Public Works and Government Services Canada Integrity Clauses

by Bennett Jones LLP
Contact

This information circular provides an overview of the integrity provisions recently implemented by Public Works and Government Services Canada (“Public Works”), as they apply to real estate transactions across Canada (“Integrity Provisions”). The information circular is divided into the following three sections:

  • Part I: Integrity Provisions - Overview;
  • Part II: Compliance with Integrity Provisions; and
  • Part III: Liability for Non-Compliance.

Part I: Integrity Provisions – Overview

On July 11, 2012, Public Works extended its integrity provisions for procurement contracts to all solicitations and real property transactions for purposes of further demonstrating its commitment to having business in Canada conducted by companies and individuals that respect the law and act with integrity. As a result, effective as at July 11, 2012, all solicitations to lease and leases with Public Works are required to comply with the Integrity Provisions. Leases with Public Works which existed as at July 11, 2012, are honoured, but any lease amendments made subsequent to July 11, 2012, are required to comply with the Integrity Provisions.

Public Works has prepared draft Integrity Provisions relating to offers to lease and leases, copies of which can be found at www.tpsgc-pwgsc.gc.ca/biens-property/ci-ic-eng.html.

Applicable Transactions

The Integrity Provisions apply to real property transactions managed by Public Works. Among other things, Public Works manages the acquisition and disposal of Crown-owned properties, the letting of commercial crown-owned space and leasing transactions for all uses.

Applicable Offences

The Integrity Provisions require the entity entering into the lease or offer to lease (hereinafter referred to as the “Contracting Party”), to certify that it, as well as its parents,1 subsidiaries,2 affiliates,3 and any and all directors thereof (collectively, the “Related Persons”), have never been convicted of any of the following integrity-related offences:

  1. frauds against the government under the Criminal Code of Canada;
  2. frauds under the Financial Administration Act;
  3. payment of a contingency fee to a person to whom the Lobbying Act applies;
  4. corruption, collusion, bid-rigging or any other anti-competitive activity under the Competition Act;4
  5. money laundering;
  6. participation in activities of criminal organizations;
  7. income and excise tax evasion regardless of the amount in question;5
  8. bribing a foreign public official; and
  9. offences in relation to drug trafficking, (collectively, the “Offences”).

Exemptions

In the event that a Contracting Party or any of its Related Persons have been convicted of an Offence, they may nonetheless be eligible to solicit or enter into leases with Public Works if:

  1. a record suspension or a criminal pardon has been granted; or
  2. capacities have been restored by the Governor in Council (“GIC”) at any time before a record suspension is granted.

A Contracting Party or its Related Person, as applicable, may apply for a record suspension five or ten years after the expiration of the sentence or probation period depending on whether the infraction is prosecuted through summary proceedings or indictment. Once a Contracting Party or Related Person, as applicable, receives a record suspension or alternatively, once it has its capacities restored by the GIC, it becomes eligible to solicit and enter into leases with Public Works.

“Required by Law” and Public Interest Exceptions

There are instances when a Contracting Party may still enter into real property transactions with Public Works notwithstanding that it, or any of its Related Persons, may be convicted of an Offence. Such instances arise when required by law or when Public Works considers it necessary to the public interest for reasons which include, but are not limited to, the following:

  1. when only one entity is capable of performing the offer to lease agreement or lease;
  2. emergency;
  3. national security;
  4. health and safety; and
  5. economic harm.

The foregoing exceptions are applied by Public Works on a case-by-case basis and may be coupled with additional controls, administrative measures, and monitoring on the real property agreement in question.

So far as we are aware, Public Works has not yet used the public interest exception in relation to a real property transaction. However, since November 2012, public interest exceptions have been used in three instances relating to procurement contracts where it was determined by Public Works that the Contracting Party was the only entity available to provide a particular good or service.6

Parties subject to the Integrity Provisions

The Contracting Party

If a Contracting Party has been convicted of an Offence, then it cannot solicit or enter into any leases with Public Works.

Parent

As long as a conviction stands against the parent of a Contracting Party, the Contracting Party itself would be ineligible to solicit or enter into any leases with Public Works. The only way to circumvent the Integrity Provisions in such circumstances is to change the control of the Contracting Party, which may, for example, be accomplished through the sale of the parent’s shares in the Contracting Party.

Subsidiary

As long as a conviction stands against a subsidiary of a Contracting Party, the Contracting Party itself would be ineligible to solicit or enter into any leases with Public Works. However, if a Contracting Party were to sell the subsidiary prior to soliciting or entering into a lease, then such Contracting Party would be eligible to do so.

Affiliate

As long as a conviction stands against an affiliate of a Contracting Party, such Contracting Party itself would be ineligible to solicit or enter into any leases with Public Works. A business concern, organization or individual would be considered an “affiliate” of the Contracting Party if directly or indirectly:

  1. either one controls, or has the power to control, the other, or
  2. a third party has the power to control both.

Indicia of control include: interlocking management or ownership, identity of interests among family members, shared facilities and equipment, common use of employees, or a business entity created which have the same or similar management, ownership, or principal employees, as the case may be.

Director of the Contracting Party, Parent, Subsidiary or Affiliate

If a director of a Contracting Party, or a director of any parent, subsidiary or affiliate of such Contracting Party, directly or indirectly controls or possesses the power to control the Contracting Party or the applicable parent, subsidiary or affiliate thereof, and such director is convicted of an Offence, the Contracting Party itself would be ineligible to solicit or enter into any leases with Public Works. Only one wayward director is required to render the Contracting Party ineligible to conduct business with Public Works. However, should such director resign and not retain control over such Contracting Party, parent, subsidiary or affiliate, as applicable, prior to such Contracting Party soliciting or entering into a lease, the Contracting Party would be eligible to do so.

Employees

An employee’s conviction would have no bearing on a Contracting Party’s eligibility to solicit or enter into a lease with Public Works so long as the employee does not control or possess the power to control the Contracting Party.

Family Members

A director’s family member’s conviction would have no bearing on a Contracting Party’s eligibility to lease or enter into a lease with Public Works so long as the employee does not control or have the power to control the Contracting Party.

No Dollar Value Thresholds

All real property transactions with Public Works, of any value, are subject to the Integrity Provisions.

No Time Limitations for Convictions

The Integrity Provisions apply if a conviction occurred notwithstanding any lapse of time and regardless of whether the Contracting Party has been in good standing since the time of such conviction.

Impact of Charges, Investigations and Allegations

Unless there is a conviction against the Contracting Party or its Related Persons, charges, investigations or allegations have no bearing on the eligibility of the Contracting Party.

No Foreign Offences

The Integrity Provisions affect individuals and companies (Canadian or foreign) that are convicted of Canadian offences. Foreign offences are not covered by the Integrity Provisions.

Current Practice

Unfortunately no “standard” practice has yet developed in the real estate industry regarding the appropriate internal compliance measures which a Contracting Party should undertake.

Whether internal compliance measures are undertaken and the extent of the compliance measures to be taken is an issue to be addressed by each Contracting Party and will depend upon many factors including the Contracting Party’s risk tolerance which may, in turn, depend on the size, structure and complexity of the Contracting Party’s organization, the “value” to the Contracting Party of the offer to lease or lease in question and other circumstances surrounding the offer to lease or lease in question.

From our limited experience to date, the compliance measures which are being undertaken in the real estate industry range from simply doing nothing and accepting the risk (presumably depending upon many factors including the benefit versus the risk to the Contracting Party) to limited internal assessments and/or enquiries.

It should also be noted that the nature and extent of compliance measures which will be undertaken by a Contracting Party may also be affected by any “cure” provisions which are implemented and available to a Contracting Party. Obviously, if there is an effective “cure” right, the extent that a Contracting Party may wish go to in undertaking compliance measures may be lessened.

Part II: Compliance With Integrity Provisions

Certification and Verification

In order to comply with the Integrity Provisions, a Contracting Party must:

  1. certify that neither it nor any of its Related Persons, have been convicted of an Offence; and
  2. provide a complete list of the current directors sitting on its board.7

Upon receipt of the foregoing information by Public Works, Public Works will proceed to verify such information and is further entitled to request additional verification by way of a signed Criminal Record Verification Consent. Completed Criminal Record Verification Consent forms are maintained by Public Works for a two-year period.

Internal Compliance Measures

In order to ensure compliance with the Integrity Provisions, Contracting Parties may wish to consider the following:

  • Assess their corporate structure to identify which entities, would be considered Related Persons.
  • Ascertain all current members of the board of directors of the Contracting Parties and the Related Persons, as applicable.
  • Conduct (through internal means, independent research, government resources, or third parties) an audit to determine if the Contracting Party, or any of its Related Persons, has been convicted of an Offence.
  • If any of the Contracting Party or its Related Persons have committed an Offence, determine if such party is eligible to apply for a record suspension.
  • If a director has been convicted of an Offence, the Contracting Party may wish to initiate processes to have the director resign.
  • If a parent, subsidiary or affiliate has been convicted, the Contracting Party may have to conduct a cost-benefit analysis to determine whether, in order to comply, it is appropriate to proceed with a corporate restructuring.

Part III: Liability For Non-Compliance

General

The liability that flows from non-compliance with the Integrity Provisions depends on whether the Contracting Party is making an offer to lease or is entering into or has entered into a lease. In the event of an offer to lease, the Contracting Party is ineligible to make an offer to lease if:

  1. the information requested by Public Works is missing or inaccurate;
  2. the information contained in the offeror’s certifications is false;
  3. if required, the offeror fails to timely provide Public Works with a completed Criminal Record Verification form; or
  4. the offeror otherwise delays or obstructs the efforts of Public Works to determine the veracity of the offeror’s certifications.

It should be noted that the offeror Contracting Party and its Related Persons are required to remain free and clear of any conviction for the term of the lease, including any extensions thereof. If it is determined, after entering into a lease, that the information contained in the offeror’s certifications is false, Public Works may terminate the lease in question.

In respect of a lease, Public Works has the right to terminate the lease for default if at any time during the term of the lease, including any extensions thereof, Public Works determines that:

  1. the lessor made a false declaration in its offer to lease;
  2. the lessor makes a false declaration under this lease;
  3. the lessor fails to diligently maintain and provide up-to-date the information requested;
  4. if required, the offeror fails to timely provide Public Works with a completed Criminal Record Verification form; or
  5. the lessor, or any of its Related Persons, fail to remain free and clear of any convictions during the term of the lease, including any extensions thereof.

Public Works also has the right to demand the immediate return of any advance payments made under the lease. Moreover, if the lessor fails to diligently maintain and provide up-to-date information to Public Works or fails to deliver a Criminal Record Verification when requested, Public Works can apply to the court for an order of specific performance. An order for specific performance would enjoin the lessor to do what it has contracted to do under the lease in question.

Damages

The Integrity Provisions provide that the lessee, in addition to other remedies that may be available to it, will have the right to terminate the lease or offer to lease, as applicable, for default. Moreover, the Integrity Provisions do not limit the remedies available to the lessee at law which leads to the inference that Public Works has left itself the option, in addition to the right to terminate the offer to lease or the lease, as applicable, to pursue any remedies available to it at law or in equity. While we have not been able to find any case law on this point, it is reasonable to assume that in the event that Public Works enters into an offer to lease or a lease, as applicable, in reliance upon false certifications made by the Contracting Party, it will have available to it the right to terminate the offer to lease or the lease as well as the right to sue for any damages which it incurs as a result thereof (such as relocation costs, etc.), and any other equitable remedies which may be appropriate in the circumstances.

Personal Liability

There has been some concern raised as to whether liability could extend personally to officers or directors of the Contracting Party or its Related Persons if the certification is false or untrue.

Our research on the remedies available in the event of non-compliance with the Integrity Provisions did not disclose any intention to extend liability personally to officers or directors of the Contracting Party or its Related Persons.

Ability to Cure

Pursuant to paragraph (h) of the Integrity Provision relating to offers to lease (Appendix “A”) where the lessee intends to reject an offer to lease for the reasons set out in paragraph (g) of such Integrity Provision, it will inform the Contracting Party and provide it with five (5) working days within which to make written representations as to why its offer to lease should not be rejected.

We also understand, based upon our discussions with Public Works departmental officials, that the Integrity Provisions will soon be revised to provide a cure period (expected to be 30 days) to remedy any certification that was false or untrue. For example, a director of a Contracting Party who is guilty of an Offense could be removed and/or replaced within the cure period. Until we see the proposed revision to the Integrity Provisions we are not able to comment on whether any proposed “cure rights” will be workable.

Notes

  1. Under the Integrity Provisions, “parent” means a corporation that holds all issued and outstanding shares of the capital stock of a corporation (Income Tax Act RSC 1985, c-1 (5th Supp)).
  2. Under the Integrity Provisions, “subsidiary” means a corporation in which all the issued and outstanding shares of its capital stock belong to (i) a person; (ii) a corporation that is a wholly-owned subsidiary of the same person; or some combination of persons as described under (i) and (ii) (Income Tax Act RSC 1985, c-1 (5th Supp)).
  3. Under the Integrity Provisions, “affiliate” means an entity which, directly or indirectly, in relation to the Contracting Party: (i) either one controls, or has the power to control, the other; or (ii) a third party has the power to control both.
  4. Prior to July 11, 2012, Contracting Parties who participated in programs such as the Competition Bureau’s Leniency Program would be exempted from the Integrity Provisions.
  5. The Contracting Party would still be eligible to make offers to lease or enter into leases if it owes taxes or is in dispute with the Canadian Revenue Agency in respect of taxes.
  6. Elizabeth Thompson, “Companies handed government contracts despite integrity violations”, iPolitics (4 Jun 2013) online at para 3: http://www.ipolitics.ca/2013/06/04/companies-handed-government-contracts-despite-integrity-violations/.
  7. If the Contracting Party is already a party to a lease, it is obligated to diligently update by written notice to Public Works, the current members of the lessor’s board of directors.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP
Contact
more
less

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.