Corporate Criminal Liability Discussion Paper 1999



CRITICISMS OF THE TRADITIONAL THEORIES

General criticisms concerning the capacity of these theories to apprehend the true nature of corporate fault

[30]  The view that an original notion of corporate fault needs to be developed is based to a large degree on the observation by legal writers that the traditional theories of vicarious liability or identification are unable fairly and realistically to apprehend reprehensible corporate conduct. For many, this is illustrated by an analysis of the inquiry reports and judgments issued in the wake of such disasters as the sinking of the ferry "Herald of Free Enterprise" 30 or the fire in the London tube. 31 In every instance, the observation is further buttressed by philosophical and social science research on how organizations function and make decisions.32

[31]  There is no denying that our theory of criminal liability developed in a context in which the issue was one of seeking individual liability in natural persons. 33 Our theory of fault, based on free will, is essentially focused on human psychological processes and punishes certain psychologically blameworthy choices. Once the decision is made to criminally punish corporations, the issue arises of whether we can be content to attribute to the corporation the blameworthy state of mind of those persons who may be characterized as directing minds.

[32]  Legal writers criticize the doctrine of vicarious liability not only for dealing hammer blows at the fundamental precepts of a justice system based on suppressing individual moral wrongdoing and seriously distorting the doctrine of mens rea, but for being both overly broad and overly restrictive. 34 Overly broad, first, because all of the corporation's employees may engage its liability irrespective of their status in the organization and the corporate chain of command. Second, because the company can be held liable in the absence of any wrongdoing or negligence on its part. 35 The doctrine of vicarious liability is said to be overly restrictive, however, in so far as the requirement of a relationship of subordination between the corporate employer and the person who committed the offence appreciably reduces the potential reach of the criminal law.

[33]  There are problems as well with the identification theory. Apart from the difficulty of accurately defining the parameters of the notion of directing mind, the major criticism of this theory, as replicated in Tesco Supermarkets Ltd. v. Natrass 36 and more or less followed in Canada, 37 is addressed to its limited application. As we stated earlier, the limited number of persons identified with the company substantially reduces the applicability of the criminal law. Furthermore, linking the corporation's liability to the wrongful acts of its senior officials clearly constitutes an encouragement to isolate the latter to ensure they are unaware of any doubtful practices by the corporation. 38 In this regard, it is argued, the identification theory is counterproductive. Moreover, focusing on the state of mind of the senior management works to the benefit of the larger entities and to the detriment of the smaller ones, 39 and this is unfair. 40 Finally, making an excessively narrow association between the guilt of the company and the guilt of a mere individual may obscure the fact that some offences may be committed as a result of systemic or organizational pressure originating directly from the corporate context. 41 Relying too strenuously on personal liability as the foundation of corporate liability overlooks the fact that a company's organization and the requirements it imposes on its staff may push the latter into breaking the law. In this regard, the identification theory may be excessively restrictive and incapable of grasping the essence of what constitutes corporate wrongdoing. 42


[34]  Viewed from another angle, however, the identification theory may be too broad. Indeed, the theory can be criticized, especially in so far as the notion of directing mind is expanded somewhat, for automatically attributing to the corporation the moral turpitude of an individual even though the organization itself, as an entity, has committed no wrong in the strict sense of the word. 43 In so far as the corporate entity took steps to prevent the wrongful conduct, it would be unfair to subject it to the opprobrium and consequences of a criminal conviction for the deed of an individual who took the personal initiative to break the law.

[35]  More fundamentally, these criticisms all take for granted that it is inappropriate to try to transpose the individual model to the corporate context, to the degree that corporations have knowledge, a mode of operation, decision-making processes and powers that differ from those of natural persons. 44 These criticisms borrow from the works of social science researchers, which tend to demonstrate that such organizations cannot simply be envisaged as the sum of the natural persons of which they are composed, but to some degree have a personality of their own that transcends individuals. 45 Corporations, like natural persons, it is said, have the capacity to make decisions, an essential ingredient of criminal liability, but this faculty is not comparable to individual free will. Field and Jörg summarize quite well this idea, which is advanced primarily by French and adopted by all those who criticize the traditional approaches:

Of course, there are those who have argued that the very idea of corporations being morally responsible is nonsensical. Only the individual human being can be said to have moral personality and to be morally responsible for his/her acts. But we would argue (following French) that the policies, standing orders, regulations and institutionalised practices of corporations are evidence of corporate aims, intentions and knowledge that are not reductible to the aims, intentions and knowledge of individuals within the corporation. Such regulations and standing orders, regulations and institutionalised practices of corporations are evidence of corporate aims, intentions and knowledge that are not reductible to the aims, intentions and knowledge of individuals within the corporation. Such regulations and standing orders are authoritative, not because any particular individual devised them, but because they have emerged from a decision-making process recognised as authoritative within the corporation. These regulations and standing orders are also evidence of corporate capacity to differentiate right from wrong and act accordingly, to think ethically in terms of the consequences of corporate actions and to give reasoned explanations to the outside world. There is a strong argument for seeing such capacities for reasoning, understanding and control of conduct as the essence of moral personality and the basis of moral responsibility. 46

[36]  It is also stressed that corporations generally dispose of a sum of information that is quite incommensurate with the information available to a single individual.47

[37]  In the context of criminal liability, the concepts of intent and corporate wrongdoing are not reducible to the individual intent of the employees, managers or officers. They correspond, rather, to the express or implicit policies governing the activities of the corporation. Corporate fault should, therefore, be sought in the corporate culture. 48

Criticisms concerning the issues left unresolved

[38]  Before discussing the potential solutions to these problems and exploring in greater detail the notion of corporate culture advanced by these writers, it is worth noting that the theories advanced by the courts as the basis for corporate criminal liability, and more particularly the identification theory, are subject to criticism in so far as they provide but a partial response to the problems related to recognizing corporate liability.49

[39]  The main point of the Supreme Court decision in Canadian Dredge concerns the attribution of criminal liability to corporations for offences requiring subjective mens rea. The identification theory is elaborated in order to find some way to attribute moral fault to the corporation. Some passages of the decision, however, address the liability of companies in the context of regulatory offences of absolute or strict liability.

[40]  In so far as absolute liability offences are concerned, Estey J. is of the opinion that it is unnecessary to establish a special rule applicable to corporate liability or to rely on any theory to justify a company's liability in such cases. Once the law is breached, he says, there is automatic primary responsibility in the company. Where the legislature by the clearest intendment establishes an offence where liability arises instantly upon the breach of the statutory prohibition, no particular state of mind is a prerequisite to guilt. Corporations and individual persons stand on the same footing in the face of such a statutory offence. It is a case of automatic primary responsibility. Accordingly, there is no need to establish a rule for corporate liability nor a rationale therefor. The corporation is treated as a natural person.50

[41]  It seems clear that the commission of the actus reus of the offence by any employee of the corporation will suffice to engage its liability. To a great extent, the corporation is vicariously liable.

[42]  As for strict liability offences, the issue is less simple, although Estey J. states that in such cases as well liability does not depend on the application of any doctrine.

Where the terminology employed by the legislature is such as to reveal an intent that guilt shall not be predicated upon the automatic breach of the statute but rather upon the establishment of the actus reus, subject to the defence of due diligence, an offence of strict liability arises. See R. v City of Sault Ste. Marie, [1978] 2 S.C.R. 1299. As in the case of an absolute liability offence, it matters not whether the accused is corporate or

unincorporate, because the liability is primary and arises in the accused according to the terms of the statute in the same way as in the case of absolute offences. It is not dependent upon the attribution to the accused of the misconduct of others. This is so when the statute, properly construed, shows a clear contemplation by the Legislature that a breach of the statute itself leads to guilt, subject to the limited defence above noted. In this category, the corporation and the natural defendant are in the same position. In both cases liability is not vicarious but primary. 51

[43]  These passages from Canadian Dredge on corporate liability in the context of regulatory offences have been criticized on the ground that they constitute an abandonment of the identification theory for regulatory offences.52

[44]  But in so far as the defence of due diligence is concerned, it seems clear that it is the diligence of the corporation that must be relied on. In fact, Estey J. refers to the following passage from the Sault Ste. Marie decision.

Since the issue is whether the defendant is guilty of an offence, the doctrine of respondeat superior has no application. The due diligence which must be established is that of the accused alone. Where an employer is charged in respect of an act committed by an employee acting in the course of employment, the question will be whether the act took place without the accused's direction or approval, thus negating wilful involvement of the accused, and whether the accused exercised all reasonable care by establishing a proper system to prevent commission of the offence and by taking reasonable steps to ensure the effective operation of the system. The availability of the defence to a corporation will depend on whether such due diligence was taken by those who are the directing mind and will of the corporation, whose acts are therefore in law the acts of the corporation itself. 53

[45]  In fact, it would appear that in relation to the commission of the actus reus, the doctrine of vicarious liability is the basis for corporate liability for regulatory offences. The defence of due diligence would nevertheless be available, under the identification theory, for persons who constitute the directing mind of the company.54

[46]  Although the aforecited passages show some confusion concerning the attribution of corporate liability for regulatory offences, they also indicate that over and above any discussion on corporate wrongdoing, no real thinking has gone into what constitutes an act capable of being attributed to a corporation. To what degree can the commission of the actus reus be attributed to a corporation? When can an act be characterized as corporate?

The most difficult question of all, however, is the determination of positive corporate action. This can be attributed in part to the fact that corporations can only act through their agents. As a result, there is a tendency to reduce the acts of the corporation into the acts of its agents who physically and mentally participated in the act. Even if it is accepted that some actions by the agents of a corporation constitute corporate action, the issue arises of which of these can be attributed to the corporation. 55

[47]  This is not a purely theoretical question. The appropriate response has some impact, for example, on the ability of corporations to rely on certain defences. As we know, some defences linked to the voluntary aspect of the actus reus may be cited by humans. We are thinking in particular of the defences of extreme drunkenness, automatism or necessity. If, for example, damage is caused by an extremely inebriated captain of a vessel, can the company cite the defence of extreme drunkenness and plead the lack of an actus reus? If intoxication aboard vessels constitutes a chronic problem and results from a lack of supervision of the employees, is the actus reus still absent? To our knowledge, the courts have not provided any answer to these questions.

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