Winning In The Long Run

Winning In The Long Run

Allan D. McKitrick

McKitricksBarristers and Solicitors

17A Cumberland Street S.Thunder Bay, ON P7B 2T3

NORTHWESTERN ONTARIO MUNICIPAL ASSOCIATION

Tel: (807) 345-1251 Fax: (807) 345-0043

Email: [email protected]

April 22, 2010

The Marathon Competitors

• Fairness

• Freedom

• Common Sense

• Private Rights

• Public Rights

The Start Line – Mile 0

• Cardinal Construction v. Brockville (Municipality)

• Ontario S.C.J., February 3, 1984

The No Contract Issue

• “Following receipt of tenders, the municipal council passed a by-law to authorize the acceptance of the plaintiff’s tender and to authorize the execution of a contract for the subject work.”

• “A copy of the by-law and a draft of the contract for execution were sent to the plaintiff, but the formal contract was never executed either by the plaintiff or the municipality.”

• work was completed and there was no complaint by the municipality as to the quality of the work.


• Municipality paid (without prejudice) subject to negotiation – plaintiff sued

SO WHAT HAPPENED?


• “as a matter of law, in the absence of a formal agreement executed by the municipality under seal pursuant to the authorizing by-law, there was no binding contract.”


• “However, notwithstanding the absence of a binding contract the municipality could not have the benefit of work and services performed at its request without responsibility for payment therefor.”

• “Having completed the work to the satisfaction of the municipality, the plaintiff was entitled to payment on a quantum meruit basis.”


• quantum meruit means:

as much as is deserved – an inferred promise to pay a reasonable value for services, even in the absence of an enforceable agreement

The Exempting Clauses In Issue

The Exempting Clause Issue

• “The location and depth of underground utilities and services shown on the Contract drawings are based on the investigations made by the Engineer. It is, however, the Contractor’s responsibility to contact the Municipal Authorities or Utility Companies for further information in regard to the exact location of these utilities, to exercise the necessary care in construction operations and to take such other precautions as are necessary to safeguard the utilities from damage.”


• “For the contractor’s information only, it is anticipated that special support of structures, as shown on the Contract Drawings, will be required for approximately twenty (20) feet of water-main, twenty (20) feet of gas main and one hundred (100) feet of Bell conduit. The information provided herein is approximate only and the Contractor shall base his bid solely on the findings at the site.”


• G.C. “102-2 Contractor’s Investigation”

• “The Contractor declares that in tendering for the work and in entering into the contract, he has either investigated for himself the character of the work to be done and all local conditions including the location of any utility which can be determined from the records or other information available at the offices of any person, partnership…(cont. on next page)


• …Corporation, including a municipal corporation and any board or commission thereof, having jurisdiction or control over the utility, that might affect his Tender or his acceptance of the work, or that, not having so investigated, and except as hereinafter provided he is willing to assume and does assume, all risk of conditions now existing or arising in the course of the work which might or could make the work, or any items thereof more expensive in character, or more onerous to fulfill, than was contemplated or known when the tender was made or the contract signed.”


• “The contractor also declares that in tendering for the work and in entering into the contract he did not and does not rely upon information furnished by the Corporation or any of its servants or agents respecting the nature or conformation of the ground at the site of the work, or the location, character, quality or quantity of the materials to be removed, or to be employed in the construction of the work, or the character of the equipment or facilities needed to perform the work, or the general and local conditions and all other matters which could in any way affect the performance of the work under the contract other than information furnished in writing for or in connection with the tender or the contract by the Engineer, except information specifically excluded from this subsection.”


• Bidder did not, either at the site or at the offices of Bell or the City, inquire into the nature of the Bell installation; instead Bidder saw and relied upon the representation “underground Bell tel. cable” in the tender drawings certified by the Engineer


• “In short, he saw nothing in the documents or at the site that caused him to question the nature of the “cable” or to inquire further as to its nature. At the time (without the benefit of hindsight) the Bell installation was, in his mind, of no particular significance.”

• Court did not find the judicial decision that involved the “exempting clause” referred to it as helpful “as the terms and conditions differ from those at Bar, and in any event each case must be decided on its own facts.”


• Court then looked at specific provisions and the tender documents as a whole and determined “this convoluted and confusing provision (s.102-2), like the whole contract, is to be construed contra proferentem.”

• “102-2 is to be read with 103-2 which provides for the very situation where the bidder relies on incorrect information provided by the City (including the engineer on its behalf). In other words [the bidder] does not assume the risk that the information so provided is incorrect; that information is assumed to be correct.”

SO WHAT HAPPENED?


• Court then held: “I conclude, therefore, on a fair interpretation of these provisions, that the City is not exempted from liability….”

• with respect to City argument that bidder when investigating should have recognized the warning signs that the facility was other than as represented…


• The Court rejected this and, among other things, cited the following paragraph from an 1881 case:

• “If a man is induced to enter a contract by a false representation, it is not sufficient to say, ‘If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them’.”

• And further, the Court said….


• “The city became aware before tenders were submitted that the Bell installation was a concrete duct structure. They had a duty to convey that information to bidders, including Cardinal, not only as a matter of professional accuracy but because the information provided in the tender documents was intended by the city to induce bidders to act upon it. In allowing the designation “cable” to stand the city was in breach of its duty of care to Cardinal and for this must be held accountable.”

Exempting Clause – Propositions From Cardinal

• Generally, the duty owed to bidders in the preparation of tender documents is to exercise reasonable care that the information presented reflects with reasonable accuracy the nature of the work and its factual components so as to enable the contractor to prepare a proper bid;


• For a party issuing a tender in a construction context to rely on a full investigation clause, the party must give practical reality to the requirement of independent investigation and allow the time necessary for bidders to properly complete their investigations,


• if it was otherwise this would mean that a tenderer could not rely on any information furnished by the engineer who prepared the documents for tender so that the tenderer would have to duplicate all the pre-engineering work even though there was usually insufficient time to do so; the Court in Cardinal found this to be unrealistic.

Mile 13.1 Halfway point

• Orillia (City) v. Nicol, Ontario Court of Appeal, March 6, 1997

Issue – Charter of Rights, searches s. 8

• whether a search conducted pursuant to a regulatory municipal by-law respecting debris and garbage infringes s. 8 of the Charter and, if so, whether the infringement is justified under s.1

• s.8 – unreasonable search and seizure

• s.1 – justified as a reasonable limit

Facts

• city served notice on a homeowner to clear property of old unworking cars within 30 days

• city official, without owner’s consent, climbed the

fence and took pictures showing the cars had not been removed as required

• the property was a vacant yard in a residential area surrounded by a fence and a no trespassing sign was posted on the property.

Facts

• by-law said city inspector is to be permitted to inspect for its investigation purpose

• appellant submitted by-law constituted an infringement of s.8 of the Charter and that this infringement was not justified under s.1

SO WHAT HAPPENED?

Decision

• lower standard applied to a search conducted to enforce regulatory standards than to a search to enforce the criminal law;

• why? stigma and penalty differences and:

• “people in today’s society are accustomed to regulation and it is generally accepted that it is necessary for the state to ensure that an individual’s activities are compatible with the common good of the community.”

Decision

• “The wording of section 8 of the Charter does not prohibit inspections without prior authorization. It simply imposes a requirement of reasonableness. The requirement of reasonableness is a flexible standard to be applied in the context of the particular case.”

• “The standard of reasonableness required by the by-law depends largely on identifying the privacy interest which is at stake and the severity of intrusion of that privacy interest.”

Decision

• “[Regulatory powers of inspection] are based on the common sense assumption that the threat of unannounced inspection may be the most effective way to induce compliance.”

• “The object of the search, garbage and refuse, has a low expectation of privacy” and “once a 30 day notice period to remove has been given, the search in question is one which may be reasonably expected by all members of a residential community as a means of ensuring compliance with the notice and to ensure that the health, safety and property standards are then met.”

Decision

• Thus, C.A. found that search was reasonable so no infringement of s.8, making it unnecessary to consider s.1.

Mile 24 – A “Marathon” Case on the “Reasonable Search” Subject

The Case

• R v. M.(A.)

• S.C.C. heard May 22, 2007, decided April 25, 2008

The Facts

• Principal of high school issued standing invitation to police officers to conduct sniffer dog searches at school

• School had zero tolerance drug policy

The Facts

• Student brought drugs in his backpack

• Sniffer dog detected drugs in backpack of youth in gymnasium during random walk through

The Issue

• Can the evidence obtained by the police through the use of the sniffer dog be used in court?

SO WHAT HAPPENED?

S.C.C.

• By a 6-3 score

• “NO”

Why Not?

• Youth’s charter rights to not be subject to unreasonable search and seizure violated

• High school students are entitled to privacy, albeit lessened privacy in school environment.

• There must exist a reasonable suspicion before using sniffer dog.

• “Teenagers expect the contents of their backpacks not to be open to the random speculative scrutiny of the police. This expectation is a reasonable one that society should support”.

Why Not?

• The student expected the contents of his backpack to be private, and this expectation was not abandoned when he left his backpack in a public place (gymnasium).

• False positives can arise from sniffer dog searches – from the perspective of the general population, false positives raise serious concerns about the invasion of the privacy of innocent people.

Why Not?

• “While the sniffer dog search may have been seen by the police as an efficient use of their resources, and by the principal as an efficient way to advance a zero tolerance policy, their objectives were achieved at the expense of the privacy interest of every student at the school.”

• Dissenting Judge – “Using sniffer dogs to perform a random search for drugs at a high school can be justified on the basis of a generalized reasonable suspicion about the presence of illicit substances, providing that a reasonably informed student would have been aware of the possibility of random searches involving the use of dogs”.

Why Not?

• And further,

• “The heightened importance of preventing drug activity in schools, the highly regulated nature of the school environment, the reduced expectation of privacy students have while at school, and the minimally intrusive nature of sniffer dog searches all support a finding that police may use sniffer dogs to search in schools where there is a reasonable suspicion of drug activity”.

Why Not?

• “However, police may not enter a school and conduct a search whenever they please on the basis that drugs may be found on any given day. Each random dog-sniff search must be justified on the basis of a suspicion that drugs will be located at that specific location at the specific time the search is being performed.”

What do you thing the result should be?

Mile 26.2 - What Just Happened

• Important S.C.C. decision involving exclusion clauses in tendering

When Did It Happen

• February 15, 2010

The Facts

• The Province accepted a bid and awarded the work to a party who was not eligible to bid.

• Another bidder claimed that doing so breached the term of the tender call to only consider bids from eligible bidders and the duty in tendering law to treat all bidders fairly.

The Facts

• However, in bidding on this project, all bidders agreed to a term which provided that no claims could be brought against the Province resulting from the participation by the bidder in the tender call.

The Exclusions (“NO CLAIMS”) Clause• “Except as expressly and specifically

permitted in these Instructions to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim”.

The Issues

• Did the Province breach the tender call terms and did it breach its duty to act fairly?

• If so, could it rely on the “no claims” clause?

B.C.S.C.

• The trial Judge found that the Province acted unfairly and that the clause was ambiguous and she resolved this ambiguity in the bidder’s favour.

• She held that the Province’s breach was fundamental and that it was not fair or reasonable to enforce the exclusion clause in light of the nature of Province’s breach.

B.C.C.A.

• Set aside the Trial Judge’s decision

• Held that the exclusion clause was clear and unambiguous and barred compensation for all defaults

• Held that bidder was sophisticated – if you don’t like the rules don’t bid

So What Happened at the S.C.C.

S.C.C.

• By a 5-4 score, the S.C.C. agreed with the B.C.S.C. and overturned the decision of the B.C.C.A.

Passages from the S.C.C. Decision

• “The Province’s attempts to persuade us that it did not breach the tendering contract are, in my view, wholly unsuccessful.”

• “The foundation of the tendering contract was that only six, pre-selected bidders would be permitted to participate in the bidding.”

Passages from the S.C.C. Decision

• “…the Province not only acted in a way that breached the express and implied terms of the contract by considering a bid from an ineligible bidder, it did so in a manner that was an affront to the integrity and business efficacy of the tendering process

So what did the S.C.C. have to say about the Province’s submission that the parties were free to agree to limitations of liability and did so?

No Claims Clause Issue – The Majority

• clause is ambiguous and should be interpreted against the drafter (contra proferentem)

• protecting the integrity and fairness of the process is particularly weighty in the context of public procurement; in that context, in addition to the interests of the parties, there is the need for transparency for the public at large

No Claims Clause Issue – The Majority• “properly interpreted, the exclusion clause

does not protect the Province from [the bidder’s] damage claim which arises from the Province’s dealings with a party not even eligible to bid let alone from the breach of the implied duty of fairness to bidders…”

No Claims Clause Issue – The Majority

• “In other words, the Province’s liability did not arise from the bidder’s participation in the process that the Province established, but from the Province’s unfair dealings with a party who was not entitled to participate in that process.

No Claims Clause – The Dissent

• Dissenting Judge:

• “The appeal…brings into conflict the public policy that favours a fair, open and transparent bid process, and the freedom of contract of sophisticated and experienced parties in a commercial environment to craft their own contractual relations.”


• “I agree with [the bidder] that the public interest favours an orderly and fair scheme for tendering in the construction industry, but there is also a public interest in leaving knowledgeable parties free to order their own commercial affairs.”


• “In my view, on the facts of this case, the Court should not rewrite - nor should the Court refuse to give effect to the terms agreed to by the parties.”

Can a government ever have a no claims clause in a tender process?

No Claims Clause Issue – Majority and Dissent Consider Three Issues1. whether as a matter of interpretation the

exclusion clause even applies to the circumstances established in evidence;

2. whether the exclusion clause was unconscionable at the time the contract was made as might arise from situations of unequal bargaining power between the parties; this issue deals with contract formation not breach;

No Claims Clause Issue – Majority and Dissent Consider Three Issues3.If the exclusion clause is held to be valid

and applicable, the court may 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, proof of which lies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts;

Analysis and Discussion

Highlights Unpredictability of Court Outcomes• 13 judges involved at three levels

• 7 said Province could rely on the no claims clause and that it was clear and unambiguous

• 6 said the opposite but

• 5 of the 6 are S.C.C. judges so the decision of the 6 prevail over the decision of the 7

Analysis and Discussion

• Law is not a pure science

• Judges are human – have different views

• No such thing as a guaranteed “winner”

• Outcomes can be very difficult to predict

And the winner of this marathon is...

FAIRNESS…..

…THE ULTIMATE MARATHONER

Thank You

Allan D. McKitrick

McKitricksBarristers and Solicitors

17A Cumberland Street S.Thunder Bay, ON P7B 2T3

Tel: (807) 345-1251 Fax: (807) 345-0043

Email: [email protected]

Documents

Winning In The Long Run