Lincoln Caylor: Canadian Corporate Criminal Liability

Introduction

In Canada, corporate criminal liability is increasingly becoming an area of focus for regulators, law enforcement officers, and the public. As stories of corporate wrongdoing have generated media and public interest, key stakeholders have been trying to develop various tools and mechanisms to properly apportion fault and determine liability in often complex and highly public scandals. One merely has to read about the SNC-Lavalin matter that has generated controversy and the calls for a public inquiry in the highest echelons of the Canadian executive branch to understand the importance of carefully managing corporate criminal liability. This blog posts reviews Canadian corporate criminal liability, setting out some new developments in the law and highlighting key areas of concern for corporations undertaking either an internal investigation or being investigated by a regulator.

Overview Of Canadian Corporate Liability Doctrine

In Canada, corporate criminal liability is narrow in scope. Unlike in the United States, Canada does not apportion criminal liability under the doctrine of respondeat superior. Rather, corporate liability is generally apportioned to the employees or individuals involved in the wrongdoing, instead of the actual corporations themselves.1

Unlike American precedent, Canadian jurisprudence has historically upheld the 'identification doctrine', an organizing principle of corporate liability wherein an “identity” is established “between the directing mind and the corporation, which results in the corporation being found guilty for the act or the natural person, the employee”.2 The identification doctrine will only be used in narrow circumstances to hold the corporation accountable. It will not be engaged if the employee/individual who committed the alleged acts is not a 'directing mind' of the corporation, or if there was fraud on the corporation. Additionally, judges retain the residual right to not apply the doctrine depending on the circumstances of the case.

Directing minds of a corporation are senior officers or members of a corporation who have an “express or implied delegation of executive authority to design and supervise the implementation of corporate policy rather than simply to carry out such policy.”3 A 'directing' mind of a corporation will be criminally liable when acting within the scope of his employment/role of the corporation. Where the criminal act is totally in fraud of the corporate employer or solely for the benefit of the employee, he will not be considered a 'directing mind of the corporation' and criminality will be assigned to him individually instead of the company. Rather than vicarious liability, Canadian courts will only attribute criminal acts of the directing mind to the corporation under the umbrella of corporate criminal liability.4

Actions taken by employees who are not directing minds will not engender criminal liability to the corporation: the fraudulent activities of directors, officers and employees cannot be attributed to the corporation unless there was sufficient reason to do so “for the particular purpose or defense at issue”.5 The main question to be asked regarding corporate liability in Canada is “who should bear the responsibility for the criminal actions of a corporation's directing mind”.6

...if the agent falls within a category which entitles the Court to hold that he is a vital organ of the body corporate and virtually its directing mind and will in the sphere of duty and responsibility assigned to him so that his action and intent are the very action and intent of the company itself, then his conduct is sufficient to render the company indictable by reason thereof.7

It is rare in Canada for criminal liability to be attached to the corporations for the actions of its employees; instead, perpetrators are found criminally liable on an individualized basis. The test for corporate attribution was set out in Canadian Dredge:

For the fraudulent acts of employees to be attributable to the corporate employer: (1) the wrongdoer must be the directing mind of the corporation; (2) the wrongful actions of the directing mind must have been done within the scope of his or her authority; that is, his or her actions must be performed within the sector of corporate operation assigned to him. For the purposes of this analysis, an individual will cease to be a directing mind unless the action (1) was not totally in fraud of the corporation; and (2) was by design or result partly for the benefit of the corporation.8

The Supreme Court in Livent clarified this by stating that the below factors provide “a sufficient basis” to find liability for a corporation, but not a necessary basis. Courts have the inherent discretion to not apply the corporate identification doctrine where it is contrary to public interest.9

Canada's background laws support and structure liability in this way as well. Even though there has been legislative action to change the nature of corporate criminal liability so corporations themselves could be held more liable, there have been extremely few cases where corporations have been criminally prosecuted. The legislative amendments in expanded the scope of potential criminal liability by replacing the word corporation with the more broadly-defined term “organization”, and created provisions wherein corporations could be found criminally liable for negligence and non-negligence based facts.10 It created criminal offences regarding the health and safety of workplaces, and expanded the scope of corporate liability. However, the amendments have not been very successful, and corporate crime continues to primarily be an issue at the locus of the accused individual.

Canadian...