T-1197-71
The Queen in right of Canada (Plaintiff)
v.
Phoenix Assurance Company Limited (Defend-
ant)
Trial Division, Decary J.—Montreal, April 6,
1976; Ottawa, April 14, 1976.
Crown—Contracts—Bid bond—Request to begin work
before formal contract signed and performance bond provid-
ed—Whether defendant relieved of responsibilities under bid
bond.
Under the terms of a construction contract, between the
plaintiff and D Company, the plaintiff's requirements related to
two stages: (1) the first stage was the bid which was to be
accompanied by a security, in this case a bid bond, for 10 per
cent of the cost of the bid; (2) the second stage began with the
award of the contract and required a performance bond for 50
per cent of the cost of the contract or a security deposit for the
same amount plus a labour and materials payment bond for 50
per cent of the cost of the contract. D Company complied with
the requirement of the first stage by obtaining a bid bond
issued by defendant. D Company's bid was accepted and plain
tiff notified D Company to commence work immediately. Work
began without a formal written contract being entered into and
without a performance bond and labour and materials payment
bond being provided beforehand. The plaintiff brought the
action against the defendant in regard to the obligations which
it had assumed under the bid bond.
Held, the action is dismissed. Under the terms of the bid
bond, the defendant undertook to ensure that a contract would
be signed and that D Company would arrange for a perform
ance bond as well as a labour and materials payment bond to be
issued. Plaintiff, in ordering that work begin before the con
tract was signed and before the labour and material bond was
issued, relieved defendant of its responsibilities and entered into
a contract sui furls, or an innominate contract, with D Com
pany for completion of the work. Plaintiff was putting an end to
the first stage, that of the bid, and moving on to the second
stage where defendant was not involved in any way whatever.
The Queen v. Fidelity Insurance Co. of Canada [1970]
Ex.C.R. 627, distinguished.
ACTION.
COUNSEL:
G. Côté, Q. C., for plaintiff.
A. Laurin for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Tansey, Lavery, Johnston, O'Donnell, Clark
& Carrière, Montreal, for defendant.
The following is the English version of the
reasons for judgment rendered by
DECARY J.: The point at issue is whether, as a
result of plaintiff's request to "Les Entreprises
Jean R. Denoncourt Inc.", hereinafter referred to
as "Denoncourt", to begin construction of a retain
ing wall before a contract for the work to be
carried out had been signed, defendant was freed
from the obligations which it had assumed by a bid
bond.
This case involved a question of law, but a
question of law whose nature will be determined
by the facts.
I must here reproduce in full page C-2 of the
construction bid, which was awarded to Denon -
court (Exhibit P-1):
REQUIREMENTS RELATING TO SECURITY
A -WITH BID
1. BID OF LESS THAN $25,000: No security is enclosed with
this bid. We know that the Department may require security
when the contract is awarded, in accordance with sections
B-1 and B-2 below.
2. BID OF $25,000 and OVER: We enclose security in the
form of:
(i) a bid bond, in the approved form and originating with
a company whose bonds are acceptable in the amount of at
least ten per cent of the bid,
OR
(ii) a security deposit of at least ten per cent of the bid, or,
when the bid exceeds $250,000, in the amount of $25,000
plus five per cent of the amount of the bid above $250,000.
The maximum amount of the deposit required for any bid
shall be $100,000. This deposit must be in the form of a
certified cheque, payable to the Receiver General for
Canada, and drawn on a bank subject to the Bank Act or
the Quebec Savings Banks Act,
OR
(iii) Canada Government bonds or debentures of a com
pany included in the "National Railways" (according to
the definition of this expression given in the Canadian
National Railways Capital Revision Act), unconditionally
guaranteed as to capital and interest by the Government of
Canada, if these obligations are
(a) payable to bearer,
(b) deposited as security with the Minister of Finance
and the Receiver General for Canada in accordance
with the Regulations on internal obligations in Canada,
or
(c) registered in the name of the Minister of Finance
and the Receiver General for Canada.
The security deposit mentioned in (ii) and (iii) shall be
forfeited if we refuse to conclude a contract when we are
requested to do so, but the Minister may, if it is in the
public interest, waive the right of Her Majesty to confis
cate the security deposit.
We understand that if the security is not provided in the
prescribed manner, as described above, the bid is liable to
be rejected.
B -ON AWARD OF THE CONTRACT
1. On receipt of notice of the acceptance of our bid, we shall
provide:
(i) a performance bond in the amount of fifty per cent of
the amount payable under the contract, OR a security
deposit as described in A-2(ii) or A-2(iii) above,
AND
(ii) a labour and materials payment bond in the amount of
fifty per cent of the amount payable under the contract,
OR an additional security deposit in the amount of ten per
cent of the amount payable under the contract.
Page C-2 Bid form.
Plaintiff's requirements relate to two different
stages. The first stage is the bid, which must be
accompanied by a security, in the case at bar a bid
bond in the amount of ten per cent of the cost of
the bid. This bid bond refers only to the bid and
has nothing to do with completion of the work.
The second stage begins with the award of the
contract, and requires a performance bond of an
amount equal to fifty per cent of the cost of the
contract, or a security deposit in the same amount,
and in addition a labour and materials payment
bond in the amount of fifty per cent of the cost of
the contract.
Denoncourt complied with the requirement at
the first stage by obtaining a bid bond issued by
defendant company. I think I should reproduce
here the relevant part of this contract, entitled
"bid bond" (Exhibit P-2):
NOW, THEREFORE, the condition of this obligation is such that
if the Principal shall have the said tender accepted within sixty
days from the closing date of the tender call and shall enter into
a contract with the Obligee and furnish a Performance Bond
and a Labour and Material Payment Bond each in the amount
of 50% of the contract and satisfactory to the Obligee or other
acceptable security, then this obligation shall be void, otherwise
to remain in full force and effect.
This paragraph clearly establishes, in my opin
ion, that the obligation assumed by defendant
would be extinguished if Denoncourt's bid was
accepted within a period of sixty days from the
closing date of the call for bids, and if Denoncourt
signed a contract with the Department of Public
Works and provided a performance bond and a
labour and materials payment bond. On the other
hand, if no contract was signed between Denon -
court and plaintiff, and if there was no perform
ance bond or labour and materials payment bond,
then the obligation assumed by defendant would
remain in force.
On September 5, 1969, that is fifteen days after
the bid bond, Denoncourt was informed by telex
that its bid had been accepted by the Department
of Public Works (Exhibit D-1):
CPCN TEL MTL TB
DPW REGNL MTL
MONTREAL PQ SEPTEMBER 5 1969
LES ENTREPRISES JEAN R DENONCOURT INC
79 RUE DU PRINCE
SOREL PQ
WE ACCEPT YOUR BID IN THE AMOUNT OF $178,751.50 FOR
PROTECTING WALL AT VERCHERES, QUE. BEGIN WORK
IMMEDIATELY. WRITTEN CONFIRMATION FOLLOWS.
P PARE
DIRECTOR, FINANCE AND ADMINISTRATION
DEPARTMENT OF PUBLIC WORKS
2085 UNION AVE
MONTREAL 111 PQ
CPCN TEL MTL TB
DPW REGNL MTL
This communication of September 5, 1969 was
followed by a letter of the same date from Mr.
Paul Paré, Director, Finance and Administration
in the Department of Public Works, which reads
as follows (Exhibit P-3):
cc: Director, Construction Engineering (Montreal District)
2085 Union Ave., Montreal 111, Que.
Les Entreprises Jean-R.
Denoncourt Inc.
79 rue du Prince 2167-575-T
Sorel, Que.
September 5, 1969
Re: Verchères, Que—Construction of a protecting wall
Dear Sirs:
This letter is to confirm our telegram of September 5, 1969
accepting your bid in the amount of $178,751.50 for the
aforementioned work. This acceptance is subject to all the
terms stipulated in your bid.
Please begin work immediately and ensure that it will be
completed three (3) months from today, as stipulated in your
bid. Since time is of the essence in a contract, one of the
conditions of your contract is that all expenses to which the
Crown is put by your failure to complete the work on time will
be charged to you if the delay is not caused by the Department.
Mr. G. K. Aubut, District Director, Department of Public
Works, 1631 Delorimier St., Montreal 133, Que., is directly
responsible for the completion of this contract and any requests
for further information should be addressed to him.
Please ensure that the insurance policy, in conformity with the
general terms and conditions, is forwarded to our office as soon
as possible. The amount of the required "all risk" policy is
$178,751.50.
Before the formal contract can be signed by the Department,
you must send to our office the appropriate security mentioned
in the bid documents, namely:
(i) A performance bond in the amount of fifty per cent of
the amount payable under the contract OR a security deposit
as described in A-2(ii) or A-2(iii) of the bid documents
AND
(ii) a labour and materials payment bond in the amount of
fifty per cent of the amount payable under the contract OR
an additional security deposit in the amount of ten per cent
of the amount payable under the contract.
Under the terms of the contract, the Department will make no
payment until it has received the appropriate security and the
insurance policy.
Yours very truly,
ORIGINAL SIGNED BY PAUL PARE
Paul Paré
Director, Finance and
Administration
cc: District Director (Montreal)
Operations Officer (Quebec)
Ottawa, Ontario
Director, Construction Engineering (Montreal District)
Bids Office (Montreal District)
Finance, Region
Regional Services Officer (Montreal)
A. Michaud (Region)
It will be noticed in this letter that, once again,
an order was given to begin work immediately so
that it could be finished within three months of the
date of the letter, that is within three months of
September 5, 1969. On page two of the said letter,
it will be noticed that reference is made to the
contract which is to be signed, and this contract is
referred to as a "formal contract". A formal con-
tract implies that there already exists an agree
ment between the parties and hence a contract.
Mr. Paré refers again to the requirements of the
Department before the signing of the formal con
tract, and these requirements, as I noted above,
appear in the bid.
In my opinion, I cannot ignore the fact that
there was a contract between the parties as soon as
the telex of September 5, 1969 was sent, ordering
Denoncourt to begin work, and this fact is con
firmed by the letter dated the same day, by Mr.
Paré, although there is in this letter a reference to
the contract for a performance bond and a labour
and materials payment bond. I believe that it is
necessary to study the scope of these facts with
reference to defendant, which undertook to ensure
that a contract would be signed, and then to ensure
that Denoncourt would arrange for a performance
bond as well as a labour and materials payment
bond to be issued.
Was defendant relieved of its responsibilities
toward Denoncourt by the fact that plaintiff
required the work to begin without a written con
tract, without a performance bond, without a
labour and materials payment bond provided
beforehand?
In my opinion, defendant only undertook to
ensure that Denoncourt would sign a contract and
provide performance and labour and materials
payment bonds. Defendant's obligations did not go
beyond the preliminary stage, namely that of the
bid and the signing of the contract, and of obtain
ing bonds on behalf of its client Denoncourt.
Plaintiff, in ordering that work begin before the
contract was signed and before the labour and
materials payment bond was issued, relieved
defendant of its responsibilities, because plaintiff
was putting an end to the first stage, that of the
bid, and moving on to the second stage where
defendant was not involved in any way whatever.
By these acts, plaintiff relieved defendant of its
responsibilities and entered into a contract sui
juris, or an innominate contract, for completion of
the work. Defendant's responsibility at the stage of
the bid had been fulfilled, because plaintiff had
contracted with Denoncourt only for the first
stage, namely that of the bid and of the formaliza
tion of contracts for carrying out the work and for
the bond, before construction work began, though
Denoncourt was not relieved of its responsibility to
fulfil the requirements.
Great reliance was placed on a case decided by
Dumoulin J. in The Queen v. Fidelity Insurance
Co. of Canada.' Learned counsel for the plaintiff
even to some extent implied that this decision
constituted stare decisis. There can be no stare
decisis between judges of the same court. There
may be a question of collegiality in a case where
the facts are identical, or at least are similar to the
extent that a decision cannot be ignored.
In this case heard by Dumoulin J., there was no
bid bond at all, but a performance bond which is
at the outset completely different. The case decid
ed by Dumoulin J. concerned the second stage,
namely the carrying out of the work, whereas the
case at bar concerns the first stage, the one before
the work was carried out. In my view plaintiff, by
requiring that the work be carried out before the
formalities had been completed, waived all rights
she had previously held toward defendant, since
these rights expired when the work was begun.
The facts in The Queen v. Fidelity Insurance
Co. of Canada (supra) are quite different from the
facts in the case at bar, in that the former involves
a performance bond contract which remained in
force for the company which had provided the
bonds as long as the contract to carry out the work
was not terminated, while in the case at bar, the
bid bond contract is terminated, in my opinion,
when an innominate contract or a contract sui
juris is brought into being by the commencement
of construction work.
1 [1970] Ex.C.R. 627.
In my view, once the order to carry out the work
was given before the performance contract was
signed, there was no longer a legal bond between
plaintiff and defendant, because this bond existed
only for the duration of the first stage which ended
when work was begun, whether a contract had
been signed or not.
Plaintiffs action is dismissed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.