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Hangar Lease
Published in the August 2008 issue of Transportation Notes - View Article
Northway Aviation rented its base hangar to support its Northern Manitoba air services from Southeast Resource Development Council. Its lease had an expiry date of December 31, 2007. In early December, the land owner informed two individuals, one apparently the agent of Northway, of an interest in selling. Northway submitted an offer to purchase for $485,000. Another individual made an identical offer. Both were rejected, but the owner indicated new offers could be submitted until January 9, 2008.
On the second round, Northway submitted an offer of $490,000 with conditions attached. Another party submitted an unconditional offer of $485,000. This latter offer was accepted.
Northland thus faced the prospect of losing its base. It filed a lawsuit in which it alleges that the sale was by tender, that it made the highest offer and that custom required acceptance of the highest bid absent a clear indication that the custom would not be observed. Having commenced this action, it then sought an injunction to prevent the sale until its rights had been determined.
The judge at first instance found that an injunction should be granted. He found Northland had raised a serious issue which required trial, that failing to grant the injunction would cause Northland irreparable harm which could not be adequately compensated and that the balance of convenience lay with Northland.
Unfortunately for Northland, the Court of Appeal of Manitoba did not agree. It has dissolved the injunction and given Northland 45 days to vacate in an orderly fashion.
The most serious issue considered by the Court was a factual one: did the land owner’s action, in indicating an interest in selling, amount to a call for tenders? It is well settled that where a party calls for tenders, the submission of a bid can amount to the formation of a preliminary contract. The parties are then under a legal obligation to work out the details of a final contract in accordance with trade custom. Thus, if Northway was correct in its characterization of the transaction, it would indeed have a strong case for saying that it should have been awarded the right of purchasing the hangar.
The difficulty was that there was no evidence of any terms and conditions of the alleged tender. Bids were submitted without any comment to the effect that they were a reply to a tender. The Court found that this lack of evidence resulted in failure to meet the first threshold (serious issue to be tried). It disposed of the other two elements of the injunction test more briefly, stating: “I come to the inescapable conclusion that the motions judge either misdirected himself as to the evidence or was clearly wrong”. No injunction should have been granted.
Northway Aviation v. Southeast Resource
2008 MBCA 93