MJB Ent. Ltd. v. Defence Constr. Co. (1999), 237 N.R. 334 (SCC)
MLB Headnote and full text
[French language version follows English language version]
[La version française vient à la suite de la version anglaise]
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Temp. Cite: [1999] N.R. TBEd. AP.018
M.J.B. Enterprises Ltd. (appellant) v. Defence Construction (1951) Limited and the said Defence Construction (1951) Limited carrying on business as Defence Construction Canada and the said Defence Construction Canada (respondent)
(25975)
Indexed As:
M.J.B. Enterprises Ltd. v. Defence Construction (1951) Co. et al.
Supreme Court of Canada
Lamer, C.J.C., Cory, McLachlin,
Iacobucci, Major, Bastarache and
Binnie, JJ.A.
April 22, 1999.
Summary:
The defendants invited tenders for the construction of a pump house, installation of a water distributing system and the dismantling of a water tank on a military base. MJB was the second lowest tenderer. MJB contended that the lowest tender was invalid and that MJB should have been awarded the contract. MJB sued the defendant for damages.
The Alberta Court of Queen’s Bench, in a decision reported at 164 A.R. 399, dismissed the action. MJB appealed.
The Alberta Court of Appeal, in a decision reported at 196 A.R. 124; 141 W.A.C. 124, dismissed the appeal. The plaintiff, although unsuccessful, sought to deprive the defendants of their costs on appeal. The Court of Appeal, in a decision reported at 200 A.R. 372; 146 W.A.C. 372, held that there was no reason to depart from the general rule that costs should follow the event. MJB appealed.
The Supreme Court of Canada allowed the appeal, awarded the agreed to damages and remitted the two disputed damage issues to trial for assessment.
Building Contracts – Topic 1302.2
Tender calls – General – Privilege clause – [See
Building Contracts – Topic 1345
].
Building Contracts – Topic 1304
Tender calls – General – Effect of tender by builder – The Supreme Court of Canada discussed its 1981 decision in Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission – The court stated that it was always possible that a “Contract A” did not arise upon the submission of a tender or that if Contract A did arise, the irrevocability of the tender was not one of its terms, all this depending upon the terms and conditions of the tender call – The court also stated that it did not wish to endorse Ron Engineering’s characterization of Contract A as a unilateral contract – See paragraphs 15 to 20.
Building Contracts – Topic 1345
Tender calls – The tender contract – Interpretation – The defendants invited construction tenders and accepted the lowest tender – However, the lowest tender was invalid because it contained a qualification – The invitation to tender contained a privilege clause which stated that “[t]he lowest or any tender shall not necessarily be accepted” – The plaintiff, the second lowest tenderer, sued the defendants for damages – The Alberta Court of Appeal held that the privilege clause was a complete defence to the action – The plaintiff appealed – The Supreme Court of Canada allowed the appeal – The court held that: “Contract A” arose upon the submission of the tender; Contract A contained no explicit term imposing an obligation to award Contract B (the construction contract) to the lowest valid tender; Contract A contained an implied term that only a compliant tender would be accepted (but not necessarily the lowest compliant tender); and the privilege clause did not override the obligation to accept only compliant bids.
Building Contracts – Topic 1385
Tender calls – Breach of tender – Action for breach – [See
Building Contracts – Topic 1345
].
Building Contracts – Topic 1389
Tender calls – Breach of tender – Damages – The defendants invited construction tenders – MJB was the second lowest tenderer – MJB contended that the lowest tender was invalid and that MJB should have been awarded the contract – MJB sued the defendant for damages for breach of contract – The Supreme Court of Canada allowed the action, holding, inter alia, that the damages were not too remote – The court awarded the agreed to damages and remitted the two disputed damage issues to trial for assessment – See paragraphs 55 to 61.
Contracts – Topic 1270
Formation of contract – Tender calls – Bid – Effect of – [See
Building Contracts – Topic 1304
].
Contracts – Topic 1276
Formation of contract – Tender calls – Breach of tender – [See
Building Contracts – Topic 1345
and
Contracts – Topic 3523
].
Contracts – Topic 3523
Performance or breach – Breach – What constitutes a breach – The defendants invited construction tenders – MJB was the second lowest tenderer – MJB contended that the lowest tender was invalid and that MJB should have been awarded the contract – MJB sued the defendant for damages for breach of contract – The Supreme Court of Canada stated that acting in good faith or thinking that one had interpreted the contract correctly were not valid defences to an action for breach of contract – See paragraph 54.
Cases Noticed:
Ron Engineering & Construction (Eastern) Ltd. v. Ontario and Water Resources Commission, [1981] 1 S.C.R. 111; 35 N.R. 40, refd to. [para. 1].
Megatech Contracting Ltd. v. Carleton (Regional Municipality) (1989), 34 C.L.R. 35 (Ont. H.C.), refd to. [para. 8].
Bate Equipment Ltd. et al. v. Ellis-Don Ltd. et al. (1992), 132 A.R. 161 (Q.B.), affd. (1994), 157 A.R. 274; 77 W.A.C. 274 (C.A.), leave to appeal dismissed [1995] 2 S.C.R. v; 190 N.R. 398; 193 A.R. 78; 135 W.A.C. 78, refd to. [para. 8].
Martselos Services Ltd. v. Arctic College, [1994] 3 W.W.R. 73 (N.W.T.C.A.), leave to appeal dismissed [1994] 3 S.C.R. viii; 178 N.R. 80, refd to. [para. 11].
Blackpool & Fylde Aero Club Ltd. v. Blackpool Borough Council, [1990] 3 All E.R. 25 (C.A.), refd to. [para. 20].
Hughes Aircraft Systems International v. Airservices Australia (1997), 146 A.L.R. 1 (F.C.), refd to. [para. 20].
Pratt Contractors Ltd. v. Palmerston North City Council, [1995] 1 N.Z.L.R. 469 (H.C.), refd to. [para. 20].
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. 27].
Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1; 152 D.L.R.(4th) 1, refd to. [para. 27].
Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986; 136 N.R. 40; 53 O.A.C. 200; 91 D.L.R.(4th) 491, refd to. [para. 27].
Cartwright & Crickmore Ltd. v. MacInnes, [1931] S.C.R. 425, refd to. [para. 44].
Acme Building & Construction Ltd. v. Newcastle (Town) (1992), 2 C.L.R.(2d) 308 (Ont. C.A.), agreed with [para. 46].
Glenview Corp. v. Canada (1990), 34 F.T.R. 292 (T.D.), refd to. [para. 47].
Chinook Aggregates Ltd. v. Abbotsford (Municipal District) (1987), 28 C.L.R. 290 (B.C. Co. Ct.), affd. (1989), 35 C.L.R. 241 (B.C.C.A.), refd to. [para. 50].
Kencor Holdings Ltd. v. Saskatchewan, [1991] 6 W.W.R. 717; 96 Sask.R. 171 (Q.B.), refd to. [para. 50].
Welsh (Fred) Ltd. v. B.G.M. Construction Ltd., [1996] 10 W.W.R. 400 (B.C.S.C.), refd to. [para. 50].
Wimpey (George) Canada Ltd. v. Hamilton-Wentworth (Regional Municipality) (1997), 40 O.T.C. 68; 34 C.L.R.(2d) 123 (H.C.), refd to. [para. 50].
Twin City Mechanical v. Bradsil (1967) Ltd. and Ontario (1996), 27 O.T.C. 1; 31 C.L.R.(2d) 210 (Ont. Gen. Div.), refd to. [para. 50].
Thompson Brothers (Construction) Ltd. v. Wetaskiwin (City) (1997), 205 A.R. 185; 34 C.L.R.(2d) 197 (Q.B.), refd to. [para. 50].
Hadley v. Baxendale (1854), 9 Exch. 341; 156 E.R. 145, refd to. [para. 57].
Cornwall Gravel Co. v. Purolator Courier Ltd., Levert and Boisvenue (1978), 32 N.R. 597; 83 D.L.R.(3d) 267 (Ont. H.C.), affd. (1979), 32 N.R. 596; 115 D.L.R.(3d) 511 (Ont. C.A.), affd. [1980] 2 S.C.R. 118; 32 N.R. 594, refd to. [para. 59].
Workers’ Compensation Board (Alta.) v. Riggins et al. (1992), 131 A.R. 205; 25 W.A.C. 205; 5 Alta. L.R.(3d) 66, agreed with [para. 61].
Authors and Works Noticed:
Blom, Joost, Mistaken Bids: The Queen v. Ron Engineering & Construction Eastern Ltd. (1981-82), 6 Can. Bus. L.J. 80, p. 91 [para. 18].
Fridman, Gerald Henry Louis, Tendering Problems (1987), 66 Can. Bar Rev. 582, p. 591 [para. 18].
Fridman, Gerald Henry Louis, The Law of Contract in Canada (3rd Ed. 1994), p. 476 [para. 29].
Goldsmith, Immanuel, Canadian Building Contracts (4th Ed. 1988) (Looseleaf), p. 1-20 [para. 45].
Nozick, R.S., Comment on The Province of Ontario and the Water Resources Commission v. Ron Engineering and Construction (Eastern) Ltd. (S.C.C.) (1982), 60 Can. Bar Rev. 345, p. 350 [para. 18].
Swan, John, Comment on The Queen v. Ron Engineering & Construction (Eastern) Ltd. (1981), 15 U.B.C.L. Rev. 447, p. 455 [para. 18].
Waddams, Stephen M., The Law of Contracts (3rd Ed. 1993), para. 159 [para. 18].
Counsel:
W. Donald Goodfellow, Q.C., and Eugene Meehan, for the appellant;
Larry M. Huculak, for the respondent.
Solicitors of Record:
W. Donald Goodfellow, Calgary, Alberta, for the appellant;
Department of Justice Canada, Edmonton, Alberta, for the respondent.
This appeal was heard on November 6, 1998, by Lamer, C.J.C., Cory, McLachlin, Iacobucci, Major, Bastarache and Binnie, JJ., of the Supreme Court of Canada.
On April 22, 1999, Iacobucci, J., delivered the following judgment for the court in both official languages.
