This article is an extract from the 5th edition of Government Procurement.
In its September 2019 decision in LaPrairie Works Inc v. Ledcor Alberta Limited, the Court of Queen’s Bench of Alberta rejected a contractor’s claim that fair dealing duties applied between competing bidders and gave those bidders the right to sue each other over alleged tendering infractions. The dispute dealt with a claim brought by a losing bidder over a tendering process for a provincial maintenance contract. The losing bidder alleged the misuse of its confidential business information by the winning bidder. The winning bidder brought a motion to dismiss the claim, arguing that there was no general cause of action that allowed a losing bidder to sue another for lost profits. The Court agreed, finding that while a cause of action exists to seek damages for breach to confidentiality, there was no compelling public policy basis for implying a general fair process contract between competing bidders:
No public-policy basis for implying a contract
LaPrairie produced no evidence that the apparent non-recognition of a bidders’ contract, to date, in Canadian law has hampered interest in tendering or otherwise negatively affected the tendering process in this country. As well, imposing a “bidders-conduct” contract with different obligations than under the general law may inhibit tendering. Potential bidders may be dissuaded from participating, knowing that (even if they comply with the general law e.g. not transgress the Criminal Code or any other statutes or regulations governing commercial behaviour e.g. bribery laws) they may be exposed to liability to another bidder i.e. without having “signed on” to a different level of bidding conduct than that imposed by the general law.
As for an asserted need to protect the integrity of the tendering process, nothing in the tender process itself is jeopardized by inter-tenderer misconduct of the kind alleged by LaPrairie here. (I make no findings about what Ledcor did or did not do during the bid-preparation phase i.e. after the making of the asserted “bidders’ contract” here). The allegations relate to Ledcor breaching a confidentiality agreement entered into between LaPrairie and Ledcor some years earlier, when Ledcor was considering acquiring LaPrairie’s interest in certain highway-maintenance contracts and to various improper information-gathering steps by Ledcor during the bid-preparation phase, which (according to LaPrairie) gave Ledcor an unauthorized window into LaPrairie’s private financial data and thus an improper edge in preparing its own bid, which narrowly beat out LaPrairie’s. It can pursue those claims at trial, and Ledcor can defend against them.
These allegations go to the wider world of data gathering and use i.e. how businesses in competition gather and use information and what the borderlines should be between proper and improper gathering and use. They do not go to the heart of the tendering process. In this case, Alberta sought and obtained a number of bids for the contracts in question. It selected Ledcor’s bid, Alberta and Ledcor entered into a highway-maintenance contract, and Ledcor has been and is performing it. In other words, possibly subject to the “against Alberta” aspect discussed below, the tendering process worked as it was supposed to.
As the Court concluded, “safeguarding the tendering process is not a basis, even policy-wise, for finding a bidders’ contract.” Furthermore, the Court determined that there was no free-standing fairness duty owed between bidders. While the claimant could still pursue its breach of confidentiality claim, the Court was not prepared to apply general fair dealing duties between bidders when those bidders never agreed to any such duties and where the government calling for bids never imposed those duties:
E. Conclusion
LaPrairie’s attempt to stitch together a “bidders’ contract” out of the referenced understandings, expectations, discussions, and ethical code fails. It has not proved that such a contract was created here or even a genuine issue as to its creation. It did not contract with Ledcor by any traditional means (offer, acceptance, mutual intention to create legal relations, consideration), and it did not contract by other means (à la The Satanita or other signing up, by participating, to known rules governing participant behaviour).
Alberta did not stipulate for particular “bidder conduct” (vis-à-vis other bidders) in its tendering specifications. It has not enacted “bidder conduct” legislation. Other jurisdictions which have (noted earlier) have used history as a guide, disqualifying prospective bidders for transgressions of “commercial conduct” laws, including the Criminal Code.
Canadian law has not yet extended to establishing a freestanding obligation of good faith or fair dealing in a tendering context. Where LaPrairie could have attempted to contract with Ledcor and other bidders for different “bidder conduct” rules (i.e. than the general law and assuming no breach of competition laws in doing so) but did not do so, it would be unwise to imply not only a term of good faith or fair dealing into their relationship but a contract where none otherwise exists.
The context here is competitors in pursuit of a contract. With Alberta having set the competition rules without reference to particular bidder conduct, and the general law already providing borderlines between lawful and unlawful commercial activities, and with no other sources (e.g. ARHCA bylaws, codes of conduct, or otherwise) creating both standards of behaviour and a contract among participants to adhere to them, bidders are, and were here, free to research and assemble their bids without fear of breaching a contract with other bidders.
LaPrairie can still pursue other claims (e.g. breach of the confidentiality agreement) for various asserted shortcomings in Ledcor’s behaviour.
Whether the borderline between lawful and unlawful commercial conduct should be changed, and whether “unfair conduct” that is not illegal should give rise to remedies in a tendering context do not have to be explored here. LaPrairie tried on this aspect only to show that it had contracted with Ledcor for a different (i.e. than the general law) set of bidder-conduct rules. (It would have had an uphill battle in pursuing a claim based on a non-contractual general duty of fairness and good faith.27)
As this case illustrates, unsuccessful bidders continue to craft creative causes of action to seek remedies against other parties in a bidding process. Government institutions should therefore be careful to establish clear ground rules around their bidding procedures to avoid unnecessarily creating new causes of action that could increase the already high levels of legal challenges launched in connection with their tendering processes.
