AH pays damages in breach of contract lawsuit
The Township of Algonquin Highlands paid an Ajax-based solid waste handling company more than $70,000 in damages in a breach of contract lawsuit.
According to court documents obtained by the Times, in a decision on Dec. 7, 2018, Justice Bryan Shaughnessy of the Superior Court of Justice ruled in favour of Reaction Distributing Inc. in the lawsuit against Algonquin Highlands, the company suing the township after the township disqualified the company’s bid on a contract. Those damages totalled $71,063.60. The Township of Algonquin Highlands subsequently appealed that ruling, and in May of 2019, its appeal was dismissed with the decision upheld.
According to the court documents, “The respondent [Reaction Distributing] submitted a tender for work to be done for the appellant [the township]. The respondent submitted its tender in a three-ring binder contained in a box. The box did not have the respondent’s name or address on the outside of the box. It was one of the contractual requirements of the tender process that all tenders had to be submitted in a sealed envelope that had marked, on the outside, the company’s name and return address.”
The contract was for the supply and installation of waste compactors at the Dorset transfer station in 2015. The company took issue with the disqualification, suing the township. The judge ultimately ruled the omission of the company’s name and address from the front of the box did not justify its bid being disqualified. The ruling also notes the disqualified bid was the lower of the two bids the township received for the job.
“The appellant disqualified the respondent’s tender as a consequence of this omission and awarded the contract for the work to the only other company that submitted a tender,” the court documents read. “The respondent sued the appellant for breach of contract. The trial judge found that the respondent’s tender was in substantial compliance with the tender requirements. The trial judge found that the respondent’s failure to include its name and return address was a mere irregularity. He thus found that the appellant’s disqualification of the respondent’s tender constituted a breach of contract. The trial judge found that the respondent had submitted the lowest bid for the work and would have been awarded the contract for the work if the appellant had evaluated the respondent’s tender. Consequently, the trial judge awarded the respondent its lost profit from its failure to be awarded the contract for the work.”
Reaction Distributing owner Larry Vine said his company had been in touch with the township leading up to the submission of the bid and the opening of tender documents.
“I sent a number of questions,” Vine told the Times, saying those answers were used to assist him in drawing up the paperwork.
“It was accepted by the township,” he said, adding a company rep was present when the tender documents were opened. “It was opened by the township.”
Vine told the paper it was about a week or so later that Reaction Distributing was informed it would be disqualified due to the omission of the company’s name and address from the front of the box.
Algonquin Highlands Mayor Carol Moffatt told the paper that the senior township staff member who was present on that day doesn’t agree with that version of events.
The tendering process allows municipalities to waive issues of non-compliance when it comes to following the bid procedure, something the township chose not to do.
“While the terms of the tender process permitted the appellant to waive any non-compliance, the appellant says that that term did not require it to waive any non-compliance,” the court documents read. “It says that the respondent clearly did not comply with the requirement to have its name and return address on the outside of the tender and therefore it was entitled to disqualify the respondent’s tender.
“The appellant raised three issues: (i) that the trial erred in finding a breach of contract in this situation; (ii) erred in finding that the appellant had not acted in good faith; and (iii) erred in finding that the respondent would have been awarded the contract for the work, if the appellant had considered its tender. At the hearing, the appellant chose not to pursue the third issue.
“We do not accept either of the other grounds advanced by the appellant,” the court documents continue. “On the first issue, the law is that substantial compliance is the test to be applied in considering tender requirements: Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3 (CanLII),  1 S.C.R. 116. Consequently, and subject to the second issue, it was open to the trial judge to find that the respondent substantially complied with the tender requirements and thus the appellant’s failure to consider the respondent’s bid constituted a breach of contract.”
“On the second issue, the trial judge found that the appellant had not treated the respondent fairly and equally in reaching its conclusion to disqualify the respondent’s tender. The trial judge’s finding, in this regard, is a factual one that is not to be interfered with absent palpable and overriding error, of which there is none here. We would note, on this point, that the appellant did not place any evidence before the trial judge as to the reasons why the appellant was not prepared to waive the non-compliance.”
In an email to the Times, Algonquin Highlands Mayor Carol Moffatt re-iterated the company had not fully complied with the tender requirements.
“The company didn’t fully comply with the contractual requirements of the tender submission and the tender was rejected, something that happens on occasion,” Moffatt wrote. “The company sued. The municipality sought to uphold its right to manage the requirements of its own tender process, a process which is not only clearly laid out ahead of time, but which is also intended to provide a fair, consistent and transparent playing field for all bidders. The courts didn’t agree.”
Moffatt told the paper the decision to appeal was made after discussions with the township’s legal counsel.
“After discussion with legal counsel, council supported an appeal,” she wrote in an email to the Times. “Ultimately, the courts didn’t support the municipality’s position which, in my opinion, sets up a damned either way scenario: if a municipality has to accept non-compliant bids, who’s to say the compliant bidders won’t sue for the same reason of perceived fairness? Adhering to firm requirements at the front end is meant to protect the integrity of the public process, and Algonquin Highlands stands firm on that.”
The contract for the job was awarded to the other bidder, Metro Compactor Service Inc., by Algonquin Highlands council in October of 2015 in the amount of $208,248 plus HST.
The Times has submitted a request for the township’s legal costs for the lawsuit and the subsequent appeal.