The Supreme Court of Canada has dismissed an appeal brought forward by contractor, J. Cote & Son Excavating. Last week’s decision in J. Cote & Son Excavating Ltd. v. Burnaby City effectively upholds the use of reprisal clauses in tender documents.
Both the Canadian Construction Association (CCA) and the Vancouver Regional Construction Association (VRCA) are both displeased with the decision, which has serious implications for contractors.
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.
“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.
According to the associations, the ruling 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,” explains 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.”
The decision by the Supreme Court of Canada effectively means that there is no constitutional barrier to municipalities using reprisal clauses.
“It is very troubling that a public body would use “reprisal clauses” that effectively punish contractors for exercising their legal rights around contractual matters,” said Fiona Famulak, VRCA president.
“We know that public projects are already attracting fewer bidders due to the high volume of work in B.C., and the chilling effect that the provincial government’s Community Benefits Agreement is having on public sector procurement. By refusing to accept tenders from contractors who are or have been in a legal dispute with them, the City of Burnaby could further exacerbate an already challenging market and drive potential bidders away.”
CCA will continue to closely monitor any developments as the association believes this case ruling could have major implications for the construction industry in all of Canada.