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Bulletin

Bill 61: Ministry of Justice Wants to Make Recovering Misappropriated Funds Easier

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Construction Bulletin

On November 13, 2013, the Québec Minister of Justice, Mr. Bertrand St-Arnaud, introduced Bill 61 entitled An Act mainly to recover amounts paid unjustly by public bodies in relation to certain contracts in the construction industry. This bill proposes granting the Minister of Justice, in his capacity as Attorney General, the right to institute proceedings to recover overpayments made to any person that contracted with the Province by committing fraud or engaging in fraudulent tactics, or by using such tactics while performing an already-awarded contract. The bill suggests establishing certain presumptions that would make it easier to prove and assess the Province’s damages, and would prolong the prescription period that usually applies in such cases. It also proposes the creation of a voluntary reimbursement program for enterprises that want to come clean and avoid legal proceedings. Finally, it seeks to amend the Act respecting contracting by public bodies in order to make certain aspects of processing applications for authorization to contract with the Province easier for the Autorité des marchés financiers (AMF).

It is as yet uncertain whether Bill 61 will be adopted in its current or amended form, but here are the main elements of the bill.

A. Provisions Regarding the Rules Applicable to Legal Proceedings

As regards legal proceedings, the bill proposes establishing two presumptions that will facilitate the Minister’s task. The first consists of dispensing with the requirement that the Minister prove the existence of real damages, which would be presumed on proof of fraud or fraudulent tactics. The second exempts the Minister from having to prove the value of the damages. The damages would be presumed to correspond to an amount equal to a percentage of the contract price where the enterprise in question committed fraud or engaged in fraudulent tactics. What that percentage will be remains to be established by order-in-council.  It bears noting, however, that the Minister could nevertheless claim damages in an amount greater than this percentage, subject to providing proof.

Another specific element of the provisions that apply to legal recourses open to the Minister is that these actions may be brought directly against the directors or representatives of the enterprise that committed fraud or engaged in fraudulent tactics. This bill, therefore, lifts the corporate veil. What is more, all persons sued may be held solidarily liable for damages caused to the Province, and their property may be encumbered by a legal hypothec to secure payment of any potential conviction.

In terms of prescription, the bill also contains provisions that derogate from ordinary law. The Minister would have five years within which to bring an action that would be heard and decided by preference. This exceptional limitation period would apply retroactively to actions past or pending, if the damage to a public body was caused by fraud or fraudulent tactics in the 15 years preceding the date on which the bill came into force.

Another interesting point is that though it is the Minister, first and foremost, who would be able to bring proceedings based on the specific rules proposed by the bill, all public bodies contemplated by the Act respecting contracting by public bodies (ch. C-65.1) would also be able to institute proceedings under these rules, provided they obtain the Minister’s permission.

B. Voluntary Reimbursement Program

Bill 61 proposes creating a voluntary reimbursement procedure that would allow fraudulent enterprises to mend their ways and avoid proceedings. To do this, the bill would allow the Minister to transact and grant discharges, on his own behalf or that of a public body, to any person that committed fraud or engaged in fraudulent tactics against the Province.

In order to be able to conduct such voluntary reimbursement transactions, the enterprise or person that wants to participate in the program would have to designate a representative to negotiate the transaction. This designated representative would enjoy legal immunity and could not be compelled to disclose the facts discovered that prompted their decision to participate in negotiations leading to a voluntary reimbursement transaction. This legal immunity could be lifted, however, on proof that this designated representative acted in bad faith.

The bill further proposes that the amounts recovered by the Minister or a portion of the amounts recovered by public bodies be used to create a fund to pay for the expenses incurred by the Minister to administer this bill. Any surplus accumulated by the fund would be transferred to the Province’s general fund.

C. Provisions Amending the Act Respecting Contracting by Public Bodies (ch. C-65.1)

In addition to the provisions facilitating the recovery of funds misappropriated from Province coffers, the bill also contains provisions making the criteria for issuing an authorization to contract with a public body more flexible.

More specifically, an application filed with the AMF for authorization to contract with the Province would no longer be automatically refused due to the fact that the enterprise was convicted of an offence identified in the Act, and the AMF would be given greater latitude on how to handle applications.

Finally, a person named in the register of enterprises ineligible for public contracts (Registre des entreprises non admissibles or RENA) would henceforth be authorized to file an application for authorization before the AMF.

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