Company’s win against province upheld

Court of Appeal stands by liability, awarding of damages

Bonnie Belec
Published on April 14, 2014
The Janeway Children’s Hospital in St. John’s. — Photo by Rhonda Hayward/The Telegram

A local construction company will receive close to $1 million from the provincial government without even having to drive a nail.
And that’s thanks to a court case involving the Eastern Regional Integrated Health Authority vs. Olympic Construction Ltd.

An earlier court ruling said the health authority breached its tender contract with Olympic Construction for an extension to the Janeway Children’s Hospital in St. John’s.

The health authority appealed that decision, but on Thursday the Newfoundland Court of Appeal upheld the original ruling.

“The trial judge’s decision that Eastern breached its tender contract with Olympic was based on his view that Eastern’s awarding of the tender contract to Redwood (Construction Ltd.), after encouraging Olympic to bid; changing the tender contract to accommodate Olympic’s bid; and accepting and opening it; was a breach of Eastern’s duty of good faith to Olympic,” wrote Justice Lois Hoegg.

Hoegg agreed with that assessment, as did Justice Malcolm Rowe and Justice C.W. White.

The trial judge had also found that Olympic ought to have been awarded the tender contract, and he ordered Eastern to pay damages to Olympic for the loss of profit it would have made had it been awarded the project.

Eastern also appealed the amount of damages awarded and the prejudgment interest award, and failed on both counts.

“Eastern has not shown that the trial judge erred in awarding damages to Olympic for its loss of profits, calculated at 13 per cent of the project bid. Accordingly, the damages awarded to Olympic of $684,712.71 (plus HST) is not disturbed,” wrote Hoegg.

The Court of Appeal also awarded legal costs to the construction company.

Olympic sued Eastern after it was advised in writing on July 28, 2009 that its tender was disqualified on the basis that it had not attended “a mandatory site meeting.” Instead, the tender contract was awarded to Redwood, the second lowest bidder.  

The matter stemmed back to May 25, 2009, when Eastern issued a call for tenders for the Janeway extension project. The closing date was July 2, 2009.

Bidders were instructed to attend a site examination and a site assessment meeting. They were also notified there might be additions to the instructions during the bidding period.

The first addition was made on June 2, 2009, amending the closing date to June 18, 2009.

Bidders were also told: “A mandatory site assessment meeting will be held on Thursday, June 11, 2009. Bidders are required to attend this session to fully ascertain the project scope and its intricacies. Tenders will not be accepted from contractors failing to attend the site assessment meeting.”

The only bidder at the meeting was Redwood, which raised concerns with the health authority that it had not assured a competitive bid process.

An architect for the project suggested to a representative of Olympic that it might consider submitting a bid on the project.

Olympic was interested, but before it submitted a bid sought assurance that an extension to the tender would be granted and that it would be qualified as a bidder. Eastern said the same to another potential bidder, Anchorage Contracting Ltd.

In order to accommodate the interests of Olympic and Anchorage (as well as any other potential bidders), Eastern organized a second site meeting and extended the closing date to June 25, 2009.

All three companies attended the second site meeting.  

 Before the tender closed, Olympic submitted a bid for $6,725,458.87, including HST and bid bond. Redwood submitted a bid that was $20,000 more than Olympic’s. Anchorage did not submit a bid.

The bids from Olympic and Redwood were accepted and opened by Eastern after the tender closed on June 25, 2009.

On June 30, Redwood wrote to Eastern stating that Olympic’s bid ought to be disqualified because Olympic had not attended the first site meeting.

Redwood stated bidders had been told that attendance at the first site meeting was mandatory, whereas the site assessment meeting held on June 22 was not designated as mandatory.

The trial judge concluded that Olympic would not have bothered to spend time and money engaging in a bid process unless it knew it would be a compliant bidder, and Eastern’s subsequent acceptance and opening of Olympic’s bid — along with Redwood’s bid — after the close showed that Eastern regarded Olympic’s bid as compliant with the tender contract,” the court decision stated.

“The trial judge went on to find that but for Redwood’s letter of complaint, written after the closing date, Eastern ought to have, and indeed would have, awarded the contract to Olympic (as Eastern’s own representatives testified), because it was the lowest compliant bidder.”

He concluded that by not awarding the tender contract to Olympic, Eastern breached its duty of good faith, saying, “there is no good faith in a bid process that encourages bidders to spend moneys, only to be denied the fruits of their labours at the end of the day.’”