This article is an extract from the 5th edition of Government Procurement.
In its November 2017 decision in Mega Reporting Inc. v. Yukon, the Yukon Supreme Court found the government liable for running a flawed evaluation process notwithstanding a limitation of liability disclaimer contained in the Contract A tender call document. However, the Yukon Court of Appeal subsequently overturned that decision and ruled that that disclaimer shielded the government from liability.
The dispute dealt with a flawed evaluation process for court reporting services in a Yukon government Contract A request for proposals (“RFP”) process. Notwithstanding the inclusion of a liability disclaimer in the tender call, the trial court found the government liable for failing to document a proper evaluation process.
The court refused to enforce the liability disclaimer on public policy grounds, maintaining that its enforcement would allow the government to breach its fairness duties under Contract A with impunity:
To give effect to the waiver would permit Yukon to continue to represent to the public that it engages only in fair, accountable, open and transparent procurement processes without suffering any consequences for failing to do so. In other words, it would allow Yukon to say one thing and then to do the opposite with impunity. Though the public has a strong interest in maintaining the right to contract freely, in this case, this interest is offset by a similar public interest in ensuring a fair, accountable, open and transparent bid process. This is particularly so in circumstances where large amounts of public funds are on the line.
I have therefore concluded that to allow the waiver contained in the RFP to bar Mega’s claim would be contrary to public policy.
However, in its June 2018 decision, the Yukon Court of Appeal reversed the trial decision, ruling that disclaimers should only be struck down on policy grounds in extreme situations where harm to the public good is “substantially incontestable”:
With respect, the judge erred in law by not considering the high threshold necessary to establish that public policy outweighs the interests in enforcement. The judge held that “[t]hough the public has a strong interest in maintaining the right to contract freely, in this case, this interest is offset by a similar public interest in ensuring a fair, accountable, open and transparent bid process” (at para. 40). The judge appears to have merely considered whether one policy interest outweighs the other, without once referencing the test set out by Chief Justice Duff in In Re Estate of Charles Millar, Deceased, [1938] S.C.R. 1 at 7, cited above by Binnie J. in Tercon, and considering whether “the harm to the public is substantially incontestable”. In my view, the public policy interest which Mega points to in this case does not meet that high threshold.
The Court of Appeal ruled that the liability disclaimer should be enforced and that it was a matter for voters, rather than the courts, to intervene if the government had acted improperly:
However, in the case at bar, the obligations to conduct a bidding process fairly and transparently are as much for the benefit of those tendering, and the public at large, as they are for bidders like Mega. The government does not adopt statutes or regulations on tendering solely out of concern to protect vulnerable bidders, but also to provide clear guidance so that parties can effectively bid and the process can be sufficiently competitive, ensuring that taxpayers receive value for their money. Yet the government, one of the parties whose interests the procurement principles are ostensibly supposed to advance, and who in fact adopted them in the first place, has come to the conclusion that the public policy interest motivating those principles should not override their ability to protect themselves from liability. Why should the Court step in now and tell that party that they misunderstand their interests or that they are improperly weighing the impact that enforcement of the exclusion clause will have on the competitiveness and efficiency of future RFPs? Surely that cannot be a “substantially incontestable” public policy consideration in the circumstances.
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To the extent that the public at large has an interest in a fair and transparent process, they have recourse through the ballot box if they believe the territorial government is not getting value for money. Again there is no evidence that the staff who evaluated the bid were in any kind of conflict of interest or that Yukon engaged in any fraudulent practices in awarding the contract.
Therefore, in my view, no overriding public policy that is “substantially incontestable” outweighs the strong interests in enforcement of the clause.
In summary, the Court of Appeal ruled that the trial judge erred in failing to enforce the liability disclaimer in the RFP on public policy grounds. While the Court of Appeal decision left many unresolved issues, the plaintiff bidder’s leave to appeal to the Supreme Court of Canada was dismissed without reasons in April 2019, thereby leaving ongoing uncertainty regarding the ultimate enforceability of Contract A liability disclaimers.
