Final Report of Quebec’s Corruption Inquiry: Recommendation of a False Claims Act

There will be plenty of coverage in the coming days of the final report of the Charbonneau Commission, released this morning. This is the culmination of a lengthy inquiry into Quebec’s construction industry, which extended its tentacles to other spheres of public life. I had a miniscule part in the report. One of the 60 recommendations is the adoption by Quebec of a False Claims Act, an American statute that permits private parties to bring relator actions against fraudsters. Back in 2013, I wrote a note (included in the report submitted by Neal A. Roberts) on the legality of such a measure. Here it is:

Introduction

Daily and weekly revelations from the Charbonneau Commission have alerted Quebeckers to allegations of widespread corruption in government contracting in the province. These allegations will be discussed in the Charbonneau Commission’s final report.

Another element of the Charbonneau Commission’s mandate is to make recommendations as to how government contracting can be improved and corruption weeded out. One possibility is the development of a civil remedy statute analogous to the United States’ False Claims Act, which this report describes in detail. Without opining on the need for or the merits of a Québec statute that would resemble the False Claims Act, I can comment on the general appropriateness of adopting such a statute. Three elements need to be considered: the place of civil remedies statutes in Canadian law; Québec’s ability, as a province of the Canadian federation, to enact it; and its compliance with Québec and Canadian constitutional rights and freedoms.

My conclusion is that there is no obvious barrier to the adoption of a civil remedy statute.

General Context

Civil remedies are frequently made available by statute in Canada. Federal competition legislation – the Canadian equivalent of American anti-trust laws – provides in the following terms a right of private enforcement for breach of statutory provisions

36. (1)Any person who has suffered loss or damage as a result of

(a) conduct that is contrary to any provision of Part VI, or

(b) the failure of any person to comply with an order of the Tribunal or another court under this Act,

may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.

However, Canadian law does not provide for treble damages for breaches of competition-law norms.

Securities legislation commonly provides both for a regulatory system and for private enforcement (see e.g. Securities Act, R.S.O. 1990, c. S. 5, Part XXIII). Québec is no different in this regard. Title VIIII of its Securities Act, R.S.Q. c. V. 1-1 provides for a series of civil remedies for breaches of securities laws.

Québec has in the recent past sought the assistance of the general public in responding to corruption. The Act Respecting Elections and Referendums in Municipalities, R.S.Q. c. E-2.2 was recently amended to include the following provision:

312.1. The Superior Court may, on a motion, if it considers it warranted in the public interest, declare provisionally incapable to perform any duty of office a member of the council of a municipality against whom proceedings have been brought for an offence…that is punishable by a term of imprisonment of two years or more.

The motion may be brought by the municipality, the Attorney General or any of the municipality’s electors…

To assess whether it is warranted in the public interest, the court considers the connection between the alleged offence and the council member’s duties and the extent to which the alleged offence is likely to discredit the administration of the municipality. (emphasis added)

In Boyer c. Lavoie, 2013 QCCS 4114, the Mayor of Saint-Rémi, who had been charged with abuse of office, conspiracy and fraud, was removed from office pursuant to an application under this provision.

Federalism

Québec has broad authority under Section 92(13) of the Constitution Act, 1867 to enact laws relating to “property and civil rights in the province”. It also has an ancillary jurisdiction under section 92(15) to impose fines, penalties or imprisonment for breaches of validly enacted provincial legislation.

Enacting a civil remedy to combat fraud in government contracting should fall comfortably under this broad authority. Indeed, the enactment of civil remedies is a provincial competence par excellence (see MacDonald v. Vapor Canada, [1977] 2 S.C.R. 134).

A slight worry is the possibility that such legislation would be considered as relating to matters of criminal law, which is a matter of federal jurisdiction. As only the federal Parliament has the authority to enact criminal laws, the argument might be made that a provincial civil remedy relating to matters of fraud is beyond its powers.

However, I think this worry is dispelled by the Supreme Court of Canada’s decision in Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624 to uphold Ontario’s Civil Remedies Act, S.O. 2001, c. 28 against constitutional challenge. As Binnie J. summarized his conclusions (at para. 4):

[T]he CRA method of attack on crime is to authorize in rem forfeiture of its proceeds and differs from both the traditional criminal law which ordinarily couples a prohibition with a penalty…and criminal procedure which in general refers to the means by which an allegation of a particular criminal offence is proven against a particular offender. The appellant’s answer, however, is that the effect of the CRA in rem remedy just adds to the penalties available in the criminal process, and as such the CRA invalidly interferes with the sentencing regime established by Parliament.  It is true that forfeiture may have de facto punitive effects in some cases, but its dominant purpose is to make crime in general unprofitable, to capture resources tainted by crime so as to make them unavailable to fund future crime and to help compensate private individuals and public institutions for the costs of past crime.  These are valid provincial objects…. (emphasis added)

The same conclusions would apply a fortiori to a Québec civil remedy for corruption. Any crime-suppressing effects would be incidental to the primary purpose of providing a civil remedy to improve the provision of services to government entities.

Human rights

Both the federal Canadian Charter of Rights and Freedoms and the provincial Québec Charter of Human Rights and Freedoms contain protections for persons accused of criminal offences. For example, section 11 of the federal Charter accords a panoply of rights to “[a]ny person charged with an offence”.

These protections attach not just to classic criminal-law statutes, but also to other provisions the breach of which carries “true penal consequences” (R. v. Wigglesworth, [1987] 2 S.C.R. 541). Any statute creating a civil remedy is vulnerable to attack on the basis that it violates the presumption of innocence by requiring proof on a balance of probabilities rather than beyond all reasonable doubt.

However, this argument did not succeed before the Ontario Court of Appeal in Ontario (Attorney General) v. Chatterjee, 2007 ONCA 406, 86 O.R. (3d.) 168. The Court noted that forfeiture proceedings have not been treated as criminal in nature (at para. 41), a point that applies with equal force to civil remedies for fraudulent conduct. The Court also took into account the absence of “the stigma associated with a criminal conviction” (at para. 43), a point that is again equally forceful in the context of civil remedies.

One other factor which influenced the Court in Chatterjee was the in rem nature of forfeiture proceedings (at para. 42). This is arguably not true of the civil remedy under the False Claims Act, but I doubt this small difference would persuade a court to strike down the civil remedy proposed in this report. In any event, it is arguable that a civil remedy for corruption is so closely analogous to the forfeiture provisions upheld in Chatterjee that a principled distinction would be impossible to make.

It is possible that a treble damages provision would provoke more concern on the part of the courts. Nonetheless, it is notable that Canadian courts have not regarded regulatory offences with large fines as triggering the “true penal consequences” test (see e.g. Canada (Competition Bureau) v. Chatr Wireless Inc., 2013 ONSC 5315 ($10m regulatory penalty did not attract the protections of the Charter)).

Conclusion

My conclusion is that there is no obvious legal barrier to the adoption of a civil remedy for fraud in Québec. Doubtless such a provision would be challenged in the courts by parties pursued under it, but any such challenge, in my view, would be unlikely to succeed.

This content has been updated on November 24, 2015 at 12:11.