Court of Appeal for Ontario

Citation: Stericycle ULC v. HealthPRO Procurement Services Inc., 2021 ONCA 878

Date: 2021-12-10 Docket: C69008

Judges: Strathy C.J.O., Zarnett J.A. and Wilton-Siegel J. (ad hoc)

Between:

Stericycle ULC Applicant (Appellant)

And:

HealthPRO Procurement Services Inc., Provincial Health Services Authority and Daniels Sharpsmart Canada Limited Respondents (Respondents)

Counsel:

• J. Thomas Curry, Monique J. Jilesen and Zachary Rosen, for the appellant, Stericycle ULC
• D. Barry Prentice, for the respondent, HealthPRO Procurement Services Inc.
• Julie Parla, Katherine Booth and Andrew Butler, for the respondent, Provincial Health Services Authority
• Randy Sutton and Justine Smith, for the respondent, Daniels Sharpsmart Canada Limited

Heard: October 19, 2021 by videoconference

On appeal from the order of Justice Cory A. Gilmore of the Superior Court of Justice, dated November 25, 2020, with reasons reported at 2020 ONSC 7253.

Wilton-Siegel J. (Ad Hoc):

[1] The appellant Stericycle ULC (“Stericycle”) appeals an order dated November 25, 2020 of Gilmore J. that dismissed Stericycle’s application for a declaration that it, rather than the respondent Daniels Sharpsmart Canada Limited (“Daniels”), is the “primary supplier” for the respondent Provincial Health Services Authority (“PHSA”) in British Columbia pursuant to a public tendering process conducted in 2020 by the respondent, HealthPRO Procurement Services Inc. (“HealthPRO”).

[2] This case involves a public multiple-supplier tendering process under which the public authority would select one of two successful bids to be the primary supplier. Stericycle’s appeal raises issues of contract interpretation, bid repair and the operation of the duty of good faith in respect of the selection process of Daniels as the primary supplier. For the reasons below I would dismiss the appeal.

Factual Background

[3] HealthPRO is a group contracting organization that manages procurement and contracts on behalf of its member hospitals and health authorities across Canada, including PHSA.

[4] PHSA is one of several health authorities responsible for administering health care services in British Columbia. PHSA co-ordinates programs and services, including supply chain services, for over 1,000 medical facilities under its umbrella, including hospitals and other public health facilities.

[5] Stericycle is in the business of providing biomedical waste management services to medical facilities across Canada. Daniels is a competitor of Stericycle in Canada.

[6] In 2013, HealthPRO awarded Stericycle a contract for biomedical waste management services under which Stericycle provided such services to HealthPRO members, including PHSA medical facilities. As extended, the 2013 Contract had an expiry date of May 31, 2020 and contained the following provision referred to as the “Six Month Provision”:

AWARDED SUPPLIER: Agrees to hold the then current contract pricing firm for committed members up to a period of six (6) months beyond the expiry date (or any option years exercised) to allow, if required, for the implementation of a new contract to a different supplier.

[7] In 2019, HealthPRO issued a request for qualification (an “RFQ”) for a new national contract for biological waste management services. The purpose of the RFQ was to qualify potential suppliers for the forthcoming public tendering process (the “RFP”). Both Stericycle and Daniels responded to the RFQ and qualified to bid when HealthPRO issued the RFP regarding the new contract. Each of Stericycle and Daniels responded to the RFP.

[8] Daniels did not have established waste management facilities in British Columbia when it participated in the RFQ and the RFP. In its RFQ, Daniels included the following statements:

Daniels Health will be fully committed and able to meet and exceed the service capabilities required for the HealthPRO membership by the 2020 start date of this contract.

Daniels Health is in the process of commissioning a fully functional Biomedical Waste facility in British Columbia. This facility, complete with permits, will be operational by the summer of 2020.

In its RFP, Daniels added the following statement:

Daniels will have national coverage (adding British Columbia) before June 2020.

[9] The RFP included a statement that HealthPRO would employ a multi-supplier award strategy to allow its members to individually determine their best contract commitment scenario and to benefit from the collective buying power of a national initiative. To this end, unlike the 2013 Contract which contemplated a single supplier, the RFP contemplated the award of 2020 Contracts to multiple eligible suppliers from which a HealthPRO member would select a “primary supplier” and could also designate a “secondary supplier” if more than one 2020 Contract was awarded by HealthPRO. A primary supplier would receive a committed volume of at least 80% of the business of the selecting HealthPRO member; a secondary supplier would be obligated to provide up to 20% of the business but had no guarantee of any volume of business.

[10] Each of Stericycle and Daniels was awarded a 2020 Contract by notice dated January 31, 2020. The 2020 Contracts contemplated a contractual “start date” of June 1, 2020 with a term ending November 30, 2024. The contract resulting from HealthPRO’s acceptance of Stericycle’s RFP is referred to as the “Stericycle 2020 Contract”; the contract resulting from HealthPRO’s acceptance of Daniel’s RFP is referred to as the “Daniels 2020 Contract”.

[11] On February 26, 2020, Daniels advised PHSA that “Daniels would be in a position to start servicing PHSA and its member sites by the end of this calendar year.” On March 19, 2020, Daniels contacted HealthPRO to confirm that PHSA would be able to request a six-month extension of the 2013 Contract pursuant to the Six Month Provision. PHSA also requested information from HealthPRO regarding the Six Month Provision. On April 7, 2020, HealthPRO advised PHSA that the Six Month Provision allowed for the extension of Stericycle’s contract pricing for up to 6 months beyond the 2013 Contract expiry date to implement a new contract to a different supplier.

[12] On June 2, 2020, HealthPRO advised Daniels that PHSA had selected it as PHSA’s primary supplier and advised Stericycle that it had not been selected as PHSA’s primary supplier. Stericycle learned the identity of the primary supplier on the same day. In a further document, Stericycle was advised that PHSA had not selected Stericycle as its primary supplier, that PHSA was now authorized to receive Stericycle’s secondary pricing as per the commitment effective date, that PHSA was not required to select a secondary supplier, and that PHSA may or may not utilize secondary pricing. Accordingly, HealthPRO did not expressly advise Stericycle that it had been selected as the secondary supplier. However, Stericycle would effectively become the secondary supplier, to the extent that PHSA chose to avail itself of a secondary supplier, as it was the only other supplier awarded a 2020 Contract covering British Columbia.

[13] In view of the fact that Daniels would not have a commissioned waste facility operating in British Columbia on June 1, 2020, PHSA insisted that Stericycle provide all of the waste management services required by its members pursuant to the terms of the Six Month Provision under the 2013 Contract after that date.

[14] In order to assist Daniels to obtain the necessary licence to operate a waste management facility in British Columbia, PHSA wrote a letter dated June 18, 2020 to the Ministry of Environment and Climate Change Strategy of British Columbia supporting Daniels’ request for an expedited authorization of its licence.

[15] Daniels commenced providing services on December 1, 2020 immediately following expiration of the period covered by the Six-Month Provision.

The Decision of the Application Judge

[16] Before the application judge, Stericycle submitted that HealthPRO and PHSA acted in bad faith and in breach of contract in awarding the primary supplier designation to Daniels. In dismissing the application, the application judge addressed three principal issues raised by Stericycle.

[17] First, the application judge dismissed Stericycle’s argument that HealthPRO and PHSA effectively rewrote the Daniels 2020 Contract by permitting Daniels to commence the provision of services later than June 1, 2020.

[18] Second, the application judge rejected Stericycle’s submission that certain communications between Daniels and PHSA initiated by PHSA after January 31, 2020 amounted to bid repair. She held that the communications were operational in nature and did not go to the substantial terms of the Daniels 2020 Contract, that the prohibition against communications in the RFP related to suppliers only, and that, in any event, the most significant communication (being PHSA’s letter of June 18, 2020) occurred after the primary supplier designation had been made.

[19] Lastly, the application judge rejected Stericycle’s argument that, by having Stericycle provide 100% of services after June 1, 2020, PHSA had irrevocably elected Stericycle as its primary supplier through its conduct. The application judge also dismissed Stericycle’s argument that the 2013 Contract terminated on the award of the 2020 Contract to Stericycle, or on the start date of the 2020 Contracts, as Stericycle could not have been subject to two contracts at one time.

[20] The decision of the application judge was based on four significant findings. Stericycle’s grounds of appeal are based on its view that the application judge erred in respect of each of these findings.

[21] First, the application judge held that the 2013 Contract was not spent on the award of the 2020 Contract, or on the start date of the 2020 Contracts, and that PHSA was entitled to insist that Stericycle continue to provide services for six months after June 1, 2020 under the 2013 Contract without such conduct amounting to selection of Stericycle as its primary supplier.

[22] Second, the application judge held that the Daniels 2020 Contract did not require Daniels to commence the provision of services as of June 1, 2020. The application judge found to the contrary that neither the RFP nor the RFQ contained any provision imposing a mandatory implementation date for services or any requirement that a supplier have established operations in a province in which it proposed to offer services as of the 2020 Contract start date. The application judge concluded that, while the 2020 Contract start date was June 1, 2020, the implementation date of the 2020 Contract for any given HealthPRO member was whatever date the member chose. In the case of PHSA, therefore, it was December 1, 2020.

[23] Third, the application judge found that the Daniels bid included a promise to have a facility available for waste disposal but this commitment did not extend to compliance on the start date of the 2020 Contract. This finding addressed Stericycle’s suggestion that Daniels misrepresented its ability to commence operations as of the start date of the 2020 Contract and chose not to reveal the correct information until the 2020 Contract was awarded. This issue is not relevant to the conclusions in these reasons. However, in reaching this conclusion, the application judge referred to the decisions in Tantramar Sanitation & Trucking Ltd. v. Sackville (Town), 2006 NBQB 13, 298 N.B.R. (2d) 365 and Aquatech v. Alberta (Minister of Environment and Parks), 2019 ABQB 62, 86 B.L.R. (5th) 207 regarding respectively the purposes of public sector procurement and the importance of allowing competitors to participate meaningfully in a public tender process to achieve those purposes. The principles articulated in these decisions informed the findings of the application judge more generally.

[24] Lastly, the application judge concluded that neither PHSA nor HealthPRO owed any duty of good faith to Stericycle in conducting the selection process or otherwise. She held that, in accordance with the analysis of contracts arising in respect of public tendering bids articulated in Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] 1 S.C.R. 116, any duty owed by HealthPRO to Stericycle during the tendering process was extinguished on the award of the 2020 Contracts. She also held that PHSA’s delegated agency from HealthPRO to make its supplier selection did not establish privity between PHSA and Stericycle with respect to the Stericycle 2020 Contract and therefore did not give rise to a duty of fairness owed by PHSA to Stericycle in respect of the selection of a primary supplier.

Analysis of the Grounds of Appeal

[25] Before this court, Stericycle broadly raised five grounds of appeal which I will address in turn.

(1) The Interpretation of the Six Month Provision

[26] For the purposes of this appeal, Stericycle’s most significant submission is that the application judge erred in holding that Stericycle was obligated to provide services under the Six Month Provision without engaging in a formal exercise of contractual interpretation in reaching that conclusion.

[27] Stericycle argues that it was not obligated to maintain 2013 pricing in the present circumstances on the plain language of the Six Month Provision. It suggests that it was a supplier under both the 2013 Contract and the 2020 Contract with the result that there was no “new contract to a different supplier” but rather implementation of a new contract to multiple suppliers, one of which was Stericycle. The appellant says that the application judge failed to consider the best evidence of the intention of the parties, which it suggests was the equivalent provision in the 2020 Contract. That provision reads as follows:

HealthPRO requires Awarded supplier(s) to hold all contract pricing and terms (including rebate) firm for up to six (6) months beyond contract expiry (including following any Option Term) in the event that the new contract is awarded to a different supplier or awarded to multiple suppliers.

Stericycle also argues that, in reaching her interpretation, the application judge erred by allowing her view of commercial efficacy to overwhelm the plain language of the agreement.

[28] I pause to consider the applicable standard of review of the findings of the application judge that involved a contractual interpretation of provisions of the 2013 Contract and the 2020 Contracts. Stericycle has suggested that the standard of review should be correctness. It bases this assertion on the statement of Wagner J. in Ledcor Construction Ltd. v. Northridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23 that the interpretation of a standard form contract should in certain circumstances be classified as a question of law and subject to a correctness standard: at paras. 24, 33. However, the factors enumerated by Wagner J. in Ledcor that would inform such a conclusion – the interpretation is of precedential value and there is no meaningful factual matrix – are not present in this case. Rather, the circumstances fit squarely within the circumstances contemplated in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 as giving rise to a question of mixed fact and law – that “[t]he legal obligations arising from a contract are … limited to the interest of the particular parties”: at para. 52. Further, unlike Ledcor, there is a factual matrix that is specific to the parties and that is meaningful for the interpretation of the 2013 Contract and the 2020 Contracts. Lastly, the concept of a standard form contract is only partially applicable in respect of the Daniels 2020 Contract given the fact that the clauses in that Contract to be interpreted are not limited to terms imposed on the bidders but must necessarily include Daniels’ responses in its RFP. Accordingly, I conclude that the standard of review of the contractual interpretation of the relevant provisions of the 2013 Contract and the 2020 Contracts is the palpable and overriding error standard.

[29] The well-established principles of contractual interpretation are set out in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24 and need not be repeated here. The application judge properly applied those principles in respect of the two matters raised by Stericycle that involve contractual interpretation – the Six Month Provision and the start date under the 2020 Contracts – and her conclusions regarding these matters do not reflect any palpable and overriding error in either case.

[30] Dealing with the Six Month Provision, the finding of the application judge that Stericycle was obligated to supply services under this Provision is entirely reasonable for the following reasons. On its plain language, this provision applies in the case of “implementation of a new contract to a different supplier.” In this case, PHSA implemented a new contract, the Daniels 2020 Contract, and selected a new supplier, Daniels. As the primary supplier, Daniels was obligated to supply at least 80% of the volume of business and could, at PHSA’s option, be required to supply 100% of that volume. Conversely, Stericycle was not formally designated the secondary supplier and, as mentioned, in the Secondary Pricing Authorization, HealthPRO advised that its members “are not required to select a secondary supplier and may or may not utilize secondary pricing.” Stericycle therefore had no guarantee that it would be requested to supply any volume at all and is more properly characterized for this purpose as a potential supplier.

[31] Stericycle suggests that paragraph 2(s) of the terms and conditions included in the 2013 Contract, rather than the Six Month Provision, governed transition arrangements. That provision reserved a right in favour of HealthPRO to enter into a new contract with a different supplier with such contract to become effective at any time during the final month of the 2013 Contract. However, there is nothing in this provision that suggests that it was intended to be the exclusive provision regulating transition arrangements at the end of the 2013 Contract. Moreover, this provision appears directed toward different situations altogether – Stericycle ceasing to supply in advance of the termination of the 2013 Contract or more beneficial pricing being available from the new supplier. I also note that the terms and conditions included in the 2020 Contract contained a similar provision together with the revised version of the Six Month Provision set out above, suggesting that the two provisions are intended to provide optional transition rights to HealthPRO members.

[32] I also see no error in the absence of any consideration by the application judge of the equivalent provision in the 2020 Contract. The 2013 Contract contemplated a single supplier. In that context, the language of the Six Month Provision gives a clear indication of the intention of the parties. The language in the 2020 Contract, while perhaps giving greater flexibility in the event of multi-supplier contracts which could be structured in various ways in the future, does not add anything of interpretative value in respect of the 2013 Contract.

[33] Stericycle’s further argument that the Six Month Provision is on its face solely a pricing provision interprets this provision too narrowly in a manner that cannot have been intended by the parties. Stericycle’s interpretation renders the provision redundant for the reason that a pricing provision that is not accompanied by an obligation to supply has no practical utility.

[34] The interpretation of the application judge is also supported by the factual matrix. Her finding that it would be neither “efficient nor realistic” to require a new supplier to begin supplying services on the start date of the 2020 Contracts is amply supported by the factual background in which the tendering process was conducted. The evidence before the application judge was that the introduction of a new supplier for the over 1,000 public medical facilities under PHSA would require a considerable transition period. In addition, as the application judge observed, a mandate to commence services on the start date would grant an incumbent with operating facilities in a province a significant advantage over all other bidders in the next bidding cycle and could be expected to negatively affect the competitive bidding necessary to achieve beneficial pricing in that cycle. All of these circumstances were part of the factual matrix in which the 2013 Contract was awarded. They are compelling evidence that the parties understood and intended that the Six Month Provision would survive the maturity date of the 2013 Contract. The application judge did not allow her view of commercial efficacy to overwhelm her interpretation of the Six Month Provision.

(2) The Allegation of Concurrent Contracts

[35] Stericycle’s second and third grounds of appeal are effectively determined by the first conclusion above regarding the operation of the Six Month Provision. Stericycle’s position on each issue is predicated on acceptance of its interpretation of the Six Month Provision.

[36] Stericycle argues that the application judge failed to consider the legal significance of two concurrent contracts for the same services. Stericycle submits that, in the circumstances of two agreements dealing with the same subject matter, there is an inference that the later was intended to displace the earlier in the absence of language expressly addressing the issue in the later contract.

[37] I do not agree that there is any such “common sense inference” of general application. It is trite law that each case must be examined on its own facts. Moreover, it is not uncommon for two supply contracts having different terms as to volume and pricing to co-exist for a period of time. In the present circumstances, the concept of the Six Month Provision necessarily entails the possibility of concurrent contracts for the duration of the Six Month Provision. Stericycle had concurrent obligations to provide services under the Six Month Provision, on 2013 pricing terms, and under the Stericycle 2020 Contract, on 2020 secondary supplier pricing terms, as requested by PHSA. The PHSA therefore had a correlative right or option to require services under both the Six Month Provision and the 2020 Contract for a limited period of time. It exercised its right or option to receive services under the Six Month Provision as the more favourable arrangement.

(3) The Doctrine of Election

[38] Similarly, the existence of such an option in favour of PHSA is a complete answer to Stericycle’s argument that the application judge erred in failing to consider that PHSA irrevocably elected Stericycle as PHSA’s primary supplier through its conduct.

[39] The doctrine of election was described in the following terms in Charter Building Company v. 1540957 Ontario Inc. (Mademoiselle Women’s Fitness & Day Spa), 2011 ONCA 487, 107 O.R. (3d) 133, at para. 19:

Election at common law takes place where a party is faced with a choice between two inconsistent courses of action that affect another party's rights or obligations, and knowing that the two courses of action are inconsistent and that he or she has the right to choose between them, makes an unequivocal choice and communicates that choice to the other party. The doctrine provides that the party making the election is afterwards precluded from resorting to the course of action that he has rejected. The election is effective at the point of communication on the basis that the parties to an ongoing relationship are entitled to know where they stand. [Citation omitted.]

[40] To be clear, Stericycle does not argue that PHSA manifested an intention to change its designation of the primary supplier under the 2020 Contracts merely by requiring Stericycle to continue to provide services after June 1, 2020 at 2013 prices. Rather, it suggests that this was the result of PHSA’s actions in the face of “two inconsistent courses of action” that affected Stericycle’s rights or obligations. It says that, given Daniels’ inability to commence the provision of services on June 1, 2020, PHSA had only two courses of action under the Stericycle 2020 Contract: it could designate Stericycle as the primary supplier or as the secondary supplier.

[41] However, given the operation of the Six Month Provision, PHSA had a third option under the 2013 Contract as discussed – an entitlement to designate another supplier as the primary supplier and require the provision of services by Stericycle during the six-month transition period following June 1, 2020. Accordingly, any issue of inconsistent actions under the Stericycle 2020 Contract which might have justified application of the doctrine of election did not arise.

(4) Allegations of a Breach of the Duty of Good Faith

[42] The remaining grounds of appeal involve Stericycle’s position that the application judge erred in failing to properly apply the principles pertaining to the duty of good faith to the circumstances of this case. As mentioned, the application judge held that neither HealthPRO nor PHSA owed a duty of good faith to Stericycle. While Stericycle suggests that HealthPRO or PHSA owed a duty of good faith to Stericycle in the performance of the Daniels 2020 Contract, Stericycle’s principal arguments of a breach of the duty of good faith are grounded in the existence of the Stericycle 2020 Contract. Stericycle submits that the award of the Stericycle 2020 Contract distinguishes this case from the circumstances in Double N Earthmovers. Stericycle argues that the application judge erred in failing to recognize that performance of the Stericycle 2020 Contract and, in particular, PHSA’s exercise of its discretion in selecting the primary supplier, was subject to the organizing principle of good faith.

[43] The organizing principle of good faith in contractual dealings was addressed in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494 and expanded upon in C.M. Callow Inc. v. Zollinger, 2020 SCC 45, 452 D.L.R. (4th) 44 and Wastech Services Ltd. v. Greater Vancouver Sewage and Drainage District, 2021 SCC 7, 454 D.L.R. (4th) 1. In these decisions, the Supreme Court recognized two existing doctrines as manifestations of the principle of good faith – the duty to exercise a contractual discretion in good faith and the duty of honest performance of a contract.

[44] The duty to exercise a contractual discretion in good faith will be breached where the exercise of discretion is unreasonable, in the sense that it is unconnected to the purposes for which the discretion was granted: Wastech, at para. 88. The duty of honesty in contractual performance was explained by Cromwell J. in Bhasin as meaning “simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract”: at para. 73.

[45] I will address in turn the arguments of Stericycle that each such manifestation of the duty of good faith was breached. Stericycle also suggests that this organizing principle encompasses the implied duty to act fairly towards all bidders in a public tendering process referred to in Bhasin, at para. 56, incorporating the statement in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 58-59. However, Stericycle’s allegation of a breach of a duty of fairness in the public tendering process is based on the same factual circumstances as the allegation of a failure of HealthPRO and PHSA to exercise their contractual discretion to select the primary supplier reasonably. For that reason and the reason that the duty of good faith does not require a party to forego advantages flowing from a contract, in my view the duty of fairness in the present circumstances is equivalent to, and entails the same standard as, the duty of PHSA to exercise its contractual discretion reasonably, rather than a separate and more onerous duty: Bhasin, at paras. 65, 73.

(a) Allegations of a Breach in the Exercise of Discretion in the Supplier Selection Process

[46] Stericycle identified a number of alleged breaches of the obligation to exercise the contractual discretion to select a primary supplier reasonably. It says the application judge failed to consider these alleged breaches because of her determination that PHSA was not subject to such an obligation in respect of Stericycle. These alleged breaches can be summarized in three different formulations of the content of the duty of good faith that Stericycle says HealthPRO and/or PHSA owed in the present circumstances:

1. a duty to hold suppliers to the commitments made in their RFQ and RFP responses, the breach of which Stericycle describes as allowing Daniels to “re-write” the start date and as permitting impermissible bid repair by Daniels;
2. a duty not to select a supplier known to be unable to commence the provision of services on the start date of the 2020 Contracts; and
3. a duty not to conscript Stericycle into helping Daniels buy time to allow Daniels to cure fundamental misrepresentations in the RFQ and RFP responses by which it won the Daniels 2020 Contract.

[47] The essence of Stericycle’s ground of appeal on this issue, which underlies all three of these formulations, is that the application judge erred in failing to find that, in excusing Daniels from its obligation to commence providing services under the Daniels 2020 Contract on June 1, 2020, HealthPRO and PHSA breached a duty of good faith owed to Stericycle.

[48] It is not necessary for present purposes to determine whether HealthPRO or PHSA owed a duty of good faith to Stericycle to exercise a contractual discretion reasonably in the selection of the primary supplier under the Stericycle 2020 Contract. Even if it is assumed that HealthPRO and/or PHSA owed such a duty, neither HealthPRO nor PHSA breached such duty of good faith to Stericycle. Two considerations inform this conclusion.

[49] First, Stericycle cannot assert a breach of a duty of good faith in respect of the selection of Daniels as the principal supplier for two alternative reasons.

[50] Stericycle was not a party to the Daniels 2020 Contract. Accordingly, Stericycle cannot assert a breach of a duty of good faith in the performance of that contract insofar as HealthPRO and PHSA may be found to have waived any breach of Daniels’ obligations in the Daniels 2020 Contract regarding the date of commencement of operations: Double N Earthmovers, at paras. 71-72.

[51] In addition, and alternatively, even if Stericycle has standing to assert a breach of the Daniels 2020 Contract, the application judge’s determination that the start date in the 2020 Contracts did not relate to the provision of services, and that Daniels was only required under the Daniels 2020 Contract to begin providing services to a HealthPRO member upon the date selected by that member, excludes a finding of any such breach. Stericycle submits that the application judge erred in reaching this interpretation. In my view, however, this contractual interpretation of the application judge is also free of reversible error for the following reasons.

[52] Stericycle relies principally on the HealthPRO letters awarding the 2020 Contracts to Daniels and Stericycle, which stated that the term of the 2020 Contracts would run from June 1, 2020, and on HealthPRO’s supplier selection notification to Daniels, which stated that the contract start date was June 1, 2020. The application judge acknowledged that the 2020 Contracts ran for a period that commenced on that date. However, she found that it was understood in the industry, and therefore by the parties, that there was a difference between the date on which the term of the 2020 Contracts began, being the start date, and the implementation date for the provision of services to individual HealthPRO members.

[53] In this regard, she noted that there was no provision in either the RFQ or the RFP that imposed a mandatory date for the implementation of services. She also observed that HealthPRO members could, and did, choose later dates as the implementation date for the provision of services to them. Elsewhere in the Reasons, the application judge also referred to the complexity and resulting time to transition the provision of services from Stericycle to a new supplier. She also observed that it would be commercially unreasonable to require a prospective new supplier to make the significant financial investment required to provide services in a province without a guarantee of being selected as a service provider. This reality reinforces the need for a transition period after the start date of a contract. In this regard, there is no evidence that the one month contemplated by paragraph 2(s) in the 2013 Contract would have been sufficient to transition the approximately 1,000 medical facilities of PHSA to a new supplier. There was therefore ample evidence in the factual background to the negotiation and execution of the 2020 Contracts to support the interpretation of the application judge. I would add that the existence of the Six Month Provision, and its counterpart in the 2020 Contracts, adds further support for the interpretation of the application judge.

[54] The second consideration that informs the conclusion of an absence of a breach of this element of the duty of good faith is the legal position of PHSA given the existence of the Six Month Provision. As mentioned, Stericycle mischaracterizes this position in arguing that PHSA had only two choices in making its supplier selection – a primary supplier and a secondary supplier. However, the Six Month Provision provided PHSA with a third option which PHSA adopted – to select a primary supplier and to rely upon the benefit of the Six Month Provision until the primary supplier was able to commence the provision of services.

[55] In summary, by virtue of the first consideration, PHSA did not breach any obligation to Stericycle in refraining from requiring Daniels to begin providing service on June 1, 2020. Put positively, PHSA was entitled to select December 1, 2020 as the date of commencement of such services. By virtue of the second consideration, PHSA did not breach any obligation to Stericycle in requiring it to continue to supply under the Six Month Provision until December 1, 2020.

[56] Given this framework, there is no basis for a finding that HealthPRO or PHSA acted unreasonably in the selection of Daniels as the primary supplier under the Daniels 2020 Contract. As the application judge noted, the purpose of HealthPRO’s RFQ and RFP process, and therefore the purpose of the 2020 Contracts, was to permit HealthPRO’s members to gain the greatest benefit from collective buying power, that is to secure competitive contracts and offer choice to the members. The third option allowed PHSA to achieve its selection of its preferred primary supplier in reliance on a contractual obligation to which Stericycle had agreed in the 2013 Contract. PHSA therefore exercised its contractual discretion to select the primary supplier in a manner that was entirely consistent with the purposes of the 2020 Contracts.

[57] Further, to the extent that Stericycle’s expectations are relevant, PHSA’s decision did not fall outside of the range of behaviours contemplated, or that should reasonably have been contemplated, by Stericycle.

[58] Given that Stericycle agreed to provide services for a period of six months following the termination of the 2013 Contract pursuant to the Six Month Provision, Stericycle could not reasonably expect that PHSA would require Daniels to commence the provision of services immediately upon termination of the 2013 Contract if a deferral of the implementation date best met the needs of PHSA’s facilities. For the same reason, any expectation of Stericycle that it would be paid in accordance with pricing under the 2020 Contract rather than pursuant to the 2013 Contract was unreasonable if the 2013 pricing was more favourable to PHSA members and time was required to transition to the new supplier. Similarly, the selection of Daniels as the primary supplier did not involve unfairly conscripting Stericycle to allow Daniels the time to cure any misrepresentation in its RFQ and RFP, whether or not it might also have relieved Daniels of the consequences of any misrepresentation.

(b) Allegations of a Breach of the Duty of Honest Performance

[59] Stericycle’s final ground of appeal is that the application judge erred in failing to find that HealthPRO and PHSA breached the duty of honest performance of the Stericycle 2020 Contract.

[60] Stericycle relies on a number of separate allegations in support of this position. In particular, Stericycle alleges that HealthPRO acted dishonestly in providing information regarding the Six Month Provision to Daniels, in relying on the Six Month Provision to allow Daniels to delay its start date, and in relying on the fact that Daniels would be able to obtain expedited authorization with PHSA’s assistance in making its selection of Daniels as the primary supplier. Stericycle also alleges that PHSA acted dishonestly in not informing Stericycle much earlier than June 2, 2020 of its intended reliance on the Six Month Provision in its selection of Daniels as the primary supplier.

[61] The application judge was alert to these matters and concluded that they did not amount to bid repair although she did not address them in the context of an alleged breach of a duty of good faith. In my view none of the impugned actions satisfy the test set out in C.M. Callow for demonstration of dishonest performance of the Stericycle 2020 Contract.

[62] None of these allegations involve lying or actively misleading Stericycle about a matter directly linked to performance of the Stericycle 2020 Contract or to the exercise of rights set forth therein. In particular, nothing in the RFP prevented PHSA from obtaining the information that it required regarding proposed implementation of the 2020 Contracts by Daniels and Stericycle in order to make an informed selection of its primary supplier. Further, HealthPRO was entitled to advise PHSA, as its member, of its rights under the 2013 Contract and, as discussed, PHSA was entitled to rely upon such rights. Moreover, the evidence before the application judge does not establish that PHSA’s decision to select Daniels was the direct result of HealthPRO’s communication with Daniels regarding PHSA’s rights under the Six Month Provision. The evidence also fails to establish bad faith in the communication of PHSA’s position to Stericycle. PHSA’s decision (or more properly the decisions of each of PHSA’s members) was finalized only shortly before June 2, 2020, having been delayed by the pandemic, and Stericycle was advised of PHSA’s intention to rely on the Six Month Provision shortly thereafter.

[63] This ground of appeal is therefore also denied.

Conclusion

[64] For the reasons set out above, the appeal is dismissed.

[65] If the parties are unable to agree on costs within 15 days of the release of these reasons, they may submit written costs submissions, which are not to exceed 5 double-spaced pages in length, exclusive of costs outlines. The respondents shall serve and file their submissions within 15 days after the release of these reasons, and Stericycle shall have 15 days to respond.

Released: December 10, 2021 “GRS” “Wilton-Siegel J.” “I agree G.R. Strathy C.J.O.” “I agree B. Zarnett J.A.”