



COURT
    OF APPEAL FOR ONTARIO

CITATION: Stericycle ULC v. HealthPRO
    Procurement

Services Inc., 2021 ONCA 878

DATE: 20211210

DOCKET: C69008

Strathy C.J.O., Zarnett J.A. and
    Wilton-Siegel J. (
ad hoc
)

BETWEEN

Stericycle
    ULC

Applicant (Appellant)

and

HealthPRO Procurement Services
    Inc., Provincial Health Services Authority and Daniels Sharpsmart Canada
    Limited

Respondents (Respondents)

J. Thomas Curry, Monique J. Jilesen and
    Zachary Rosen, for the appellant, Stericycle ULC

D. Barry
    Prentice, for the respondent, HealthPRO Procurement Services Inc.

Julie
    Parla, Katherine Booth and Andrew Butler, for the respondent, Provincial Health
    Services Authority

Randy
    Sutton and Justine Smith, for the respondent, Daniels Sharpsmart Canada Limited

Heard: October 19,
    2021 by videoconference

On appeal from the order of Justice Cory A. Gilmore of the Superior
    Court of Justice, dated November 25, 2020, with reasons reported at 2020 ONSC
    7253.

Wilton-Siegel
    J. (
Ad Hoc
):

[1]

The appellant Stericycle ULC (Stericycle) appeals
    an order dated November 25, 2020 of Gilmore J. that dismissed Stericycles
    application for a declaration that it, rather than the respondent Daniels
    Sharpsmart Canada Limited (Daniels), is the primary supplier for the
    respondent Provincial Health Services Authority (PHSA) in British Columbia
    pursuant to a public tendering process conducted in 2020 by the respondent,
    HealthPRO Procurement Services Inc. (HealthPRO).

[2]

This case involves a public multiple-supplier
    tendering process under which the public authority would select one of two
    successful bids to be the primary supplier. Stericycles appeal raises issues
    of contract interpretation, bid repair and the operation of the duty of good
    faith in respect of the selection process of Daniels as the primary supplier. For
    the reasons below I would dismiss the appeal.

Factual Background

[3]

HealthPRO is a group contracting organization
    that manages procurement and contracts on behalf of its member hospitals and
    health authorities across Canada, including PHSA.

[4]

PHSA is one of several health authorities
    responsible for administering health care services in British Columbia. PHSA
    co-ordinates programs and services, including supply chain services, for over 1,000
    medical facilities under its umbrella, including hospitals and other public
    health facilities.

[5]

Stericycle is in the business of providing
    biomedical waste management services to medical facilities across Canada.
    Daniels is a competitor of Stericycle in Canada.

[6]

In 2013, HealthPRO awarded Stericycle a contract
    for biomedical waste management services under which Stericycle provided such
    services to HealthPRO members, including PHSA medical facilities. As extended,
    the 2013 Contract had an expiry date of May 31, 2020 and contained the
    following provision referred to as the Six Month Provision:

AWARDED SUPPLIER:
    Agrees to hold the then current contract pricing firm for committed members up
    to a period of six (6) months beyond the expiry date (or any option years
    exercised) to allow, if required, for the implementation of a new contract to a
    different supplier.

[7]

In 2019, HealthPRO issued a request for
    qualification (an RFQ) for a new national contract for biological waste
    management services. The purpose of the RFQ was to qualify potential suppliers
    for the forthcoming public tendering process (the RFP). Both Stericycle and
    Daniels responded to the RFQ and qualified to bid when HealthPRO issued the RFP
    regarding the new contract. Each of Stericycle and Daniels responded to the RFP.

[8]

Daniels did not have established waste
    management facilities in British Columbia when it participated in the RFQ and
    the RFP. In its RFQ, Daniels included the following statements:

Daniels Health will be fully committed and
    able to meet and exceed the service capabilities required for the HealthPRO membership
    by the 2020 start date of this contract.



Daniels Health is in the process of
    commissioning a fully functional Biomedical Waste facility in British Columbia.
    This facility, complete with permits, will be operational by the summer of 2020.

In its RFP, Daniels added the
    following statement:

Daniels will have
    national coverage (adding British Columbia) before June 2020.

[9]

The RFP included a statement that HealthPRO
    would employ a multi-supplier award strategy to allow its members to
    individually determine their best contract commitment scenario and to benefit
    from the collective buying power of a national initiative. To this end, unlike
    the 2013 Contract which contemplated a single supplier, the RFP contemplated the
    award of 2020 Contracts to multiple eligible suppliers from which a HealthPRO
    member would select a primary supplier and could also designate a secondary
    supplier if more than one 2020 Contract was awarded by HealthPRO. A primary
    supplier would receive a committed volume of at least 80% of the business of
    the selecting HealthPRO member; a secondary supplier would be obligated to
    provide up to 20% of the business but had no guarantee of any volume of
    business.

[10]

Each of Stericycle and Daniels was awarded a
    2020 Contract by notice dated January 31, 2020. The 2020 Contracts contemplated
    a contractual start date of June 1, 2020 with a term ending November 30, 2024.
The contract resulting from HealthPROs acceptance of Stericycles
    RFP is referred to as the Stericycle 2020 Contract
; the contract
    resulting from HealthPROs acceptance of Daniels RFP is referred to as the Daniels
    2020 Contract.

[11]

On February 26, 2020, Daniels advised PHSA that Daniels
    would be in a position to start servicing PHSA and its member sites by the end
    of this calendar year. On March 19, 2020, Daniels contacted HealthPRO to
    confirm that PHSA would be able to request a six-month extension of the 2013
    Contract pursuant to the Six Month Provision. PHSA also requested information
    from HealthPRO regarding the Six Month Provision. On April 7, 2020, HealthPRO
    advised PHSA that the Six Month Provision allowed for the extension of Stericycles
    contract pricing for up to 6 months beyond the 2013 Contract expiry date to implement
    a new contract to a different supplier.

[12]

On June 2, 2020, HealthPRO advised Daniels that
    PHSA had selected it as PHSAs primary supplier and advised Stericycle that it
    had not been selected as PHSAs primary supplier. Stericycle learned the
    identity of the primary supplier on the same day. In a further document,
    Stericycle was advised that PHSA had not selected Stericycle as its primary
    supplier, that PHSA was now authorized to receive Stericycles secondary
    pricing as per the commitment effective date, that PHSA was not required to
    select a secondary supplier, and that PHSA may or may not utilize secondary
    pricing. Accordingly, HealthPRO did not expressly advise Stericycle that it had
    been selected as the secondary supplier. However, Stericycle would effectively become
    the secondary supplier, to the extent that PHSA chose to avail itself of a
    secondary supplier, as it was the only other supplier awarded a 2020 Contract
    covering British Columbia.

[13]

In view of the fact that Daniels would not have a
    commissioned waste facility operating in British Columbia on June 1, 2020, PHSA
    insisted that Stericycle provide all of the waste management services required
    by its members pursuant to the terms of the Six Month Provision under the 2013
    Contract after that date.

[14]

In order to assist Daniels to obtain the
    necessary licence to operate a waste management facility in British Columbia,
    PHSA wrote a letter dated June 18, 2020 to the Ministry of Environment and
    Climate Change Strategy of British Columbia supporting Daniels request for an
    expedited authorization of its licence.

[15]

Daniels commenced providing services on December
    1, 2020 immediately following expiration of the period covered by the Six-Month
    Provision.

The Decision of the Application Judge

[16]

Before the application judge, Stericycle
    submitted that HealthPRO and PHSA acted in bad faith and in breach of contract
    in awarding the primary supplier designation to Daniels. In dismissing the
    application, the application judge addressed three principal issues raised by Stericycle.

[17]

First, the application judge dismissed Stericycles
    argument that HealthPRO and PHSA effectively rewrote the Daniels 2020 Contract by
    permitting Daniels to commence the provision of services later than June 1,
    2020.

[18]

Second, the application judge rejected Stericycles
    submission that certain communications between Daniels and PHSA initiated by
    PHSA after January 31, 2020 amounted to bid repair. She held that the
    communications were operational in nature and did not go to the substantial
    terms of the Daniels 2020 Contract, that the prohibition against communications
    in the RFP related to suppliers only, and that, in any event, the most
    significant communication (being PHSAs letter of June 18, 2020) occurred after
    the primary supplier designation had been made.

[19]

Lastly, the application judge rejected
    Stericycles argument that, by having Stericycle provide 100% of services after
    June 1, 2020, PHSA had irrevocably elected Stericycle as its primary supplier
    through its conduct. The application judge also dismissed Stericycles argument
    that the 2013 Contract terminated on the award of the 2020 Contract to Stericycle,
or on the start date of the 2020 Contracts
, as Stericycle
    could not have been subject to two contracts at one time.

[20]

The decision of the application judge was based
    on four significant findings. Stericycles grounds of appeal are based on its
    view that the application judge erred in respect of each of these findings.

[21]

First, the application judge held that the 2013
    Contract was not spent on the award of the 2020 Contract, or on the start date
    of the 2020 Contracts, and that PHSA was entitled to insist that Stericycle continue
    to provide services for six months after June 1, 2020 under the 2013 Contract
    without such conduct amounting to selection of Stericycle as its primary
    supplier.

[22]

Second, the application judge held that the Daniels
    2020 Contract did not require Daniels to commence the provision of services as
    of June 1, 2020. The application judge found to the contrary that neither the
    RFP nor the RFQ contained any provision imposing a mandatory implementation
    date for services or any requirement that a supplier have established
    operations in a province in which it proposed to offer services as of the 2020
    Contract start date. The application judge concluded that, while the 2020
    Contract start date was June 1, 2020, the implementation date of the 2020
    Contract for any given HealthPRO member was whatever date the member chose. In
    the case of PHSA, therefore, it was December 1, 2020.

[23]

Third, the application judge found that the
    Daniels bid included a promise to have a facility available for waste disposal
    but this commitment did not extend to compliance on the start date of the 2020
    Contract. This finding addressed Stericycles suggestion that Daniels misrepresented
    its ability to commence operations as of the start date of the 2020 Contract
    and chose not to reveal the correct information until the 2020 Contract was
    awarded. This issue is not relevant to the conclusions in these reasons. However,
    in reaching this conclusion, the application judge referred to the decisions in
Tantramar Sanitation & Trucking Ltd. v. Sackville (Town)
, 2006
    NBQB 13, 298 N.B.R. (2d) 365 and
Aquatech v. Alberta (Minister of
    Environment and Parks)
, 2019 ABQB 62, 86 B.L.R. (5th) 207 regarding
    respectively the purposes of public sector procurement and the importance of
    allowing competitors to participate meaningfully in a public tender process to
    achieve those purposes. The principles articulated in these decisions informed
    the findings of the application judge more generally.

[24]

Lastly, the application judge concluded that
    neither PHSA nor HealthPRO owed any duty of good faith to Stericycle in
    conducting the selection process or otherwise. She held that, in accordance
    with the analysis of contracts arising in respect of public tendering bids
    articulated in
Double N Earthmovers Ltd. v. Edmonton (City)
, 2007 SCC
    3, [2007] 1 S.C.R. 116, any duty owed by HealthPRO to Stericycle during the
    tendering process was extinguished on the award of the 2020 Contracts. She also
    held that PHSAs delegated agency from HealthPRO to make its supplier selection
    did not establish privity between PHSA and Stericycle with respect to the
    Stericycle 2020 Contract and therefore did not give rise to a duty of fairness
    owed by PHSA to Stericycle in respect of the selection of a primary supplier.

Analysis of the Grounds of Appeal

[25]

Before this court, Stericycle broadly raised
    five grounds of appeal which I will address in turn.

(1)

The Interpretation of the Six Month Provision

[26]

For the purposes of this appeal, Stericycles most
    significant submission is that the application judge erred in holding that Stericycle
    was obligated to provide services under the Six Month Provision without engaging
    in a formal exercise of contractual interpretation in reaching that conclusion.

[27]

Stericycle argues that it was not obligated to
    maintain 2013 pricing in the present circumstances on the plain language of the
    Six Month Provision. It suggests that it was a supplier under both the 2013
    Contract and the 2020 Contract with the result that there was no new contract
    to a different supplier but rather implementation of a new contract to
    multiple suppliers, one of which was Stericycle. The appellant says that the
    application judge failed to consider the best evidence of the intention of the
    parties, which it suggests was the equivalent provision in the 2020 Contract.
    That provision reads as follows:

HealthPRO requires
    Awarded supplier(s) to hold all contract pricing and terms (including rebate)
    firm for up to six (6) months beyond contract expiry (including following any
    Option Term) in the event that the new contract is awarded to a different
    supplier or awarded to multiple suppliers.

Stericycle also argues that, in
    reaching her interpretation, the application judge erred by allowing her view
    of commercial efficacy to overwhelm the plain language of the agreement.

[28]

I pause to consider the applicable standard of
    review of the findings of the application judge that involved a contractual
    interpretation of provisions of the 2013 Contract and the 2020 Contracts. Stericycle
    has suggested that the standard of review should be correctness. It bases this
    assertion on the statement of Wagner J. in
Ledcor Construction Ltd. v.
    Northridge Indemnity Insurance Co
., 2016 SCC 37, [2016] 2 S.C.R. 23 that
    the interpretation of a standard form contract should in certain circumstances
    be classified as a question of law and subject to a correctness standard: at
    paras. 24, 33. However, the factors enumerated by Wagner J. in
Ledcor
that would inform such a conclusion  the interpretation is of precedential
    value and there is no meaningful factual matrix  are not present in this case.
    Rather, the circumstances fit squarely within the circumstances contemplated in
Sattva Capital Corp. v. Creston Moly Corp
., 2014 SCC 53, [2014] 2
    S.C.R. 633 as giving rise to a question of mixed fact and law  that [t]he
    legal obligations arising from a contract are  limited to the interest of the
    particular parties: at para. 52. Further, unlike
Ledcor
, there is a
    factual matrix that is specific to the parties and that is meaningful for the
    interpretation of the 2013 Contract and the 2020 Contracts. Lastly, the concept
    of a standard form contract is only partially applicable in respect of the
    Daniels 2020 Contract given the fact that the clauses in that Contract to be
    interpreted are not limited to terms imposed on the bidders but must
    necessarily include Daniels responses in its RFP. Accordingly, I conclude that
    the standard of review of the contractual interpretation of the relevant
    provisions of the 2013 Contract and the 2020 Contracts is the palpable and
    overriding error standard.

[29]

The well-established principles of contractual
    interpretation are set out in
Ventas, Inc. v. Sunrise Senior Living Real
    Estate Investment Trust
, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24 and
    need not be repeated here. The application judge properly applied those
    principles in respect of the two matters raised by Stericycle that involve
    contractual interpretation  the Six Month Provision and the start date under the
    2020 Contracts  and her conclusions regarding these matters do not reflect any
    palpable and overriding error in either case.

[30]

Dealing with the Six Month Provision, the
    finding of the application judge that Stericycle was obligated to supply
    services under this Provision is entirely reasonable for the following reasons.
    On its plain language, this provision applies in the case of implementation of
    a new contract to a different supplier. In this case, PHSA implemented a new
    contract, the Daniels 2020 Contract, and selected a new supplier, Daniels. As
    the primary supplier, Daniels was obligated to supply at least 80% of the
    volume of business and could, at PHSAs option, be required to supply 100% of
    that volume. Conversely, Stericycle was not formally designated the secondary
    supplier and, as mentioned, in the Secondary Pricing Authorization, HealthPRO
    advised that its members are not required to select a secondary supplier and
    may or may not utilize secondary pricing. Stericycle therefore had no
    guarantee that it would be requested to supply any volume at all and is more
    properly characterized for this purpose as a potential supplier.

[31]

Stericycle suggests that paragraph 2(s) of the
    terms and conditions included in the 2013 Contract, rather than the Six Month
    Provision, governed transition arrangements. That provision reserved a right in
    favour of HealthPRO to enter into a new contract with a different supplier with
    such contract to become effective at any time during the final month of the
    2013 Contract. However, there is nothing in this provision that suggests that
    it was intended to be the exclusive provision regulating transition
    arrangements at the end of the 2013 Contract. Moreover, this provision appears
    directed toward different situations altogether  Stericycle ceasing to supply
    in advance of the termination of the 2013 Contract or more beneficial pricing being
    available from the new supplier. I also note that the terms and conditions
    included in the 2020 Contract contained a similar provision together with the
    revised version of the Six Month Provision set out above, suggesting that the
    two provisions are intended to provide optional transition rights to HealthPRO
    members.

[32]

I also see no error in the absence of any
    consideration by the application judge of the equivalent provision in the 2020
    Contract. The 2013 Contract contemplated a single supplier. In that context,
    the language of the Six Month Provision gives a clear indication of the
    intention of the parties. The language in the 2020 Contract, while perhaps
    giving greater flexibility in the event of multi-supplier contracts which could
    be structured in various ways in the future, does not add anything of
    interpretative value in respect of the 2013 Contract.

[33]

Stericycles further argument that the Six Month
    Provision is on its face solely a pricing provision interprets this provision
    too narrowly in a manner that cannot have been intended by the parties. Stericycles
    interpretation renders the provision redundant for the reason that a pricing
    provision that is not accompanied by an obligation to supply has no practical
    utility.

[34]

The interpretation of the application judge is
    also supported by the factual matrix. Her finding that it would be neither
    efficient nor realistic to require a new supplier to begin supplying services
    on the start date of the 2020 Contracts is amply supported by the factual
    background in which the tendering process was conducted. The evidence before
    the application judge was that the introduction of a new supplier for the over
    1,000 public medical facilities under PHSA would require a considerable
    transition period. In addition, as the application judge observed, a mandate to
    commence services on the start date would grant an incumbent with operating
    facilities in a province a significant advantage over all other bidders in the
    next bidding cycle and could be expected to negatively affect the competitive
    bidding necessary to achieve beneficial pricing in that cycle. All of these
    circumstances were part of the factual matrix in which the 2013 Contract was
    awarded. They are compelling evidence that the parties understood and intended that
    the Six Month Provision would survive the maturity date of the 2013 Contract. The
    application judge did not allow her view of commercial efficacy to overwhelm
    her interpretation of the Six Month Provision.

(2)

The Allegation of Concurrent Contracts

[35]

Stericycles second and third grounds of appeal
    are effectively determined by the first conclusion above regarding the
    operation of the Six Month Provision. Stericycles position on each issue is
    predicated on acceptance of its interpretation of the Six Month Provision.

[36]

Stericycle argues that the application judge
    failed to consider the legal significance of two concurrent contracts for the
    same services. Stericycle submits that, in the circumstances of two agreements
    dealing with the same subject matter, there is an inference that the later was
    intended to displace the earlier in the absence of language expressly
    addressing the issue in the later contract.

[37]

I do not agree that there is any such common
    sense inference of general application. It is trite law that each case must be
    examined on its own facts. Moreover, it is not uncommon for two supply
    contracts having different terms as to volume and pricing to co-exist for a
    period of time. In the present circumstances, the concept of the Six Month
    Provision necessarily entails the possibility of concurrent contracts for the
    duration of the Six Month Provision. Stericycle had concurrent obligations to
    provide services under the Six Month Provision, on 2013 pricing terms, and under
    the Stericycle 2020 Contract, on 2020 secondary supplier pricing terms, as
    requested by PHSA. The PHSA therefore had a correlative right or option to require
    services under both the Six Month Provision and the 2020 Contract for a limited
    period of time. It exercised its right or option to receive services under the
    Six Month Provision as the more favourable arrangement.

(3)

The Doctrine of Election

[38]

Similarly, the existence of such an option in favour
    of PHSA is a complete answer to Stericycles argument that the application
    judge erred in failing to consider that PHSA irrevocably elected Stericycle as PHSAs
    primary supplier through its conduct.

[39]

The doctrine of election was described in the
    following terms in
Charter Building Company v. 1540957 Ontario Inc. (Mademoiselle
    Womens Fitness & Day Spa)
, 2011 ONCA 487, 107 O.R. (3d) 133, at para.
    19:

Election at common
    law takes place where a party is faced with a choice between two inconsistent
    courses of action that affect another party's rights or obligations, and
    knowing that the two courses of action are inconsistent and that he or she has
    the right to choose between them, makes an unequivocal choice and communicates
    that choice to the other party. The doctrine provides that the party making the
    election is afterwards precluded from resorting to the course of action that he
    has rejected. The election is effective at the point of communication on the
    basis that the parties to an ongoing relationship are entitled to know where
    they stand. [Citation omitted.]

[40]

To be clear, Stericycle does not argue that PHSA
    manifested an intention to change its designation of the primary supplier under
    the 2020 Contracts
merely
by requiring Stericycle
    to continue to provide services after June 1, 2020 at 2013 prices. Rather, it
    suggests that this was the result of PHSAs actions in the face of two
    inconsistent courses of action that affected Stericycles rights or
    obligations. It says that, given Daniels inability to commence the provision
    of services on June 1, 2020, PHSA had only two courses of action under the
    Stericycle 2020 Contract: it could designate Stericycle as the primary supplier
    or as the secondary supplier.

[41]

However, given the operation of the Six Month
    Provision, PHSA had a third option under the 2013 Contract as discussed  an
    entitlement to designate another supplier as the primary supplier and require
    the provision of services by Stericycle during the six-month transition period
    following June 1, 2020. Accordingly, any issue of inconsistent actions under
    the Stericycle 2020 Contract which might have justified application of the
    doctrine of election did not arise.

(4)

Allegations of a Breach of the Duty of Good
    Faith

[42]

The remaining grounds of appeal involve Stericycles
    position that the application judge erred in failing to properly apply the
    principles pertaining to the duty of good faith to the circumstances of this
    case. As mentioned, the application judge held that neither HealthPRO nor PHSA owed
    a duty of good faith to Stericycle. While Stericycle suggests that HealthPRO or
    PHSA owed a duty of good faith to Stericycle in the performance of the Daniels
    2020 Contract, Stericycles principal arguments of a breach of the duty of good
    faith are grounded in the existence of the Stericycle 2020 Contract. Stericycle
    submits that the award of the Stericycle 2020 Contract distinguishes this case
    from the circumstances in
Double N Earthmovers
. Stericycle argues that
    the application judge erred in failing to recognize that performance of the
    Stericycle 2020 Contract and, in particular, PHSAs exercise of its discretion
    in selecting the primary supplier, was subject to the organizing principle of
    good faith.

[43]

The organizing principle of good faith in
    contractual dealings was addressed in
Bhasin v. Hrynew
, 2014 SCC 71,
    [2014] 3 S.C.R. 494 and expanded upon in
C.M. Callow Inc. v. Zollinger
,
    2020 SCC 45, 452 D.L.R. (4th) 44 and
Wastech Services Ltd. v. Greater
    Vancouver Sewage and Drainage District
, 2021 SCC 7, 454 D.L.R. (4th) 1. In
    these decisions, the Supreme Court recognized two existing doctrines as
    manifestations of the principle of good faith

the
    duty to exercise a contractual discretion in good faith and the duty of honest
    performance of a contract.

[44]

The duty to exercise a contractual discretion in
    good faith will be breached where the exercise of discretion is unreasonable,
    in the sense that it is unconnected to the purposes for which the discretion
    was granted:
Wastech
,
at para. 88. The duty of honesty in contractual performance was explained by
    Cromwell J. in
Bhasin
as meaning simply that parties must not lie or
    otherwise knowingly mislead each other about matters directly linked to the performance
    of the contract: at para. 73.

[45]

I will address in turn the arguments of Stericycle
    that each such manifestation of the duty of good faith was breached. Stericycle
    also suggests that this organizing principle encompasses the implied duty to
    act fairly towards all bidders in a public tendering process referred to in
Bhasin
,
    at para. 56, incorporating the statement in
Tercon Contractors Ltd. v.
    British Columbia (Transportation and Highways)
, 2010 SCC 4, [2010] 1 S.C.R.
    69, at paras. 58-59. However, Stericycles allegation of a breach of a duty of
    fairness in the public tendering process is based on the same factual
    circumstances as the allegation of a failure of HealthPRO and PHSA to exercise
    their contractual discretion to select the primary supplier reasonably. For
    that reason and the reason that the duty of good faith does not require a party
    to forego advantages flowing from a contract, in my view the duty of fairness in
    the present circumstances is equivalent to, and entails the same standard as,
    the duty of PHSA to exercise its contractual discretion reasonably, rather than
    a separate and more onerous duty:
Bhasin
, at paras. 65, 73.

(a)

Allegations of a Breach in the Exercise of
    Discretion in the Supplier Selection Process

[46]

Stericycle identified a number of alleged
    breaches of the obligation to exercise the contractual discretion to select a
    primary supplier reasonably. It says the application judge failed to consider these
    alleged breaches because of her determination that PHSA was not subject to such
    an obligation in respect of Stericycle. These alleged breaches can be
    summarized in three different formulations of the content of the duty of good
    faith that Stericycle says HealthPRO and/or PHSA owed in the present
    circumstances:

1.

a duty to hold suppliers to the commitments made
    in their RFQ and RFP responses, the breach of which Stericycle describes as
    allowing Daniels to re-write the start date and as permitting impermissible
    bid repair by Daniels;

2.

a duty not to select a supplier known to be
    unable to commence the provision of services on the start date of the 2020
    Contracts; and

3.

a duty not to conscript Stericycle into helping Daniels buy time to
    allow Daniels to cure fundamental misrepresentations in the RFQ and RFP
    responses by which it won the Daniels 2020 Contract.

[47]

The essence of Stericycles ground of appeal on
    this issue, which underlies all three of these formulations, is that the
    application judge erred in failing to find that, in excusing Daniels from its
    obligation to commence providing services under the Daniels 2020 Contract on
    June 1, 2020, HealthPRO and PHSA breached a duty of good faith owed to Stericycle.

[48]

It is not necessary for present purposes to
    determine whether HealthPRO or PHSA owed a duty of good faith to Stericycle to
    exercise a contractual discretion reasonably in the selection of the primary
    supplier under the Stericycle 2020 Contract. Even if it is assumed that HealthPRO
    and/or PHSA owed such a duty, neither HealthPRO nor PHSA breached such duty of
    good faith to Stericycle. Two considerations inform this conclusion.

[49]

First, Stericycle cannot assert a breach of a
    duty of good faith in respect of the selection of Daniels as the principal
    supplier for two alternative reasons.

[50]

Stericycle was not a party to the Daniels 2020
    Contract. Accordingly, Stericycle cannot assert a breach of a duty of good
    faith in the performance of that contract insofar as HealthPRO and PHSA may be
    found to have waived any breach of Daniels obligations in the Daniels 2020
    Contract regarding the date of commencement of operations:
Double N
    Earthmovers
,
at paras.
    71-72.

[51]

In addition, and alternatively, even if Stericycle
    has standing to assert a breach of the Daniels 2020 Contract, the application
    judges determination that the start date in the 2020 Contracts did not relate
    to the provision of services, and that Daniels was only required under the
    Daniels 2020 Contract to begin providing services to a HealthPRO member upon
    the date selected by that member, excludes a finding of any such breach. Stericycle
    submits that the application judge erred in reaching this interpretation. In my
    view, however, this contractual interpretation of the application judge is also
    free of reversible error for the following reasons.

[52]

Stericycle relies principally on the HealthPRO
    letters awarding the 2020 Contracts to Daniels and Stericycle, which stated
    that the term of the 2020 Contracts would run from June 1, 2020, and on HealthPROs
    supplier selection notification to Daniels, which stated that the contract
    start date was June 1, 2020. The application judge acknowledged that the 2020
    Contracts ran for a period that commenced on that date. However, she found that
    it was understood in the industry, and therefore by the parties, that there was
    a difference between the date on which the term of the 2020 Contracts began,
    being the start date, and the implementation date for the provision of services
    to individual HealthPRO members.

[53]

In this regard, she noted that there was no
    provision in either the RFQ or the RFP that imposed a mandatory date for the
    implementation of services. She also observed that HealthPRO members could, and
    did, choose later dates as the implementation date for the provision of
    services to them. Elsewhere in the Reasons, the application judge also referred
    to the complexity and resulting time to transition the provision of services
    from Stericycle to a new supplier. She also observed that it would be
    commercially unreasonable to require a prospective new supplier to make the
    significant financial investment required to provide services in a province without
    a guarantee of being selected as a service provider. This reality reinforces
    the need for a transition period after the start date of a contract. In this
    regard, there is no evidence that the one month contemplated by paragraph 2(s)
    in the 2013 Contract would have been sufficient to transition the approximately
    1,000 medical facilities of PHSA to a new supplier. There was therefore ample
    evidence in the factual background to the negotiation and execution of the 2020
    Contracts to support the interpretation of the application judge. I would add
    that the existence of the Six Month Provision, and its counterpart in the 2020
    Contracts, adds further support for the interpretation of the application
    judge.

[54]

The second consideration that informs the
    conclusion of an absence of a breach of this element of the duty of good faith
    is the legal position of PHSA given the existence of the Six Month Provision. As
    mentioned, Stericycle mischaracterizes this position in arguing that PHSA had
    only two choices in making its supplier selection  a primary supplier and a
    secondary supplier. However, the Six Month Provision provided PHSA with a third
    option which PHSA adopted  to select a primary supplier and to rely upon the
    benefit of the Six Month Provision until the primary supplier was able to
    commence the provision of services.

[55]

In summary, by virtue of the first
    consideration, PHSA did not breach any obligation to Stericycle in refraining
    from requiring Daniels to begin providing service on June 1, 2020. Put
    positively, PHSA was entitled to select December 1, 2020 as the date of
    commencement of such services. By virtue of the second consideration, PHSA did
    not breach any obligation to Stericycle in requiring it to continue to supply
    under the Six Month Provision until December 1, 2020.

[56]

Given this framework, there is no basis for a
    finding that HealthPRO or PHSA acted unreasonably in the selection of Daniels
    as the primary supplier under the Daniels 2020 Contract. As the application
    judge noted, the purpose of HealthPROs RFQ and RFP process, and therefore the
    purpose of the 2020 Contracts, was to permit HealthPROs members to gain the
    greatest benefit from collective buying power, that is to secure competitive
    contracts and offer choice to the members. The third option allowed PHSA to
    achieve its selection of its preferred primary supplier in reliance on a
    contractual obligation to which Stericycle had agreed in the 2013 Contract. PHSA
    therefore exercised its contractual discretion to select the primary supplier
    in a manner that was entirely consistent with the purposes of the 2020
    Contracts.

[57]

Further, to the extent that Stericycles expectations
    are relevant, PHSAs decision did not fall outside of the range of behaviours
    contemplated, or that should reasonably have been contemplated, by Stericycle.

[58]

Given that Stericycle agreed to provide services
    for a period of six months following the termination of the 2013 Contract
    pursuant to the Six Month Provision, Stericycle could not reasonably expect
    that PHSA would require Daniels to commence the provision of services
    immediately upon termination of the 2013 Contract if a deferral of the implementation
    date best met the needs of PHSAs facilities. For the same reason, any
    expectation of Stericycle that it would be paid in accordance with pricing
    under the 2020 Contract rather than pursuant to the 2013 Contract was
    unreasonable if the 2013 pricing was more favourable to PHSA members and time
    was required to transition to the new supplier. Similarly, the selection of
    Daniels as the primary supplier did not involve unfairly conscripting Stericycle
    to allow Daniels the time to cure any misrepresentation in its RFQ and RFP,
    whether or not it might also have relieved Daniels of the consequences of any
    misrepresentation.

(b)

Allegations of a Breach of the Duty of Honest
    Performance

[59]

Stericycles final ground of appeal is that the
    application judge erred in failing to find that HealthPRO and PHSA breached the
    duty of honest performance of the Stericycle 2020 Contract.

[60]

Stericycle relies on a number of separate
    allegations in support of this position. In particular, Stericycle alleges that
    HealthPRO acted dishonestly in providing information regarding the Six Month
    Provision to Daniels, in relying on the Six Month Provision to allow Daniels to
    delay its start date, and in relying on the fact that Daniels would be able to
    obtain expedited authorization with PHSAs assistance in making its selection
    of Daniels as the primary supplier. Stericycle also alleges that PHSA acted
    dishonestly in not informing Stericycle much earlier than June 2, 2020 of its
    intended reliance on the Six Month Provision in its selection of Daniels as the
    primary supplier.

[61]

The application judge was alert to these matters
    and concluded that they did not amount to bid repair although she did not
    address them in the context of an alleged breach of a duty of good faith. In my
    view none of the impugned actions satisfy the test set out in
C.M. Callow
for demonstration of dishonest performance of the Stericycle 2020 Contract.

[62]

None of these allegations involve lying or
    actively misleading Stericycle about a matter directly linked to performance of
    the Stericycle 2020 Contract or to the exercise of rights set forth therein. In
    particular, nothing in the RFP prevented PHSA from obtaining the information
    that it required regarding proposed implementation of the 2020 Contracts by
    Daniels and Stericycle in order to make an informed selection of its primary
    supplier. Further, HealthPRO was entitled to advise PHSA, as its member, of its
    rights under the 2013 Contract and, as discussed, PHSA was entitled to rely
    upon such rights. Moreover, the evidence before the application judge does not establish
    that PHSAs decision to select Daniels was the direct result of HealthPROs communication
    with Daniels regarding PHSAs rights under the Six Month Provision. The
    evidence also fails to establish bad faith in the communication of PHSAs
    position to Stericycle. PHSAs decision (or more properly the decisions of each
    of PHSAs members) was finalized only shortly before June 2, 2020, having been
    delayed by the pandemic, and Stericycle was advised of PHSAs intention to rely
    on the Six Month Provision shortly thereafter.

[63]

This ground of appeal is therefore also denied.

Conclusion

[64]

For the reasons set out above, the appeal is
    dismissed.

[65]

If the parties are unable to agree on costs
    within 15 days of the release of these reasons, they may submit written costs
    submissions, which are not to exceed 5 double-spaced pages in length, exclusive
    of costs outlines. The respondents shall serve and file their submissions
    within 15 days after the release of these reasons, and Stericycle shall have 15
    days to respond.

Released: December 10, 2021 GRS

Wilton-Siegel
    J.

I
    agree G.R. Strathy C.J.O.

I
    agree B. Zarnett J.A.


