by Maureen Sullivan
The duty to provide accurate information to contractors is of paramount importance, as the verdict in this case from Saskatchewan’s Court of Queen’s Bench demonstrates. Failing to do so, whether deliberately or negligently, can cost defendants thousands of dollars and delay important projects. In this case, the plaintiff successfully argued that the defendant failed to provide accurate information, and that relying on the information provided was entirely reasonable for them to have done.
The plaintiff, North Pacific Roadbuilders Ltd. (“North Pacific”), is a company incorporated in British Columbia and owned by Ronald Burek, who had also incorporated a company called Prairie Roadbuilders Ltd. (“Prairie”) in Alberta. North Pacific, which had been created in order to allow Mr. Burek to bid on projects outside of Alberta, relied on Prairie to supply it with roadbuilding machines. North Pacific had done considerable work in British Columbia, but prior to the events detailed in this case had not worked in Saskatchewan. For its first project in the province, North Pacific successfully bid on a road construction tender issued by Cameco Corporation. The bid had been submitted jointly with Tron Power, a northern Saskatchewan contractor, since Cameco had a policy requiring a certain number of northern personnel on any of its contracts and since Tron Power did not have sufficient machinery to perform the contract themselves. Further, roadbuilding was not Tron Power’s area of expertise.
The road North Pacific was supposed to construct was a 57-kilometre ore haul road between Cameco Corporation’s mine and mill at Key Lake and a new mine at McArthur River. The specifications and technical information in the tender documents were prepared by UMA Engineering Ltd. (“UMA”), which was later acquired by the engineering firm AECOM Canada Ltd. Once UMA had become involved in the project, Cameco gave it three reports on the area’s terrain; the reports had been prepared by a firm of engineers (J.D. Mollard and Associates Limited; “Mollard”) specializing in air photogrammetry – that is, making measurements of terrains based on photographs taken from above. The route UMA eventually chose for the road was an approximate of the one the engineering firm had originally chosen.
North Pacific alleged that UMA misrepresented – deliberately and/or negligently – the conditions of the terrain on which the road was supposed to be built, and that these misrepresentations caused them to lose over six thousand dollars. The defendant, UMA, denied that they misrepresented anything, and further denied both that the plaintiff had relied on the soil information in those documents and that the terrain conditions had caused North Pacific’s losses. UMA also alleged, in the alternative, that the plaintiff was contributorily negligent.
In order to determine if the tender documents issued by UMA had accurately represented the terrain, the judge examined the documents alongside the reports from Mollard. The judge also examined the reports UMA had made for Cameco in order for Cameco to get regulatory approval for the project, prior to issuing a request for bids. The judge found, among other facts, that:
- UMA’s reports to Cameco included mentions of boulders in the soil and other soil conditions that were not included in the tender documents;
- UMA’s reports to Cameco also included different terrain mapping information that was not made known to bidders;
- The tender documents did not make it known to the bidders that Mollard’s reports were available for inspection, as Mollard had strongly recommended;
- UMA prepared all of the drawings and technical specifications included in the tender documents;
- UMA had included descriptions of sample soil that stated they contained only sand, despite the sample testholes having actually also contained a certain percentage of rock;
- UMA did not include a description of the Standard Test Procedure it used for testing soil in the tender documents;
- UMA did not note that samples contained cobbles or boulders when they did;
For these and other reasons – including a short visit to the site by Mr. Burek, where he was told that the conditions he saw then would continue throughout the road-construction site – the equipment brought to the site by North Pacific was based on an expectation of primarily sandy soil. Because of delays due to equipment being damaged by boulders, and later needing to demobilize equipment for the winter and then remobilize, Cameco did not accept the road as complete until August 20, 1998; Cameco had intended to use the road as a winter road in December 1997.
A week before the road was accepted as complete, Mr. Burek spoke to a Cameco representative by telephone and let him know that the extra rock North Pacific had encountered – a quantity of which had not been included in the tender documents – had caused delays and damage in the amount of approximately $2 million in additional costs. Mr. Burek was advised to make a written claim to UMA. He did so in a letter dated November 10, 1998; UMA responded and denied the claim.
In order to assess the reasonableness of the claim, along with whether North Pacific had reasonably relied on the information given by UMA in the tender documents, the judge considered testimony from Mr. Burek, from an employee of Prairie (Mr. Burek’s Albertan company), George Mollard (of the engineering firm Mollard), an expert engineer with experience in northern Saskatchewan in both the public and private sectors, UMA’s engineer in charge of the project, UMA’s supervising engineer on the haul road, a junior design engineer employed by UMA, a heavy equipment operator familiar with the region who had been employed by North Pacific for part of the project, a Cameco engineer with expertise in soil mechanics, an engineer employed by neither party but with expertise in preparing bids, and an engineer with expertise in tendering contracts who had worked for the province for many years. Thus the judge examined a considerable amount of evidence in determining the claim.
In order to assess if UMA had negligently misrepresented information to North Pacific, the judge first examined previous case law to determine that UMA did owe a duty of care to bidders to provide accurate information that was not misleading in any way. The judge further determined, based on assessing technical and testimonial evidence, that some – but not all – of the information UMA had provided in the tender documents was in fact misleading, either expressly or by omission. The judge also found that many of Mr. Burek’s assumptions regarding the soil were unreasonable, which is why not all of the information UMA provided was found to be misleading: that is, it would only have been misleading had Mr. Burek’s assumptions based on them been entirely reasonable.
Three further points were made out, thus leading the judge to hold that the misrepresentation was negligent. First, the judge held that, based on evidence, UMA had fallen below the standard of care it owed bidders by failing to disclose the Mollard terrain mapping. Second, the judge found that it was reasonable for the plaintiff to have relied on the information UMA provided that did not disclose an increase in rock further north along the planned route and made no mention of extensive boulders. Third, the judge accepted the evidence that North Pacific incurred costs over and above what it anticipated because of relying on the information. Thus the plaintiff was found to be entitled to damages. While the plaintiff did also allege deliberate misrepresentation, or deceit, the judge did not find this based on evidence.
UMA had claimed that should they be found negligent, the plaintiff should be found to have contributed to that negligence by failing to make its own inquiries into additional geological information. The judge held that North Pacific was not so negligent, in part because none of the bidders had made these types of inquiries, indicating that all assumed they had been supplied with all available terrain information.
North Pacific claimed nearly $5 million in damages. In assessing the plaintiff’s and defendant’s arguments regarding damages, the judge was unable to determine what a correct bid would have been, due to insufficient evidence. However, the judge did note that Mr. Burek had twice – first verbally, to Cameco, and second in writing, to UMA – stated his damages to be $2 million. Thus the judge awarded North Pacific $2 million.
Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.
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