BURNABY, B.C. – The City of Burnaby’s municipal reprisal clause have been upheld by the Supreme Court of Canada.
The case involved a B.C. contractor who became blacklisted from city work after suing the city over a sewer contract payment. However, the courts have not been convinced the policy violates the company’s right to access the courts and all appeals have been dismissed.
The Canadian Construction Association (CCA), which helped J. Cote and Son Excavation fund its defence, stated it was unhappy with the ruling and that it effectively upholds the use of reprisal clauses in tender documents.
“The clause effectively forces consultants or contractors who may have a dispute with the city to choose between pursuing their legal rights and bidding on city contracts for the next two years,” said Mary Van Buren, CCA president.
She explained that the ruling has serious implications for contractors as it condones placing contractors on a two-year blacklist that bans them from bidding on city projects.
“The inclusion of these types of clauses in contracts essentially allows contractors to be financially punished for exercising their legal rights,” said Van Buren. “The result is contractors are deterred from accessing the courts to enforce their legal rights because they fear being banned from future participation in projects.”
She added that the decision by the Supreme Court of Canada effectively means that there is no constitutional barrier to municipalities using reprisal clauses. CCA plans to continue to closely monitor the issue for any developments.
Chris Gardner, president of the Independent Contractors and Businesses Association (ICBA), said the specifics of the case and ruling are complicated, but the issue of reprisal clauses could be improved. He advocates for encouraging more disputes to go through arbitration rather than the courts which eat up time and money.
“There’s different ways to handle this,” said Gardner. “I do think that (reprisal clauses) have the feeling of being fairly draconian and heavy handed. There’s mediation and arbitration. Ultimately nobody benefits from going to court.”
The National Trade Contractors Council of Canada (NTCCC) expressed disappointment with the ruling, calling it “short-sighted”.
“These clauses deter contractors from accessing their legal rights through fear of being banned from participation in future projects,” said Sandra Skivsky, who added that the association will monitor the impact of the ruling and work with stakeholders to come up with solutions.
When the case went to trial in 2018, the court was not convinced the clause violated the rights of the company.
“The right of access cannot be extended to contractual or tender provisions that indirectly discourage corporations from commencing litigation,” wrote Justice Miriam A. Maisonville in her 2018 trial judgment. “To do so would undermine the undue hardship threshold established by the Supreme Court. There is a fundamental difference between hearing fees which have the effect of preventing potential litigants of modest means from brining their cases to court, and a contractual term as part of a bidding process which excludes corporate contractors who engage in litigation with the government.”
Justice Maisonville concluded that a municipality is entitled to insert a term as part of its public bidding process which bars bids from contractors who are engaged in litigation with the municipality, as long as there is no indication of bad faith and the clause lies within the municipality’s power.
The clause used by the City of Burnaby against J. Cote & Son Excavating stated that the city would not accept tenders from any party that is, or has been within the last two years, involved in legal proceedings initiated against Burnaby arising out of a contract for works or services.
“In such cases, the clause is valid and not contrary to public policy,” wrote Maisonville.
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