Case information

Contract — Performance — Obligation of good faith — Contract between compostable and recyclable materials collection company and municipal institution — Whether court of appeal is entitled to set aside trial judgment by substituting findings of fact made based on its own analysis of evidence for findings of fact made based on analysis carried out by trial court, even though there is no indication that trial judge did not conduct reasonable and realistic assessment of that evidence — Whether contracting party that enters into cooperative process with its counterparty to collaboratively resolve issue relating to their contractual relationship is entitled in return to be informed of claims that this counterparty intends to make in respect of avenues envisaged by both parties to resolve issue in question, under duty to inform or any other requirement arising from general obligation of good faith.

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Ville de Montréal (“City”) issued a public call for tenders for the collection and transportation of recyclable materials. A few days later, it realized that it had included erroneous data. It quickly corrected its error by publishing an addendum. Services Ricova inc. (“Ricova”) submitted a tender without having taken notice of the data corrected by the addendum. It was awarded the contract. Shortly after the start of its delivery of services, Ricova discovered its error. Suffering substantial monthly losses, it informed the City of its inability to abide by the contract. For its part, the City called upon blue-collar workers to make sure that the recyclable materials that Ricova was unable to deal with were collected. A few months later, it awarded a temporary contract by mutual agreement with another company. It resiliated the contract with Ricova nearly eight months later.

The City claimed amounts related to, in particular, the costs associated with the intervention of the blue-collar workers and the monetary difference between Ricova’s tender and the contract resulting from the new call for tenders. Ricova sought the resiliation of the contract, alleging that the City breached its obligation of good faith. It also challenged the legitimacy of the amounts it had to pay.

The Superior Court found that the City had not breached its obligation of good faith in the awarding of the contract. Ricova’s error had been inexcusable, and the contract could not be resiliated on the ground of error. However, the judge noted that the City had breached its obligation of good faith in the management of the contract, and it ordered the City to reimburse the amount paid that represented the difference between Ricova’s contract and that of the second company. It also ordered the City to reimburse the taxes added to the invoice concerning the blue-collar workers. The Court of Appeal was of the opinion that the evidence did not support the finding that the City had breached its obligation of good faith and, more specifically, its duty to act consistently and its duty to inform during the performance of the contract and at the time of its resiliation. Because the trial judgment contained a palpable error, it set aside the judgment in order to remove the reimbursement of the amount representing the difference between Ricova’s contract and that awarded to the new contractor.