Mr. Speaker, Bill C-45 is the culmination of many years of attempts to reform the general law of attributing criminal liability to corporations. In fact, Bill C-45 would give Canada rules that are appropriate for the complex, modern corporate world where often a company has many places of business, various subsidiaries, parts of the business contracted out to specialists, decentralized control over some parts of the business and a great deal of discretion vested in its managers.
Now, in these circumstances, it is difficult to decide whether a corporation has committed a crime both by doing something the law prohibits and by intending to break a law or having mens rea, as the criminal lawyers say.
It is not surprising that rules that were originally developed beginning in the horse-and-buggy age are often in need of updating as conditions change. It is part of the genius of the common law system that adjustments can be made by the courts as new cases come before them. The common law may not always have the logical consistency that academics want but it does get the job done.
Historically, at first the courts held that a corporation could not break the law but gradually the courts made exceptions.
The first criminal offence for which a British company was found liable was for nuisance. Something simply had to be done about locomotives setting fire to crops by their sparks. The real problem was not with a strict liability offence but with those offences where the crown had to show some form of intent.
It was not until 1915 that the House of Lords developed a so-called directing mind test for offences of intent but the test was quite narrow, concentrating on a corporation's board of directors.
Of course Canada also followed British judgments until 1949 when appeals to the judicial committee of the Privy Council were finally abolished and our Supreme Court of Canada was created.
The Alberta Court of Appeal struggled with this issue as late as 1941 in a case called Rex v. Fane Robinson Ltd. The two directing officers of a garage company, pursuant to an agreement with an insurance adjuster, added a certain sum to a repair bill on an insured automobile. On the receipt of the moneys from the insurer, part of the additional sum was given to the adjuster and the balance was retained by the garage company. There was no problem finding the individuals involved guilty but the garage company was also charged with conspiracy to defraud and obtaining money by false pretences.
The trial judge, following the narrow test developed by the Privy Council, acquitted the company. In the judgment he wrote as follows:
The accused is a corporate body incorporated under the laws of the Province of Alberta. A corporation acts through its directors. There is no evidence whatever disclosed in the minutes of the meetings of the directors or the shareholders which are in evidence, that any authority by resolution was ever given to the directors acting in their official capacity to enter into the conspiracy alleged in the first count, or to procure by false pretences the money alleged in the second count...
The Court of Appeal in a two to one decision convicted the company. Justice Ford wrote:
--I have, not without considerable hesitation, formed the opinion that the gradual process of placing those artificial entities known as corporations in the same position as a natural person as regards amenability to the criminal law has...reached that stage where it can be said that, if the act complained of can be treated as that of the company, the corporation is criminally responsible for all such acts as it is capable of committing and for which the prescribed punishment is one which it can be made to endure.
Interestingly enough the dissenting judge wrote “I am of the opinion that mens rea must be established in a case of this nature. A number of changes in regard to liability of corporations have been made from time to time by Parliament and, as has been suggested, the changes and extension of liability of corporations will probably be extended, but in my opinion the extension, if there is such to be, must come from Parliament”.
It is important to note that what was said in the dissenting opinion was that it must come from Parliament.
It has been more than 60 years since that was written and I would respectfully submit it is high time that Parliament did set the rules. The legal background, the many attempts to reform the law and the situation in other countries were thoroughly canvassed in the discussion paper the Department of Justice provided the standing committee and in the government's response to the standing committee's one page report. Clearly we are not starting from scratch and no one should be taken by surprise by the provisions of Bill C-45.
The fundamental question that we as parliamentarians must answer is whether the proposals in Bill C-45 with respect to offences requiring proof of knowledge or intent by the corporations are appropriate in today's conditions.
As members know, in the absence of action by Parliament, the Supreme Court expanded the so-called directing minds test in the Canadian Dredge and Dock case in 1985. The government in its response found the Canadian Dredge and Dock case rules too restrictive. Also the committee rejected the American vicarious liability model as contrary to fundamental principles that underlie Canadian criminal law. It also rejected the Australian corporate cultural model as being vague and also untested.
Instead, Bill C-45 proposes to broaden the persons who can be considered directing minds through the definition of “senior officer”. It sets out three ways that a senior officer can make the corporation criminally liable, but in all cases the senior officer must have the intent at least in part to benefit the corporation.
The first question we must ask ourselves is whether the definition of “senior officer” is broad enough to catch the right officers without being so broad that it unfairly stigmatizes the corporations. Members should not underestimate the consequences of the criminal conviction on the reputation of the corporation but also on the individuals employed by that corporation.
The proposed definition of “senior officer” includes everyone who has an important role in setting policy or managing an important aspect of the corporation's activities. It is significant that that person does not have to have the final say in setting policy but must have an important role. Moreover, a person who has no role in making policy can be a senior officer if he or she is entrusted with important management duties.
In the Rhône case referred to in the government's response, the Supreme Court stated the following: “The key factor which distinguishes directing minds from normal employees is a capacity to exercise decision making authority on matters of corporate policy, rather than merely to give effect to such policy on an operational basis”. Clearly, the proposal in the bill is broader.
The new definition makes it clear that the directors, the chief executive officer and the chief financial officer of a corporation are, by the virtue of the position that they hold, automatically senior officers. A corporation charged with an offence cannot argue that the individuals occupying these positions actually had no real role in setting policy or managing the corporation and so were not senior officers.
However, there is an endless list of titles: senior vice-president finance; general manager western division; corporate counsel. The same title can mean quite different things in different corporate structures. For example, the executive assistant to the president could have a great deal of authority and effectively speak for the president in one corporation and so be a senior officer, but in another corporation would have only minor administrative functions, perhaps such as scheduling the president's meetings.
Necessarily, the Criminal Code has to use general language so that the courts will have to decide in each case whether a person who is not the CEO, CFO or a director is indeed a senior officer. By requiring that person play an important role in developing policy or managing an important aspect of the business, we are indeed providing the courts with indications of the position the person must actually play in that organization.
The first two ways that a senior officer could make the organization liable set out in section 22.3 are fairly straightforward. The most obvious way for the organization to be liable is the first way set out in 22.3, which is that the senior officer actually committed the crime for the direct benefit of the corporation. For example, if the CEO cooks the books and thereby induces others to provide funds to the corporation, both the corporation and the CEO may be guilty of fraud. However, senior officers usually direct others to do such work.
The second way set out in section 22.3 makes it clear that the corporation is guilty if the senior officer has the necessary guilty intent and indeed wants to benefit the corporation, but subordinates carry out the actual physical act. An example would be where a senior officer could be benefiting the corporation by having it deal in stolen goods. The senior officer could instruct employees to buy from the supplier offering the lowest price, knowing that the person who offers to sell the goods at the lowest price can only make such an offer because the goods are stolen. Here the employees themselves have no criminal intent, but the senior officer and the corporation could be found guilty.
The bill proposes a third way of holding the corporation liable and this is something new. A corporation could be guilty of a crime if a senior officer knows employees are going to commit an offence but that senior officer does not stop them. Using the stolen goods example, a senior officer might become aware that an employee will get a kickback from the thieves for getting the corporation to buy the stolen goods. The senior officer may have done nothing to set up the transaction, but if he or she does nothing to stop it with the intent that the corporation again will obtain a benefit from the lower price, the corporation would be responsible.
Members should note that indeed in this third case, unlike the first two, the senior officer does not have to be active within the scope of her authority. In other words, if a manager of security knows that there is criminal activity going on in the sales division, for example bribing municipal officials to get a contract, she cannot decide to let it slide so that the company will benefit, even if that area of the corporation's business is not her responsibility. She must take all reasonable steps to stop the commission of the crime.
The supreme court has held in the Sansregret case, which involved a sexual assault that “Where the accused is deliberately ignorant as a result of blinding himself to reality, the law presumes knowledge”.No doubt the court will apply the same test to an organization, which will be liable if a senior officer is wilfully blind to information in order to avoid confirming what he or she suspects.
The government in its response to the standing committee report concluded that Canadian criminal law as it applies to corporations is in need of modernization. The directing mind model does not reflect the reality of corporate decision making in the delegation of operational responsibility in complex organizations.
Cumulatively, the changes to the law which are set out in Bill C-45, particularly as they affect those crimes that require knowledge or intent, represent a significant broadening of the rules for holding a corporation liable. The proposed changes should be supported by the House and I urge members to vote in favour of the bill.