The Yukon Court of Appeal in Mega Reporting Inc. v Yukon (Government of), 2018 YKCA 10 recently reinforced the ability of governments (including local governments) to rely on a waiver of liability clause in a contract – in essence the court ruled that a government will be precluded from relying on the clause only where it is all but certain that to do so would harm the public.

Background

The case involved an RFP issued by the Yukon Government (“Yukon”) for court reporting services. There were only two bidders, and Yukon disqualified the first bidder owing to shortcomings with its bid. That bid was the lower bid. Evidently Yukon did not properly document its evaluation of the bid, did not assign scores to the bid nor tell bidders how points would be awarded, and misinterpreted the requirement for references as being a requirement for “letters of reference”.

The disqualified bidder successfully sued Yukon for breach of contract, on the basis that Yukon had breached the duties of fairness, accountability and transparency in the way it evaluated the bid. The trial judge found that a ‘Contract and Procurement Directive’ established a statutory duty of fairness that Yukon failed to meet.

Of particular interest for local governments, the trial judge found that Yukon could not rely on a waiver of liability clause contained in the RFP, because the public’s interest in ensuring fair tendering outweighed Yukon’s right to rely on the express terms of the RFP (i.e. the waiver of liability clause). The trial judge found that the waiver of liability clause was aimed directly at excusing Yukon from liability in cases in which it acted unfairly in evaluating a bid, a result that the trial judge could not condone.

Analysis

The Yukon Court of Appeal (which, incidentally, is BC’s court of appeal as well), ruled that Yukon could rely on the waiver of liability clause, because it was not “substantially incontestable” that to do so would harm the public. The court acknowledged that a waiver of liability clause will not be given effect where to do so would eliminate statutory protections for the ‘innocent’ party. In this case however, the court ruled that there were no such statutory protections in play. In effect the court affirmed that it is only in rare cases that a specific contractual term will be ignored on public policy grounds. As the court noted: “Although Yukon certainly failed to observe best practices in the conduct of the RFP, in my view there is no “substantially incontestable” public policy rationale that justifies overriding a clear and specific exclusion clause.” In the result the court dismissed the bidder’s claim against Yukon.

This decision confirms that waiver of liability clauses remain powerful tools for local governments to avoid liability, especially in the context of RFPs. As well, the case serves as a reminder that, regardless of the ability to rely on such a clause to avoid liability, the failure to fairly evaluate bids can attract a lawsuit (and in this case, an appeal).