Written by Ranjan Agarwal, Radha Curpen, Brad Gilmour, Sharon Singh and Greg Whiteside
On November 5, 2020, the Supreme Court of Canada released its decision in Quebec (Attorney General) v 9147-0732 Québec Inc, 2020 SCC 32, in which the court decided that the constitutional protection against being subject to cruel and unusual punishment provided under section 12 of the Canadian Charter of Rights and Freedoms does not apply to corporations. This decision restricts even more the available rights under the Charter that are extended to a corporation in quasi-criminal and regulatory proceedings and importantly confirms that there is no constitutional protection against large and potentially disproportionate fines for corporate offenders.
This decision does not, however, impact other well-founded sentencing principles, including that a fine must be proportionate to the gravity of the offence and the degree of responsibility of the offender.
Given the increase in regulatory fine regimes and regulatory prosecutions across the country, corporations engaged in regulated industries must be aware of the effects of even minor contraventions resulting in prosecution, given that another ground to defend against disproportionate fines has been eliminated. Below we outline the background of the case, the decision, and its implications on corporations.
In May 2016, the Court of Quebec convicted a construction company for performing residential renovations without the appropriate licenses. Under the provincial Building Act, CQLR, c. B-1.1, a license is required for all persons or corporate entities providing construction services. As in most regulated industries, a breach of regulatory requirements can lead to prosecution and fines for their contraventions. Here, section 197.1 of the Building Act creates a range of fines for offenders with a mandatory minimum penalty of $30,843 and possible maximum penalty of $154,215.
The Court of Quebec accepted that the company had accidentally invoiced the clients from their corporation, rather than another related and co-owned entity that had the appropriate licenses to perform construction services. Effectively, the court accepted that the offence was an “administrative error” “(“une erreur de codification”) by the company. Despite the relatively minor nature of the contravention, the court had to apply the mandatory minimum sentence under the Building Act.
The company appealed unsuccessfully to the Quebec Superior Court, arguing that the application of such a high fine infringed the company’s rights under section 12 of the Charter, (which prohibits “cruel and unusual punishment”). The company appealed again to the Quebec Court of Appeal. A majority of the Quebec Court of Appeal came to a different conclusion than the previous courts, finding that where the Charter provides a “tangible benefit” to a corporation, the corporation can avail itself of that right. Since a corporation could suffer harsh or severe economic impacts from a high fine, the penalty could be “cruel and unusual”.
Cruel and Unusual Punishment
In their argument for the application of section 12, the company suggested that fines could be cruel and unusual where they were “so excessive as to outrage standards of decency” and “abhorrent or intolerable” as found in the recent case of R v Boudreault, 2018 SCC 58,  3 SCR 599. However, the Supreme Court distinguished Boudreault, which dealt with the mandatory application of victim fine surcharges under the Criminal Code being levied against convicted criminals without the means to pay: “recognizing the suffering of individuals from harsh economic treatment by the state does not lead to the inference that section 12 protects the economic interests of corporations.”
Instead, the judges in three concurring reasons, all agreed that the word “cruel” is inherently linked to the pain and suffering of humans or other living beings, not “inanimate objects without a soul or emotional life.” Furthermore, the protection against cruelty is inextricably linked to the dignity of all human beings, something which corporate entities could not experience. Thus, based on these grounds, the court found that the appropriate constitutional interpretation of section 12 precluded its application to corporations.
The Limited Use of the Charter in Quasi-Criminal and Regulatory Proceedings
Given the Supreme Court’s decision, the Charter remains of limited application to a corporate accused in quasi-criminal and regulatory proceedings. While sections 7 to 14 of the Charter are legal rights provided to all accused persons, the primary rights that generally remain applicable to corporations are section 8, section 11(b), and section 11(d):
- section 8 continues to protect corporations from unreasonable search and seizure of property—the basis for this protection however largely stems from the potential effects of a search on employees;
- section 11(b) provides that corporations, like people, are entitled to trial in a reasonable time—again, the basis for this was not based on any personal characteristics of a corporation, but on every accused’s right to a fair trial; and
- section 11(d) provides all accused, including corporations, to be presumed innocent until proven guilty.
Increased Fines in Quasi-Criminal and Regulatory Proceedings
In recent years, there has been a significant trend increasing both mandatory minimum and possible maximum fines to punish corporate offenders. As an example, in the area of environmental regulation, governments have imposed mandatory minimum fines in Ontario (under the Environmental Protection Act), Quebec (under the Environment Quality Act), and federally (under the Fisheries Act and Migratory Birds Convention Act). While mandatory minimums may seem relatively small in some cases and in some circumstances, these fines are often calculated for each day an offence occurs and can disproportionally affect corporations with massive fines in total.
In some cases, the magnitude of maximum penalties have also ballooned. For example, as a result of amendments under the Environmental Amendment Act in 2010, maximum fines for a summary conviction under several environmental statutes, such as the Migratory Birds Convention Act and Canadian Environmental Protection Act, increased from $300,000 to $4,000,000 per offence.
These amendments have also corresponded to dramatic increases in fine amounts issued by the courts for corporate offenders under environmental legislation, including recent decisions such as R v University of British Columbia ($1.15 million), R v Kirby Offshore Marine Operating LLC ($2.9 million), and R v The Lake Louise Ski Area Ltd ($2.1 million).
In summary, increased minimum and maximum fines in Canada for quasi-criminal and regulatory offences have become more common, resulting in the potential for significant penalties even in relatively minor circumstances. Despite this trend, the Supreme Court of Canada has made it clear that corporations cannot rely on section 12 of the Charter to argue that high fines constitute cruel and unusual punishment. In spite of this result, other well-established principles for determining the appropriate magnitude of a fine in quasi-criminal or regulatory proceedings, such as proportionality, parity and totality, remain intact.
For companies under investigation or subject to quasi-criminal or regulatory proceedings, 9147-0732 Québec Inc provides several important considerations:
- as regulatory fines increase in Canada, the Charter will continue to be of limited use in its application to quasi-criminal and regulatory prosecutions;
- minor contraventions can lead to significant fines, which cannot be challenged under section 12 of the Charter; and
- the limitation of the Charter in this area will make it harder to challenge mandatory minimum and possible maximum fines.
The Bennett Jones Environmental Law group provides advice at all stages of quasi-criminal and regulatory proceedings. For any questions related to these issues, please contact the authors.