T-3366-72
Wilfrid Nadeau Inc. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Walsh J. Quebec, November 30
and December 1, 1976; Ottawa, January 20, 1977.
Crown—Tort—Whether liability arises only where duty
owed—Contract awarded to higher bidder than plaintiff—
Whether Crown servants made faulty recommendations—
Whether Treasury Board acted solely on basis of such recom-
mendations—Public Works Act, R.S.C. 1970, c. P-38, s.
16(2)—Financial Administration Act, R.S.C. 1970, c. F-10, s.
34—Government Contract Regulations, s. 7(2) Crown Liabil
ity Act, R.S.C. 1970, c. C-38—Quebec Civil Code, art. 1053.
Plaintiff claims that servants of the Crown were negligent in
that information they supplied to the Treasury Board concern
ing his capacity to fulfil a contract was false and that they
ought to have described their method of calculating the final
cost of an undertaking in their recommendation to the Treasury
Board. Defendant claims that the Crown Liability Act only
provides for actions against individual servants and not groups
of servants.
Held, the action is dismissed. The plaintiff failed to prove
that the recommendations made to the Treasury Board were
negligent or prejudicial: the opinions the Crown servants
expressed might be questionable, but there was no evidence
adduced that they were made with malice or with political
considerations in mind.
The Queen v. Wilfrid Nadeau Inc. [1973] F.C. 1045,
discussed. Cleveland-Cliffs SS. Co. v. The Queen [1957]
S.C.R. 810, distinguished.
ACTION.
COUNSEL:
R. Bélanger, Q. C., for plaintiff.
J. C. Ruelland and J. M. Aubry for
defendant.
SOLICITORS:
Raynold Bélanger, Quebec, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
WALSH J.: This action arises out of the award
by the Minister of Indian Affairs and Northern
Development of a contract for the construction of
about five miles of highway in the La Mauricie
National Park in Quebec, with the approval of the
Treasury Board as required by law, for which
contract plaintiff had tendered a total price of
$984,864 and complied with all the other condi
tions of the tender, to another tenderer, A. Pla-
mondon & Fils Inc., the second lowest bidder
whose bid was, however, some $4,000 higher at
$988,512. Plaintiff claims damages in the amount
of $285,928 which it claims it would have made on
the contract and an additional $100,000 arising
from the fact that it had not, in anticipation of
being awarded the contract, accepted any other
winter work with the result that its men and
equipment remained inactive for a considerable
period of time.
Plaintiff's tender was made on August 22, 1972,
accompanied by the required deposit of $62,000.
Clause 20 of the Instructions to Tenderers includ
ed the usual condition "The Minister reserves the
right to reject any or all tenders, and the lowest or
any tender will not necessarily be accepted." At
first sight this clause might appear to dispose of
the matter but a motion to strike the statement of
claim as disclosing no cause of action as a result of
this clause was dismissed by the then Associate
Chief Justice Noël on February 1st, 1973. The
dismissal of this motion was appealed and by
judgment of the Court of Appeal dated November
26th, 1973, the judgment was confirmed'. Apart
from suggesting that this argument might perhaps
have more properly been raised by seeking a deter
mination of a question of law pursuant to Rule 474
of the Rules of this Court, the appeal judgment
pointed out that after the respondent (i.e. the
plaintiff) had had discovery it might turn out that
what it has pleaded would constitute an arguable
case of fault under Article 1053 of the Quebec
Civil Code. The learned Chief Justice Jackett in
writing the judgment of the Court stated at page
1046:
1 [1973] F.C. 1045.
It must at least be arguable that a person who has been misled
into becoming a bidder for a construction contract in a compe
tition that had been "fixed" from the outset has a claim under
Article 1053 for any expenses or losses directly resulting from
his having been invited to become a bidder in such a "fixed"
competition. That being so it cannot be said that it is obvious
that the allegations in the Declaration in this case disclose no
cause of action.
In addition, the question as to whether section 7(2) of the
Government Contracts Regulations, 2 which requires Treasury
Board authority "to pass by the lowest tender", confers some
right on the lowest tenderer is also a question that a judge of
first instance might properly regard as one that should not be
dealt with on a simple motion to strike out under Rule 419
because the correct answer to that question is not obvious until
after more elaborate argument than that presented to him.
In addition to the provision of the Government
Contracts Regulations (supra) the necessity of
special approval when a contract is not given to the
lowest tenderer appears from section 16(2) of the
Public Works Act 3 which reads as follows:
16. (2) In all cases in which it seems to the Minister not to
be expedient to let such work to the lowest tenderer, he shall
report the same and obtain the authority of the Governor in
Council before passing by such lowest tender.
By section 3 of the Financial Administration Act 4
the Treasury Board is constituted as a committee
of the Queen's Privy Council for Canada. By
subsection (3) of section 5 of the Financial
Administration Act the Governor in Council may
authorize the Treasury Board to exercise any of its
powers under, inter alia, section 34 of the Act.
Section 34 refers to the making of regulations by
the Governor in Council respecting conditions
under which contracts may be entered into and to
direct that no contract in which payments are
required in excess of amounts specified by the
Governor in Council shall be entered into unless it
has been approved by the Governor in Council or
the Treasury Board. It is apparent that for the
2 Section 7(2) of the then applicable Government Contracts
Regulations [SOR/64-390] reads as follows:
(2) Where tenders have been obtained pursuant to subsec
tion (1) and it appears to the contracting authority not to be
expedient to let the contract to the lowest tenderer, the
contracting authority shall obtain the approval of the Trea
sury Board to pass by the lowest tender.
3 R.S.C. 1970, c. P-38.
4 R.S.C. 1970, c. F-10.
purposes of the awarding of this contract the
approval by the Treasury Board had the same
force and effect as approval by the Governor in
Council. Section 28 of the Federal Court Act
giving wide powers of review of decisions of federal
boards, commissions or other tribunals to the
Court of Appeal specifically states in subsection
( 6 ):
Notwithstanding subsection (1), no proceeding shall be taken
thereunder in respect of a decision or order of the Governor in
Council, the Treasury Board, a superior court or the Pension
Appeals Board or in respect of a proceeding for a service
offence under the National Defence Act.
Certainly a fortiori the Trial Division has no right
to review such a decision.
Plaintiffs present proceedings cannot therefore
be based on the decision of the Treasury Board to
award the contract to A. Plamondon & Fils Inc.
rather than to itself but must rest on proving fault
on the part of Crown servants as such in the
recommendations made by them to the Treasury
Board on which its decision was based, that not
only were the recommendations made false,
incomplete or misleading, but that it was as a
result of such recommendations that Treasury
Board gave its approval, and that but for such
recommendations it would instead have approved
plaintiffs tender. This very evidently poses a heavy
burden of proof on plaintiff, but in view of the
decision of the Court of Appeal, proof of a nature
which it is entitled to attempt to make.
Article 1053 of the Quebec Civil Code reads as
follows:
Every person capable of discerning right from wrong is
responsible for the damage caused by his fault to another,
whether by positive act, imprudence, neglect or want of skill.
This is not substantially different from common
law rules of tort, and plaintiff emphasizes that acts
of "imprudence" or "neglect" can be sufficient to
found an action in damages. Defendant made ref
erence to sections 3(1)(a) and 4(2) of the Crown
Liability Acts which read respectively as follows:
5 R.S.C. 1970, c. C-38.
3. (1) The Crown is liable in tort for the damages for which,
if it were a private person of full age and capacity, it would be
liable
(a) in respect of a tort committed by a servant of the
Crown,...
4. (2) No proceedings lie against the Crown by virtue of
paragraph 3(1)(a) in respect of any act or omission of a servant
of the Crown unless the act or omission would apart from the
provisions of this Act have given rise to a cause of action in tort
against that servant or his personal representative.
and contended that since no specific allegation of
fault was made against any individual Crown ser
vant the present action could not lie against the
Crown. I would not go this far in interpreting the
limiting provisions of section 4(2) as it would
appear to me that liability can still accrue to the
Crown for a collective act or omission of a number
of servants all of whose actions or omissions con
tributed, though perhaps in a small way, to the
fault complained of which resulted in the recom
mendation to the Treasury Board which plaintiff
complains of as being the cause or origin of the
damages. Interpreted in this way there would be
no apparent conflict between the provisions of the
Crown Liability Act and Article 1053 of the
Quebec Civil Code in its application to the facts of
this case.
The recommendation to the Treasury Board
which resulted in the contract being awarded to A.
Plamondon & Fils Inc. contained the following
statements with respect to plaintiff:
The financial and construction ability of the low bidder Wilfred
Nadeau Inc. was checked through various sources to establish
his ability to carry out this size of project.
This is an extremely complex piece of work which requires
special qualifications and equipment.
Although the low bidder has performed normal road work
contracts in the range of $200,000 to $500,000, it is doubtful if
he could carry out a contract of this value and complexity.
It appears from all reports that he does not have sufficient nor
the specialized equipment required to complete works where
accelerated completion is a requirement.
Although we understand there has been improved financial
performance lately, there is a record of writs issued in favour of
several suppliers and sub-contractors, and earlier, in 1966 this
firm made an offer of compromise to creditors at 200 on the
dollar which was accepted by the majority of creditors.
Should the Department be required to accept the low bid, it
would be necessary to provide additional resident supervision in
order to ensure compliance with project specification and com-
pletion requirements, thereby increasing the cost of the total
project.
It is plaintiff's contention that this information is
false and inaccurate both with respect to its
qualifications and its financial position.
At the trial Henri Gélinas, engineer in the
employ of plaintiff at the time testified that he had
examined the plans before making the tender and
had visited the site and walked it on foot. The
company had the equipment and manpower
needed and could easily have completed the con
tract within the year allotted. Any supplies needed
could readily be obtained and he considered it a
very normal road building project and in fact in
many ways easier than some the company had
accomplished because it was a new road so they
would not encounter any interference from traffic
as in the case of widening or improving existing
roads which the company had done. The company
had had occasion to move 11 or 12 times as much
earth on other projects. He submitted a table
showing that plaintiff had done road work in 1972
and 1973 to a total value of $3,602,572 and
another table showing that if they had been able to
do it at the unit prices quoted for the subject
contract the work done by the company in 1972
would have had a value of $2,789,700 and that
done in 1973, $3,022,517. This was because higher
unit prices had been quoted for the La Mauricie
project than for the roads projects undertaken for
the provincial government which had involved
greater volumes of earth moving and supply of
road building materials and hence lower unit
prices. He calculated that their total profit on the
contract would have been $285,928 and that after
the tenders were opened and they found their bid
was the lowest they then made no bids for other
contracts with the result that by the spring of 1973
they were forced to put in a very low bid to get
some work to keep their equipment in use and it
was not until the autumn of 1973 that the com
pany finally secured another large contract, and
accordingly another $100,000 was lost. When the
company bid on the subject contract all the
projects which had been undertaken in the spring
of 1972 were nearly finished so that their equip
ment would have been available for winter work on
this contract which could readily have been done.
The bids were opened on August 22, 1972, but
by telegram of August 30 the company was
advised by G. J. Bowen, Director of Technical
Services for the Department that the delay for
acceptance of the offer was extended to October
21, 1972, pursuant to section 11 of the tender
which permitted this. It was on September 28,
1972 that the Treasury Board authorized the
awarding of the contract to A. Plamondon & Fils
Inc. pursuant to the recommendation of the
Department of Indian Affairs and Northern De
velopment dated September 19, 1972. On October
3, 1972, plaintiff's tender deposit cheque in the
amount of $62,000 was returned to it with a
covering letter from Mr. Bowen. In reply to a
demand by telegram from plaintiff for the reasons
why its tender was refused Mr. Bowen wrote the
company on October 12, 1972, stating that before
awarding a contract of this size and complexity to
a contractor the Department inquires as to its
construction experience and financial means, that
as a result of their inquiry it appeared that plain
tiff company had not yet undertaken such a com
plex or large scale contract, and furthermore that
its liquid funds were somewhat limited and that it
also had had some financial difficulties. Accord
ingly, because of the nature of the undertaking and
its ecological aspects it had been decided to give
the contract to A. Plamondon & Fils Inc. of
Grand'mère which had successfully concluded
equally important works and which had a satisfac
tory financial position. Attention was drawn to the
fact that by Article 20 of the contract the right
was reserved to refuse any bid and that the lowest
or any other submission need not necessarily be
accepted.
The witness Gélinas testified that between
August 22 and October 9 no employee of the
Crown had ever indicated to him that there was
any doubt as to plaintiff's competence to carry on
the work, the first intimation to this effect being
the letter of October 12, nor did anyone ask for
any additional information from him as to the
financial position of the company. He stated that
Mr. Albert Nollet, the engineer for the Depart
ment of Indian Affairs in its Quebec office had
told him that it was not he who had made these
comments with respect to plaintiff.
A number of witnesses were called to testify as
to the competency and financial stability of plain
tiff. Mr. Roland Labrie, who was in 1972 an
accountant for the Roads Department of the Prov
ince of Quebec, testified that he had known the
plaintiff firm which was recognized as being a
substantial one and it was never necessary for him
to make joint cheques payable to them and a
subcontractor as was often done with other con
tractors whose financial position was less secure.
Alexandre Phabert, Director of the Provincial
Bank in Lévis at the time, which bank certified
plaintiff's cheque for $62,000 deposited with its
tender, testified that the company dealt regularly
with the bank and that if it had been awarded the
contract it would no doubt have been assigned to
the bank against advances, which is the normal
practice. The bank regularly financed plaintiff's
contracts and plaintiff had a good record with
them. Some advances to plaintiff have been made
for amounts up to $475,000.
Jules Simard, an engineer with the Department
of Transport in Quebec in 1972 testified that he
had a telephone call from someone in the Indian
Affairs Department, and that he advised them that
plaintiff company had previously done work for his
department and had fulfilled all its obligations. He
stated that as an engineer he does not consider
that the subject contract presented any particular
difficulties.
Mr. Albert Nollet, an engineer who was with
the Department of Indian Affairs and Northern
Development in 1972, testified that he had worked
in the Quebec office for several years and he was
asked to make an inquiry respecting the Nadeau
firm. He had been in Quebec since 1967 and the
name of the company was not unknown to him,
although perhaps not as well known as some
others. He made inquiries from various colleagues,
who suggested that he communicate with the Pro-
vincial Roads Department and Quebec Hydro. The
latter company stated that Wilfrid Nadeau Inc.
had a small contract with them which was not yet
finished but that they considered it to be a com
petent contractor as it now had a full-time engi
neer. The Roads Department also confirmed to
him that they had had no financial problems with
the Nadeau firm. He then transmitted this infor
mation to Ottawa. He was shown a letter dated
September 15, 1972, addressed to Mr. G. J.
Bowen, Director of the Technical Services Branch
written by A. B. Sainthill for Mr. J. G. Cham
pagne, the Acting Chief of the Finance and
Administration Division which purported to give
the substance of Mr. Nollet's telephone report of
his inquiries from Quebec Hydro and the Minister
of Works. Respecting the information allegedly
received by Mr. Nollet from the Provincial Minis
ter of Works it is stated "This agency considers
Nadeau both financially and technically com
petent to undertake roads projects having a value
up to $1,000,000 each and it is suggested that for
larger contracts, particularly those having
accelerated completion requirements, the contrac
tor might experience difficulties due to a lack of
adequate equipment and organization". Before the
figure $1,000,000 there is inked in the word "half'
with a marginal initialling identified as being Mr.
Champagne's initials. The second page of the
letter states:
Mr. Nollet is investigating other agencies for whom this con
tractor has undertaken road construction work. If the informa
tion received is inconsistent with that reported above, he will
advise Mr. Bowen personally immediately the information
comes to his attention.
On the basis of the information received to date, it would
appear that Wilfrid Nadeau Incorporated should be able to
carry out the subject contract provided the contractor supple
ments his equipment and organization. These matters could be
satisfactorily arranged by meeting with Nadeau prior to award.
It is evident therefore that as of September 15,
1972, the reports made to Mr. Bowen did not in
any way indicate that the contract should not be
given to the plaintiff company. Despite this on
September 19, 1972, the recommendation was
made that the contract be awarded to A. Plamon-
don & Fils Inc. Although the recommendation to
Treasury Board bears the name A. B. Sainthill at
the top since he was head of Contract Administra-
tion for the Department of Indian Affairs, he
stated when he testified that he did not personally
verify it as he was on a special project at the time,
and neither signed nor initialled it. Mr. Cham
pagne was his supervisor at that date and Mr.
Bowen in turn was above him. He had com
municated with Mr. Nollet but otherwise had
nothing to do with the project. The document in
question was prepared by Mr. W. E. Allen whose
initials appear on it, the other initials being those
of Mr. Champagne and of Mr. Thompson, the
latter being described by him as merely part of the
administrative process. It was his view that Mr.
Allen and Mr. Champagne would assume responsi
bility for the contents of the report.
During the course of his testimony Mr. Ray-
mond Phillips, a Treasury Board functionary,
conceded that there were other pertinent docu
ments submitted to the Treasury Board in addition
to the formal recommendation but that he did not
have them with him. Counsel for the Crown
objected to the production of any such documents
submitting an affidavit of the Honourable Jean-
Pierre Goyer made pursuant to the provisions of
section 41(2) of the Federal Court Act which
reads as follows:
41. (2) When a Minister of the Crown certifies to any court
by affidavit that the production or discovery of a document or
its contents would be injurious to international relations, na
tional defence or security, or to federal-provincial relations, or
that it would disclose a confidence of the Queen's Privy Council
for Canada, discovery and production shall be refused without
any examination of the document by the court.
While Mr. Goyer was not the Minister of Indian
Affairs and Northern Development at the time his
affidavit complies with the provisions of that sec
tion of the Act which absolutely prohibits the
Court from examining the documents referred to.
In the event that section 41(1) of the Act had been
invoked which deals with documents containing
information which on grounds of public interest
should allegedly be withheld, the Court would
despite this have had the right to examine the
document and order its production and discovery
on the grounds that public interest in the proper
administration of justice outweighs in importance
the public interest specified in the affidavit, and I
would have had no hesitation in ordering the pro
duction of any such communications. Subsection
(2), however, allows no such discretion and the
plaintiff and the Court are obliged to rely solely on
the formal recommendation made on behalf of the
Minister of Indian Affairs and Northern Develop
ment to the Treasury Board, which was produced
without any objection by defendant, supplemented
by whatever additional information was disclosed
by witnesses in their testimony. Witness Phillips
did testify, however, that it was his belief that any
additional documents were merely amplification of
the formal submission made, giving further details.
The sole witness called for defence was Mr.
George Bowen now Director of Building Engineer
ing for the Department of Public Works who in
1972 was Director of the Technical Services
Branch of the Department of Indian Affairs and
Northern Development. He testified that he was
present in Ottawa with others when the tenders
were opened. It was the responsibility of his
Branch to examine the technical and financial
capacity of the tenderers. On the financial side,
the Department had a contract with Dun and
Bradstreet to make a report. On the technical side,
the bids are closely examined to find whether there
are any apparent discrepancies. In due course the
submission to the Treasury Board was prepared by
Mr. Allen, some 35 copies being printed. Only one
bears the initials of the officials, which are affixed
to it as it goes up the line. It is his belief that the
document in the Department would also have his
initials and those of his superior. In any event he
saw and approved it before it reached the Treasury
Board. He had also seen the Dun and Bradstreet
report before the submission was made. At this
stage plaintiff objected to the production of the
report as it had not been mentioned in defendant's
list of documents. Rule 456, however, provides as
follows:
Rule 456. At any stage of an action, the Court may order any
party to produce to the Court any document in his possession,
custody or power relating to any matter in question in the cause
or matter and the Court may deal with the document when
produced in such manner as it thinks fit.
I believe that this document should be produced
since it is relevant to the recommendation made to
the Treasury Board. In admitting it, however, I
indicated to counsel for plaintiff that since he was
taken by surprise by the production at the trial of
this document (which he had not previously seen)
he would be given ample opportunity to examine
same and to call witnesses in rebuttal if he so
desired.
Witness Bowen testified that it was only after
receiving the Dun and Bradstreet report on Wilfrid
Nadeau Inc. that he asked for a report on A.
Plamondon & Fils Inc. but that this latter report
was also made before the submission to the Trea
sury Board. He stated that he had examined Mr.
Sainthill's report of September 15, 1972, to him
before making the submission to the Treasury
Board, and that he is unaware of any communica
tion indicating that it was intended that the con
tract should be awarded to Plamondon. The reason
for prolonging the delay for making a decision was
because of the closeness of the two bids and the
two lowest bidders were advised of this. He testi
fied that a Dun and Bradstreet report is always
asked for on the lowest bidder and that if several
bids are close a report may be asked for on more
than one of them. When the report was made to
the Treasury Board he did not have a list of either
Nadeau's or Plamondon's equipment on file. He
does not know whether anyone in his Department
had checked the credit of Wilfrid Nadeau Inc.
with its bank. He stated that he made no inquiries
as to whether the work previously done by the
Nadeau company was similar to the work on this
project but added that in his view work in a
national park is not a normal highway road. He
conceded however that there was nothing to indi
cate that the Nadeau company was incapable of
building this road, and that he was aware that if
additional machinery was required it could be
rented. He admitted that when reference was
made in the recommendation to the Treasury
Board of the need for special qualifications and
equipment, if he had known that the Nadeau
company had such special qualifications and could
get any additional equipment required, that state
ment might not have been made. Although some
of the items had been checked by Mr. Nollet his
report was not referred to in the submission to the
Treasury Board.
The Dun and Bradstreet report indicated that on
December 15, 1971, Mr. Nadeau as President, had
declined to submit a statement so that the full
extent of assets and liabilities could not be deter
mined. The sales volume was steady at $500,000 to
$550,000. Working funds were limited and some
slowness was noted in the trade. The report noted
two writs on June 12, 1970 for $1,055 and $2,377
in connection with claims for accounts which were
settled and two judgments on May 14 and June 25,
1970 for $4,639 and $2,626 also on accounts
which were now settled. A further writ had been
issued on April 1, 1971, for $3,016. Work in
progress as of December 15, 1971, the date of the
report amounted to some $170,000 and $70,000
was owing on loans, secured by this work in
progress and the President's signature. Reference
was made to the fact that on October 19, 1966, the
company had made an offer of compromise to
creditors of 20¢ on the dollar payable 30 days
after ratification which was accepted. Reference
was also made to a $750,000 road building con
tract to be completed by September 1971 and to
1970-71 snow removal contracts totalling $44,000.
In a more up to date report indicated as being
received on September 5, 1972, it was reported
that in a communication dated May 18, 1972,
signed by R. Carrière, Accountant, it was reported
that the company had three full-time employees
and 24 part-time, with annual sales in the range of
$300,000 to $500,000 and that on December 7,
1971, it had been awarded a $436,715 contract by
the Quebec Department of Roads for road work.
In rebuttal Mr. Nadeau testified that the pro
posal to creditors in 1966 had been made by him
personally and not by the company and in actual
fact he had eventually paid 100% to all but two
ordinary creditors. The 1971 action and one of the
two 1972 actions [sic] were also against him per
sonally and in fact in 1971 and 1972 the only
actions taken against the company resulted from
vehicle accidents for which they were insured. He
admitted that he was the principal shareholder of
the company however. While Mr. Bowen had
admitted that if he had known that no proposal
had ever been made by the company in 1966 and
that the information with respect to this was inac-
curate this would not have been included in the
submission to the Treasury Board, he maintained
that upon receipt of the Dun and Bradstreet report
there was no necessity to inquire for further details
from the party on whom the report was made, and
that he never recalls this having been done.
Another factor which Mr. Bowen stated justi
fied the recommendation made to the Treasury
Board in favour of A. Plamondon & Fils Inc. is the
fact that all bids are made on the basis of unit
prices using the estimated quantities furnished to
the bidders in an annex to the contract documents
and experience has indicated that these estimated
quantities are frequently inaccurate. According to
Mr. Bowen this inaccuracy is most likely to occur
in the areas dealing with excavation and moving of
rock. On these two items the unit price bid of
Wilfrid Nadeau Inc. was higher than that of A.
Plamondon & Fils Inc. and in fact these two items
made up over 50% of the total amount of the bid.
As a result even a 5% increase in the quantities to
be so excavated or moved would in the end result
cause the total Nadeau bid to be higher than that
of Plamondon. As a matter of fact the final cost of
the contract was $1,253,912.97 and if the Nadeau
unit price figures had been applied to the quanti
ties of earth excavation and rock moving which
resulted in this substantially higher final price the
contract would actually have cost $23,178.65 more
than was paid to A. Plamondon & Fils Inc. It goes
without saying that these final figures are not
relevant and cannot be used in determining wheth
er any fault was involved in recommending the
award of the contract to the second lowest bidder.
They were admitted as an illustrative example,
however, to show that where different unit prices
are bid for different portions of the work the
lowest total bid may not end up in the lowest total
cost if there is an underestimation of some of the
quantities involved for which the lowest overall
bidder has submitted a higher unit price, and that
this possibility is therefore one which can properly
be taken into consideration in awarding a contract
when the two lowest bids are close. While it is true
that no mention of this was made in the recom
mendation to the Treasury Board, Mr. Bowen
testified that this formed part of the deliberations
before the report was made. It is difficult to see
how the omission of any mention of this in the
recommendation to the Treasury Board can have
been prejudicial to plaintiff, although there may be
some suspicion in plaintiff's mind that this is an
argument thought of by hindsight to justify the
award to A. Plamondon & Fils Inc., as, if mention
of this had been included in the recommendation,
it would merely have constituted an additional
ground for not awarding the contract to Wilfrid
Nadeau Inc.
Plaintiff takes special exception to several state
ments in the recommendation to Treasury Board
which it contends are misleading and inaccurate.
1. "This is an extremely complex piece of work
which requires special qualifications and equip
ment." By witnesses called at the hearing plaintiff
established that there were no particular problems
involved in this work which was a more or less
normal road building contract, and in any event
plaintiff had the necessary qualifications and, if it
did not have all the equipment required, could
easily have rented whatever was necessary.
2. "Although the low bidder has performed
normal road work contracts in the range of $200,-
000 to $500,000 it is doubtful if he could carry out
a contract of this value and complexity." In this
connection it must be pointed out that from the
Dun and Bradstreet report it appears that annual
sales by plaintiff were in the area of $500,000. The
letter of September 15, 1972, written by Mr.
Sainthill on behalf of Mr. Champagne outlined the
results of a report by Mr. Nollet in which he
referred to the Provincial Department of Public
Works as indicating that plaintiff was both finan
cially and technically competent to undertake
roads projects having a value of up to $1,000,000
each and had only expressed doubt with respect to
contracts above this figure. This original figure of
$1,000,000 was reduced to $500,000 apparently by
Mr. Champagne and when Mr. Nollet during his
testimony was shown this letter he stated that he
would not disagree with the contents. It should
also be noted that the list of contracts submitted
by plaintiff showing road work done by it in 1972
and 1973 is relevant only in establishing its capaci
ty to undertake this contract, as 1973 contracts
can of course not be used to establish the knowl
edge which defendant's employees or the parties
from whom they made inquiries would be expected
to have as of September 1972 with respect to
plaintiffs technical capacity.
3. "It appears from all reports that he does not
have sufficient nor the specialized equipment
required to complete work where accelerated com
pletion is a requirement." This statement appears
to be especially misleading in its use of the words
"all reports" since the reports received appear to
have been favourable, and in particular the last
sentence of Mr. Sainthill's letter of September 15,
1972, written on behalf of Mr. Champagne reads:
On the basis of the information received to date, it would
appear that Wilfrid Nadeau Incorporated should be able to
carry out the subject contract provided the contractor supple
ments his equipment and organization. These matters could be
satisfactorily arranged by meeting with Nadeau prior to award.
While it is apparent that this paragraph itself
indicates that the contractor would have to supple
ment his equipment and organization and there
fore he did not at the time have the specialized
equipment required, "all reports" do not indicate
this. 6
4. The reference in the letter to the writs issued in
favour of suppliers and subcontractors and to the
earlier 1966 offer of compromise all of which
information was taken from the Dun end Brad-
street report without verification, much of which
was subsequently proved to be inaccurate.
If I have gone in considerable detail into the
evidence it is not with a view of reviewing the
recommendation which was made or deciding
whether it was properly made or not as I have no
authority to do that in the present proceedings.
What has to be determined, however, is whether
there was any negligence on the part of any ser
vant or servants of the Crown in gathering the
information or making the report which would
justify an action against them under Article 1053
of the Quebec Civil Code and hence justify an
action against defendant under section 3(1)(a) of
the Crown Liability Act notwithstanding the
exception of section 4(2) of that Act.
6 Perhaps it was intended to say that a consensus of reports
led to this conclusion, but if so the use of the term "all reports"
was misleading.
Mr. Nadeau makes no secret of the fact that he
believes that political influences resulted in the
award of the contract to A. Plamondon & Fils
Inc., a local company from Grand'mère in the La
Mauricie area rather than to his company whose
headquarters are in the Lévis area. Accordingly he
believes that excuses had to be found, which he
contends do not stand up to close scrutiny, in an
attempt to justify not awarding the contract to his
company as the lowest bidder. His suspicions have
two origins. First it appears that almost immedi
ately after the opening of tenders representatives
of the Plamondon firm communicated repeatedly
with him and his engineer, Mr. Gélinas, offering to
compensate them for withdrawing the company's
tender. He was eventually offered $20,000,
$10,000 to be paid forthwith and $10,000 at the
end of the contract, and when he asked what
would become of his certified cheque in this event
he was assured by them that they had received
assurance that it would be returned. Precise evi
dence as to who gave them this assurance was
objected to and not admitted, being hearsay. Mr.
Gélinas corroborated that there were several phone
calls and two visits from two members of the
Plamondon family who wanted to negotiate fur
ther to have Wilfrid Nadeau Inc. withdraw its bid,
but they were not at all interested in withdrawing.
Since normally a contract would be awarded to the
lowest bidder and it would not be allowed to
withdraw its tender without at least forfeiting its
deposit, it does appear extraordinary that the
second lowest bidder would be willing to offer
financial compensation to the lowest bidder to
withdraw, unless it had received some assurance
that in this event it would be given the contract
and the tender cheque of the lowest bidder
returned. The second circumstance which gives
rise to Mr. Nadeau's suspicions is the invoking of
section 41(2) of the Federal Court Act so as not to
disclose any other documents or communications
which might have been part of the record before
the Treasury Board when it made its decision,
other than the formal recommendation made to it.
Counsel for the Crown contended that this was
done as a matter of principle, but, since it is
admitted that there was other information before
the Treasury Board which the Crown refuses to
produce as constituting a confidence of the
Queen's Privy Council for Canada, this adds fuel
to plaintiff's suspicions that these documents may
have been of a nature indicating political influence
or patronage. However, this Court cannot reach
any conclusions based on surmise or suspicions and
plaintiff has failed to prove the existence of any
such improper considerations.
There is no doubt that a contract should normal
ly be awarded to the lowest tenderer unless there is
reasonable justification for not doing so. This is a
duty which is not owed to the lowest tenderer,
however, but to the public treasury which should
never be called upon to pay a higher price than is
necessary without good reason. Nevertheless, dam
ages are caused to a lowest tenderer who is not
awarded the contract and if this results from
imprudence or neglect of a servant or servants of
the Crown for which they could, if sued, be person
ally held liable under the provisions of Article
1053 of the Quebec Civil Code, since the awarding
of this contract relates to the Province of Quebec,
then the Crown can be held liable by virtue of
section 3(1)(a) of the Crown Liability Act. In this
context it is not necessary that a duty be owed to a
person before responsibility can be incurred when
damages have been caused to him by the fault of
such servant or servants. I believe that the case of
the Cleveland- Cliffs SS. Co. v. The Queen' can
be distinguished on the facts. While the various
servants of the Crown who participated in the
collecting of information with respect to plaintiff's
technical capabilities and financial position owed
no duty to plaintiff, that would not relieve them of
responsibility if they were guilty of negligence
consisting of imprudence or neglect in collecting or
verifying this information, or in the preparation of
the report made to the Treasury Board.
It is therefore necessary to decide whether any
actionable negligence can be attributed to Mr.
Nollet, Mr. Sainthill, Mr. Champagne or Mr.
Bowen. Mr. Nollet made reasonably complete in
quiries in Quebec about plaintiff and appears to
have made a fair report. In fact the letter of
September 15, 1972, to Mr. Bowen outlining the
substance of his report concludes with a recom-
' [1957] S.C.R. 810.
mendation in favour of plaintiff providing it sup
plemented its equipment and organization, so
plaintiff cannot claim to have lost the contract as a
result of any fault on the part of Mr. Nollet. Mr.
Sainthill was only involved in the matter to the
extent of writing the aforementioned letter on
behalf of Mr. Champagne and since Mr. Nollet
confirmed when testifying that it fairly represent
ed the substance of his verbal report, and, as
already stated, the recommendation in it was not
unfavourable to plaintiff no action for damages
could be brought against Mr. Sainthill. Mr.
Champagne did make the initialled change reduc
ing the alleged finding of the Provincial Minister
of Works that plaintiff was financially and techni
cally competent to undertake roads projects up to
$1,000,000 each to a figure of half this amount.
This may have been done as a matter of caution on
his part, but Mr. Nollet, when testifying did not
object to this change in reporting what he had
allegedly been told by the Provincial Minister of
Works and did not disagree with the contents of
the letter as amended. This figure does not seem to
be unreasonable in any event bearing in mind that
any contracts obtained by plaintiff in late 1972 or
in 1973 would not of course be known at the time
and the Dun and Bradstreet report indicated
annual sales by plaintiff in the amount of $500,000
to $550,000. I cannot therefore find any actionable
negligence attributable to Mr. Champagne.
Finally, we come to Mr. Bowen who, although
he did not write the submission to the Treasury
Board, accepts the primary responsibility for the
contents of same. I cannot find that he was guilty
of negligence in accepting the Dun and Bradstreet
report as being accurate and relying on it in
dealing with the financial position of plaintiff.
While Dun and Bradstreet itself concedes that
these reports are not necessarily always correct
and does not assume responsibility for the contents
it is certainly common business practice to rely on
them. Although the submission to the Treasury
Board makes reference to writs issued against
plaintiff and to the offer of compromise to credi
tors which information has now been proven to
have been inaccurate it does state: "We under
stand there has been improved financial perform
ance lately" so it is questionable how much weight
was given to the inaccurate information. In any
event I think it is fair to say that when the
principal shareholder of a closely held family com
pany has had a record of personal financial dif
ficulties this can justify some doubt as to the
financial position of the company itself. While
further inquiry from Mr. Nadeau or from the
company's bank would have cleared up some of the
erroneous information in the report I cannot find
any obligation on the part of Mr. Bowen or other
servants of defendant to do this. It would be
difficult indeed for any business normally relying
on Dun and Bradstreet reports if it were necessary
to verify the accuracy of each item of information
in such reports or risk being held negligent for
accepting and acting on such if it proves to have
been inaccurate.
It must be conceded that the submission, which
recommends the awarding of the contract to A.
Plamondon & Fils Inc. appears to have stressed to
some extent reasons why it should not be awarded
to plaintiff, rather than relying on the more
favourable contents of the letter of September 15,
1972, to Mr. Bowen and this raises some question
as to what may have transpired in the meanwhile
to motivate the recommendation rejecting plain
tiff's lower bid. However, as previously stated, the
duty of this Court is not, after reviewing the
evidence, to decide whether the contract should
have been awarded to plaintiff rather than to A.
Plamondon & Fils Inc., but merely to determine
whether there was actionable negligence by any
servant of defendant in collecting information
about plaintiff or in recommending this award,
and I cannot find anything in Mr. Bowen's han
dling of the matter justifying such a finding. It is
true that the recommendation refers to the con
tract as being "an extremely complex piece of
work requiring special qualifications and equip
ment", and several engineers testified at the trial
that this is not so. This was, however, Mr. Bowen's
opinion which he reiterated at the trial. Perhaps
Mr. Bowen was not justified in concluding that it
was doubtful that plaintiff "could carry out a
contract of this value and complexity" because it
was doubtful whether "it had sufficient or the
necessary specialized equipment", or that if the
Department were required to accept the low bid
"it would be necessary to provide additional resi
dent supervision to ensure compliance with the
project specifications and completion require
ments", without taking into consideration that if
plaintiff lacked some of the equipment required it
could easily obtain same by rental or otherwise
and that it would be reasonable to assume that
some resident supervision would be necessary in
any project of this size, but this again seems to
constitute a question of opinion, which, while it
may be open to question cannot necessarily be said
to be false or malicious. Moreover, Mr. Bowen
explained in evidence, although it was not men
tioned in the submission to the Treasury Board
why, because of higher unit prices on certain items
which items were the most likely to have been
underestimated by the Department in calling for
tenders, the lowest total bid may not necessarily be
the cheapest in the long run. In a contract where
two bidders are so close it is not unreasonable to
take such a factor into consideration. Certainly,
although in principle the lowest tender should
always be accepted, it can reasonably be argued
that if two bids are very close and there is even
slight doubt about the capacity of the lowest
bidder to accomplish the contract successfully, and
none about that of the second lowest bidder there
is more reason to justify the award to the latter
than there would be if there were a very large
difference in the bids, in which event it would
require very positive evidence concerning the
financial and technical capacity and reputation of
the lowest tenderer before his bid could reasonably
be refused. The situation might be different if it
had been proved that the recommendation was
made in the present case because of improper
motives involving political influences or patronage
rather than solely on the basis of comparing the
financial and technical capacity and experience of
the two lowest bidders and the unit prices submit
ted by them, but plaintiff was unable to make any
such proof. The burden of proof is clearly on
plaintiff to establish fault on the part of one of the
servants of the Crown or of a combination of them
if the present action against the Crown is to suc
ceed and I must conclude that plaintiff has failed
to discharge this burden. The action will therefore
be dismissed with costs.
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