When is Purchase Agreement Information Exempt as Third Party Information?

Osgoode Hall (circa 2015), home of the Divisional Court of Ontario

Today’s article should be of interest to anyone who applies the mandatory third party exemption in section 17(1) of FIPPA (or its equivalent in section 10(1) of MFIPPA) to purchase agreements, service agreements, and supporting documents such as the records of discussions surrounding decisions to purchase products and/or services.

The Divisional Court of Ontario recently unanimously affirmed a decision of the Information and Privacy Commissioner of Ontario (IPCO) describing how the mandatory third party exemption in section 17(1) of FIPPA applies to information provided by a vendor during the procurement process and to the resulting service agreement itself.

Original IPCO Decision: Order PO-4031

The original IPCO decision is Order PO-4031 (Appeals PA17-501 and PA18-129) William Osler Health System – Brampton Campus, decided February 28, 2020 by Adjudicator Diane Smith. The requestor had asked for all linen and laundry services agreements in the custody or control of William Osler Health System (WOHS), as well as all successful proposals for linen and laundry services not yet subject to an executed agreement, and all documents relating to the first two items.

In dispute were a number of records responsive to the request; the first two were an executive summary of the agreement that WOHS reached with the vendor K-Bro Linen Systems Inc. (Record 1) and the agreement itself (Record 2). The remaining records outlined various pricing alternatives that WOHS was invited to consider, and discussions related to the deal.

K-Bro Linen Systems Inc. (“K-Bro”) took the position that neither the executive summary of the contract, the executed contract itself, nor any of the other records should be disclosed.

The Third Party Information Exemption

For ease of reference, 17(1)(a)-(c) of FIPPA is set out directly below:

Third party information

17 (1) A head shall refuse to disclose a record that reveals a trade secret or scientific, technical, commercial, financial or labour relations information, supplied in confidence implicitly or explicitly, where the disclosure could reasonably be expected to,

(a) prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of a person, group of persons, or organization;

(b) result in similar information no longer being supplied to the institution where it is in the public interest that similar information continue to be so supplied; [or]

(c) result in undue loss or gain to any person, group, committee or financial institution or agency;

Freedom of Information and Protection of Privacy Act, R.S.O. 1990, CHAPTER F.31

The language of section 10(1)(a)-(c) of MFIPPA is substantially identical.

IPCO Adjudicator Smith considered, “[d]oes the mandatory third party information exemption at sections 17(1)(a) or (c) apply to the records?”, and outlined the following test to determine whether section 17(1) would apply:

For section 17(1) to apply, the institution and/or the third party must satisfy each part of the following three-part test:

1. the record must reveal information that is a trade secret or scientific, technical, commercial, financial or labour relations information; and

2. the information must have been supplied to the institution in confidence, either implicitly or explicitly; and

3. the prospect of disclosure of the record must give rise to a reasonable expectation that one of the harms specified in paragraph (a), (b), (c) and/or (d) of section 17(1) will occur.

IPCO Order PO-4031, paragraph 14

Did the records reveal “trade secrets”, “commercial information” or “financial information”?

With respect to the first part of the test above, WOHS asserted that the records contained “trade secrets”, “commercial information”, and “financial information”.

Adjudicator Smith agreed with WOHS and K-Bro that “the records contain commercial and financial information relating to the selling of linen and laundry services to a hospital and the costs of these services”. However, she disagreed with WOHS’s position that the records contained “trade secrets”, noting that WOHS did not provide specific representations on this issue, and finding that there was “insufficient evidence in the records themselves to suggest such a conclusion”.

Having found that the records contained commercial or financial information, the first part of the test was satisfied. Adjudicator Smith then considered the second part of the test: whether the information was supplied to the hospital in confidence, either implicitly or explicitly.

Was the information “supplied in confidence”?

Record 1, the executive summary of the services agreement and Record 2, the services agreement itself

A series of earlier Divisional Court decisions had found that vendor agreements were not “supplied” to the purchasing institution and therefore should not be exempt under s.17(1). However, K-Bro attempted to distinguish its services agreement (“Record 2”) from those prior cases, taking the position that it “should be found to have been supplied for the following reasons:”

  1. Record 2 is a simple services contract.
  2. Record 2 involves only two parties: the TPA and the hospital.
  3. There is nothing in the information at issue in Record 2 to suggest that it was in any way “customized.”
  4. The other records demonstrate that the information at issue in the Record 2 contract was supplied by the TPA in its proposal to the hospital for linen and laundry services.
  5. The information at Issue in Record 2 is exactly the same as that included in the TPA’s RFP responses.
  6. The TPA did not engage in any negotiations with the hospital prior to the execution of Record 2.
  7. Nowhere in any of the records is there any suggestion or evidence that the hospital was attempting to negotiate with the TPA with respect to the four options it presented in its proposal, rather it was deciding upon which of the options presented by the TPA would be the most financially beneficial.
  8. As documented in the Executive Summary (Record 1), once the hospital had made its decision on which of the four options provided by the TPA was the most financially beneficial, it then proceeded to enter into an agreement for the provision of linen and laundry services – Record 2. The information severed from Schedule 4 (Pricing, Payment and Reimbursements) includes that related to:
    1. Additional costs
    2. $ Prices/kg or identified item (piece).
IPCO Order PO-4031, paragraph 30

Adjudicator Smith considered whether the services agreement and its executive summary should be considered to have been “supplied” by K-Bro. She noted that the provisions of a contract, in general, “have been treated as mutually generated, rather than ‘supplied’ by a third party, even where the contract is preceded by little or no negotiation”:

[40] The requirement that the information was “supplied” to the institution reflects the purpose in section 17(1) of protecting the informational assets of third parties.

[41] Information may qualify as “supplied” if it was directly supplied to an institution by a third party, or where its disclosure would reveal or permit the drawing of accurate inferences with respect to information supplied by a third party.

[42] The contents of a contract involving an institution and a third party will not normally qualify as having been “supplied” for the purpose of section 17(1). The provisions of a contract, in general, have been treated as mutually generated, rather than “supplied” by the third party, even where the contract is preceded by little or no negotiation or where the final agreement reflects information that originated from a single party.

[43] There are two exceptions to this general rule which are described as the “inferred disclosure” and “immutability” exceptions. The “inferred disclosure” exception applies where disclosure of the information in a contract would permit accurate inferences to be made with respect to underlying non-negotiated confidential information supplied by the third party to the institution. The “immutability” exception arises where the contract contains information supplied by the third party, but the information is not susceptible to negotiation. Examples are financial statements, underlying fixed costs and product samples or designs.

[44] [K-Bro] has not submitted that any of the records contain information that is subject to the “inferred disclosure” and “immutability” exceptions. Nor is such information apparent to me from my review of the records. Therefore, I find that these exceptions do not apply in these appeals.

IPCO Order PO-4031

Adjudicator Smith concluded that the contents of the services agreement and its executive summary should not be considered to have been “supplied” by K-Bro, and therefore the mandatory third party information exemption in s.17(1) of FIPPA did not apply. She ordered the services agreement and its executive summary released in their entirety.

Remaining Records (4, 5, 6, 8 and 13)

Regarding the remaining records, which contained discussions around the services agreement, including other pricing options K-Bro was offering to WOHS, Adjudicator Smith agreed with K-Bro that these should be considered to have been “supplied in confidence”. Further, Adjudicator Smith accepted K-Bro’s argument that the disclosure of these pricing options to the public could provide information to K-Bro’s competitors and its other customers as to the rate structure under which K-Bro was willing to offer its services and the price differential range it is willing to accept. On this basis, the Adjudicator was satisfied that the third part of the test was met, and she ordered WOHS to withhold the information in the remaining records that K-Bro identified as being subject to s.17(1).

Divisional Court Affirms: K-Bro Linen Systems Inc. v. Ontario (Information and Privacy Commissioner), 2022 ONSC 3572 (Div. Ct.)

K-Bro appealed the IPCO’s decision to release the services agreement and executive summary to Divisional Court. On June 15, 2022, the Court released its decision unanimously affirming the IPCO’s decision.

Supplied in confidence

The Court explained what it means for information to be “supplied in confidence” for the purpose of disclosure under FIPPA:

[12] There are several decisions from the IPC and this Court dealing with what it means for information to be “supplied in confidence” during contract negotiations. This Court has found that the content of a negotiated contract will not ordinarily be considered information “supplied” in confidence by a party to the contract: Boeing Co. v. Ontario (Ministry of Economic Development and Trade), 2005 CanLII 24249 (ON SCDC), Miller Transit Limited v. Information and Privacy Commissioner of Ontario, 2013 ONSC 7139. This is true even if there was little negotiation over the contract or where the contract substantially reflects a proposal made by a party to the final contract. For example, in Boeing Co. v. Ontario (Ministry of Economic Development and Trade) at para. 18, the Court wrote:

The Commissioner has consistently found that information in a contract is typically the product of a negotiation process between the parties and that the content of a negotiated contract involving a governmental institution and another party will not normally qualify as having been “supplied”. Even where the contract is preceded by limited negotiation, or where the final agreement substantially reflects information that originated from a single party, the Commissioner has concluded that the information was not supplied (for example, IPC Order MO-1706, pp. 9-10; IPC Order P-1545 at pp. 9-10).

[13] In Miller Transit, the Court held (at para. 27) that absent evidence to the contrary, the content of a negotiated contract involving a government institution and a third party is presumed to have been generated in the give and take of negotiations, not “supplied” by the third party. The onus was on K-Bro to rebut the presumption that the information in its service contract is not covered by the exemption in s. 17(1): Miller Transit, at para. 31.

K-Bro Linen Systems Inc. v. Ontario (Information and Privacy Commissioner), 2022 ONSC 3572 (Div. Ct.)

Agreement was the result of negotiations

K-Bro asserted that unlike in Boeing Co. and Miller Transit, its service agreement with WOHS was not the result of negotiations, and that the IPCO Adjudicator ignored this evidence. The Court disagreed, finding that the IPCO Adjudicator “made a factual finding that the contract was the product of negotiations between K-Bro and the Hospital even though there was no procurement process and little back-and-forth between the parties.”

Contrary to K-Bro’s submissions, lengthy discussions between multiple parties over complex issues is not necessary to find that a contract was the product of negotiations. It was open to the Adjudicator to find that the RPF [sic] process constitutes a form of negotiation, albeit a limited one.

ibid, paragraph 18

Even if not negotiated, the Agreement should be disclosed

Further, the Court noted the Adjudicator’s finding that even if the contract was not a product of negotiations, it would still not be protected under s.17(1)(a), because it was a contract resulting from a bidder’s proposal in an RFP process. The Court determined this finding was reasonable and also consistent with previous Divisional Court decisions dealing with the interpretation of s.17(1) of FIPPA.

Same information treated differently

K-Bro also argued that the Adjudicator’s decision was flawed because it was “internally inconsistent”; specifically, the Adjudicator had found pricing information and one other specific term in the service contract were not “supplied in confidence” in the context of the service contract and executive summary, but had also found that the same information was “supplied in confidence” in the context of another record.

The Court resolved this purported inconsistency by explaining that information “supplied in confidence” in one context may not be in another:

The same piece of information can be provided to a government institution in an entirely different context, including contract negotiations, where its confidentiality could not reasonably be expected. For example, this Court has distinguished between information given to a government institution as part of a regulatory process, which has been found to have been “supplied in confidence” and therefore exempt from disclosure, and information that finds its way into a government contract, which is not exempt: Miller Transit at para. 30.

ibid, paragraph 23

Absurd result?

Finally, K-Bro argued that the Adjudicator’s decision created an “absurd result” because it interpreted the word “supplied” in a manner that is inconsistent with its ordinary dictionary meaning. The Court disagreed, noting that the Adjudicator was considering whether information was “supplied in confidence”:

In all contract negotiations, the parties will give information to each other to inform the terms of the contract. For the purpose of s. 17(1) the question is whether the information was supplied in confidence. And this Court has repeatedly found that when information is included in the final terms of a contract, it is not going to be considered to have been supplied in confidence to the institution. This interpretation is not absurd. It is consistent with the purpose of the FIPPA, which is to provide a right of access to information under the control of institutions to the extent possible while also protecting individual privacy: FIPPA, s. 1.

ibid, paragraph 24

The Court therefore upheld the disclosure of Record 1, the executive summary, and Record 2, the services agreement, consistent with the decision of the IPCO Adjudicator.

Conclusions

The decision of the Divisional Court serves as a useful and current guideline for the disclosure of contractual information under FIPPA/MFIPPA, and affirms that in general, information included in the final terms of an agreement should not be considered to have been supplied in confidence to the institution, and therefore s.17(1) will not apply to exempt such information from disclosure.

On the other hand, in accordance with the original IPCO decision, pricing discussions, options offered but not taken, and notes of conversations with a vendor may all be exempt under s.17(1), so long as the information was supplied in confidence, not incorporated in the final agreement, and it can be demonstrated that the disclosure of such information would prejudice the vendor’s competitive position, interfere significantly with the vendor’s contractual or other negotiations with other government institutions, result in undue loss to the vendor, or undue gain to its competitors.

Published by Justin Petrillo

I have created the FOI Assist™ software to help Ontario’s provincial and municipal government institutions of all sizes track and respond to Freedom of Information (FOI) requests. For most of my career I have been a lawyer, advising clients on commercial, intellectual property and FOI/privacy issues. From 2013 to 2015, I managed the FOI program for the Toronto 2015 Pan/Parapan Am Games Organizing Committee while serving as Legal Counsel to the Games. Prior to becoming a lawyer, I obtained a computer science degree and worked as a software developer at several well-known technology companies.

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