COURT FILE NO.: CV-10-413239 DATE: 20160603

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

GRAILLEN HOLDINGS INC. and REGION OF HURONIA ENVIRONMENTAL SERVICES LTD. Plaintiffs

– and –

THE CORPORATION OF THE TOWN OF ORANGEVILLE Defendant

P. David McCutcheon and Chloe A. Snider, for the Plaintiffs John R. Hart and Effie Lidakis, for the Defendant

HEARD at Toronto: October 13, 14, 15, 20, 21, 22 and 23, 2015 and by subsequent written submissions

REASONS FOR JUDGMENT

Stinson J.

[1] This dispute arises from the efforts of the Town of Orangeville to make appropriate arrangements to dispose of the biosolids contained in its sewage.

[2] The Town has a Water Pollution Control Plant (“WPCP”). The WPCP receives the output of the Town’s sanitary sewer system: essentially, all fluids and materials flushed down the sinks and toilets in the Town. The more solid elements of this waste material – the parts that are distinct from liquid effluent – are known as “biosolids.” Given that they are the direct product of sewage and human waste, biosolids are hazardous and must be disposed of in a safe and environmentally-prudent fashion.

[3] Until the events that gave rise to this litigation, the Town depended on two companies to satisfy its biosolid-disposal obligations: Region of Huronia Environmental Services Ltd. (“ROHES”), a sewage hauling and related services business, and Graillen Holdings Inc., which operated a facility that contained nine large storage lagoons used for the storage of biosolids. Graillen and ROHES are related companies, ultimately controlled by the same shareholders, Graham Allen (“Allen”) and Gayle Allen, who are spouses.

[4] Under these arrangements, ROHES disposed of the Town’s biosolids by transporting them from the WPCP to the Graillen site for storage (as required) and then spreading them on farm fields as fertilizer. From an environmental perspective, the spreading process is a carefully regulated one. For instance, spreading of the biosolids on fields is generally not allowed during winter months, which is a major reason that storage at Graillen’s site was necessary, since storage capacity at the WPCP was limited.

[5] The contractual arrangements with the Allen-controlled companies were coming to an end in late 2010 and the Town therefore needed to either renew them or devise another solution for the disposal of its biosolids. On August 5, 2010, the Town issued a call for tenders for the collection, haulage, storage and/or disposal of biosolids from the Town’s WPCP (the “2010 Tender”). ROHES submitted a bid in response.

[6] In 2010 the parties also negotiated about the possibility of the Town purchasing the Graillen biosolids storage facility (the “Property”). On August 9 the Town accepted an offer from Graillen and ROHES to sell the Property for a purchase price of $7 million with a closing date of July 29, 2011. The Agreement of Purchase and Sale also contained a termination clause, exercisable until March 31, 2011, giving the Town a right of termination as a consequence of its due diligence inquiries into the advisability of the purchase.

[7] At a meeting on September 27, 2010, the Town Council awarded the 2010 Tender to Entec Waste Management Inc., the only other bidder who responded to the tender. Entec’s bid was not solely based on the haulage, storage and spreading method of biosolid disposal that had formerly been carried on by ROHES and Graillen. Rather, Entec’s bid included a different method of disposing of a portion of the Town’s biosolids, known as “dewatering.” This process involves the mechanical pressing or dewatering of biosolids, at the WPCP site, to remove as much water as possible. The remaining solid material is known as “dewatered cake”, a substance that may be disposed of in a variety of ways, including landfill, incineration and composting. By using dewatering for a portion of the Town’s biosolids, the Entec bid obviated the need for offsite biosolid storage.

[8] Because the Town decided to opt for the Entec proposal to dispose of its biosolids, it had no need for the storage facility located on the Property that was the subject of the Agreement of Purchase and Sale. On September 28, 2010, the Town purported to terminate the Agreement and requested the return of the $250,000 deposit that it had paid to the vendors’ lawyer. The refund was refused.

[9] The plaintiffs now sue the Town alleging: (1) that the 2010 Tender was awarded improperly to Entec, and (2) that the Town wrongly exercised the termination clause in the Agreement of Purchase and Sale and thus breached the Agreement.

FACTUAL BACKGROUND

The 2010 Tender

[10] On August 5, 2010, the Town issued a call for tenders for the collection, haulage, storage and/or disposal of biosolids from the Town’s WPCP. The deadline for the submission of tender bids was 2:00 p.m. on August 31, 2010. For present purposes, it will be useful to indicate what amounted to a compliant tender, what rights the Town reserved to itself to accept or reject any bid, and what bidding options were provided to interested tenderers. For ease of reference, I have summarized and/or quoted from the relevant documents and requirements in Appendix A to these Reasons.

[11] On p. 2 of the 2010 Tender, under the heading “Information to be Submitted,” nine documents are indicated as being required for a compliant bid (see item 1 in Appendix A). These documents served various purposes, including: to identify the bidder, to compare the cost of submitted bids, and to ensure compliance with the regulatory criteria that had to be satisfied in each compliant bid.

[12] To satisfy this last, regulatory, purpose, each compliant bid had to include a Schedule of Tender Documents received by the Tenderer (see item 2 in Appendix A). This Schedule, which was required to be returned as part of a submitted tender, included many of the same documents indicated on p. 2 of the Tender, but also included some additional ones, most notably Schedule ”B” – Contractor Health and Safety Handbook.

[13] The purpose of including the Health and Safety Handbook in this Schedule – thereby drawing it to the attention of interested bidders – was evidently to put bidders on notice of the important regulatory requirement that they enclose a signed copy of the pre-bid health and safety checklist and signing page, and a signed copy of the Contractor Safety Agreement: see item 6 in Appendix A.

[14] The importance of this Health and Safety Handbook to the overall scheme and compliance structure of the tender is also revealed in s. 15 (c) of the Tender Terms and Conditions, which provided that “[when] a contract is awarded, Contractors will be required to adhere to the requirements of the Town’s Health & Safety Handbook (copy of this handbook is attached as Schedule “B”).” (See item 5 in Appendix A.)

[15] The Town provided three methods by which a party could bid on the 2010 Tender (see item 4 in Appendix A). “Bid Option 1” concerned bids that would treat and dispose of the Town’s biosolids in what was, by then, the “usual” way: namely, by haulage, storage (as required) and disposal of biosolids from the WPCP. “Bid Option 1, Alternative 1” required a Tenderer to break down its bid into individual activities. “Bid Option 1, Alternative 2” was to be used in bids where the Tenderer preferred to submit its total bid based on one price for all of the biosolids that were to be hauled for disposal. Finally, “Bid Option 2” was a more open-ended option that clearly contemplated bids that did not depend on haulage, storage, and disposal of biosolids in the way that had become usual at the Town by 2010. It did not mention haulage or storage but simply asked tenderers to “clearly and completely describe the proposed biosolids handling system.” Among the possibilities contemplated by Bid Option 2 in the 2010 Tender was a bid based on the dewatering process, described above. The Tender Bid Sheet for Bid Option 2 made it clear that bids submitted under Bid Option 2 were subject to all the other terms and conditions of the 2010 Tender.

[16] Lastly of note, for present purposes, the 2010 Tender provided that “the lowest or any bid will not necessarily be accepted.” This is a so-called “privilege” clause, which will be considered in more detail below.

[17] On August 25, 2010, prior to the tender deadline, ROHES submitted a compliant tender bid using Bid Option 1, Alternative 1. On its face, the ROHES bid amount under Bid Option 1 Alternative 1 was $722,156 per annum, for a three year term.

[18] On August 31, 2010 Entec Waste Management Inc. submitted the only other bid in response to the 2010 Tender. It bid on Bid Option 2, and proposed to implement a dewatering process for a portion of the Town’s biosolids, that would be carried out at the Town WPCP, with the subsequent removal of the dewatered cake from the facility. The balance of the biosolids would be disposed of in the traditional fashion, but no storage would be required. On its face, its bid amount was $718,750.00 per annum.

[19] Following the close of the 2010 Tender on August 31, 2010, Entec submitted a series of additional documents to support its bid and to establish its qualifications. Significantly, as submitted the Entec bid did not include a signed copy of either the pre-bid health and safety checklist and signing page, or the signed Contractor Safety Agreement (the “Safety Documents”). Entec did not submit the Safety Documents until almost a year later, in August 2011.

[20] In a report dated September 23, 2010, the Town staff recommended to Council that it accept the Entec bid. At its meeting on September 27, Council awarded the 2010 Tender to Entec.

[21] The plaintiffs complain that the Entec Bid was deficient and ought not to have been accepted by the Town. They submit that the ROHES bid, being the only other response to the 2010 Tender, ought to have been accepted. They sue for their lost profit arising from the wrongful failure of the Town to award the contract to ROHES.

The Agreement of Purchase and Sale

[22] In early 2010 Graham Allen (the principal of Graillen and ROHES) was planning to retire. He decided to explore the possibility of selling the Graillen biosolids storage facility. In February 2010, Allen approached Jack Tupling, the Town`s Director of Public Works, to discuss the potential sale of the Property to the Town. He indicated that he was seeking a price in the order of $7 million. Following this preliminary discussion, Tupling reported to the Town Council by way of a written report and at the March 22, 2010 Council meeting, Council authorized the retention of legal counsel to assist the Town in pursuing options whereby it could secure control of the Property.

[23] The Town subsequently retained an outside lawyer, William Stutz, in connection with the potential purchase of the Property. Stutz had acted for the Town previously. For his part, Allen retained John Cockburn as his lawyer in respect of the proposed sale.

[24] On July 14, 2010, Cockburn delivered to Stutz two alternative offers to sell the Property. The offers were irrevocable to July 21, 2010 and provided for a closing date of December 1, 2010. Under the first offer, Graillen and ROHES offered to sell the Property for $7,000,000. Under the second offer, the vendors offered to sell the Property and two additional adjacent properties owned by another Allen-controlled company for $8,500,000. Stutz wrote back to Cockburn on July 20, 2010 advising that the Town was likely not interested in the two extra parcels and requesting changes to the irrevocable date (to August 10), the due diligence date (to September 30), and an amendment to the purchaser’s termination right contained in the first offer.

[25] The Stutz July 20 letter also informed Cockburn (and thus, his client Allen) that, in connection with its due diligence inquiries, the Town was issuing a call for tenders for haulage, storage and disposal services, pointing out that tenders would be required since, regardless how the purchase negotiations turned out, haulage and disposal services would be needed. I will return to this topic below.

[26] Since the purchaser’s termination right offer is central to the parties’ dispute, I reproduce in full the original clause as drafted by Cockburn:

This Agreement is terminable at the election of the Purchaser [the Town] in the event that by the 25th day of August, 2010, it has not been satisfied with the result of its due diligence inquiries and searches and/or the warranties and covenants of the Vendor [Graillen] contained herein including without limitation of the foregoing its inquiries with respect to zoning and Official Plan Compliance, Ministry of Environment approvals and compliances, the status and transferability of the Certificate of Approval under which the cells are operated, the terms and conditions of any contracts/leases/agreement to be assumed by the Purchaser following closing, its soil and environmental testing.

[27] As initially revised by Stutz, the clause read as follows:

This Agreement is terminable at the election of the Purchaser in the event that by the 30th day of September, 2010 , it has not been satisfied in its sole discretion , with the result of its due diligence inquiries and searches and investigations of the financial impact and economic viability and advisability and/or the warranties and covenants of the Vendor contained herein including without limitation of the foregoing its inquiries with respect to zoning and Official Plan Compliance, Ministry of Environment approvals and compliances, the status and transferability of the Certificate of Approval under which the cells are operated, the terms and conditions of any contracts/leases/agreement to be assumed by the Purchaser following closing, its soil and environmental testing. [Changes underlined.]

[28] The changes proposed by Stutz were acceptable to Allen, and on July 23, Cockburn returned to Stutz the amended offers, executed by the vendors. At a closed Council meeting held August 9, the Town decided to accept the first offer to sell (i.e. for the Property only) and directed that that it be signed back with a new due diligence date of March 31, 2011 and a new closing date of July 29, 2011. On August 10, 2010, Stutz returned the amended signed offer (i.e. incorporating the new dates) to Cockburn, and enclosed the Town’s deposit cheque for $250,000. On August 18, Allen initialled the amendments on behalf of the vendors and Cockburn returned to Stutz the fully executed Agreement of Purchase and Sale, thereby creating a binding contract (the “Agreement”).

[29] In its final form, the Agreement provided that the Town would purchase the Property from Graillen and ROHES at a purchase price of $7 million, with a closing date no later than July 29, 2011. The final version of the termination clause read as above, with the due diligence and termination option date of March 31, 2011, instead of September 30, 2010.

[30] As events transpired, however, at its meeting on September 27 the Town awarded the 2010 Tender to Entec. Because Entec proposed a method involving partial dewatering which required no offsite storage, the Town no longer required the biosolids storage facility contained on the Property that was the subject of the Agreement. Accordingly, also at the meeting on September 27, the Town Council voted to exercise the right to terminate the Agreement.

[31] On September 28, in a letter from Stutz to Cockburn, the Town terminated the Agreement and sought the return of the deposit, as follows:

At a meeting of Council on September 27, 2010, we were advised that based on all available information, our client, the Corporation of the Town of Orangeville, had come to the conclusion that the completion of the above mentioned transaction was not economically viable or advisable. Accordingly, we received instructions to invoke the purchaser’s termination rights set out in Schedule “A” of the Offer to Sell.

We would be much obliged to you for arranging for the return of the deposit in the amount of $250,000.00 by way of a cheque payable to the Corporation of the Town of Orangeville in that amount.

[32] By letter dated October 5, Cockburn responded as follows:

The termination right defined by Schedule “A” to the Purchase Agreement clearly hinges upon the results of due diligence inquiries, searches and investigations, which inquiries and investigations lead the Purchaser to conclude that the transaction is not “economically viable or advisable….” or there are no other operational or title problems with the subject of the sale. No requisitions were raised by the requisition date (September 17, 2010) with respect to realty title. No issues have ever been raised with respect to any of the other inquiries referred to in the termination right provision.

There has never been any suggestion by the Town or any of its staff that due diligence inquires have uncovered any adverse information about the purchase.

The Purchaser does not therefore have the right to terminate under the provisions of Schedule “A” to the Agreement of Purchase and Sale by reason of its choice to accept a third party bid for treatment of Orangeville biosolids elsewhere than on the subject property.

We therefore expect the Sale arising out the Agreement of Purchase and Sale to be closed in accordance with its terms on or before the 29 th day of July, 2011.

[33] Stutz replied to Cockburn as follows:

Quite frankly, we were surprised by the position taken by your client. It is our opinion that the contractual termination rights of the purchase could not be more clearly stated in the Agreement of Purchase and Sale.

Council, for the Town of Orangeville, having received the results of the initial due diligence efforts of its staff is not satisfied that the purchase of your client’s property is economically viable or advisable in the current circumstances.

This is not a question of title issues or repudiation of contract. It is simply a matter of our client availing itself of clearly agreed upon termination rights accorded to it in the contract.

[34] This litigation followed. Well after this action was commenced, the plaintiffs found another purchaser for the Property and the ROHES/Graillen business, someone who was minority shareholder. The plaintiffs assert that the second sale was at a substantially lower price and they look to the Town to compensate them for that loss. The Town counterclaims for the return of the deposit.

Issues and Analysis

[35] This case raises three main issues. The first concerns the fashion in which the Town dealt with the tendering process relating to the disposal of its biosolids by accepting an allegedly non-compliant bid from Entech, and in not awarding a contract to the plaintiffs. The second concerns the plaintiffs’ assertion that the Town improperly invoked the termination clause in the Agreement of Purchase and Sale and thus wrongly breached the Agreement. The third issue is the correct quantification of the plaintiffs’ damages.

Issue 1 – Did the Defendant Breach the Plaintiffs’ Rights in Awarding the Tender to Entech?

[36] “Tendering” is a special branch of contract law that is often used in large construction projects and significant undertakings such as the one underlying the case at bar. The summary of the law that follows relies heavily on Angela Swan and Jakub Adamski, Contributors, Halsbury’s Laws of Canada – Contracts (2013 Reissue), II. Offer and Acceptance, 4. Special cases, (3) The Tendering Process. In a typical tendering process, an owner of commercial property or a relevant public body will issue a tender call, inviting tenders or bids to work on a project. The information in the tender call should contain requisite information allowing bidders to make a compliant bid or tender.

[37] The tendering process creates what is known in the jurisprudence as “Contract A,” a kind of preliminary contract between the party issuing the tender and each bidder who responds to the tender call. The object and purpose of Contract A is the creation of a subsequent contract between the issuing party and the successful bidder, known as “Contract B”: Ron Engineering & Construction (Eastern) Ltd. v. Ontario, [1981] S.C.J. No. 13, [1981] 1 S.C.R. 111; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] S.C.J. No. 17, [1999] 1 S.C.R. 619.

[38] A call for tenders thus amounts to an offer by the party issuing the tender to consider the bids it receives and to enter into a Contract B with the party whose bid is accepted. A bidder accepts the Contract A offer by submitting a compliant tender. A bid also amounts to an offer to enter into Contract B. Where a bid is accepted, the terms of the tender and the bid documents become the terms of Contract B: Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] S.C.J. No. 3, [2007] 1 S.C.R. 116 at paras. 2-3.

[39] A non-compliant bid – one that does not satisfy the requirements of the tender call – will not give rise to Contract A, as it does not accept the terms offered by the issuing party: Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5, [2004] B.C.J. No. 5, 40 B.L.R. (3d) 168 (B.C.C.A.), relying on Ron Engineering, supra at 121-122.

[40] A bid will be compliant and will create Contract A if it satisfies all material conditions in the tender call: Double N Earthmovers Ltd., supra, at paras. 109-110. What amounts to material compliance is governed by an objective test: Silex Restorations Ltd. v. Strata Plan VR 2096, 2004 BCCA 376, [2004] B.C.J. No. 1339, 35 B.C.L.R. (4th) 387 at para. 29 (B.C.C.A.).

[41] As might be anticipated from the two immediately preceding paragraphs, Contract A implies certain duties on the party issuing a tender call. The foremost of these duties is the requirement to select only compliant bids: M.J.B., supra. There is also an implied duty on the party issuing the tender to treat all bidders fairly and equally. This implied duty contains within itself the further duty to conduct the tender process in good faith: Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] S.C.J. No. 60, [2000] 2 S.C.R. 860 at para. 88; Oz Optics Ltd. v. Timbercon, Inc., 2011 ONCA 714 at para. 68.

[42] The implied duty and fairness will affect the operation of so-called “privilege” clauses: clauses which purport to allow the party issuing the tender to reject any or all bids submitted. Thus, a discretion granted by a privilege clause allowing the tender issuer to reject any or all bids will only be validly exercised if it is done in good faith and if it does not violate the implied duty to treat all bidders fairly and equally. This discretion, moreover, will only be validly exercised to reject the lowest, or any, bid if it can be assessed on the basis of valid, objective reasons: Sound Contracting Ltd. v. Nanaimo (City), 2000 BCCA 312, [2000] B.C.J. No. 992, [2000] 5 W.W.R. 545 at para. 17 (B.C.C.A.).

[43] With this jurisprudence in mind, and turning to the tender issue in the case at bar, the plaintiffs argue that the Town wrongly accepted the Entech tender, since it was non-compliant. The result, they say, was a breach of the “Contract A” aspect of the tender process. The first question to decide, therefore, is whether the Entech tender was compliant.

[44] The terms of “Contract A” are found in the tender documents by which the Town sought tenders in relation to the disposal of its biosolids. The tender documents contained a variety of requirements, including the forms to be submitted by bidders, information on the cost of the bids and the methods of biosolid disposal that were being proposed, and – most importantly for present purposes – the agreement of bidders to the tender terms and conditions.

[45] The plaintiffs’ principal argument is that Entech failed to submit a signed Contractor Health and Safety Handbook and checklist as part of its bid. The Town concedes that this was not done by Entec until August 2011 and that no such material was submitted when the Entec bid was delivered to the Town on August 31, 2010. This issue turns on whether this material was required at the time of bid submission.

[46] The Town refers to the instructions contained in the Bid Sheet for Bid Option 2, which applied to Entec’s bid. These instructions specify that “To be considered a complete tender, Tenderers submitting a tender under Bid Option 2 must submit the other 8 items identified in the Notice to All Tenderers Item 1, Information to be Submitted, clause on p. 2 of this document.”

[47] Thus the Town argues that the list of nine documents, described under the heading “Information to be Submitted” on p. 2 of the tender (Appendix A, item 1), comprises a comprehensive array of the material necessary to submit a qualified bid. The Town argues that if the items described in that list were submitted, the bid would be a compliant one for the purposes of Contract A. Compliance, in other words, did not require submission with the bid of a signed Contractor Health and Safety Handbook and checklist.

[48] The Town’s position on the importance of the Safety Documents is to the effect that the 2010 Tender clearly contemplated the submission of contractor safety documents after the award of a contract and, in any event, that the Safety Documents were not required for a complete tender.

[49] At this point, however, it is useful to refer to a passage from Winkler C.J.O.’s reasons in Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673, para. 16, on the canons of construction to be applied to a commercial contract: “[t]he court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective.” With that principle in mind, I now consider the significance of the signed Contractor Health and Safety Handbook and checklist, to the overall contractual scheme that is represented by the tender documents.

[50] One of the nine required documents on p. 2 of the Tender is the Agreement to Tender Terms and Conditions. The third paragraph of that Agreement, on p. 8 of the Tender (Appendix A, item 3), stipulates, inter alia, that “I/We further declare that we have carefully examined … all Specifications, Agreement to Tender Terms and Conditions, Tender Terms and Conditions ….” The tenderer’s signature on this document, therefore, fixes the signatory with knowledge of the Tender Terms and Conditions.

[51] Those Terms and Conditions, in turn, include the requirement at para. 15(c) that “When a contract is awarded, Contractors will be required to adhere to the requirements of the Town’s Contractor Health and Safety Handbook (copy of this handbook is attached as Schedule “B”)” (Appendix A, item 5).

[52] A combined reading of the Agreement to Tender Terms and Conditions, and the Tender Terms and Conditions themselves, indicates that Contractual Health and Safety Handbook was of considerable importance to the overall tender scheme. That impression is reinforced by the Schedule of Tender Documents Received by the Tenderer – to be returned with each compliant tender bid – which includes, at Schedule “B,” the signed Contractor Health and Safety Handbook.

[53] The upshot of the foregoing is that a reasonable reading of the contractual scheme set out in the tender documents – one that gives meaning and effect to all of its terms – would make the submission of a signed Contractor Health and Safety Handbook an integral and essential part of Contract A.

[54] This brings me to the mandatory language within the Handbook itself:

Upon submission of its bid, the contractor will enclose a signed copy of the pre-bid health and safety checklist and signing page and a signed copy of the Contractor Safety Agreement. These signed documents indicate that the contractor has read the policy and accepts its terms and conditions in whole and has considered health and safety in its bid. [Emphasis added.]

[55] If the Health and Safety Handbook is an integral part of Contract A, as I find that it is, then the failure to satisfy any of its requirements would mean a non-compliant bid within the meaning of the contractual scheme as a whole. That proposition accurately characterizes the Entec bid which, for lack of the signed documents that were required by the Handbook, was non-compliant and which, accordingly, could not have been validly accepted by the Town.

[56] The importance of the Handbook is not merely suggested by a harmonious and connected reading of the various tender documents. It is also in conformity with interpretive canon of the “good business sense” mentioned by Winkler C.J.O. in para. 16 of Salah. The purpose of the signed documents required by the Handbook was to “indicate that the contractor has read the policy and accepts its terms and conditions in whole and has considered health and safety in its bid.” It makes eminent sense, from a liability perspective, for the Town to require that compliant bidders understand the health and safety requirements of the tender, all the more so as the subject matter of the ultimate contract involved human biosolids, a hazardous material, and one that posed a considerable public health risk if incorrectly treated, handled, stored or disposed of. All in all then, both a textual reading of the tender documents and a commercially sound contextual interpretation of them, lead to the conclusion that the documents required by the Health and Safety Handbook were essential components of a compliant bid for the purposes of Contract A.

[57] One further point is necessary on this theme. If the rules of construction left me unable to ascertain the meaning of the Handbook within the contractual scheme of the tender, and I was driven to the interpretive principle of contra proferentem – that rule of last resort (Geoff Hall, Canadian Contractual Interpretation Law, 2nd edition, 2.9.3, p. 69) – then the outcome would still be the same. That rule mandates that, where the Court is unable to resolve a contradiction or an ambiguity in the terms of a contract, those terms will be construed against the author of the contract. In this case, the Town devised the contractual scheme and text of Contract A, and any ambiguity in that scheme is to be construed against the Town.

[58] I therefore conclude that the Entec bid was non-compliant and that the Town’s decision to accept it was a breach of Contract A.

[59] This brings me to the question of remedy. The plaintiffs assert that “ROHES was the only compliant bidder. It had been the service provider to the Town for 8 years and its service was excellent. It follows that the tender would have been awarded to ROHES.” Accordingly, the plaintiffs seek damages in the amount of the expected profit that ROHES would have earned had it been awarded the tender. In other words, the plaintiffs claim that because of the Town’s breach of Contract A, they should be awarded the profits they would have realized in the course of performing Contract B.

[60] Some authority for the correct approach in situations of this kind has been provided by the Supreme Court of Canada in M.J.B. In that case the defendant/respondent received four tender bids on a contract and awarded the tender to the lowest bidder of the four, despite the fact that the lowest and successful bidder had submitted a non-compliant bid. The plaintiff/appellant, who had submitted the second lowest tender, sued for breach of contract and in the Supreme Court was awarded damages in the amount of profits it would have realized had it been awarded Contract B.

[61] Importantly, the evidence in that case supported the conclusion that, had the successful bidder been disqualified (as it should have been), the defendant would have awarded the contract to the next lowest tenderer, subject to verification that the next lowest tenderer had an acceptable experience record and was qualified to do the work. The plaintiff was the next lowest bidder and it was shown in evidence that it had an acceptable experience record and was qualified to do the work.

[62] The Supreme Court found on a balance of probabilities that the plaintiff would have been awarded Contract B had the lowest bidder been disqualified. The plaintiff’s loss of Contract B was caused by the defendant’s breach of Contract A, and that loss was not too remote within the classical test for remoteness of damages articulated in Hadley v. Baxendale (1854), 9 Exch. 341, 156 E.R. 145 (para. 57). The Supreme Court therefore awarded the appellant damages in the amount of profits it would have realized had it been awarded Contract B.

[63] In my view, the foregoing analysis is the correct approach to follow when considering the appropriate relief arising from the Town’s breach of Contract A in the present case. This analysis leads to the following question: have the plaintiffs proven, on a balance of probabilities, that the Town would have awarded the 2010 Tender to ROHES if the Entec bid had been disqualified, as it should have been?

[64] My answer to that question is “No.” I reach this conclusion because Entec was proposing to deal with a portion of the Town’s biosolids using a different system – “dewatering” – that obviated the need for any biosolids storage during the winter months and other times when direct application to farm fields was not possible. The decision by Town Council followed a staff report which reviewed the Entec bid and recommended its acceptance over the ROHES bid, despite commenting that ROHES’ service had been excellent. The most obvious advantage of the dewatering method was that it solved the considerable financial and logistical problem of hauling and storing the biosolids until they could be dispersed on farm fields. At a stroke, the dewatering system solved the Town’s biosolids storage problem, and saved it the need to spend $7 million in acquiring a storage facility. From the Town’s point of view, the advantages of Entec’s proposal to use a dewatering process so as to eliminate the need for biosolids storage were considerable and, plainly, helped to drive the ultimate award of the 2010 Tender to Entec.

[65] Viewed in this perspective, I cannot conclude that it is more likely than not that ROHES would have been awarded the 2010 Tender had Entec’s bid been disqualified. Instead, I find it more likely that, had the Town adverted to the technical deficiencies in the Entec bid, it would have refrained from awarding the tender to either bidder and it would have issued a new tender – perhaps one with clearer instructions concerning the prerequisites for a compliant bid – with a view to soliciting compliant tenders offering a dewatering component that would compete with the haulage and storage process employed by ROHES and Graillen.

[66] It follows that, although the plaintiffs have persuaded me that the Town breached Contract A through its acceptance of a non-compliant bid, they have failed to persuade me that ROHES would and should have been awarded Contract B. To succeed in recovering damages in the amount of the lost profits they would have made under Contract B of the 2010 Tender, the plaintiffs must also prove, on a balance of probabilities that, but for the improper acceptance of the non-compliant Entec bid, they would have been the successful bidders. They have not done so.

Issue 2 – Was the Town Entitled to Terminate the Agreement of Purchase and Sale?

[67] On this issue, it is useful to begin with the basic principles of contractual interpretation in the context of a commercial agreement.

[68] In Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673, supra, para. 16, Winkler C.J.O. framed the test for interpreting a commercial contract in the following way:

The basic principles of commercial contractual interpretation may be summarized as follows. When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity.

[69] These principles were adopted by Cronk J.A. in Downey v. Ecore International Inc., 2012 ONCA 480 and by Juriansz J.A. in Ariston Realty Corp. v. Elcarim Inc., 2014 ONCA 737.

[70] On the themes of “good business sense” and “commercial absurdity,” Goudge J.A. had this to say in Kentucky Fried Chicken v. Scott's Food Services Inc. (1998), 41 B.L.R. (2d) 42 (Ont. C.A.), para. 27:

Where, as here, the document to be construed is a negotiated commercial document, the court should avoid an interpretation that would result in a commercial absurdity. [City of Toronto v. W.H. Hotel Ltd. (1966), 56 D.L.R. (2d) 539 at 548 (S.C.C.)]. Rather, the document should be construed in accordance with sound commercial principles and good business sense; [Scanlon v. Castlepoint Development Corporation et al. (1992), 11 O.R. (3d) 744 at 770 (Ont. C.A.)]. Care must be taken, however, to do this objectively rather than from the perspective of one contracting party or the other, since what might make good business sense to one party would not necessarily do so for the other.

[71] It is necessary to inquire into the factual matrix surrounding a contract. In Kentucky Fried Chicken, para. 25, Goudge J.A. borrowed from Lord Wilberforce in Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen, [1976] 1 W.L.R. 989 at 995-96 (H.L.) for the following:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as “the surrounding circumstances” but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

[72] More recently, in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, para. 58, Justice Rothstein provided guidance about how the “surrounding circumstances” can helpfully inform a contract:

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

[73] The language used in the Agreement of Purchase and Sale permitted the Town to exercise a right of termination. Although the words “sole discretion” are used in the Agreement, there are limitations on the exercise of that discretion. The duty to perform contractual obligations in good faith has traditionally applied to situations where one party exercises a discretionary power under the contract: Bhasin v. Hrynew, 2014 SCC 71, para. 47.

[74] What is the scope of this obligation of good faith? In some cases, good faith will demand something more than honesty for the valid exercise of a discretionary power. As an example of this, the Supreme Court of Canada in Bhasin, supra, para. 89, referred to Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072, where good faith in the context of the relevant contract required a party to take reasonable steps to obtain the planning permission that was a condition precedent to a sale of property. In other cases, however, the duty of good faith has been less exacting. In Bhasin, supra, para. 89, the Supreme Court also considered cases where good faith merely required that discretionary powers should not be exercised in a fashion that is “capricious” or “arbitrary.” In any event, Bhasin is authority for the proposition that a contractual discretion exercisable by one party to a contract can never be unfettered; it must always be controlled by the organizing principle of good faith.

[75] It is important to be clear, however, that good faith in the exercise of a discretion does not import an objective standard of reasonableness. The Alberta Court of Appeal has said as much in Partec Lavalin Inc. v. Meyer, 2001 ABCA 145, [2001] A.J. No. 764 (Alta. C.A.). That case concerned a term in an employment contract that allowed for termination if, inter alia, “in the Project Manager’s opinion the conduct or quality of the Employee’s work proves to be unsatisfactory.” The Alberta Court of Appeal reversed the trial judge’s finding that this contractual provision should be subject to an objective standard, and continued, at para 19:

In the subjective realm of opinion, taste, suitability and personal compatibility, it is inappropriate to require reasonableness. Rather, the subjective discretion must be exercised honestly and in good faith. I agree with the above jurisprudence which asks, in applying the subjective standard, whether there is an absence of bad motive or capriciousness, or some other evidence tending to show dishonesty or lack of good faith.

[76] Accordingly, the Alberta Court of Appeal’s decision in Partec Lavalin has been taken to be authority for the proposition that “[w]here a court finds that a discretionary contractual provision has a subjective standard, the freedom of the party possessing the discretionary power is significant: Hall, supra, para. 8.9.2, p. 266.

[77] Turning now to discretionary powers that are governed by an objective standard, some cases and situations lead straightforwardly to the assessment of a discretion according to an objective standard, such as the fair market price for a product, or rent payable that is fair and equitable: Hall, supra, para. 8.9.3, p. 267. Courts will often apply that standard, however, even in the face of express language to the contrary, when justice and the particular facts cry out for it. Greenberg v. Meffert, [1985] O.J. No. 2539 (Ont. C.A.) was such a case, and concerned a sales agent’s commission, which was to be determined “at the sole discretion of the company.” Despite the wide discretion that was apparently conferred by the text of the employment contract in Greenberg, the commission provision was found to subject to an objective standard – and was determined to have been exercised unreasonably – presumably on the basis that it had the effect of depriving the employee of compensation for work that he had done.

[78] Finally on this theme, it should be mentioned that some discretionary provisions have both subjective and objective elements: Hall, supra, 8.9.4, pp. 269-270. Marshall v. Bernard Place Corp., [2000] O.J. No. 463 (Ont. C.A.) was such case. It concerned an agreement of purchase and sale of a residential property that gave the purchaser a right to have the property inspected and to receive a subsequent inspection report “satisfactory to him in his sole and absolute discretion.” The Court of Appeal found that this term imposed a two-step analysis: first, the inspection report provided an objective ground on which to exercise the contractual discretion; second, the significance of any deficiencies revealed by the inspection report was to be assessed subjectively by the purchaser.

[79] Turning to the application of these principles to the circumstances of this proceeding, the termination clause in the Agreement involves criteria relating to the viability and advisability of the sale from the Town’s point of view. This suggests an element of judgment which is subjective to the Town. That is to say, following the Alberta Court of Appeal’s decision in Partec Lavalin, the termination clause in this case does not import an objective, reasonable standard.

[80] That conclusion is reinforced by a proper and fair reading of the words used in the termination clause. They are very broad. The plaintiffs argue that the criteria to which these words refer should be limited to considerations relating to the characteristics of the property itself and not other considerations, such as the financial position of the Town. On a fair reading and giving the words their plain and natural meaning, I do not accept that submission. The language is quite broad and includes the words “without limitation of the foregoing” when it cites the specific examples. At its heart, the clause reserves to the Town the right to terminate the transaction if it thinks it is advisable to do so. That is a very wide discretion.

[81] With respect to whether the Town did or did not exercise its discretion in a reasonable fashion, and in good faith, the evidence is clear that the Town went through an assessment of its options with respect to biosolids disposal. It knew that offsite biosolids storage would be unnecessary if it chose a process that, in part, involved dewatering. It opted for that process. On that basis, it determined that there was no need to proceed with the purchase transaction and it exercised its right of termination.

[82] In advance of the Council meeting at which the tendering decision was to be made, the Town’s lawyer suggested that if the Town chose one or the other of the tenders, Council may also wish to consider whether it wished to proceed with the proposed purchase of the lagoon facilities. I find as a fact that the decision to invoke the termination clause was based on the Town’s decision to choose the tender that involved some dewatering as a solution to the offsite biosolids storage problem. Put simply, the purchase of the Property was no longer advisable when the Town chose a different method to dispose of its biosolids.

[83] This is not a case similar to Multi-Malls Inc. v. Tex-Mall Properties Ltd. (1980), 108 D.L.R. (3d) 399, 1980 CarswellOnt 120 (Ont. H. Ct. J.), or Mason v. Freedman, [1958] S.C.R. 483, 1958 CarswellOnt 73, in which a party sought to take advantage of his own default or acted in a fashion designed to frustrate the object of the underlying agreement of purchase and sale. Rather, in good faith and for proper considerations, the Town reached the conclusion that there was no need to proceed with the purchase, and it thus exercised the right of termination.

[84] The factual matrix surrounding the Agreement of Purchase and Sale reinforces my sense that there was nothing improper about the way that the Town exercised its discretion when invoking the termination clause. The parties were represented by counsel and were commercially sophisticated. There is no suggestion of any inequality of bargaining power between them or of any unconscionability in their Agreement of Purchase and Sale.

[85] It is notable that the original language of the Agreement was altered at the behest of the Town to expand the scope of its termination rights. That alteration has to be considered in tandem with the 2010 Tender and the purpose to which the land would have been put had the sale gone through. Indeed, when the Town’s lawyer wrote to Allen’s lawyer during the negotiation of the changes to the draft termination clause, he expressly mentioned that, in connection with its due diligence inquiries, the Town was issuing a call for tenders for biosolid haulage, storage and disposal services. This reinforces the legitimacy of the Town’s reliance on the outcome of the tender process as a relevant consideration in its decision to invoke the termination clause.

[86] As a sophisticated businessman with extensive experience in the sewage disposal business, Allen had to know that the Town was seeking tenders not only for traditional disposal of biosolids by spreading on farmers’ fields, but also through alternative methods, which might include dewatering and landfill or compost. I infer that it would further have been apparent to him that it was possible that if the Town opted for the dewatering process, it would not require the use of the storage lagoons that had formerly been used at the plaintiffs’ site. In turn, this would have meant that it was likely that the Town, were it to choose dewatering as opposed to standard disposal, would have no need to acquire the storage space that was represented by the plaintiffs’ land. After all, one of the drivers for the deal and the basis for the defendant being interested in the plaintiffs’ land was to solve its long-term biosolids storage requirements. Were the storage requirements to become unnecessary due to an alternative choice being selected for disposal, so too would be the motivation to purchase the plaintiffs’ property.

[87] Thus, interpreting the termination clause in the way I propose, allowing the Town to exercise its discretion to terminate, in good faith, and for subjective reasons that concerned considerations peculiar to it alone, accords with the interpretive requirements of commercial reasonableness and good business sense, while respecting the objective intentions of the parties as they are revealed by the text of the Agreement and the context surrounding it.

[88] I therefore conclude that the Town acted reasonably, lawfully and in good faith when it invoked the right of termination contained in the Agreement. It follows that I find against the plaintiffs with respect to their claim for breach of the Agreement of Purchase and Sale due to the alleged wrongful termination. It further follows that the Town’s counterclaim succeeds.

Issue 3 – What is the Correct Quantification of the Plaintiffs’ Damages?

The Tender Claim

[89] I will begin with the plaintiffs’ claim for damages for lost profit arising from the Town’s breach of tender – Contract A. As previously explained, although I found that the Town breached Contract A when it accepted the non-compliant Entec bid, I was not persuaded that the plaintiffs would and should have been awarded Contract B. To succeed in recovering an award of lost profit on the ground of a claim as a wronged tenderer, a claimant must also prove that, but for the improper acceptance of the non-compliant tender, it would have been successful bidder. In light of their inability to do so, the plaintiffs’ claim for damages for lost profit consequent on the breach of the tender contract fails. At best, plaintiffs in this case might recover an award based on the wasted expenses they incurred in the tendering process; the plaintiffs’ claim was not broken down in that fashion, however.

[90] Despite my conclusion on liability, I am obliged to assess the plaintiffs’ damages on this aspect of their case. I would base such an award on the net loss of profit that ROHES would have earned over the course of the new contract term.

[91] The plaintiffs presented expert evidence with respect to the loss of profit they assert that ROHES suffered by reason of not receiving the contract as contemplated. This calculation is based on the notion of incremental profit that would have been earned from this additional business, since there would be no indirect costs arising from this undertaking. The evidence supports the conclusion that no extra overhead costs would have been incurred. I therefore accept as correct the plaintiffs’ quantification of the profit that ROHES would have made had it been awarded Contract B under the 2010 Tender.

[92] According to the expert’s calculation, the lost profit over the proposed three year term of the contract amounts to $1,146,962. That evidence was not countered by any evidence from the defendant. Accordingly, I would assess the plaintiffs’ damages under this head at $1,146,962.

[93] In accepting that number as the correct calculation of damages for lost profit, I note that included in the expense summary used by the expert was the cost paid by ROHES to Graillen on account of land rental. This expense represents the cost paid by for use of the Graillen storage facility. Presumably, had ROHES’s bid for the 2010 Tender been accepted and had the sale of the Property to the Town proceeded, ROHES would still have needed temporary storage for the Town’s biosolids and would have continued to pay those costs accordingly (albeit to the Town, not to Graillen). Thus, no adjustment need be made to the damage calculation on account of the potential sale of the Property to the Town.

The Real Estate Transaction

[94] I turn now to the quantification of damages in connection with the real estate transaction. The Agreement with the Town provided for a purchase price of $7 million. According to the plaintiffs, the ultimate price paid for the Property was $5.9 million. It was sold as part of a package deal for sale of the Graillen/ROHES business (including land, equipment and goodwill) to a former employee and minority shareholder. The plaintiffs also assert that they incurred extra expenses in making that deal. They therefore claim the loss on the sale of $1.1 million ($7 million minus $5.9 million) plus those extra expenses as their costs of mitigation.

[95] In response, the Town asserts that the plaintiffs failed to mitigate their loss, failed to take reasonable steps to find another purchaser, and improperly claim expenses of mitigation. The Town also argues that the purchase price in the subsequent transaction was not properly allocated because it was part of a larger transaction involving assets for the operation of the business and not just the land itself. The town submits that many of the expenses would have been incurred in connection with the original transaction in any event. Additionally, the Town argues that some expenses should properly be allocable to the sale of the business and equipment and other assets and not to the land sale and thus should not be recoverable from the Town as costs of mitigation.

[96] Dealing first with the subject of mitigation, I am satisfied that the plaintiffs did what they could to try to find another purchaser. It must be borne in mind that Graillen’s biosolids storage facility was a most unusual property. This was reflected by the fact that, when it was initially considering the purchase, the Town was unable to obtain an appraisal of the Property, because there were no comparable private facilities in the province.

[97] The plaintiffs’ various early attempts to find a buyer did not come to fruition. The Town did not present persuasive evidence that would suggest that the plaintiffs somehow could have found a buyer sooner or that they failed to sell the Property for an adequate price. Bearing in mind that the onus of proof for failure to mitigate is on the defendant, I am not persuaded that the plaintiffs failed to mitigate.

[98] The principal issue here is whether, in calculating their damages, the plaintiffs fairly and properly allocated to the Property a sufficient portion of the sale price of the ROHES/Graillen assets and business, of which the Property was only a portion. As a matter of logic, the higher the price allocated to the non-land assets means the lower the price realized from the Property, a correspondingly larger gap between the original sale price and the resale price, and a higher damage award. Thus the value realized from the non-land assets warrants careful scrutiny.

[99] There was no expert evidence concerning the value of the Property as part of the actual sale. The plaintiffs’ allocation really came down to a subtraction from the total amount of the sale – $8.9 million – of the portion said to be allocable to the value of the equipment and goodwill on the sale, which was pegged at $3 million. The difficulty is whether it is fair and reasonable to accept the Plaintiffs’ allocation of purchase price between the land and the non-land assets in the absence of expert evidence.

[100] With respect to the equipment, there was an independent valuation showing it had a value of approximately $2,565,000. There was no evidence as to the proper valuation for the goodwill of the business. That said, ROHES and Graillen had an ongoing business which, through the use of equipment, the deployment of personnel and the utilization of the storage space in the lagoons and the existing contracts, was a profitable enterprise. Thus, there was some value for the goodwill that passed to the purchaser.

[101] Another factor is that the sale took place to a minority shareholder who held 7% of the ROHES shares. This means that he was purchasing only a 93% interest in the equipment and business. Thus, he would have paid only 93% of the $2,565,000 for the equipment, or roughly $2,385,450 and a similarly discounted sum for goodwill.

[102] The evidence is thus somewhat unsatisfactory with respect to the correct calculation of the plaintiff’s damages in relation to the land transaction. Plainly, in addition to the equipment and other assets of the business, the purchaser did acquire goodwill which had some value. Thus, in my view, it would be incorrect to allocate only the purchaser’s share of the equipment value ($2,385,450) to the purchase price of the business and the remainder to the land.

[103] Recognizing that that some of the purchase price properly should be allocable to goodwill, I am prepared to accept that the non-land aspects of the deal likely had a value in the order of $2.7 million. This means that, out of the $8.9 million paid by the purchaser, $6.2 million should be attributed to the Property. The result means that the loss on the resale of the Property alone was $7 million minus $6.2 million equals $800,000.

[104] In addition to the loss on the resale of the Property, the plaintiffs incurred additional expenses associated with the resale. Expenses reasonably incurred by a party in order to mitigate the party’s loss are properly recoverable from the defendant: S.W. Waddams, The Law of Damages, Looseleaf edition (Canada Law Book: Toronto, 2015), ch. 15.290, p. 15-16. The mitigation expenses included professional fees spent on other attempted sales, commissions paid to the business consultant who helped to put the subsequent successful deal together, as well as legal fees incurred in the negotiations and documentation of the ultimate sale. In my view, subject to one qualification, these are all proper expenses of mitigation and should be considered in calculating the plaintiffs’ losses.

[105] The qualification is the Town’s argument that some of these expenses were not attributable to the sale of the Property, since the transaction involved not only the land, but also the sale of the business and equipment. I agree with that submission. That said, it would be an impossible task to try to sort out with specificity what effort by either the broker, or business consultant, or lawyer, was attributable to which aspect of the deal. Rather, I agree with the submission that a pro rata allocation of these expenses as between the land portion and the non-land portion of the sale price would be appropriate. Based on the above approach, I would apply the following calculation:

Total sale price - $8.9 million = 100%

Land - $6.2 million = 69.663%

Other assets - $2.7 million = 30.337%

Thus I would allow the plaintiffs to recover as costs of mitigation 69.663% of the expenses they incurred in connection with the ultimate sale.

[106] The total mitigation expenses incurred amount to $486,830.18. This means that the amount of mitigation expenses allocable to the land portion of the transaction is 69.663% of $486,830.18, or $339,140.50.

[107] Finally, the plaintiffs must credit against their losses arising from the aborted sale to the Town the revenue they continued to receive, which they otherwise would not have enjoyed had the sale proceeded. This is the income from Dunlogon, in the amount of $242,500.

[108] To summarize the assessment of damages in relation to the land transaction, as indicated above I calculate the loss on the sale of the land at $800,000 and the expenses of mitigation allocable to this portion of the transaction at $339,140.50, for a subtotal of $1,139,140.50. Deducting the Dunlogon income of $242,500 results in a net loss of $886,640.50. Thus I would assess the plaintiffs’ damages in relation to the abortive sale to the Town at $886,640.50.

CONCLUSION and DISPOSITION

[109] For the reasons set out above, the claims of the plaintiffs are dismissed. The counterclaim of the Town for the return of the deposit of $250,000 is granted. The Town is entitled to pre-judgment interest on that sum.

[110] In relation to costs, I encourage the parties to reach agreement. If they are unable to do so, I direct as follows:

(a) The defendant shall serve its bill of costs on the plaintiffs, accompanied by written submissions, within fifteen days of the release of these reasons.

(b) The plaintiffs shall serve their response on the defendant within fifteen days thereafter. I invite the plaintiffs to submit the bill of costs they would have submitted, had they prevailed in the action.

(c) The defendant may, but is not obliged to, serve a reply, within ten days thereafter.

(d) In all cases, the written submissions shall be limited to four double-spaced pages, plus bills of costs.

(e) I direct that counsel for the defendant shall collect copies of all parties' submissions and arrange to have that package delivered to me in care of Judges' Administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no materials should be filed individually: rather, counsel for the defendant will assemble a single package for delivery as described above.

Stinson J.

Released: June 3, 2016

APPENDIX A

1. Notice to All Tenderers (Tender, p. 2, Joint Document Brief, Vol. 3, Tab 60)

“The following MUST be completed and submitted with your Bid:

1. Identification Sheet

2. Schedule of Tender Documents Received by Tenderer

3. Agreement to Tender Terms and Conditions

4. Bid Sheet

5. List of Sub-Contractors

6. Tenderer’s Experience Record

7. Acknowledgement of Project Details

8. Agreement to Bond

9. Bid Bond”

10. Schedule of Tender Documents Received by Tenderer (Tender, p. 7, Joint Document Brief, Vol. 3, Tab 60)

“Tender, Notice to All Tenderers, Identification Sheet, Schedule of Tender Documents Received by Tenderer, Agreement to Tender Terms and Conditions, Submission of Bids, List of Sub-Contractors, Tenderer’s Experience record, Acknowledgment of Tender and Contract Details, Agreement to Bond, Bid Bond, Tender Terms and Conditions, Specifications, and Form of Contract, Schedule “A” – Sludge Haulage and Quality Data, Schedule “B” – Contractor Health and Safety Handbook.”

3. Agreement to Tender Terms and Conditions (Tender, p. 8, Joint Document Brief, Vol. 3, Tab 60)

I/We, further declare that we have carefully examined the locality and site of the proposed works, as well as all Specifications, Agreement to Tender Terms and conditions, Tender Terms and Conditions, Agreement and Bonding and Insurance requirements relating thereto ….”

4. Submission of Bids (Tender, p. 10, Joint Document Brief, Vol. 3, Tab 60)

Bidding Options

Tenderers may submit bids using one of two options.

Bid Option 1 involves completing the bid sheet below. There are two alternatives under Bid Option 1. Tenderers shall bid on either Bid Option 1 – Alternative No. 1 or Bid Option 1 – Alternative No. 2. Do not submit prices for both alternatives.

Bid Option 2 involves submitting a proposal for a biosolids handling system that varies from the haulage/storage/land disposal system that is covered in Bid Option 1.

Bid Option 1

For the collection, haulage storage and/or disposal of biosolids from the Town of Orangeville Water Pollution Control Plant at 16 Town Line. Price bid shall exclude Harmonized Sales Tax (the “HST”), as applicable.

Bid Option 1 – Alternative 1 shall be used if the Tenderer prefers to break down the bid into individual activities.

Bid Option 1 – Alternative 2 shall be used if the Tenderer prefers to submit his total bid based on one price for all the biosolids that are hauled for disposal.

The total estimated quantities in both alternatives are the same. The split that is shown in Bid Option 1 – Alternative 1 is based on the records from previous years.

If the Town accepts a Tender that is based on Bid Option 1 – Alternative 1, the payments will be made based on the actual quantities of biosolids/supernatant handled for each activity (A through E) and the unit price tendered for that activity.

Regardless of which alternative is selected, the Tenderer may elect to submit bids for any or all of the Terms of Contract between 1 year and 5 years. A Tenderer should only submit bids for those Terms of Contract for which they would be willing to enter into a contract with the Town.

For greater clarity, a Tenderer may submit prices for one or more of the five contract terms in Bid Option 1. The Town reserves the right to select the term which best suits its needs.

Bid Option 2

If a Tenderer proposes to submit a bid under Bid Option 2, he shall, on company letter head, clearly and completely describe the proposed biosolids handling system, any conditions or limitations that are attached to the bid, and the pricing structure.

Bids submitted under Bid Option 2 shall be subject to all other requirements of this tender. That is, only the method to be used and the payment terms and conditions will vary. The tenders will be evaluated accordingly by the Town

Tenderers should note that the tender results are considered public information, and will be presented to Council for consideration in open session.”

5. Tender Terms and Conditions (Tender, p. 29, Joint Document Brief, Vol. 3, Tab 60)

6. Occupational Health and Safety Act

(c) When a contract is awarded, Contractors will be required to adhere to the requirements of the Town’s Contractor Health & Safety handbook (copy of this handbook is attached as Schedule “B”). This includes but is not limited to providing proper traffic control, using proper personal protective equipment and ensuring the contractor’s staff are properly trained.”

6. Schedule “B” of the Tender, Contractor Health and Safety Handbook (Tender, p. 52, Joint Document Brief, Vol. 3, Tab 60)

Upon submission of its bid, the contractor will enclose a signed copy of the pre-bid health and safety checklist and signing page and a signed copy of the Contractor Safety Agreement. These signed documents indicate that the contractor has read the policy and accepts its terms and conditions in whole and has considered health and safety in its bid.”