Court of Appeal for Ontario

Date: 2017-06-21

Docket: C62340

Judges: Simmons, Rouleau and Roberts JJ.A.

Between

Graillen Holdings Inc. and Region of Huronia Environmental Services Ltd. Appellants (Plaintiffs)

and

The Corporation of the Town of Orangeville Respondent (Defendant)

Counsel

P. David McCutcheon and Chloe A. Snider, for the appellants

John R. Hart and Effie Lidakis, for the respondent

Heard

May 3, 2017

On Appeal

On appeal from the judgment of Justice David Stinson of the Superior Court of Justice, dated June 3, 2016, with reasons reported at 2016 ONSC 3687.

Reasons for Decision

[1] The appellants appeal from the dismissal of their action for damages arising out of the respondent Town's 2010 tendering process and the termination of an agreement of purchase and sale, in relation to the disposal of the respondent's biosolids waste.

[2] From 2002 to 2010, the appellant, Region of Huronia Environmental Services Ltd. ("Rohe"), together with the related company, the appellant, Graillen Holdings Inc. ("Graillen"), provided collection, haulage, storage and disposal services to the Town for its biosolids waste. In 2010, the Town decided to put these services out for tender. It also entered into an agreement of purchase and sale with Graillen to purchase its lagoons for storage of the Town's biosolids waste. The agreement of purchase and sale contained a termination clause that the Town could exercise at its sole discretion after due diligence investigations of the purchase's financial impact and economic viability and advisability.

[3] In response to its 2010 tendering process, the Town received the bids of Rohe and Entec Waste Management Inc. Entec's bid proposed a new form of dewatering process, which would obviate the Town's need for storage of its biosolids waste, and, as a result, the Town's reason to purchase Graillen's lagoons. Entec's bid was also slightly less expensive than Rohe's bid. The Town awarded the contract to Entec and terminated the agreement of purchase and sale with Graillen.

[4] The trial judge found that the Entec bid was non-compliant because it had failed to include certain documents and that, by accepting Entec's bid, the Town had thereby breached the 2010 tendering process. However, the trial judge determined that the appellants were not entitled to damages for the Town's breach, because they had failed to demonstrate that they would have been awarded the contract by the Town. The trial judge concluded that the Town would have instead re-tendered the contract.

[5] Assuming without deciding that the Entec bid was in fact non-compliant, we reject the submission that the trial judge erred in concluding that the tender contract would not have been awarded to Rohe, as the compliant bidder. The trial judge found that the appellants did not meet their onus to show on a balance of probabilities that the contract would have been awarded to Rohe. The trial judge explained that it was more probable that the Town would have re-tendered the contract. It was open to the trial judge on the evidence to reach this conclusion.

[6] In particular, the 2010 tendering process had disclosed to the Town that its preferred option of adopting a dewatering process was viable and therefore could be the subject of a new and different tendering process. In addition, after opening the tenders, it became clear that Rohe's tender, while compliant, suffered from similar problems to those which had occurred during the Town's 2005 tendering process and that had led to the re-tendering of the 2005 contract. Those problems included the fact that the appellants' representatives sought to renegotiate the length of the contract with Town council, as well as a lack of clarity regarding the price and volume in the Rohe's bid as submitted.

[7] Moreover, the Town had the time to re-tender. Its contract with the appellants did not expire until the end of November 2010, and the appellants indicated that they were agreeable to an extension beyond that date. In any event, the Town had waste storage capacity until the end of January 2011.

[8] In these circumstances, we agree with the trial judge's conclusion that it would have been open to the Town to reject the bids, cancel the tendering process, and re-tender with different specifications for the legitimate purpose of ensuring that the new bids met its needs: see Kamloops Office Systems Ltd. v. Kamloops/Thompson, 2003 BCSC 619, at para. 53.

[9] With respect to the appellants' submissions that the Town did not specifically plead that it would have re-tendered had it known that Entec's bid was non-compliant, in our view, it was unnecessary that this be specifically pleaded in the circumstances of this case. The appellants asserted that the Town would have awarded the contract to Rohe and, initially in their statement of claim, sought specific performance of the contract as a remedy. The Town expressly denied the appellants' claim that it would have awarded the contract to Rohe.

[10] The evidence, as set out above, left it open to the trial judge to conclude that the Town would not have awarded the contract to Rohe and that, accordingly, the appellants had failed to meet their onus of demonstrating that they would have been the successful bidder.

[11] With respect to the agreement of purchase and sale, the trial judge found that the Town reasonably and in good faith terminated the agreement of purchase and sale, and ordered that the appellants return the Town's deposit.

[12] Once the Town had decided to adopt the dewatering process, the purchase of the Graillen property was no longer required and made no economic sense. Accordingly, in all the circumstances, the Town's exercise of its option to terminate the agreement was made for legitimate business reasons and in good faith, with the understanding at that time, that the Entec bid was compliant. We see no basis to interfere.

[13] We reject the appellants' argument that the trial judge should have inferred from the evidence that Town staff knew and did not disclose to Town council that the Entec bid was non-compliant. This is a difficult inference to draw on the trial record. It is apparent from his reasons that the trial judge did not draw it. We see no error in the trial judge not drawing this inference.

[14] Accordingly, the appeal is dismissed. As the respondent acknowledged, it is therefore unnecessary that we address the cross-appeal.

[15] As agreed, the respondent, as the successful party, shall have its partial indemnity costs in the amount of $45,000, inclusive of disbursements and HST.

"Janet Simmons J.A."

"Paul Rouleau J.A."

"L.B. Roberts J.A."