In highly regulated fields and industries, participants are often under a statutory obligation to cooperate with the auditors, inspectors and peace officers who investigate contraventions of the applicable regulatory regime, typically comprised of an Act, Regulations and sometimes the terms of a licence. This coerced cooperation comes in many forms: from retaining and turning over records and documents, to permitting access for physical inspection, to answering probing questions. More often than not inspections occur without warning, and happen quickly before the individual or entity subject to inspection is fully able to take stock of the situation. While this element of surprise benefits the state’s legitimate compliance testing agenda, it may simultaneously prejudice the individual’s right to be free from self-incrimination and the right to retain and instruct counsel.
For example in British Columbia licensees of bars and restaurants are under a positive duty to cooperate with liquor inspectors or police officers performing licenced premises checks, and must produce on demand sales receipts, CCTV footage and staff information. Similarly the Wildlife Act makes it an offence not to answer a conservation officer’s questions with respect to the locality of where fish or wildlife in a person’s possession was caught or killed.
At the federal level similar principles are enshrined in the Income Tax Act and in the Fisheries Act. Although these are very different pieces of legislation, for the purposes of this article they are similar in that these Acts require taxpayers and persons engaged in fishing, respectively, to cooperate with federal officials conducting compliance related inspections.
Under any of the above Acts, refusal to cooperate with an inspector, or cooperating and failing an inspection, will attract penal consequences – ranging from suspension or cancellation of a licence, to a fine, to incarceration. Thus Canadian courts have consistently observed that regulatory regimes of this nature create a tension between where a mere “inspection” ends and an “investigation” begins. In regulated industries cooperation is often required for the former, but not the latter. The issue then for actors in these industries, and their counsel, is what does the duty to cooperate look like? And when does that duty end?
Generally speaking, individuals are not required to cooperate with police when they are suspected of having committed a crime. The right to be free from self-incrimination, is enshrined in Section 7 of the Charter, and is assisted by Section 10 of the Charter which requires that upon arrest or detention the police must advise an accused person of their right to silence and their right to retain and instruct counsel. In theory, after speaking with counsel, an accused person is better informed about the jeopardy they are facing, and the process that lies ahead, and can govern themselves accordingly
In the regulatory context, unfortunately, the analysis is more nuanced.
The Supreme Court of Canada has recognized that an individual’s right to be free from self-incrimination, a right that places limits on the state’s ability to forcibility compel an individual to give evidence against their own interest, must be balanced with another principle of fundamental justice: all relevant evidence should be available for the trier of fact in the search for truth. The latter principle recognizes the necessity of government agents being able to ensure compliance with regulations; this means permitting inspections of persons and places participating or involved in a regulated industry.
The rationale is that by choosing to engage in a regulated industry like alcohol or gaming, or a regulated sport like fishing or hunting, the individual – to some degree- has forfeited their right to be left alone by the state. In these situations the power of inspection is necessary and in the public interest to ensure that persons acting under a regulatory statute are in compliance with the same. When subject to a lawful investigation, an individual’s privacy interest in their records or documents (or other items or places relevant to the regulatory regime), must give way to the broader state interest in having the information or document disclosed.
However once non-compliance has been observed, an inspection invariably turns into an investigation. At this juncture the rules of engagement change – whether the state’s investigator, auditor, or peace officer appreciate it at the time or not.
Practically speaking it can be difficult to differentiate between when an inspection ends and an investigation begins. This is a question of mixed fact and law. Complicating matters, in some circumstances it can be permissible for both to be carried out at the same time. As long as the purpose of the continuing inspection is for the predominant purpose of inquiring or determining the extent of compliance only, and not for the purpose of gathering further evidence of the observed offence, then it remains an inspection.
Put simply, once evidence of non-compliance arises during an inspection, which moves the belief of the inspector from a non-compliance check, to reasonable and probable grounds that an offence has been committed, that inspector is no longer engaged in an inspection, but is now almost certainly engaged in an investigation to gather evidence in furtherance of prosecuting the offence. From that point onwards the predominant purpose is penal liability, and not compliance.
At this stage in the state vs. individual (regulator vs. regulated) interaction, the regulator must relinquish the statutory authority it was previously relying on to mandate cooperation and acknowledge that an adversarial relationship has now crystalized which may require that the individual receive a Charter caution, or that the regulator obtain a search warrant to obtain further information. The determination of when the inspector has “crossed the Rubicon” and changed the nature of his or her inquiry is a context driven and fact specific analysis.
Importantly, the Supreme Court of Canada held in R. v. Jarvis that evidence validity obtained during the “auditing” stage of a tax investigation can be used against a taxpayer at the “investigative” stage; there is no derivate use immunity.
Though there is a recognized difference between the application of some Charter rights in the regulatory as opposed to criminal context, many regulatory statutes contain provisions which bear the hallmarks of criminal legislation – namely prohibitions coupled with penalties, which can include incarceration. When these provisions of a statute are at issue, the full panoply of Charter rights are engaged for the individual’s protection. Conversely, the contravention of other sections of the same statute may not engage any Charter rights. In practice this means differing level of Charter protection may apply to different aspects of the same statute depending on the circumstances.
A 2007 fisheries case out of Newfoundland, R. v. Lowe, not only contains a thorough canvassing of the law in this area, but also provides a useful fact pattern for analysis. Mr. Lowe was a retired member of the RCMP engaged in an organized fishery protest involving fishing for cod out of season. The Department of Fisheries and Oceans sent fisheries officers to observe the protest, but not seize any vessels or evidence.
The court found that when approached by a fisheries officer, the occupants of the boat were under a duty to permit an inspection and assist in the carrying out of the same. These obligations are set out in the Fisheries Act.
However, once the fisheries officer determined that he had reasonable and probable grounds to believe that an offence or non-compliance of the Act had occurred, in this case by viewing cod in the boat, the occupants were no longer required to assist him in gathering evidence, only to cooperate in any continuing inspection. As soon as the officer’s belief crystalized that non-compliance had occurred, he was required to inform Mr. Lowe of his Charter rights to counsel and silence.
The court found that that the fisheries officers transitioned their inspection to an investigation and failed to provide Mr. Lowe with his Charter rights. As a result of this Charter breach the court excluded the relevant aspects of DFO’s evidence.
For administrative law practitioners, particularly those who appear before tribunals that perform an adjudicative function, it may be useful before your next hearing to place the regulator’s disclosure package on the inspection-investigation spectrum, and compare the same to your client’s version of events. If you determine that the state relied on its inspection powers while it was investigating your client, you may have uncovered a new basis to oppose the regulator’s sanction and further your client’s interests.