Roading & Asphalt Ltd v South Waikato District Council

JurisdictionNew Zealand
CourtHigh Court
JudgeKeane J
Judgment Date08 June 2012
Neutral Citation[2012] NZHC 1284
Docket NumberCIV 2010-463-473

[2012] NZHC 1284

IN THE HIGH COURT OF NEW ZEALAND

HAMILTON REGISTRY

CIV 2010-463-473

Between
Roading & Asphalt Limited
Plaintiff
and
South Waikato District Council
Defendant
Counsel:

P P Buetow & M B Lake for Plaintiff

J A Macgillivray & M S Crocket for Defendant

Claim for damages for breach of contract and breaches under Fair Trading Act 1986 and Local Government Act 2002 — plaintiff alleged that defendant council failed to award its solid waste contract in line with its tender documents — plaintiff was incumbent waste contractor — tender document stated respondent would evaluate tenders according to the “Lowest Price Conforming Method” but that the lowest tender might not be accepted — plaintiff tendered the lowest but respondent accepted higher rival tender on basis of the net cost to the rate payer when allowances were made for waste diversions, savings in landfill space and waste levies — allegation that defendant had breached the terms of the tender and an implied duty to treat all tenderers fairly and equally — whether the tender entitled the defendant to evaluate tenders according to the criteria it had identified — whether criteria gave the defendant any ability to accept any tender apart from the lowest.

Held: In electing to evaluate tenders according to the lowest price conforming method, but in two stages, the council had reserved to itself the right at the first stage to evaluate tenderers' non-price attributes. At that first stage the council was entitled to assess the tenderers' capacity to carry out the contract to be awarded, against the attributes it identified, and the means by which the contractor proposed to do so; including the tenderers' capacity to divert and recycle waste and the likelihood that they would do so satisfactorily.

There was however, only one term of the substantive contract that referred to the council's liability under the Waste Minimisation Act 2008 and that was by way of oblique reference in the term governing the contractor's duty to cover refuse daily. The contractor was not under an explicit duty to divert waste from the landfill in order to minimise the council's waste levy liability. It was left with a choice as to what extent it did so and the council only sought to influence that choice by its bonus offer, but left the contractor to fix the bonus level. The contract imposed no duty at all on the contractor to save the council landfill space.

The council had not at that first stage expressly reserved to itself the ability to compare tenderers' proposals in any respect. It had only reserved to itself the ability to pass or fail each tenderer on each of the non-price attributes it identified. The council only reserved to itself the ability to compare tenders at the second stage, and then principally, if not exclusively, only on the basis of price.

By awarding the contract to MPL, even though its price was higher than that of RAL, the council had departed from its terms of tender which RAL had been obliged to adhere to, and on which it was entitled to rely. RAL had been obliged to complete its tender in strict accord with those terms. Though its tender was to be assessed in two stages, what counted finally was ‘the lowest price’. The council had focused on the bonus claim, and had given it overriding significance. This was in breach of the express terms of their preliminary contract. The council had also breached an implied term to treat all tenderers fairly and equally. By evaluating the tenders on a basis that was not disclosed to the tenderers, it was inherently unfair.

Had RAL been aware of the basis on which the council assessed the tenders, it almost certainly would have pitched its tender differently. Comparison of RAL's waste diversion record with MPL's had been beyond the terms of tender and was highly unfavourable to RAL. The terms of the tender had not given the council the discretion to select a tender other than the lowest one. If the council wanted a discretionary power to do so, it was obligated to say so in the tender.

On the balance of probabilities the council would have awarded the contract to RAL for the next two years if it had complied with the terms of its tender. RAL had suffered the agreed loss it claimed for those two years, $330,634, plus GST. There was no evidence RAL suffered any loss as to the third optional year of the contract. A third year had to be mutually agreed and that depended not just on RAL's performance, but on whether the council had by then constructed its materials processing facility at the landfill and what form of contract that then called for. Whether RAL would have obtained a third year was speculative.

Judgment for the plaintiff in the amount of $330,634 plus GST.

JUDGMENT OF Keane J

1

In April — May, 2010, the South Waikato District Council invited tenders for a contract for ‘solid waste disposal operations at the Putaruru Transfer Station and Newell Road Landfill in Tokoroa for a two year period’, capable of being extended to a third year. Tenders, complying with the Council's terms of tender, and taking into account the terms of the contract the Council proposed entering into, were to be made in the form the Council prescribed by Friday, 21 May 2010.

2

The Council's terms of tender stated that it would evaluate tenders according to the ‘Lowest Price Conforming Method’, in two stages. First, each tender was to be assessed against six non-price attributes ‘and no others’, on a pass/fail basis — relevant experience, track record, technical skills, resources, management skills and methodology. At the second stage any tenders that qualified were to be rated according to price.

3

The terms of tender made it clear that the Council did not commit itself to accepting the lowest or any qualifying tender. The terms stated that ‘the lowest or any tender will not necessarily be accepted’; and, in completing the tender document, tenderers confirmed that they understood that the Council was ‘not bound to accept the lowest or any tender’.

4

The Council received three tenders, two of which survived the Council's scrutiny at the first stage. One came from Roading and Asphalt Limited, that had held the solid waste contract for eight years. The price it tendered was $1,032,220. The other came from Materials and Processing Limited, that then held the contract to transport residual waste from Putaruru to Tokoroa. It tendered $1,072,083.

5

Despite the fact that RAL had tendered the lower price, the Council decided to accept MPL's tender. On 31 May 2010 the Council advised RAL that MPL's tender had been accepted because ‘the cost to Council’ of the MPL bid was $1,000,265, plus GST. On 2 June it confirmed to RAL that MPL had tendered $1,072,083.50, exclusive of GST, but that the ‘cost to Council’ of MPL's bid was less than RAL's bid. It said this:

In its assessment of the tenders received, the Council took into account the Contractors' methodology; and the net cost to the rate payer when allowances were made for waste diversions, savings in landfill space and waste levies.

6

RAL immediately contended that, in accepting the MPL tender, the Council had breached the terms of tender. RAL accepted that the Council could decline to accept the lowest or any tender. But RAL contended that, if the Council chose to accept any tender, it had to be the lowest. The Council, by contrast, contended that its only duty was to evaluate tenders by the two stage process. It was then able, it contended, in the exercise of its discretion whether to accept the lowest or any tender, to accept MPL's second lowest tender.

7

In this proceeding RAL contends, principally in contract, that the Council awarded the substantive contract in breach of the express terms of tender, and also in breach of an implied duty to treat all tenderers fairly and equally. It contends as well for breaches of the Fair Trading Act 1986 and the Local Government Act 2002. The Council accepts that its terms of tender did give rise to a contract with tenderers governing the tender process. It denies any breach and any want of fairness and equality.

8

The Council also accepts that, if RAL had been awarded the contract it would have earned each year $165,317, plus GST; over the two years of the contract $330,634. It denies that, even if it is in breach, it caused RAL any such loss. RAL, the Council contends, would never have been awarded the contract. On that basis also it denies any liability to RAL for the third optional year of the contract.

9

RAL and the Council differ as to how satisfactory their relationship was in the eight years during which RAL held the solid waste contract. RAL relies on the fact that their three year contract had been extended for two years by option and then for three more years by yearly increments. The Council says, by contrast, that after the Waste Minimisation Act 2008 came into force in July 2009, and it became liable to pay a $10 levy for each tonne of waste deposited at the landfill, RAL showed no interest in diverting and recycling waste.

10

In the same vein, RAL contends that the priority the Council gave to waste diversion in the assessment of tenders was completely unheralded. Whereas, the Council contends, RAL, more than any other tenderer, should have known that waste diversion was a Council priority of increasing importance. This case turns finally, I consider however, under all three causes of action, on two issues as to the terms of tender.

11

One of those issues is whether they entitled the Council to evaluate tenders according to the criterion it identified, ‘the net cost to the ratepayer’, allowing for ‘waste diversions, savings in landfill space and waste levies’. The other is whether they gave the Council any ability to...

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3 cases
  • South Waikato District Council v Roading and Asphalt Ltd
    • New Zealand
    • Court of Appeal
    • 19 November 2013
    ...the outcome of this appeal. 1 See [6] below. 2 See [6] and [39](b) below. 3 Roading & Asphalt Ltd v South Waikato District Council [2012] NZHC 1284 [High Court 4 This summary is taken from Gallen J's explanation of the process in Pratt Contractors Ltd v Palmerston North City Council [19......
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    • 8 June 2012
    ...HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2010-463-473 [2012] NZHC 1284 BETWEEN ROADING & ASPHALT LIMITED Plaintiff AND SOUTH WAIKATO DISTRICT COUNCIL Defendant Hearing: 7, 8, 9 November 2011 Counsel: P P Buetow & M B Lake for Plaintiff J A Macgillivray & M S Crocket for D......
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    • New Zealand
    • Supreme Court
    • 10 March 2014
    ...1 2 The applicant now seeks leave to appeal to this Court on two questions: Roading & Asphalt Ltd v South Waikato District Council [2012] NZHC 1284. South Waikato District Council v Roading & Asphalt Ltd [2013] NZCA ROADING AND ASPHALT LIMITED v SOUTH WAIKATO DISTRICT COUNCIL [2014]......

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