Executive Summary: Key Legal and Evidentiary Issues

• A construction contractor sued a Quebec municipality for over $1.1 million in soil disposal costs after a dispute arose over which party bore responsibility for contaminated soil removal.
   
• Quebec's Court of Appeal found that the trial judge erred in characterizing the parties' agreement as a purely lump-sum contract, since the bid schedules clearly combined lump-sum and unit-price items.
   
• Contractual interpretation of an ambiguous provisioning clause for contaminated soil disposal led the appellate court to conclude the contractor was entitled to be paid at the unit rate specified in the bid documents.
   
• Despite this favourable interpretation, the contractor failed to prove it had optimized its reuse of contaminated soil before disposing of a volume 45 times greater than what the bid schedule anticipated.
   
• Expert evidence proved determinative, with the municipality's expert found more persuasive in calculating whether a soil disposal surplus actually existed.
   
• The court ultimately allowed the appeal only in part, awarding a modest sum far below the amount originally claimed.
   

Facts of the case

9329-0146 Québec inc., operating as M. Potvin Excavation, won a public tender from the Ville de Saint-Constant to reconstruct three street segments, including replacement of water main and sewer infrastructure. A pre-tender environmental study by Laboratoire GS identified soil contamination at concentrations between limit values "A" and "B" under Quebec's ministerial intervention guide. The study did not estimate the volume of this contaminated soil, referred to as "A-B Soil," though it did estimate 1,000 tonnes of a more heavily contaminated category ("C+ Soil") for one of the three areas.

The bid schedules the contractor submitted included a miscellaneous-work item providing a unit price of $69.83 per metric tonne for disposing of A-B Soil off-site, with a provisional quantity of 100 tonnes per area. At the project kick-off meeting, the City advised the contractor that disposal costs for A-B Soil would not be paid separately, taking the position these costs were folded into the overall lump-sum bid price. The contractor disagreed and proceeded under protest. By the end of the project, it had disposed of 13,746 tonnes of A-B Soil at an authorized site — far exceeding the 300-tonne provisional total contemplated across all three areas — and claimed $1,103,628.90 including taxes.

The trial judge dismissed the claim, finding the contract was lump-sum in nature, that disposal costs were included in that lump sum, that the contractor failed to prove it could not have reused the soil as backfill, and that the City had not breached any duty to inform the contractor about the extent of the contamination.

Policy and legislative provisions at issue

The dispute centred on the characterization of the parties' agreement under the Civil Code of Québec's rules governing contracts for services, including whether the price was to be fixed by lump sum (art. 2107 C.C.Q.) or by unit rate. Clause 2 of the bid form expressly contemplated both unit-priced and lump-sum work, while item 5.1 of the bid schedules covered disposal of pavement and granular foundation surplus as part of the lump-sum street-reconstruction price. Item 11.1, by contrast, set out a separate unit-priced provision specifically for off-site disposal of contaminated excavation material, including A-B Soil at $69.83 per tonne.

Also at issue were clauses 2, 17, and 33.2 of the specifications' technical requirements, which obliged the contractor to maximize reuse of recoverable soil as backfill before resorting to off-site disposal, and clause 1.7.1, addressing the procedure for characterizing newly discovered contaminated soil. The Court applied the two-step interpretive framework from the Supreme Court's decision in Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43, which directs that only ambiguous contractual terms require resort to the Civil Code's interpretive rules, and that the search for common intention (step two) goes beyond a superficial reading (step one). The Court also considered the tripartite duty-to-inform test from Banque de Montréal v. Bail Ltée, [1992] 2 S.C.R. 554.

Reasoning and analysis

The Court of Appeal found the trial judge erred in treating the entire contract as lump-sum, since the bid schedules plainly mixed pricing methods depending on the item. It further found that item 5.1, which the trial judge relied on to conclude disposal costs were included in the lump sum, in fact applied only to pavement and street-foundation material — not to excavation material from installing water and sewer pipes below the infrastructure line. Properly interpreted, the Court concluded that item 11.1 — the miscellaneous-work provision — was the applicable clause, and that it was ambiguous given its low provisional quantity relative to industry practice around provisioning for unknown contamination.

Applying the second stage of the Uniprix framework, the Court found the parties' common intention was that the contractor would be paid the unit rate for any A-B Soil it was actually forced to dispose of off-site, beyond what could reasonably be backfilled into the trenches. However, this entitlement was conditional on the contractor demonstrating that it had first optimized reuse of the soil as backfill, as required by the specifications' technical clauses.

On this second question, the Court declined to disturb the trial judge's factual findings. The contractor's own volumetric expert did not calculate the volume of A-B Soil actually present and offered no opinion on whether a disposal surplus existed. The municipality's expert, by contrast, calculated that the volume of backfill required exceeded the volume of A-B Soil present [the source cites a required backfill volume of 11,420 t.m. against 11,170.46 t.m. and, elsewhere, 11,169.34 t.m. — these figures differ slightly in the original judgment], meaning no surplus should have existed requiring off-site disposal at all. The Court noted that the 13,746 tonnes actually disposed of was 45 times the 300-tonne provisional total in the bid schedules, and that the contractor's own disposal and transport costs of $406,490.72 stood in stark contrast to the $1,103,628.90 it claimed — a gap the Court characterized as representing a 150% profit margin. On the duty-to-inform ground, the Court agreed with the trial judge that the environmental study had been available to the contractor, that its estimators had not reviewed key data within it, and that the municipality had not concealed any determinative information.

Ruling and overall outcome

The Court of Appeal allowed the appeal only in part. While it agreed the contractor was entitled to be paid at the unit rate under item 11.1 rather than have those costs absorbed into the lump sum, it found the contractor failed to prove it needed to dispose of more than the 300 tonnes of A-B Soil originally provisioned across the three project areas. Accordingly, the Ville de Saint-Constant was ordered to pay 9329-0146 Québec inc., M. Potvin Excavation, $24,846.11, with interest at the legal rate and the additional indemnity under article 1619 C.C.Q. running from October 14, 2020. Given the very limited success of the appeal relative to the original $1,103,628.90 claim, each party was ordered to bear its own costs, and the contractor was further ordered to pay the municipality's expert fees.