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

Corporate Liability

November 2002

Legislative Proposals

The Government notes that our current approach to criminal liability has been exhaustively studied, culminating with the 1993 White Paper calling for reform of the General Part of the Criminal Code. The Standing Committee on Justice and Human Rights hearings allowed a full discussion of the basic issues. Further consultation is not required. It is time to reform the law.

1. Engaging the Liability of the Corporation

As stated earlier, a corporation can only be convicted of a crime by attributing responsibility to the corporation for the misconduct of individuals. The fundamental question is: How high up the corporate ladder must individuals be before their actions and intentions can be said to be those of the corporation?

One major problem with the Canadian approach to corporate liability is the restrictive interpretation placed on "directing minds" under the Rhône case. The only persons considered to be directing minds under this approach are those individuals who exercise decision-making authority on matters of corporate policy.

Determining whether an individual should be considered the mind of the corporation with respect to the commission of a specific criminal offence solely on the basis that the individual could set policy is very narrow and quite artificial. In a large corporation, the board of directors and the principal executive officers who set policy can only do so in broad, general terms and are incapable of overseeing the day-to-day operations of the corporation. They must give managers a great deal of latitude to implement the policies in the workplace. The class of persons capable of engaging the liability of the corporation should be expanded to include individuals who exercise delegated, operational authority.

In an industrial situation like Westray, this proposed change in the law would require the prosecution to prove only that those who controlled the operation of the mine were criminally negligent, and not those who set policy in head office either on the board of directors or as senior executives.

2. Corporate Liability - Combining Fault and Misconduct

Another major problem with the current law is the need to find a single directing mind who committed the prohibited act with the necessary guilty state of mind (mens rea). In large, modern corporations operating in several jurisdictions, such a search is artificial. It is also possible that many individuals at different levels within the corporation could contribute to the commission of a crime in such a way that the corporation itself should be held responsible.

Negligence offences

The Criminal Code contains offences based on negligence, such as criminal negligence causing death, and offences requiring subjective intent, like fraud. Where the crime is one of negligence, corporate criminal liability should be based on the actions and moral fault of the corporation as a whole. It is appropriate to base corporate criminal liability on the aggregate fault of several employees and officers, each of whom may have contributed to the end result. For example, the basis of negligence may lie not only in the conduct of the employees, but also in managerial officers who reasonably ought to have known what was happening or who were not reasonably diligent in establishing or monitoring mechanisms for compliance with corporate policies.

This change would mean that, in a Westray situation, it would be possible to view the many decisions with respect to safety as a whole. Even if it might not be possible to show that any single person had acted in a criminally negligent manner, it would still be possible to obtain a conviction of the corporation on the basis that cumulatively there was criminal negligence. Similarly, the corporation could be criminally negligent if it allowed senior officials to insulate themselves so that instances of safety violations would not come to their attention.

Subjective intent offences

Most Criminal Code offences require a higher degree of mens rea than negligence. Many of these offences are clearly inapplicable to corporations, for example sexual assaults or impaired driving. However, corporations can commit a host of criminal offences that require a subjective intent to break the law, for example obtaining a benefit based on a forged document or money laundering.

Where a subjective intent is required, the Government believes it should be a requirement to prove that a "directing mind" or a person exercising operational authority formed the requisite intent for the commission of the crime and had the intention, at least in part, of benefiting the corporation. This would be sufficient to engage the liability of the corporation even where the acts which form the subject-matter of the crime are committed by lower-level employees, whether or not those employees have the intention to commit the crime as well. For instance, the liability of a corporation could be triggered where a person exercising operational authority implements improper accounting practices with the intent of evading taxes, where those practices are carried out by employees who are unaware of their illegal effect. The corporation could be held responsible for the acts of the employees combined with the criminal intent of the person with operational authority.

It is also possible to imagine a situation in which a person exercising operational authority becomes aware (or is wilfully blind by consciously disregarding information) that lower level employees are engaging in criminal behaviour that benefits the corporation. For example, a senior manager might become aware that those under her charge were obtaining goods by unlawful means for subsequent sale by the company. The manager should take remedial action to prevent the continuation of the misconduct or notify authorities. The manager, however, might choose to tolerate the practice for the benefit of the company. The liability of the corporation should, therefore, also be engaged where a person with operational authority fails to take remedial action when they are aware of the fact that one or more employees are committing a criminal offence on behalf of or for the benefit of the corporation.

3. Ensuring Workplace Safety

The Government recognizes that corporations are the major players in the Canadian economy and that accidents involving injury and loss of life at work occur generally in the corporate workplace. However, corporations are subject to extensive regulation aimed at ensuring safety in the workplace and the criminal law normally comes into play only when the regulatory process has failed to prevent accident or injury and there is evidence of culpable neglect of duty. The criminal law should generally be drawn in general terms applicable to all persons, and make special provisions for corporations only where necessary. The Government believes that the Criminal Code can be made more effective with respect to workplace safety without making special offences applicable only to corporations, but rather by building on the existing provisions regarding criminal negligence.

The Criminal Code imposes various legal duties including the duty to provide the necessaries of life for one's child (s. 215) and to use reasonable care and skill when doing any act that may endanger the life of another (s. 216). Moreover, if a person undertakes to do an act, that person is under a duty to perform the act if failing to do so would endanger life (s. 217). Wanton or reckless disregard of a duty which leads to death or injury is grounds for a charge of criminal negligence causing death (s. 220) or criminal negligence causing bodily harm (s. 221). However, the Code makes no explicit provision regarding a duty of a person directing work to ensure safety for the workers carrying out the work or to take reasonable steps to ensure the safety of the public.

In the Government's view, everyone who employs others to perform work or has the power to direct how work should be done should be under a duty to take reasonable steps to ensure safety of the workers and the public. The Government proposes to enshrine that duty in a new section 217.1 of the Code. What is "reasonable" will vary with the nature of the work and the experience of the workers. The courts are well-equipped to consider the evidence and decide on the proven facts whether a person has shown reckless disregard of the duty that led to death or injury.