The Superior Court of Québec recently quashed a refusal
of the Autorité des marchés financiers (AMF) to grant
the authorization necessary to obtain a public contract. This
decision, in Terra Location inc. v Autorité des
marchés financiers, 2015 QCCS 509, marks a first
since the coming into force of the
Integrity in Public Contracts Act (IPCA) in December 2012. The
decision confirms that the AMF must disclose the precise
allegations upon which it has concluded that a business failed to
satisfy the IPCA's integrity requirements. The AMF's
failure to disclose these allegations constitutes a breach of
procedural fairness that vitiates the decision-making process and
"must inevitably lead to the reversal of [the AMF's]
decision" [our translation].
In May 2013, Terra Location inc. (Terra), a construction
company, requested an authorization from the AMF to enter into
contracts with certain public bodies. Nine months later, in
February 2014, Terra received notice of the AMF's refusal
alleging, among other things, that the company had done business
with subcontractors that Revenu Québec had identified as
suppliers of fraudulent invoices. Terra immediately denied
involvement in any collusive practices. In addition, on the basis
that the notice was vague, Terra requested that the AMF provide
additional clarification concerning the alleged collusive practices
and the identity of the fraudulent subcontractors.
Notwithstanding Terra's demands for clarification, the AMF
rejected the request for authorization in a decision rendered in
June 2014. That decision was based on the AMF's discretionary
power to refuse such a request if the business "fails to meet
the high standards of integrity that the public is entitled to
expect from a party to a public contract or subcontract".
Terra sought judicial review of the AMF's decision before
the Superior Court, demanding that the decision be set aside on the
ground that, notably, the failure to disclose the identity of the
subcontractors in question deprived it of its right to a full and
The Requirement of Transparent Decision Making
In granting the application for judicial review, the Superior
Court emphasized that to comply with the requirements of procedural
fairness, the AMF must disclose the information on which it bases
its decisions. The refusal to grant an authorization to enter into
public contracts does not escape this requirement, particularly
since the allegation of fraudulent invoicing represented a
"serious accusation putting into question the integrity of
both Terra and its directors" [our translation]. The Court
observed as follows:
 We can nevertheless take from this that a public body
charged with both requiring and monitoring a high standard of
integrity as specified by law must always act with the utmost
caution and with a constant concern for the respect of the rules of
natural justice and procedural fairness, which are inherent to the
execution of its mandate. [our translation]
The Court concluded that the AMF, having provided only snippets
of information regarding its allegations, had indeed compromised
Terra's ability to present a full and complete defence. The
failure of the AMF to provide any clarification thus
"constituted an obvious and elementary violation of the rules
of natural justice" [our translation]. With the AMF's
decision-making process having been vitiated by this breach of
procedural fairness, the Court set aside the decision and returned
the file to the AMF.
The Terra Location decision sheds some light on the
AMF's administration of this fairly new and important regime
requiring prior authorizations to obtain public contracts. It is
noteworthy that the AMF justified its decision in part by relying
on assertions made by the Permanent Anti-Corruption Unit (PACU).
These assertions were themselves based on fragmentary information
obtained from Revenu Québec. Terra's application for
judicial review revealed that both the AMF and PACU were unaware of
the identity of the allegedly dishonest subcontractors with whom
Terra had dealt with.
In this context, procedural fairness is more important than
ever. The decision to hold the AMF to a high standard of
transparency in the exercise of its broad discretionary powers to
evaluate a business's integrity is greatly welcome.
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