Introduction
On April 26, 2015 the jury issued 60 "not guilty" verdicts for the six individuals and three corporations who stood accused in the 8 month long R v Durward trial. This case marks a milestone in Canadian bid-rigging trials; it is one of the largest proceedings of this nature to have ever occurred. It also established new precedents in competition and procurement law. The Charge to the Jury, which is some 300 pages long and is included as an attachment to this article, is particularly valuable for lawyers and companies currently engaged in any procurements or facing allegations of bid-rigging. This charge may form the basis upon which section 47 of the Competition Act is interpreted in the future.
Several of the accused elected for a trial by jury on 10 charges of bid-rigging contrary to section 47(1)(b) of the Competition Act and 10 charges of conspiracy contrary to section 465(1)(c) of the Criminal Code. In a jury trial, the jury is the trier of fact, but the judge instructs the jury on matters of law. Justice Warkentin's instructions on the law in relation to this matter are extremely important as there is currently scant case law relative to section 47. It is the most recent interpretation of section 47(1)(b) .
Introduction to the Trial:
The charges related to ten Requests for Proposals (RFPs) issued by Public Works and Government Services Canada (PWGSC) and Transport Canada (TC) for IT professional services. in the Summer and Fall of 2005.
The Competition Bureau initiated an investigation in 2005 and laid charges in February 2009. Had the individuals and companies been found guilty, they faced possible imprisonment of up to five years, debarment from conducting any business with the federal government for up to 10 years and potential major fines.
The trial involved over a million pages of documents and it was held in a specially designed electronic courtroom in Ottawa.
Elements of the Offence
The accused were charged with the offence of bid-rigging as it was articulated in 2005. Since then the section has been amended. The presiding judge broke down the bid-rigging offence into 5 questions, each of which had to be satisfied to meet the elements of the offence:
- Was the RFP a "call for bids or tenders"?
- Did the accused honestly albeit mistakenly believe that the RFP was not a "call for bids or tenders"?
- Did the accused "submit" a bid or tender?
- Was the bid or tender "arrived at by agreement or arrangement"?
- Was the agreement or arrangement "made known to the person calling for the bids or tenders at or before the time when they were submitted"?
Calls for Bids or Tenders
When charging the jury on the first question, the judge noted that the words "bid" and "tender" are synonymous. For a procurement to be a bid or tender there must be: an invitation by the caller for offers from contractors to enter into a subsequent contract on terms specified in the invitation to undertake the services for a price as specified by the contractor. The submissions are required to be compliant with the terms of the tender-call and must set out the terms by which the contractor would be willing to undertake to fulfill the services sought.
In order to explain the legal framework by which the procurement process is to be analyzed, the trial judge had first to instruct the jury on the basic elements of contract formation. An offer is described as an indication of a person's willingness to enter into a contract according to certain terms. Acceptance is an indication of agreement to enter into the contract under the terms proposed. In order to determine whether the parties intended to create a legally binding relationship, a jury must look at the terms of the agreement, the context in which the parties are operating and the exchange (or lack of exchange) of consideration. A promise is only legally enforceable when there is an exchange of something of value relative to that promise. Consideration does not have to be proportionate to the promise made, nor does it have to be monetary in nature.
A call for bids or tenders involves the formation of two contracts dubbed "Contract A/Contract B". Contract A is created when a caller issues a call for bids or tenders (offer) and a bidder submits a bid in response (acceptance). Through a bidder's submission of a bid (offer) and with the ultimate selection of a winning bid (acceptance), Contract B is formed. For there to be Contract A and Contract B, the elements of contract formulation (offer, acceptance, and consideration) must be present.
If a jury ultimately finds that the parties did not intend to be legally bound, then there is no offer and acceptance. Similarly, whether the procurement process is a call for bids or tenders depends on whether the call gives rise to contractual obligations quite apart from any resulting contract. If there is no contractual intent, then the procurement vehicle is not a "call for bids or tenders." It is important to note that the title of the tendering document should not be used as a determination of the parties' intentions.
Mistake of Fact
The Judge put before the jury the defence of mistake of fact for their consideration. Once the jury is satisfied beyond a reasonable doubt that the RFPs were calls for bid or tender, they were then asked to decide whether the accused had mistakenly but honestly believed that the RFPs were not calls for bids or tenders. For its part, the Crown bore the burden of proving beyond a reasonable doubt that the accused knew that the RFP was indeed a call for bid or tender.
Submission of a Bid or Tender
The trial judge did not require the jury to deliberate this issue since the accused did not argue there was no submission. Instead, the jury was formally directed to find that bids were indeed submitted.
Arrived at by Agreement or Arrangement
The crucial question in this element is whether two or more of the accused (who are not members of the same company) and/or others (co-conspirators named in the indictment) both intended to and entered into an arrangement or agreement to 'pre-arrange' or arrive at a bid. Based on evidence adduced at trial, the presiding judge noted that the arrangement or agreement must be proved to be an impermissible one and the jury must also find that the accused intended to commit the offence of bid-rigging. Furthermore, for this element to meet the test, the bid must be "arrived at," which means that the impermissible agreement or arrangement must lead to the bid and cannot relate to any steps made towards the preparation of that bid.
The trial judge gave examples of permissible agreements or arrangements. The judge wrote that an agreement or arrangement to work together to recruit the individuals (resources) required for the bids is not an impermissible agreement or arrangement. This type of collaboration is well-known to the respondent government departments and agencies. Also permissible are agreements or arrangements relating to prime-subcontractor relationships where subcontractors submit their own prime proposals to the same call. Lastly, a mutual prime-sub relationship (where Company A is both a prime and subcontractor to Company B, and Company B is a prime and a subcontractor to Company A) is not an impermissible agreement if Company A and Company B do not arrive at an impermissible agreement regarding their respective bids.
An "agreement or arrangement" was defined as the meeting of the minds of two or more persons who have a common objective or purpose. In the context of R v Durward, that common object is described as the intention to submit a bid or tender by arrangement or agreement. For it to be an offence contrary to section 47(1)(b) of the Competition Act, the presiding Judge deemed that there must be a wrongful combination or joining together to accomplish such an end result.
The jury was asked to consider what the seven individuals and three corporations did, how they did it, and what they said. When examining the evidence, the jury was asked to determine whether the similar aspects found within the resultant bids or tenders submitted by the accused parties to Public Works and Government Services Canada (PWGSC), Transport Canada (TC), and the Canada Border Services Agency (CBSA) occurred by pure chance based on coincidences of market intelligence, or whether the similarities of bid/tender were the result of a cognizant intention to arrive at the bid submission by agreement or arrangement.
Was the Agreement or Arrangement Made Known?
In order to determine if the agreement or arrangement was made known, the jury had to answer two factual sub-questions. First it was required to determine which government agency was the party/person calling for bids or tenders; whether it was the contracting authority or the client that designed the technical requirements. The judge instructed the jury to consider all of the evidence to arrive at that determination.
The second sub-question was whether that person/party was actually informed of the agreement or arrangement. The judge determined that this requirement to make known the agreement or arrangement could be satisfied by either express notification or open disclosure (implied notification). The jury was also told that they could determine the "made known" question through circumstantial evidence. In doing so, the judge did not follow older case law relied on by the Crown which required explicit notice to the caller.
Conclusion
The Charge to the jury is not widely available to the public or lawyers. It is not a decision that is reported and available through online services. Instead, it was filed as an exhibit at trial. While it is a matter of public record, by attaching the charge to this article, the authors hope to make this important document more broadly available to the public and lawyers.1 It is anticipated that this charge to the jury will serve as guidance in the areas of competition, procurement and white collar criminal law.
Footnotes
Fasken Martineau DuMoulin LLP, Ottawa Office. The authors wish to acknowledge the contribution of their summer law student, Laura Konkel, to this article.
1 Note that there were some further changes to the charge attached to this article that were made by the judge following its reading to the jury. Those changes were delivered orally by the judge to the jury and were transcribed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
