Dexter Construction Company v. Nova Scotia (Attorney General)

Dexter Construction Company v. Nova Scotia (Attorney General) Court Supreme Court Date 2004-08-09 Citation 2004 NSSC 160 Docket SH 165314 Judge/Registrar/Adjudicator Boudreau, Allan (Honourable Justice) Document Type Decision Relations Library Sheet - Dexter Construction Company v. Nova Scotia (Attorney General) - 2004 NSSC 160 - 2004-08-09 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Dexter Construction Company v. Nova Scotia (Attorney General), 2004 NSSC 160 Date: (2004/08/09) Docket: S.H. 165314 Registry: Halifax Between: Dexter Construction Company Limited Plaintiff v. The Attorney General of Nova Scotia representing Her Majesty The Queen in right of the Province of Nova Scotia Defendant Judge: The Honourable Justice Allan P. Boudreau Heard: November 24, 25 & 26, 2003 in Halifax, Nova Scotia Final Written Submissions: January 13, 2004 Written Decision: August 9, 2004 Counsel: George W. MacDonald, Q. C. for the plaintiff Michael T. Pugsley, for the defendant INTRODUCTION: [1] Dexter Construction Company Limited, (“Dexter”) tendered on a project for highway and bridge repair with the Department of Transportation and Public Works for the Province of Nova Scotia, (“DTPW”). The project was awarded to Dexter, it being the lowest compliant bidder. A contract was entered into between the parties shortly thereafter. A few weeks after the contract was finalized, DTPW became aware that it had made an error in its tendering documents whereby the Dexter bid could cost DTPW additional monies for repairs to the concrete deck on the CNR overpass, (“the Bridge”), portion of the project. Dexter has sued for alleged unpaid concrete removal work, being some $535,000.00, plus interest. [2] DTPW contends that Dexter knew or ought to have known that item 5.13.02 of the amended tender documents entitled, “Concrete Removal on Bridge Decks - Restoration” was in error and that it was an obvious duplicate of item 5.13.08 entitled, “Concrete Bridge Deck Repair”. Dexter bid the first item at $1,000.00 per unit and the second item at $140.00 per unit. DTPW has paid for all of the work in question at $140.00 per unit and Dexter has sued claiming it is entitled to $1,000.00 per unit in accordance with item 5.13.02 of the contract. A pivotal issue is the state of Dexter’s knowledge regarding the two items in question at the time of submitting its bid and entering into the contract for the project. FACTUAL BACKGROUND: [3] On June 5, 1999, DTPW issued a tender call for highway repair. The project had three major components, but this case is only concerned with the repair work to the Bridge. The original tender call contained page 27 which is found at tab - 19 of exhibit - 1. The three pertinent items listed on page 27 are the following: Specification (A) Unit (B) Estimated Quantity (C) Unit Price (D) & (E) Extension (F) 5.13.04 - Through Repairs - Bridge Deck Restoration (Div. 5 sec.13) (Spec. Prov.) 5.13.07 - Asphalt Concrete Removal Bridge Deck & approaches (Div.5 Sec. 13)(Spec. Prov.) 5.13.08 - Concrete Bridge Deck Repair Square Metre Lump Sum Square Metre 20.00 1.00 315.00 [4] Asphalt concrete is the technical term for what we non-technical persons know as pavement or asphalt pavement and it is not what we know as concrete or cement. Therefore, item 5.13.07 dealt with pavement and item 5.13.08 dealt with repairs to the concrete or cement part of the Bridge deck, underneath the pavement. Item 5.13.04 referred to repairs to the concrete portion of the Bridge deck which would not be just surface work, but which would go right through the concrete exposing all the steel reinforcement. [5] When Michael Rogers, a field engineer with DTPW who was in charge of this project, noticed that item 5.13.07, (pavement removal on the Bridge) was included in the Bridge repair section of the tender documents, he asked to have it removed because he had already included estimated quantities for this work in his overall project estimates for pavement removal in another section of the tender documents. Changes to the original tender documents were then made by way of addendum and circulated to the bidders. The change in question was made by Stephen Shannon, a Program Management Engineer at DTPW’s Head Office. This was done on instructions from Mr. Rogers. Mr. Shannon testified, but he could not recall how he chose clause 5.13.02 for the item changes in the addendum, but he conceded it appears to be incorrect. [6] As a result of the instructions of Mr. Rogers and the actions of Mr. Shannon, the tender documents were amended on June 17, 1999 by way of the addendum found at page 28 of tab - 19, exhibit - 1. The pertinent provisions of that addendum, which also include Dexter’s bid on each of those items, are as follows: Specification (A) Unit (B) Estimated Quantity (C) Unit Price (D) & (E) Extension (F) 5.13.02 - Concrete Removal on Bridge Decks - Restoration (Div.5 Sec.13)(Spec. Prov.) 5.13.04 - Through Repairs - Bridge Deck Restoration (Div. 5 sec.13) (Spec. Prov.) 5.13.08 - Concrete Bridge Deck Repair Square Metre Square Metre Square Metre 1.00 20.00 315.00 $1,000.00 $250.00 $140.00 $1,000.00 $5,000.00 $44,100.00 The result being that item 5.13.07 was replaced with item 5.13.02, instead of being removed entirely. An important change is not only the removal of the word “asphalt” from item 5.13.07 but the change of unit from “lump sum” to “square metre”. The addendum was issued by DTPW on June 17, 1999 and received by Dexter on June 18, 1999, three business days before the tenders closed on June 24, 1999. Dexter was advised on June 29, 1999, that it was the lowest bidder, and a contract was finalized and entered into shortly thereafter. The contract incorporated the work for Bridge deck repair as per the addendum. [7] Mr. Rogers testified he received a copy of the tender addendum in question on June 22, 1999, and that he did not review it before it went out to bidders. He did not review it until the contract had been awarded to Dexter. In other words, he did not review the change he had requested before the contract with Dexter was finalized. Mr. Rogers testified that when he saw item 5.13.02 in the contract, he contacted Donald Feeney and Jon Freeman, the Construction Manager and Project Engineers respectively, for DTPW central district, and told them that item 5.13.02 was not what he intended. Mr. Shannon had only removed the word “asphalt’ from item 5.13.07 and changed the Units to “Square Metre”, whereas Mr. Rogers apparently wanted the entire item removed. [8] Mr. Feeney testified he sees winning bids and that they are reviewed carefully by the department before a contract is awarded. He said they look carefully at how the contractor has bid the units. They review the contract for “balance” to ensure that the majority of the contract price is not required to be paid too early in the contract. Mr. Feeney also testified that unit price contracts are used in contracts such as these because it is not possible to ascertain quantities with any degree of precision. The contract always provides that unit prices cannot change if quantities vary, and that there is no limit on variance. In this case, the contract was awarded to Dexter without any one in DTPW noticing the error of including item 5.13.02 in the addendum and in the resulting contract with Dexter. [9] Cecil Vance, the General Manager for Dexter, testified that DTPW puts out tender calls for in excess of one hundred contracts per year and that Dexter bids on 80 to 90 percent of those. He stated that 40 to 60 per cent of those bids are successful. He said the first thing he does in looking at a tender call is read the special provisions to see what is out of the ordinary because they are especially important for “Unit Price” contracts such as the one in question. Mr. Vance testified that Dexter did not normally do this type of work, ie., bridge deck restoration. He said it was usually done by a different group of more specialized contractors. [10] Mr. Vance testified that there is no description of the work to be performed under item 5.13.08 anywhere in the tender documents and that item 5.13.02 is the only provision which is addressed in the specifications or the special provisions. Mr. Vance said that he did not pay any attention to the fact item 5.13.02 only showed an estimated quantity of 1.00 unit. [11] Mr. Vance testified that David Shupe, the senior estimator for Dexter, prepared the estimate for this bid. He said Mr. Shupe prepared a cost estimate for the entire project and estimated the unit cost of all the work to be performed as well as all other related costs of construction. Mr. Vance would then review that information and assess its reasonableness as well as the competitive state of the market. Dexter also obtained quotes or bids from various sub-contractors and suppliers in order to prepare its bid. The amounts bid on any particular item do not necessarily reflect the quotes received from sub-contractors. The bid can be more or less. It is the bottom line of the bid, ie., the total price, with which general contractors are most concerned. In this case, Dexter awarded the sub-contract for the work in question to Wilcraft Concrete Services Ltd., (“Wilcraft”). Wilcraft, in its quote to Dexter, bid both items 5.13.02 and 5.13.08 identically at $140.00 per unit. [12] Mr. Vance also testified that it would have been Dean Greenough, the job superintendent for Dexter on this project, who would have first made him aware of the dispute with DTPW regarding items 5.13.02 and 5.13.08. [13] Mr. Freeman testified the contract was awarded to Dexter July 6, 1999 and, that between that date and July 29, 1999, he received a telephone call from Dean Greenough, the superintendent for Dexter on this project. He said Mr. Greenough questioned item 5.13.02 and what it entailed. Mr. Freemen testified he told Mr. Greenough that it was a mistake. Mr. Freeman said that, at that first conversation, it was left open as to why 1.00 square metre was in item 5.13.02. Mr. Freeman said that, at his second telephone conversation with Mr. Greenough, he told Mr. Greenough that 1.00 square metre was not intended to be in item 5.13.02 of the contract documents. [14] Mr. Freeman and Mr. Feeney both testified to a meeting they had at the Bridge shortly after the telephone conversations with Mr. Greenough. The work had already commenced by that time. Mr. Freeman testified that Mr. Greenough was again told item 5.13.02 was an error and that DTPW intended to pay under item 5.13.08 and not 5.13.02. It appears that the parties agreed to disagree with regard to item 5.13.02 and that the parties agreed to proceed with the work nevertheless. [15] In the end, the work was completed and DTPW paid Dexter pursuant to item 5.13.08 for the total of 623.2 square metres of concrete repair work at $140.00 per square metre. Dexter was paid $87,248.00. Dexter requested payment for the 623.2 square metres at $1,000.00 per unit and claimed that item 5.13.02 applied to this work. Dexter’s main claim is therefore for $535,752.00, plus interest, compounded. As a result of this disagreement, Dexter also refused to sign a full and final release and DTPW witheld the holdback on the project. Dexter also claims interest on the holdback, the payment of which was delayed for many months after completion of the work. ISSUES: [16] - The Court is left to decide who should bear the responsibility for this contract being formed and proceeding right through to the end with item 5.13.02 included, albeit in error. - Needless to say, pertinent to this inquiry are the actions of all the parties, and in particular, the state of knowledge of the error on the part of Dexter. THE LAW: [17] It is uncontested that what we have here is a unilateral mistake on the part of DTPW. The mistake is leaving item 5.13.02 as a bidable item in the addendum to the tender documents; while at the same time omitting to have a clear work and payment reference for item 5.13.08. DTPW requests rectification of the contract in defence of Dexter’s claim for damages. In Performance Industries ltd. v. Sylvan Lake Golf & Tennis Club Ltd., [2002] S.C.J. No. 20, Justice Binnie, writing for a unanimous court on this point, stated the tests or hurdles which are preconditions to rectification at paragraph 31 as follows: ¶ 31 Rectification is an equitable remedy whose purpose is to prevent a written document from being used as an engine of fraud or misconduct “equivalent to fraud”. The traditional rule was to permit rectification only for mutual mistake, but rectification is now available for unilateral mistake (as here), provided certain demanding preconditions are met. Insofar as they are relevant to this appeal, these preconditions can be summarized as follows. Rectification is predicated on the existence of a prior oral contract whose terms are definite and ascertainable. The plaintiff must establish that the terms agreed to orally were not written down properly. The error may be fraudulent, or it may be innocent. What is essential is that at the time of execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not. Moreover, the attempt of the defendant to rely on the erroneous written document must amount to “fraud or the equivalent of fraud”. The court’s task in a rectification case is corrective, not speculative...[Emphasis added] And further at paragraph 31: ... In Hart, supra, at p. 630, Duff J. (as he then was) stressed that “[t]he power of rectification must be used with great caution”. Apart from everything else, a relaxed approach to rectification as a substitute for due diligence at the time a document is signed would undermine the confidence of the commercial world in written contracts. [Emphasis added] In the present case there was no prior oral agreement, but is clear that for DTPW to succeed in this case it must first establish that Dexter’s actions and further permitting it to take advantage of those actions would be “equivalent to fraud”. In this case, if Dexter knew or ought to have known of the error and DTPW did not, then it must amount to fraud or the equivalent of fraud for Dexter to try to enforce its claim. [18] Justice Binnie also went on to state his own caution regarding the remedy of rectification at paragraph 34 of Performance Industries, supra: ¶ 35 As stated, high hurdles are placed in the way of a business person who relies on his or her own unilateral mistake to resile from the written terms of a document which he or she has signed and which, on its face, seems perfectly clear. The law is determined not to open the proverbial floodgates to dissatisfied contract makers who want to extricate themselves from a poor bargain. [Emphasis added] [19] In the present case, the contractual documents are not perfectly clear, as contended by Dexter. There are two work items, ie., 5.13.02 and 5.13.08, both, on their face, covering concrete bridge deck repairs. A reading of all the contractual documents in question, including all the tender documents can lead one to two interpretations as to what was intended by items 5.13.02 and 5.13.08 which both ended up in the final contract. Dexter contends that, in such a case, the contra proferentum rule should be applied and the interpretation most favourable to Dexter should be enforced since it was DTPW which drafted all the terms of the contract. In my view, it is not that cut and dry because it was Dexter which completed most of the monetary components of the tender and contractual documents. [20] DTPW, at paragraph 11 of its Defence and in its submissions, has alleged that Dexter “knew, or ought to have known, that there was a mistake in the tender documents with respect to concrete removal, as noted in paragraph 10" of the Statement of Defence. Paragraph 10 of the Statement of Defence makes statements of DTPW’s intentions, and, needless to say, Dexter could not know another party’s intention. However, the reference to “ought to have known” is an apparent allegation of negligence on the part of Dexter, in failing to ascertain the true state of affairs. Is the negligence of either party relevant to the inquiry in a case such as the present; unless it amounts to the equivalent of fraud as mentioned earlier. Justice Binnie in Performance Industries, supra, commented on negligence at paragraph 36: ¶ 36 I referred earlier to the four conditions precedent, or “hurdles” that a plaintiff must overcome. To these the appellants wish to add a fifth. Rectification, they say, should not be available to a plaintiff who is negligent in reviewing the documentation of a commercial agreement. To the extent the appellants’ argument is that in such circumstances the Court may exercise its discretion to refuse the equitable remedy to such a plaintiff, I agree with them. To the extent they say the want of due diligence (or negligence) on the plaintiff’s part is an absolute bar, I think their proposition is inconsistent with principle and authority and should be rejected. [21] In the case of First City Capital Ltd. v. British Columbia Building Corp., (1989), 43 B.L.R. 29, McLachlin, C.J.S.C. (as she then was) commented on willful ignorance as follows at pages 4 and 5: There is also authority for the proposition that rescission may be granted where a party, having an indication that the other party is entering the contract under some serious mistake or misapprehension regarding a fundamental term, either proceeds on a course of wilful ignorance designed to inhibit his own actual knowledge of the other’s mistake, or deliberately sets out to ensure that the other party does not become aware of the mistake: Taylor v. Johnson, supra, at p.201. In summary therefore, the equitable jurisdiction of the courts to relieve against mistake in contract comprehends situations where one party, who knows or ought to know of another’s mistake in a fundamental term, remains silent and snaps at the offer, seeking to take advantage of the other’s mistake. In such cases, it would be unconscionable to enforce the bargain and equity will set aside the contract. [22] Therefore, it appears that wilful ignorance and negligence are both relevant to the inquiry in cases such as the present. ANALYSIS: [23] When I consider the actions of Dexter, in particular the fact that Mr. Greenough telephoned DTPW shortly after the contract was awarded to inquire what item 5.13.02 entailed, together with the testimony of Mr. Vance, which I found vague and rather evasive when he was questioned as to what he perceived when he saw item 5.13.02 with only 1.00 unit, as well as the bids of Dexter’s sub-contractors, all of which, except one, bid just about identical amounts for items 5.13.02 and 5.13.08, and one, Duron, did not bid on item 5.13.02 at all, but especially the bid of Wilcraft, the successful sub-bidder, which bid identical amounts of $140.00 for both items, I find that Dexter knew, or ought to have known that something was amiss between items 5.13.02 and 5.13.08. [24] I come to this conclusion taking note of the fact that Unit Price Contracts are bid all over the map and also that unit prices do not necessarily reflect the cost to the general contractor. Numerous examples of this were given at trial. It is the bottom line which appears to govern and drive the game of the tendering process. I am also cognisant of the fact Dexter had very little, if any, previous experience with concrete bridge deck restoration. It is also noteworthy that we have no information or evidence on this issue from Mr. Shupe, Dexter’s senior estimator who compiled the bid, nor from Mr. Greenough, the project’s superintendent who telephoned DTPW shortly after the tender was awarded to Dexter to inquire what item 5.13.02 entailed. [25] What was Dexter legally obligated to do, if, as I have found, it was most probably aware that something was amiss with the two items in question? I am not able to conclude, on a balance of probabilities, that Dexter was initially aware of all the financial ramifications of its bid, but only that Dexter was aware something was probably problematic. In view of those findings, I am not able to conclude that Dexter’s actions at the time of entering in the contract amounted to “fraud, or the equivalent of fraud”. [26] In Windjammer Homes Inc. v. Generation Enterprises (1989) 43 B.L.R. 315 (B.C.S.C.), Justice Lander commented as follows on the question of knowledge: Implicit in finding constructive knowledge, or possibly as a second element of equitable fraud, is that the party seeking to enforce the contract acted in such a way as to gain an advantage unfairly or in bad faith. [Emphasis added] In the circumstances, I am unable to conclude that Dexter, in not bringing the anomaly between the two items in question to the attention of DTPW prior to finalizing the contract, was attempting to gain an advantage unfairly, or in bad faith. However, as I shall discuss later, that does not mean that Dexter was not at fault or negligent for not doing so. [27] While I am not able to conclude that Dexter’s inaction after being aware of a potential problem between items 5.13.02 and 5.13.08 amounted to fraud or an attempt to defraud DTPW, it would certainly now be inequitable and move the case to the “equivalent of fraud” category if the Court were, in the circumstances, to award Dexter the amount claimed. [28] If Dexter was aware of an apparent or probable problem in the tender documents with regard to the two items in question, did it have any obligation or duty to bring it to DTPW’s attention? In this case, I find that the parties owed a duty to each other by virtue of the direct contractual relationship between them. There can be no closer proximity than that in business dealings. What Dexter appears to be arguing is that if DTPW was negligent in the preparation of the tender addendum, then it must bear the full brunt of that negligence. In my view, there can be no doubt that DTPW was negligent in the preparation and subsequent distribution of the addendum in question without it being checked or reviewed by the person who directed the change, or anyone else for that matter, until after the contract with Dexter had been finalized. Does that alone prevent DTPW from asserting any remedy? Based on the comments of Binnie, J. at paragraph 36 of the Performance Industries case, supra, I find that it does not. [29] On the other hand, did Dexter owe a duty to DTPW to bring any apparent or potential problems of which it was aware to the attention of DTPW. Recent cases in Nova Scotia have interpreted duty very broadly, to include acting reasonably in one’s own interest. In Sydney Co-Op Society v. Coopers and Lylerand (2002), 213 N.S.R. (2nd) 115, Justice LeBlanc of this Court said the following at paragraph 171: [171] I accept the defendant’s argument that in assessing whether or not the plaintiff’s are contributorily negligent for the loss they sustained, it is not a question of a standard of care test but whether they acted reasonably for their own safety. In the above noted quote, the word “interest” could be substituted for the word “safety”. The interests of Dexter obviously include the finalization of a bid or contract on terms which are mutually understood and accepted by the parties. Surely the tendering process should not be allowed to degenerate to something less. [30] In Hustins Enterprises v. Byrne Architects. [2002] N.S.R. (2nd) Uned. 96, our Court of Appeal appears to also adopt the broader concept of fault when Hamilton, J.A. stated the following at paragraph 56: [56] . . . It is trite to say that the doctrine of causation requires that Hustins only receive damages from Byrne for the loss caused by Byrne’s breach of contract. If Hustins suffered a loss due to its own unreasonable conduct it must bear the cost itself of its contributory fault. [31] I find Dexter owed a duty to DTPW by virtue of the contractual relationship between the two. I also find that Dexter breached that duty by choosing a course of inaction which resulted in the ambiguous contract of which Dexter now complains. As stated earlier, I have no hesitation in finding that DTPW was also at fault in the preparation and distribution of the addendum in question, the subsequent review of the Dexter bid and the ultimate contract. CONCLUSION: [32] In the circumstances, for the reasons already mentioned, I find that Dexter’s conduct was unreasonable in not bringing an anomaly in the tender documents, of which I have found it was aware, to the attention of DTPW. [33] I therefore find that both parties were at fault or to blame for the ambiguous contract which resulted. In the circumstances, I am unable to conclude that one party is more at fault than the other. I find that each party is equally at fault or negligent for the ambiguous contract and each party must therefore bear the financial consequences of this anomaly equally. DAMAGES: [34] It remains to be decided what damages flow from the joint and equal fault of the parties with regard to the resulting ambiguous contract. The difference between the two possible positions regarding payment under the ambiguous contract is, as stated previously, the sum of $535,752.00. Dexter shall therefore have judgment against DTPW for one half that amount, being $267,876.00, plus prejudgment interest at the rate of 5.5% per annum from the time final payment on the project was due, inclusive of the release impass period, to the date of entering judgment. In the circumstances, Dexter shall also have judgment for interest, also at the 5.5% rate, on the withheld holdback from the time payment was due, inclusive of the release impass period, to the date the holdback was paid. [35] Dexter had claimed all interest on a compound basis; however, the evidence does not convince me that I should award such interest. I am not satisfied that the end result of this project caused additional equivalent interest to be paid by Dexter, on a compounded basis. I found the evidence unconvincing in this regard. I therefore award simple interest only. [36] I will grant an order accordingly, including costs if the parties can agree. If the parties cannot agree on the costs, I will entertain submissions from the parties in chambers or in writing, at a mutually convenient time. Boudreau, J.