Compliance and Liability Risks - Statutory · PDF fileCompliance and Liability Risks - Statutory Declarations ... and construction ... statutory declarations are critical to the payment

Compliance and Liability Risks- Statutory Declarationsy

A il 17 2013Presented by:Christopher Madill

April 17, 2013

© 2013 Stewart McKelvey. All rights reserved. Not to be copied or used in whole or in part without the express written consent of Stewart McKelvey

STATUTORY DECLARATIONS

Statutory Declarations• Enable the payment of progress claims and release of holdback funds. • Subject to enumerated exceptions, CCDC 9A-2001 states:

All t f l b b t t d t i d t tiAll accounts for labour, subcontracts, products, services, and construction machinery and equipment which have been incurred directly by the Contractor in the performance of the work as required by the Contract, and for which the Owner might in any way be held responsible, have been paid in full as required by the Contract up to and including the latest progress payment receivedby the Contract up to and including the latest progress payment received, …

• The warning on CCDC 9A-2001 is explicit: The making of a false or fraudulent declaration is a contravention of the Criminal Code of Canada, and could carry, upon conviction, penalties including fines or , y, p , p gimprisonment.

© 2013 Stewart McKelvey all rights reserved33 2013 Construction Seminar


Statutory Declarations• Hundreds of statutory declarations exchanged on large construction

projects. Risk of being viewed as “administrative” or “routine”

• The attestation is important:And I make this solemn declaration conscientiously believing it to be true and knowing it is of the same force and effect as if made under oath

• Significant civil and criminal penalties for submitting a false stat dec.



Criminal Consequences• Section 134 of the Criminal Code of Canada (false statements under

oath):

134(1) Subject to subsection (2), every one who, not being specially permitted, authorized or required by law to make a statement under oath or solemn affirmation, makes such a statement, by affidavit, solemn declaration or deposition or orally , y , p ybefore a person who is authorized by law to permit it to be made before him, knowing that the statement is false, is guilty of an offence punishable on summary conviction.



Criminal Consequences• Section 368 of the Criminal Code of Canada (utterance of a forged

document):

( ) ff368. (1) Everyone commits an offence who, knowing or believing that a document is forged,

(a) uses, deals with or acts on it as if it were genuine;(b) causes or attempts to cause any person to use, deal with or act on it as if it

were genuine;were genuine;(c) transfers, sells or offers to sell it or makes it available, to any person,

knowing that or being reckless as to whether an offence will be committed under paragraph (a) or (b); or

(d) possesses it with intent to commit an offence under any of paragraphs (a)(d) possesses it with intent to commit an offence under any of paragraphs (a) to (c).



Criminal Consequences• Contractor cannot avoid criminal sanction by certifying payment of subs

in a form other than a statement under oath. Section 362 of the Criminal Code of Canada (false statement):

362. (1) Every one commits an offence who … (c) knowingly makes or causes to be made, directly or indirectly, a false statement in writing with intent that it should be relied on, with respect to the financial condition or means or ability to pay of himself or herself or any person or organization that he or she is interested in or that he or she acts for for the purpose of procuring in any forminterested in or that he or she acts for, for the purpose of procuring, in any form whatever, whether for his or her benefit or the benefit of that person or organization, … (ii) the payment of money



Criminal Consequences• R. v. Murray, 2000 NBCA 2

Contractor submitted statutory declarations that declared falsely• Contractor submitted statutory declarations that declared, falsely, that subcontractors and suppliers had been paid

• City of Campbellton made progress payments to the contractor• City of Campbellton made progress payments to the contractor, ends up having to pay twice

• Forgery charges contractor pleads guilty• Forgery charges, contractor pleads guilty.



Criminal Consequences• R. v. Murray, 2000 NBCA 2 (cont’d):

• At sentencing contractor argues it’s accepted industry practice for• At sentencing, contractor argues it s accepted industry practice for contractors to submit false statutory declarations.

• Argument rejected. Contractor sentenced to 1 year in jail andArgument rejected. Contractor sentenced to 1 year in jail and ordered to pay restitution of $250,000.

• On appeal, restitution order upheld but jail sentence converted to house arrest.



Criminal Consequences• Canada v. Bulletin Publications Ltd, [1979] M.J. No. 17 (Man. Co.

Ct.):

"a false and inaccurate declaration, made knowingly and deliberately, would attract a prosecution under the provisions of th C i i l C d f C d "the Criminal Code of Canada".



Civil Consequences

• Breach of contract

• Breach of trust

• Punitive and aggravated damages



Civil Consequences• Yorkdale Drywall Co. v. Schulberg, [1993] O.J. No. 137 (Ont. Gen.

Div) - Contractor who billed an owner for monies allegedly paid to subcontractors but which were not in fact paid was liable forsubcontractors, but which were not in fact paid, was liable for punitive damages of $100,000.

J h t & A i t Ltd W d [1994] O J N 662 (O t G• Johnston & Associates Ltd. v. Wade, [1994] O.J. No. 662 (Ont. Gen. Div.) – Contractor who signed an affidavit in support of a lien “for far more than could possibly be justified” was liable for punitive damages of $50 000damages of $50,000.



Civil Consequences• Francis Belliveau Ltd. v. Nelson-Miramichi (Village), 1989

CarswellNB 65, 37 C.L.R. 1 - trial judge awarded a contractor $96 086 09 plus interest at the rate of 11 75 per cent per annum$96,086.09 plus interest at the rate of 11.75 per cent per annum.

• On appeal, the principal award was upheld, but the Court of Appeal d th i t t d t i if it d ti f threversed the interest award to signify its condemnation of the

contractor for having sworn a false statutory declaration in support of a request for payment.



Civil Consequences• Francis Belliveau Ltd v Nelson-Miramichi (Village) 1989 CarswellNBFrancis Belliveau Ltd. v. Nelson Miramichi (Village), 1989 CarswellNB

65, 37 C.L.R. 1 (cont’d). On appeal, Court states:

The village claims that no moneys are owed to Belliveau because of falsehoods in the t t t d l ti t th ff t th t ll l i i t B lli f k th j b h dstatutory declarations to the effect that all claims against Belliveau for work on the job had

been satisfied … the Court should demonstrate its condemnation of the unconcerned practice of declarants who make false statements in their claims for payment. The owner should be able to rely upon those declarations so that the owner will not be called upon to pay a second time in order to discharge liens or other preferred claims. Here, the declarations were made by the president of the company and declared before a commissioner of oaths, who was an officer of the same company. There was some evidence of at least one substantial outstanding claim. We are of the opinion that the consequences of such loose practice must be significant. We are therefore of the opinion that Francis Belliveau Ltd. should be deprived of all interest on its claim.that Francis Belliveau Ltd. should be deprived of all interest on its claim.



Civil Consequences• Beatty Floors Ltd. v. KTM Development Corp., 2009 BCSC 1046.

B Fl L d hi d b KTM D l C l• Beatty Floors Ltd. hired by KTM Development Corp. to supply flooring material. The principal of KTM swears two statutory declarations stating that all subcontractors had been paid.Statutory declarations were false as Beatty had not yet been paid• Statutory declarations were false, as Beatty had not yet been paid.

• KTM receives further payments from the owner based on the false stat decs. Payment does not reach Beatty• Payment does not reach Beatty.



Civil Consequences• Beatty Floors Ltd. v. KTM Development Corp. (cont’d).

• Importance of accurate Stat Decs highlighted at paragraph 10:

Owners and project managers [...] rely on statutory declarations from contractors in order to ensure the contractor has discharged its obligations and the s bcontractors' labo rers and material men on projects ha e been paid Validsubcontractors' labourers and material men on projects have been paid. Valid statutory declarations are critical to the payment process and are of paramount importance to owners and project managers. If statutory declarations cannot be relied on by owners and project managers, the orderly payment process on construction projects will become chaoticconstruction projects will become chaotic.



Civil Consequences• Beatty Floors Ltd. v. KTM Development Corp. (cont’d).

• KTM and its principals liable for breach of trust under the BLAp p

• Beatty awarded damages of $37,829.88, being the amount owed by KTM to Beatty.

• Beatty awarded punitive damages of $15,000, Court stating that KTM and its principals “should be punished to deter them and

f f f ”others from swearing false statutory declarations in the future.”


QUESTIONS

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These materials are intended to provide brief informational summaries only of legal developments and topics of general interest The materials should not be relied upon as ainterest. The materials should not be relied upon as a substitute for consultation with a lawyer with respect to the reader’s specific circumstances. Each legal or regulatory situation is different and requires review of the relevant factssituation is different and requires review of the relevant facts and applicable law. If you have specific questions related to these materials or their application to you, you are encouraged to consult a member of our firm to discuss your needs for specific legal advice relating to the particular circumstances of your situation. Due to the rapidly changing nature of the law, Stewart McKelvey is not responsible for i f i f f t l l d l tinforming you of future legal developments.


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Compliance and Liability Risks - Statutory · PDF fileCompliance and Liability Risks - Statutory Declarations ... and construction ... statutory declarations are critical to the payment