A-376-97
The Martel Building Limited (Appellant)
v.
Her Majesty the Queen (Respondent)
Indexed as: Martel Building Ltd.v. Canada (C.A.)
Court of Appeal, Isaac C.J., Desjardins and Décary JJ.A."Ottawa, April 21, 22 and July 16, 1998.
Crown — Torts — Appeal from F.C.T.D. judgment dismissing tort, contract action against Crown — Crown leasing appellant's downtown Ottawa building since 1975 — Entering into negotiations for renewal — Appellant planning to renovate in conjunction with renewal — Crown not communicating to appellant further information required — Went to tenders — Although lowest bidder, appellant not awarded contract because Crown adding to bid for fit-up, other costs — Appeal allowed — Duty of care arising where sufficiently close relationship between parties, foreseeability of harm to appellant — That long-standing lessor/lessee relationship, lease contemplating possibility of renewal, Crown only tenant in building since construction, Crown dominant player in leasing rental space in area, supporting conclusion sufficiently close relationship to give rise to duty of care in negotiation process — Trial Judge not addressing duty of care in tendering process — Implied contractual obligation on Crown under bidding contract to treat all bidders fairly according to good faith principle giving rise to common law duty of care — Relationship between parties sufficiently close, Crown ought to have contemplated injury to appellant by breach of duty — Crown breached duty of care in tendering process by not mentioning fit-up requirement to appellant, adding costs of fit-up to appellant's bid, while no such costs added to successful bid — As to causation, question whether Crown's negligence causing appellant to lose opportunity to renegotiate renewal fairly, participate in tender — Clearly causal link between appellant's loss, Crown's negligence — Trial Judge concluding loss of opportunity to complete negotiations not justifying amount of damages equal to 10-year contract — Degree of probability of contract being awarded future event irrelevant in assessment of causation, although relevant in assessment of damages — Defendant's conduct need not be sole cause of loss.
Practice — Pleadings — Amendments — One day prior to end of oral arguments, Trial Judge allowing amendment to statement of claim to include, as separate cause of action, claim in negligence for respondent's failure to exercise duty of care in negotiations for lease renewal, preparation of tender documents, evaluation of appellant's bid in response to tender — Although offered opportunity to reopen case, respondent declined — Amendments pursuant to R. 420 allowed at any stage of action to determine real questions in controversy, provided not resulting in injustice to other party not compensable by award of costs, serving interests of justice — As new claims of negligence resting upon same facts as those upon which other claims based, difficult to frame what occurred herein as cause of action, respondent offered opportunity to reopen case, Trial Judge properly exercising discretion, particularly as respondent suffering no prejudice.
This was an appeal from a Trial Division judgment dismissing an action in tort and in contract against the Crown. The respondent had been lessee of the larger part of the appellant's building, the Martel Bulding in downtown Ottawa, since its construction in 1975. The Crown's 10-year lease was to expire in 1993 but there was an option for renewal. In anticipation of the expiration of the lease, the appellant's President and Chief Executive Officer met on several occasions with representatives of the Department of Public Works, but was unaware that the Department needed further information. The Department decided to proceed by way of a call for tenders. The appellant was not awarded the contract despite having been the lowest bidder because its bid was calculated as more costly than the second lowest bid when the respondent added amounts to the appellant's bid for fit-up and other costs.
After rejecting the contractual arguments, the Trial Judge proceeded on the ground of general negligence principles. She concluded that a duty of care existed, which had been breached, but dismissed the action because there was no causal link between the breach of duty and the damages suffered.
One day prior to the end of oral arguments, the Trial Judge allowed an amendment to the statement of claim to include, as a separate cause of action, a claim in negligence for failure by the respondent to exercise a duty of care in negotiations with the appellant for a lease renewal, as well as in preparation of the tender documents and the evaluation of the appellant's bid in response to the tender. She offered the respondent an opportunity to reopen the Crown's case, but that offer was declined.
The issues were: (1) whether the Trial Judge erred in allowing the appellant's amendment to the statement of claim; and (2) whether the Crown was negligent for the way it had dealt with the appellant.
Held, the appeal should be allowed.
(1) Amendments pursuant to Rule 420 are allowed at any stage of an action for the purpose of determining the real questions in controversy, provided that this would not result in an injustice to the other party not compensable by an award of costs, and that it would serve the interests of justice. Considering that the new claims of negligence rested upon the same facts as those upon which the other claims were based, that it was difficult to frame what had occurred in this case as a cause of action, and that the respondent was clearly offered the opportunity to reopen the case for the Crown, the Trial Judge properly exercised her discretion in allowing the amendment, particularly as the respondent suffered no prejudice.
(2) Imposing a duty of care would not impose upon the Crown an obligation to act in the best interest of the appellant. What it imposes is an obligation to act and deal fairly with the appellant. Such an obligation does not preclude the Crown from acting in Her own interest. Two factors must be established before a duty of care arises: (1) the existence of a sufficiently close relationship between the parties, and (2) the foreseeability of harm being caused to the appellant by the respondent's carelessness. The fact that the parties had a long-standing lessor/lessee relationship, that the lease contemplated a possibility of renewal, that the respondent was essentially the only tenant in the Martel Building and had been so since it was built, and that the Crown was the dominant player in the leasing of rental space in the area, viewed as a whole, supported the conclusion that the parties were involved in a sufficiently close relationship to give rise to a duty of care in the negotiation process.
The Trial Judge did not address negligence in the tendering process. The respondent owed the appellant a common law duty of care in the context of the call for tenders. In determining whether the parties had a sufficiently close relationship so as to give rise to a common law duty of care, the relationship between the parties and assumed or imposed obligations were factors to be considered. The implied contractual obligation of the respondent under the bidding contract to treat all the bidders fairly according to the good faith principle, is an assumed obligation which gives rise to a common law duty of care owed to the appellant. The relationship between the appellant and the respondent was sufficiently close that the respondent ought to have contemplated that the appellant would be injured by a breach of that duty.
The duty of care in the tendering process was breached by the Crown. She had the obligation to ensure fair treatment in the process by avoiding undisclosed preferences and the awarding of contracts to non-conforming bidders. The contiguous space requirements, negligently added to the tender specifications, resulted in a higher bid for the appellant. There had been no mention of fit-up costs being required if the respondent stayed in the building. While $60,000 were added to the appellant's bid for the provision of a secured card access system, no such costs were added to the successful bid although the respondent later incurred installation costs of $15,000 at the successful bidder's building for such a system.
In order to assess whether the respondent's conduct had caused the appellant's loss, the injury or harm suffered by the appellant had to be assessed. In the context of the negotiations, the appellant suffered the loss of an opportunity to negotiate the lease renewal. In the context of the tender, the appellant suffered the loss of the opportunity to fairly participate in the tender process and the loss of a reasonable expectation of receiving the contract.
A causal link clearly existed between the appellant's loss and the respondent's negligence. In concluding that the respondent's negligence had not caused the appellant to lose a 10-year rental contract, the Trial Judge confused the test for causation with the legal analysis for quantifying damages. What the Trial Judge concluded was that the loss of opportunity to complete the negotiations did not justify an amount of damages equal to a 10-year rental contract. That was not the question she had to decide at that stage. The degree of probability of the contract being awarded to the appellant is a future event which is irrelevant in the assessment of causation, although relevant in the assessment of damages. She should instead have assessed the question as to whether the respondent's negligence had caused the appellant to lose the opportunity to renegotiate a renewal and to fairly and equally participate in the tender process.
The fact that the downward spiral in the market also contributed to the loss of the appellant's lease opportunity led the Trial Judge to conclude that the respondent's negligence was not "actually" the cause of appellant's loss. A defendant's conduct need not be the sole cause of the injury or loss. The respondent's negligent conduct was the main, if not the only, cause of both the appellant'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.
statutes and regulations judicially considered
Federal Court Act, R.S.C., 1985, c. F-7, s. 52(b)(iii).
Federal Court Rules, C.R.C., c. 663, R. 420.
cases judicially considered
applied:
Canderel Ltd. v. Canada, [1994] 1 F.C. 3; [1993] 2 C.T.C. 213; (1993), 93 DTC 5357; 157 N.R. 380 (C.A.); Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; (1992), 91 D.L.R. (4th) 289; 11 C.C.L.T. (2d) 1; 137 N.R. 241; Best Cleaners and Contractors Ltd. v. The Queen, [1985] 2 F.C. 293; (1985), 58 N.R. 295 (C.A.); Northeast Marine Services Ltd. v. Atlantic Pilotage Authority, [1995] 2 F.C. 132; (1995), 179 N.R. 17 (C.A.); Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; (1986), 75 N.S.R. (2d) 109; 31 D.L.R. (4th) 481; 186 A.P.R. 109; 34 B.L.R. 187; 37 C.C.L.T. 117; 42 R.P.C. 161; BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; (1993), 99 D.L.R. (4th) 577; [1993] 2 W.W.R. 321; 75 B.C.L.R. (2d) 173; 20 B.C.A.C. 241; 14 C.C.L.T. (2d) 233; 5 C.L.R. (2d) 173; 147 N.R. 81; 35 W.A.C. 241; Athey v. Leonati, [1996] 3 S.C.R. 458; (1996), 140 D.L.R. (4th) 235; [1997] 1 W.W.R. 97; 81 B.C.A.C. 243; 132 W.A.C. 243.
considered:
Continental Bank Leasing Corporation et al. v. The Queen (1993), 93 DTC 298 (T.C.C.); Edgeworth Construction Ltd. v. N. D. Lea & Associates Ltd., [1993] 3 S.C.R. 206; (1993), 107 D.L.R. (4th) 169; [1993] 8 W.W.R. 129; 83 B.C.L.R. (2d) 145; 32 B.C.A.C. 221; 11 B.L.R. (2d) 101; 17 C.C.L.T. (2d) 101; 12 C.L.R. (2d) 161; 157 N.R. 241; 53 W.A.C. 221.
referred to:
Kamloops (City of) v. Nielsen et al., [1984] 2 S.C.R. 2; (1984), 10 D.L.R. (4th) 641; [1984] 5 W.W.R. 1; 29 C.C.L.T. 97; Hall v. Hebert, [1993] 2 S.C.R. 159; (1993), 101 D.L.R. (4th) 129; [1993] 4 W.W.R. 113; 78 B.C.L.R. (2d) 113; 26 B.C.A.C. 161; 15 C.C.L.T. (2d) 93; 45 M.V.R. (2d) 1; 152 N.R. 321; 44 W.A.C. 161; Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165; (1997), 146 D.L.R. (4th) 577; 115 Man. R. (2d) 241; 35 C.C.L.T. (2d) 115; 211 N.R. 352; 139 W.A.C. 241; London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299; (1992), 97 D.L.R. (4th) 261; [1993] 1 W.W.R. 1; 73 B.C.L.R. (2d) 1; 43 C.C.E.L. 1; 13 C.C.L.T. (2d) 1; 143 N.R. 1; 31 W.A.C. 1; R. in right of Ontario et al. v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111; (1981), 119 D.L.R. (3d) 267; 13 B.L.R. 72; 35 N.R. 40; Chinook Aggregates Ltd. v. Abbotsford (Mun. Dist.), [1990] 1 W.W.R. 624; (1989), 40 B.C.L.R. (2d) 345; 35 C.L.R. 241 (C.A.); Twin City Mechanical v. Bradsil (1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont. Gen. Div.); Ken Toby Ltd. v. British Columbia Buildings Corp. (1997), 34 B.C.L.R. (3d) 263 (S.C.); Health Care Developers Inc. v. Newfoundland (1996), 141 Nfld. & P.E.I.R. 34; 136 D.L.R. (4th) 609; 29 C.L.R. (2d) 237; 443 A.P.R. 34 (C.A.).
authors cited
Linden, Allen M. Canadian Tort Law, 6th ed. Toronto: Butterworths, 1997.
O'Byrne, S. K. "Good Faith in Contractual Performance: Recent Developments" (1995), 74 Can. Bar Rev. 70.
APPEAL from the trial judgment dismissing an action in tort and in contract against the Crown (Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.)). Appeal allowed.
appearances:
James H. Smellie and M. Lynn Starchuk for appellant.
Frederick B. Woyiwada and Kim Gibner for respondent.
solicitors of record:
Osler, Hoskin & Harcourt, Ottawa, for appellant.
Deputy Attorney General of Canada for respondent.
The following are the reasons for judgment rendered in English by
Desjardins J.A.: This case, under appeal from the Trial Division [(1997), 129 F.T.R. 249], is one in tort. At issue before us is whether the respondent can be held liable in negligence for the way it dealt with the appellant in the negotiations for the renewal of a lease and when tenders were later called.
The action proceeded on the basis of contract and tort. At one point, the Trial Judge took the initiative of encouraging counsel for the appellant to expand his claim on to the broader category of the general negligence principles, which had not initially been claimed, "hoping", she said, "that an analysis on that basis might lead to a remedy for the [appellant].1 One day prior to the end of the oral arguments, she allowed an amendment to the appellant's statement of claim so as to include, as a separate cause of action, a claim in negligence for failure, on the part of the respondent, to exercise a duty of care in her dealing with the appellant in the negotiations for a lease renewal in the appellant's building as well as the preparation of the tender documents and the evaluation of the appellant's bid in response to the tender. The respondent objected to the amendment, but was overruled by the Trial Judge. She however offered the respondent an opportunity to reopen her case.2 The respondent declined the offer.
The trial proceeded first on the issue of liability. Damages were left for future hearings depending on the outcome on the issue of liability.
The facts
A summary of events is necessary for the understanding of this appeal.
The respondent had been leasing the larger part of the appellant's building (the Martel building) since its construction in 1975 under a 10-year lease due to expire on August 31, 1993, with an option for renewal. The premises were occupied by the Atomic Energy Control Board (AECB). The Department of Public Works, more specifically the National Capital Region Division of Public Works and its different subdivisions (the Department), was the leasing party for federal agencies.
In anticipation of the expiration of the lease, the appellant's President and Chief Executive Officer, Mr. McMurray, met with the representatives of the Department, Messrs. Séguin and Mahar, to negotiate the possibility of a renewal. The appellant planned to renovate the building in conjunction with the renewal. Despite numerous meetings, Mr. Séguin failed to communicate properly with Mr. McMurray with the result that Mr. McMurray was never advised that the Department required further information than that already provided to Mr. Séguin. In the end, the Department decided to proceed by way of a call for tenders in order to acquire the necessary leased space.
The appellant participated in the tenders. When the bids were opened, it appeared to have won the tenders. The appellant, however, was not awarded the contract despite having been the lowest bidder. Firstly, the tender invitation carried the standard clause stating that the respondent was not required to accept the lowest or any bid. But more importantly, it was later found that the appellant's bid had been calculated as more costly than the second lowest bid, the one of Standard Life, mainly because of additional costs added by the respondent to the appellant's bid for fit-up and other costs.
The judgment under appeal3
The remarkably clear and distinct findings of facts made by the Trial Judge on the elaborate and often contradictory evidence adduced before her are key to this appeal.
The Trial Judge saw no merit in the allegations based on the law of contract. She rejected the appellant's contention that a breach of an implied term of an existing lease between the parties had occurred. She stated that while the lease contemplated the possibility of renewal, there was no obligation therein to renegotiate. She dismissed the possibility that an agreement might have been reached on or about October 30, 1992, since Mr. Séguin did not have the authority to conclude a contract with the appellant.
With regard to the negotiations in the tort action, the Trial Judge found that Messrs. Séguin and Mahar were the lessor's "window" into the Department and, as such, they had the responsibility of being an effective and transparent window, which they failed to be. She found that Mr. Séguin was an employee of the respondent with ostensible authority to negotiate, but not to conclude a contract. Mr. McMurray, she wrote, had been misled, perhaps inadvertently, into thinking that Mr. Séguin had the authority to commit the Department.4 Nevertheless, Mr. McMurray was aware that any concluded negotiations would only result in a recommendation for ultimate approval by Treasury Board. She found that had such a recommendation been made, it was "exceedingly likely"5 that Treasury Board would have accepted it.
The Trial Judge found that Mr. Séguin had failed to act upon the instructions of the Department to obtain information regarding Mr. McMurray's proposal, and that he had also left the Department with the impression that he had taken initiatives in this regard when he had not. She found that the respondent's non-negotiable bottom line price of $220/m2 and the time limits within which an agreement had to be reached were never made clear to Mr. McMurray. Mr. McMurray had reasonably understood, on the basis of the communications that he had received from Messrs. Séguin and Mahar that, if he met the $220/m2 price rate, the Department would recommend renewal of the lease to the Treasury Board for approval and that, barring some unforeseen circumstances, the lease would "likely be renewed".6 The failure of Messrs. Séguin and Mahar to communicate effectively and in a timely fashion with Mr. McMurray resulted in Mr. McMurray being unable to provide timely information on the retrofit details,7 which ultimately became the "deal breaker". Decisions were later made by the Department hastily and on the basis of incorrect information. As a consequence, Mr. McMurray lost the opportunity to negotiate the lease renewal.
With regard to the tender process in the tort action, the Trial Judge found that the costs added to the appellant's bid were attributable in part to the tender's contiguous space requirements, which required that AECB move from some floors in the Martel building to others. The contiguous space requirement, however, had not been requested by the AECB. The Trial Judge found that this requirement had been included in the expression of interest advertisement by Mr. Mahar, because he had never prepared one before and had worked from a precedent which called for contiguous space.
According to the Trial Judge, it was primarily fit-up costs8 which had made the appellant's bid the second lowest rather that the lowest. No details of the fit-up requirements were provided at trial. She found, however, that Mr. McMurray had not been informed that fit-up costs would have been required if the AECB were to stay in the Martel building.
She stated that costs for a secured card access system had been added to the appellant's bid even if Mr. McMurray had included such a system as an option in his retrofit plans. No amount for this purpose had been added to the Standard Life bid although the evidence showed that the respondent subsequently had to install such systems in two of the Standard Life building elevators. She concluded that one could understand Mr. McMurray's suspicion that undisclosed preferences played a role in the addition of unmentioned fit-up costs to the financial analysis of his bid. She found that a "somewhat arbitrary"9 assessment appeared to have been made in the financial analysis of the appellant's bid.
At this stage, she commented:10
It is clear that something went terribly wrong for the plaintiff in its dealing with Public Works. The difficulty, however, is framing what occurred as a legal cause of action.
She then proceeded with a legal analysis of this case.
She rejected the appellant's argument that there was, in Canadian law, a distinct tort of failure to negotiate in good faith to which corresponded a duty to negotiate in good faith. She simply stated that such tort had not yet emerged.
She then proceeded on the ground of general negligence principles with a three-step analysis, namely (a) whether a duty of care existed; (b) whether a breach of that duty had occurred; and (c) whether damage resulted from that breach. Applying the criteria elaborated in City of Kamloops v. Nielsen et al.11 and in Hall v. Hebert,12 she concluded that a duty of care existed since the relationship between the parties was sufficiently close that, in the reasonable contemplation of the respondent, carelessness on her part might cause damages to the appellant. She then found there had been a breach of that duty for the following reasons:13
The second requirement to be met, to succeed in a negligence claim, is whether there was a breach of the duty of care. The content of a duty of care is determined by considering what is reasonable in the circumstances. That is, did the defendant, as represented by the various officers of Public Works, act reasonably in the light of all the circumstances. I cannot conclude that they did. First, a great deal of delay ensued in entering into negotiations when the defendant's employees knew of the time constraints under which they worked and the plaintiff did not. Then, there was carelessness in failing to make Mr. McMurray aware of who had authority to commit the Department and who did not. There was a failure to make the defendant's negotiating position clear to him. There was a failure to make clear to him, at an early enough time to give him a realistic opportunity to comply, that retrofit details were required before the Department would recommend lease renewal. There was a failure to set a realistic schedule and make Mr. McMurray aware of it so that he knew the deadlines. There was a failure to ensure that timely and pertinent information was supplied to avoid creating such time constraints for the internal departmental decision-making process that decisions were made to Mr. McMurray's detriment, on the basis of incomplete and inaccurate information. I have no doubt that the standard of care was breached. In addition, a somewhat arbitrary assessment of fit-up costs appears to have been added to the financial analysis of the plaintiff's bid. I am aware that the terms of the tender invitation expressly state that there is no requirement to choose the lowest or any bid.
She however dismissed the action having failed to see a causal link between the breach of duty and the damages. This is what she said:14
Unfortunately, the difficulty the plaintiff faces, regardless of how the facts are characterized, is that of proving causation. He claims damages on the basis of the loss of a ten year rental contract. As a result of the defendant's employees actions he lost the opportunity to complete negotiations of the lease renewal. The market was in a downward spiral. This also contributed to the loss of his lease opportunity. In Stewart v. Pettie et al., [1995] 1 S.C.R. 131; 177 N.R. 297; 162 A.R. 241; 83 W.A.C. 241, at 153, it was stated that one must prove, on the balance of probabilities, that the breach of duty of care actually caused the loss complained of. See also Snell v. Farrell, [1990] 2 S.C.R. 311, 110 N.R. 200; 107 N.B.R. (2d) 94; 267 A.P.R. 94, at pp. 319-320, 328. I am not able to conclude that the plaintiff has proven the causal linkage to support the damages claimed.
With great regret, I dismiss the plaintiff's claim.
Analysis
I shall dispose first of a preliminary matter.
The respondent's contention that the Trial Judge erred in allowing the appellant's amendment to its statement of claim, so as to include a distinct tort of failure to negotiate in good faith, is without merit. The respondent was offered the opportunity to reopen her case and has suffered no prejudice. Rule 420 of the Rules of our Court [Federal Court Rules, C.R.C., c. 663], applicable at the relevant time, provided:
Rule 420. . . .
(2) No amendment shall be allowed under this Rule
. . .
(b) during or after trial, except to make the pleadings accord with the issues on which all parties went to trial or on terms that there be a new trial, or that the other parties otherwise be given an opportunity for such discovery and preparation for trial as may be necessary to meet the new or amended allegations.
In Canderel Ltd. v. Canada,15 Décary J.A., for this Court, summarized the principles applicable to amendments of pleadings pursuant to Rule 420:
. . . while it is impossible to enumerate all the factors that a judge must take into consideration in determining whether it is just, in a given case, to authorize an amendment, the general rule is that an amendment should be allowed at any stage of an action for the purpose of determining the real questions in controversy between the parties, provided, notably, that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice. [My emphasis.]
He then referred16 to the decision of Bowman T.C.J. in Continental Bank Leasing Corporation et al. v. The Queen:17
. . . I prefer to put the matter on a broader basis: whether it is more consonant with the interests of justice that the withdrawal or amendment be permitted or that it be denied. The tests mentioned in cases in other courts are of course helpful but other factors should also be emphasized, including the timeliness of the motion to amend or withdraw, the extent to which the proposed amendments would delay the expeditious trial of the matter, the extent to which a position taken originally by one party has led another party to follow a course of action in the litigation which it would be difficult or impossible to alter and whether the amendments sought will facilitate the court's consideration of the true substance of the dispute on its merits. No single factor predominates nor is its presence or absence necessarily determinative. All must be assigned their proper weight in the context of the particular case. Ultimately it boils down to a consideration of simple fairness, common sense and the interest that the courts have that justice be done. [My emphasis.]
Considering that the new claims of negligence rested upon the exact same facts as those upon which the other claims were based, that it was difficult to frame what occurred in this case as a cause of action, and that the respondent was clearly offered by the Trial Judge to reopen her case, the Trial Judge properly exercised her discretion in allowing the amendment. This is even more so considering that the respondent suffered no prejudice.
Having disposed of the respondent's contention on the amendment, I do not plan to deal with whether the time has come for this Court to recognize that a distinct tort of failure to negotiate in good faith has now emerged. The Trial Judge's clear findings of facts make it possible for this Court to decide this appeal on the general principles of negligence without the help of a novel doctrine.
The Trial Judge found, correctly in my view, that a duty of care existed and that a breach of that duty occurred. She erred, however, in failing to see the causal link between the damages and the breach of the duty of care. Moreover, her analysis is directed exclusively to the negotiation process. She failed to consider the conduct of the respondent during the tendering process.
The duty of care
The respondent claims that the Trial Judge erred in finding that a duty of care existed.
I see no merit in the respondent's argument that a finding of a duty of care between two business adversaries would be incompatible with long-standing principles of business efficacy because the respondent would then have to take into account the appellant's interests instead of her own. Imposing a duty of care upon the respondent would not have the effect of imposing on her an obligation to act in the best interest of the appellant. What it does is to impose on her the obligation to act and deal fairly with the appellant. Such an obligation does not preclude the respondent from acting in her own interest.
Whether a duty of care arises will depend on the circumstances of each particular case. The Trial Judge correctly stated that, with some qualification, a duty of care arises where there is a sufficiently close relationship between the parties that, in the reasonable contemplation of the respondent, carelessness on its part might cause damages to the appellant.18 Two factors must then be established: the existence of a sufficiently close relationship between the parties and the foreseeability of harm being caused to the appellant.
The fact that the parties had a long-standing lessor/lessee relationship, that the lease contemplated a possibility of renewal, that the respondent was essentially the only tenant in the building and had been so since the building was first constructed, and that the respondent was the dominant player in the leasing of rental space in the area, viewed as a whole, are all relevant factors to support the conclusion that the parties enjoyed a sufficiently close relationship to give rise to a duty of care in the negotiation process.19
Negligence in the tendering process was a matter before the Trial Judge which she failed to address. I add, in this regard, that the respondent owed the appellant a common law duty of care in the context of the call for tenders.
Following the decision of the Supreme Court of Canada in R. in right of Ontario et al. v. Ron Engineering & Construction (Eastern) Ltd.,20 this Court held in Best Cleaners and Contractors Ltd. v. The Queen21 that in addition to the obligations resting upon an owner on the basis of the terms and conditions of a call for tenders, that person is obliged "not to award a contract except in accordance with the terms of the tender call".22 Although dissenting, Pratte J.A. expressed the view that a term was to be implied in the bidding contract so as to impose upon the owner calling the tender the "obligation to treat all bidders fairly and not to give any of them an unfair advantage over the others".23 An obligation of fair treatment to all bidders was also recognized by this Court in Northeast Marine Services Ltd. v. Atlantic Pilotage Authorities24 so as to preserve the integrity of the tendering process.
In determining whether the parties enjoyed a sufficiently close relationship so as to give rise to a common law duty of care, as I said earlier,25 the relationship between the parties and assumed or imposed obligations are factors to be considered under the principles enunciated in Canadian National Railway Co. v. Norsk Pacific Steamship Co.26 The implied contractual obligation of the respondent under the bidding contract to treat all the bidders fairly, according to the good faith principle, is an assumed obligation which gives rise to a common law duty of care vis-à-vis the appellant.27 The relationship between the appellant and the respondent was sufficiently close that it ought to have been in the respondent's contemplation that the appellant would be injured by a breach of that duty.
Both in Central Trust Co. v. Rafuse28 and in BG Checo International Ltd. v. British Columbia Hydro and Power Authority29 the Supreme Court of Canada makes it clear that sometimes a given wrong prima facie supports an action in contract and in tort. Such case arises, for instance, where the duty in contract and the common law duty in tort are coextensive.30
The case at bar falls into this category.
Breach of a duty
The respondent's contention, that the facts upon which the Trial Judge relied to conclude that there was a breach of duty were not supported by the evidence, is without merit.
With respect to the negotiations, the Trial Judge found, correctly so in my view, that the respondent had failed to:
" pursue the negotiations in a timely fashion;
" make Mr. McMurray aware of who had authority to commit the Department and who did not;
" make the respondent's negotiating position clear to him;
" make clear to him, at an early enough time to give him a realistic opportunity to comply, that retrofit details were required before the Department would recommend the lease renewal;
" set a realistic schedule and make Mr. McMurray aware of it so that he knew the deadlines;
" ensure that timely and pertinent information was supplied to avoid creating such time constraints for the internal departmental decision-making process that decisions were made to Mr. McMurray's detriment, on the basis of incomplete and inaccurate information.
The duty of care owed to the appellant in the context of the tendering process was also, in my view, breached by the respondent. The respondent had the obligation to ensure fair treatment in the tenders by avoiding such factors as undisclosed preferences and awards of contracts to non-conforming bidders. The Trial Judge clearly found as a fact that "a somewhat arbitrary assessment of fit-up costs appear[ed] to have been added to the financial analysis of the plaintiff's bid".31 She also found that some of the costs arbitrarily assessed to the appellant's bid were attributable to the tender's contiguous space requirements, which had not been required initially by the AECB and which, obviously, had been negligently added to the tender specifications by Mr. Mahar, resulting in a higher bid for the appellant. There had not been any mention of fit-up costs being required if the AECB stayed in the Martel building. No details of any fit-up requirements had ever been provided to the appellant in this regard. While $60,000 were added to the appellant's bid for a secured card access system"even though the appellant had suggested to include those costs in its retrofit"no such costs were added to the Standard Life bid. Moreover, the respondent later incurred installation costs of $15,000 on that building for such a system. The Trial Judge concluded that as a result, one could understand "Mr. McMurray's suspicion that undisclosed preferences played a role in the addition of the hitherto unmentioned fit-up costs to the financial analysis of his bid".32 In my view, all these facts lead to the conclusion that the respondent breached her duty to act fairly towards the appellant in the tenders.
Causation
In order to assess whether the respondent's conduct caused the appellant's loss, we must assess what, exactly, is the appellant's loss; what "injury" or "harm" it suffered.
In the context of the negotiations, I agree with the Trial Judge that the loss suffered by the appellant was the loss of an opportunity to negotiate the lease renewal. The Trial Judge concluded that the respondent's negligent conduct resulted not only in Mr. McMurray being unable to provide the required retrofit details, but also in decisions being made hastily by the appropriate branch of the Department and on the basis of incorrect information.33
In the context of the tender, I am of the view that the loss suffered by the appellant was the loss of opportunity to fairly participate in the tender and the loss of a reasonable expectation of receiving the contract. Absent the respondent's negligent conduct, the appellant's bid would have been the lowest bid and, most probably, the most beneficial contract for the respondent.
We must now assess whether the respondent's negligence caused the appellant's losses. In my view, a causal link clearly exists between the appellant's loss and the respondent's negligence.
I agree with the appellant that the Trial Judge has made two distinct mistakes in her analysis. Her first error was to confuse the test for causation with the legal analysis for quantifying damages. Her second error occurred when she applied an erroneous legal test to prove causation.
The Trial Judge confused the test for causation with the legal analysis for quantifying damages on the basis of the following statements she made:34
[The appellant] claims damages on the basis of the loss of a ten year rental contract. As a result of the defendant's employees actions he lost the opportunity to complete negotiations of the lease renewal. . . . I am not able to conclude that the plaintiff has proven the causal linkage to support the damages claimed. [My emphasis.]
The "loss of a ten-year rental contract", however, was the amount of damages claimed by the appellant as a result of its having lost the opportunity to complete negotiations with the respondent. The Trial Judge concluded that the respondent's negligence had not caused the appellant to lose a ten-year contract. She should instead have assessed the question as to whether the respondent's negligence had caused the appellant to lose the opportunity to renegotiate a renewal and to fairly and equally participate in the tender. What the Trial Judge concluded was that the loss of opportunity to complete the negotiations did not justify an amount of damages equal to a ten-year rental contract. In my view, that was not the question she had to decide at that stage.
The appellant rightly points out that the degree of probability of the contract being awarded to the appellant is a future event which is irrelevant in the assessment of causation, although clearly relevant in the assessment of damages. In Athey v. Leonati,35 the Supreme Court of Canada clearly stated that what would have happened in the future in the absence of the tortious conduct is a factor which is relevant only in the context of the assessment of damages:36
The respondents argued that the trial judge's assessment of probabilities in causation was similar to the assessment of probabilities routinely undertaken by courts in adjusting damages to reflect contingencies. This argument overlooks the fundamental distinction between the way in which courts deal with alleged past events and the way in which courts deal with potential future or hypothetical events.
Hypothetical events (such as how the plaintiff's life would have proceeded without the tortious injury) or future events need not be proven on a balance of probabilities. Instead, they are simply given weight according to their relative likelihood . . . . A future or hypothetical possibility will be taken into consideration as long as it is a real and substantial possibility and not mere speculation . . . .
By contrast, past events must be proven, and once proven they are treated as certainties. In a negligence action, the court must declare whether the defendant was negligent, and that conclusion cannot be couched in terms of probabilities. Likewise, the negligent conduct either was or was not a cause of the injury. The court must decide, on the available evidence, whether the thing alleged has been proven; if it has, it is accepted as a certainty . . . .
This point was expressed by Lord Diplock in Mallet v. McMonagle, [[1970] A.C. 166 (H.L.)], at 176:
The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards.
Furthermore, the Trial Judge applied an erroneous causation test. It is clear from her reasons for judgment that the fact that the downward spiral in the market also contributed to the loss of the appellant's lease opportunity led her to conclude that the respondent's negligence was not "actually" the cause of its loss. The Supreme Court of Canada made it clear in Athey v. Leonati that a defendant's conduct need not be the sole cause of the injury or loss:37
It is not now necessary, nor has it ever been, for the plaintiff to establish that the defendant's negligence was the sole cause of the injury. There will frequently be a myriad of other background events which were necessary preconditions to the injury occurring . . . . As long as a defendant is part of the cause of an injury, the defendant is liable, even though his act alone was not enough to create the injury. There is no basis for a reduction of liability because of the existence of other preconditions: defendants remain liable for all injuries caused or contributed to by their negligence. [Emphasis in the text.]
In my view, the negligent conduct of the respondent was clearly the main, if not the only, cause of both the appellant'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.
Conclusion
I would allow the appeal with costs and would set aside the decision of the Trial Judge. Pursuant to subparagraph 52(b)(iii) of the Federal Court Act [R.S.C., 1985, c. F-7], I would declare the respondent liable in negligence and would refer the matter back to the Trial Judge for a continuance of the trial on the issue of damages. Costs in the action in the Trial Division will be in the cause.
Isaac C.J.: I agree.
Décary J.A.: I agree.
1 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 267, Reed J.
2 Transcript of proceedings, March 25, 1997, at p. 32ff.
3 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.).
4 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 267.
5 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 265.
6 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 261.
7 A retrofit is a renovation undertaken by a landlord to renew the common areas of a building and to upgrade the building, including its mechanical and electrical systems, to current standards; Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 252.
8 "Fit-up" is work undertaken by a tenant to the space it occupies, to meet its particular requirements; Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 252.
9 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 268.
10 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 265.
11 [1984] 2 S.C.R. 2.
12 [1993] 2 S.C.R. 159.
13 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 268.
14 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 268.
15 [1994] 1 F.C. 3 (C.A.), at p. 10.
16 [1994] 1 F.C. 3 (C.A.), at p. 12.
17 (1993), 93 DTC 298 (T.C.C.), at p. 302.
18 ;Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165; London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, at p. 408; City of Kamloops v. Nielsen et al., [1984] 2 S.C.R. 2, at p. 10; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, at p. 1160.
19 Factors such as the nature of the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection, are all relevant to establish sufficient proximity giving rise to a duty of care; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, at p. 1153.
20 [1981] 1 S.C.R. 111.
21 [1985] 2 F.C. 293 (C.A.).
22 [1985] 2 F.C. 293, at p. 306, Mahoney J.A. for the majority.
23 ;Best Cleaners and Contractors Ltd. v. The Queen, [1985] 2 F.C. 293 (C.A.), at p. 300, Pratte J.A.
24 [1995] 2 F.C. 132 (C.A.), at pp. 159-160, Stone J.A. dissenting. The majority was "in general agreement" with him in this regard; see p. 179. See also Chinook Aggregates Ltd. v. Abbotsford (Mun. Dist.) , [1990] 1 W.W.R. 624 (B.C.C.A.); Health Care Developers Inc. v. Newfoundland (1996), 141 Nfld. & P.E.I.R. 34 (C.A.).
25 See note 19.
26 [1992] 1 S.C.R. 1021, at pp. 1152-1153. See more fully at pp. 1147-1155.
27 Twin City Mechanical v. Bradsil (1967) Ltd. (1996), 31 C.L.R. (2d) 210 (Ont. Gen. Div.) and Ken Toby Ltd. v. British Columbia Buildings Corp. (1997), 34 B.C.L.R. (3d) 263 (S.C.) have applied the duty of fairness to all bidders in tort situations. In Edgeworth Construction Ltd. v. N. D. Lea & Associates Ltd., [1993] 3 S.C.R. 206, the Supreme Court of Canada has extended the duty of care (negligent misrepresentation) owed by the province to a contractor so as to include the engineering firm which prepared the drawings. The contract between the province and the contractor did not negate the duty of care. See also S. K. O'Byrne, "Good Faith in Contractual Performance: Recent Developments" (1995), 74 Can. Bar Rev. 70, at p. 92ff.
28 [1986] 2 S.C.R. 147.
29 [1993] 1 S.C.R. 12, at p. 26.
30 ;BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12, at pp. 26-37. See also Allen M. Linden, Canadian Tort Law, 6th ed. (Toronto: Butterworths, 1997), at pp. 439-440.
31 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 268.
32 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.), at p. 264.
33 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249 (F.C.T.D.).
34 Martel Building Ltd. v. Canada (1997), 129 F.T.R. 249, (F.C.T.D.), at p. 268.
35 [1996] 3 S.C.R. 458.
36 [1996] 3 S.C.R. 458, at pp. 470-471.
37 [1996] 3 S.C.R. 458, at p. 467.