Government Response to the Fifteenth Report of the Standing Committee on Justice and Human Rights

Corporate Liability

November 2002

The Criminal Law and Corporations

While the Standing Committee hearings dealt primarily with the role of the criminal law in protecting workers and the public from physical harm, the Government is conscious that any changes that are made in the general criminal law with respect to attributing criminal liability to corporations will necessarily have an impact on the investigation and prosecution of all forms of corporate crime. Great care must be taken to ensure that any amendments to the Criminal Code developed in response to the tragedy at Westray are consonant with the fundamental principles that underlie Canadian criminal law and do not have unintended consequences on criminal liability in situations other than workplace safety.

Common Law

The criminal law in Canada has its origins in English common law. Over the centuries, judges developed the common law in the context of the individual accused. Because of the stigma attached to a conviction, the criminal law has safeguards for the accused and a conviction requires the highest standard of proof, proof beyond a reasonable doubt. The Charter of Rights and Freedoms codifies many of the rules of the common law and establishes strict norms that the state must observe in any prosecution.

The rules developed for individuals have always been difficult to apply to corporations because corporations are legal fictions and can only act through individuals. The courts began applying criminal sanctions to corporations only in the late 19th century as large firms, particularly railroads, played an increasingly important role in the economy. The courts began by finding corporations guilty of property offences such as nuisance and gradually expanded liability to a greater range of offences. In so doing, they developed, on a case-by-case basis, rules to govern the attribution of liability from individuals employed in various capacities by the corporation to the corporation itself. Whenever a corporation is found guilty of a crime, the court has actually made the corporation responsible for the actions of the individuals who committed the physical act.

As Justice Estey writing in the leading Canadian case, R. v. Canadian Dredge and Dock wrote: The position of the corporation in criminal law has been under examination by courts and law makers for centuries. The questions which arise are manifold and complex. They are not likely to be answered in a permanent or universal sense in this appeal, or indeed by the courts acting alone. Proceeding through the history of these issues in the criminal law adds perspective but no clear answer to the problem. [6]

Corporate Mens REA

The criminal law insists that the person who commits the physical act (actus reus) must also have mens rea, a guilty mind, before that person can be found guilty of the offence. The criminal law does not, for example, permit the conviction of a person suffering from a mental disorder and incapable of appreciating the nature of the act.

Moreover, the criminal law is loath to hold a person responsible for the actions of another person. Canadian courts have generally rejected the concept of holding an accused liable for the criminal wrongdoing of another person. In its landmark pre-Charter ruling in R. v. City of Sault Ste. Marie[7], the Supreme Court held that, even for regulatory offenses (in that case, a provincial pollution offence), "the principle that punishment should in general not be inflicted on those without fault applies."

Under the Charter of Rights and Freedoms, in contrast to the situation in the United States of America or Australia, there is an important constitutional standard of fault, which makes absolute liability extremely rare and unavailable in the criminal context. The notion that there should always be fault, at least in the form of negligence, is an important and well-justified requirement of just punishment by the state. The due diligence defence became a minimum constitutional standard in 1985 with the decision of the Supreme Court of Canada in Motor Vehicle Act Reference. [8]

Much of the complexity in the area of corporate criminal liability revolves around the question of who in a corporation must have mens rea so that the corporation itself can be said to have mens rea. The question is not difficult when the corporation is small and the owner is also the manager - clearly, the mind of the owner is the mind of the corporation.

However, modern corporations may have structures that often bear only a passing resemblance to the simpler models considered by the courts in developing the common law. It is not easy to decide who is the corporation for the purposes of attributing criminal liability when a corporation has a head office in one city, regional operations around the globe, and various subsidiary corporations with their own subsidiaries and regional operations. The situation is complicated further when a board of directors meets only infrequently and issues only the broadest guidelines for senior management.