This article is an excerpt from Government Procurement, which is available for purchase.
In its February 2014 judgment in GE Canada Real Estate Financing Business Property Co. v. 1262354 Ontario Inc., the Ontario Superior Court of Justice dismissed a debtor’s legal challenge and approved an agreement of purchase and sale that resulted from a bankruptcy related bidding process. The legal challenge arose out of a dispute between the receiver and debtor over the latter’s refusal to sign a non-disclosure agreement prior to obtaining access to the financial information submitted by the third parties who were bidding on the assets. In deciding to approve the proposed asset sale, the court emphasized the importance of the sealing order protocol in protecting the integrity of the bidding process against unfair advantage:
32 In Sierra Club of Canada v. Canada (Minister of Finance)1 the Supreme Court of Canada sanctioned the making of a sealing order in respect of materials filed with a court when (i) the order was necessary to prevent a serious risk to an important interest, including a commercial interest, because reasonably alternative measures would not prevent the risk and (ii) the salutary effects of the order outweighed its deleterious effects.2 As applied in the insolvency context that principle has led this Court to adopt a standard practice of sealing those portions of a report from a court-appointed officer – receiver, monitor or trustee – filed in support of a motion to approve a sale of assets which disclose the valuations of the assets under sale, the details of the bids received by the court-appointed officer and the purchase price contained in the offer for which court approval is sought.
33 The purpose of granting such a sealing order is to protect the integrity and fairness of the sales process by ensuring that competitors or potential bidders do not obtain an unfair advantage by obtaining sensitive commercial information about the asset up for sale while others have to rely on their own resources to place a value on the asset when preparing their bids.3
34 To achieve that purpose a sealing order typically remains in place until the closing of the proposed sales transaction. If the transaction closes, then the need for confidentiality disappears and the sealed materials can become part of the public court file. If the transaction proposed by the receiver does not close for some reason, then the materials remain sealed so that the confidential information about the asset under sale does not become available to potential bidders in the next round of bidding, thereby preventing them from gaining an unfair advantage in their subsequent bids. The integrity of the sales process necessitates keeping all bids confidential until a final sale of the assets has taken place.
35 From that it follows that if an interested party requests disclosure from a receiver of the sensitive commercial information about the sales transaction, the party must agree to refrain from participating in the bidding process. Otherwise, the party would gain an unfair advantage over those bidders who lacked access to such information.
After considering these principles, the court concluded that the receiver had acted reasonably in requiring that the debtor sign a non-disclosure agreement before having access to the financial information in the bids. It therefore approved the agreement of purchase and sale, notwithstanding the debtor’s objections. As this case illustrates, confidentiality protocols are often required to maintain the integrity of the bidding process and shield it from inappropriate third party interference.
