Executive Summary: Key Legal and Evidentiary Issues

• The case involved a municipal contract dispute over a recycling collection contract awarded by public tender.

• Ricova claimed it relied on outdated bid specifications, resulting in severe losses and eventual contract termination.

• The trial court found the City partly liable for misleading Ricova, awarding over $1 million in damages.

• The Court of Appeal ruled Ricova’s error was inexcusable and upheld the City’s right to seek damages.

• Montréal’s conduct did not breach duties of good faith or information under civil law principles.

• The original damages award was overturned, and the City was only ordered to refund $8,971.32 in taxes collected in error.

Background and contract formation

In 2017, the City of Montréal launched a public tender for the collection and transport of recyclables in five boroughs. Services Ricova Inc. submitted a bid for Côte-des-Neiges–Notre-Dame-de-Grâce based on outdated tender data. The City had corrected the figures shortly after the call for tenders was issued, via Addendum No. 1, but Ricova mistakenly based its price on the original, erroneous specifications.

Ricova’s bid was substantially lower than all others, prompting internal City review. Nevertheless, the City awarded Ricova the contract, considering its bid compliant and in line with its previous aggressive pricing history. Ricova began service in December 2017 but quickly faced major financial losses and informed the City it could not sustain the contract. By February 2018, Ricova issued a formal notice of termination.

Trial decision and reasoning

Ricova later sued the City, claiming reimbursement of penalties, service costs, a performance bond, and over $1 million in losses related to the cost difference between its original contract and the replacement contract awarded to a third party. The trial judge rejected most of Ricova’s claims, finding that the error in pricing was inexcusable and that the City had not acted in bad faith during contract formation. However, the court accepted that Montréal had failed to clearly inform Ricova it would pursue recovery of the price difference, thereby breaching its duty of good faith during contract execution. Based on this, Ricova was awarded $1,014,903.45 in damages.

Appeal and appellate analysis

The City appealed. The Court of Appeal overturned the trial ruling on damages, finding no breach of good faith or informational duties. The judges emphasized that the City had never agreed to a mutual termination and consistently expressed that Ricova was expected to fulfill its obligations. Ricova, represented by legal counsel throughout, could not claim surprise at the City’s pursuit of damages. The Court found that Ricova’s unilateral termination was unlawful and that the City was entitled to seek the difference in contract cost from the replacement provider. Ricova’s own operational mismanagement and financial constraints—not City misrepresentation—led to the contract’s failure.

Outcome

The Court of Appeal allowed the appeal, reversed the lower court’s award of over $1 million in damages to Ricova, and instead ordered the City to pay only $8,971.32—the amount corresponding to improperly collected taxes. Costs were awarded in favour of the City both at trial and on appeal. The ruling reinforces the principle that contractors bear responsibility for due diligence in public tenders and limits equitable relief where contractual and procedural safeguards are not respected.