Corporate Criminal Liability - Discussion Paper, March 2002
1. The Basis of Liability
Although corporate criminal liability is an established concept in Western legal systems, every country has had to address the same fundamental legal design issues. Foremost among these issues is the difficulty in drawing a direct analogy between corporations and human beings who commit crimes. While a corporation may be characterized as a "person" capable of a crime, basing fault on the same psychological processes as apply to people raises problematic issues with respect to moral turpitude, the mens rea element of offences and defences.
A realistic approach to making corporations accountable requires an exploration of the decision-making structure of companies and a degree of innovation in adapting the elements that define individual, human culpability. All the traditional common law theories, as well as newer statutory models, entail a definition of the links between the criminal act and the decisions of management as it represents the corporate entity.
(a) Common law theories
This approach is currently applied in Canada and, subject to changes currently under consideration, in the United Kingdom. It is a legal fiction in that it focuses on the actions of the "directing mind" of the corporation and merges individual and corporate persons in order to assign criminal liability to the latter.
The theory is narrower than vicarious liability. It requires that the corporation take responsibility for those with decision-making authority over matters of corporate policy (rather than only implementing policy). It is not sufficient merely to establish that any employee or agent acted criminally.
As noted earlier in this document, the Canadian version of the identification doctrine is somewhat broader than the English common law approach. In Canadian Dredge and Dock, the Supreme Court of Canada expanded the category of directing mind to include "the board of directors, the managing director, the superintendent, the manager or anyone else delegated by the board of directors to who is delegated the governing executive authority of the corporation". In the United Kingdom, the target group is confined to the board of directors, the managing director and other highly-placed managers.
The identification theory has been criticized for its limited application. It is premised on the court being able to ascertain key managers who not only have control over making corporate policy, but have also actually committed an offence. While the Supreme Court, while acknowledging the geographical and operational decentralization of many corporations, has ruled that there may be more than one directing mind, the identification theory goes only part way towards addressing the manner in which large corporations function. Its focus on individual decisions by individual managers contrasts with the fact that companies are complex and may -- in a very negative scenario -- create group norms and systemic pressures that lead to lawbreaking.
In 1987, the Law Reform Commission of Canada proposed in its Report #31, Recodifying Criminal Law, codification of the identification approach with respect to crimes involving mental states of either purpose or recklessness, along the following lines:
(a) With respect to crimes involving purpose or recklessness, a corporation is liable for conduct committed on its behalf by its directors, officers or employees acting within the scope of their authority and identifiable as persons with authority over the formulation or implementation of corporate policy.
For negligence offences, it would not be necessary to first prove the liability of any individual:
(b) With respect to crimes requiring negligence, a corporation is liable as above, notwithstanding that no director, officer or employee may be held individually liable for the same offence.
In 1993, a Sub-committee of the House of Commons Standing Committee on Justice and the Solicitor General recommended a variation on the LRC draft legislation:
Recommendation Ten: The Sub-Committee recommends that a recodified General Part of the Criminal Code contain a provision on corporate criminal liability that makes clear that corporations will be liable for conduct committed by those with authority over its actions, whether or not there is an individual who could be held personally liable for the conduct.
In June, 1993, the Government in response to the Sub-Committee Report tabled a White Paper "Proposals to amend the Criminal Code (general principles)" in the form of a draft Bill. Corporate criminal liability was one of many issues dealt with in the Bill.
In November, 1994, the then Minister of Justice released Reforming the General Part of the Criminal Code: A Consultation Paper and followed up with Towards a New General Part of the Criminal Code of Canada - Details on Reform Options which contained options developed based on comments the Department of Justice had received on the White Paper. The latter suggested that the Criminal Code should provide that a corporation should be held liable through the acts, taken together, of any number of its representatives, no matter what level they occupy in the company.
The White Paper proposed that a corporation would be liable for the acts of its "representatives" defined as its directors, officers, employees, members or agents. For an offence requiring criminal negligence or negligence, there would be no need for individual attribution of the failure to exercise reasonable care. The corporation would be liable for the collective failure of its managerial people to exercise reasonable care. For offences requiring intent or recklessness, the necessary state of mind had to be found in representatives who had "express or implied authority to direct, manage or control its activities in the area concerned."
Does the identification theory, as applied in Canada, provide a sound basis for determining the criminal liability of corporations?
What modifications to the identification theory would improve its usefulness when applied to the modern corporation?
Vicarious Liability (respondeat superior)
The doctrine of vicarious liability has been followed by the federal courts in the United States but largely rejected in Canada and the United Kingdom.
The criminal law model of vicarious liability was adapted from the law of torts. In the American context, a corporation may be criminally liable for the acts of its officers, agents or servants who are acting within the scope of their employment and for the benefit of the corporation. Vicarious liability, therefore, is another method of imputing the illegal acts of employees to the corporation itself.
Vicarious liability casts a wide net, although the attribution of liability to the corporation is not as "automatic" as some have suggested. First, it must be found that an individual employee committed the crime with the requisite state of mind and, if that mens rea element is established, it is imputed to the corporation itself; the mens rea can also be shown on the basis of collective knowledge on the part of employees as a group, even though no single employee possessed sufficient information to know that a crime was being committed. Secondly, the employee must have acted within the scope of employment. This has been held to include any act that occurred while the offending employee was carrying out job-related activity and, accordingly, this is a very wide, perhaps easily met standard. Finally, the employee must have intended to benefit the corporation; this requirement has been very broadly interpreted by American courts.
Aside from the sheer breadth of this vicarious liability doctrine, it may be criticized for distorting the concept of fault, particularly in relation to mens rea offences, since the fault of an individual is readily transferred to the company without proof of the latter's misfeasance or malfeasance. A corporation's efforts to prevent illegal activity by employees may be ignored in the application of the vicarious liability doctrine.
Canadian courts have rejected vicarious liability as the basis for assigning corporate criminal liability for mens rea offences, since, by analogy, the criminal law makes an individual responsible only for crimes in which he or she is the primary actor. The equating of vicarious liability for corporations in the criminal sphere with civil liability in the tort context is also seen as violating the precepts of criminal law.
Vicarious liability, nevertheless, represents another attempt to link the corporate personality to the actions of individual employees. The logic of vicarious liability, moreover, is not entirely absent from the "identification" theory itself.
Does vicarious liability provide a sound basis for attributing criminal liability to the corporation?
(b) New Legislative Approaches
Corporate Manslaughter - United Kingdom draft proposals
The recent Home Office proposals, Reforming the Law on Involuntary Manslaughter: The Government's Proposals, are strongly critical of the identification theory that has long been followed in the United Kingdom. Although limited to cases involving death, the proposals assail the identification theory generally, stating: "There can often be great difficulty in identifying an individual who is the embodiment of the company and who is culpable" (emphasis in original), and "the result of the identification doctrine has meant that there have been only a few prosecutions of a corporation for manslaughter in the history of English law…." Several major disasters, it is stated, and the inability of the law to hold companies accountable, prompted this Home Office study, and the Law Commission's earlier review of the law. It remains to be seen how these proposals will affect the liability of corporations for crimes not involving death.
The Home Office proposals, not yet enacted as law, radically depart from the identification doctrine but, nonetheless, they represent yet another attempt to link the functioning of large corporations to their responsibility for disastrous events.
As can be seen from the following elements, the proposed "corporate killing" offence is a specific offence, a form of manslaughter that can only be committed by a corporation:
- The special offence of corporate killing broadly corresponds to other offences proposed by the Home Office of killing by gross carelessness;
- The offence is based on corporate conduct falling far below what could reasonably be expected;
- The offence does not require that the risk be obvious or that the defendant be capable of appreciating the risk;
- A death should be regarded as having been caused by the conduct of the corporation if it is caused by a "management failure", so that the way in which its activities are managed or organized fails to ensure the health and safety of persons employed in or affected by its activities;
- Such a failure will be regarded as a cause of a person's death even if the immediate cause is the act or omission of an individual.
The term "management failure" has been used, rather than "corporate failure", an indication that the concept is a refinement of the "directing mind" idea, i.e. the law is still looking for decisions made by certain managers, or groups of managers, in order to find the corporation primarily liable; however, there is no requirement that an individual be found liable as a condition precedent to corporate liability. The Law Commission draft bill appears to take a broad view, defining "management failure" in terms of the way in which company activities are managed and organized, in the context of a failure to ensure the health and safety of employees or others affected by these activities. This approach may invite the court to search for a direct causal relationship between overall corporate policy, organization and environment and the actus reus of manslaughter and, once this connection is found, to assign liability to the company.
The Home Office paper further states: "The Government believes the creation of a new offence of corporate killing would give useful emphasis to the seriousness of health and safety offences and would give force to the need to consider health and safety as a management issue". The linkage has been drawn, therefore, between criminal liability and health and safety regulation.
Does the United Kingdom model of Corporate Manslaughter/Corporate Killing suit the Canadian context?
"Corporate Culture" – Commonwealth of Australia
Until 1995, all of Australia adhered to the identification doctrine. In Australia, the criminal jurisdiction of the national government, the Commonwealth of Australia, is restricted to crimes against the Commonwealth and Commonwealth employees and organizations e. g. espionage and environmental pollution. The states have primary responsibility for the criminal law with respect to offences against private individuals e.g. manslaughter and assault. With the Australian Criminal Code Act, 1995, the Commonwealth of Australia adopted a broader concept of "corporate culture" as the premise for corporate criminal liability.
The new legislation capped years of study of the issue. The 1995 measures were also part of a larger criminal law reform initiative by the national government: in the context of corporate liability, the Act starts by applying the general principles of criminal responsibility under the Model Criminal Code to corporations. More important, the new law was portrayed as an effort to premise liability on the way that the explicit or implicit policies of the company affected its actions, and the impact of those actions.
For mens rea offences (those requiring intention, knowledge or recklessness as a fault element), the Act attributes fault to the body corporate where it expressly, tacitly or impliedly authorizes or permits the commission of such an offence. Such authorization or permission can be established by any of the following four means, as set out in s. 12.3(2):
- Proving that the body corporate's board of directors intentionally, knowingly or recklessly carried out the relevant conduct, or expressly, tacitly or impliedly authorized or permitted the commission of the offence; or
- Proving that a high managerial agent of the body corporate intentionally, knowingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence; or
- Proving that a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision; or
- Proving that the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.
There are thus two major ways of attributing criminal liability to the corporation: proving that senior management carried out the relevant conduct with the requisite degree of intent; or, through a "corporate culture" analysis. The former approach resembles the identification doctrine, with its emphasis on the "directing mind", except that the Australian Act codifies a definition of "high managerial agent" as "an employee, agent or officer of the body corporate with duties of such responsibility that his or her conduct may fairly be assumed to represent the body corporate's policy". The Act also explicitly provides a due diligence defence to s.12.3(b) where "the body corporate proves that it exercised due diligence to prevent the conduct, or the authorisation or permission" of the high managerial agent. This defence could exonerate the corporation where a director acts illegally and contrary to the explicit orders of the board of directors.
The Act defines "corporate culture" as "an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the part of the body corporate in which the relevant activities take place".
It is worth exploring the link between "corporate culture" and mens rea. Like the identification doctrine, this model imposes primary liability on the corporation but not on the basis of the culpable action of an individual director. There are indications that the goal of this legislation is to impute a real intent, in the criminal law sense, to the corporate entity: section 12.1 states that "This code applies to bodies corporate in the same way as it applies to individuals". While a company may not have a "mind", its intentions are to be drawn from its organization and actions.
The expansive definition of "corporate culture" in the Act invites the court to delve deeply into corporate operations. The court can be expected to examine such factors as: management structure, policy directives, monitoring of compliance by employees regarding legal requirements, patterns of compensation and rewards for behaviour, etc. It may probe beyond official policies into actual practices that encourage law-breaking, for example, pressure to meet production schedules that leads to violations of the law.
In exploring the "corporate culture", the court is required to consider "whether the employee, agent or officer [who may have committed a particular offence] of the body corporate believed on reasonable grounds, or entertained a reasonable expectation, that a high managerial agent of the body corporate would have authorised or permitted the commission of the offence". This may amount to an effective defence for the company, particularly if it has put an extensive compliance program in place and the employee is fully aware of it.
In summary, it appears that, unlike the identification theory, there is no requirement to find an individual responsible for an offence as a condition precedent to imposing liability on the corporation for an offence involving intention. From this perspective, the "corporate culture" model emphasizes a form of collective responsibility embodied in the corporation, thereby suggesting that corporate intention is not reducible to the individual intention of employees. This broad concept is tempered somewhat by the due diligence defence: if the corporation is the focus, prima facie, of liability, then this liability can shift back to the individual employee when it is proven that the latter lacked "reasonable grounds" to believe that his or her actions would have been permitted.
While the Australian legislation takes a somewhat different approach to negligence offences, it does instruct the court to carry out an inquiry into corporate conduct. Section 12.4(1) first states that the tests of negligence for a body corporate and a natural person are the same, that is, conduct that involves "such a great falling short of the standard of care that a reasonable person would exercise in the circumstances" and "such a high risk that the physical element exists or will exist" that the conduct "merits criminal punishment".
These provisions indicate that a corporate standard of care can be assessed, and found to be breached, through the collective capacity ("aggregating the conduct of any number of employees") or the overall conduct of the company ("when viewed as a whole"). It is not entirely clear whether a company could still be found negligent derivatively from the negligence of an individual employee.
Private Member’s Bill C-284, whose subject matter was referred to the Standing Committee on Justice and Human Rights, proposes an alternate formulation of the "corporate culture" model of liability. It proposes a new section 467.3 that would in part read
(2) Where it is shown that an act or omission has been committed on behalf of a corporation, directly or indirectly by the act or pursuant to the order of one of more of its officers, employees or independent contractors, and…
(b) the act or omission was tolerated, condoned or encouraged by the policies or practices established by or permitted to subsist by the management of the corporation, or the management of the corporation could and should have been aware of but was wilfully blind to the act or omission,
(c) the management of the corporation had allowed the development of a culture or common attitude among its officers and employees that encouraged them to believe that the act or omission would be tolerated, condoned or ignored by the corporation…
These provisions are similar to the Australian model in certain ways. Bill C-284 requires a corporate culture to have led to the belief that non-compliance would be "tolerated, condoned or ignored by the corporation". The Australian model, in comparison, requires the corporate culture must have "directed, encouraged, tolerated or led to non-compliance".
The Australian law, however, provides a more comprehensive definition of "corporate culture" which is lacking from Bill C-284. It is also not readily apparent what the difference is between the corporate culture provision referred to above and paragraph 467.3(2)(b), which also holds the corporation liable if "the act or omission was tolerated, condoned or encouraged by the policies or practices established by or permitted to subsist by the management of the corporation…".
Is "corporate culture" a proper basis for assigning criminal liability to the corporate body? How might corporate culture be defined?
(c) Other Approaches
Reactive Corporate Fault
The "corporate mens rea" argument, however, is undermined if corporate delinquency is viewed as largely negligence behaviour, or perhaps "gross negligence", in the criminal law context. The mens rea, from this perspective, receives little attention in the "corporate fault" model. Instead, rather than a requirement of proof of a unique, corporate mens rea, some have suggested that a "reactive corporate fault" theory be applied. It would stress the existence of an actus reus in combination with the remedial measures taken by the company. As a legal construct, it would only assess "fault" after the company was given a chance to fix the problem. In effect, mens rea and actus reus would not be contemporaneous. Offences against the person would be treated as offences of "reactive non-compliance".
This approach obviously represents a departure from traditional approaches to criminal liability. It also raises the significant question of whether or not the mens rea will ever (need to) be established at any time in the process. Nevertheless, this model does raise the important factor of compliance as an objective of the criminal law; such issues are addressed in the section on penalties and remedial measures.
Specific Corporate Offences
The Home Office proposal to create a new "corporate killing" offence is an example of corporate criminal liability being customized to address certain types of offending, in this case a specialized form of manslaughter.
Such a specialized offence does provide clarity and certainty in the application of the law to corporations and targets the most serious kinds of behaviour. However, it is not clear what the value would be if the victims of corporate malfeasance are injured and no death results, or for other types of malfeasance such as fraud or environmental crimes.
Other specific offences for corporations could be considered. For instance, Private Member’s Bill C-284 contained another offence specifically tailored to corporations. The proposed new section 467.5 reads:
Every corporation that permits, or fails to take all reasonable steps to provide safe working conditions for its employees is guilty of an indictable offence and liable on conviction to a fine of not more than $100,000 for every day on which the unsafe working conditions are shown to have subsisted.
Such an offence is attractive because it focuses directly on potentially dangerous situations. However, in constructing a narrowly tailored offence for specific contexts, regard must be had to existing regulatory provisions that may address the same specific situations. For instance, the Canada Labour Code and provincial labour statutes generally require employers to ensure the safety and health of their employees in the work place. These regulatory statutes also provide more complete safety regimes and complaints and inspection procedures. Breach of these statutory obligations is usually a punishable offence.
It should also be borne in mind that a narrowly tailored offence may be unable to respond to other types of corporate malfeasance, such as environmental transgressions or the manufacture and distribution of dangerous consumer products. Another possible problem with creating specific offences is the difficulty associated with identifying and enumerating all possible forms of misconduct deserving of specific offence. In this regard, it should be noted that the criminal law is a law of general application which normally sets down basic minimum standards applicable to everyone. For instance, the common law approach to corporate crime in Canada, the identification theory, is a general theory capable of imputing liability in any situation.
Are there new models for attributing liability to a corporation that merit consideration?
Should corporations be made liable for all types of crimes, or only crimes resulting in death or bodily harm?
Should specific corporation-based offences be created, or is it preferable to codify broad principles of corporate criminal liability?
2. Punishment, Remedial Orders and Corporate Compliance
While a typical structure of criminal law penalties can be envisaged for offences committed by corporations (e.g. fines), law reform efforts in this area must address several public policy objectives. Outside the corporation there may be specific victims who deserve redress; there may also be employees within the company itself who suffer from the offences attributed to the corporate body. Yet, beyond individual victims, the broader public interest may also be engaged in many important ways, e.g. the state of the environment, the safety of consumer products, etc.
It may be that neither individuals nor the public interest benefit from an entirely punitive approach that has the effect of putting the company out of business or that fails to clean up the problem and prevent its reoccurrence.
Section 735(1) of the Criminal Code currently specifies that:
A corporation that is convicted of an offence is liable, in lieu of any imprisonment that is prescribed as punishment for that offence, to be fined in any amount, except where otherwise provided by law,
- that is in the discretion of the court, where the offence is an indictable offence; or
- not exceeding twenty-five thousand dollars, where the offence is a summary conviction offence.
Also relevant are the many federal statutes dealing with specific areas of activity that provide for fines and other sanctions for regulatory offences created within those statutes, such as the Canada Environmental Protection Act, the Canada Labour Code, and the Consumer Packaging and Labelling Act.
The May 2000 proposals from the Home Office concerning "corporate killing" provide fines as an initial penalty, but also posit a scheme of remedial action and enforcement:
5(1) A court before which a corporation is convicted of corporate killing may, subject to subsection (2) below, order the corporation to take such steps, within such time, as the order specifies for remedying the failure in question and any matter which appears to the court to have resulted from the failure and been the cause or one of the causes of the death.
(2) No such order shall be made except on an application by the prosecution specifying the terms of the proposed order, and the order, if any, made by the court shall be on such terms (whether those proposed or others) as the court considers appropriate having regard to any representations made, and any evidence adduced, in relation to that matter by the prosecution or on behalf of the corporation.
The Home Office proposals anticipate enforcement orders being used by various enforcement bodies, particularly in the health and safety area. Where the court (in a corporate killing prosecution) issues a separate order, it appears that such enforcement bodies could be instructed to check compliance and refer matters back to the court where necessary.
The United States has taken these issues in new and expanded directions. The American experience is of interest for the comprehensiveness of its approach to the punitive and remedial aspects of sentencing, and the way these elements are often combined. In 1991, Federal Sentencing Guidelines were developed covering the sentencing of corporate defendants. They were designed to allow an evaluation and a balancing of the severity of the crime, the pecuniary gain to the corporation resulting from its conduct and the relative culpability of the corporation. The goal of deterrence is highlighted in the Guidelines (and attached Commentary) themselves, as is the related objective of creating incentives for organizations to maintain internal mechanisms for preventing, detecting and reporting criminal conduct. Equally important as a sentencing goal is the need to get the corporation to remedy the harm that it has caused.
This approach inevitably entails an extensive investigation into the corporate structure and operations. Fines, restitution orders and orders of probation are parts of the mix. The Guidelines require the sentencing court to employ a two-step process in determining the appropriate fine. Initially, a base fine is calculated, defined as: the amount indicated on an offence table (maximum is $72.5 million), the pecuniary gain from the offence or the pecuniary loss caused by the offence. The base fine is then adjusted upward or downward depending upon the "culpability of the organization". For example, upward adjustments are made based on the level of management involved, the existence of past similar conduct and the size of the organization (with larger corporations likely to receive larger penalties). Downward adjustments are based on the existence of an effective compliance program to prevent violations of the law and whether the firm voluntarily reported the offence to governmental authorities and then cooperated with the investigation. The Guidelines also provide that any gain to the organization remaining after restitution and other remedial measures are factored in must be added to the fine. Amounts paid by the company as the result of civil actions are not used to offset the ultimate fine.
On the general subject of fines and their impact, some commentators have referred to what they call the "deterrence trap", whereby a fine may serve to deter future lawbreaking but, at the same time, prevent the company from taking necessary preventive and remedial action. A balance should be struck. The Guidelines state that "the court shall reduce the fine… to the extent that imposition of such a fine would impair its ability to make restitution to victims".
As noted, the presence of a corporate compliance program may reduce the "culpability score" that informs the setting of a fine. The establishment of corporate compliance strategies may have a more significant impact, persuading prosecutors not to bring charges against the corporation in the first instance where the program demonstrates a real commitment. Although expensive, development and implementation of such programs is becoming more common as a method of attempting to avoid civil and criminal liability in the first place.
Implementing a compliance program entails establishing standards and procedures to be followed by employees and other agents that are reasonably capable of reducing the prospect of criminal conduct. A code of conduct per se is not sufficient. The program must reflect the realities of the particular type of business, including the areas where the greatest risk of liability lies. The appointment of a compliance officer is necessary; the role of the officer is to oversee actual compliance with the program, and its standards. This is usually a high-level person with policy-making responsibilities, such as a director, executive officer or manager of a section of the company.
An essential element of a compliance program is education and training of employees in relation to compliance. It is clear that these efforts must be sustained and also monitored for effectiveness. They must be publicized to employees so that they may have enough confidence to disclose suspected wrongdoing without fear of retribution. Implementing an employee hotline is one example.
A good compliance program serves to detect and provide early warnings before misconduct develops into criminal violation -- an investment that could make the cost of a compliance program economical as a preventive step. The internal reporting structure of the company is an important factor in determining the attribution of liability to the corporate body. Those who can prove that internal reporting mechanisms have been effective in detecting problems early may limit their exposure to liability.
The Sentencing Guidelines specifically provide for restitution, remedial orders and probation as part of sentencing. Probation, for up to five years, may take the form of government monitoring and oversight of the corporation's activities. Community service may be a condition of probation, which usually translates into the company paying employees or others to perform the service ordered by the court. Other conditions could include making periodic submissions to the court or a probation officer. As can be seen, such probation may become intrusive for the ongoing functioning of the company. The court may order probation in addition to other sanctions.
This consultation paper does not advocate for a particular model or mix of remedies but it is suggested that remedial measures and penalties be examined from the perspective of the needs of victims and the full range of public policy goals.
What powers, including the power to impose remedial measures, should reside in the court in sentencing corporations?
Should Canada adopt the kind of remedial powers and measures employed in the United States?
3. Liability of Directors, Managers and Employees
Recommendation 73 of the Westray Inquiry Report recommended that the accountability of corporate executives and directors for workplace safety be examined.
As individuals, directors, officers and agents of a corporation are personally liable for Criminal Code offences they commit. Also, under sections 21 to 23 of the Criminal Code, directors may also be found liable criminally as parties to an offence, including an offence found to be committed by the corporate body or other employees. Under these provisions, a corporate executive or board member could be liable if he or she aided or abetted a person to commit an offence (section 21), counseled a person to be a party to an offence (section 22), or is an accessory after the fact to an offence (section 23). Quite often, managers and executives are charged as parties to an offence along with the corporation. It is important to note that for each of these types of liability, the person is liable on account of their own actions.
Various non-criminal statutes expressly impose liability on management for their active participation or passive acquiescence in the commission of offences. Most of these address regulatory and strict liability offences, although some cover mens rea offences. A typical formulation is found in the Canadian Environmental Protection Act:
280. Where a corporation commits an offence under this Act, any officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence, and is liable to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted.
Numerous other federal and provincial acts establish offences of this nature in particular regulatory domains. The question at hand is whether a general provision covering directors' liability should be inserted in the Criminal Code or, conversely, whether the law should delineate situations where only certain managers are liable.
It may be argued that imposing liability on directors, officers and agents is at least as good a deterrent to corporate crime as fines imposed on the company. But questions must be asked such as which officers should be held liable, on what basis should liability be based, and what degree of involvement of the directors, officers and agents is necessary for criminal liability to attach to that individual for the crimes of the corporation?
The Home Office proposals on involuntary manslaughter state that company employees could still be liable for the offences of reckless killing and killing by gross carelessness, as well as the company itself being liable. The Law Commission had recommended against punitive sanctions on company directors in relation to the corporate killing offence but the Government chose to include such measures as a deterrent. A director could be charged with one of the new manslaughter offences even if proceedings were not brought against the company; individual criminal liability, however, would not be automatic when the corporation was convicted. In addition, culpable directors could be disqualified under the U.K. regime, from acting in a management capacity on other businesses in Great Britain.
In the United States, "responsible public officers" may be individually liable in respect of "public welfare offences", particularly environmental offences. These are not criminal offences where specific intent and knowledge are required. This doctrine de-emphasizes mens rea, while concentrating on the officer's role in the company in relation to the criminal conduct.
Private Member’s Bill C-284 proposes a form of director’s liability in its proposed section 467.4, which states in part:
(1) Every one who is a director or officer of a corporation that is guilty of an offence under section 467.3 who:
alone or with others authorized the act or omission that constituted the offence, or
knew or who ought to have known, as a result of circumstances described in paragraphs 467.3(1)(b), (c) or (d) that the act or omission that constituted the offence was being committed or would or was likely to take place, and failed to take all reasonable steps to prevent its commission, including, in the case where the act or omission was being committed or was authorized, reporting the matter to a peace officer or to an official or agency of government having authority over health or safety at the workplace in question, is guilty of an offence and liable on conviction as if committed personally and liable to the same penalty as if the director or officer had committed the act or omission personally.
Paragraph (a) premises liability upon the director’s authorization of an offence. Paragraph (b), on the other hand, would hold a director liable if he or she "ought to have known" of the likely commission of an offence, even if he or she in fact did not know.
With respect to holding individuals liable for criminal offences that are committed by someone else, including a corporate body, Charter of Rights principles such as the presumption of innocence take on particular importance -- no matter which system of attributing liability is used.
To what extent should the Criminal Code specify the liability of individual directors, officers and employees in the context of corporate criminal liability?
What degree of involvement or acquiescence is appropriate or adequate to hold directors, officers or employees liable for the crimes of the corporation?
4. What is a Corporation?
When considering the criminal liability of the corporation itself, the definition of "corporation" is of major importance, simply because it determines the situations in which, and the extent to which, the law will apply.
In Canadian Dredge and Dock, the Supreme Court of Canada wrote, in relation to the identification doctrine:
The corporation is but a creature of statute, general or special, and none of the provincial corporation statutes and business corporations statutes, or the federal equivalents, contain any discussion of criminal liability or liability in the common law generally by reason of the doctrine of identification… The identity doctrine merges the board of directors, the managing director, the superintendent, the manager or anyone else delegated by the board of directors to whom is delegated the governing executive authority of the corporation, and the conduct of any of the merged entities is thereby attributed to the corporation. (at 693)
Although the Court does not expressly limit itself, the language used indicates that the Court was concerned with incorporated businesses. This is no doubt because the particular facts of the case involved an incorporated business. Nonetheless, this language raises the question: to which types of organizations or company structures should criminal liability potentially attach?
The Home Office proposals address the scope of the proposed new offence of "corporate killing" in terms of the corporate organizations to which it should apply. The Home Office agreed with the Law Commission that the new offence should apply to most bodies corporate, irrespective of the legal means by which it was incorporated, and therefore would capture agencies of government, incorporated charities and clubs, etc. Furthermore, the Home Office was uncertain about the application of the corporate killing offence to unincorporated bodies where, it could be argued, the emphasis should be on the liability of the individuals within the organization for manslaughter; however, it was also noted that unincorporated entities are often indistinguishable in practice from corporations. The paper further debated the application of the proposed offence to "undertakings", namely, schools, hospitals, partnerships, unincorporated charities, etc.
The Criminal Code defines "every one", "person" and "owner" as including, inter alia, "public bodies", "bodies corporate", "societies" and "companies". Other federal statutes employ a variety of definitions covering, e.g., partnerships, unincorporated organizations and associations. The Canada Business Corporations Act defines "body corporate" to include "a company or other body corporate wherever or however incorporated". While definitions may vary according to the statute and its purpose, there is a tendency to broad, inclusive definitions in federal statutes. The broad definition in the Criminal Code is consistent with the basic premise of corporate criminal liability, that legal entities, and not just individuals, are to be held accountable for offences.
What sorts of legal entities should be included within the scope of a provision on corporate criminal liability?
How would those entities be defined in legislation?
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