Naylor Group Inc. v. Ellis-Don Construction Ltd.

Prime contractor awarded large construction contract as lowest bidder ? prime contractor?s bid carries subcontractor?s bid ? subcontractor?s workers not members of International Brotherhood of Electrical Workers (IBEW) ? prime contractor unable to enter into subcontract with named subcontractor contracts with IBEW subcontractor at same bid price ? contractor breached Contract A ? damages for wrongful refusal to contract

In 1991, the Oakville-Trafalgar Memorial Hospital called for bids for the construction of an addition and renovation of a hospital. Ellis-Don Construction Ltd., a general contractor, invited Naylor Group Inc. to bid for the electrical work on the project.

At the time, Ellis-Don had a continuing dispute over bargaining rights with the International Brotherhood of Electrical Workers (IBEW). After many years of wrangling, the dispute came before the Ontario Labour Relations Board (OLRB) in 1990. The ruling was still under reserve at the time of bidding.

Naylor had an in-house union, not affiliated with IBEW. Ellis-Don assured Naylor that this would not be a problem.

Naylor bid a price of $5,539,000. Naylor?s bid, submitted through the Toronto Bid Depository, was low and Ellis-Don carried Naylor?s price in its own bid for the prime contract. The next lowest bid for the electrical work was Comstock, an IBEW subcontractor, whose bid was $411,000 higher than Naylor?s.

Ellis-Don was the low prime bidder at $38,135,900. If it had carried Comstock?s electrical bid instead of Naylor?s, it would not have been low bidder overall and would probably have lost the prime contract.

The OLRB decision was released on February 28, 1992. It confirmed EllisDon?s obligation to use only electrical subcontractors affiliated with the IBEW.

In the meantime, the Hospital had incorporated various changes to its project. Despite the OLRB ruling, Ellis-Don asked Naylor to submit a price for the contract changes, and carried Naylor?s price in its bid to the owner. In May 1992, with Naylor still carried in Ellis-Don?s list of subtrades, the Hospital awarded the prime contract to Ellis-Don. GC 10.2 of the prime contract (CCDC-2 1982) provided:

The Contractor agrees to employ those Subcontractors proposed by him in writing and accepted by the Owner at the signing of the Contract.

Ellis-Don indeed offered the subcontract to Naylor but on condition that it align itself with IBEW. Naylor refused. Ellis-Don then offered the work to Guild Electric, an IBEW subcontractor but ineligible under the bid depository rules, for the same amount as had been bid by Naylor. The final subcontract was eventually signed with Guild with a minor price difference.

Naylor sued for breach of contract and unjust enrichment. It claimed that Ellis-Don had used Naylor?s low bid to get the prime contract, then ?shopped? its bid to get the work done at a very favourable price. All of this, argued Naylor, undermined the integrity of the bid depository process and breached the terms of Contract A, as defined by the Supreme Court of Canada inR. v. Ron Engineering & Construction (Eastern)

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