In Design Services Ltd. v. Canada, the Supreme Court of Canada is considering the critical issue in the law of tendering of whether an owner owes a duty of care in tort to the subcontractors, architects and consultants of an unsuccessful bidder.
This case involves a contract for the construction of a naval reserve building in St. John's, Newfoundland and Labrador. Olympic Construction Ltd. assembled a team of subcontractors, consultants, and an architect. Its tender was not chosen. It sued the owner. So too did the subcontractors, consultants, and architect. The bidder settled with the owner. However, the other parties pressed on with the litigation.
The trial judge held that although there was no contract between the owner and these other parties, the owner owed them a duty of care in tort.
The Federal Court of Appeal reversed this decision. It concluded that the owner was not liable in either contract or tort to these other parties.
The Supreme of Canada granted leave to appeal. Argument was heard on November 9, 2007 and the Court reserved its judgment.
This is a milestone in the law of tendering. The Supreme Court of Canada had earlier declined to address this issue in its decision in Martel Building Limited v. Canada, [2000] 2 S.C.R. 860, where the Court stated at para 108: "[w]e believe that the issue of whether a duty of care can arise between a subcontractor and an owner must be left to a case in which it arises". This is clearly a case in which the issue now arises.
Tendering is already litigious area. This case could make it worse. Until now most litigation has been confined to owners and unsuccessful bidders, but if this case extends the scope of potential liability a new era in tendering litigation could be introduced.
The construction industry is eagerly awaiting the outcome of this case.
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