British Columbia court rules contractors, not owners, responsible for obtaining construction materials

In its decision in JJM Construction Ltd. versus Sandspit Harbour Society, the British Columbia Supreme Court held that it remains the responsibility of the bidder, rather than of the owner, to ensure the necessary labour, materials and equipment to complete a project. In a project for the construction of a hard rock breakwater at a small craft harbour at Sandspit, Queen Charlotte Islands, the contractor sued the owner alleging negligent misrepresentation in the tender call in relation to the availability of materials from the nearby quarry.

LEGAL | PAUL EMANEULLI

In its decision in JJM Construction Ltd. v. Sandspit Harbour Society, the British Columbia Supreme Court balanced the owner’s disclosure duties against the bidder’s due diligence duties. The case involved a $6 million lawsuit arising out of the construction of a hard rock breakwater at a small craft harbour at Sandspit, Queen Charlotte Islands, B.C. The project called for a variety of rocks to be used as building materials.

The bid package contained a passage that identified a nearby rock quarry as a potential source for the required rock but instructed bidders to “make your own determination of these and other rock sources that you may wish to consider.” The successful bidder relied on the nearby quarry identified in the tender call package for its materials, but the court noted that quarry proved to be a problematic source.

The work was to have commenced in October. It began late and did not progress well. The problem was the quarry. Mr. Shiels was plagued with difficulties beginning with the need for a permit to haul rock to the site which was not quickly obtained. His equipment regularly broke down and he had some labour difficulties. His greatest problem, however, was that despite his best attempts, and to his unhappy surprise, he was not able to produce much of the larger filter stone and rip rap required and he found he could produced none of the armourstone. He was soon heavily in debt and running out of money.

The quarry eventually ceased operations. This led to significant project problems and to an eventual contract dispute. The contractor claimed against the Harbour Society, asserting negligent misrepresentation in the tender call in relation to the availability of materials from the nearby quarry.

However, the court rejected the contractor’s assertion that it had relied on the tender call’s reference to the nearby quarry since “the covering letter which identified two ‘potential rock sources’ in Sandspit clearly stated that bidders were to make their own determination of those and any other rock sources they may have wished to consider”. The court held that it remains the responsibility of the bidder, rather than of the owner, to ensure the necessary labour, materials and equipment to complete a project.

The supply of materials, like labour and equipment, must, as a general proposition, be the exclusive purview of the contractor.

In the normal course, the contractor makes a determination of the source or sources from which, if any, the material for a project, in this case the rock, can be obtained to meet the specifications, and what it will cost. The court also confirmed that responsibility for ensuring availability of required materials does not fall under an owner’s disclosure duty. Generally, the duty owed to bidders in the preparation of tender documents is to exercise reasonable care that the information presented reflects with reasonable accuracy the nature of the work and its factual components so as to enable the contractor to prepare a proper bid: Cardinal Construction Ltd. v. Brockville (City) (1984), 4 C.L.R. 149 at 162 (Ont. H.C.).

There is no obligation to determine for the benefit of bidders that the materials required for what is to be constructed are available at a price they might consider acceptable and no implied representation in that regard. The court found that the contractor had assumed the risk of relying on an undeveloped quarry as the source of its materials. This decision helps clarify a bidder’s due diligence duties and the need for bidders to satisfy themselves with respect to the availability and cost of project materials.

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