In a judgment handed down on May 30th, Global Fuels
Inc. ("Global") was ordered to stand
trial on the charge of having conspired to fix the price of gas in
breach of the Competition Act (R.S.C. (1985), ch. C-34).
The Court of Québec laid the foundation for the
interpretation of the new section 22.2 of the Criminal
Code (the "Code") on the criminal
liability of organizations.
Legislative changes to the Code dated March 31, 2004, added,
among other things, the concept of "senior officer" in
section 2 and provided that organizations could be liable for the
acts of "senior officers" pursuant to section 22.2.
Before these changes, the prosecution had to rely on the
"identification theory" to hold an organization
criminally liable. This theory had established an
organization's liability by imputing the intent and acts of its
"directing mind" when that person acted in the
performance of his duties and in the interests of the organization.
The concept of the directing mind required individual
decision-making power over the organization's policies, going
beyond solely the senior management and the board of directors. A
single organization could therefore have several directing minds,
each associated with a separate and distinct sphere of activity or
For the first time, a court has defined the scope of the new
section 22.2 by holding that the definition of "senior
officer" encompasses more than the individuals who formed the
directing mind under the identification theory.
The Court adopted a fairly liberal interpretation of the
definition of "senior officer". In addition to noting
that an organization can have several senior officers, the Court
focused on the individuals' duties and responsibilities rather
than their capacity or title. Thus, [Translation] "a
person may be considered a 'senior officer' and expose the
organization to liability [...] either through having an important
role in the establishment of an organization's policies or by
being responsible for managing an important aspect of the
organization's activities" under section 22.2.
It is important to note the introduction of the criterion of the
importance of the individual's role, which did not
exist in prior case law involving the directing mind. Even so,
similar principles have been used to achieve similar results. Each
case is unique; the characterization of a person as a "senior
officer" may include an analysis of the [Translation]
"person's title in the business, as well as the duties
he performs and the extent of his authority", while the
importance of the role performed or the aspect of the
organization's activities in question will be determined based
on the facts, including [Translation] "the
corporation's entire organizational structure and
In the end, the Court of Québec did not limit the
definition of "senior officer" to an organization's
senior management, thereby extending the concept to a larger pool
of individuals than under the identification theory. It will be
interesting to see how the jurisprudence evolves following this
decision. It should also be noted that the Superior Court could
arrive at a different conclusion at trial.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A discussion on how the fraud risk to your company will be reduced by your understanding key areas that need improvement, establishing controls and your oversight to ensure that appropriate controls are implemented and consistently applied.
The much-anticipated judgment in R v. Dunn, in which the former CEO, CFO, and Controller of Nortel Networks were prosecuted for fraud in association with inaccuracies in Nortel’s reported financial results, was released on January 12. All three were acquitted.