Canada: BC Court Of Appeal Decision On Municipal Tender "Reprisal Clause"

Construction Law Bulletin
Last Updated: June 5 2019
Article by Tariq Ahmed and David MacLean

On May 16, 2019, the BC Court of Appeal released its decision in J. Cote & Son Excavating Ltd. v. Burnaby City.[1] This decision may have important implications for construction contractors and others who are, have been, or are about to be involved in litigation against a municipality or similar public authority as well as owners who solicit bids on large construction projects. The case was focused on a "reprisal clause" included in the City of Burnaby's terms of public tender for bids on construction work that excluded bids from contractors who were involved in litigation against the City in the two years prior to the tender closing date. A contractor brought an action against the City on the basis that the clause was unconstitutional.

The BC Court of Appeal dismissed the contractor's appeal, holding that the jurisprudence does not endorse a broad general constitutional right of unrestricted or absolute access to the civil superior courts that precluded the City's use of the impugned clause.

This bulletin summarizes the BC Court of Appeal's decision and contains key insights for construction contractors and other members of the construction industry.

The Trial Court Decision

A contractor specializing in road construction and utilities work brought a summary trial application against the City seeking declarations that the impugned clause was of no force and effect because it: unjustifiably infringed the constitutionally protected rule of law; unjustifiably infringed the contractor's right of reasonable access to the courts contrary to the Charter; prevented access to the courts in a manner inconsistent with s. 96 of the Constitution Act, 1867; and was contrary to public policy.

A summary trial was heard before the BC Supreme Court in 2018. That court concluded that there is a constitutional right of access to the courts by the application of the rule of law and s. 96 of the Constitution Act, 1867, but it is subject to permissible limits. Consequently, the BC Supreme Court refused to make a declaration that the impugned clause was of no force and effect, and dismissed the application entirely.[2]

The Appeal

The main issue on appeal was whether the impugned clause infringed a constitutionally protected right of access to the civil superior courts. Specifically, the contractor argued that the trial court erred in concluding that the impugned clause:

1. was not contrary to the rule of law;

2. did not deny access to the civil superior courts in a manner inconsistent with s. 96 of the Constitution Act, 1867;

3. did not infringe a Charter-protected right of access to the civil superior courts; and

4. was not contrary to a common law right of access to the civil superior courts.

With respect to the first issue, the Court of Appeal held that rule of law concerns that support access to justice rights are properly addressed under a s. 96 analysis. Consequently, the Court of Appeal rejected the contractor's attempt to rely on the rule of law as stand-alone principle grounding a right of access to the courts.

With respect to the second issue, the Court of Appeal rejected the contractor's argument that any limitation or restriction is sufficient to infringe the s. 96 right of access to the superior courts and held that s. 96 of the Constitution Act, 1867 does not protect the ability or right to bid on public tenders. In doing so, the Court of Appeal noted that the impugned clause was only a provision in the City's tender materials, and was not imposed by a law of general application resulting from either the provincial or federal government's exercise of legislative competence that would ordinarily engage s. 96 of the Constitution Act, 1867. The Court of Appeal also noted that while constitutional review is the appropriate mechanism to scrutinize legislation, in contrast, contracts are predominantly governed by private law principles. Unlike legislation, which is imposed on the public, contracts are voluntary agreements between parties.[3]

With respect to the third issue, the Court of Appeal reasoned that the Charter does not prescribe a general right of access to the civil superior courts and noted that the contractor was unable to ground its argument in a specific section of the Charter.

Finally, with respect to the fourth issue, the Court of Appeal concluded that a common law right of access to the courts could not be more expansive then the protection afforded by s. 96 of the Constitution Act, 1867. As the Court of Appeal summarized:

[79] I agree with the Attorney General that the common law right of access cannot be more expansive than the protection afforded by s. 96 of the Constitution Act, 1867. In my opinion, the majority in Trial Lawyers fully described the parameters of the right of access to the civil superior courts. Section 96 is the only path to a constitutional requirement of access to the civil superior courts. Section 96 only protects against a denial of access, which was reached in that case at the point where the hearing fees caused undue hardship.[4]

Implications

The Court of Appeal's decision provides tacit support for the use of reprisal clauses in future construction contracts. Although reprisal clauses have been upheld by BC courts in the past,[5] the Court of Appeal's recent decision makes it particularly difficult for contractors to argue against the use of or constitutionality of reprisal clauses going forward. Although reprisal clauses are not uncommon in the construction industry, this decision may lead to an increase in their use by owners.

Finally, it is worth noting that the reprisal clause at issue in this case was actually removed by the City from its public tender form as the City began to use a list of pre-qualified contractors for its infrastructure capital construction tenders.[6] Using a list of pre-qualified contractors may, for many owners be a more suitable, process to assess whether a claim is relevant to the qualifications and suitability of a contractor. Some claims occur in the ordinary course of business such as enforcement of subcontractor lien rights that may necessarily involve the owner. Some are more problematic for an owner and may go to the heart of the ability of the parties to work together and achieve a successful project.


 

[1] J. Cote & Son Excavating Ltd. v. Burnaby (City), 2019 BCCA 168.

[2] J. Cote & Son Excavating Ltd. v. Burnaby (City), 2018 BCSC 1491.

[3] J. Cote & Son Excavating Ltd. v. Burnaby (City), 2019 BCCA 168 at para 62.

[4] J. Cote & Son Excavating Ltd. v. Burnaby (City), 2019 BCCA 168 at para 79.

[5] Sound Contracting v. City of Nanaimo, 2000 BCSC 1819.

[6] J. Cote & Son Excavating Ltd. v. Burnaby (City), 2019 BCCA 168 at para 12.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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