ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-0368
DATE: 2015-12-10
B E T W E E N:
Finn Way General Contractor Inc.,
Daniel Matson, for the Plaintiff (Respondent)
Plaintiff
- and -
The Corporation of the Municipality of Red Lake,
Allan McKitrick, for the Defendant (Moving Party)
Defendant
HEARD: September 4, 2015,
at Thunder Bay, Ontario
Mr. Justice D. C. Shaw
Decision On Motion For Summary Judgment
[1] This is a summary judgment motion by the Corporation of the Municipality of Red Lake (“the Municipality”) for an order dismissing the action brought by Finn Way General Contractor Inc. (“Finn Way”).
[2] Finn Way claims damages against the Municipality with respect to a tender competition for the construction of the Red Lake Medical Centre.
Background
[3] In 2012, Goldcorp. Inc., a gold producer with operations in the Red Lake area, announced that it would donate $5,000,000 to the Municipality for the renovation and expansion of the old medical centre or for the construction of a new one. The donation would be open for two years, commencing September 1, 2012.
[4] The Municipality obtained a conditional grant from the Northern Ontario Heritage Fund Corporation of up to $250,000 for a geothermal ground loop system for the medical centre.
[5] Council members of the Municipality were of the view that the new medical centre needed to be constructed without cost to the Municipality.
[6] Through its Consultant, the Municipality made a call for tenders to construct a medical centre.
[7] The deadline for tenders was initially set for September 4, 2013. However, the deadline was extended to October 4, 2013, so that an addendum could be prepared by the Consultant which would permit bidders to provide an alternate price credit if construction began in the fall of 2013 but was suspended for the 2013/2014 winter months and resumed in the spring of 2014.
[8] At the time, starting construction in the fall of 2013 remained a realistic goal and the Municipality desired to see as much construction performed as possible in the fall of 2013.
[9] Included in the Instructions to Bidders were the following provisions:
section 5.2 Lowest bid or any Bid will not necessarily be accepted.
section 5.3 In evaluating Bids, the Owner reserves the right to adjust the bid prices, submitted in accordance with the information provided on the Bid Form, for the purpose of and prior to determine the successful bid.
[10] The Bid Form, as amended by Addendum No. 1 required bidders to submit a base bid on the medical centre as well as a bid with alternate price credits.
[11] With respect to alternate price credits, the Bid Form provided:
- Alternate Price
(a) Provide credit to the base bid quoted on page one (1) to delete the supply and installation of the specified Geothermal Ground Loop System.
Credit for Deletion of Ground Loop System: $______________
(b) Base bid shall include winter heating and hoarding costs. Provide CREDIT to suspend construction once temperatures drop to levels that warrant heating and boarding and resume construction in the Spring of 2014. Under this pricing option the objective will be to complete as much construction this year which may include such activities as site earthworks, site servicing and possibly foundation work. Full construction would resume in the spring as soon as weather permits.
Credit to suspend construction through winter months and resume construction in Spring 2014: $_______________.
[12] The Price and Payment Procedure section of the Tender Documents provided:
3.2 Alternative Prices
3.2.1 If called for in the contract alternative price shall include all labour, materials, products, equipment, services and respective overhead, profit, taxes (including GST), disbursements and related charges required for substituting, deleting or changing of materials and products and/or construction from that shown or specified and represent the total amounts which will be added to or deducted from the Contract Price (as noted for each item), if the alternatives are required to be included in the Contract, for the following alternatives, with no change to Contract Time unless otherwise stated with respective Alternate Price.
[13] Five companies, including Finn Way and Tom Jones Corporation (“Jones”), bid on the tender call for the medical centre. Bidders were required to submit a base bid as well as a bid with alternate price credit adjustments. Jones and Finn Way were the lowest of the five bids.
[14] The bids of Jones and Finn Way, exclusive of HST, were as follows:
Bidder
Tom Jones Corporation
Finn Way General Contractor
Base Bids
$5,094,180.00
$5,169,000.00
Alternate Price Adjustments
1
Bid with both alternate price credit adjustments
$4,751,641.00
$4,865,000.00
2
Bid with geothermal deletion credit adjustment only
$4,849,641.00
$5,051,000.00
3
Bid with winter suspension credit adjustment only
$4,996,180.00
$4,983,000.00
[15] Jones had the lowest base bid. Jones also had the lowest bid if both alternate price credits were applied or if only the first alternate price credit for the geothermal loop was applied. However, if the first alternate price credit for the geothermal loop did not apply and the second alternate price credit for winter suspension was applied, Finn Way would be the lowest bidder.
[16] Shortly after the bids were opened on October 8, 2013, the Municipality received a letter from Jones about the possibility that the Consultant might recommend awarding the contract to Finn Way. A second letter from Jones’ lawyer on October 9, 2013, threatened legal action if Finn Way’s bid was accepted over Jones’ bid. On November 15, 2013, Finn Way wrote to the Consultant advising that it should be awarded the construction contract for the medical centre on the basis that it was the low bidder once the Municipality took the credit provided for in s. 7(b) of the Bid Form if construction was suspended during the winter.
[17] As a result of the competing claims by Jones and Finn Way as to which was the low bidder, the Municipality delayed making a decision while considering its position. After evaluating the bids and with the commencement of construction in the fall no longer an option, the Municipality decided to proceed with the geothermal ground loop system and without suspension of construction for the winter months. The Municipality determined that the correct way to determine the lowest bidder was by considering the base bids of the bidders and by not considering alternate price credits. Because the Municipality was proceeding with the geothermal ground loop system and because construction would not begin in the fall of 2013 and there would be no suspension of work during the winter months of 2013-2014, the Municipality determined that the two alternate price credit adjustments were not applicable.
[18] All bids were over budget. However, the Municipality did not want to abandon or delay the medical centre project because it might result in the loss of Goldcorp’s $5,000,000 donation for a facility that the Municipality had determined was needed to attract doctors and health care workers.
[19] The Municipality entered into negotiations with Jones, resulting in changes to certain specifications for the project and a reduction of $371,178.75 from the base bid of $5,094,180 to $4,723,001.25.
[20] On December 23, 2013, the Municipality’s Council passed a resolution to award the medical centre project to Jones.
[21] On January 20, 2014, Council authorized the execution of a construction contract with Jones.
[22] The Municipality instructed Jones to commence construction immediately, not to suspend construction and to complete the project on schedule.
[23] Construction began on February 11, 2014. The initial stage of construction, during February, March and April 2014 was site preparation. The project proceeded to completion without any suspension of work.
[24] Substantial completion of the project was certified on January 30, 2015 and an occupancy permit was issued on that date.
Finn Way’s Statement of Claim
[25] Finn Way claims damages of $775,000 for breach of contract.
[26] The essential elements of Finn Way’s claim are set out in paragraphs 16 – 19 of its statement of claim:
Construction and Breach
The Plaintiff states that construction commenced in the Fall of 2013 and was in fact suspended for the winter of 2013/2014. The Plaintiff states that construction resumed in or about April of 2014.
The Plaintiff states that the Defendant in fact suspended construction over the winter of 2013/2014 and therefore used and relied upon or should have used and relied upon the Winter Suspension Alternate Price when evaluating the bids.
The Plaintiff states that the Defendant was obligated to award the contract (Contract B) to the Plaintiff as its Winter Suspension Alternate Price was the lowest. The Defendant in fact suspended work over the winter.
The Plaintiff states that the Defendant breached the terms of Contract A when it awarded Contract B to Tom Jones Construction.
Submissions
A. The Municipality
[27] The Municipality submits that the allegations in the statement of claim are fundamental to Finn Way’s claims and a trial is not required to determine that they are incorrect.
[28] The Municipality submits that, contrary to what is alleged in the statement of claim, construction did not commence in the fall of 2013 and construction was not suspended for the winter of 2013/2014. As a result, the winter suspension alternate price credit, upon which Finn Way relies, was inapplicable.
[29] The Municipality submits that sections 5.2 and 5.3 of the Instruction to Bidders gave the Municipality significant discretion in evaluating the bids.
[30] It submits that it would have been wrong and unfair to Jones to rely solely upon the second alternate price credit component to determine which over budget bidder was the low bidder when the tender documents did not provide for that and when the winter suspension credit became irrelevant before the contract was awarded to Jones.
B. Finn Way
[31] Finn Way submits that it submitted the lowest bid when the geothermal loop credit is ignored and the winter suspension credit is applied. Finn Way submits that the purpose of the winter suspension credit was to suspend construction to eliminate heating and hoarding costs. It submits that when the Municipality made the decision to award the contract during the winter months, and avoided heating and hoarding costs, the winter suspension credit should have been applied, at least in part, and, under the tender documents, the Municipality should have accepted Finn Way’s bid. In the alternative, Finn Way submits that it should have been allowed to negotiate a new price with the Municipality.
[32] Finn Way submits that clause 3.2.1 of the Price and Payment Procedures of the Tender Documents required the Municipality to choose the winter suspension adjustment price credit according to how the Municipality in fact chose to proceed and according to the true cost of the project to the Municipality. If the heating and boarding costs were not going to be incurred, then the alternate winter suspension adjustment price credit should be applicable. Finn Way submits that when the Municipality awarded the contract to Jones, it should have known that heating and hoarding costs were not needed.
[33] Finn Way submits that a trial is required:
(1) because in depth evidence is required on the Municipality’s decision to award the contract to Jones;
(2) because there is no evidence on the negotiations between the Municipality and Jones; and
(3) because there is no evidence as to the heating and hoarding costs that may have been incurred by Jones.
Principles on Summary Judgment Motion
[34] The principles to be followed with respect to a summary judgment motion are set out in Hryniak v. Mauldin, 2014 SCC 7:
• Summary judgment motions must be granted whenever there is no genuine issue requiring a trial. (Rule 20.04(2)(a)).
• There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment (para. 49).
• When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective (para. 50).
• On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new-fact finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a).
Discussion
[35] I have decided that there is no genuine issue requiring a trial. The evidence before me enables me to fairly and justly determine the dispute in this action. Summary judgment will be granted, dismissing Finn Way’s claim.
[36] I begin by observing that the facts alleged at paragraphs 16-18 of the statement of claim, which are the basis of Finn Way’s claim, are contradicted by the evidence. Finn Way alleges in its statement of claim that construction of the medical centre commenced in the fall of 2013, that construction was suspended for the winter of 2013/2014 and that the construction which had begun in the fall of 2013 resumed in or about April 2014. These allegations are wrong.
[37] It was not until January 20, 2014, that Council authorized the execution of a construction contract with Jones. Site preparation started on February 11, 2014. Site preparation is construction within the meaning of s. 2.1.2 of the Summary of Work section of the Tender Documents. The sole affidavit filed by Finn Way on the summary judgment motion is from Frank Besignano, a project co-ordinator with Finn Way. Mr. Besignano had never been at the construction site. In his affidavit, Mr. Besignano deposed that construction was completely suspended over the winter months. However, on his cross-examination, Mr. Besignano did not dispute that no work was done on the project in 2013. In submissions on the hearing of the summary judgment motion, counsel for Finn Way candidly acknowledged that Mr. Besignano “misunderstood” that construction had not started in the winter and conceded that construction had in fact started, as alleged by the Municipality, on February 11, 2014.
[38] I will address the three reasons that Finn Way gives in support of its position that a trial is required:
- Submissions that in depth evidence is needed on the Municipality’s decision to award the contract to Jones.
[39] Finn Way states that:
(a) it only has an affidavit from the Chief Administrative Officer of the Municipality, Mark Vermette, on the decision to award the contract to Jones;
(b) there is no evidence on the negotiations between the Municipality and Jones that led Jones to revise its price; and
(c) the heating and hoarding costs of Jones are not known.
[40] The evidence of Mr. Vermette on the Municipality’s decision is detailed, clear and uncontradicted. The Municipality determined that the correct and fair way to determine the lowest bidder was to base its decision on the base bids of the bidders and not to consider the alternate price credits. The Municipality took into consideration s. 5.3 of the Instructions to Bidders which, while it reserved a right to the Municipality to adjust the bid prices, it did not require it to do so. Mr. Vermette deposed that the Municipality believed that it would be wrong and unfair to determine the lowest compliant bid based solely on consideration of the second alternate price credit adjustment. He said that if the Municipality was going to consider the alternate price credits, the Municipality concluded that it would need to consider both of them, and in doing so Jones’ bid would still be the lowest. The Municipality determined that pursuant to the guidelines of the Canadian Construction Documents Committee (CCDC23-2005), considering only base bids to determine the lowest bid “is generally perceived as the fairer approach”.
[41] Mr. Vermette deposed that the geothermal ground loop alternate price credit was inapplicable because the Municipality had decided to proceed with the geothermal ground loop. He deposed that the Municipality determined that because work on the project would not commence in the fall of 2013 and because there was to be no suspension of work for the winter months, the alternate price credit for winter suspension was not applicable.
[42] Mr. Vermette deposed that the CCDC23-2005 guidelines provided that negotiations should take place with the lowest compliant bidder because “re-bidding should be avoided whenever possible”. The Municipality feared that delay from re-bidding may cause it to lose Goldcorp’s donation of $5,000,000. The Municipality therefore began negotiations exclusively with Jones to determine whether the two parties could agree on changes and a corresponding reduction in the price.
[43] Mr. Vermette deposed that negotiations with Jones, as the lowest compliant bidder, resulted in acceptable changes and a reduced price.
[44] In my view, a trial is not required to amplify this evidence of Mr. Vermette.
- Submission that there is no evidence on the negotiations that led Jones to revise its price.
[45] Attached as Exhibit “Z” to Mr. Vermette’s affidavit is a detailed breakdown of the changes negotiated between the Municipality and Jones and the reduction in prices, individualized for each of the 22 changes, which in the aggregate totalled a reduction of $371,178.75.
[46] None of those 22 changes relate in any way, directly or indirectly, to heating and hoarding costs. In cross-examination on his affidavit, Mr. Vermette said that at the point when the Municipality determined that it would accept the base bid of Jones, the Municipality’s timeline was such that it wanted to start and finish construction without delay and without suspension. Because there would be no suspension of construction once it had started, no consideration was given to a heating and hoarding credit for winter suspension. From the Municipality’s perspective, it was irrelevant to have a heating and hoarding credit.
- Submission that it is necessary to have a trial to ascertain what Jones’ heating and hoarding costs were on the project,
[47] I am of the view that whether Jones incurred such costs and the amount of such costs, if any, is of no relevance to the just disposition of this case.
[48] The winter suspension price adjustment credit was not applicable. The Municipality wanted the construction to run continuously once it had started in the winter. The price that the Municipality negotiated with Jones had no heating and hoarding adjustment. The final price was the base bid, on which Jones was the lowest bidder, less the negotiated changes. None of the changes related to heating and hoarding.
[49] I, therefore, do not accept the reasons which Finn Way gives as to why a trial is required.
[50] On this summary judgment motion, Finn Way submits that although s. 5.2 of the Instructions to Bidders provided that the lowest bid or any bid may not be accepted by the Municipality, this privilege was subject to a limitation that the winning bid had to be based on criteria known to the bidders, whether in the tender documents or on criteria which were objectively ascertainable. Finn Way contends that the price must be determined with reference to the winter suspension alternate price adjustment credit, if the credit was applicable, based on what heating and hoarding costs were actually incurred. In effect, Finn Way is saying that if Jones did not incur heating and hoarding costs, or if it only partially incurred those costs, then the winter suspension credit should have been applied and Finn Way’s bid should have been selected. Finn Way submits that whether construction was suspended during the winter was irrelevant. It is the avoidance of heating and hoarding costs that Finn Way says is key. Finn Way submits that the privilege clause of s. 5.2 does not give the Municipality the right to ignore the elimination of those costs.
[51] I observe, firstly, that this is not how the case for Finn Way is pleaded in its statement of claim. As previously noted, the claim, as pleaded, is that construction started in the fall of 2013, was suspended for the winter of 2013/2014 and resumed in or about April 2014. It is on these alleged facts that Finn Way pleads that the winter suspension alternate price credit adjustment was applicable. On the uncontroverted evidence of the Municipality, these alleged facts are wrong. This, in itself, is fatal to Finn Way’s position on summary judgment.
[52] However, even if the flawed pleadings are not sufficient reason to grant the summary judgment motion, I do not accept the submission that the Municipality was obligated to award the contract to Finn Way on the grounds that heating and hoarding costs may have been eliminated, in whole or in part, during construction which started on February 11, 2014.
[53] Section 5.3 of the Instructions to Bidders gave the Municipality the right to adjust bid prices, which would include adjusting for the geothermal ground loop and winter suspension. However, it did not require the Municipality to do so.
[54] The Municipality was rightly concerned that if it delayed the project, the $5,000,000 donation from Goldcorp was at risk. Relative to the size of the Municipality, and in the context of its pressing need for a new medical centre, the loss of the donation would be significant. Once it became apparent that construction would not start in the fall of 2013, the Municipality reasonably decided that construction should begin without delay during the winter months, forthwith upon execution of the contract, and should proceed continuously until completion. A reduced base bid price was negotiated with Jones. Whether Jones incurred heating and hoarding costs, and in what amounts, if any, was of no consequence to the Municipality. The base bid did not need to be adjusted for alternate price credits, both because s. 5.3 of the Instructions to Bidders did not require the Municipality to adjust the base bid, and because the two alternative price adjustments were not relevant. The geothermal ground loop was installed and the terms of s. 7(b) of the Bid Form were not applicable. Construction was scheduled to begin, and did begin, in the dead of winter. Unlike the wording of s. 7(b), there was to be no waiting until spring, “weather permitting”.
[55] Section 3.2 of the Price and Payment Procedure provisions of the Tender Documents speaks to alternate prices, but only if they are included in the contract with the successful bidder, i.e. Contract “B” as described in The Queen in Right of Ontario v. Ron Engineering and Construction (Eastern) Ltd., 1981 17 (SCC), [1981] 1 S.C.R. 111. The alternate prices were not included in the construction contract between the Municipality and Jones.
[56] In my view, the Municipality acted in good faith. It assessed the competing bids fairly and equally, on objectively reasonable criteria that are set out in the uncontradicted evidence of the Municipality. The Municipality did not have an obligation to Finn Way to apply the winter suspension credit or to attempt to ascertain during its negotiations with Jones what heating and hoarding costs may or may not be incurred by Jones during winter construction. The Municipality did not have an obligation to Finn Way to include Finn Way in the negotiations for a reduced base bid price.
[57] Once the Municipality decided that construction was to begin as quickly as possible in the winter, and not to be delayed until the arrival of spring, there was no reason for the Municipality to take the winter suspension credit or heating and hoarding costs into account in determining the lowest bid. In the circumstances of this case, the fairest approach was to consider only the base bids. In considering only the base bids, the Municipality did not manipulate the tender process nor did Jones gain an unfair advantage. Once the Municipality determined that Jones was the lowest compliant bid, it was within the Municipality’s right to negotiate only with Jones on changes to the work and corresponding changes to the bid price.
Conclusion
[58] For the reasons given, the summary judgment motion of the Municipality is granted and the action brought by Finn Way is dismissed.
Costs
[59] If the parties are unable to agree upon costs, the Municipality shall deliver its submissions, not to exceed five pages exclusive of its Bill of Costs, within 45 days. Finn Way shall deliver its submissions within 20 days of service of the Municipality’s submissions, not to exceed five pages, exclusive of any Bill of Costs which it may wish to submit for comparison purposes. There shall be no reply submissions. Failing receipt of the Municipality’s submissions as above, the issue of costs shall be deemed to be resolved.
The Hon. Mr. Justice D. C. Shaw
Released: December 10, 2015
COURT FILE NO.: CV-14-0368
DATE: 2015-12-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Finn Way General Contractor Inc.,
Plaintiff
- and -
The Corporation of the Municipality of Red Lake,
Defendant
DECISION ON MOTION
Shaw J.
Released: December 10, 2015
/mls