However, the court's emphasis on the fact that the subcontractors had a chance to enter a joint venture but did not take it is troubling. Does that mean that there might be liability in a case that was like this one except that the subcontractors did not have an opportunity to protect themselves by entering a joint venture?
Quoting Jason Neyers:
CONTRACTS/TORTS: TENDERS
Design Services Ltd. v. Canada (Fed. C.A., July 21, 2006) (31618)
"Public Works (PW) launched a 'design-build' tendering process for the construction of a building. The tendering documents indicated that proponents could bid on the contract alone or in conjunction with other entities as a joint venture. PW awarded the contract to a non-compliant bidder. O, the contractor which should have been awarded the contract, and the subcontractors associated with it, sued. No partnership or joint venture had been entered into between O and the subcontractors. O settled with PW, but the subcontractors continued with the litigation. The trial judge found that PW owed a duty in tort, but not in contract, to the subcontractors. The Court of Appeal set aside the decision, concluding that a new duty of care should not be recognized in these circumstances."
The Supreme Court of Canada held (unanimously) that the appeal is dismissed.
Justice Rothstein wrote the following (at pp. 22-24, 27):
"The fact that the appellants had the opportunity to form a joint venture, and thereby be parties to the 'Contract A' made between PW and Olympic, is an overriding policy reason that tort liability should not be recognized in these circumstances. Allowing the appellants to sidestep the circumstances they participated in creating and make a claim in tort would be to ignore and circumvent the contractual rights and obligations that were, and were not, intended by PW, Olympic and the appellants. In essence, the appellants are attempting, after the fact, to substitute a claim in tort law for their inability to claim under 'Contract A'. After all, the obligations the appellants seek to enforce through tort exist only because of 'Contract A' to which the appellants are not parties. In my view, the observation of Professor Lewis N. Klar (Tort Law (3rd ed. 2003), at p. 201) - that the ordering of commercial relationships is usually in the bailiwick of the law of contract - is particularly apt in this type of case. To conclude that an action in tort is appropriate when commercial parties have deliberately arranged their affairs in contract would be to allow for an unjustifiable encroachment of tort law into the realm of contract.
There are certainly factors that indicate a close relationship between PW and the appellants, such as the appellants' expectation that PW was choosing a design-build team at the SOQ stage and the reliance of the appellants on a fair selection methodology in the tendering process. Nonetheless, the appellants' ability to foresee and protect themselves from the economic loss in question is an overriding policy reason why tort liability should not be recognized in these circumstances. The appellants had the opportunity to arrange their affairs in such a way as to be in privity of contract with PW relative to 'Contract A', but they chose not to do so and they are now trying to claim through tort law for lack of a contractual relationship with PW. Tort law should not be used as an after-the-fact insurer.
I conclude that the appellants have failed to satisfy the first stage of the Anns test justifying a finding of a prima facie duty of care.
Having found no prima facie duty of care at the first stage of the Anns test, it is unnecessary to continue with the second stage of examining residual policy concerns that could negate the creation of a new duty of care. However, it may be useful to comment on one residual policy concern - indeterminate liability.
... That the facts here suggest indeterminacy is, I think, symptomatic of a more general concern in the construction contract field. Even where subcontractors are named and known by an owner, those subcontractors will have employees and suppliers and perhaps their own subcontractors who also could suffer economic loss. And these suppliers and subcontractors will have their own employees and suppliers who might claim for economic loss due to the wrongful failure of the owner to award the contract to the general contractor upon which they were all dependant. The construction contract context is one in which the indeterminacy of the class of plaintiffs can readily be seen.
Even if a prima facie duty of care had been found at the first stage of the Anns test, in my view, it would have been negated at the second stage because of indeterminate liability concerns."
