Publication

Procurement-Supreme Court limits owners' duty to treat bidders fairly

On January 25, 2007, the Supreme Court of Canada released its decision in Double N Earthmovers Ltd v. Edmonton.¹ This may be the most important decision in procurement law since the Court's 2000 decision in Martel Building Ltd. v. Canada,² and it appears to tilt the playing field in favour of purchasers.

The case involved a challenge by an unsuccessful bidder for the supply of equipment to the City of Edmonton. During the bid process, Double N told the City that one of the other bidders, Sureway, was proposing to provide equipment that did not meet the requirements set out in the Request for Proposals (RFP). The City ignored this warning and Sureway won the bid. Ultimately, in the contract it signed with Sureway, the City waived the RFP requirement relating to the equipment. Double N sued the City, claiming that owners owed a duty to bidders to check the validity of information provided in response to an RFP, particularly where an owner was put on notice regarding potential inaccuracies or deficiencies in the information. Both the trial court and the Alberta Court of Appeal dismissed the action.

The Supreme Court dismissed the appeal in a 5-4 decision, holding that the owner had no duty to investigate the validity of information provided in bids. In the view of the majority, the owner's duty to bidders was strictly confined to the period from the issuance of the RFP to the award of the ultimate contract. The owner's obligation to treat bidders fairly did not survive the creation of the contract to perform the actual work or provide the material bid upon. Accordingly, provided that the terms of the RFP allowed it to do so, the City was free to waive some of the RFP requirements after the award of the contract.

For a more detailed analysis of the decision, including the position of the dissenting judges, you may consult our information bulletin on the Double N case.

Of interest, on the same day the Supreme Court released its judgment in Double N Earthmovers, it also granted leave to appeal from the Federal Court of Appeal's decision in Design Services Ltd. v. Her Majesty the Queen.³ At issue in Design Services is whether an owner has a duty in tort or contract to subcontractors of bidders. The Court's upcoming decision in this case may therefore provide further guidance in this area of the law. To learn more, contact Sally A. Gomery (Ottawa) or William W. McNamara (Toronto).

In Pro Swing Inc. v. Elta Golf Inc.,⁴ the Supreme Court of Canada reconsidered the law with respect to the enforcement of foreign judgments in common law jurisdictions. The Court unanimously agreed that (1) the rule preventing recognition of foreign non-money judgments should be changed but that the change should be made cautiously, to ensure that the orders do not create problems for the Canadian legal system or unfairness for the parties; (2) the criteria applied with respect to the enforcement of monetary judgments should apply to a foreign non-money judgment: the judgment must have been rendered by a court of competent jurisdiction, and there must be no fairness considerations (fraud, public policy, or natural justice) that would make it unenforceable; (3) a foreign non-money judgment must be final and clear as regards its terms and its intended extraterritorial scope; and (4) Canadian courts will not enforce foreign penal laws or judgments. The Court split, however, on the stringency of the new rule, and whether the orders in this case should be enforced. It should be noted that this new rule set out by the Supreme Court accords with the rule of civil law in force in Quebec (Articles 3155 and following of the Civil Code of Québec). To learn more, contact Alan Mark (Toronto) or Scott Campbell (Toronto).

The Supreme Court of Canada has ruled that governments will no longer be able to retain taxes imposed pursuant to unconstitutional legislation. In Kingstreet Investments Ltd. v. New Brunswick,⁵ several business owners challenged a provincial regulation imposing a user charge on the purchase of alcohol and sought reimbursement of the amounts paid. The Supreme Court held that the business owners were entitled to restitution of the unconstitutional taxes as a matter of constitutional law. In its unanimous ruling, the Court rejected the suggestion made some years earlier to the effect that, for policy reasons, there should be a rule immunizing public authorities from restitutionary claims with respect to monies paid under invalid legislation.⁶ To learn more, contact Andres C. Garin (Montréal) or Randy C. Sutton (Toronto).

In a flurry of decisions rendered in December 2006, the Supreme Court addressed several important questions of aboriginal law.⁷ Perhaps of greatest interest is R. v. Sappier. In Sappier, the Court considered the question whether the M'ikmaq and Maliseet First Nations of New Brunswick benefit from an aboriginal or treaty right to harvest timber for personal use. The Court found that harvesting wood for domestic purposes was integral to the distinctive pre-contact cultures of the Mi'kmaq and Maliseet peoples and, accordingly, held that the First Nations in question have an aboriginal right to harvest timber from Crown lands for non-commercial domestic use. The decision provides significant guidance as to the test for determining whether a given practice is integral to an aboriginal community's distinctive culture. As a result of this decision, it is likely that aboriginal communities throughout Canada will be able to successfully advance similar claims to harvest timber. Such claims may have a significant impact on the management of forestry resources. To learn more about R. v. Sappier or any other of the Supreme Court's recent aboriginal law judgments, contact Andres C. Garin (Montréal) or Pierre-Christian Labeau (Québec).

Financial institutions and other businesses which commonly rely on standard form agreements, can breathe easier now that the Ontario Court of Appeal has confirmed that customers can be bound by agreements that they have not read. In Baldwin v. Daubney,⁸ the Court dismissed an appeal from an order dismissing claims against a number of financial institutions who had entered into margin loan agreements with the plaintiffs. The Court determined that the financial institutions were entitled to rely on the loan documents even if the customers had not read them. The Court also found that the relationship between financial institutions and their clients is one of debtor and creditor which, absent special circumstances, will not usually give rise to either a fiduciary relationship or a common law duty to warn of the risk that the loan might be called. To learn more, contact William W. McNamara (Toronto).

In a decision that comes as a considerable relief to industry in Quebec, the Quebec Court of Appeal recently rejected no fault liability for nuisance under Quebec's civil law. The case of Ciment du St-Laurent v. Barrette,⁹ involves a class action brought by the neighbours of a cement works located near Quebec City claiming damages for excessive dust, noise and odours. At trial, the Superior Court¹⁰ found that the defendant, Ciment St-Laurent, had not committed any fault, had acquired the best anti-pollution equipment available, had properly maintained such equipment and respected all applicable emissions standards. Nonetheless, the Superior Court held that the defendant was liable on the basis that liability for nuisance in Quebec law is not based on fault, but whether one's neighbours have suffered abnormal inconvenience.

The Quebec Court of Appeal reversed the Superior Court on this issue, unanimously holding that the provision relied upon, Article 976 of the Civil Code of Québec, does not create any personal right of action and cannot serve as the basis of a class action. According to the Court of Appeal, liability for nuisance is based on the general regime of extra-contractual liability in Quebec law, set out in Article 1457 of the Civil Code of Québec, and proof of fault is therefore necessary. Unfortunately for the defendant, the Court of Appeal also reversed the Superior Court's finding that there had been no fault. Both parties are currently seeking leave to appeal to the Supreme Court of Canada. To learn more, contact François Fontaine (Montréal), who is representing Ciment St-Laurent.

In Poulin v. Ford Motor Co. of Canada,¹¹ certification was denied on a number of bases, including the role that a United States law firm played in the action. The United States law firm had entered into a "litigation support" contract with the Canadian counsel retained, but was ultimately found by the Court to be underwriting the litigation. This, coupled with the fact that the representative plaintiff had a general lack of knowledge regarding the claim and was unfamiliar with the "litigation support" arrangement between his counsel and the United States law firm led the Court to entertain "serious reservations" as to whether the representative plaintiff was able to properly instruct counsel on behalf of other class members. This case suggests that Canadian courts should be mindful of the relationship between Canadian law firms and their United States counterparts in prosecuting cross-border copycat class actions. To learn more, contact Dana B. Fuller (Toronto), Robert L. Armstrong (Toronto) or D. Michael Brown (Toronto), who acted as counsel for the successful defendant in this class action, Magna Donnelly Corporation.

The British Columbia Supreme Court has recently granted certification in a class action which would almost undoubtedly have been denied in Ontario. In Cooper v. Merrill Lynch Canada Inc, the plaintiffs alleged that Merrill Lynch generated profits by providing its clients with less favourable foreign exchange rates without sufficient disclosure. Merrill Lynch opposed certification on the basis that the individual issues relating to what information was provided to its clients and what the clients understood would overwhelm any common issues and relied on a number of Ontario cases in support of its position. The Court indicated, however, that the courts in B.C. have taken a much more liberal approach and held that there was no other way to resolve the claims which would be more economic or efficient. This case highlights the divergent approaches to preferable procedure analysis in Ontario and B.C. courts, which plaintiffs may take into consideration when choosing a forum for commencing class proceedings. To learn more, contact Jeremy J. Devereux (Toronto) or Steve J. Tenai (Toronto).

An international arbitral tribunal constituted under the rules of the International Centre for the Settlement of Investment Disputes (ICSID) awarded US$83.8 million to two Cyprus-based claimants controlled by Airport Development Corporation and Aéroports de Montréal Capital, Inc. following the unlawful termination by the Hungarian government of an agreement to manage the Budapest International Airport. This award is particularly significant because the tribunal endorsed the claimants' contention that in view of the unlawfulness of the expropriation, the applicable standard of compensation is the customary international law standard rather that the lesser standard set out in the bilateral investment treaty on which the claim was based. Ogilvy Renault has published an information bulletin on the Budapest International Airport case. To learn more, contact Pierre Bienvenu (Montréal) or Martin J. Valasek (Montréal), who acted as counsel for the successful claimants in this arbitration.

On October 19, 2006, the Limitations Act, 2002 (Ontario) was amended to provide certain exemptions to section 22 of the Act, which provides that the limitation periods apply despite agreements to vary or exclude them. Parties may now freely enter into an agreement to extend or suspend a limitation period and may also agree to shorten a limitation period so long as none of the parties is a "consumer" as defined by the Consumer Protection Act. To learn more, contact D. Michael Brown (Toronto).

Ogilvy Renault is once again well represented in Chambers Global Guide to the top lawyers. Ogilvy Renault's lawyers and/or practice areas were ranked in the areas of Arbitration, Banking and Finance, Competition and Antitrust, Corporate and M&A, Dispute Resolution, Intellectual Property, Projects, Public International Law, Restructuring and Insolvency, Tax Litigation and WTO/International Trade. Referred to as having an "ingrained business, sense", being a "major national player" and comprising a "first-rate firm for its practical, technically proficient and value-driven lawyers who are brilliant at teamwork", Ogilvy Renault and its lawyers continue to shine in these international rankings. Lawyers in the Litigation Group who were recognized are Pierre Bienvenu, Benjamin Bedard, Jean Bertrand, Christine Carron, Paul Conlin, Yves Fortier, Louis Gouin, William Hesler, Alan Mark and Gregory O. Somers.

In fact, Ogilvy Renault is the only Canadian law firm to have been ranked worldwide in the Chambers Global Guide for its arbitration practice. A key member of this practice, Pierre Bienvenu (Montréal), recently appeared on behalf of the London Court of International Arbitration to intervene before the Supreme Court of Canada in the case of Dell Computer Corporation v. Union des Consommateurs, an appeal which concerns the enforceability of arbitration clauses in consumer agreements in Quebec, in the context of a class action.

The Honourable Pierre A. Michaud, O.C., Q.C. (Montréal), former Chief Justice of Quebec and counsel at Ogilvy Renault, was recently appointed to act as mediator in the dispute between the Government of Quebec and the Fédération des médecins omnipraticiens du Québec.

On November 23, 2006, Louis-Paul Cullen (Montréal), Senior Partner, was appointed a judge of the Quebec Superior Court in recognition of an illustrious career as an Ogilvy Renault litigator spanning nearly 30 years.

In January of this year, the federal government announced that Bernard A. Roy, Q.C. (Montréal), Senior Partner, had been appointed President of the Old Port of Montreal Corporation. He will continue to practise with the firm as Counsel.

Ogilvy Renault is pleased to announce that Éric Dunberry has been appointed as Montréal Chair of the Litigation Group, while Alan Mark takes on the role of Toronto Chair of the group. Éric, who is also Chair of the firm's energy practice, has extensive expertise in commercial litigation and alternative dispute resolution, particularly in the areas of energy, technology and product liability. Alan, a corporate and commercial litigator, has expertise in securities litigation, shareholder and partnership litigation and class actions. He also carries on a substantial electricity law and regulation practice.

Pierre-Christian Labeau has joined the firm's Québec office. Prior to joining us, Pierre-Christian was interim director of the Native and Constitutional Law Division of the Quebec Department of Justice. He has considerable expertise in Aboriginal and Constitutional Law and has appeared before the Quebec Court of Appeal and the Supreme Court of Canada in several precedent-setting cases.

Philippe Larochelle has joined the firm's Montréal office. Prior to joining us, Philippe had a varied litigation practice including work as defence counsel before the International Criminal Tribunal for Rwanda in Arusha, Tanzania. Most recently, he successfully argued an appeal before the Supreme Court of Canada in R. v. Déry,¹² a case relating to whether the crime of attempted conspiracy exists in Canadian law.

Recent and forthcoming engagements of members of Ogilvy Renault's Litigation Group:

Jean A. Savard, Q.C. (Montréal), recently spoke in Montréal on case law developments in construction law in 2006 at a symposium organized by the Quebec Branch of the Canadian Bar Association. Now in his 17th year of presenting at this conference, Jean also spoke in Québec last month on the same topic. To learn more, contact Jean.

Alan Mark (Toronto) recently spoke on Recent Developments in Contract Law at Insight Information's Conference on Negotiating and Drafting Major Business Agreements. To learn more, contact Alan.

Sylvie Rodrigue (Montréal/Toronto) will be speaking at the Class Actions Symposium on April 26-27 at Osgoode Hall in Toronto. She will provide an overview of recent developments in class actions in Quebec as part of a "cross-country check-up". To learn more, contact Sylvie.

Jeremy J. Devereux (Toronto) of Ogilvy Renault's Mining and Resources practice attended the Prospectors and Developers Association of Canada's International Convention, Trade Show and Investors Exchange Meeting in Toronto from March 4 to 7, 2007. Since its inception in 1932, the annual convention has been a gathering place for people and companies involved in exploration and development of new mineral deposits. In 2006, 14,500 participants from 100 countries attended and 2007 promised to be another record-breaking year. To learn more about Ogilvy Renault's Mining and Resources practice area, contact Jeremy.

Jeremy J. Devereux (Toronto) will be speaking on "The Regulator's Challenges and Initiatives: Recent and Pending Developments" at the Canadian Institute Conference on Risk in Structured Products in Toronto on April 23-24, 2007. To learn more, contact Jeremy.

1.             2007 SCC 3.

2.             [2000] 2 S.C.R. 860.

3.             2006 FCA 260.

4.             2006 SCC 52.

5.             2007 SCC 1.

6.             Air Canada v.British Columbia, [1989] 1 S.C.R. 1161, per La Forest J.

7.             R. v. Sappier; R. v. Gray, 2006 SCC 54; R. v. Morris, 2006 SCC 59; and McDiarmid Lumber Ltd. v. God's Lake First Nation, 2006 SCC 58.

8.             [2006] O.J. No. 3919 (C.A.).

9.             2006 QCCA 1437.

10.           Barrette v. Ciment du St-Laurent Inc., [2003] R.J.Q. 1883 (Que. S.C.).

11.           [2006] O.J. No. 4625 (S.C.J.).

12.           2006 SCC 53.

For further information, please contact one of the following lawyers:

Montréal

Richard L. Desgagnés    (514) 847-4431
rdesgagnes@ogilvyrenault.com

Toronto

Randy C. Sutton    (416) 216-4046
rsutton@ogilvyrenault.com

About Ogilvy Renault

Ogilvy Renault is a full-service business law firm with more than 400 lawyers, patent and trade-mark agents practising in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, and London (UK), and serves some of the largest and most successful corporations in Canada, and in more than 120 countries worldwide. The firm was recently named Best Law Firm in Canada by The International Law Office.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.

© Ogilvy Renault LLP 2007 - All Rights Reserved

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