Martel Building Ltd. v. Can. (2000), 262 N.R. 285 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]


Temp. Cite: [2000] N.R. TBEd. NO.068

Her Majesty The Queen (respondent) v. The Martel Building Limited (respondent)

(26893; 2000 SCC 60)

Indexed As: Martel Building Ltd. v. Canada

Supreme Court of Canada

McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour, JJ.

November 30, 2000.


The Atomic Energy Control Board, a federal agency, was the primary tenant in the plaintiff’s office building under a 10 year lease expiring in August 1993. Officials in the Department of Public Works were re­sponsible for negotiating renewals and rec­ommending that certain decisions be made. The plaintiff pushed for negotiations for a lease renewal. The officials involved did not diligently pursue negotiations, even in light of time constraints that the plaintiff was unaware of. A lease renewal was never ne­go­tiated and tender documents were issued. The plaintiff’s bid was not accepted. The plaintiff sued the federal Crown claim­ing that (1) the government breached an implied term of the existing lease and of an agree­ment for the renewal of the lease; (2) the government was negligent by failing to ne­go­tiate a renewal in good faith; and (3) the government was negligent in conducting the lease renewal negotiations, preparing tender documents and in evaluating the plaintiff’s bid.

The Federal Court of Canada, Trial Divi­sion, in a judgment reported 129 F.T.R. 249, dismissed the action. There was no obliga­tion to renegotiate and no binding agreement to renew. There did not yet exist an action­able tort of failure to negotiate in good faith. Finally, although officials owed the plaintiff a duty of care and breached that duty by their conduct, there was no causal connec­tion between that breach and the plaintiff’s loss of the opportunity to renew the lease. The plaintiff appealed.

The Federal Court of Appeal, in a judg­ment reported 229 N.R. 187, allowed the appeal, found the federal Crown liable in negligence and remitted the matter to trial for continuance of the trial on the matter of damages. The trial judge, having found both a duty of care and a breach of that duty, erred in failing to find a causal link between the negligence and the plaintiff’s loss. The court stated that “the negligent conduct of the [Crown] was clearly the main, if not the only, cause of both the [plaintiff’s] loss of opportunity to negotiate the lease renewal and its loss of a reasonable expectation of receiving the contract follow­ing a fair ten­dering process”. The federal Crown ap­pealed.

The Supreme Court of Canada allowed the appeal and restored the judgment of the Trial Division. No duty of care arose by reason of pre-contractual negotiations.

Contracts – Topic 1263

Formation of contract – Tender calls – Duties – [See
Torts – Topic 98

Crown – Topic 1207

Contracts with Crown – Leases – Renewal -Duty respecting – [See
Crown – Topic 1562
Torts – Topic 9110

Crown – Topic 1562

Torts by and against Crown – Negligence by Crown – Negotiation of leases – The plaintiff leased space to a government department – The lease was expiring – The plaintiff sought to negotiate a renewal with government officials – There was no obli­gation to renew or negotiate a renewal – Negotiations began, but the manner in which the officials conducted the negoti­­ations foreclosed any possibility of renewal – The lease was not renewed and tender docu­ments were issued – The plaintiff’s tender was not accepted – The plaintiff sued for damages, claiming that the offi­cials were negligent in negotiating, prepar­ing tender documents and in evaluating the plaintiff’s bid – The trial judge, in dis­miss­ing the claim, held that although the offi­cials owed the plaintiff a duty of care and breached that duty, there was no causal connection between the plaintiff’s lost oppor­tunity to have the lease renewed and the breach of duty – The plaintiff lost only a chance to negoti­ate a lease renewal, not a renewed lease – The Federal Court of Ap­peal agreed that there was a duty of care and a breach of that duty – However, the trial judge erred in failing to find a causal link – The Supreme Court of Canada re­stored the dismissal of the claim on the ground that the law did not recog­nize a duty of care in pre-contractual nego­tiations – See paragraphs 31 to 73.

Damages – Topic 531

Limits of compensatory damages – Re­moteness – Torts – Recoverable damages – Purely economic loss – [See
Torts – Topic 97

Torts – Topic 77

Negligence – Duty of care – Relationship required to raise duty of care – [See
Crown – Topic 1562

Torts – Topic 97

Negligence – Duty of care – Pre-contrac­tual negotiations – The Supreme Court of Canada held that the law did not recog­nize a duty of care in pre-contractual negoti­ations and the tort of negligence did not permit damages for pure economic loss arising out of conduct in pre-contractual negotiations – The court stated that pre-contractual negotiations did not fall under the five recognized categories that were exceptions to the traditional rule against recovery of damages for pure economic loss – Policy reasons negating a duty of care included indeterminate liabil­ity, the class of potential plaintiffs, the very nature of negotiations (to obtain the most advan­tageous financial bargain) and extending the duty of care would defeat the essence of negotiation by labelling a party’s failure to disclose its bottom line, its motive and financial position as negli­gent – Further, imposing a duty of care would interject tort law as after-the-fact insurance against failures to act with due diligence or to hedge the risk of failed negotiations through the pursuit of alterna­tive strategies or opportunities and would impose upon the courts a significant regulatory function, scrutinizing the minu­tiae of pre-contrac­tual conduct – The last policy reason was the need to discourage needless litigation -See paragraphs 31 to 73.

Torts – Topic 98

Negligence – Duty of care – Tender spec­ifications – Martel, an unsuccessful bidder on a federal government tender, sued for damages in contract and tort, alleg­ing the government breached the duty of care owed in preparing the ten­der and eval­uating its bid – The Supreme Court of Canada held that the government owed a duty to treat all bidders equally and fairly and to not accept non­compliant bids – No duty of care was owed in drafting tender specifications – All bid­ders were treated fairly and equally – Martel had the lowest initial bid, but was the sec­ond lowest bid (by over $500,000) after the government adjusted all bids for “fit-up costs”, con­tigu­ous space costs and the cost of a secured card system – The adjustments were pro­vided by the tender documents, were made to all bids and the govern­ment’s decision was stated to be final – Although the gov­ernment did treat Martel unequally by add­ing $60,000 to its bid for a secured card system (not added to other bids), dam­ages were pre­cluded for want of causa­tion – Martel’s bid, being over $500,000 more than the lowest bidder, would not have been accepted had the $60,000 not been added to its bid – Martel was not deprived of an opportunity to become the successful bidder – The claim, based in both tort and contract, was dis­missed – See para­graphs 74 to 119.

Torts – Topic 9110

Duty of care – Particular relationships – Economic interests – Duty to negotiate in good faith – The plaintiff leased office space to a government agency – The lease was due to expire – The government had no obligation to renew or to negotiate a renewal – When negotiations were unsuc­cessful, the plaintiff sued for damages, claiming breach of a duty to negotiate in good faith – The trial judge refused to extend tort law to include an actionable tort of failing to negotiate in good faith – The Federal Court of Appeal held that it was unnecessary to determine whether a “distinct tort of failure to negotiate in good faith has now emerged” – The Supreme Court of Canada noted that the issue of a duty to bargain in good faith was not raised before it – Although a duty to bar­gain in good faith was not yet recognized at law, the court stated that the issue was left to be determined at some future time -See paragraph 73.

Cases Noticed:

D’Amato et al. v. Badger et al., [1996] 2 S.C.R. 1071; 199 N.R. 341; 79 B.C.A.C. 110; 129 W.A.C. 110; 137 D.L.R.(4th) 129, refd to. [para. 34].

Rivtow Marine Ltd. v. Washington Iron Works and Walkem Machinery and Equipment Ltd., [1974] S.C.R. 1189, refd to. [para. 36].

Canadian National Railway Co. v. Norsk Pacific Steamship Co. and Tug Jervis Crown et al., [1992] 1 S.C.R. 1021; 137 N.R. 241, refd to. [para. 36].

Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453, refd to. [para. 36].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, refd to. [para. 38].

Nielsen v. Kamloops (City), Hughes and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1; [1984] 5 W.W.R. 1; 29 C.C.L.T. 97; 8 C.L.R. 1; 10 D.L.R.(4th) 64, refd to. [para. 40].

Bow Valley Husky (Bermuda) Ltd. et al. v. Saint John Shipbuilding Ltd. et al., [1997] 3 S.C.R. 1210; 221 N.R. 1; 158 Nfld. & P.E.I.R. 269; 490 A.P.R. 269, refd to. [para. 41].

Anns v. London Borough Council of Merton, [1978] A.C. 728 (H.L.), refd to. [para. 46].

Hercules Managements Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 46].

Hofstrand Farms Ltd. v. B.D.C. Ltd., [1986] 1 S.C.R. 228; 65 N.R. 261; 26 D.L.R.(4th) 1, refd to. [para. 46].

Just v. British Columbia, [1989] 2 S.C.R. 1228; 103 N.R. 1; [1990] 1 W.W.R. 385; 41 B.C.L.R.(2d) 350; 18 M.V.R.(2d) 1; 64 D.L.R.(4th) 689, refd to. [para. 53].

Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Com­mission, [1981] 1 S.C.R. 111; 35 N.R. 40; 119 D.L.R.(3d) 267, refd to. [para. 79].

M.J.B. Enterprises Ltd. v. Defence Con­struction (1951) Ltd. et al., [1999] 1 S.C.R. 619; 237 N.R. 334; 232 A.R. 360; 195 W.A.C. 360, refd to. [para. 80].

Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; 77 N.R. 161; 21 O.A.C. 321, refd to. [para. 81].

Best Cleaners and Contractors Ltd. v. Canada, [1985] 2 F.C. 293; 58 N.R. 295 (F.C.A.), refd to. [para. 84].

Chinook Aggregates Ltd. v. Abbotsford (Municipal District) (1989), 35 C.L.R. 241 (B.C.C.A.), refd to. [para. 84].

Martselos Services Ltd. v. Arctic College (1994), 111 D.L.R.(4th) 65 (N.W.T.C.A.), leave to appeal refused [1994] 3 S.C.R. viii; 178 N.R. 80, refd to. [para. 85].

Northeast Marine Services Ltd. v. Atlantic Pilotage Authority, [1995] 2 F.C. 132; 179 N.R. 17 (F.C.A.), refd to. [para. 85].

Tarmac Canada Inc. v. Hamilton-Wentworth (Regional Municipality) (1999), 125 O.A.C. 72; 48 C.L.R.(2d) 236 (C.A.), refd to. [para. 85].

Vachon Construction Ltd. v. Cariboo Regional District et al. (1996), 78 B.C.A.C. 43; 128 W.A.C. 43; 136 D.L.R. (4th) 307 (C.A.), refd to. [para. 85].

Health Care Developers Inc. v. Newfound­land (1996), 141 Nfld. & P.E.I.R. 34; 443 A.P.R. 34; 136 D.L.R.(4th) 609 (Nfld. C.A.), refd to. [para. 85].

Murphy v. Alberton (Town) (1993), 114 Nfld. & P.E.I.R. 34; 356 A.P.R. 34 (P.E.I.T.D.), refd to. [para. 85].

Kencor Holdings Ltd. v. Saskatchewan, [1991] 6 W.W.R. 717; 96 Sask.R. 171 (Q.B.), refd to. [para. 85].

Colautii Brothers Marble Tile and Carpet (1985) Inc. v. Windsor (City) (1996), 21 O.T.C. 68; 36 M.P.L.R.(2d) 258 (Gen. Div.), refd to. [para. 85].

Yorkton Flying Services Ltd. v. Saskatchewan (Minister of Natural Resources), [1995] 9 W.W.R. 184; 135 Sask.R. 63 (Q.B.), refd to. [para. 85].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109; 37 C.C.L.T. 117; 31 D.L.R.(4th) 481, refd to. [para. 106].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 106].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241; [1993] 2 W.W.R. 321, refd to. [para. 106].

Twin City Mechanical v. Bradsil (1967) Ltd. and Ontario (1996), 27 O.T.C. 1; 31 C.L.R.(2d) 210 (Gen. Div.), revd. (1999), 116 O.A.C. 396; 43 C.L.R.(2d) 275 (C.A.), refd to. [para. 108].

Toby (Ken) Ltd. v. British Columbia Buildings Corp. [1997] B.C.T.C. Uned. 662; 34 B.C.L.R.(3d) 263 (S.C.), revd. (1999), 122 B.C.A.C. 79; 200 W.A.C. 79; 62 B.C.L.R.(3d) 308 (C.A.), refd to. [para. 108].

Authors and Works Noticed:

Cherniak, E.A., and Howe, E., Policy and Predictability: Pure Economic Loss in the Supreme Court of Canada (1999), 31 Can. Bus. L.J. 209, p. 232 [para. 43].

Feldthusen, B., Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow (1990-91), 17 Can. Bus. L.J. 356, pp. 357, 358 [para. 38].

Feldthusen, B., Economic Negligence: The Recovery of Pure Economic Loss (4th Ed. 2000), p. 14 [para. 62].

Feldthusen, B., Liability for Pure Econ­omic Loss: Yes, But Why? (1999), 28 U.W. Austr. L. Rev. 84, pp. 87 [para. 60]; 102 [para. 63].

Linden, Allen M., Canadian Tort Law (6th Ed. 1997), pp. 405, 406 [para. 37].

Wallace, I.N.D., Contractual Relational Loss in Canada (1998), 114 L.Q.R. 370, pp. 374 to 379 [para. 43].


David Sgayias, Q.C., and Frederick B. Woyiwada, for the appellant;

James H. Smellie and M. Lynn Starchuk, for the respondent.

Solicitors of Record:

Morris Rosenberg, Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the appellant;

Osler, Hoskin & Harcourt, Ottawa, Ontario, for the respondent.

This appeal was heard on February 17, 2000, before McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour, JJ., of the Supreme Court of Can­ada.

On November 30, 2000, Iacobucci and Major, JJ., jointly delivered the following judgment in both official languages for the Supreme Court of Canada.


Martel Building Ltd. v. Canada

(2000), 262 N.R. 285 (SCC)

Supreme Court of Canada
Reading Time:
44 minutes
Arbour, Bastarache, Binnie, Gonthier, Iacobucci, Major, McLachlin 

Iacobucci and Major, JJ.
: This appeal calls for an extension of the tort of negligence to include a duty of care on parties during negotiations, during the preparation of calls for tender and during the evaluation of bids submitted in response to such calls. In each instance the respondent sought damages for pure economic loss.

Factual Background

More Insights