Construction companies involved in a legal dispute over contract payments can shield financial information if it is commercially sensitive in forming a basis for contract bidding but only with the approval of the court and if it has no direct bearing on the legal dispute, a BC Supreme Court (BCSC) decision ruled in a hearing of McCaw’s Drilling & Blasting Ltd. v. Greenfield Construction (2019 BCSC 2244).
The hearing decision hinges upon the “good reason” test. In civil court matters, there is no rule for redacting documents and documents are usually placed before the court in their entirety. But, the “good reason” test allows court judges to make exemptions if there is a valid reason such as compromising a company’s downstream ability to bid on future contracts.
BCSC Master Bruce Elwood handed down the hearing decision as the two companies faced off over a dispute involving a Park Canada contract slated to go to court on Nov. 23 after a Jan. 30 discovery hearing. The parties at the hearing disagreed as to what information should be released. Greenfield had provided documents for examination to McCaw’s, but they were heavily redacted while McCaw’s wanted unredacted documents.
“I have concluded that the defendant has justified some, but not all, of its redactions, and that the documents must be produced with more limited redactions made in accordance with these reasons for judgment,” Elwood said in his decision.
The hearing basically dealt with three types of financial information in contracts and how and when information would be withheld. The three types of financial information are information in documents that have no bearing on the case (which can be redacted), relevant information that impacted the case but jeopardized a company’s downstream competitiveness (could be redacted but with a sworn affidavit regarding the reason) and relevant information pertaining to the case directly which had to be revealed.
The legal dispute going to trial stems from a June 2016 contract awarded by Parks Canada and Public Works and Government Services Canada (“Parks Canada”) to defendant Greenfield to rehabilitate a section of the Trans-Canada Highway in Yoho National Park. Greenfield entered a subcontract with plaintiff McCaw’s for work on the project that included drilling, blasting, drain holes, scaling and anchors.
Greenfield agreed to pay McCaw’s unit rates set out in the subcontract. The subcontract also entitled McCaw’s to invoice Greenfield for extra costs, including costs relating to downtime or work stoppages caused by Greenfield.
McCaw’s alleges that it performed its obligations, rendered invoices but Greenfield failed to pay, and the drilling company further incurred extra costs which were also not paid. The company is claiming damages for breach of contract, owed funds and unjust enrichment by Greenfield.
Greenfield is alleging that McCaw’s didn’t complete the work, rectify deficiencies and, as a result, it incurred costs, expenses, damages and losses. In a counterclaim, Greenfield seeks damages for breach of contract.
Under the rules of discovery which gives McCaw’s rights to examine documents, Greenfield produced documents relating to the subcontract such as unit rates. McCaw’s demanded documents or categories of documents, including Parks Canada records or statements showing the amounts paid by Parks Canada in relation to the road rehabilitation project. Greenfield provided the heavily redacted documents.
“Greenfield withheld or blacked out everything except the date, general description of the work done and units and quantities specific to the work by McCaw’s,” Elwood said in his reasons. “The information withheld includes descriptions, units and quantities of all other work on the project, as well as the amounts invoiced to Parks Canada by Greenfield for each progress payment”.
Elwood said he could assess the redactions “or excuse Greenfield from producing complete copies of the documents.” He was concerned though that issuing a production order for complete documents would compromise confidential information in an industry where bidding on contracts is common.
The court allowed Greenfield general manager Robbie Tozer to depose in a sworn affidavit that withheld information was commercially sensitive setting out reasons such as years of establishing expertise on bidding and that B.C. and Parks Canada had more upcoming work and the company could be bidding against McCaw’s in the future. The information was sealed, restricting public use, and placed before the court.
But he ruled that Greenfield could not redact information on statements that related to how much Greenfield billed Parks Canada for McCaw’s services, and, as the case involved financial demands by the litigants, that financial information may impact the final awards handed down in the court decision.
Elwood agreed with Greenfield that information relating to other contractors and their rates were irrelevant such as the unit price for “traffic accommodation” which was not part of the McCaw’s contract.
“Greenfield may redact quantities, unit rates and pricing on other aspects of the project, payments to other subcontractors, and information relating to its bidding strategy and risk evaluation,” Elwood reasoned. “Greenfield must disclose as much of the documents as possible without revealing this information.”