Corporate Criminal Liability - Discussion Paper, March 2002
Background: Canadian Law
The leading case on corporate criminal liability in Canada is Canadian Dredge and Dock Co. v. The Queen  1 S.C.R. 662, in which the Supreme Court of Canada accepted the "identification" doctrine as the basis for liability.
This doctrine, adapted from a line of English court decisions, attributes liability to a company when a crime is committed by senior employees, namely the "directing mind" of the corporation:
In order to trigger its operation and through it corporate criminal liability for the actions of the employee (who must generally be liable himself), the actor-employee who physically committed the offence must be the "ego", the "center" of the corporate personality, the "vital organ" of the body corporate, the "alter ego" of the corporation or its "directing mind". (p. 682)
Some method of linking the actions of individuals to the corporate entity had to be found, since corporations can only act through their employees. In Canadian Dredge and Dock, once this linkage was established, the identification theory operated to attribute primary liability to the corporation. This effective merging of legal (the corporation) and natural (the directing mind) persons was a necessary legal fiction created to facilitate the attribution of criminal responsibility to the corporation.
There are limits to the responsibility of a corporation for the acts of its employees. The Supreme Court in Canadian Dredge and Dock set out three conditions: the identification doctrine only operates where the Crown demonstrates that the action taken by the directing mind (a) was within the field of operation assigned to him; (b) was not totally in fraud of the corporation; and (c) was by design or result partly for the benefit of the company. (pp. 713-4)
In a 1993 decision, the Supreme Court further qualified the notion of the directing mind:
The key factor which distinguishes directing minds from normal employees is the capacity to exercise decision-making authority on matters of corporate policy, rather than merely to give effect to such policy on an operational basis….
Furthermore, in Canadian Dredge and Dock and other cases, the Court, recognizing the complexity of corporate structures, has held that extensive delegation of authority and geographical decentralization will not be enough for the company to avoid liability for the actions of its key decision-makers.
This Canadian approach is sometimes characterized as steering a middle course between the somewhat narrower English approach and the American vicarious liability approach whereby a corporation potentially faces liability for offences committed by any of its employees. The Supreme Court of Canada's approach, sometimes called the "delegation" theory, encourages a pragmatic, case-by-case inquiry to determine whether or not a particular senior employee should be considered the directing mind of the company.
Pursuant to Canadian Dredge and Dock, a corporation will not take on primary responsibility for a criminal offence in the following situations:
- The individual who committed the act was not a directing mind, i.e. did not have the authority to devise or develop corporate policy, or make corporate decisions. Thus, the identification doctrine is confined to the company's executive ranks.
- The directing mind acted wholly in fraud of the company, without the company benefiting from the action. This is a high standard for the defendant to meet, since it is not a sufficient defence to prove merely that the manager acted in disobedience to explicit instructions not to disregard the law.
Since the mens rea of the directing mind will be attributable to the corporation itself, it would appear that corporate liability is contingent on the liability of at least one individual being established. The Supreme Court, in Canadian Dredge and Dock, however, did not definitively answer this question.
The identification theory, as it has evolved in Canada, has been criticized as too narrow in that only the actions of high-level managers with decision-making authority over corporate policy trigger liability in the corporation. In practice, in multifaceted companies lower-level management may be the ones interpreting, applying and even creating corporate policy. As a practical matter, it may be difficult to trace the chain of decision-making by senior officers. The Canadian Dredge and Dock approach may also be criticized as encouraging senior management to insulate itself within the corporate structure from certain activities for which it might incur criminal liability.
The identification theory has also been criticized as too broad, and perhaps too simplistic, in that it automatically attributes the actions of certain individuals to the corporation. Prior efforts by the company to prevent illegal activity by senior employees may not count for much.
Like other models, the identification theory has had to grapple with the concepts of actus reus and mens rea as they are transposed (or not) from individual criminality onto the corporate body. Where a specific mens rea is required -- as opposed to absolute and strict liability offences -- the question arises as to whether moral fault can be attributed to corporations in the same way as it applies to individuals. With respect to the actus reus of a Criminal Code offence, it is not clear that every action of an employee should be attributed to the company. In this regard, defences such as drunkenness and automatism, for example, -- two defences available to individuals -- cannot be transposed foursquare onto corporations.
The identification doctrine represents an attempt by Canadian courts to relate and adapt the principles of individual criminal liability to a corporate setting, taking into account the reality of corporate operations.
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