N. Kerna was disqualified shortly after the bids were opened because it was not a City of Edmonton contractor.
16 On or about July 7, 1986, the City entered into separate negotiations with each of Double N, Sureway, and Twin City. As Twin City’s bid was not accompanied by a bid bond, however, it too was disqualified shortly thereafter.
17 This left the bids of Sureway and Double N. Sureway’s bid was lower.
18 Sureway was told by the City that it “would probably” get the contract if it could supply Item 3, the motor scraper, at the rate bid by Twin City. As a result, Sureway reduced its rate for Item 3.
19 In its meeting with the City, Double N also agreed to lower its bid; however, the evidence of a City official was that even with the revisions it had made, Double N’s bid was higher than Sureway’s.
20 Double N’s principal believed that Sureway did not own any 1980 or newer equipment and told the City of his suspicions on July 7, 1986, and on several prior occasions. The response of City officials was that since Sureway had bid 1980 equipment, the City would be entitled to insist that Sureway supply 1980 equipment.
21 On August 18, 1986, the City Executive Committee approved awarding the contract to Sureway. A Purchase Order was issued to Sureway the same day. Work was to commence on September 1, 1986.
22 Sureway was required to register its equipment with the City prior to the September 1 start date so that the City could set up an account for Sureway. On August 28, Sureway’s representatives attempted to register bulldozers manufactured in 1979 and 1977 as Items 1 and 2 of the contract.
23 As a result, City officials called a meeting with Sureway on August 29. The evidence showed that the City officials were angered that Sureway intended to register equipment manufactured prior to 1980. As the trial judge stated, the “reaction of [the City officials] recorded at the August 29th meeting is ample evidence that in the mind of those from the City . . . a contract had been entered into for 1980 units or newer” ((1998), 57 Alta. L.R. (3d) 288, 1998 ABQB 31, at para. 53).
24 At the August 29th meeting, the City insisted on compliance with the 1980 requirement and Sureway agreed that its equipment would be upgraded to 1980 equipment within 30 days. This was documented in memoranda prepared by City officials.
25 In a subsequent letter dated September 5, however, Sureway said that it had “explored all avenues”, and that it would be supplying the 1979 unit specified in its bid documents. The City did not pursue the matter further. As reflected in an internal memorandum dated September 9, City officials decided that “this file to be allowed to lie peacefully”.
26 A 1980 bulldozer was purchased by Sureway by October 1986. Nevertheless, some of the work was performed by pre-1980 equipment through the duration of the 30-month contract.
27 Double N sued the City for breach of contract. The City brought Sureway into the action by way of a third party notice.
28 At trial, Marceau J. dismissed Double N’s claim. He found that Sureway’s bid was compliant, and that Contract B came into being when the City accepted Sureway’s tender on August 18, 1986. He found no duty on the part of the City to investigate Sureway’s tender. Nor did he find that the City was in breach of Double N’s Contract A by deciding, after accepting Sureway’s bid, to let Sureway use equipment older than 1980. In the trial judge’s view, all the Contract A’s came to an end upon the valid formation of Contract B with Sureway, and the City could not be liable to Double N for its post-Contract B dealings with Sureway.
29 Double N appealed to the Court of Appeal of Alberta. Its appeal was dismissed unanimously: (2005), 41 Alta. L.R. (4th) 205, 2005 ABCA 104. Russell J.A., on behalf of the court, agreed with the trial judge that Sureway’s bid was compliant on its face, and that an owner is not subject to a duty to investigate suspicions of potential non-compliance. Russell J.A. also rejected Double N’s argument that the City’s Contract A obligations with an unsuccessful bidder could survive the formation of Contract B with a compliant bidder.
III. Analysis
30 As was reiterated by this Court in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, and Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860, 2000 SCC 60, the express terms set out in the tender documents govern Contract A. However, Contract A may also contain certain implied terms if they meet the test for implied terms set out by this Court in Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711: para. 27 of M.J.B. Enterprises. Implied terms can be based on the existence of any of: (1) custom; (2) the legal incidents of a particular class or kind of contract; or (3) the presumed intentions of the parties, where the term is necessary to give business efficacy to a contract.
31 In M.J.B. Enterprises, Iacobucci J. discussed the application of the third branch of that test to the tendering context:
What is important . . . is a focus on the intentions of the actual parties. A court, when dealing with terms implied in fact, must be careful not to slide into determining the intentions of reasonable parties. This is why the implication of the term must have a certain degree of obviousness to it, and why, if there is evidence of a contrary intention, on the part of either party, an implied term may not be found on this basis. [Emphasis added; emphasis in original deleted; para. 29.]
Applying those principles, this Court in M.J.B. Enterprises recognized an implied term in Contract A that an owner will only accept a compliant bid.
32 In Martel, this Court recognized an additional implied obligation on the part of owners to treat all bids “fairly and equally”. This had the necessary “obviousness” to meet the threshold in Canadian Pacific Hotels, since contractors would not likely spend the requisite time and money on a bid without expecting that each bid would be treated fairly: Martel, at para. 88.
33 Sureway and the City concede that Double N submitted a bid that complied with the tender requirements, and thus Contract A arose between the City and Double N.
34 Before this Court, Double N asserted that the City breached the duties it owed to Double N under Contract A by:
(1) accepting Sureway’s non-compliant bid;
(2) failing to investigate Sureway’s bid;
(3) engaging in impermissible “bid shopping”;
(4) awarding the contract to Sureway on terms other than those set out in the tender documents; and
(5) permitting Sureway to supply equipment manufactured prior to 1980.
A. Did the City Accept a Non-Compliant Bid?
35 In the courts below, Double N’s argument concerning the compliance of Sureway’s bid appears to have related solely to the representation by Sureway that the unit it tendered for Item 1 was manufactured in 1980 when in fact it was manufactured in 1979. On the face of its bid, Sureway promised to supply a 1980 Caterpillar D8K as Item 1. That is what the City accepted when it issued its Purchase Order. Sureway was obliged under the terms of its bid to supply a 1980 unit and that obligation was enforceable by the City. Double N cannot successfully argue that Item 1 of Sureway’s bid was non-compliant.
36 In this Court, Double N’s argument centred on Item 2 of Sureway’s bid. With respect to Item 2, Sureway promised to provide a “1977 or 1980 Rental Unit”. Double N interprets Sureway’s bid as offering the City two alternatives, something which Double N appears to concede was not prohibited by the tender documents. Double N argues that the 1977 unit was not compliant on its face, but that the alternative 1980 unit was also not compliant because the bid did not contain the specifications for that machine that were required to be supplied for each proposed unit.
37 Sureway’s offer of the “1980 Rental Unit” must be read in the full context of the particulars provided under Item 2. In doing so, it is apparent that the make, model and cost per hour listed by Sureway with respect to Item 2 applied to the 1980 rental unit. Thus, the 1980 rental unit was, on its face, promised to be a 1980 Caterpillar D8K, available at a cost of $85.84 per hour. However, as Sureway’s bid indicated that it would rent the unit if its bid was accepted, the serial number and City of Edmonton licence registration number listed with respect to Item 2 could not apply.
38 The tender documents required that serial numbers and City of Edmonton licence registration numbers be provided for each and every piece of equipment bid. Condition 17 of the Conditions of Tender provided:
Bidders are advised that all the instructions to Bidders and Conditions of Tender (as supplemented herein) must be strictly complied with and failure to do so either in whole or in part may invalidate the bid in question. [Emphasis added.]
39 Bidders accordingly were made aware that not every failure to comply with the tender requirements would invalidate a bid. Condition 17 must be read in harmony with Condition 7, which permitted the City to “waive any informality” in a tender:
The City reserves the right to reject any and all Tenders, and to waive any informality therein, to award by item or class. The lowest or any Tender may not necessarily be accepted.
40 In our view, the absence of licence and serial numbers for the rental unit are precisely the sort of informality Condition 7 was designed to address.
41 Generally, an informality would be something that did not materially affect the price or performance of Contract B. The absence of serial numbers and the licence registration numbers cannot be said to affect materially the price or performance of Contract B. In this case, it would have been obvious to bidders that the provision of licence and registration numbers was not an essential term of the tender documents, and were therefore capable of being waived by the City. This is because it would have been impossible for any bidder to supply a City of Edmonton licence registration number for Item 4, as the City had never previously registered that type of equipment in the past. Indeed, the evidence shows that City officials did not view the provision of licence and serial numbers as a material condition of the tender. A City official testified that the request for equipment particulars was included solely to enable him more conveniently to access information about the equipment and to proceed with registration, after a bid was accepted.
42 Double N’s argument is that Sureway’s bid in respect of the 1980 rental unit “amounts to nothing more than a representation that ‘Sureway will comply’”. But that is in the nature of the bidding process; it represents a commitment to comply with what is bid. We do not construe the tender documents as preventing the City from accepting a promise to provide rental equipment, or indeed, equipment that had not been previously registered with the City.
43 The City’s Purchase Order constituted the City’s acceptance. In the Purchase Order, the City specified the acceptance of three pieces of equipment and stated: “All above as per specifications previously submitted” and “All conditions of the tender specifications dated June 09, 1986 will apply.” As one of the specifications of the Tender Form dated June 9, 1986 was that all equipment be 1980 or newer, in our view, the Purchase Order can be construed as the City’s acceptance of the 1980 rental unit offered in Item 2 of Sureway’s bid. Where an owner accepts only a compliant option offered by a bidder, there is no breach of any obligation of fairness owed to other bidders.
44 Further, according to the express terms of the tender documents, the City had the right to accept parts of a bid. Condition 7, set out above, permitted the City to award by item or class. The Tender Form also contained notations that indicated that the City would not necessarily accept all units bid by a bidder:
Equipment items 1 and 2 and/or 4 must be provided by single contractor.
Preference may be given to contractor able to supply total equipment requested.
The City exercised its power to award by item or class in declining to make an award of Item 4. In our view, choosing the compliant 1980 rental unit offered by Sureway was also within the City’s right to award by item or class.
45 For these reasons, we conclude that the City did not breach any duties owed to Double N in accepting Sureway’s bid for Items 1, 2 and 3.
B. Did the City Have a Duty to Investigate Sureway’s Bid?
46 Double N submits that the City had a duty to investigate whether the equipment Sureway bid in fact met the City’s specifications. Double N argues that a check of the serial number provided for Item 1 against the serial numbers of units registered in the City’s database would have revealed that the unit bid in respect of Item 1 was in fact manufactured in 1979, not 1980. According to Double N, “[f]air and equal treatment requires that pertinent records on file with the City should be reviewed when evaluating the bids.” In addition, Double N argues that through its complaints, it had made the City aware of the need to investigate the equipment Sureway bid.
47 In support of the existence of a duty to investigate, Double N pointed to the City’s right to inspect equipment provided in the tender documents. Clause 11 of the Equipment Requirements provided:
Equipment Inspection: Tendered equipment will be subject to inspection . . . for compliance [with] safety standards, landfill usage, and compliance with the Hired Equipment Rental Agreement.
This clause, however, provides a right to inspect, but does not impose a duty to do so. Moreover, the type of inspection contemplated in this clause would not necessarily reveal the date of manufacture of a unit. Thus, this clause is of no assistance to Double N.
48 Double N also made reference to Condition 9 of the Conditions of Tender which provided:
The material delivered under this request for Tender shall remain the property of the successful Bidder until a physical inspection and actual usage of this material and/or service is made and thereafter accepted to the satisfaction of the City and must comply with the terms herein and be fully in accord with the specifications and of the highest quality. In the event the material and/or service supplied to the City is found to be defective or does not conform to specifications, the City reserves the right to cancel the order, or part thereof, upon written notice to the successful Bidder and return the product, or part thereof, to the successful Bidder at the successful Bidder’s expense. [Emphasis added.]
Again, conferring a right to inspect is not equivalent to imposing a duty to investigate. Moreover, Condition 9 is couched in terms of cancelling a purchase order. Thus, it implies that equipment bid would only be checked for compliance with the specifications after the contract was awarded.
49 As there was no express obligation to investigate the equipment bid prior to acceptance, the question is whether there is an implied term to do so.
50 We do not think there is an implied duty requiring an owner to investigate to see if bidders will really do what they promised in their tender. We agree with Russell J.A.’s observation on behalf of the Court of Appeal, that:
To impose a duty on owners to investigate whether a bidder will comply with the terms of its bid would overwhelm and ultimately frustrate the tender process by creating unwelcome uncertainties. [para. 36]
51 The notion that an owner is expected to investigate bids falls well short of the necessary “obviousness” to form part of the presumed intentions of the “actual parties”: M.J.B. Enterprises, at para. 29 (emphasis deleted). There is no reason why the parties would expect an owner to investigate whether a bidder will comply, when each bidder is legally obliged to comply in the event its bid is accepted. Whether or not the bidder is, at the time of tender, capable of performing as promised is irrelevant in light of the bidder’s legal obligation to do so once its bid is accepted.
52 The duty of “fairness and equality” was recognized in Martel in part because it was thought to be “consistent with the goal of protecting and promoting the integrity of the bidding process” (para. 88 (emphasis added)). Double N’s focus instead is with the integrity of the bidders. The bidding process, by contrast, is fully protected by an obligation that all bids receive equal treatment. The best way to make sure that all bids receive the same treatment is for an owner to weigh bids on the basis of what is actually in the bid, not to weigh them on the basis of subsequently discovered information.
53 Finally, contrary to Double N’s suggestions, allegations raised by rival bidders do not compel owners to investigate the bids made by others. This would encourage unwarranted and unfair attacks by rival bidders and invite unequal treatment of bidders by owners. This would frustrate, rather than enhance, the integrity of the bidding process.
54 For these reasons, we conclude that the City did not breach any duties owed to Double N by failing to investigate Sureway’s bid.
C. Did the City Engage in Impermissible “Bid Shopping”?
55 Double N says that the City’s pre-award negotiations with Double N and with Sureway amounted to “bid shopping”. In Double N’s submission, these negotiations sufficiently flawed the tender process that it must be set aside. It makes the argument for the first time in this Court, leaving us without the assistance of prior judicial findings.
56 In Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943, 2001 SCC 58, at para. 9, the Court quoted a definition of bid shopping that described the practice as follows:
. . . “the practice of soliciting a bid from a contractor, with whom one has no intention of dealing, and then disclosing or using that in an attempt to drive prices down amongst contractors with whom one does intend to deal” . . . .
Other courts have described bid shopping somewhat more broadly, as “conduct where a tendering authority uses the bids submitted to it as a negotiating tool, whether expressly or in a more clandestine way, before the construction contract has been awarded”: see Stanco Projects Ltd. v. British Columbia (Ministry of Water, Land and Air Protection) (2004), 242 D.L.R. (4th) 720, 2004 BCSC 1038, at para. 100, aff’d (2006), 266 D.L.R. (4th) 20, 2006 BCCA 246.
57 In support of its argument that the tender documents prohibited what occurred, Double N referred to these words of Iacobucci J. in M.J.B. Enterprises: “The rationale for the tendering process, as can be seen from these documents, is to replace negotiation with competition” (para. 41). But M.J.B. Enterprises makes clear that the tender documents control the contractual obligations of the parties to a tender, and Iacobucci J.’s observations were based on the particular documents in that case.
58 In this case, by contrast, the documents clearly indicated that some measure of negotiation was anticipated. Condition 25 provided:
Changes in Tenders will not be permitted after the Tenders have been opened, unless negotiated with the lowest evaluated Tenderer.
59 “[L]owest evaluated tender” was not defined in the tender documents. However, it cannot, as Double N submitted orally, refer only to a tender that has been accepted. Had that been the intention, it would have been a simple matter for the condition to expressly say so. On the contrary, the relevant time in Condition 25 is anytime “after the Tenders have been opened” and the context is the tendering period, not the period after acceptance. While negotiated changes may occur after acceptance, the condition certainly does not preclude negotiated changes before when obligations have not yet become binding, which is the more likely time when such negotiations would take place. In the absence of a definition, the meaning of the words “lowest evaluated tender”, read in conjunction with the implied requirement that the City only accept a compliant tender, refers to the tender’s offering compliant units at the lowest evaluated total price anytime after the evaluation.
60 Accordingly, pursuant to Condition 25, the City was specifically entitled to negotiate with Sureway, which was the lowest bidder offering compliant units after the City’s initial evaluation. It was no breach of the City’s Contract A with Double N for it to have exercised a right specifically conferred by Condition 25.
61 If the City can be criticized at all, it was not in its negotiations with Sureway, but rather with Double N. Since Double N was not the lowest evaluated tender, an argument can be made that the City ought not to have negotiated with Double N. However, since Double N has no basis for complaining about a breach that was to its benefit, this breach is of no assistance to Double N.
D. Did the City Award the Contract to Sureway on Terms Other Than Those Set out in the Tender Documents?
62 Double N argued that Sureway’s deceit in respect of Item 1 prevented Sureway and the City from forming Contract B on the day the City accepted Sureway’s bid. It was not until the City decided to later permit Sureway to supply the 1979 unit that the parties came to a consensus ad idem. Thus, the contract the City awarded to Sureway was different from that tendered, constituting a breach of the City’s Contract A obligations to Double N.
63 While Sureway’s bid stated that the unit it offered in respect of Item 1 was a 1980 Caterpillar D8K, it was in fact a 1979 unit. The trial judge found that Sureway had intended to deceive the City into thinking it had a compliant bid and then attempt to get the City to permit Sureway, after its bid was accepted, to supply equipment manufactured prior to 1980.
64 As explained by Estey J. in Ron Engineering, the primary obligation of a bidder is to enter into Contract B on the terms tendered if the owner accepts the tender. The essence of this obligation is that the owner will be able to hold the contractor to the terms of the tender and its bid because those terms automatically form the terms of Contract B.
65 At the moment the City communicated its acceptance of Sureway’s