This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2019 decision in Shannex Inc. v. Nova Scotia (Health and Wellness), the Nova Scotia Supreme Court ruled against the disclosure of commercial bidder information. The dispute dealt with a public access request for information relating to the annual operations funding and budget summaries for an incumbent Nova Scotia nursing homes service provider. The incumbent took the position that the disclosure of this information would harm its competitive position in future bidding competitions:
It is the intention of the appellant to participate in future competitions for the building and operation of nursing homes, both in Nova Scotia and New Brunswick. The appellant points to its past successes in such competitions, and states that it would be a serious bidder in any future competition. The appellant submits that the information sought here, if provided, would allow competitors to extrapolate from that information and calculate the budget by which the appellant runs its homes. This would give those competitors an unfair advantage in future competitions, by then being able to underbid the appellant in those processes.
On the other hand, the government took the position that the information should be disclosed in response to a public access request since some of that information had already been disclosed and the incumbent had failed to show how further disclosure would harm its competitive position:
On the other hand, it is the position of the respondent that the information should be released. In their submission, the appellant has not met the onus of showing that disclosure of the requested information would harm its competitive position, or cause it undue financial loss. The respondent notes, further, that the information relating to the appellant’s legacy homes (pre-2007) has already been disclosed (as a result of a similar court application in 2004).
In considering the specific facts of the case, the Court determined that the information in question was commercial and financial in nature and that it had originally been provided to the government in confidence by the incumbent with the expectation that its confidentiality would be protected. The Court summarised the applicable Supreme Court of Canada legal test for determining whether to protect information from disclosure due to potential commercial harm, which is informed by legal principles drawn from the United Kingdom and Australia, and holds the standard of proof as falling somewhere between the “possibility” and “probability” of harm:
The Supreme Court of Canada in Merck Frosst Canada v. Minister of Health, 2012 SCC 3 considered the standard that needed to be met when a litigant was expected to show “harm that could reasonably be expected to result from disclosure”. The Court held that this standard lay somewhere between “possibility” and “probability”:
As with any question of statutory interpretation, the court must interpret the words of the statute in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.
I begin with the English text of the provision. The words “could reasonably be expected to result” seem to avoid either the standard of mere possibility or the standard of probability. We must assume, I think, that both of those standards would clearly have been known to the drafters. This suggests that some middle ground was intended: something cannot reasonably be expected to occur if it is a mere possibility: but something may be reasonably expected even if it is not more likely than not to occur. The word “expected” derives from the verb “to expect”, a primary meaning of which is to “regard as likely” (The Canadian Oxford Dictionary (2nd ed. 2004), at p. 523). The word “likely” is more difficult to pin down. While it can mean “probable” it may also mean “such as well might happen” (p. 889). In legal usage, the standard of proof on the balance of probabilities is often expressed by saying that something must be shown to be more likely than not. I conclude that the English text of the statute suggests a middle ground between that which is probable and that which is merely possible. The intended threshold appears to be considerably higher than a mere possibility of harm, but somewhat lower than harm that is more likely than not to occur.
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This interpretation also serves the purposes of the Act. A balance must be struck between the important goals of disclosure and avoiding harm to third parties resulting from disclosure. The important objective of access to information would be thwarted by a mere possibility of harm standard. Exemption from disclosure should not be granted on the basis of fear of harm that is fanciful, imaginary or contrived. Such fears of harm are not reasonable because they are not based on reason: see Air Atonabee, at p. 277, quoting Re Actors’ Equity Assn. of Australia and Australian Broadcasting Tribunal (No 2) (1985), 7 A.L.D. 584 (Admin. App. Trib.), at para. 25. The words “could reasonably be expected” refer to an expectation for which real and substantial grounds exist when looked at objectively”: Watt v. Forests [2007] NSWADT 197 (AustLII), at para. 120. On the other hand, what is at issue is risk of future harm that depends on how future uncertain events unfold. Thus, requiring a third party (or, in other provisions, the government) to prove that harm is more likely than not to occur would impose in many cases an impossible standard of proof.
In applying the governing legal test, the Court determined that, based on the evidence provided, the disclosure of the information would be prejudicial to the incumbent’s future competitive position since the disclosure of its per diem rate would put its competitors at an advantage in any future bidding process:
Both provinces of Nova Scotia and New Brunswick have now engaged in competitive bidding (through RFPs) for the last number of new constructions, commencing in 2007. There is certainly evidence to support the suggestion that these processes will continue in the future; at the very least, such is a reasonable belief to hold. The report of Paul Bradley is further support for the appellant’s position. Mr. Bradley notes that a per diem rate is a valuable piece of information in this context:
The per diem rate is effectively a composite of: (1) the Proponent’s estimated costs of delivering the services under the contracts, plus (2) return on investment, both of which are confidential pieces of information for a company. Confidentiality is particularly important when procuring entities use a competitive bidding process, where success is highly dependent on the Proponent having the lowest price. Knowledge of either component (cost or return on investment) would allow competitors to replicate Shannex’s per diem rate, negating the advantage of Shannex’s accumulated experience that has contributed to the Company’s high success rate on competitive proposals. (page 4)
Mr. Bradley concludes that disclosure of the information sought here would likely have a significant and measurable effect on the appellant’s chances of success at future competitions. I accept his conclusions.
Under those circumstances, I agree that the information, were it disclosed, could “reasonably be expected to harm significantly the competitive position of the appellant, or result in undue financial harm to the appellant”, as is required by the statute. I accept that the release of the information sought could allow a competitor to effect calculations to determine Shannex’s budgeted costs, and therefore allow Shannex to be undercut at future bidding competitions. This risk to the appellant’s financial health is, in my view, well within the scope proposed by our Supreme Court; that is, between “that which is probable and that which is merely possible”.
In finding that the disclosure of the information could prejudice the incumbent’s future competitive bidding position, the Court concluded that the information in question should not be disclosed.
As this case illustrates, the determination of whether to disclose supplier information in response to a public access request continues to be a mixed and complex question of law and fact that requires case-specific analyses of the governing legal principles and specific facts relating to the nature of the information in question and the potential impact of its disclosure to other parties.
