Corporate Criminal Liability Discussion Paper 1999



POTENTIAL SOLUTIONS AND QUESTIONS FOR DISCUSSION

[92]  At the conclusion of this study, it seems obvious that the identification theory developed by the courts as the basis for corporate criminal liability is not fully satisfactory, especially when the liability in question is that of a large corporate entity.

[93]  It would be appropriate, in my view, to codify a notion of corporate fault that is more closely related to the way in which bodies corporate actually operate. To a large degree, the notion of corporate culture, as formalized in the Australian Code, could serve as a model.

[94]  In my opinion, there should be a distinct part of the Criminal Code expressly covering corporations. The 1993 White Paper of the federal Minister of Justice associated corporate liability with being a party to an offence. Saying that for the purposes of paragraph 21(1)(a) a corporation commits an offence made the application to a corporation of the other ways of being a party problematic. Subsection 22(3) attempted to remedy these difficulties, but it is clumsily drafted, so that such modes of participation as aiding and abetting do not constitute distinct offences but rather different ways of committing the same offence. Furthermore, there should be no objection in principle to corporate liability through complicity, as it is understood in subsection 21(2). I see no reason to limit corporate criminal liability to actually committing an offence or being a party to an offence by aiding, abetting or counselling it. So I would suggest that the reference to paragraph 21(1)(a) and the text of subsection 22(3) be dropped and that a section simply be drafted defining the conditions in which a corporation can be criminally liable.

[95]  Although the courts have traditionally focused on defining rules that would apply to business corporations as a special form of bodies corporate, it will be noted that the 1993 White Paper specifically states that any body corporate may be held criminally liable. This position should be adopted, in my opinion. There is no statutory policy that would bar bodies corporate that are not profit-seeking business corporations from being subject to criminal liability. In so far as certain organizations exist, are active within our society and are recognized in the form of some status and certain corresponding privileges, they should, in principle, be subject to criminal sanctions. This position would only codify more clearly a situation that already exists, at least in regard to union associations and churches. 93

[96]  I suggest that the definition of corporate act in the Australian model be followed. The acts of any employee, agent or officer of a corporate body could constitute, prima facie, an act of the corporation itself. Notwithstanding certain criticisms that such a definition does not actually grasp the essence of the corporate act, 94 no one has so far managed to come up with a satisfactory model definition of corporate act. In fact, instead of developing an elaborate definition of corporate act as a theoretical concept, I think it would be appropriate to codify it to some degree negatively by providing a defence of due diligence that the corporation could rely on to escape liability.

[97]  I also think it would be appropriate to clarify the issue of whether a corporation can raise the defences of necessity, compulsion by threats, or any other defence based on the lack of voluntariness of the actus reus. In my opinion, a corporation should not be able to rely on these defences, which are directly related to individual free will.

[98]  In Canadian Dredge, the Supreme Court stated that in so far as the corporation is the sole victim of its agents' wrongdoing, there is no reason to hold it liable for that wrongdoing. I think this defence, which is strictly corporate, should be codified.

[99]  With respect to the definition of the notion of corporate fault for offences requiring a subjectively assessed mens rea, a number of comments are in order.

[100]  First, as we noted previously, the Australian model, while the most complete effort at formalizing the notion of corporate fault, to some degree confuses the types of fault when it comes to defining corporate culture, notwithstanding a valiant attempt to preserve the traditional spectrum of faults and to distinguish between subjectively assessed fault and negligence. In my opinion, this is inevitable and is not reprehensible in itself.

[101]  Our entire penal structure attempts to establish a clearly defined boundary between various subjective faults and negligence. Furthermore, offences involving the presence of a subjective state of mind are punished more severely and are more stigmatizing than negligence offences. This is explained by the very basis of criminal liability in our law, which, while designed in part to suppress the harmful consequences of certain forms of conduct, also tends to suppress moral turpitude. Indeed, it must be acknowledged that our conception of the different fault elements is directly and solely derived from the empirical observation of the psychological processes peculiar to natural persons.

[102]  Whatever the case, corporations are in some regards fictitious entities and there is a fictitious aspect to any attempt to attribute to them the cognitive and psychological states peculiar to individuals. Our concern for justice in respect of corporations has so far been manifested through the idea that it was necessary at all costs to keep intact the spectrum of faults and to treat corporations like natural persons. See footnote 95 95 Yet it is doubtful that this ideal of justice is achieved when, for example, we attribute to the corporation the fault of a natural person who took the initiative to break the law. Corporations are structures, organizations, and our reprobation should be directed to this distinctive nature. Criminal sanctions, in my view, are appropriate only if it is in fact the organization, its modes of operation and its deficient structures that are singled out where they produce unacceptable consequences that could have been avoided given the resources and information at the corporation's disposal. The entire body of literature on corporate fault points in this direction. The final remaining step is to recognize that there is little use in trying to associate this corporate fault artificially and at whatever cost with our traditional notions of intention or recklessness.

[103]  In so far as negligence as a fault element is concerned, it might be necessary to provide that criminal negligence refers to a significant departure from the standard of conduct of a prudent and diligent corporation, and define it accordingly, to ensure compliance with the Supreme Court of Canada decisions in regard to the requisite standard of negligence on which to base a finding of criminal liability. 96 I say "might" because, in my opinion, it is unnecessary to treat corporations exactly like natural persons. As I stated earlier, in the context of provisions applicable solely to corporations, the principles of fundamental justice can be interpreted differentially. 97 In my opinion, neither the concept of equality before the law nor the desire to treat corporations fairly forces us irremediably to model corporate fault on individual fault.98

[104]  I am fully aware that proving those items that would establish the existence of a corporate culture leading to the commission of an offence will require a long and complex process of investigation. The quotation from Bucy, at note 73 of this paper, illustrates this. But in my opinion Parliament should not be deterred by this consideration.

[105]  The decision to make corporations criminally liable and to found such liability on an appropriate basis is one of principle.

[106]  Although at first sight it may seem difficult to prove the existence of an inadequate corporate culture, it may be no more difficult than precisely identifying the directing mind which, under the identification theory, may have committed the fault that can be attributed to the corporation. To be persuaded of this, one need only think of the Westray Mine tragedy. A consultation of the Inquiry Report 99 indicates that the identification theory was not a very effective basis for the liability of the company that owned the mine. Nor, it seems, did the identification theory, while at first sight a simpler one, greatly facilitate the work of the Inquiry. The complexity of investigations into the criminal liability of corporations stems less from the complexity of the underlying theory than from the complexity of the organization and functioning of corporations. Irrespective of whatever theory of liability is adopted, any investigation designed to sort out the sequence of events and allocate liability among individuals entails appreciably the same work. 100 In practice, there are some obvious problems in assigning criminal liability to corporations, particularly in the case of large corporate entities. Whether this or that theory is adopted as the basis for finding such liability should not, in the last analysis, have any major impact on the investigative work or the onus facing the Crown attorney.

[107]  One way to lessen the investigative work is to impose a certain burden of proof on a corporation that prima facie has committed an offence. The Australian Code already puts an onus on the corporation to prove that it exercised due diligence to prevent the commission of the offence. I think some serious thought should be given in this regard to imposing a similar onus in our law. At first sight, this violates the Charter-protected presumption of innocence. And in view of the Supreme Court's decisions in this area, it is extremely likely that such a provision would be a source of litigation. However, the defence of due diligence, to the extent that a burden of proof is attached to it, strains the presumption of innocence less than some novel twist in the doctrine of vicarious liability or the doctrine of identification. Due diligence would be raised once evidence had been entered that a managerial agent of the firm had authorized or participated in the commission of the offence or that the corporate culture had led to the commission of the offence. Instead of the company being automatically convicted once the misdeed of some senior officer was proved, the company could avert a conviction by rebutting the presumption of fault established by the fault of its officer. In this sense, the burden of proof would be reversed less by the law than by the evidence of the fault committed by the corporation's representative. The possibility of relying in its defence on the absence of corporate fault appreciably reduces the risk that the corporation would be convicted for the deed of an isolated individual without any real fault on the part of the corporation as a collective entity. To reason in terms of the presumption of innocence in the face of this reverse burden amounts to saying that a rigid application of the identification theory that leaves the corporation no way out raises no constitutional difficulty, while any extenuation of this theory is suspect. However, we noted earlier the Supreme Court's openness to the possibility of adopting a different conception of the principles of fundamental justice when reviewing provisions exclusively applicable to corporations. And the obvious problems of proof encountered by the prosecution when establishing preventive measures and the prevailing atmosphere within a firm cannot be overlooked.101

[108]  In my view it is obvious that, to the degree that corporate liability provisions are drafted from the standpoint of transposing as closely as possible the traditional individual liability rules, the greater will be the number of constitutional challenges directly based on the principles of fundamental justice applicable to individuals. Indeed, the more we attempt to reproduce the traditional schema of individual liability, the less the notion of presumption of innocence will reflect its original meaning in the corporate context.

[109]  By this logic, it would even be possible to go further and provide that once the commission of the actus reus of the offence is proved, the corporation will have the burden of proving that its corporate culture did not lead to the commission of the offence. 102 It could be enacted that the commission of the actus reus by an agent of the corporation triggers a presumption of deficient corporate culture that is rebuttable by the corporation.

[110]  In my opinion, the decision to impose a burden of proof on the corporation in criminal matters is warranted by criminal policy and administrative convenience but is not predetermined by the present state of Charter case law.

[111]  A number of people, wary of interfering with the presumption of innocence of corporations, have fewer scruples about proposing that harsher treatment of company directors would enhance the effectiveness of the criminal law.

[112]  A number of statutes specifically address the criminal liability of company directors. For example, the Canadian Environmental Protection Act 103 provides, in section 122, that

"Where a corporation commits an offence under this Act, any officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence, and is liable to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted."104

[113]  Such provisions, while they seem harsh at first sight, in my opinion simply codify the common law rules governing parties to the offence. In so far as a natural person has participated, counselled or assisted in the commission of an offence, he is guilty of that offence under the common law. These rules are replicated in sections 21 and 22 of the Criminal Code. Given the possible issue as to the application of sections 21 and 22 of the Code to regulatory offences, provisions of this kind constitute an appropriate precaution.

[114]  However, I think it is difficult to go further and attribute criminal liability to the officers, agents or directors of a firm, absent any personal fault by them, without being exposed to constitutional challenge. The liability of the natural persons making up a body corporate brings us back to the fundamental principles governing individual liability. But, as I mentioned earlier, vicarious liability is incompatible with the principles of fundamental justice as they apply to individuals. 105 The principles of fundamental justice in section 7 of the Charter bar the conviction of someone who is psychologically innocent. Statutory provisions that would automatically attribute to a natural person the fault of some other person or corporate entity, absent any personal fault on their part, would be constitutionally suspect, particularly if such provisions were accompanied by a sentence of imprisonment.

[115]  In my opinion, the furthest one can go appears to have been reached in such provisions as subsection 124(2) of the Canadian Environmental Protection Act, 106 which provides:

In any prosecution of the master of a ship, the pilot in command of an aircraft or the owner or person in charge of a platform or other anthropogenic structure for an offence arising out of a contravention of Part VI, it is sufficient proof of the offence to establish that it was committed by a crew member or other person on board the ship, aircraft, platform or structure, whether or not the crew member or other person is identified or prosecuted for the offence.

[116]  By itself, this provision clearly imposes vicarious liability. However, the defence under section 125 allows the person to whom fault is attributed to defend himself by citing his due diligence. 107 In this sense, the provision creates not an absolute liability offence but a negligence offence, and in this regard does not appear to pose any difficulty under section 7 of the Charter.108

[117]  It does, however, pose another type of problem, related to the presumption of innocence. In so far as a provision of this nature applies in the regulatory context, it might be justified by section 1 of the Charter. 109 But it is far from obvious that Parliament would be able to justify, in a free and democratic society, reversing the onus of proof to facilitate identification of the guilty party in a criminal proceeding in order to avoid having to prosecute the corporation that is responsible for the offence. In criminal matters, the Supreme Court has displayed little tolerance for arguments based on administrative efficiency.110

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