Todd Brothers Contracting Limited v. Corporation of the Township of Algonquin Highlands, 2015 ONSC 1501
NO. CV-13-115317-00
DATE: 20150306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TODD BROTHERS CONTRACTING LIMITED
Plaintiff
– and –
CORPORATION OF THE TOWNSHIP OF ALGONQUIN HIGHLANDS
Defendant
Leo Klug, for the plaintiff
Todd Robinson, for the defendant
HEARD: August 8, 2014
Bale J.
Overview
[1] In this action, Todd Brothers Contracting Limited claims damages for breach of a construction contract. The contract arose from a request for tender prices (RFT), for the construction of a new runway, and the rehabilitation of an existing runway, at the Haliburton-Stanhope Airport.
[2] The scope of work contemplated by the RFT included four parts. The claim made by Todd is for damages incurred as a result of the Township’s failure to proceed with the contract, after only one of the four parts (Part D) was completed.
[3] On this motion for summary judgment, the Township requests an order dismissing the action, upon the following grounds:
• that the contract entered into by the parties was for Part D of the RFT, only, and that there was therefore no breach;
• that even if Todd Brothers was awarded a contract for the remaining parts of the RFT, it executed a written waiver which precludes if from claiming damages;
• that Todd Brothers has not proved the damages claimed; and
• that the claim made is, in any event, barred by operation of section 4 of the Limitations Act, 2002.
[4] For the reasons that follow, I have determined that the parties did enter into a contract for the full scope of work included in the RFT, and that the claim is not barred by operation of the Limitations Act, 2002. However, I agree with the Township that the waiver executed by Todd Brothers precludes it from claiming damages, and that Todd has not proved the damages claimed.
Analysis
Scope of the contract
[5] Todd Brothers and others submitted tenders by the RFT closing date of April 24, 2009. Todd was the low bidder with a bid of $2,278,722.70.
[6] The RFT provided that tenders would be open for acceptance by the Township during the forty-five day period following the tender closing date. However, because of an unanticipated review by the Canadian Environmental Assessment Agency (CEAA), and at the request of the Township, Todd Brothers agreed to extend the time for acceptance of its tender to July 15, 2009.
[7] In late June of 2009, because the CEAA review had not been completed, the Township decided to seek approval from the Ministry of Agriculture, Food and Municipal Affairs (OMAFRA) to complete the project in three phases. Phase 1 (Part D of the RFT) did not require CEAA approval, and could therefore be completed without waiting for the results of the CEAA review. Phase 2 (Part A of the RFT), and Phase 3 (Parts B and C of the RFT), would be put on hold pending completion of the CEAA review. Todd Brothers agreed to this phasing of the project, and to a further extension of the time for acceptance of its tender.
[8] On September 3, 2009, Township council passed a resolution accepting Todd Brothers’ tender “in accordance with the tender documents, subject to the Canadian Environmental Assessment Act.”
[9] The Township argues that although Township council passed a resolution accepting Todd Brothers’ tender, there was no binding agreement for two related reasons: first, because the RFT provided that an award of the contract required the Township’s “written confirmation mailed to the successful bidder”, and no such confirmation was mailed; and second, because acceptance of the tender was never communicated to Todd Brothers. The first of these assertions is wrong in fact; the second is wrong in law.
[10] The provision of the RFT relied upon by the Township provides that “the party to whom the Contract is awarded will be required to execute the agreement contained herein … within seven (7) days … after mailing of written notice by the [Township] … advising of the award of the Contract to him.” This provision does not, as argued by the Township, make an award of the contract conditional upon the Township’s “written confirmation mailed to the successful bidder”. Rather, it provides an obligation on the part of the contractor to sign the contract contained in the RFT, within seven days of being advised that its tender was accepted. If the Township failed to mail written notice of the award to Todd Brothers, it cannot rely upon that failure to argue that acceptance of the tender did not create a binding agreement.
[11] In Ontario v. Ron Engineering, 1981 CanLII 17 (SCC), [1981] 1 S.C.R. 111, the Supreme Court of Canada articulated a “Contract A/Contract B” analysis to be applied in cases such as this one. Contract A is formed when a contractor submits a compliant bid in response to an invitation to tender. The principal terms of Contract A are the irrevocability of the tender during the acceptance period provided for in the RFT, and the obligation of both parties, if the tender is accepted, to enter into a contract (Contract B), on the terms set out in the RFT. The obligation of the parties to enter into Contract B arises from Contract A, and is not dependent upon communication of the acceptance from the owner to the contractor.
Written waiver
[12] Prior to the Township council resolution accepting its tender, Todd Brothers signed a “Compensation Waiver Acknowledgment” which provided that Todd Brothers would:
not seek any compensation for … work identified but not completed … in the event that the Township cannot proceed to any of the phases as a result of matters beyond the control of the Township of Algonquin Highlands, or delays resulting from the review being completed by the CEAA … any other public issues/concerns or the withdrawal of funding from applicable sources.
[13] CEAA completed its review in December of 2010, and provided a report to Township council. Although the report was not filed as evidence on this motion, it would appear that the airport project was approved, subject to the implementation of measures to mitigate any adverse environmental effects, and subject to certain conditions with respect to reporting. However, a newly elected Township council whose members were predominately opposed to the project passed a resolution to “defer the execution of the [CEAA report] until a further review of the project is conducted.”
[14] In January of 2011, the Ministry of Natural Resources (MNR) proposed a joint airport improvement project, as part of which the Ministry would relocate its northeastern fire management headquarters, and consolidate its regional operations, at the Haliburton/Stanhope airport. Pursuant to its contribution agreement with OMAFRA, the Township was obliged to consider MNR’s proposal; and, although the evidence is not entirely clear on this point, it appears that the joint project proceeded, rather than Parts A, B and C of the original project.
[15] Todd Brothers’ position on the waiver is that Township council should have signed off on the CEAA report in December of 2010, and that its failure to do so was a purely political decision. However, the political decision was based upon public concerns (the members elected to council had campaigned in opposition to the original project), and the proposal made by MNR in January 2011 would have intervened in any event.
[16] In these circumstances, the Township is entitled to rely upon the written waiver in full defence to Todd Brothers’ claim. The Township was unable to proceed with Parts A, B and C of the original project prior to December of 2010, because of the ongoing CEAA review. It was unable to proceed with those parts of the original project after December of 2010, because of the joint airport improvement proposal made by MNR. Had the Township failed to pursue the joint project with MNR, as required by the OMAFRA contribution agreement, it risked withdrawal of provincial funding.
Damages
[17] Rather than pleading particulars of any damages suffered, and providing evidence of such damages on this motion, Todd Brothers pleaded that it had “submitted a written notice of formal claim in the amount of $178,378.51”, and that the defendant had “refused to acknowledge the validity of the claim or to pay the amount or any amounts being claimed thereunder.”
[18] In support of its position, Todd Brothers relies upon the Ontario Provincial Standards for Roads and Public Works (OPS General Conditions of Contract) which were incorporated into the RFT. In particular, Todd relies upon GC 8.01.02 (b) of the general conditions which provides:
In the case of a Major Item where the quantity of Work performed or Material supplied or both by the Contractor is less than 85% of the tender quantity, the Contractor may make a written request to negotiate for the portion of the actual overheads and fixed costs applicable to the amount of the underrun in excess of 15% of the tender quantity. For purposes of the negotiation, the overheads and fixed costs applicable to the item are deemed to have been prorated uniformly over 100% of the tender quantity for the item. Overhead costs shall be confirmed by a statement certified by the Contractor's senior financial officer or auditor and may be audited by the Owner. Alternatively, where both parties agree, an allowance equal to 10% of the unit price on the amount of the underrun in excess of 15% of the tender quantity shall be paid.
[19] Based upon this provision, Todd Brothers’ argues that it is entitled to recover $178,378.51 from the Township, being 10 per cent of the contract price of Parts A, B and C of the original project. I disagree with this argument for the following reasons. First, the quoted section applies where there is an underrun, not where a project, or discrete part thereof, does not proceed. Second, even if the section did apply, the required certificate was not provided. Third, the Township did not agree to the 10 per cent allowance. And fourth, the provisions of the OPS General Conditions that would have applied to Todd Brothers’ claim are contained in GC 3.13 which provides for mediation or arbitration of disputes between an owner and a contractor.
Limitation period
[20] The issue here is whether, had the “Compensation Waiver Acknowledgment” not been effective to bar Todd Brothers’ claim, it would none-the-less have been barred by operation of the Limitations Act, 2002.
[21] The statement of claim was issued on July 10, 2013. Accordingly, the action would have been statute-barred if the claim was discovered, within the meaning of section 4 of the Act, prior to July 10, 2011.
[22] The first difficulty in determining whether the action is statute-barred is figuring out what Todd Brothers’ cause of action is. The “written notice of formal claim” referred to above says the following: “Our claim is for 10% of the underperformed works – to cover overheads, fixed costs, as well as costs listed in our letter of Intent to Claim of December 13, 2010.” The amount claimed is 10 per cent of the contract price of Parts A, B and C of the original project. It would therefore appear that the cause of action alleged is the failure of the Township to provide Todd Brothers’ with the work provided for in those parts. If this is the case, then the limitation period would run from the day that Todd Brothers discovered that this work would no longer be made available to it.
[23] The Township’s first argument is that at various times during 2009 and 2010, Todd Brothers was advised that the project was on hold as a result of the CEAA review, and that Todd is therefore presumed to have known of its claim during this period of time. I am unable to accept this argument because the contract was awarded “subject to the requirements of the Canadian Environmental Assessment Act”, and because, as I understand it, the claim is based on the failure of the Township to proceed with Parts A, B and C of the original project, and not delays incurred during 2009 and 2010.
[24] The Township’s second argument suffers from the same defect as the first. The second argument is that by a letter dated December 13, 2010, Todd Brothers delivered notice of an “Intent to Claim for Delays in Contract and Loss of Recoverables”, that on several occasions before that date, Ross Todd spoke to the Township’s project manager about whether or not Todd Brothers should advance a claim against the Township, and that therefore Todd Brothers must have known, no later than December 2010, that it had a claim against the Township. However, the “Intent to Claim” delivered by Todd Brothers said that Todd would “be seeking formal compensation for costs incurred to date due to numerous delays in starting this work.” Delay in proceeding with a construction contract is a different cause of action than failure to proceed, at all, with the balance of the contract work. If Todd Brothers had a valid claim for delay, it could be asserted whether the balance of the contract work proceeded or not.
[25] The Township’s third argument is that the damages claimed by Todd Brothers all date from the period between April 28, 2009 and January 4, 2011. As a matter of fact, it is not clear that such is the case, since the damages claimed are based upon a percentage of the value of the unperformed contract work, rather than upon any particular expenses that were incurred. In any event, there is a difference between expenses incurred and damages. The expenses may have been incurred prior to July 10, 2011, but those expenses would not become damages until the contract was breached: i.e. not until the Township cancelled Parts A, B and C of the original project, in favour of the new joint project with MNR.
[26] The Township’s fourth argument is that Todd Brothers was aware, as of the date of a meeting held on April 12, 2011, that Parts A, B and C of the original project would not be proceeding, that all subsequent dealings between the parties related to the joint project with MNR, and that therefore, the limitation period began to run no later than the date of the meeting. I am unable to accept this argument for the following reasons.
[27] First, as of the April 2011 meeting, Todd Brothers couldn’t have known that the Township would not be proceeding with the balance of the original project because, at that time, it was simply a case of ongoing negotiations between the Township and MNR that had not been finalized. This fact is clear from the letter written to Todd by the solicitors for the Township on August 17, 2011 which contained the following: “During this meeting [meeting of April 12, 2011], the municipality advised that it wished to defer the above-captioned contract [the contract for the original project] and explore other airport improvement opportunities, rather than constructing the new runway. You advised you were content with this deferral.”
[28] Second, the reason why Todd Brothers was content with the deferral was that it was promised work on the joint project with MNR, in the event that the joint project replaced the original project. Todd would therefore only have a cause of action based upon a breach of the original contract, if it wasn’t given work on whichever of the two projects did proceed, or if neither of them proceeded. In the meantime, the original contract remained in effect. Todd Brothers’ work on Part D of the original project was completed in October of 2011. After that time, there was sporadic correspondence between Todd and the Township relating to the status of the project, and then in November of 2012, apparently tired of waiting, Todd delivered the “Notice of Formal Claim” pleaded in the statement of claim.
Disposition
[29] For the reasons given, I find that there is no genuine issue requiring a trial. The motion for judgment is therefore granted, and the action is dismissed.
[30] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered to Judges Reception, at the Durham Region Courthouse, no later than April 3, 2015.
“Bale J.”
Released: March 6, 2015
NO. CV-13-115317-00
DATE: 20150227
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TODD BROTHERS CONTRACTING LIMITED
Plaintiff
– and –
TOWNSHIP OF THE CORPORATION OF ALGONQUIN HIGHLANDS
Defendant
REASONS FOR JUDGMENT
Bale J.
Released: March 6, 2015