Background

In 2007, the Province of Nova Scotia awarded 9 contracts to Shannex Inc. (“Shannex”) for the construction and operation of nursing homes and expected to issue RFPs for additional similar facilities in the future.

An unidentified party submitted a request (pursuant to Freedom of Information legislation) to the same provincial department that had issued the RFPs for information on annual operations funding paid to Shannex for the 9 nursing homes, and budget summaries, including per diem rates, for each of those homes.

As the provincial department had decided to release the information, it notified Shannex, who appealed the proposed disclosure. Shannex’s main argument was that the information, if provided, would allow competitors to extrapolate from that information and calculate the budget by which Shannex runs its homes. This would give those competitors an unfair advantage in future competitions, by then being able to underbid Shannex.

The provincial freedom of information legislation is remarkably similar across the country and establishes exemptions to the general rule in favour of disclosure. The legislation places the onus on the entity that objects to the disclosure to meet a three-part test for the confidential information exemption. In this case, Shannex was required to show that the disclosure would:

  1. reveal its commercial and financial information, and
  2. the information was supplied in confidence, and
  3. the disclosure could reasonably be expected to harm significantly its competitive position or result in undue financial harm to it.

At hearing of this case, Shannex offered expert evidence that the per diem rates are a composite of Shannex’s costs of service delivery and its return on investment – both of which are confidential information for the company. Shannex also relied on a New Brunswick decision – in which Shannex had intervened – where quite similar financial information was sought concerning operation agreements for nursing homes in that province (Carmont et al v. PNB et al, 2018 NBQB 53). Under similar legislation, the New Brunswick court ruled that the information was exempt from disclosure based on all 3 parts of the confidential information test.

Court Decision

In Shannex Incorporated v. Nova Scotia (Health and Wellness), 2019 NSSC 24, the court accepted Shannex’s expert evidence that success in the bidding process for nursing homes is highly dependent on the lowest price, and that knowledge of either component of the per diem would allow competitors to replicate that rate and eliminate the incumbent’s advantage derived from its experience. The court decided that it was reasonable to assume that the province would issue future RFPs for the same type of facilities, and that Shannex would participate. The court also considered that, although not binding in Nova Scotia, the New Brunswick decision was highly persuasive.

The Nova Scotia court concluded that the information met all of the 3 elements of the test for exemption, as it was commercial or financial in nature, supplied in confidence, and could reasonably be expected to significantly harm Shannex’s competitive position or result in undue financial harm to it. Shannex’s application to appeal the release of this information succeeded, and the decision to release was overturned.

This decision is a reminder of the links between procurement law and Freedom of Information legislation. Successful bidders can be expected to challenge the release of information related to their bids and contracts and contracting authorities must be vigilant in their consideration of information requests within the legislation’s parameters. It is always best to seek subject matter expertise when faced with other than a straightforward request, as the landscape under this legislation continues to shift as new rulings based on new fact patterns emerge.

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Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.