This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2019 decision in Acadian Marine v. Highfield Construction and Parks Canada, the Supreme Court of Prince Edward Island recognized a subcontractor’s right to sue over what the subcontractor claimed to be a negligently drafted solicitation document. The dispute dealt with a federal government bridge repair contract in Prince Edward Island. The government moved to have the case dismissed, asserting long-standing legal authority that precluded subcontractors from bringing claims directly against purchasing institutions. However, notwithstanding those prior precedents, the Court rejected the government’s application and allowed the subcontractor’s claim to proceed.
As the Court summarized, the subcontractor sought compensation for negligent misrepresentation, alleging that it incurred additional project expenses due to the government’s flawed specifications:
In summary, the claim of Acadian is relatively straightforward. It alleges that Parks Canada, pursuant to a tender process entered into a contract with the successful bidder Highfield. Highfield being the general contractor then entered into a subcontract with a more specialized provider of underwater pier services being Acadian. Acadian relied upon the tender specifications which had been prepared by Parks Canada to assess the work and price the labour and materials necessary to complete the job. Once Acadian began working on the project it became clear that the scope of the work had not been captured in the tender specifications and it would require much more effort and expense on behalf of Acadian to finish the necessary work and complete the contract. In the Amended Statement of Claim, Acadian specifically alleges that Parks Canada “negligently misrepresented the scope of the work required by the tender”.
As the Court ruled, the subcontractor established the reasonable reliance grounds recognized by the Supreme Court of Canada’s governing legal test and therefore permitted the negligent misrepresentation case to proceed to trial:
As Justice La Forest had indicated in the earlier decision of Norsk, he adopted the scholarly approach of Professor Feldthusen and the “five general indica of reasonable reliance” as set out in Professor Feldthusen’s text Economic Negligence (3rd Ed. 1994). Justice La Forest reiterated the five indica in Hercules Management (para. 3).
I will now examine the pleadings to determine if the five general indicia of reasonable reliance are present: 1) does the defendant have a direct or indirect financial interest in the transaction in respect of which the representation was made. Clearly the defendant, Parks Canada being the owner of the underwater piers and the bridge does have a direct financial interest in the transaction as it requires the bridge to be repaired in order to meet its mandate of managing the National Park; 2) is the defendant a professional or someone who possess special skill, judgment or knowledge? Parks Canada as the owner and the agency which prepared the tender specifications possess a special knowledge which only an owner would have in regards to the condition of the piers; 3) the advice or information was provided in the course of the defendant’s business. As is clear from the pleadings in particular, paragraph 4, Parks Canada is the federal governmental agency whose mandate includes the management of the National Parks including the Prince Edward Island National Park which is the location of the Covehead Bridge. The preparation of the tender was clearly in the course of Parks Canada’s business; 4) the information or advise was given deliberately and not on a social occasion. This was a business transaction between Parks Canada and Highfield and not a situation where the information was being provided in some casual or flippant manner; 5) the information or advice was given in response to a specific inquiry or request. The Amended Statement of Claim stated that the request was made by Parks Canada when it requested applications for tender and as part of that process it prepared the tender specifications.
The Court also concluded that notwithstanding prior Supreme Court of Canada rulings that bar subcontractor claims against purchasing institutions, negligent misrepresentation claims fell within an exception to that general rule. The implications of this decision are significant since exposing purchasing institutions to claims from both prime contractors and subcontractors in relation to tender call specifications would significantly increase the scope of potential risk in relation to the drafting of specifications. This case, therefore, underscores the importance of ensuring heightened due diligence in the drafting of solicitation documents.
