DATE: 20020206 DOCKET: C33873

COURT OF APPEAL FOR ONTARIO

ABELLA, CHARRON and CRONK JJ.A.

B E T W E E N:

CABLE ASSEMBLY SYSTEMS LTD.

Brian Morgan and Paul D. Amey

for the appellant

Appellant

• and -

THE DUFFERIN-PEEL ROMAN

Robert G. Keel and Nadya Tymochenko,

CATHOLIC SEPARATE SCHOOL

for the respondent

BOARD

Respondent

Heard: January 22, 2002

On appeal from the judgment of Justice James C. Kent dated February 22, 2000.

CHARRON J.A.:

[1] Cable Assembly Systems Limited (“Cable Assembly”) appeals from the dismissal of its action against The Dufferin-Peel Roman Catholic Separate School Board (“the Board”). Cable Assembly’s claim was for damages for breach of the duty of fairness and good faith arising from the Board’s Request for Proposals (“RFP”) for a computer cabling project for the Board’s elementary schools.

[2] At the commencement of the trial, the parties agreed that, if liability was found, Cable Assembly’s damages were to be assessed at $425,000, exclusive of pre-judgment interest. It was also common ground between the parties that the Board’s RFP gave rise to a duty to act fairly and in good faith during the decision-making process to determine to whom the final contract would be awarded. The sole issue was whether the Board had breached its duty.

[3] It was Cable Assembly’s position at trial that the Board had acted unfairly in negotiating the terms of the final contract with the three lowest acceptable bidders rather than with Cable Assembly alone, as the lowest of the three. Alternatively, it was alleged, on the basis of certain events that occurred during the course of the negotiations, that the Board breached its duty by failing to provide the three bidders with an equal opportunity to make a new proposal, and by treating them differently.

[4] The trial judge rejected Cable Assembly’s position and dismissed the action. I see no reason to interfere with this result. It is consistent with governing principles of law, and founded on findings of fact that are supported by the evidence. My reasons follow.

1. The facts

[5] The RFP was made on August 16, 1995, with a closing date of September 13, 1995. The computer cabling project was described in part as follows:

Bidders are required to provide pricing for installation of approximately 13,000 drops in 88 sites, however, in 1995 the Board will require installation in approximately 40 sites with a completion date of December 20, 1995. We hope to complete the remaining installations pending budget approval during the 1996 Budget Year. [Emphasis added.]

[6] The RFP also set out the Board’s objectives, concluding with the following remarks:

The [Board] requires solutions covering all portions of this RFP. Partial bids will not be accepted. Please recall that the board will require the installation of approximately 40 sites in the 1995 budget year, and hopes to receive allocations to complete installations in the 1996 budget year. [Emphasis in original; underline added.]

[7] The RFP also contained the following privilege clauses:

The Board shall not be obligated to accept the lowest, or any, proposal in whole or in part thereof and reserves the right to re-bid or cancel the project in its entirety.

The Board shall not be obligated to accept the lowest, or any proposal and reserves the right to accept, or reject a proposal received, or to re-bid or cancel the project in its entirety.

[8] Finally, the RFP provided that the Board’s Purchasing Acquisition and Disposal Procedures (“the Procedures”) would apply. The following provisions are relevant to this appeal. Under the definition section of the Procedures, “proposal” is defined as “an offer from a supplier to provide goods and services, acceptance of which may be subject to further negotiation.” The Procedures provided for “purchase by negotiation” to apply in various circumstances including, under clause 4.4, where “the lowest bid received substantially exceeds the estimated cost of the goods.”

[9] The evidence at trial disclosed that, at the time the RFP was made, the “estimated cost of the goods” or budget allocation for the entire project was $2,000,000. Cable Assembly’s proposal was the lowest acceptable bid and the only one that came below the estimated cost for the project, at $1,914,429.60. However, by the time the proposals were evaluated, the Board was aware that it did not have the funding it had expressed hope to receive for the 1996 calendar year. The budget allocation was therefore down to $1,000,000.

[10] Given the time constraints which did not reasonably allow for the making of a new RFP, and the fact that the lowest acceptable bid exceeded the revised “estimated cost of the goods”, the Board decided to invoke clause 4.4 of the Procedures and to proceed with a purchase by negotiation. The Board met and entered into negotiations with the three lowest acceptable bidders, including Cable Assembly and Compucentre Toronto Inc. (“Compucentre”). Compucentre was ultimately awarded the contract.

2. The meeting and negotiations with two additional bidders

[11] The trial judge held that “[w]hile a safer course for the Board may have been to negotiate only with the lowest bidder, it was not excluded from wider negotiations by the terms of the request for proposal, its own purchasing acquisition procedures or current jurisprudence.” He therefore found no breach of duty on this ground.

[12] Cable Assembly submits that the Procedures did not allow for such negotiations to take place. It is argued that the words “estimated cost of the goods” in clause 4.4 can only be referable to the Board’s initial estimate of $2,000,000, and that since Cable Assembly’s bid did not exceed that amount, the clause was of no application. Cable Assembly therefore argues that, in the circumstances, the Board’s only alternative was to reject all the proposals and to make a new RFP. Alternatively, Cable Assembly argues that the definition of “proposal” itself provided for negotiations to take place only with the lowest bidder.

[13] I see no merit in the contention that the definition of “proposal” provided for anything more than a definition. I also do not agree that the sole remaining course of action available to the Board was the making of a new RFP. In my view, based on the terms of the RFP and the Procedures, the trial judge’s conclusion that wider negotiations were open to the Board was reasonable. By its terms, the RFP made it clear that the scope of the project and, consequently, the “estimated cost of the goods” were subject to funding being available for the year 1996. I therefore would not give effect to this ground of appeal.

3. The different treatment accorded to the three bidders in the negotiations process

[14] Cable Assembly’s contention at trial that the Board had not provided all three bidders with an equal opportunity to make a new bid was based in large part on an allegation that Compucentre had received confidential information about the Board’s revised budgetary position prior to the first meeting at which time the Board informed the three bidders of the reduced scope of the project. Cable Assembly relied on the fact that Compucentre arrived at that meeting prepared to discuss a revised proposal that involved fitting all the sites with half the cables as a means of lowering the project’s cost, a suggestion that coincided with the Board’s revised plan. The trial judge was not satisfied on the evidence that there had been a leak of information. He held that “[t]reating all schools equally rather than completing only approximately half the schools and perhaps not being able to complete the other half in the next year is an approach that two minds could conceive of independent of one another.” He therefore rejected that the Board could be liable on this basis. Given the express references in the RFP to the uncertainty of funding for the second year, it is my view that the trial judge’s finding on this point is entirely supported by the evidence.

[15] Cable Assembly does not dispute the trial judge’s finding that there was no leak of information, but submits that the fact that Compucentre entered into the negotiations for a revised bid with a distinct advantage compounds the unfairness arising from the different treatment accorded to the three bidders during the negotiating process that followed. Cable Assembly relied at trial and on appeal on certain communications that had taken place and on indulgences granted to Compucentre. The trial judge held that there had been “differing treatment” accorded to the three bidders in certain respects, and found that this was “unfortunate and inappropriate.” However, he further concluded that the differing treatment had not enabled “Compucentre’s new bid to become lower than Cable’s” and that, consequently, the question whether or not it constituted unfairness was “of academic interest only.”

[16] In my view, it was open to the trial judge on the evidence to find that the differing treatment accorded to the three bidders was “unfortunate and inappropriate”. However, I do not agree with Cable Assembly’s submission that the trial judge erred in failing to conclude, based on the cumulative effect of this conduct, that the Board breached its duty of fairness and good faith. The trial judge's conclusion that the conduct in question had no bearing on the ultimate award of the contract is also supported by the evidence. Consequently, since Cable Assembly did not lose the opportunity to participate fairly in the process, its claim was properly dismissed: see Martel Building Ltd v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860. I would not give effect to this ground of appeal.

Disposition

[17] For these reasons, I would dismiss the appeal with costs.

Released: February 6, 2002

Charron J.A.

I agree Abella J.A.

I agree Cronk J.A.