On September 23, 2015, the Government published for consultation its draft Voluntary Reimbursement Program (the "Program"). The Program implementation is provided for in an Act to ensure mainly the recovery of amounts improperly paid as a result of fraud or fraudulent tactics in connection with public contracts, adopted on March 24, 2015 (the "Act").
Interested parties have until October 23, 2015, to submit their comments. The Program will come into force on November 1, 2015, and will expire on October 31, 2017.
The Program will target all public contracts entered into after October 1, 1996 for which "there may have been fraud or fraudulent tactics." The proposed process is similar to settlement conferences: the company or individual who wants to participate (the "Proposer") will first have to propose a settlement and disclose the method used to determine the proposal amount; the Program director may convene a conciliation session with the Proposer and the public bodies opposed to the proposal, to attempt to reach an agreement.
The objective of the Program is to allow companies that want to avoid civil proceedings to voluntarily reimburse the illicit profits that may have been charged, and obtain a discharge for contracts covered by the regulation. If this discharge is not granted, the Act provides special rules that will facilitate claims against the companies, their directors and officers at the time of the alleged overcharge. It should be noted that under these rules, the overcharge will be assumed to correspond to 20% of the contract amount and the applicable limitation period will be 20 years from the date these provisions come into force. For more information on the Act, see our previous analysis.
- Administration: The Program will be administered by the Honourable François Rolland, former Chief Justice of the Superior Court of Quebec, appointed as Director on August 24, 2015 (the "Director").
- Confidentiality: Other than with the express consent of the Minister and the Proposer, anything said or written in the context of the Program will be confidential and may not be admitted in evidence before any court. This rule will also apply in the context of civil or administrative proceedings and in response to inquiries by administrative or law enforcement agencies.
- Process held in camera: The entire process of analysing and negotiating a settlement proposal will be held in camera.
- Criminal and penal proceedings: Participation in the Program will have no impact on criminal or penal proceedings that may also be instituted with respect to the public contracts in question.
- Civil proceedings: Public bodies will have the possibility to sue for damages relating to public contracts that have not been the object of a settlement under the Program or that are not covered by the Act.
The process contemplated for the Program is as follows:
- Notice of intent: No later than November 1, 2016, the Proposer has to submit a notice of intent which must contain, inter alia, the list of the public bodies concerned by the settlement proposal, the years covered by the proposal, as well as the list of the individuals or companies who require a discharge.
- Notification to public bodies: Upon receipt of a notice of intent, the Minister will inform in writing, within 30 days, each public body concerned by the notice of intent.
- Settlement proposal: Within 30 days of filing a notice of intent, the Proposer will have to send a proposal to the Director. The proposal shall, among other things, list the covered contracts, the total amount paid by the public body for each contract, the method used to determine the proposal amount, as well as the terms of payment and guarantees proposed to secure payment. Once filed, the settlement proposal cannot be withdrawn.
- 10% fees: The Proposer must include with the proposal a cheque equal to 10% of the amount proposed, to cover the costs incurred for the implementation of the Program. This amount will be non-refundable and adjusted upward if the eventual settlement exceeds the amount of the proposal. While this amount may seem high, it should be noted that the Act provides that if a company does not obtain a discharge under the Program and is subsequently sued, it will pay an additional amount equal to 20% of the damage awarded to compensate the costs incurred for the application of the Act.
- Disclosure: The Proposer will undertake to disclose to the Director all facts and information that are relevant for to the assessment of its settlement proposal. A Proposer who omits or refuses to disclose material information or documents can be excluded from the Program.
- Assessment: The Director will assess the proposal and may request additional explanations that the Proposer will have to provide. If unable to recommend the proposal, the Director must first inform the Proposer and allow it to make the necessary changes.
- Preliminary recommendation: No later than 150 days after a notice of intent is filed, the Director shall send its preliminary recommendation to the Minister.
- Notice of refusal by public bodies: Any public body concerned by the proposal shall, within 60 days of being informed, advise the Minister in writing whether it agrees or not with the portion of the proposal that concerns it. If the proposal is refused, the public body must explain its reasons and submit a counter-proposal. In the absence of notice, the public body will be deemed to have accepted the proposal.
- Conciliation: Within 30 days of receiving one or several notices of refusal, the Director may convene the interested parties to a conciliation meeting.
- Balloting: If the Director receives a notice of refusal, all the public bodies concerned will have to vote on the proposal. Each public body will have one vote for each dollar of the amount covered by the settlement proposal. To be accepted, the proposal must be approved by public bodies holding at least 2/3 of the voting rights. If the Director cannot make a favourable recommendation on the proposal in its entirety, the Minister may submit to a vote only those parts of the proposal that have been recommended.
- Discharge: Once the proposal is accepted, the Minister will sign a discharge on behalf of all public bodies concerned. This discharge will have no effect with respect to contracts for which false statements were made or for which there was clearly incomplete disclosure in the process leading to the settlement.
McCarthy Tétrault's comments
As the Program was published for consultation purposes, it is possible that certain of its terms will be modified before it comes into force on November 1, 2015. It will be interesting to see the amendments that will be made by the Minister when the final version of the Program is made public.
Given that the deadline to participate to the Program is November 1, 2016, and that a detailed settlement proposal must then be sent no later than 30 days from that date, companies that want to participate in the Program should begin to develop the analysis in support of their settlement proposal.
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