December 14, 2011

Ontario court finds owner found liable for verbal representation on sewer construction project

Bid Protest Bulletin | Paul Emanuelli

In its decision in George Robson Construction (Weston) Ltd. v. Hamilton-Wentworth (Regional Municipality), the Ontario Superior Court of Justice found that the written disclaimers in a tender call did not protect the owner from the verbal misrepresentations it made to the plaintiff bidder.

The case involved a construction project for the installation of a sewer pipe under a highway. A dispute arose over whether the contract was restricted to concrete pipe liner or also allowed for less costly steel pipe liner. The bidder claimed that the owner had verbally confirmed that the steel liner was acceptable and calculated its price in accordance with that representation. The court found that the bidder was prejudiced by the owner’s inaccurate verbal representation:

I find that Benner would not have submitted the plaintiffs’ bid without Szigeti’s representation. Benner had finely tuned his bid, which depended on his use of 750 mm steel as a liner because its outside diameter would allow him to use the machine he planned to use.

The court also held that the disclaimer contained in the owner’s tender call did not protect it from this verbal misrepresentation:

The defendant is not entitled to rely on the written provisions in the document entitled “Instructions to Bidders”, in the face of the explicit representations made by Szigeti.

Lord Denning said the following on this issue in Mendelssohn v. Normand Ltd., [1969] 2 All E.R. 1215, [1970] 1 Q.B. 177 (C.A.) at pp. 183-84. There are many cases in the books when a man has made, by word of mouth, a promise or a representation of fact, on which the other party acts by entering into the contract. In all such cases the man is not allowed to repudiate his representation by reference to a printed condition, see Couchman v. Hill [1947] K.B. 554; Curtis v. Chemical Cleaning and Dyeing Co. [1951] 1 K.B. 805; and Harling v. Eddy [1951] 2 K.B. 739; nor is he allowed to go back on his promise by reliance on a written clause, see City and Westminster Properties (1934) Ltd v. Mudd [1959] Ch. 129, 145 by Harman J. The reason is because the oral promise or representation has a decisive influence on the transaction — it is the very thing which induces the other to contract — and it would be most unjust to allow the maker to go back on it. The printed condition is rejected because it is repugnant to the express oral promise or representation.

In addition to the representation by Szigeti the defendant knew, before accepting the plaintiffs’ tender, that the plaintiffs had tendered the detail relating to Addendum #6 using steel as opposed to concrete.

Therefore, the defendant is estopped from later invoking written provisions in the “Instructions to Bidders” with respect to this particular detail.

Notwithstanding the tender call disclaimer, the court found the owner liable due to the inaccurate verbal representation and awarded the prejudiced contractor $222,000 in damages. In light of the conflicting evidence at trial with respect to whether the verbal representations were ever actually made, this case underscores the need to formalize pre-bidding communications with bidders and ensure that all such communications are reduced to written form to ensure equal access to all bidders and to reduce the risk of future misunderstandings and disagreements.

This article is extracted from Emanuelli's Government Procurement textbook published by LexisNexis Butterworths. Reach Paul at paul.emanuelli@procurementoffice.ca.

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