Where Angels Fear
to Tread:
Maystar, Bradscot and correcting simple errors in arithmetic
John Smith, MGS Legal Services
ALOC Conference Nov. 2012
A fundamental principle in procurement law is that there has to
be certainty as to price.
In our practice price is entered on the Rate Bid Form.
The question that we all get and dread is : ”There is a problem
with the Rate Bid Form, what can we do?”
• The most common problem is multiple prices.
• The causes for multiple prices can range from pure confusion
to pure mathematics.
• Pure Confusion: variety of numbers listed which are unrelated
• Pure Mathematics: errors where the error can be corrected by
a matter of simple arithmetic recalculation or extension
• Courts are reluctant to approve correction in the case of pure
confusion; more willing to allow correction in the case of pure
mathematics
• The following slide is an example of what can result from
confusion over pricing.
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Town of Newmarket will not appeal Maystar decision
Newmarket and Maystar settle on damages claim
NEWMARKET, Ontario, November 11, 2009 - On September 24, 2009, the Ontario Court of Appeal dismissed the Town of Newmarket's appeal
regarding the May 6, 2008 Ontario Superior Court ruling involving Maystar General Contractors Inc. (Maystar). In a recent meeting, the Town of
Newmarket Council decided not to appeal the Court of Appeal's decision, but rather to work towards a settlement with Maystar for damages.
The Town of Newmarket negotiated a total settlement with Maystar for $2.5 million dollars, including damages and legal fees.
"To avoid any further legal fees and contain costs, we felt it was in our best interest to negotiate a settlement with Maystar," says Newmarket Mayor,
Tony Van Bynen. "We could have faced significantly higher legal damages."
In September 2005, the Town received four bids from developers for the construction of the now-completed Magna Centre, including bids from
Maystar and Bondfield. Maystar had the lowest unofficial bid of $35.5 million. During the evaluation process, the Town's consultants advised the Town
that the Bondfield bid contained an arithmetic error on the GST calculation. When corrected, Bondfield had the lowest bid at $35.3 million.
In December 2005, Maystar commenced a court application against the Town of Newmarket for breach of contract. On May 6, 2008, Justice Laurence
Pattillo ruled in favour of Maystar. On May 27, 2008, Council decided to appeal the May 6 Ontario Superior Court decision. The Court of Appeal
dismissed the appeal on the basis that the Town accepted a non-compliant bid. View the full decision from the Court of Appeal for more information.
"The Town made its decision based on clear recommendations for the award of the tender," says Chief Administrative Officer, Bob Shelton.
Unfortunately, the courts saw it differently, but did identify the difficult position the Town was in and that the Town acted in good faith."
"We made our decisions in the best interest of our residents and our Town's future, says Mayor Tony Van Bynen. "We're glad to finally put this behind
us. We have a state-of-the-art recreation complex, which our community has enjoyed for the past four years. With all things considered, we feel we
have received a great deal of value from these facilities."
Costs will be absorbed in the Town's 2009 budget.
-30Media contact:
Wanda Bennett, Manager of Corporate Communications
Tel: 905-953-5300, ext. 2041 ? E-mail: wbennett@newmarket.ca
• How did this happen?
• It all started with a case called Bradscot (MCL) Ltd. v. Hamilton
Wentworth Catholic District School Board (1999) 42 OR (3d)
723
• Bidder quoted the following prices:
• 1) $17,720,000.00-Stipulated Price
• 2) $1,240,000.00-GST
• 3) $18,460,400.00-Total Bid Price (Stipulated price + GST)
All of these figures are incorrectly calculated.
• The Court found that there was no uncertainty that the
Stipulated Price was the relevant price and the bid was
compliant.
• In the Town of Newmarket case, the following facts presented:
• Bidder quoted these figures:
• 1) $33,000,528.00-Stipulated Price
• 2) $2,346,960.00-GST
• 3) $35,874,960.00-Total Bid Price (GST+ Stipulated Price)
• All of these figures are incorrectly calculated.
• The legal advice to Newmarket, based on the Bradscot decision was
to accept the Stipulated Price.
• The Court found there was uncertainty as to price. Was the correct
price the Stipulated Price or the Total Bid Price? The bid was found
to be non compliant.
• How does the Court distinguish Maystar from Bradscot ?
• Court looked at the procurement documents, found that the
Bradscot language was much clearer when describing which
figure was to represent the bid price.
• It found that the Stipulated Price was clearly the bid price and
the GST and Total Bid Price were superfluous to the
document.
• The language in the RFP in
Bradscot is:
•
• 2. I/WE OF BONDFIELD CONSTRUCTION COMPANY (1983)LIMITED (Firm Name)
• Agree to supply all necessary labour, materials, plant, equipment and services
• including specified allowances for the complete execution of the WORK,
INCLUDING ALL TRADES, specified herein including Addenda numbered 1 to 7
inclusive.
• AGREE to Complete the Work in accordance with the requirements of the
Contract documents
• including applicable Provincial Sales Tax for the Basic Stipulated Sum of:
• SEVENTEEN MILLION SEVEN HUNDRED TWENTY THOUSAND
• ($17,720,00) Canadian Dollars
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•
3. TENDER AMOUNT SUMMARY AND GST
X
.1 BASIC Stipulated Sum Tender Amount: $17,200,000
(same as above)
• .2 7% Federal GST to be added to Basic Stipulated
• Sum Tender Amount: $ 1,240,000
• .3 OVERALL Stipulated Sum Tender Amount: $18,460,400
• (Line 3.1 + Line 3.2 = Line 3.3)
• While the language in Maystar procurement
documents is less clear.
• The language is as follows:
• 1.1 …Stipulated Price of "Thirty-three million Five Hundred twenty-eight "
($33,000,528.00) Dollars in lawful money of Canada, included in which are all
Provincial Sales and Excise taxes, customs duties, freight, exchange, and all other
charges, except Goods and Services Tax (GST).
• 1.1.1: …Goods and Services Tax (GST): "Two million Three Hundred Forty-six
Thousand Nine Hundred sixty" ($2,346,960.00) Dollars
• 1.1.2: The total cost of the work (Stipulated Price + GST) is:
• "Thirty-five million eight hundred Seventy-four Thousand nine hundred sixty." ($
35,874,960.00) Dollars
• In Maystar the court was unable to place the price figures in
any order of importance.
• The paragraph containing the pricing showed no obvious
order of importance.
• The language of the procurement contained references to
“Total Bid Price” for various purposes which, to the court,
meant that the Total Bid Price was essential to the bid.
• The court found there were two potential answers, either the
Stipulated Price or the Total Bid Price.
• Since the GST calculation did not relate to either price, there
was no way of recalculating in order to confirm one price,
which left the court with two potential prices and uncertainty
of price.
• Pure Mathematics
• Whitehorse (City) v. Ketza Construction Corp., [2009] Y.J. No.
174
• Ketza submitted the following figures
• 1) $863,053.00- Total all items
• 2) $52152.65-GST
• 3) $915,205.65-Total Tender Price
• This is a pure mathematics case.
• The GST is not 5% of the Total All Items price, but the Total
Tender Price is the sum of the GST and the Total All Items
price.
This is a clear mistake which can be corrected by a mathematical
calculation.
• The procurement documents said Total Tender Price would be
used for price comparison.
• Court dealt with this by saying that mathematical correction
was permissible, because it was an accepted practice and was
not unfair to any party
• Privilege Clause
In this case, the rfp document contained the usual privilege clause
which warned the bidder the lowest bid would not necessarily be the
winner and that it could accept a bid that was in the City’s best
interest.
However, the rfp document did not contain the other common
privilege clause that permitted the purchaser to waive irregularities
and informalities.
The court found that since the addition of ;”..in the City’s best interest”
was sufficient to justify the mathematical correction.
• Now for a Pure confusion case: Vachon Construction Ltd. v.
Cariboo (Regional District),[1996] B.C.J. No. 1409 (C.A.)
The Rate Bid Form described the price in words as: “four hundred
and eighty eight thousand four hundred and fifty dollars.”
Following those words appeared the bracketed figure
$492,450.00.
• The purchaser called the bidder to confirm which was the
correct bid.
• The court found that the bid was uncertain because of the
discrepancy between the description of prices and there was
nothing the purchaser could do to correct the error without
rendering the bid non compliant.
• Here is a pure mathematics example:
Foundation Building West Inc. v. Vancouver (City of) [1995] B.C.J.
No. 861
Bidder was required to present 26 prices and a total price.
The 26 prices were correct, but the addition of the total price was
incorrect.
• The bidder notified the purchaser of the mistake prior to the
close of tenders, although not in compliance with the method
of communication provided for in the tender documents.
• The purchaser told the bidder that it corrected mathematical
errors as a matter of course, although this was not specified in
the tender documents.
• The court found that it was not unreasonable for a purchaser
to have a policy of correcting mathematical errors, even if the
tender documents did not specifically provide for this. As long
as this policy was applied to all bidders, the court saw no
reason to declare the bid non compliant.
• Privilege Clause
• As in the Whitehorse decision above, the court looked at
the privilege clause.
• Unlike Whitehorse, the privilege clause contained
language that specifically allowed the purchaser to waive
any non compliance with the tender documents,
specifications or conditions.
• The Court relied upon the privileged clause to the extent
that the error was a mere informality and all bidders
would receive the same treatment.
• This case characterizes an error of pure mathematics as an
example of substantial compliance as contemplated in this
passage from The Queen (Ontario) et al. v. Ron Engineering &
Construction Eastern Ltd. (1981), 119 D.L.R. (3d) 267 (S.C.C.):
• “It would be anomalous indeed if the march forward to a
construction contract could be halted by a simple omission to
insert in the appropriate blank in the contract the numbers of
weeks already specified by the contractor in its tender.”