Executive Summary: Key Legal and Evidentiary Issues

• Cryopak Industries (2007) ULC and LaunchWorks CDMO, Inc. sued the Attorney General of Canada for damages, alleging bad faith termination of contract negotiations for the supply of 10 million RT-qPCR COVID-19 test reagents.
• Central to the dispute is whether the Government of Canada breached its duty to negotiate in good faith when it abruptly ended negotiations in January 2021, citing price and profit margin concerns.
• Five undertaking requests made by the plaintiffs — MM-12, MM-13, MM-40, SG-8, and SG-12 — were opposed by the defendant on grounds of confidentiality and relevance.
• Competing confidentiality obligations arose from government procurement standards and the terms and conditions of third-party pharmaceutical suppliers, including Life Technologies, New England Biolabs (Canada) Ltd., and Qiagen.
• The court found that the defendant established a legitimate important interest in protecting the commercially sensitive pricing data of third-party contractors doing business with the government.
• Relevance, not confidentiality alone, was the determining factor in resolving each objection, with the court ordering restricted disclosure for four of the five challenged undertakings.

Facts of the case

Cryopak Industries (2007) ULC (Cryopak) and LaunchWorks CDMO, Inc. (LaunchWorks), a subsidiary of Cryopak, commenced proceedings against the Attorney General of Canada (AGC) seeking damages initially totaling $21,191,470 ($16,235,876 USD). The plaintiffs alleged that the Government of Canada failed to negotiate in good faith by abruptly and without valid reason terminating contract negotiations for the purchase of 10 million RT-qPCR reagents — diagnostic tests used for COVID-19 detection. In December 2023, after the exchange of expert reports, the plaintiffs amended their claim and reduced it to $11,309,916, representing the profit they alleged they would have earned had the contract been concluded.

The background to the dispute dates to the early stages of the COVID-19 pandemic. Beginning in March 2020, the Canadian government prioritized the domestic production of COVID-19 testing supplies to guard against anticipated shortages. A team of researchers from McGill University, led by Dr. Martin Schmeing and Dr. Don van Meyel and supported by government funding, developed a Canadian-made version of the RT-qPCR test and incorporated Canadienzyme Inc. to supply the product to the Public Health Agency of Canada (PHAC). The government, through Innovation, Science and Economic Development Canada (ISED) and PHAC, recommended that a proposal be submitted to supply the RT-qPCR MasterMix for 10 million tests. Canadienzyme established a manufacturing partnership with Cryopak, with production to be carried out through LaunchWorks.

On August 25, 2020, Canadienzyme and the plaintiffs submitted a proposal to ISED to supply 10 million test kits at a unit price of $2.10, for a total of $21,000,000, with deliveries scheduled to begin December 18, 2020 and conclude March 18, 2021. On September 23, 2020, PHAC directed Public Services and Procurement Canada (PSPC) to negotiate a sole-source contract for 10 million RT-qPCR reagents, relying on exceptions under the Government Contracts Regulations for cases of extreme urgency and where competitive tendering would not serve the public interest. Negotiations continued between October and December 2020, during which PSPC transmitted a draft contract to the plaintiffs on October 15, 2020, including a draft statement of work for review and negotiation.

On November 25, 2020, the plaintiffs disclosed their anticipated profit margin for the first time, estimated at 29.8%. PSPC responded the same day that this margin exceeded what was permissible under procurement policy. On December 9, 2020, PSPC provided the plaintiffs with a preliminary price analysis based on information they had submitted, which calculated the plaintiffs' profit margin at approximately 122%. Subsequent exchanges on price and profit margin failed to resolve the impasse. On January 7, 2021, PSPC informed the plaintiffs that the government was terminating negotiations. The plaintiffs subsequently offered to supply the test kits at $0.95 per unit, but the government declined to reopen negotiations, citing the changed pandemic context and the absence of the urgency that had justified the sole-source approach in the first place.

Policy terms and contractual clauses at issue

Several contractual and regulatory provisions were central to this proceeding. The draft contract transmitted to the plaintiffs on October 15, 2020 contained section 6.6, titled "Price Certification — Canadian Suppliers," which required the plaintiffs to disclose their anticipated profit margin, subject to review and approval by PSPC's internal accountants. The Government Contracts Regulations (DORS/87-402) were also at issue, specifically the exceptions under paragraph 6(a) (extreme urgency where delay would be prejudicial to the public interest) and paragraph 6(c) (where the nature of the procurement is such that competitive tendering would not serve the public interest), which the government invoked to pursue a sole-source contract.

In opposing the undertaking requests, the defendant filed sworn declarations and relied on the standard procurement terms referenced by PSPC employee Lauren Milne. The court also considered the confidentiality provisions from the terms and conditions of three third-party pharmaceutical companies: clause 16.7 of Life Technologies' terms, which obliged counterparties to keep confidential all non-public technical and commercial information including prices; clause 13.2 of New England Biolabs (Canada) Ltd.'s terms, with a substantially similar confidentiality obligation; and clause 4.3 read together with clause 12 of Qiagen's terms, which classified prices as confidential information and restricted either party from disclosing or publishing the other's confidential information except as required by law.

Court's reasoning and analysis

The present judgment concerned a case management notice filed by the AGC under article 228 of the Code of Civil Procedure, seeking to uphold five objections to undertaking requests made by the plaintiffs following examinations before trial of the AGC's representatives, Michael McLaughlin (examined on February 28, 2025 and July 19, 2024) and Steven Guercio (examined on September 27, 2024). The five undertaking requests were: MM-12 (value of contracts awarded for similar MasterMix reagent products from 2019 to 2023); MM-13 (contracts with suppliers who provided stocks); MM-40 (unit prices proposed by other suppliers, including contracts, relating to exhibit MM-4); SG-8 (requests and contracts concluded between PSPC or PHAC and other suppliers for similar MasterMix reagents in the context of COVID for 2020 and 2021); and SG-12 (verification with PHAC as to whether the price paid for reaction tests exceeded $2.10 per unit and, if so, by how much).

The court applied the legal framework summarized in Raymond Chabot Grant Thornton c. Bourgeois (2021 QCCS 2933), drawing on principles from the Supreme Court's decision in Sherman (Succession) c. Donovan (2021 CSC 25) and prior jurisprudence. The court confirmed that a party may resist disclosure by raising a legitimate important interest, and that it is for the party invoking such an interest to demonstrate the facts supporting its existence. While the existence of a legitimate important interest does not by itself justify refusing disclosure, it does require the court to immediately decide the objection rather than referring it to the trial judge. At that stage, the determinative question becomes relevance.

The court found that the AGC had established a legitimate important interest in protecting the commercially sensitive pricing information of third-party suppliers. It reasoned that companies contracting with the government must be able to expect that confidential commercial information they provide during procurement processes will be protected — including from competitors. The plaintiffs, as pharmaceutical companies producing similar products, were found to be direct competitors of the third parties whose pricing data they were seeking. The court also identified a public interest dimension: the integrity of the government's procurement process depends on qualified suppliers being willing to bid transparently, which requires confidence that their pricing information will not be disclosed to rivals.

On relevance, the court rejected the AGC's position that undertakings MM-12, MM-13, MM-40, and SG-8 were entirely without connection to the theory of the case. The court found it could not conclude that the documents and information sought by the plaintiffs were without foundation relative to their theory of liability — namely, that the government acted unreasonably and without valid basis in terminating negotiations on price grounds. However, given that price clearly constituted sensitive confidential information, the court ordered restricted disclosure: redacted copies would be provided to the plaintiffs, while their counsel would receive unredacted copies under strict confidentiality undertakings, with those documents to be filed under seal if introduced in evidence. Any expert engaged by counsel would be subject to the same restrictions.

As to SG-12, the court upheld the objection on a separate and independent ground: an undertaking cannot require a party to perform analyses and calculations on behalf of the opposing party. This had been confirmed by Mr. Guercio during his examination, and the plaintiffs made no representations in response to this ground.

Ruling and overall outcome

The court partly upheld the AGC's objections in respect of undertakings MM-12, MM-13, MM-40, and SG-8, ordering restricted disclosure subject to a confidentiality regime — with redacted copies to the plaintiffs and unredacted copies restricted to their counsel and any retained expert, to be filed under seal. The court also took note of the AGC's undertaking to transmit to the plaintiffs the volumes of products ordered by the government, with that information to be added to undertakings MM-20 and SG-9, and ordered that it be transmitted no later than July 4, 2026. The objection to undertaking SG-12 was upheld in full. Costs were reserved. The AGC was the substantially successful party on this procedural motion; no monetary award, damages, or costs amount was ordered at this stage, as the decision concerned only the management of discovery undertakings in advance of the trial on the merits.