Corporate Capital Punishment in Ontario

with the Ontario Court of Appeal playing the role of the Red Queen in Alice in Wonderland.

See R. v. Metron Construction Corporation, 2013 ONCA 541.

A fine which bankrupts a corporation is the equivalent of a beheading.

I’m not slighting the tragedy that resulted in charges but, given what happened in Metron and why — all you need to do is read paras. 1 – 15, particularly paras. 9-15 — do you agree with the general deterrence rationale? It seems questionable, at best, to me. General deterrence of whom? (Consider the aphorism about “stupidity” in “Forest Gump”.)

Would you have a different view of the validity of the conclusion if the fine (assuming it is paid) weren’t seemingly headed for the federal gov’t’s general fund, but instead to some fund whose ostensible purpose relates to preventing the reccurence of the events in the case?

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Comments

  1. David Collier-Brown

    I’m greatly relieved by this: It’s generally wonderful to see a corporation punished for killing its employees. That this is only the second case [see p 46] reported in Canada of one pleading guilty is genuinely shocking, and reinforces the general presumption that they are uniquely privileged in avoiding criminal sanctions.

    To borrow a line from the “persons” case, its seems Corporations are persons in matters of rights and privileges, but are not persons in matters of pains and penalties.

    As to deterrence, I’d rather have seen the court being able to not only fine the company into bankruptcy, but also withdraw its charter to exist, thus explicitly beheading it as punishment for killing its employees.

    To see a corporation put to death should, in my opinion, concentrate the directing minds of other corporations most wonderfully, without actually putting any of the directors or owners to death.

    It’s a little like the Red Queen being able to behead her victims, then give them their heads back and tell them to sin no more.

    –dave

  2. What if the directors had to pay the fines personally if the corporation could not? This has come up lately where directors have been held personally liable for cleaning up environmental damage when the corporation was out of business. Here is the story based on the demand by the Ontario Ministry of the Environment. Here is the story once the ruling confirmed directors’ liability.

    Is this a disaster for attracting directors? Should there be at least a due diligence defence to such liability? The amount of payments could be much higher than the other personal liabilities of directors, such as employee wages and unpaid taxes.

    Or is it a backstop to the principle of ‘polluter pays’, which has been Ontario’s law for many years?

  3. Dave

    What if Metron was not a corporation but a “family business” – not a legal term but I’m using it to make my point – and it was your family business. I assume you read para. 25. Would you be of the same view if the 25K limit, per count, on individuals hadn’t existed?

    Does it matter to you that, in this case, if we take the reasons for judgment at face value, Metron is legally responsible but not morally blameworthy? “Making an example” cases are often problematic where that’s the case.

    David

  4. It is not obvious to me that “executing” the corporation is as justifiable as David Collier-Brown seems to think. Would the bankruptcy of the corporation be fair to the unsecured creditors of the bankrupt? Making corporations vicariously criminally liable, except where the corporation has gained from the crime — as it might with, say, price-fixing — is not readily justifiable. Even making directors and officers vicariously criminally liable is, again, not easily justifiable. How is someone deterred by being made criminally liable when ex hypothesi that person could have done nothing to prevent the event? Of course the deaths are tragic but doing something about the tragedy legally requires careful thought.

  5. Angela, first, regarding the unsecured creditors, it would seem to me that this is no different than any other large unforeseen and unsecured debt taken on by a corporation. It is like a large civil judgment, or perhaps a remediation obligation, that can drive a company into bankruptcy. Being an unsecured creditor of anyone means that you risk an unforeseen event driving that person into bankruptcy. I see no unfairness to those creditors who, presumably, were earning a premium on their investment because it was unsecured.

    Second, as against the directing minds of the corporation, I fail to see why we must presume they could not have prevented this. The corporation pled guilty of criminal negligence causing death, therefore acknowledging foreseeability.

    The only question then is whether a fine of ~$185,000 per death caused by criminal negligence is reasonable. While I take David’s point that the efficacy of general deterrence is always debatable, if we want to take a stand against a deterrence rationale for punishment, let us make it on a case where a man or woman is serving a prolonged jail sentence solely in the name of deterring others, not where a company has simply been driven into bankruptcy by a gross and tragic mistake.

    I wholly agree with the OCA that ability to pay should not be a determinative factor in setting fines for corporations. If an otherwise just fine bankrupts the corporation, so be it.

  6. Robert,

    Foreseeability is irrelevant to Merton’s vicarious liability.

  7. David, this is not about vicarious liability.

    The role for “vicarious liability” in Canadian criminal law, if indeed there is any place for vicarious liability, is far from settled. See Canadian Dredge & Dock Co. v. The Queen, [1985] 1 SCR 662, and paragraphs 57 – 62 of this decision.

    Corporate liability for the crimes of “senior officers” is what is at issue here. This is not vicarious liability assigned to a master for the negligence of a servant, but an attempt to determine the basis upon which a corporation can be ascribed direct liability. The criminal intent of the senior officer is the criminal intent of the corporation. See para. 59 and 60 of Merton.

    Merton is being punished on the basis that it, through its senior officer, had the appropriate criminal intent.

    If you want to take issue with the level of deterrence senior officers will feel knowing that their crimes may be attributed to the corporation, fair enough. Also fair if you think the Code casts who is a “senior officer” (effectively directing mind) too wide. And it is certainly fair to debate whether a corporation can ever have any mental state ascribed to it. This is discussed at length in Canadian Dredge.

    However, this is not a case where a general deterrence rationale is being offered to justify unforeseeable liability. The criminal negligence is deemed foreseeable to Merton because it was foreseeable to its senior officer. The assumption is that senior officers, and thereby corporations generally, will be deterred from criminal conduct by harsh penalties that might even bankrupt the corporation.

  8. Robert

    We’re talking at cross purposes. Foreseeability was relevant to F’s conduct, not M’s. M could be found guilty because F’s conduct and employment status satisfied the Code requirements for M being held guilty. But the criminal conduct wasn’t a corporate act under any test makes the act of the employee or officer a corporate act. It was F’s for which M was responsible. That’s vicarious liability, call it what you will.

  9. David, the criminal code “senior officer” scheme is a method of determining that the crime was a corporate act. The theoretical justification for the criminal sanction is that the corporation can be ascribed the necessary mental state (here, in part foreseeability of harm) when a senior officer is shown to be in possession of such a state. Parliament has, for criminal liability purposes, set out a distinct test as to what acts can be ascribed directly to the corporation.

    Again, it is fair to debate whether this unwisely casts too wide a net as to what actions by senior officers can rightly be seen as having been taken by the corporation. But it is absolutely a crucial point that the scheme is one of direct, not vicarious, liability. As discussed in Canadian Dredge, at length, the idea of vicarious criminal liability is deeply troubling and likely unknown to Canadian law.

  10. Robert,

    I believe I see why I missed your point.

    Merton was convicted as a party to the offence of criminal negligence. Merton satisfied the defintion of “party” because F, its employee, who committed the offence, satisfied the requirements of the definition of senior officer. If F hadn’t committed the offence, M couldn’t have been convicted.

    As I understand what you’ve written, you’re saying that since Canadian criminal law analysis requires both the proscribed act and the requisite mental state for a Criminal Code conviction, we, in terms of that analysis, have to understand that the effect of the sections involved is to deem both the act and the mental state to have been Merton’s own act, own intent, for the purpose of the requirements of the CC sections involved.

    I agree.

    Now the “but”. The “but” is that that’s as far as we need to go in explaining the requirements for conviction and how the sections involved fit into the standard criminal law analysis. That is, for the purpose of the Code sections, we treat F’s acts and F’s intent as the corporation’s. But that’s as far as we go to explain the conviction.

    What we don’t do, though, is enquire into the rationale for that treatment of F’s acts and the consequences of F’s acts. (This isn’t a constitutional, with or without a Charter analysis, issue.)
    So, we don’t ask whether it makes sense, in any other aspect of legal analysis, to treat F’s acts and intent, as the acts of M rather than merely an act of another for which M could be held legally responsible.

    We should go farther in discussions of the rationale for the existence of corporate criminal liability, but that’s a different issue and not one which I intend to get into, here.

    OK?

    Last word is yours. This discussion is becoming too abtruse – some might say obtuse – for this setting.

    Cheers,

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