Date: 19991027
Docket: T-1390-98
Ottawa, Ontario, this 27th day of October, 1999
Present : The Honourable Madame Justice McGillis
BETWEEN:
MICHAEL CULVER
Applicant
- and -
THE MINISTER OF PUBLIC WORKS
AND GOVERNMENT SERVICES
Respondent
JUDGMENT
The application is dismissed with costs.
D. McGillis
JUDGE
Date : 19991027
Docket: T-1390-98
BETWEEN:
MICHAEL CULVER
Applicant
- and -
THE MINISTER OF PUBLIC WORKS
AND GOVERNMENT SERVICES
Respondent
REASONS FOR JUDGMENT
McGILLIS J.
INTRODUCTION
[1] The applicant has applied under section 41 of the Access to Information Act, R.S.C. 1985, c. A-1 to review the decision of the Minister of Public Works and Government Services ("Minister") refusing to disclose certain information in contracts between Standard Aero Ltd. ("Standard Aero") and the Department of Public Works and Government Services ("Department"). The principal question to be determined on this application is whether the Minister was justified in refusing to disclose the information under paragraph 20(1)(c) of the Access to Information Act on the basis that its disclosure "...could reasonably be expected to prejudice the competitive position..." of Standard Aero.
FACTS
[2] By letter dated April 10, 1997, the applicant requested that the Department send him a copy of a contract, including "all amendments, modifications and attachments", entered into between the Department, on behalf of the Department of National Defence, and Standard Aero. The contract pertained to the repair, overhaul or modification of Allison T56 gas turbine engines for aircraft. At the time, the applicant was the president of First Aviation Services, Inc. An American subsidiary of First Aviation Services, Inc., namely National Airmotive Corp., is a competitor of Standard Aero in the industry.
[3] During its preliminary review, the Department determined that the requested records contained "third party information". By letter dated May 14, 1997, the Department advised Standard Aero of the access to information request and indicated that it did not have sufficient information in its possession to justify exempting the requested records from disclosure under section 20 of the Access to Information Act. As a result, the Department provided Standard Aero with 20 days to make written representations prior to making a decision concerning the disclosure of the document.
[4] By facsimile dated May 22, 1997, Standard Aero advised the Department that four contracts, as well as various appendices, annexes and amendments, should not be disclosed on the following basis:
| The information identified is confidential and proprietary to Standard Aero. The information includes pricing, fees, descriptions, forms developed by SAL etc., the disclosure of which would provide competitors with an unfair advantage in future Government and Commercial bids. Special discount offers were provided to the Government and this information would affect future business opportunities and could result in material financial loss to Standard Aero. |
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[5] By letter dated May 29, 1997, the Department informed Standard Aero that some of the information in the requested records was exempt from disclosure under subsection 20(1) of the Access to Information Act, and that the remainder of the information would be disclosed to the applicant. By letter dated June 11, 1997, the Department disclosed portions of the requested records to the applicant.
[6] By letter dated July 24, 1997, the applicant complained to the Information Commissioner. Following the completion of his investigation, the Information Commissioner issued a report, dated May 22, 1998, in which he found that certain portions of the requested records should be released. However, he also found that the remaining information in the requested records was properly withheld by the Department under paragraph 20(1)(b) of the Access to Information Act. In the circumstances, he did not consider the applicability of paragraph 20(1)(c).
[7] By letter dated June 4, 1998, the Department disclosed additional information to the applicant, in conformity with the report of the Information Commissioner.
[8] On July 9, 1998, the applicant instituted the present proceeding challenging the decision of the Department to withhold the disclosure of certain information contained in the requested records.
[9] The evidence concerning the alleged prejudice to Standard Aero's competitive position by the disclosure of the information in the requested records was provided in a confidential affidavit affirmed on October 9, 1998 by Greg Ozog, the Director of the Canadian Forces Program for Standard Aero. Although the affidavit contains confidential information, the evidence outlined below is not confidential in nature.
[10] In his affidavit, Mr. Ozog stated, among other things, that the government has awarded the contract for the repair and overhaul of the T56 military aircraft engines to Standard Aero on a sole-source basis since 1960. Standard Aero currently has approximately 32 percent of the world market share for the repair and overhaul of T56 aircraft engines. Standard Aero's forecast sales under the 1998 contract with the Department are substantial and represent a "significant portion" of its revenue. Standard Aero has not competed against competitors for that particular contract. However, Standard Aero does bid for other T56 repair and overhaul contracts throughout the world, in particular for the United States Navy and Air Force. In the United States, by virtue of the freedom of information legislation, the bid abstracts are publicly accessible after the awarding of the contract. However, those bids contain the final selling rates and not the costs or the profit for performing the work under the contract. In contrast, the undisclosed portions of the contracts in question consisted "...mainly of hours of work to be put into various portions of the contract and the corresponding unit price, hourly rates, and monthly rates to be charged in completing the contract". As a result, the problem with disclosing that information, from Standard Aero's perspective, was expressed as follows, in paragraphs 24 and 25 of Mr. Ozog's affidavit:
| 24. ... In Canada, however, if a competitor was to obtain the final selling rates (the disputed information in the case of this Application), the competitor would be able to determine the profit and cost component of Standard Aero. The reason for this difference is that since the contract now under dispute is sole-sourced and subject to Canadian Government Supply Policy Manual calculations, Standard Aero divulges to [the Department] complete costs for providing the repair and overhaul services on the CF T56 engines. [The Department] then determines the final selling rate by applying their spread sheet profit calculation to these costs which establishes the rates that [the Department] will pay and the acceptable level of profit that Standard Aero will earn on the contract. The Supply Policy Manual containing the profit calculation methodology is available to all contractors to the Canadian Government. |
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| 25. I am informed by Mr. Soubry that a subsidiary of the Applicant"s employer (National Airmotive Corp.) is a Standard Aero competitor and a contractor to the Canadian Government. As a result, this competitor has access to the profit calculation methodology of the Canadian Government. Therefore, if this competitor were to obtain access to the disputed information, by using the [the Department] profit calculation methodology and the disputed information, they would be able to work back to determine the approximate costs and profit that Standard Aero enjoys and obtains for the contract under dispute. In contrast, in the United States, even with access to the bid prices on U.S. Government contracts, there is no way of determining what part is profit or cost of the company involved. |
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[11] Mr. Ozog further elaborated on the alleged prejudice to its competitive position that Standard Aero would suffer by the disclosure of the information in question, by stating as follows in paragraphs 30 and 31 of his affidavit:
| 30. Because of the direct relationship between the unit price and hours of work per unit to the profit calculation of Standard Aero on the Contract and thus the price paid by the [Canadian Forces] for the contract, this information is highly sensitive and thus confidential. As outlined above, if the disputed information was to be released, Standard Aero"s competitors would, by using the [the Department] profit calculation methodology and the disputed information, be able to work back to determine what are Standard Aero"s costs and profits. This would enable a competitor to benefit from Standard Aero"s significant efforts to calculate such costs and enable them to calculate various pricing scenarios in order to undercut Standard Aero on this and or on other contracts. Conversely, Standard Aero, [sic ] does not know, and has no way of knowing the same type of information (costs, profits, unit prices monthly charges, hours and rates) with respect to its competitors, nor would it have any means of access to that same type of information. If this disputed information is released, Standard Aero would be placed in a position of competitive disadvantage with respect to its competitors. |
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| 31. Competition is fierce for T56 engine repairs and overhauls. Once the disputed information is released, industry competitors would have knowledge of our costs without Standard Aero having the same insight into its competitors" financial and commercial background. In other words, the release of the disputed information would provide an important piece of financial and commercial information and intelligence to competitors of Standard Aero. The contract represents a substantial portion of Standard Aero"s overall sales, and in particular, ... of the sales of the Large Engine Product Unit division of Standard Aero, the division which services the T56 engine. As such, the loss of this contract to a competitor would have a significant negative impact on sales and thus workforce requirements by Standard Aero. |
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[12] Mr. Ozog was cross-examined on his affidavit at length by counsel for the applicant. During the course of his cross-examination, Mr. Ozog admitted that "it would take a bit of work" for a competitor to calculate Standard Aero's cost and data. Despite that admission, Mr. Ozog nevertheless maintained his position that a competitor could uncover information detrimental to the interests of Standard Aero. Counsel for the applicant did not cross-examine Mr. Ozog on any other aspect of his evidence that the release of the disputed information would place Standard Aero "in a position of competitive disadvantage with respect to its competitors". Mr. Ozog also stated during his cross-examination that the work required under its contracts with the United States military is done at its facilities in Canada.
[13] Although I have not summarized all of the evidence in the record, significant portions of which were filed by the parties on a confidential basis, I have nevertheless carefully considered all of it in arriving at my decision.
ISSUE
[14] The principal question to be determined on this application is whether the Minister was justified in refusing to disclose the information in the requested records under paragraph 20(1)(c) of the Access to Information Act on the basis that its disclosure "...could reasonably be expected to prejudice the competitive position..." of Standard Aero.
ANALYSIS
[15] In determining whether the Minister was justified in refusing to disclose the information in question, the criteria outlined in paragraph 20(1)(c) of the Access to Information Act must be considered, as well as the jurisprudence. Paragraph 20(1)(c) provides as follows:
| 20. (1) Subject to this section, the head of a government institution shall refuse to disclose any record requested under this Act that contains
| (c) information the disclosure of which could reasonably be expected to result in material financial loss or gain to, or could reasonably be expected to prejudice the competitive position of, a third party; ... |
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20. (1) Le responsable d'une institution fédérale est tenu, sous réserve des autres dispositions du présent article, de refuser la communication de documents contenant :
| c) des renseignements dont la divulgation risquerait vraisemblablement de causer des pertes ou profits financiers appréciables à un tiers ou de nuire à sa compétitivité; |
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[16] A review of the jurisprudence indicates that the exemption from access in paragraph 20(1)(c) requires proof, on a balance of probabilities, of a "reasonable expectation of probable harm". [See Canada Packers Inc. v. Canada, [1989] 1 F.C. 47 at 59 and 60 (C.A.); Saint John Shipbuilding Ltd. v. Canada (Minister of Supply and Services) (1990), 107 N.R. 89 at 91 (F.C.A.)]. Counsel for the parties agreed that the Minister bears the onus of establishing that he was justified in refusing access to the information in the requested records.
[17] I am satisfied, following my review of all of the evidence in the record, that the Minister has established, on a balance of probabilities, that Standard Aero has a "reasonable expectation of probable harm". In his evidence, Mr. Ozog indicated that the information in question would enable its competitors "to calculate various pricing scenarios in order to undercut" it on the contract with the Department "or on other contracts". Furthermore, the release of the information would provide its competitors, in a fiercely competitive global industry, with "an important piece of financial and commercial information and intelligence". The prejudicial effect of the disclosure of that information would be magnified by virtue of the fact that Standard Aero would have no access to similar information on the part of its competitors. As a result, "Standard Aero would be placed in a position of competitive disadvantage". Those key aspects of the evidence of Mr. Ozog were not challenged or undermined in any manner on cross-examination. In my opinion, the evidence of Mr. Ozog, when considered in its entirety, establishes, on a balance of probabilities, that the disclosure of the information "...could reasonably be expected to prejudice" the competitive position of Standard Aero. In other words, the evidence establishes a reasonable expectation of probable harm on the part of Standard Aero.
[18] Counsel for the applicant made reference in her submissions to the release of information under the applicable legislation in the United States. In my opinion, the evidence concerning the situation in the United States is irrelevant and unhelpful in determining the issue raised in the present proceeding. In any event, as counsel for the respondent aptly noted in his written submissions, the applicant has in his possession "a complete copy of the contracts" in issue, save and except for the very specific financial and commercial information pertaining to Standard Aero and its contractual terms.
[19] Given my conclusion, it is unnecessary for me to consider whether the information was properly exempted from access under paragraph 20(1)(b) of the Access to Information Act.
DECISION
[20] The application is dismissed with costs.
D. McGillis
JUDGE
OTTAWA, ONTARIO
October 27, 1999
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