N95 supplier told to pay security in suit over pandemic-era mask contract with Manitoba

An American company suing Manitoba for refusing to pay in full for millions of N95 masks the province claims were not fit for its intended purpose has been ordered to pay security before its lawsuit can proceed.

Private Trading Group, LLC (PTG) must put forward security costs before moving forward to trial, Court of King's Bench Justice Candace Grammond said in a decision issues earlier this month. Courts ordinarily issue security for costs orders when a plaintiff resides outside Manitoba and doesn't have assets in the province to pay for costs should they lose the case.

The government entered a purchase order for almost five million N95 masks and other equipment from the Minnesota-based company on April 7, 2020.

The total price tag for the masks was $19 million US, but the company said in a statement of claim later that year it never received the final $6 million it was supposed to get once the order was delivered.

The province is denying liability by claiming the government did not receive what it bargained for, the decision said. The judge said Manitoba is seeking the $13 million US that it paid PTG prior the delivery.

The judge's decision said the province is still keeping the masks in storage, almost five years after it entered the purchasing agreement.

Both parties had previously agreed on $81,480 as security costs should an order be issued in this case, the decision said.

Company argued masks could act as security

The judge said PTG argued the masks should serve as that security, saying the province could sell them for two cents each and make double what the company has been asked to post.

PTG said that even if they were past their expiry date, Canada and other governments had advised the masks could still be used so long as they were stored correctly and showed no signs of deterioration.

"For the purposes of this motion, I have no reason to doubt that the masks have a limited shelf life, which is relevant to their monetary value," Grammond wrote. "Having said that, I have no conclusive evidence of the current value of the masks." 

The judge went on to say the onus of such proof was on the company, and that even if it didn't have physical access to the masks, it could have still provided some sort of valuation.

She also pointed out the government had also made a significant partial payment for the masks.

PTG's statement of claim said that the province had ordered the masks for use in hospitals, but that it didn't realize they didn't meet their fit requirements and couldn't be used after they ordered.

The company claims those requirements weren't in the terms of the purchase, and that Manitoba did not ask for samples or for any testing beforehand.

The province's contract with PTG was worth $46,871,800, according to disclosures posted on the government's website.