Tercon Contractors Ltd. v. British Columbia (Ministry of Transportation)
On July 10, 2008, the Supreme Court of Canada granted leave to appeal and will hear the appeal of Tercon Contractors Ltd. ("Tercon"). Previously, the British Columbia Court of Appeal had overturned the trial court's decision which awarded Tercon $3,300,000.00 in damages. At issue in the case is the government's reliance on an exclusion of liability clause contained in the RFP documents that accompanied a call for submissions on a project for the British Columbia Ministry of Transportation ("Ministry").
The Trial Decision
The facts of the case were as follows:
- The project involved the construction of 25 kilometres of
highway over very challenging terrain in the Nass Valley,
British Columbia. Tercon responded to Request For Expression
of Interest ("RFEI") as did Brentwood Enterprises
- In total, six proponents responded to the
- Subsequently, an RFP was issued that provided: 2.8 (a)
Eligibility Only the six Proponents, qualified through the
RFEI process, are eligible to submit responses to this RFP.
Proposals received from any other party shall not be
- The RFP also contained a clause precluding the proponents
from making any claims for damages relating to their
participation in the RFP process.
- Tercon submitted a bid.
- Brentwood did not submit a bid on its own but instead
joined with Emil Anderson Construction Co. ("EAC")
in submitting a bid.
- The joint venture was not a pre-qualified bidder.
- The trial judge concluded that the owner was aware that
they were dealing with a joint venture and not with Brentwood
- The trial judge also concluded that the owner went to
great lengths to disguise the nature of the relationship in
awarding the contract to Brentwood in name only and not the
- The court held that, as the submission was from the joint
venture and not from Brentwood, it was non-compliant.
- The trial judge concluded that the Ministry breached
Contract A (the "contract" created when a bid is
submitted) in two respects. Firstly, by accepting a bid that
was incapable of being accepted by reason of being
non-compliant. Secondly, for treating Tercon unfairly in the
evaluation process by approving a non-compliant bid. (See
paragraph 138 of the reasons.)
- The court then had to consider the effect of the
exclusion of damages clause contained in the RFP
- The Ministry relied on paragraph 2.10 of the RFP to
protect it from liability. That clause provided:
"Except as expressly and specifically permitted in
these Instructions to Proponents, no Proponent shall have any
claim for any compensation of any kind whatsoever, as a
result of participating in this RFP, and by submitting a
proposal each Proponent shall be deemed to have agreed it has
- The court, having concluding that there was a breach of
Contract A by the Ministry, found that the exclusion of
liability clause could not be relied upon by the Ministry
and, at paragraph 148 of the trial decision, stated:
Section 2.10 is broadly drafted to exclude 'any
claim for any compensation of any kind whatsoever as a result
of participating in this RFP'. It does not refer to
the contract A agreement or to any specific liability that is
sought to be avoided. Particularly, it does not specifically
exclude liability for damages for fundamental breach of
contract A or for acceptance of a non-compliant bid. It is
unclear exactly what 'participating' means.
In this case, it is inconceivable that, given the
preparation, detail, and expense required to submit a bid
based upon elaborate tender documents, the practice and legal
requirement to accept only complaint bids, and the
eligibility requirements in the RFP, that Tercon would have
agreed that the Ministry could accept a non-compliant bid
without legal recourse against the Ministry for damages for
breach of contract. It is equally inconceivable that the
Ministry could expect to fundamentally breach the contract
and expect a bidder to accept that they had no legal recourse
after it had submitted a compliant bid itself. The ambiguity
in section 2.10 must be resolved in favour of the plaintiff.
The clause does not apply to these breaches.
- The court, in dealing with the enforceability of the
exclusion clause, went on to state: In the circumstances
here, it is neither fair nor reasonable to enforce the
exclusion clause. Although both parties are sophisticated, it
could not have been contemplated that there would be no
recourse if the Ministry accepted a non-compliant bid: to
suggest otherwise would change the base of the tender system
without notice. Enforcement of the exclusion clause in these
circumstances would not give effect to the intention of the
parties and would render the duty of fairness that underlies
the dealings between the owner and bidder meaningless. The
conduct of the Ministry deprived the plaintiff any benefit
under the contract, including the opportunity to conclude a
contract B and to eventually construct the Kincolith
Extension. The Ministry acted egregiously when it knew or
should have known that the Brentwood bid was not compliant
and then acted to incorporate EAC indirectly in contract B
whilst ensuring that this fact was not disclosed. These
circumstances do not lead the court to give aid to the
defendant by holding the plaintiff to this clause.
The Court of Appeal Decision
The British Columbia Court of Appeal, in overturning the trial decision, agreed that there had been a fundamental breach of Contract A, but found the exclusion clause was enforceable. The appeal court stated:
In my respectful opinion, the judge followed a rational sequence in her analysis on a correct understanding of the law. I differ from her in only one crucial respect, and that is the interpretation of the clause. I appreciate the force of the argument advanced by the respondent that the integrity of the bidding process, especially for public works, should be given high value: see Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5, 25 B.C.L.R. (4th) 214. But I find the words of the exclusion clause so clear and unambiguous that it is inescapable that the parties intended it to cover all defaults, including fundamental breaches.
The Court of Appeal gave effect to the exclusion clause and overturned the $3,300,000.00 judgment.
The Supreme Court of Canada
When the Supreme Court of Canada elects to hear an appeal and grants leave to appeal, it does not provide reasons as to why it is interested in hearing the appeal. When the Supreme Court of Canada ultimately hears the appeal, it will have the opportunity to deal with the scope and parameter of Contracts A and B, the duty of fairness, the implications of dealing with non-compliant bidders and the exclusion of liability clause that was introduced in the RFP process. The Supreme Court of Canada's decision will hopefully address all of these issues and provide greater clarity of the obligations that parties have to one another in the bidding process and whether an owner can limit or exclude liability in instances where there has been a clear violation of the obligations imposed through the bidding process.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.