Canada: "Importance Criterion": Quebec Court Guidance On Corporate Criminal Liability

INTRODUCTION

Which individuals within a corporation can cause it to become criminally liable through their actions and intentions? This question was addressed by a lower court in Quebec at a preliminary hearing in the recent case of R. v. Global Fuels Inc. (the judgment is only available in French). This is the first decision in which a Canadian court has interpreted s. 22.2 of the Criminal Code, which was enacted by Parliament in 2004 as part of a series of amendments directed at more effectively prosecuting malfeasance in the business world. (The trial on the charges is scheduled for this fall. It remains to be seen whether the trial judge will reach the same conclusion as the preliminary hearing judge on the scope of s. 22.2.)

In answering this question, the court made it clear that s. 22.2 of the Criminal Code did have the effect of expanding the scope of corporate criminal liability. No longer is the liability of corporations to be determined based on an assessment of the actions and intentions of a limited group of individuals known as its "directing minds". Rather, criminal liability is to be assessed by applying what the court described as the "importance criterion". Under the "importance criterion", an individual can cause a corporation to be liable if he or she plays an important role in the establishment of an organization's policies or is responsible for managing an important aspect of the organization's activities relating to the impugned conduct.

If the broader approach to corporate criminal liability espoused by the Quebec court is adopted by other courts, it will be important for corporations and other organizations to be vigilant in preventing those individuals meeting the "importance criterion" from taking actions that could cause the corporation or organization to be criminally liable.

FACTS

Global Fuels Inc. (Global) owns and manages gas stations in Eastern Canada, and is responsible for setting the retail price of all gas sold at those stations. In 2008, Global was accused of conspiring to prevent or lessen competition in the retail gasoline market by fixing prices in Sherbrooke and Magog between May 2005 and May 2006. The key employees involved in the transactions in issue were a vice-president, a regional manager who reported to him, and two territory managers who reported to the regional manager.

At the preliminary inquiry, Global requested that it be discharged on the charges laid against it, claiming that the actions and intentions of the individuals involved in the allegedly illegal scheme could not cause Global to be criminally liable.

DISCUSSION AND ANALYSIS

Section 22.2 of the Criminal Code

In 2004, Parliament passed amendments to the Criminal Code relating to corporate criminal liability. One significant change was to specifically address who, within a corporation or other organization, could cause it to be criminally liable and under what circumstances. In particular, s. 22.2 makes an organization liable for the acts of its "senior officers" in three circumstances:

22.2 In respect of an offence that requires the prosecution to prove fault – other than negligence – an organization is a party to the offence if, with the intent at least in part to benefit the organization, one of its senior officers:

(a) acting within the scope of their authority, is a party to the offence; (b) having the mental state required to be a party to the offence and acting within the scope of their authority, directs the work of other representatives of the organization so that they do the act or make the omission specified in the offence; or (c) knowing that a representative of the organization is or is about to be a party to the offence, does not take all reasonable measures to stop them from being a party to the offence. [emphasis added]

The term "senior officers" is defined in s. 2 of the Criminal Code as meaning "a representative who plays an important role in the establishment of an organization's policies or is responsible for managing an important aspect of the organization's activities and, in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer". The term "representative" is broadly defined as meaning "a director, partner, employee, member, agent or contractor of the organization".

On its face, the language of s. 22.2 and s. 2 appears to modify the common law test for determining corporate criminal liability. Under the common law, criminal liability of a corporation is to be assessed from the standpoint of its "directing minds" which the Supreme Court of Canada has defined as being those within the corporation who have been assigned the authority to design and supervise the implementation of policy as opposed to those who simply carry out that policy. The issue in R. v. Global Fuels was whether the common law test of corporate criminal liability had, in fact, been overtaken by s. 22.2 of the Criminal Code.

FINDINGS IN R. V. GLOBAL

The Quebec court outlined how corporate criminal liability is to be determined under s. 22.2 of the Criminal Code and, in so doing, made it clear that the common law test has been modified by this section. In order to determine if the individuals involved in the impugned transaction were capable of causing Global to be criminally liable, the court determined if they were "senior officers" of the corporation. In determining whether they were senior officers, the court held that it was necessary to apply the "importance criterion". To this end, the court considered the importance to the business of the activities for which the individual in issue is responsible. Only if the individual plays an important role in the establishment of a corporation's policies in relation to the impugned conduct or only if the individual manages an important aspect of the corporation's activities relating to the impugned conduct will he or she be capable of causing it to be liable.

The court applied its interpretation of sections 2 and 22.2 of the Criminal Code, and held that the regional manager (Payette) was a senior officer of Global. Payette met the importance criteria in relation to the impugned conduct of conspiring to prevent or lessen competition in the retail gasoline market by fixing prices. Among the factors relied upon by the court in arriving at this finding were:

  • Global's primary commercial activity was the retail sale of gasoline. Setting the price of gas, and price management policies, had a significant and direct influence on the company's profitability.
  • Payette supervised six territory managers, who were in turn responsible for giving price change instructions to Global gas stations.
  • Payette was aware of, and approved the price management methods implemented by the territory managers, an important aspect of the company's activities. He was also involved (along with the Vice-President) in establishing company policies.
  • Payette's actions were carried out in the interest and for the benefit of Global.

Having regard to the preceding, Payette was a "senior officer" of Global for the purposes of the impugned transaction and, as such, his actions triggered the criminal liability of Global, whether by participating himself in the offences (s. 22.2(a)), or by acting such that the territory managers were able to participate in the offences (s. 22.2(b)), or by neglecting to take measures to prevent the territory managers from committing them given that he was aware of their commission (s. 22.2(c)).

While this conclusion would have sufficed to engage Global's criminal liability, the court went on to examine the roles of the lower level territory managers, and held that they too were senior officers for the purposes of s. 22.2. The court focused on their actual roles and responsibilities related to managing the retail price for gasoline. Despite Global's assertions that senior management provided clear directives to the territory managers on pricing policy, the court found that they had, in fact, significant autonomy. Each territory manager was responsible for between 30 and 45 stations. The court found that, in practice, the policy regarding gasoline pricing and the mechanisms used to implement it were left in the hands of the territory managers, two of whom—with the approval of the regional manager—were allegedly able to implement an illegal and effective price-fixing strategy.

Interestingly, the court did not find the vice-president (Maddock) to be a senior officer, holding that "he is not involved in the supervision of the territory managers and he does not have any decision-making role related to the setting of gasoline prices." In other words, the vice-president would not have met the "importance criteria".

COMMENT

The decision of R. v. Global Fuels is consistent with our previous assessment that the enactment of s. 22.2 in 2004 broadened the scope of corporate culpability in Canada. Corporations and other organizations appear now to be at risk of becoming criminally liable based on the actions of a far wider range of individuals than under the common law doctrine of "directing mind". To minimize the risk of corporate criminal liability, it is clear that corporations and other organizations must ensure that their risk management plans – whether training, reviewing or auditing – include the wider group of individuals meeting the "importance criterion" and qualifying as "senior officers".

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
16 Oct 2018, Seminar, Toronto, Canada

Join Blakes lawyers for our 10th annual overview of recent legal and regulatory developments and practical strategies to navigate the changing regulation of Canada’s payments industry.

26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions