Held: The appeals should be dismissed.
Appellants are criminally liable in the circumstances by operation of the identification theory. The underlying premise of this theory is that the identity of the directing mind and the identity of the company coincide; the actor‑employee who physically committed the offence is the ego of the corporation. Therefore, even in mens rea offences, if the court finds the officer or managerial level employee to be a vital organ of the company and virtually its directing mind in the sphere of duty assigned him so that his actions and intent are the action and intent of the company itself, the company can be held criminally liable. The wrongful action of the primary representative, by attribution to the corporation, creates primary rather than vicarious liability. The identity doctrine merges the board of directors, the managing director, the superintendent, the manager or anyone else to whom was delegated the governing executive authority of the corporation, and the conduct of any of the merged entities is thereby attributed to the corporation. A corporation may, by this means, have more than one directing mind.
The directing mind, as a prerequiste to the theory's operation, must act within the scope of his authority, that is, his actions must be performed within the sector of the corporate operation assigned to him. The sector may be functional, or geographic, or may embrace the entire undertaking of the corporation. Terminological problems arise from the use of the phrase "scope of employment".
It is no defence to the application of the identification doctrine that a criminal act by a corporate employee cannot be within the scope of his authority unless expressly ordered to do the act in question. Such a condition would reduce the rule to virtually nothing. Liability can arise whether or not there be formal delegation, awareness of the board or directors, or express prohibition.
A corporation in reality has these elements: the legal entity, the personal shareholder, and the employee. By reason of the identification theory, the criminal penalty will extend, directly or indirectly, to all three which is quite unlike the situation of a natural proprietor where only two of these elements are present. Imposition of criminal liability is tolerable for a community where reality dictates corporate criminal accountability in certain circumstances.
Each company had a directing mind and the fact that he may have defrauded the corporate employer, acted in part for his own benefit, or acted in breach of instructions did not remove the company's criminal liability in the circumstances.
The presence of general or specific instructions prohibiting the conduct in question was irrelevant in determining the parameters of the identification theory. Since the corporation and the directing mind became one, the prohibition directed by the corporation to others is of no effect in law on the determination of criminal liability of either the directing mind or the corporation itself by reason of the actions of the directing mind.
The outer limit of the delegation doctrine is, however, reached and exceeded when the directing mind ceases completely to act, in fact or in substance, in the interests of the corporation. The identification theory ceases to operate when the directing mind intentionally defrauds the corporation and when his wrongful actions form the substantial part of the regular activities of his office. In such a case, where his entire energies are directed to the destruction of the undertaking of the corporation, the manager cannot realistically be considered to be the directing mind of the corporation. The same reasoning can be applied to the concept of benefits. Unlike fraud, however, a benefit can be in whole or in part. Benefit, in the sense that the directing mind intended that the corporation should not benefit from any of its activities in the undertaking, is in reality quite different from benefit to the directing mind in single transactions or in a minor part of the activities of the directing mind.
Where the criminal act is totally in fraud of the corporate employer and where the act is intended to and does result in benefit exclusively to the employee‑manager, the employee‑directing mind, from the outset of the design and execution of the criminal plan, ceases to be a directing mind of the corporation and consequently his acts cannot be attributed to the corporation under the identification doctrine. Thus, the identification doctrine only operates where the Crown demonstrates that the action taken by the directing mind (a) was within the field of operation assigned to him; (b) was not totally in fraud of the corporation; and (c) was by design or result partly for the benefit of the company.
The factual basis for these "defences" to corporate criminal liability was not present here. The impugned activities formed a "share the wealth" project for the benefit of all concerned except the public authorities who awarded the contracts. In their activities the directing minds were acting partly for the benefit of the employing appellant and partly for their own benefit.
Although the directing minds of all four appellants practised and benefited from specific instances of fraud, they did not act wholly for their own benefit or wholly in fraud of their employer in the sense that the scheme was designed to deprive the appellants from all benefit. There was no evidence in the record of any plan amongst the directing minds or of a plan held by a single directing mind which involved the destruction of the undertaking of the appellant corporations or the undermining of their fiscal health. The conspiratorial directing minds, to the contrary, aimed to ensure their corporate employers an enhanced level of profits and in the process bettered themselves.
Cases Cited
Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153; Nordik Industries Ltd. v. Regional Controller of Inland Revenue, [1976] 1 NZLR 194; Moore v. I. Bresler, Ltd., [1944] 2 All E.R. 515; R. v. Parker Car Wash Systems Ltd. (1977), 35 C.C.C. (2d) 37, considered; R. v. City of Sault Ste. Marie, [1978] 2 S.C.R. 1299; R. v. Great West Laundry Co. (1900), 3 C.C.C. 514; Lennard’s Carrying Co. v. Asiatic Petroleum Co., [1915] A.C. 705; Director of Public Prosecutions v. Kent and Sussex Contractors, Ltd., [1944] K.B. 146; R. v. I.C.R. Haulage, Ltd., [1944] K.B. 551; R. v. Fane Robinson Ltd., [1941] 3 D.L.R. 409; R. v. Ash‑Temple Co. (1949), 93 C.C.C. 267; R. v. Electrical Contractors Association of Ontario and Dent, [1961] O.R. 265; R. v. H.J. O’Connell Ltd., [1962] Que. Q.B. 666; R. v. J.J. Beamish Construction Co., [1966] 2 O.R. 867; R. v. St. Lawrence Corp., [1969] 2 O.R. 305; R. v. Spot Supermarket Inc. (1979), 50 C.C.C. (2d) 239; R. v. P.G. Marketplace and McIntosh (1979), 51 C.C.C. (2d) 185; R. v. Martin, [1932] 3 W.W.R. 1; R. v. McDonnell, [1966] 1 All E.R. 193; R. v. Fell (1981), 64 C.C.C. (2d) 456; New York Central and Hudson River Railway Co. v. United States, 212 U.S. 481 (1909); Egan v. United States, 137 F.2d 369 (1943); United States v. Basic Construction Co., 711 F.2d 570 (1983); The People v. Canadian Fur Trappers Corp., 248 N.Y. 159 (1928); State of Idaho v. Adjustment Department Credit Bureau, Inc., 483 P.2d 687 (1971); State of Louisiana v. Chapman Dodge Center Inc., 428 S.2d 413 (1983); Commonwealth of Massachusetts v. Beneficial Finance Co., 275 N.E.2d 33 (1971); R. v. Australian Films Ltd. (1921), 29 C.L.R. 195; Mousell Brothers, Ltd. v. London and North‑Western Railway Co., [1917] 2 K.B. 836; Morgan v. Babcock and Wilcox Ltd. (1929), 43 C.L.R. 163; Australian Stevedoring Industry Authority v. Oversea and General Stevedoring Co. (1959), 1 F.L.R. 298; Grain Sorghum Marketing Board v. Supastok Pty. Ltd., [1964] Qd.R. 98; Lamb v. Toledo‑Berkel Pty. Ltd., [1969] V.R. 343; Kehoe v. Dacol Motors Pty. Ltd., [1972] Qd.R. 59; Universal Telecasters (QLD) Ltd. v. Guthrie (1978), 32 F.L.R. 361; Trade Practices Commission v. Annand and Thompson Pty. Ltd. (1978), 19 A.L.R. 730; United States v. Hilton Hotels Corp., 467 F.2d 1000 (1972); Upholsterers International Union of North America, Local 1 v. Hankin & Struck Furniture Ltd. (1964), 49 W.W.R. 33; R. v. Waterloo Mercury Sales Ltd., [1974] 4 W.W.R. 516; Old Monastery Co. v. United States, 147 F.2d 905 (1945); United States v. Empire Packing Co., 174 F.2d 16 (1949); Standard Oil Co. of Texas v. United States, 307 F.2d 120 (1962); United States v. Carter, 311 F.2d 934 (1963); United States v. Ridglea State Bank, 357 F.2d 495 (1966); United States v. Beusch, 596 F.2d 871 (1979); United States v. Cincotta, 689 F.2d 238 (1982); United States v. Richmond, 700 F.2d 1183 (1983), referred to.
Statutes and Regulations Cited
Criminal Code, R.S.C. 1970, c. C‑34, ss. 338(1), 423(1)(d), 647.
Criminal Code Amendment Act, 1909, 1909 (Can.), c. 9, s. 2.
Maine Criminal Code, 9 Maine Rev.Stats.Anno., Title 17‑A, § 60.
Authors Cited
Andrews, John. "Reform in the Law of Corporate Liability," [1973] Crim. L.R. 91, 91‑97.
Archbold’s Pleading, Evidence and Practice in Criminal Cases, 41st ed., Stephen Mitchell, P.G. Richardson and J.H. Buzzard, eds., London, Sweet & Maxwell, 1982.
Australian Commentary on Halsbury’s Laws of England (4th ed.), vol. D, Sydney, Butterworths, 1976.
Burns, Peter. A Feature of Corporate Criminal Liability or Why the Brains of a Corporation Are Not Necessarily Its ‘Intimate Friends’ " (1977‑78), 2 Can. Bus. L.J. 474, 474‑476.
Caroline, M.W. "Corporate Criminality and the Courts: Where are They Going?" (1985), 27 C.L.Q. 237, 237‑254.
Clad, J.C. "The Criminal Liability of Companies", [1977] N.Z.L.J. 420, 420‑424.
Ewaschuk, E.G. "Corporate Criminal Liability and Related Matters" (1975), 29 C.R.N.S. 44, 44‑78.
Fien, C.M. "Corporate Responsibility Under Criminal Law" (1973), 5 Man. L.J. 421, 421‑439.
Fisse, W.B. "The Distinction Between Primary and Vicarious Corporate Criminal Liability" (1967), 41 A.L.J. 203, 203‑210.
Ford, H.A.J. Principles of Company Law, 3rd ed., Sydney, Butterworths, 1982.
Halsbury’s Laws of England, vols. 8 and 9, 1st ed., London, Butterworths, 1909.
Halsbury’s Laws of England, vols. 8 and 9, 2nd ed., London, Butterworths, 1933.
Halsbury’s Laws of England, vols. 9 and 10, 3rd ed., London, Butterworths, 1954.
Halsbury’s Laws of England, vol. 9, 4th ed., London, Butterworths, 1974.
Halsbury’s Laws of England, vol. 14, 4th ed., London, Butterworths, 1975.
Howard, Colin. Criminal Law, 4th ed., Sydney, Law Book Co., 1982.
Leigh, L.H. "The Criminal Liability of Corporations and Other Groups" (1971), 9 U. Ott. L.R. 247, 247‑302.
Muir, I.A. Tesco Supermarkets Corporate Liability and Fault" (1973), 5 N.Z.V.L.R. 357, 357‑372.
Shorter Oxford English Dictionary, Oxford, Clarendon Press, 1959.
Stuart, Don. Canadian Criminal Law, Toronto, Carswells, 1982.
Waddams, S.M. "Alter Ego and the Criminal Liability of Corporations" (1966), 24 U.T. Fac. L.R. 145, 145‑153.
Welsh, R.S. "The Criminal Liability of Corporations" (1946), 62 L.Q.R. 345, 345‑365.
Williams, Glanville. Textbook of Criminal Law, London, Stevens & Sons, 1978.
Williams, Glanville. Textbook of Criminal Law, 2nd ed., London, Stevens & Sons, 1983.
Winn, C.R.N. "The Criminal Responsibility of Corporations" (1929), 3 Camb. L.J. 398, 398‑415.
Yarosky, Harvey. "The Criminal Liability of Corporations" (1964), 10 McGill L.J. 142, 142‑157.
APPEALS from judgments of the Ontario Court of Appeal, sub nom. R. v. McNamara (No. 1) (1981), 56 C.C.C. (2d) 193, dismissing appeals from convictions. Appeals dismissed.
Douglas Laidlaw, Q.C., and Roy Stephenson, for appellant Canadian Dredge & Dock Company, Limited.
John Sopinka, Q.C., and James Woods, for appellant Marine Industries Limited.
Marcel Piché, Q.C., and J. O’Reilly, for appellants The J.P. Porter Company Limited and Richelieu Dredging Corporation Inc.
Edward Then, Q.C., and John C. Pearson, for the respondent.
The judgment of the Court was delivered by
1. Estey J.‑‑The complex of convictions and acquittals which led to this appeal raises important issues fundamental to the liability of a corporation in criminal law. The procedural history from trial through appeal of some twenty accused on an indictment containing seven counts is not relevant to the disposition of the four appeals now before this Court. These are appeals by four corporate appellants from convictions under ss. 338(1) and 423(1)(d) of the Criminal Code, R.S.C. 1970, c. C‑34. Following a trial of some fifteen months duration, including an eleven‑day charge to the jury by the learned trial judge, Parker A.C.J.H.C., five accused were acquitted, the jury was unable to reach a verdict concerning two accused, and convictions were entered against the remaining thirteen accused on one or more of the seven counts. The thirteen accused who were convicted appealed convictions and sentences to the Court of Appeal. The Attorney General of Ontario appealed the sentence imposed on three of the accused. The Court of Appeal dismissed eight appeals completely and ordered new trials in the case of five appellants on some or all of their respective counts. Four appellants now appeal as follows:
(a) The appellant Canadian Dredge & Dock Company, Limited (hereinafter referred to as CD") appeals against the convictions entered at trial and confirmed by the Court of Appeal on counts 1, 3, 4, 5 and 6 and asks that the conviction be quashed or in the alternative that a new trial be ordered;
(b) The appellant Marine Industries Limited (hereinafter referred to as MIL") appeals against conviction on count 2 and asks that the conviction be quashed and a new trial ordered;
(c) The appellant The J.P. Porter Company Limited (hereinafter referred to as Porter") appeals against the convictions entered at trial and confirmed by the Court of Appeal on counts 1, 4, 5, and 6 and asks that the convictions be quashed or in the alternative that there be an order for a new trial;
(d) The appellant Richelieu Dredging Corporation Inc. (hereinafter referred to as Richelieu") appeals against convictions entered at trial and confirmed by the Court of Appeal on counts 1 and 3 and asks that the convictions be quashed or in the alternative that a new trial be ordered.
There is no cross‑appeal by the Crown against the order of the Court of Appeal for a new trial on count 7 in the case of the appellant MIL.
2. Leave to appeal to this Court was granted on the following questions of law:
Re: Canadian Dredge & Dock Company Limited v. The Queen and Marine Industries Limited v. The Queen:
Is the criminal liability of a corporation, when it is based on the misconduct of a directing mind of the corporation, affected because the person who is the directing mind is at the same time acting, in whole or in part, in fraud of the corporation, or wholly or partly for his own benefit or contrary to instructions that he not engage in any illegal activities in the course of his duties?
Re: J.P. Porter Company Limited and Richelieu Dredging Corporation Inc. v. The Queen
Was there any evidence that a directing mind of the applicant corporation was acting wholly or in part in fraud of the corporation during the period covered by the indictments herein or acting wholly or in part for his own benefit during that period or contrary to instructions that he not engage in illegal activities in the course of his duties and, if so, is the criminal liability of the corporation affected by any one or more of such circumstances?
3. These questions raise squarely the issue of corporate criminal liability in our law by reason of the so‑called indentification theory or otherwise. CD, particularly, does not accept the proposition that a corporation can be liable in criminal law for a mens rea offence by reason of the identification doctrine. It is submitted on behalf of CD and MIL that this is a doctrine originating in civil law and has not been properly and authoritatively brought into Canadian criminal law. Alternatively, the appellants CD and MIL submit that a corporation is not liable in criminal law when the directing mind of the corporation is, at the material time:
1. acting in fraud of the corporation; or,
2. acting wholly or partly for his or her own benefit; or,
3. acting contrary to instructions that he not engage in illegal action in the course of his duties.
4. In the case of the appellants Porter and Richelieu the submission is made that there is evidence to support a finding that the directing minds of the corporation were, at the times in question, acting in fraud of the corporation or wholly or partly for their own benefit or contrary to instructions not to comit illegal activities in the course of employment, or any one of these circumstances; and therefore the answer to the second question, supra, is said by these appellants to be the same as the answer to the first question.
5. In none of these appeals does the Crown concede that there is any evidence in respect of any of the appellants in support of any of the three separate defences alleged by these appellants to exist in law; or that these defences are known to the law.
6. The several counts in the indictment relate to contracts between certain public authorities and the accused for dredging in the St. Lawrence River and in some of the Great Lakes in the years 1967‑73 inclusive. Many issues were raised and disposed of at trial and in the Court of Appeal which are not covered by the two questions now brought before this Court. Only the issues raised in the two questions, supra, as they relate to these four appellants remain to be settled. It is not necessary in dealing with these remaining issues of law to restate the complex corporate history of the appellants, their ownership from time to time, the evidence concerning each appellant on each count, or the details of the operation of the bidding system with reference to which these charges arose. The judgment of the Court of Appeal examines all such matters in both a detailed and comprehensive manner and may be found at [sub nom. R. v. McNamara (No. 1)] (1981), 56 C.C.C. (2d) 193. The essential facts as seen by the Crown are summarized at pp. 249‑51.
7. Each of the appellants had a manager who conducted the business of the company relating to the submission of bids for tender dredging work. These managers were:
(a) for MIL, Louis DeRome who was the General Manager of dredging operations and who became Vice‑President of the company in 1967. He died in 1970 before these proceedings commenced;
(b) for Porter, Horace Rindress who became Vice‑President of Porter in 1959 and thereafter was made a Director in 1961 and President in 1969. Rindress testified for the Crown;
(c) for Richelieu, Rindress who became President after the company was acquired by Porter in 1972;
(d) for CD, Robert Schneider who was at various times a Director and Officer and the person in charge of dredging for the appellant. He held similar positions with the appellant's predecessor companies prior to that. Schneider testified for the Crown.
The respondent Crown asserts that bids were submitted in response to calls for tender by the Government of Canada or its agencies on a collusive basis. "Low bidders" were said to have included in their bids "costs" which would cover compensating payments to be made to co‑operating " high bidders" or in some cases, "non‑bidders". Other forms of compensation were sometimes arrangements which included subcontracts by successful bidders to the accommodation bidders or to other members of the alleged conspiracy.
It was the theory of the Crown that the consideration given for these co‑operative bids or withholding of competitive bids was included in the cost estimates of the successful bidders so that the public agency was paying a higher price for the work than it would have paid if the job had been bid competitively. When money was offered as the form of consideration, the amount was recorded on documents known as "score sheets" which were kept by Rindress, Quinlan*1 and Schneider; they would meet periodically to reconcile the commitments recorded on the "score sheets" and to settle accounts. If there remained a balance owing by one corporation to another, on some occasions a false invoice would be issued by the corporation to whom the money was owing or by some other corporation designated by it, which would then be paid by a cheque from the debtor company. In some cases, however, the balance was merely recorded and carried forward. As previously mentioned, in some cases Schneider and Quinlan devised schemes whereby they personally obtained the benefit of the pay‑offs without the knowledge of the corporation which they represented. From time to time the "score sheets" were destroyed when the accounts were settled.
*1 Quinlan played the same role with reference to the accused, McNamara Corporation Limited, as Messrs. Rindress and Schneider did with reference to the other corporate accused. Quinlan was the General Manager and Vice President of the Marine Division of McNamara Corporation Limited.
(At pages 250‑51.)
8. The theory of the defence to these charges, as advanced by the appellants, is simply that whatever may be the position of the guiding managers of the four appellants personally at criminal law, no criminal liability attaches to these appellants under any of the counts because these managers were either acting in fraud on the appellant‑employers, were acting throughout for their own benefit, or were acting contrary to instructions and hence were acting outside the scope of their employment with the appellants in question. As noted earlier, in this Court at least, several of the appellants also challenged the existence of any theory of corporate criminal liability for mens rea offences.
9. In his charge to the jury, the learned Associate Chief Justice discussed the three defences put in issue by the appellants and as set out in questions 1 and 2, supra, together with the application of the identification theory in Canadian criminal law. The Court of Appeal reviewed the law and concluded that none of these defences was known to the law or, alternatively, none was, on the evidence, applicable, and consequently the appellants CD and MIL were guilty as charged on counts now in issue. In the case of the appellants Porter and Richelieu, the Court of Appeal found that whether or not these defences existed in law, there was no evidence that the directing mind of these appellants, Rindress, had conducted himself so as to raise such defences.
10. The position of the corporation in criminal law must first be examined. Inasmuch as all criminal and quasi‑criminal offences are creatures of statute the amenability of the corporation to prosecution necessarily depends in part upon the terminology employed in the statute. In recent years there has developed a system of classification which segregates the offences according to the degree of intent, if any, required to create culpability.
(a) Absolute Liability Offences
11. Where the legislature by the clearest intendment establishes an offence where liability arises instantly upon the breach of the statutory prohibition, no particular state of mind is a prerequisite to guilt. Corporations and individual persons stand on the same footing in the face of such a statutory offence. It is a case of automatic primary responsibility. Accordingly, there is no need to establish a rule for corporate liability nor a rationale therefor. The corporation is treated as a natural person.
(b) Offences of Strict Liability
12. Where the terminology employed by the legislature is such as to reveal an intent that guilt shall not be predicated upon the automatic breach of the statute but rather upon the establishment of the actus reus, subject to the defence of due diligence, an offence of strict liability arises. See R. v. City of Sault Ste. Marie, [1978] 2 S.C.R. 1299. As in the case of an absolute liability offence, it matters not whether the accused is corporate or unincorporate, because the liability is primary and arises in the accused according to the terms of the statute in the same way as in the case of absolute offences. It is not dependent upon the attribution to the accused of the misconduct of others. This is so when the statute, properly construed, shows a clear contemplation by the Legislature that a breach of the statute itself leads to guilt, subject to the limited defence above noted. In this category, the corporation and the natural defendant are in the same position. In both cases liability is not vicarious but primary.
(c) Offences Requiring Mens Rea
13. These are the traditional criminal offences for which an accused may be convicted only if the requisite mens rea is demonstrated by the prosecution. At common law a corporate entity could not generally be convicted of criminal offence. Corporate criminal immunity stemmed from the abhorrence of the common law for vicarious liability in criminal law, and from the doctrine of ultra vires, which regarded criminal activities by corporate agents as beyond their authority and beyond corporate capacity. At the other extreme in the spectrum of criminal offences there are certain crimes which cannot in any real sense be committed by a corporation as a principal, such as perjury and bigamy, whatever the doctrine of corporate criminal liability may be. As a corporation may only act through agents, there are basically only three approaches whereby criminal intent could be said to reside or not reside in the corporate entity:
(i) a total vicarious liability for the conduct of any of its agents whatever their level of employment or responsibility so long as they are acting within the scope of their employment;
(ii) no criminal liability unless the criminal acts in question have been committed on the direction or at the request, express or clearly implied, of the corporation as expressed through its board of directors;
(iii) a median rule whereby the criminal conduct, including the state of mind, of employees and agents of the corporation is attributed to the corporation so as to render the corporation criminally liable so long as the employee or agent in question is of such a position in the organization and activity of the corporation that he or she represents its de facto directing mind, will, centre, brain area or ego so that the corporation is identified with the act of that individual. There is said to be on this theory no responsibility through vicarious liability or any other form of agency, but rather a liability arising in criminal law by reason of the single identity wherein is combined the legal entity and the natural person; in short, a primary liability. This rule stands in the middle of the range or spectrum. It is but a legal fiction invented for pragmatic reasons.
14. The position of the corporation in criminal law has been under examination by courts and lawmakers for centuries. The questions which arise are manifold and complex. They are not likely to be answered in a permanent or universal sense in this appeal, or indeed by the courts acting alone. Proceeding through the history of these issues in the criminal law adds perspective but no clear answer to the problem. The first edition of Halsbury’s (1909) summarizes the position of the law up to that point at vol. 8, p. 390, paragraph 858:
858. By the general principles of the criminal law, if a matter is made a criminal offence it is essential that there should be something in the nature of mens rea, and therefore, in ordinary cases, a corporation aggregate cannot be guilty of a criminal offence.
There were four exceptions in the early common law to corporate immunity: (1) public nuisance, (2) criminal libel, (3) absolute liability offences created by statute and (4) contempt of court. See also vol. 9, pp. 235‑36, paragraph 503.
15. The second edition of Halsbury’s, published in 1933, is in precisely the same words as the earlier edition. By the time of the publication of the third edition in 1954 the law had moved along.
521. Corporations. A corporation aggregate cannot be guilty of any offences (such as bigamy or perjury) which by their very nature can only be committed by natural persons; nor can a corporation aggregate be found guilty of a crime where the only punishment is death or imprisonment.
Apart from these exceptions, a corporation may be guilty both of statutory and of common law offences, even though the latter involve mens rea; and in the construction of any enactments relating to an offence punishable on indictment or on summary conviction, the expression person" includes a body corporate unless the contrary intention appears. A corporation can only commit crimes by or through its agents, some of whom must themselves be responsible for the crime. It is a question of fact in each particular case whether the criminal act of its agent is the act of the corporation, and whether the agent's state of mind, intention, knowledge or belief can be imputed to the corporation. It depends on the nature of the charge, the position of the officer or agent relative to the corporation and the other relevant facts and circumstances of the case.
(Vol. 10, pp. 281‑82, paragraph 521.)
See also Halsbury’s (3rd ed.), vol. 9, p. 90, paragaph 183. By the time the fourth edition appeared in 1974 the law had changed a little more. The learned authors of this edition had this to say (vol. 11, p. 30, paragraph 34):
34. Corporations. In general, a corporation is in the same position in relation to criminal liability as a natural person and may be convicted of common law and statutory offences including those requiring mens rea. There are, however, crimes which a corporation is incapable of committing or of which a corporation cannot be found guilty as a principal....
Criminal liability of a corporation arises where an offence is committed in the course of the corporation's business by a person in control of its affairs to such a degree that it may fairly be said to think and act through him so that his actions and intent are the actions and intent of the corporation. It is not enough that the person whose conduct it is sought to impute to the corporation is a manager or responsible agent or high executive; whether persons are the directing mind and will" of a corporation, so that their conduct in its affairs becomes the conduct of the corporation, must depend on all the circumstances.
See also Halsbury’s (4th ed.), vol. 9, p. 804, paragraph 1379.
16. At common law there was no difficulty in finding liability in a corporation in the law of torts, even though the state of mind of the corporation was established by imputing to that corporation the intentions and the conduct of its servants and agents. Thus, in the law of torts, the courts from the earliest times found vicarious liability in the corporation on the principles of agency. On the other hand, the common law of England has shrunk back from the application of the doctrine of vicarious liability for the determination of corporate liability in criminal law for the acts of its agents (with the four exceptions already noted). This led to an irrational result, namely: general corporate immunity from liability under the criminal law at a time when the corporation, for a variety of reasons, had become the principal vehicle of commerce in the community. The state itself, through corporate and taxation legislation particularly, had actually promoted or at least facilitated this result. Early in the century the courts began to dismantle the principle of corporate immunity in the criminal law. Procedural and other obstacles to the imposition of corporation criminal liability were overcome. See Leigh, The Criminal Liability of Corporations and Other Groups" (1971), 9 U. Ott. L.R. 247, at pp. 248‑49. Perhaps the last major procedural impediment, the impossibility, as seen by some courts, of punishing a corporation when the only statutory sanction imposed was imprisonment (for example, R. v. Great West Laundry Co. (1900), 3 C.C.C. 514 (Man. Q.B.)), was removed in 1909 by The Criminal Code Amendment Act, 1909, 1909 (Can.), c. 9, s. 2 (the predecessor to the present s. 647 of the Criminal Code ) which allowed the substitution of a fine in lieu of any punishment where a corporation is convicted. Ironically, the destruction of the most difficult barrier, the attribution of mens rea to a corporation, began in earnest in a case in civil law: Lennard’s Carrying Co. v. Asiatic Petroleum Co., [1915] A.C. 705. The House of Lords was concerned with a corporation's civil liability for damages under a statute which afforded a defence where such loss occurred without its fault in privity". At issue was whether the fault" of a director who was active in the operations of the corporation, was in law the fault of the corporation itself. The Lord Chancellor, Viscount Haldane, laid down the general principle of corporate liability which is still the guiding principle in United Kingdom law (at pp. 713‑14):
... a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. That person may be under the direction of the shareholders in general meeting; that person may be the board of directors itself, or it may be, and in some companies it is so, that that person has an authority co‑ordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company, and can only be removed by the general meeting of the company. ... [W]hatever is not known about Mr. Lennard's position, this is known for certain, Mr. Lennard took the active part in the management of this ship on behalf of the owners, and Mr. Lennard, as I have said, was registered as the person designated for this purpose in the ship's register. Mr. Lennard therefore was the natural person to come on behalf of the owners and give full evidence not only about the events of which I have spoken, and which related to the seaworthiness of the ship, but about his own position and as to whether or not he was the life and soul of the company. For if Mr. Lennard was the directing mind of the company, then his action must, unless a corporation is not to be liable at all, have been an action which was the action of the company itself within the meaning of s. 502. It has not been contended at the Bar, and it could not have been successfully contended, that s. 502 is so worded as to exempt a corporation altogether which happens to be the owner of a ship, merely because it happens to be a corporation. It must be upon the true construction of that section in such a case as the present one that the fault or privity of somebody who is not merely a servant or agent for whom the company is liable upon the footing respondeat superior, but somebody for whom the company is liable because his action is the very action of the company itself.
17. Convictions were thereafter sustained under a variety of statutes including those establishing offences requiring proof of the element of mens rea, the courts applying the words of the House of Lords in Lennard’s case, supra, in attributing to the accused corporation the actions of the directing mind". See Director of Public Prosecutions v. Kent and Sussex Contractors, Ltd., [1944] K.B. 146, at pp. 155‑56, where Viscount Caldecote C.J. said:
The offences created by the regulation are those of doing something with intent to deceive or of making a statement known to be false in a material particular. There was ample evidence, on the facts as stated in the special case, that the company, by the only people who could act or speak or think for it had done both these things,...
Macnaghten J., in a concurring opinion, expressed the principle in broader terms (at p. 156):
If the responsible agent of a company, acting within the scope of his authority, puts forward on its behalf a document which he knows to be false and by which he intends to deceive, I apprehend that, according to the authorities that my Lord has cited, his knowledge and intention must be imputed to the company.
See also R. v. I.C.R. Haulage, Ltd., [1944] K.B. 551 to the same effect.
18. These general principles found application in the courts of this country in a series of cases. In R. v. Fane Robinson Ltd., [1941] 3 D.L.R. 409, the Court of Appeal of Alberta set aside an acquittal of two companies where two of its directors and officers conspired with another to defraud an insurance company by inflating the charges made by the defendant company to the insurance company for automobile repairs. Ford J.A., for the Court, found, at p. 415, that the two officers were the:
. . . acting and directing will of [the accused corporation] generally and in particular in respect of the subject‑matter of the offences with which it is charged, that their culpable intention (mens rea) and their illegal act (actus reus) were the intention and the act of the company and that conspiracy to defraud and obtaining money by false pretences are offences which a corporation is capable of committing.
In so doing the Court followed the United Kingdom authorities, including Lennard’s, supra, and found the company criminally liable stating, at p. 410:
...if the act complained of can be treated as that of the company, the corporation is criminally responsible for all such acts as it is capable of committing and for which the prescribed punishment is one which it can be made to endure.
The Court expressly avoided finding criminal liability through the doctrine of respondeat superior. See also the later cases: R. v. Ash‑Temple Co. (1949), 93 C.C.C. 267 (Ont. C.A.), per Robertson C.J.O., at pp. 279‑80; R. v. Electrical Contractors Association of Ontario and Dent, [1961] O.R. 265 (C.A.), per Laidlaw J.A., at p. 280; R. v. H.J. O’Connell Ltd., [1962] Que. Q.B. 666 (Q.C.A.), at p. 667; R. v. J.J. Beamish Construction Co., [1966] 2 O.R. 867 (H.C.), at p. 891, per Jessup J. as he then was; R. v. St. Lawrence Corp., [1969] 2 O.R. 305 (C.A.), per Schroeder J.A., at p. 320; R. v. Spot Supermarket Inc. (1979), 50 C.C.C. (2d) 239 (Q.C.A.), per Lamer J.A., as he then was, at p. 252; and R. v. P.G. Marketplace and McIntosh (1979), 51 C.C.C. (2d) 185 (B.C.C.A.), per Nemetz C.J.B.C., at pp. 187‑88.
19. The transition from virtual corporate immunity from criminal liability to virtual equality with humans in like circumstances under the criminal law is traced in greater detail by Jessup J., as he then was, in R. v. J.J. Beamish Construction Co., supra. Three years later Schroeder J.A., of the Court of Appeal of Ontario, in R. v. St. Lawrence Corp., supra, at pp. 315‑21, again reviewed this transition. In the end Schroeder J.A., at p. 320, adopted the same statement of the governing principle as Jessup J. had in Beamish, supra, although the earlier case is not cited:
While in cases other than criminal libel, criminal contempt of Court, public nuisance and statutory offences of strict liability criminal liability is not attached to a corporation for the criminal acts of its servants or agents upon the doctrine of respondeat superior, nevertheless, if the agent falls within a category which entitles the Court to hold that he is a vital organ of the body corporate and virtually its directing mind and will in the sphere of duty and responsibility assigned to him so that his action and intent are the very action and intent of the company itself, then his conduct is sufficient to render the company indictable by reason thereof. It should be added that both on principle and authority this proposition is subject to the proviso that in performing the acts in question the agent was acting within the scope of his authority either express or implied.
Counsel for MIL submitted that St. Lawrence, supra, does not extend to the facts here before the Court; and counsel for CD submitted that if it does so extend to the facts of this appeal, it was wrongly decided.
20. This rule of law was seen as a result of the removal of the officer or managerial level employee from the general class of inferior servants or agents" for whose acts the corporate employer continued (as in the case of the human employer) to be immune from vicarious liability in criminal law. This result is generally referred to as the `identification' theory. It produces the element of mens rea in the corporate entity, otherwise absent from the legal entity but present in the natural person, the directing mind. This establishes the identity" between the directing mind and the corporation which results in the corporation being found guilty for the act of the natural person, the employee. Such is the power of legal reasoning. It is the direct descendant of Blackstone's famous theorem: The husband and the wife in law are one and that one is the husband". It is a full brother of the dictum in corporate law that merging corporations cease to exist but find a continuance in the amalgamated company. In order to trigger its operation and through it corporate criminal liability for the actions of the employee (who must generally be liable himself), the actor‑employee who physically committed the offence must be the ego", the centre" of the corporate personality, the vital organ" of the body corporate, the alter ego" of the employer corporation or its directing mind". Schroeder J.A. in St. Lawrence, supra, for example, refers to the officer or senior management employee as the corporation's primary representative ... through whom the company acts, speaks and thinks" (p. 317). The terminology primary representative" comes from, or is coincidentally used in, C.R.N. Winn., The Criminal Responsibility of Corporations" (1929), 3 Camb. L.J. 398, where it is stated at p. 404:
... the conspiring minds are in fact the minds of the directors, or other primary presentatives. It is submitted that no mere conspiracy of inferior agents could affect the corporation with criminal guilt. If the guilty intention in the minds of the primary representatives is attributed to the corporation in this case where, more than anywhere, it is the vital element of the offence, it seems that it will always be proper to attribute to a corporation the guilty state of mind of its primary representatives when they do criminal acts on its behalf in the exercise of its powers.
At page 407 the learned author continues:
It is clear, on the one hand, that to seek to hold a corporation criminally liable for the acts of all its servants within the scope of their employment would be an innovation. The criminal law has never applied the maxim ‘respondeat superior’', and to seek to ingraft from without what has not taken spontaneous growth might prove an experiment foredoomed to failure.
It is the wrongful action of the ‘primary’ representative which by attribution to the corporation creates ‘primary’ rather than ‘vicarious’ liability, according to the identification theory. This article is aptly described by Jessup J. in Beamish, supra, as "a prophetic article". Lord Reid in Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153 (H.L.), challenged the accuracy of the expression alter ego" and so joins Viscount Haldane in the use of the expression ‘ego’ of the corporation. It follows that the management officer is not guilty additionally of the offence of conspiring with the employer to commit the wrongful act in question because in the identification theory there is only one entity, the natural, and legal person having merged into one identity, and hence the basic requirement of two persons in a conspiracy is not met. See R. v. Martin, [1932] 3 W.W.R. 1 (Man. C.A.), per Dennistoun J.A., at p. 8; R. v. McDonnell, [1966] 1 All E.R. 193, at p. 201; Leigh, The Criminal Liability of Corporations and Other Groups" supra, at p. 257; and Ewaschuk, Corporate Criminal Liability and Related Matters" (1975), 29 C.R.N.S. 44, at pp. 62‑64; but see also R. v. Electrical Contractors Association of Ontario and Dent, supra, at p. 272.
21. The principle of attribution of criminal actions of agents to the employing corporate principal in order to find criminal liability in the corporation only operates where the directing mind is acting within the scope of his authority (Beamish, supra, at pp. 890 and 892, and St. Lawrence, supra, at p. 320), in the sense of acting in the course of the corporations' business (Halsbury’s (4th ed.), vol. 14, p. 30, paragraph 34, supra). Scattered throughout the submissions on behalf of the four appellants, was a translation of the directing mind rule to a requirement that for its application the directing mind must, at all times, be acting in the scope of his employment. Conversely, the argument went, if the directing mind was acting totally outside the ‘scope of that employment’, the attribution of the acts of the directing mind to the corporate employer would not occur. The terminological problems arise from the fact that the concept of vicarious liability in the law of torts has been traditionally fenced in by the concept of the employee acting within `the scope of his employment' and not, in the classic words, on a frolic of his own". The identification theory, however, is not concerned with the scope of employment in the tortious sense. Scope of employment" in the St. Lawrence judgment, supra, and the other discussions of that term in Canadian law have reference to the field of operations delegated to the directing mind. The charge by His Lordship to the jury makes this abundantly clear, as does the Court of Appeal in its analysis of this defence. The Court in St. Lawrence, supra, in describing the elements of the delegation theory, concluded by adding that attribution to the corporation occurred only so long as the directing will was acting in the scope of his employment." The expression comes from the law of tort and agency and from master and servant law. It is not apt in relation to the identification theory. It smacks of vicarious liability and it invites the defence that criminal actions must prima facie be beyond the scope of an employee's duty and authority. The learned trial judge, in directing the jury, expressed it more accurately: ... so long as he was acting within the scope of the area of the work assigned to him." In Tesco, supra, at p. 171, Lord Reid employed the phrase acting within the scope of delegation" of the corporation's business. The essence of the test is that the identity of the directing mind and the company coincide so long as the actions of the former are performed by the manager within the sector of corporation operation assigned to him by the corporation. The sector may be functional, or geographic, or may embrace the entire undertaking of the corporation. The requirement is better stated when it is said that the act in question must be done by the directing force of the company when carrying out his assigned function in the corporation. It is no defense to the application of this doctrine that a criminal act by a corporate employee cannot be within the scope of his authority unless expressly ordered to do the act in question. Such a condition would reduce the rule to virtually nothing. Acts of the ego of a corporation taken within the assigned managerial area may give rise to corporate criminal responsibility, whether or not there be formal delegation; whether or not there be awareness of the activity in the board of directors or the officers of the company; and, as discussed below, whether or not there be express prohibition.
22. Generally the directing mind is also guilty of the criminal offence in question. Glanville Williams, in Textbook of Criminal Law (1978), states, at p. 947:
...the director or other controlling officer will almost always be a co‑perpetrator of or accessory in the offence....
In R. v. Fell (1981), 64 C.C.C. (2d) 456, Martin J.A., for the Ontario Court of Appeal, quoted the foregoing excerpt with approval but was there concerned with determining whether the directing mind was also guilty of the offence and not with the question as to whether or not this was a condition precedent to corporate liability. It may well be inevitable that guilt of the directing mind is a condition precedent to corporate guilt, but this has yet to be stated judicially. This discussion is directed to the corporate responsibility in criminal law where its directing mind has committed an offence.
23. The route which was taken in this country and in the United Kingdom is not that which has been followed by the federal courts of the United States. Criminal responsibility in the corporation has for many years, in those courts, been placed upon the basis of the doctrine of respondeat superior. The resultant vicarious liability seems to arise in the corporation out of the criminal acts of any employee, supervisory, menial or otherwise. The United States Supreme Court expounded this principle as far back as New York Central and Hudson River Railway Co. v. United States, 212 U.S. 481 (1909). Although the statute there before the court specifically imposed liability in the corporation for the acts of its employees (without limitation), the courts have construed the case as establishing vicarious criminal liability in a corporation for the wrongful acts of its employees of all grades and classes. The rule was restated by the Court of Appeal of the 8th Circuit in Egan v. United States, 137 F.2d 369 (1943), per Thomas J., at p. 379:
The test of corporate responsibility for the acts of its officers and agents, whether such acts be criminal or tortious, is whether the agent or officer in doing the thing complained of was engaged in employing the corporate powers actually authorized" for the benefit of the corporation while acting within the scope of his employment in the business of the principal." If the act was so done it will be imputed to the corporation whether covered by the agent or officer's instructions, whether contrary to his instructions, and whether lawful or unlawful. Such acts under such circumstances are not ultra vires even though unlawful. There is no longer any distinction in essence between the civil and criminal liability of corporations, based upon the element of intent or wrongful purpose. Malfeasance of their agents is not ultra vires.
These principles have been restated as recently as the judgment in United States v. Basic Construction Co., 771 F.2d 570 (1983) (5th CCA).
24. The state courts have not as consistently pursued the course of vicarious liability of corporations in the criminal law. In The People v. Canadian Fur Trappers Corp., 248 N.Y. 159 (1928), the New York Court of Appeals, Crane J., speaking for a court that included Chief Justice Cardozo, rejected vicarious liability as a basis for corporate criminal responsibility and seemed to adopt, at pp. 163 and 169, something akin to the identification theory. To the same effect is State of Idaho v. Adjustment Department Credit Bureau, Inc., 483 P.2d 687 (1971), at p. 691, where corporate liability was found only if:
...the commission of the offence was authorized, requested, commanded or performed (i) by the board of directors, or (ii) by an agent having responsibility for formation of corporate policy or (iii) by a `high managerial agent' having supervisory responsibility over the subject matter of the offense and acting within the scope of his employment in behalf of the corporation.
State of Louisiana v. Chapman Dodge Center Inc., 428 S.2d 413 (1983), at pp. 419‑20, is to the same general effect. For a position midway between the Canadian Fur Trappers, supra, and these cases, see Commonwealth of Massachusetts v. Beneficial Finance Co., 275 N.E.2d 33 (1971).
25. At the present time, therefore, the common law in the United States seems to be based, in the federal courts on the doctrine of vicarious liability, and in many of the state courts on something akin to the identification doctrine. Court decisions are not a complete guide to the state law on this matter, however, as some states have adopted the American Law Institute Model Penal Code, which at para. 2.07 attributes criminal liability to the corporation on much the same basis as did the Court in State of Idaho v. Adjustment Department Credit Bureau, Inc., supra. On the other hand, at least one state has by statute applied the doctrine of vicarious liability without a limitation as to the level of responsibility of the employee or agent. See Maine Criminal Code, 9 Maine Rev. Stats.Anno., Title 17‑A, § 60.
26. Australian jurisprudence on the subject of corporate liability in criminal law offers little guidance in the settlement of the issues these appeals throw up. In the Australian Commentary on Halsbury’s Laws of England (4th ed.), vol. D, p. 31, paragraph C1379, it is stated: With two exceptions, the law in Australia is the same as that in England." This would indicate that liability is imposed on the basis of the identification theory. However, this work goes on to state:
In the Code States (Queensland, Tasmania and Western Australia)... corporations are not liable for simple offences committed by their servants in the course of their duties unless it can be shown that the servant was acting under instructions from the company.
It is at least clear that criminal responsibility does not arise on the basis of vicarious liability. However, the concept that Australian courts are following the United Kingdom identification doctrine is shattered by some of the Australian law literature. The following is found in the text Howard, Criminal Law (4th ed. 1982), at pp. 379‑80:
In Australia this problem has been solved by borrowing from the civil law the notion of scope of employment: E's actions are those of the corporation if they may reasonably be regarded as within the scope of his employment. The scope of E's employment for this purpose is not necessarily limited by what he has express authority to do, for if it were, at least in the case of junior employees, it frequently would be possible to exclude the operation of the criminal law by arguing that E had no authority to commit an unlawful act. On the contrary, it has been held that the knowledge of a junior employee may be the knowledge of the corporation even though he has been forbidden by a senior employee to act in the manner to which the knowledge relates.
The scope of employment doctrine has enabled the courts in a number of cases to convict corporations for the actions of quite junior employees.
Perhaps this conclusion simply illustrates the elasticity in each of these two doctrines with the result that they tend to merge, overlap and blur on application to specific sets of facts or under the wording of a particular statute. The above text finds support in the judgment of the High Court of Australia in R. v. Australian Films Ltd. (1921), 29 C.L.R. 195, where the Court found the accused corporation vicariously liable, relying at p. 217 on Mousell Brothers, Ltd. v. London and North‑Western Railway Co., [1971] 2 K.B. 836. The statute there, however, required no mens rea and the Court equated the corporation in that circumstance with a human employer‑defendant. This uncertainty of doctrine to be applied is not cleared away by the decision in Morgan v. Babcock and Wilcox Ltd. (1929), 43 C.L.R. 163 (H.C. of Aus.) A passage in the judgment at pp. 173‑74 appears to apply without limit the principle of vicarious liability. However, the offending agent in that case was the managing director of the corporation and at p. 182 it would appear that the Court in the end swung around to the application of the identification theory as the basis of corporate guilt. The dissent of Starke J. appears to apply both doctrines without favour in attributing the actions of the employee to the corporation. Isaacs J. concurred with the majority in the result but found a liability by reason of express authorization of the wrongful acts by the board of directors of the company. At least one commentator takes the view that these two cases leave open the issue in Australian law as to whether corporate liability is determined in criminal law on the basis of vicarious liability or as a primary liability through the identification theory: W.B. Fisse, The Distinction Between Primary and Vicarious Corporate Criminal Liability" (1967), 41 A.L.J. 203, at p. 205. It would appear that some of the lower court decisions favour vicarious liability as a source of criminal responsibility in a corporation. See Australian Stevedoring Industry Authority v. Oversea and General Stevedoring Co. (1959), 1 F.L.R. 298. On the other hand, other judgments would appear to apply the narrower rule of attributed acts under the identification theory. See Grain Sorghum Marketing Board v. Supastok Pty. Ltd., [1964] Qd.R. 98; Lamb v. Toledo‑Berkel Pty. Ltd., [1969] V.R. 343 at pp. 347‑48; Kehoe v. Dacol Motors Pty. Ltd., [1972] Qd.R. 59; Universal Telecasters (QLD) Ltd. v. Guthrie (1978), 32 F.L.R. 361; cf. Trade Practices Commission v. Annand and Thompson Pty. Ltd. (1978), 19 A.L.R. 730.
27. It may be that Fisse, supra, is correct when the learned author says, at p. 210, that the predominant overtone in the judgments to date favours the identification or primary liability doctrine over vicarious liability as the source of corporate criminal liability under Australian law, but the margin is at best narrow. See also H.A.J. Ford, Principles of Company Law (3rd ed. 1982), at pp. 133‑138.
28. New Zealand has followed the same course as the courts of the United Kingdom in adopting the principle of identification to overcome problems of finding criminal liability in a corporation where the older common law doctrines of rejection of respondeat superior in criminal law, course of employment, and ultra vires combine to create a substantial corporate immunity. The law of New Zealand is reviewed by J.C. Clad in The Criminal Liability of Companies", [1977] N.Z.L.J. 420, particularly at p. 424. See also Nordik Industries Ltd. v. Regional Controller of Inland Revenue, [1976] 1 NZLR 194. A commentary on Tesco Supermarkets, supra, by I.A. Muir in (1973), 5 N.Z.U.L.R. 357, on the contrary, concludes that in New Zealand law the source of corporate criminal liability is shifting towards vicarious liability.
29. In summary, therefore, the courts in this country can be said to this date to have declined generally to apply the principle of respondeat superior in the determination of corporate criminal responsibility. Criminal responsibility in our courts thus far has been achieved in the mens rea offences by the attribution to the corporation of the acts of its employees and agents on the more limited basis of the doctrine of the directing mind or identification. Corporate responsibility in both strict and absolute liability offences has been found to arise on the direct imposition of a primary duty in the corporation in the statute in question, as construed by the court. By what appears to be the same purely pragmatic reasoning, the courts of the United Kingdom find criminal liability in a corporation only by the attribution to it of the conduct of its employees and agents where those natural persons represent the core, mind and spirit of the corporation. The United States federal courts are inclined, as we have seen, to find criminal liability in the corporation by vicarious liability where any employee‑agent commits, in the course of his employment, the criminal act.
30. The criticisms of the United States federal court doctrine are manifold. The net is flung too widely, it is said. Corporations are punished in instances where there is neither moral turpitude nor negligence. No public policy is served by punishing shareholders where the corporate governing body has been guilty of no unlawful act. The disparity between the treatment of the corporate employer and the natural employer is wide and wholly without a basis in justice or political science. The test as applied in the United States federal courts may be on the broad basis above indicated because so many of the federal statutory crimes are regulatory in nature. See Leigh, supra, p. 267, footnote 134.
31. In the criminal law, a natural person is responsible only for those crimes in which he is the primary actor either actually or by express or implied authorization. There is no vicarious liability in the pure sense in the case of the natural person. That is to say that the doctrine of respondeat superior is unknown in the criminal law where the defendant is an individual. Lord Diplock in Tesco, supra, stated at p. 199:
Save in cases of strict liability where a criminal statute, exceptionally, makes the doing of an act a crime irrespective of the state of mind in which it is done, criminal law regards a person as responsible for his own crimes only. It does not recognise the liability of a principal for the criminal acts of his agent; because it does not ascribe to him his agent's state of mind. Qui peccat per alium peccat per se is not a maxim of criminal law.
On the other hand, the corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the corporation to our criminal law is as essential in the case of the corporation as in the case of the natural person.
32. Thus where the defendant is corporate the common law has become pragmatic, as we have seen, and a modified and limited `vicarious liability' through the identification doctrine has emerged. In this context I use the word vicarious" in the sense that it is defined in the principal dictionaries, including the Shorter Oxford English Dictionary (1959), where the term is defined: that takes or supplies the place of another thing or person; substituted instead of the proper thing or person." Lord Reid in Tesco, supra, distinguishes vicarious liability from the identity doctrine by wittingly or unwittingly sliding over into the merging doctrine of corporate law. In common law and in some provincial corporate legislation, two merging corporations find their continued existence in the merged or amalgamated corporation. In common law this was deemed so by operation of law or by a legal fiction. In this it is not alone. Consider the invocation of the rule of distinction between crimes of specific and crimes of general intent in order to limit and place on a rational basis acceptable to the community the defence of drunkenness. Also to be considered is the establishment of the doctrine of part performance in the interpretation of the Statute of Frauds, which includes no reference whatever to any such doctrine but which was created to prevent the Statute of Frauds itself being used to practice a fraud. The corporation is but a creature of statute, general or special, and none of the provincial corporation statutes and business corporations statutes, or the federal equivalents, contain any discussion of criminal liability or liability in the common law generally by reason of the doctrine of identification. It is a court‑adopted principle put in place for the purpose of including the corporation in the pattern of criminal law in a rational relationship to that of the natural person. The identity doctrine merges the board of directors, the managing director, the superintendent, the manager or anyone else delegated by the board of directors to whom is delegated the governig executive authority of the corporation, and the conduct of any of the merged entities is thereby attributed to the corporation. In St. Lawrence, supra, and other authorities, a corporation may, by this means, have more than one directing mind. This must be particularly so in a country such as Canada where corporate operations are frequently geographically widespread. The transportation companies, for example, must of necessity operate by the delegation and sub‑delegation of authority from the corporate centre; by the division and subdivision of the corporate brain; and by decentralizing by delegation the guiding forces in the corporate undertaking. The application of the identification rule in Tesco, supra, may not accord with the realities of life in our country, however appropriate we may find to be the enunciation of the abstract principles of law there made.
33. The corporation which set the directing mind in position to do the wrong will suffer an economic penalty. While it is true that this penalty will feed through to the stockholders, who may well be totally innocent as in the case of a large public company, it may be seen as a risk or cost associated with the privilege of operating through the corporate vehicle. In the case of personal corporations, the imposition of a criminal penalty on the corporation may be an additional penalty imposed upon the ‘personal’ corporate stockholder but such a result would be an acceptable part of the sentencing process as it simply reflects the economic identification, as well as the legal identification, present in such a corporation. In the case of a public corporation, the economic identification factor is absent, and in a theoretical sense there is an additional penalty for the same act which must be justified in some way other than that suggested above. This is the inevitable result of the pragmatic adoption of the attribution of the acts of its delegates to the delegating corporation in order to bring that corporation within the system of criminal justice. Whether the route taken be the doctrine of respondeat superior or identification, the result is the same. The corporation in reality has three elements: the legal entity, the personal shareholder (a natural person directly or indirectly), and the employee. Once the process is set in motion, the criminal penalty will extend directly or indirectly to all three which is quite unlike the situation of a natural proprietor where only two of these elements are present. All this, in my view, while not entirely logical, is a tolerable result for a community where reality dictates corporate criminal accountability in certain circumstances.
34. There is one threshold problem which arises before we come to the several defences advanced by the appellants. Was there, on the facts here, a directing mind" in the case of each appellant, assuming for the purpose of answering this question only that the employee in question had not defrauded the employer corporation, had not acted in his own benefit, and had not acted in breach of instructions?
35. The issue (aside from the applicability of the above defences) was put to the jury by the learned trial judge in his direction. Only CD in its submissions to this Court challenged the status of its officer as a directing mind. CD argued that Schneider was not an officer or in the employ of the appellant CD during part of the period in which the alleged criminal acts took place.
36. The issue arose because of the complex of predecessors to the appellant CD. During the early 1960's a corporation now called Foodex Systems Ltd. (then named Canadian Dredge and Dock Co., Limited) owned all the shares of the appellant CD (then named T.C. Gorman (Nova Scotia) Limited). At that time Schneider was in charge of the dredging operations of Foodex Systems. In 1964 the shares of the appellant CD were sold by Foodex. In 1967 Foodex sold its dredging and marine assets to Bedford Construction Co. Ltd., a company now known as Albemont Ltd., but which was known from 1967 to 1972 as Canadian Dredge & Dock Ltd. Schneider moved with the dredging assets and became vice‑president and general manager of Albemont. In 1969 Albemont acquired all the issued shares of the capital stock of the appellant when its name was T.C. Gorman (Nova Scotia) Limited. By a May 1971 agreement Albemont agreed to sell its dredging and marine assets to the appellant CD. By a second agreement dated October 1971 Albemont agreed to sell to the appellant CD the remaining assets of its dredging and marine construction division. Schneider later acquired a substantial block of shares in the appellant CD.
37. The question is whether Schneider was the directing mind of the appellant CD during the periods covered by counts 1 and 6.
38. A review of the trial judge's charge to the jury reveals that he fairly put this issue to them. With respect to count 1 he charged, in part:
The Crown alleges that the time period for Count 1 falls in the time period 3, between May '71 and December '71. The Crown submits that Schneider was an officer and director of both Canadian Dredge & Dock No. 2 [Albemont] and T.C. Gorman [the appellant CD] at the time and that the Gorman Company, which still carries on business, although it has changed its name, is still responsible for the criminal acts of Schneider.
The main issue for you is whether at that time Schneider was either expressly or impliedly authorized to bid‑rig or whether he was a directing mind of Gorman, now known as Canadian Dredge & Dock, the accused. If he was the company would be responsible for his bid‑rigging; if he was not, the company would not be responsible.
...
[T]he question then was, was Schneider either authorized, expressly or impliedly, by Gorman or was he a directing mind of Gorman.
If he was, then the present Canadian Dredge and Dock would be responsible for the actions of Schneider at that time.
Exhibits filed by the Crown‑‑you may recall certain company returns‑‑showed Schneider was a director of Gorman as of October 1st, 1963. For the years ending April 30th, 1966, 1967, 1968 and 1969 he is not shown as an officer or director. Then the returns filed as of March 12th, 1971, and December 31st, 1971, show him as an officer and director of Gorman.
You may recall this closing date for North Traverse was June 22nd, 1971.
Counsel for the defence submits that this evidence alone does not prove that Schneider was an officer and director of Gorman as of June 22nd, 1971, when he submitted the tender on Ile d'Orleans.
Schneider signed the tender as vice‑president and general manager, but the document did not state of which company.
He submitted that it is not clear whether Schneider was authorized to submit a tender on behalf of Gorman and whether he was authorized to submit a false tender.
Schneider's evidence in chief was he was the vice‑president and general manager of Canadian Dredge and Dock number 2 [Albemont] and was also an officer of Gorman.
On cross‑examination he said he presumed he was vice‑president and general manager of both companies, but he did not know for certain.
The equipment had been sold to Gorman, but Canadian Dredge [Albemont] still exercised control.
The Crown submits the fact Schneider was a director and officer of Gorman on March 12th, 1971, signed the tender as of June 22nd, 1971, and was a director and officer of Gorman on March 31st, 1971, is evidence from which they may reasonably infer that he was an officer and director of Gorman on June 22nd, 1971.
Whether he was or not is a question of fact for you. It is for you to decide whether or not Schneider had authority, expressed or implied, or whether or not he was a directing mind of Gorman.
The charge with respect to count 6 was given in like detail. The Court of Appeal reviewed this evidence and the judge's charge to the jury and concluded at p. 446:
It is clear from these extracts that the learned trial Judge fairly put to the jury the defences to counts 1 and 6, namely, that Canadian Dredge No. 3 did not participate in bid‑rigging at North Traverse or Hamilton Harbour, and that Schneider was neither authorized to bid‑rig nor was he the company's directing mind.
39. I am in respectful agreement with the Court of Appeal that the jury must have found in the case of CD that Schneider was the directing mind of the company and that there was evidence introduced at trial in support of such a finding.
40. DeRome was said to be the directing mind of MIL. He died in August 1970. The contract in count 2, the only count in issue in this Court, was entered into in 1969. The Court of Appeal found that there was evidence to support the conclusion which the jury must necessarily have reached that DeRome was the directing mind of MIL. This is not challenged on appeal.
41. In the case of the appellants Porter and Richelieu, Rindress was found by the Court of Appeal to be the directing mind of each of these appellants. This was not challenged in this Court.
42. I turn to the submission by the appellants that the identification theory cannot import into the criminal law a brand of vicarious liability under any of the authorities where the wrongful acts of the directing mind were done in fraud on the employer, for the benefit of the employee, or contrary to the instructions issued by the employer. Whether there be evidence to support a finding that the employee of each of these appellants acted in fraud on the employer, for his own benefit, or contrary to instructions, I set aside until after the applicability of these defences in Canadian criminal law is examined. .
43. The third defence, acts carried out in the face of express instructions to the contrary, is susceptible to easy disposition. Neither the trial judge nor the Court of Appeal dealt squarely with this issue, although it came up obliquely on the issue of authorization. This treatment of this matter could not have affected the result. The argument that actions taken by an employee contrary to express instructions cannot be attributed to the corporate employer in order to found criminal liability, was advanced most forceably by the late Mr. Laidlaw on behalf of CD with reference to counts 3, 4 and 5 only. Martin, the President of CD, testified that he warned Schneider that bid‑rigging activities were not to be undertaken on pain of dismissal. These discussions were put to the jury but only in relation to the issue of CD's criminal responsibility through the authorization of Schneider to bid‑rig. Martin was acquitted, CD was convicted. It follows inexorably that the jury did not find that Schneider was authorized expressly or implicitly to rig bids. It follows in turn that the jury of necessity concluded that Schneider was the directing mind of CD. Accepting that the acquittal of Martin raises a possibility that an express prohibition was issued, the failure to charge the jury with respect to the relationship between express instructions not to engage in illegal activity and the attraction of corporate criminal liability via the identification theory would only be of consequence if such instructions in law can affect corporate criminal liability. If the law recognized such a defence, a corporation might absolve itself from criminal consequence by the simple device of adopting and communicating to its staff a general instruction prohibiting illegal conduct and directing conformity at all times with the law. That is not to say that such an element is without relevance when considering corporate liability with reference to offences of strict liability, supra. Where, however, the court is concerned with those mens rea offences which can in law be committed by a corporation, the presence of general or specific instructions prohibiting the conduct in question is irrelevant. The corporation and its directing mind became one and the prohibition directed by the corporation to others is of no effect in law on the determination of criminal liability of either the directing mind or the corporation itself by reason of the actions of the directing mind. This accords with the result reached in other courts.
44. In the Australian case, Grain Sorghum Marketing Board v. Supastok Pty. Ltd., supra, at p. 105, Jeffriess J. held the company criminally liable despite the employee's breach of company instructions because the employee:
...represented the mind and will of the company.... The position would be otherwise had the purchase been made by a storeman, or some servant in a similar capacity contrary to his instructions.
45. The United States federal courts, operating under the vicarious liability concept, have taken the same view. In United States v. Hilton Hotels Corp., 467 F.2d 1000 (1972) (9th CCA), at pp. 1006‑07, the Court balanced the general instructions given to a manager to maximize profits against directions to the manager to obey the anti‑trust provisions of the Sherman Act and concluded that the former would in reality prevail. The view was expressed that the profits from such a violation would be realized by the corporation; the isolation of the employee directly responsible for the breach is difficult in these cases; and punishment of the business entity is both appropriate and effective. Accordingly, conviction was confirmed so long as the test in vicarious liability, that the employee was acting in the scope of his employment, was met even though the employee at the time was acting contrary to general corporate policy and express instructions. The Court added a rider that seems to leave the door open to such a defence when it said, at p. 1007:
Appellant could not gain exculpation by issuing general instructions without undertaking to enforce those instructions by means commensurate with the obvious risks.
This hints of a shade of the strict liability defence. The defence was rejected in two Canadian courts: Upholsterers International Union of North America, Local 1 v. Hankin & Struck Furniture Ltd. (1964), 49 W.W.R. 33 (B.C.C.A.), and R. v. Waterloo Mercury Sales Ltd., [1974] 4 W.W.R. 516 (Alta. D.C.)
46. The argument of express prohibition was not made by MIL and there is no evidence to support such a submission. Reference was made to such a defence in the abstract by counsel for Porter and Richelieu but no evidence was identified in support and I can find none in the record. The last part of both questions put to this Court should accordingly be answered in the negative.
47. The two remaining issues as to the effect, if any, of the directing mind of the corporation acting in whole or in part in fraud on the corporation" or wholly or partly for his own benefit" raise problems both of terminology and substance. The two questions in substance raise the same legal issues. The immediate question which arises is whether or not there is, in fact and in law, any controlling difference between a directing mind acting in fraud of the corporation and a directing mind acting on behalf of the corporation as its managerial arm but doing so for his own benefit. As will be mentioned below, there are fine factual distinctions which one can make between the two concepts. In substance, however, these appeals can be more usefully analysed if the practical view is taken that the situation as between the corporation and its directing mind is the same whether the directing mind is acting in fraud of the corporation or whether he is acting against the interests of the corporation for his own benefit.
48. The identification theory was inspired in the common law in order to find some pragmatic, acceptable middle ground which would see a corporation under the umbrella of the criminal law of the community but which would not saddle the corporation with the criminal wrongs of all of its employees and agents. If there were to be no outer limit on the reach of the doctrine, the common law would have established criminal corporate liability by the doctrine of respondeat superior. What then is the appropriate outer limit of the attribution of criminal conduct of a directing mind when he undertakes activities in fraud of the corporation or for his own benefit?
49. Parker A.C.J.H.C. dealt with these issues in a single formula in his charge to the jury. He then adapted that formula to the circumstances as revealed in the evidence of each of the many accused including these four appellants. The general proposition of law relating to corporate criminal liability was expressed by the Associate Chief Justice, in his directions to the jury, in this way:
A company may be responsible for the criminal acts of its servant in two situations; (1) if the servant has authority, express or implied, to do the act, or (2) if the servant is virtually its directing mind in the sphere of duty assigned to him so that his actions and intent are the very actions and intent of the company itself...
It should be noted that the appeal of each of the appellants in this Court proceeded on the basis that liability was not attracted on the first ground but on the basis of the identification theory. The Associate Chief Justice continued:
It is a question of fact for you whether or not a person was a directing mind of the company. A director may say that the company did not give authority to a particular employee to do a certain act. This may then negative express authority but leave untouched the scope of an agent's implied authority. If an agent is virtually the directing mind of the company, the failure of the directors to confer express authority on him to do the particular act is irrelevant.
50. The learned Associate Chief Justice applied this law to count 6, which relates to CD, as follows:
Counsel raised two more points for your consideration. He asked, If Schneider acted without the knowledge and consent of the directors for his own benefit, not that of the company, then how can the company be responsible?"
There is no doubt Schneider was acting in his own self interest when he made a deal to take 20,000 [sic 200,000] in cash for 300,000 on the score sheet, but, nevertheless, he did agree to submit a fictitious high tender on behalf of Canadian Dredge and Dock. The company's tender went in and it accomplished the purpose it was intended to accomplish. J.P. Porter got the bid.
The law is that if a corporation puts an employee in a position where he is in control of a particular sphere of its operations so that he is virtually a company mind and will in the sphere of duty assigned to him, the company is responsible for his actions within that sphere. It doesn't matter that he was acting for his own benefit.
Counsel submitted that he called three directors who said that they had no knowledge; that they gave no authority to Schneider and that the by‑laws required Schneider to take the direction of the board. The same law applies. If Schneider was a directing mind of the company, express or implied authority wouldn't matter.
The issue is, at the time of the Hamilton bid was Schneider a directing mind. Remember that the new directors had not yet been appointed. The take‑over didn't occur until December the 17th. Whether or not the directors subsequently appointed knew of the bid‑rigging may go to their own guilt. We are not concerned with that at this time, only the guilt or innocence of the company.
If you find that Schneider submitted a fictitious bid at Hamilton and if you find that at that time he was a directing mind of T.C. Gorman, now known as Canadian Dredge and Dock Company Limited, then that accused would be responsible even if Schneider was acting in his own self interest and without express or implied authority from the company.
On the same count the jury was charged as follows with respect to the liability of the accused Porter:
... if the company places an employee in a certain position and gives him the authority to act legally within a particular sphere so that his acts are virtually the acts of the company and he is a directing mind of the company within that sphere of operations, then the company is responsible for his criminal acts regardless of whether or not he is acting in fraud of the company.
The learned Associate Chief Justice consistently charged the jury on the same basis.
51. The Court of Appeal, on the general principle of corporate liability in Canadian criminal law, agreed with the learned trial judge (p. 312, supra). On the effect on the criminal liability of a corporate master where the employee, the directing mind, acts in fraud upon the corporation, the Court of Appeal rejected the appellants' submissions (at p. 315):
Where superior officers of the company who are its directing minds act dishonestly in the functions delegated to them, it seems consistent with public policy to hold the corporation criminally liable. The imposition of criminal liability on the corporation in these circumstances stimulates shareholders to exercise stricter supervision and control in the selection of its directors and compels directors to be alert to the corporate practices of its senior personnel.
...
We would therefore not give effect to the argument that a finding of fraud perpetrated by these officers against their companies precluded a finding of criminal liability against those companies.
52. It has been said by many authors that no social purpose is served by convicting a corporation whose directing mind has acted throughout in fraud of that corporation and its undertaking. Similarly, where the wrongful act is conceived and designed to benefit only the directing mind and without any benefit to the corporate employer, it has been said that no social purpose is served by convicting a corporation in such a circumstance.
53. The leading case is Moore v. I. Bresler, Ltd., [1944] 2 All E.R. 515. This case was decided about the same time as the judgments came down in Director of Public Prosecutions v. Kent and Sussex Contractors, Ltd., supra, and R. v. I.C.R. Haulage, Ltd., supra, and brought into prominence in the criminal law the rationale for the identification theory established thirty years earlier in Lennard’s case, supra. Moore v. Bresler, citing Kent, supra, dealt with the defence raised by the corporate accused that its agents, its officers and employees, the co‑accused who actually committed the acts in question, had done so in fraud on their employer, the corporate accused. The individual accused were the corporate secretary, who was also a general manager of the company's branch in question, and the sales manager of the same branch. Acting in collusion, they sold some of the company's stock in trade and kept the proceeds without making any entry of the transaction in the corporate accounts. These sales were clearly made in fraud on the corporation and without knowledge in the board of directors or officials of the company. The two employees then filed false tax returns, no doubt reflecting only recorded sales and omitting any reference to the fraudulent sales made by the co‑defendants. From the facts revealed in the judgments, it would appear that the purchasers from the individual defendants received good title to the merchandise wrongfully sold to them. The King's Bench Division found that the employees were the directing minds, and because they were acting in the scope of their authority in making the sales which were carried out in the performance of their responsibilities and duties to the company, the company was accordingly liable for their acts.
54. On appeal, Viscount Caldecote C.J. applied the ‘guiding mind of the company’ theory and imputed the acts of the employee‑defendants to the corporate‑defendant (pp. 516‑17):
These two men were important officials of the company, and when they made statements and rendered returns which were proved in this case, they were clearly making those statements and giving those returns as the officers of the company, the proper officers to make the returns. Their acts, therefore, as, indeed, the Recorder seems to have been prepared to agree, were the acts of the company.
The Lord Chief Justice did not mention the defence of fraud on the company by its co‑defendants, the directing minds. Birkett J., the third member of the Court, adopted the reasons of Humphreys J. who rejected this defence. Humphreys J. in his judgment stated at p. 517:
...and the sale is not less made with the authority of the master because the employee means to put into his own pocket the proceeds of the sale when he receives them. That is what the Recorder goes on to say, that those sales were made‑‑not that the returns were made‑‑in fraud of the respondents. That is perfectly true, but there is no authority that I am aware of, and there is a very great deal of authority to the contrary, for the proposition that because a servant does something in fraud of his master, although it is something which he is actually paid to do, such as a sales manager making a sale, that, therefore, the master is not responsible for the sale.
Thus all members of the Court found the criminal actions of the co‑defendant directing minds were in law imputed to the company and two members expressly rejected the defence that the corporate defendant, wholly unaware of these acts, could not be criminally responsible therefor because they were done by its employees wholly in fraud on the company. The Lord Chief Justice, by implication, also rejected this defence but apparently on the ground that the fraudulent conduct above would not take the co‑defendants out of the scope of their employment and hence the corporate defendant would be criminally responsible. That result seems to be a blend of the vicarious liability and the directing mind theories. As has been seen, the term course of employment" has a different meaning with reference to the directing mind concept than in the tracing of tortious liability in a corporation or any other master.
55. This is the case upon which the Court of Appeal below relied, as did the respondent in this Court, for the denial of the defence advanced by all four appellants of fraud on the company and the related defence that the actions in question were taken entirely for the benefit of the individual employees, the directing minds of the appellants. This case has been mentioned in a few subsequent judgments of the courts of the United Kingdom and this country but has never been applied in the Court of Appeal or the House of Lords in England or in this Court. The judgment has been decried by several authors: S.M. Waddams, "Alter Ego and the Criminal Liability of Corporations" (1966), 24 U.T. Fac. L.R. 145, at pp. 148‑149; R.S. Welsh, The Criminal Liability of Corporations" (1946), 62 L.Q.R. 345, at p. 359; John Andrews, Reform in the Law of Corporate Liability," [1973] Crim. L.R. 91; Don Stuart, Canadian Criminal Law (1982), at p. 520; Glanville Williams, Textbook of Criminal Law (2nd ed. 1983) at p. 973; C.M. Fien Corporate Responsibility under Criminal Law" (1973), 5 Man. L.J. 421, at p. 427; Archbold’s Pleading, Evidence and Practice in Criminal Cases (41st ed. 1982), at p. 995; cf.: Harvey Yarosky, The Criminal Liability of Corporations" (1964), 10 McGill L.J. 142, at p. 148.
56. Critical comments have been founded largely on the basis that acts of employees taken wholly in fraud of the corporation, done in circumstances wherein no awareness arose in the corporation of the planning and perpetration of the wrongful acts, and not occurring by reason of any failure on the part of the corporation to supervise its operations in accordance with accepted management standards of the day, should not be imputed to the corporation for the purpose of investing criminal liability. No purpose, it is said, could be served by so doing and the community would be no better protected by such a principle. See M.W. Caroline, "Corporate Criminality and the Courts: Where are they Going?" (1985), 27 C.L.Q. 237, at pp. 245‑46.
57. The question arises as to whether on the facts and charge of Moore v. Bresler there is a defence in respect of either a fraud charge or the Tax Act charge in the corporation by reason of the fact that the dishonest act was committed by the directing mind but in fraud on the company or wholly or partly for the benefit of the dishonest employee. Were the charge in question a charge of fraud, there would clearly be no benefit to the corporation, and indeed the design of the dishonest employee was aimed squarely at reducing the financial stature of the employer. It can hardly be said with any reality that a person designing and executing such a scheme could be, while doing so, the directing mind and the ego of the company itself. That being so, no longer would we be faced with the logical conundrum that a person however dishonest cannot defraud himself. Once the ego is split into its original two parts that problem disappears. The employee would be guilty of fraud and the victim of that fraud would be the company. The victim would, in all logic, have a defence against a charge that it too had committed fraud in its own right. Were the criminal law otherwise, it would not provide protection of any interest in the community. Punishment of the corporation for such acts of its employee would not advantage society by advancing law and order. It is otherwise, however, where there is benefit to the corporation, in whole or in part, from the unlawful acts of its directing mind. The charge with reference to the tax returns raises different considerations.
58. The Court in Moore v. Bresler was dealing with a charge under the taxing statute, not fraud charges relating to the wrongful sales. If the Court had been dealing with a fraud charge, the effect of some of the dicta would be much clearer. In this transaction, the employees were doing two things. Firstly, they filed the tax return in order to comply with a statutory requirement for annual filing and by so doing they also sought to cover their tracks so that they would not be prosecuted for theft, fraud, embezzlement, etc. at the behest of their employer. At the same time as they were furthering their dishonest scheme, they were also filing a tax return which entitled the corporation to a lower tax payment than would be the case if the total revenue, real and constructive, of the company were revealed to the revenue collector. The sales were a fraud on the company but the false tax returns were not. They were a fraud on the community through the government department administering the Tax Act. The dishonest directing minds continued to act in the course of their assigned managerial duties when filing the tax returns. Thus, in a perverse way, it may be said that the company enjoyed a benefit in that the risk not only of suffering loss of revenue through embezzlement but also that the company would be taxed on the lost revenue, was somewhat reduced by the dishonest tax return. As it turned out, the company was exposed by the revenue collector to the actuality of the higher taxation. Once the dishonest employees are found to have been the directing minds of the company and once it is found that they were at the time of the commission of the dishonest acts acting in the course of their employment, in the sense that they were carrying out the enterprise and policies of the corporate employer, then their dishonest actions are attributed to the company whose liability in criminal law follows. The rule in Moore v. Bresler, if it is as broad as some have stated, may not be one which has its factual and theoretical roots in a transaction where a defence arises by reason of a total lack of benefit in the victim.
59. In R. v. Parker Car Wash Systems Ltd. (1977), 35 C.C.C. (2d) 37. Hughes J., sitting in the High Court of Justice, while not citing Moore v. Bresler, supra, (except indirectly through a reference to Tesco, supra) reluctantly" applied the identification theory to attribute to the accused employer corporation the wrongful activities of its directing mind. In the Parker case, the company received no benefit by reason of the wrongful conduct of the directing mind and, in fact, was deprived of moneys it otherwise would have received. In the result, the corporation was convicted under the Tax Act and apparently assessed under that Act as well with reference to moneys wrongfully paid out by it through the illegal actions of its directing mind. The corporation was found criminally liable notwithstanding the resultant position of loss not only of the moneys taken from its treasury by its employee, but also the taxes payable by the corporation in excess of that which would otherwise have been payable. For a comment on this case see A Feature of Corporate Criminal Liability or Why the Brains of a Corporation Are Not Necessarily Its `Intimate Friends' " (1977‑78), 2 Can. Bus. L.J. 474, by Dean Peter Burns.
60. Bresler, supra, finds a parallel in U.S. law in Old Monastery Co. v. United States 147 F.2d 905 (1945) (4th CCA). The defence of the corporate accused was that the acts of conspiracy in price fixing committed by its directing officers were not of benefit to the corporation, nor were they intended to benefit the corporation. Consequently it was argued that criminal liability could not result from the attribution of such acts to the corporation. The Court found criminal liability in the corporate defendant on the basis of the doctrine of vicarious liability and specifically rejected the defence of no benefit".
We do not accept benefit as a touchstone of corporate criminal liability; benefit, at best, is an evidential, not an operative, fact.
(Per Dobie J., at p. 908.)
The result is simple and direct vicarious liability of an otherwise innocent employer corporation.
61. In United States v. Empire Packing Co., 174 F.2d 16 (1949) (7th CCA), at p. 20 corporate liability was attracted despite the fact that the corporation employer received no benefit from the actions of its agent. However, the Court did not need to decide whether an intention on the part of the wrongdoing employee to benefit the employer corporation by his unlawful activities was required in order to infect the corporation with criminal liability.
62. These two cases were followed by Standard Oil Co. of Texas v. United States, 307 F.2d 120 (1962) (5th CCA). In that case, the Court found the corporate employer innocent because the rule of vicarious liability did not attribute to the employer the dishonest actions of its employees where those employees intended that the corporation would receive no benefit from their dishonest activities. This result was achieved by simply concluding that such acts by an employee took him outside of the scope of his employment:
Of course the defendants do not contend, nor could they, that criminal accountability and actual benefit are equated. There have been many cases, and there may well be others in the future, in which the corporation is criminally liable even though no benefit has been received in fact. But while benefit is not essential in terms of result, the purpose to benefit the corporation is decisive in terms of equating the agent's action with that of the corporation. For it is an elementary principle of agency that an act of a servant is not within the scope of employment if it is done with no intention to perform it as a part of or incident to a service on account of which he is employed."
(Per Brown J., at p. 128.)
Although the Court cited Old Monastery, supra, and did not say that it was being reversed, the clear and undeniable result is that it was reversed. There have been many similar decisions in the United States federal courts:
United States v. Carter, 311 F.2d 934 (1963) (6th CCA), at p. 942;
United States v. Ridglea State Bank, 357 F.2d 495 (1966) (5th CCA);
United States v. Hilton Hotels Corp., supra, at p. 1006n;
United States v. Basic Construction Co., supra, at p. 573;
United States v. Beusch, 596 F.2d 871 (1979) (9th CCA), at pp. 877‑78;
United States v. Cincotta, 689 F.2d 238 (1982) (1st CCA), at pp. 241‑42;
United States v. Richmond, 700 F.2d 1183 (1983) (8th CCA), at p. 1195n.
In all these United States Federal Court decisions the courts were determining the issue on the basis of the doctrine of vicarious liability and not on the identification theory and this is fundamental to an understanding of the treatment accorded the defences of fraud on the company for employee benefit.
63. The courts of New Zealand in Nordik, supra, were called upon to deal with almost the same factual situation as in Bresler, supra. The Court attributed to the corporation the fraudulent acts of its managing director who was virtually the sole shareholder. The tax returns in question were made properly by the company accountant from company records but because of the managing director's fraudulent conduct the company accounts did not reflect the cash receipts which had been diverted to the managing director upon his fraudulent sale of company assets. The Court appears to apply the identity doctrine attributing this conduct to the corporation to establish its guilt, but does not purport to follow Bresler because the learned justices interpreted that case (in the light of Tesco, supra) as apparently being decided upon the basis of vicarious liability. Despite a reluctance to impose the rather clumsy sanction of criminal liability on corporations where no blame could fairly be imputed to those truly responsible for the affairs of the corporation", the Court found corporate liability. At the conclusion of his judgment Cooke J. foreclosed any defence of fraud on the company (at p. 202):
...once identification has been made out, it must follow, I think, that for the purposes of the criminal law in a case of the present kind the question of fraud on the company becomes irrelevant and indeed meaningless. A person cannot defraud himself. The essence of the doctrine of identification is that the individual is treated as the company's self. They are one and the same.
64. This case, in the result, follows the popular interpretation of Bresler on the issue of the defence of fraud on the company by the directing mind by denying such a defence at least in the circumstances of that case. It must be noted that because Nordik is a case where the directing mind owned over eighty per cent of the shares, it is less than a telling comment when the Court said that a person cannot defraud himself for the purposes of the identification doctrine. Where there are several directing minds, and there is no economic identity between the directing minds and the shareholders, it is less realistic to extend the fiction of identity. The dishonest directing mind is in fact cheating the company and thereby its shareholders and not himself.
65. In my view, the outer limit of the delegation doctrine is reached and exceeded when the directing mind ceases completely to act, in fact or in substance, in the interests of the corporation. Where this entails fraudulent action, nothing is gained from speaking of fraud in whole or in part because fraud is fraud. What I take to be the distinction raised by the question is where all of the activities of the directing mind are directed against the interests of the corporation with a view to damaging that corporation, whether or not the result is beneficial economically to the directing mind, that may be said to be fraud on the corporation. Similarly, but not so importantly, a benefit to the directing mind in single transactions or in a minor part of the activities of the directing mind is in reality quite different from benefit in the sense that the directing mind intended that the corporation should not benefit from any of its activities in its undertaking. A benefit of course can, unlike fraud, be in whole or in part, but the better standard in my view is established when benefit is associated with fraud. The same test then applies. Where the directing mind conceives and designs a plan and then executes it whereby the corporation is intentionally defrauded, and when this is the substantial part of the regular activities of the directing mind in his office, then it is unrealistic in the extreme to consider that the manager is the directing mind of the corporation. His entire energies are, in such a case, directed to the destruction of the undertaking of the corporation. When he crosses that line he ceases to be the directing mind and the doctrine of identification ceases to operate. The same reasoning and terminology can be applied to the concept of benefits.
66. Where the criminal act is totally in fraud of the corporate employer and where the act is intended to and does result in benefit exclusively to the employee‑manager, the employee‑directing mind, from the outset of the design and execution of the criminal plan, ceases to be a directing mind of the corporation and consequently his acts could not be attributed to the corporation under the identification doctrine. This might be true as well on the American approach through respondeat superior. Whether this is so or not, in my view the identification doctrine only operates where the Crown demonstrates that the action taken by the directing mind (a) was within the field of operation assigned to him; (b) was not totally in fraud of the corporation; and (c) was by design or result partly for the benefit of the company.
67. The factual basis for these ‘defences’ to corporate criminal liability raised by the appellants must now be examined. The second question in this appeal explicitly raises the issue of evidentiary support for these three defences. CD advanced the submission that the issue was also raised, at least by inference, in the first question. MIL takes the approach that the issue as to whether the directing mind of MIL acted wholly or partly in fraud of MIL or wholly or partly for his own benefit should have been left to the jury, but it was not. In essence, therefore, the submission is that there was evidence to support the position that DeRome, the directing mind of MIL, acted wholly in fraud of MIL and wholly for his own benefit, and consequently there should not be any attribution of his acts to MIL so as to raise liability in MIL for the criminal acts of its directing mind. Under the second question with reference to the appellants Porter and Richelieu, the issue as to whether there is any evidence that Rindress, their directing mind, was acting wholly or partly in fraud of these appellants or wholly or partly for his own benefit, is squarely raised.
68. It is possible, and indeed convenient, to discuss the defences of fraud and benefit in connection with all four appellants at the same time. It is evident from the record that as a result of the illegal machinations of their respective directing minds, all four appellants received contracts, subcontracts, or other benefits. In the case of CD, for example, the corporation received a subcontract under the Toronto Harbour contract, which was the subject of count 4. This was received by CD in return for its submission of an accommodation bid. In the case of MIL, it was awarded the contract at Beauport Banks, the subject of count 2, as the low bidder as the result of arrangements made by the directing mind of MIL for two accommodation bids. The price" paid for these accommodation bids was a thirty per cent subcontract to one high bidder and a royalty" on quantities excavated, to the other high bidder. The law does not require that the courts conduct a detailed inquiry into the minutiae of inter‑conspirators' accounts in order to ascertain whether the contracts and subcontracts were profitable to the member of the conspiracy in question. Similarly, Richelieu participated in the performance of the contract which is the subject of count 1 and secured the contract in count 3. These contracts were awarded as the result of tenders made by the directing minds of the respective corporate participants. The evidence is overwhelming that as a result of the system developed by their respective directing minds, the appellants received benefits in the form of contracts and subcontracts, direct payouts and other benefits. It is also evident that the directing minds who committed this wrongful conduct benefited themselves in a variety of ways including cash receipts, share positions in participating companies, and other arrangements. It was in fact a `share the wealth' project for the benefit of all concerned except the public authorities who awarded the dredging contracts. It is, therefore, impossible to come to any conclusion other than that reached by the trial judge and the Court of Appeal that in these activities the directing minds were acting partly for the benefit of the employing appellant and partly for their own benefit. Accordingly the factual basis for a corporate defence of lack of intended and received corporate benefit is not present in these appeals.
69. Evidence of the same nature leading to the same result is found in connection with the defence of fraud by the directing minds of the appellants. There was an elaborate array of evidence which revealed that some of the directing minds had acquired, or otherwise put in place, corporate entities to act as fronts for them in receiving benefits from the price‑rigging schemes.
70. The appellants, Porter and Richelieu in particular, pressed the argument that Rindress acted in fraud on these appellants when he diverted score sheet credits of Richelieu and Porter to the account or credit of other conspirators. This falls short of forming the base for a defence of fraud on the employer by its directing mind. Fundamental to the big‑rigging schemes was the agreement amongst participants in the conspiracy to enhance the lowest bid, which was designed to be the successful bid, by an amount at least equal to the cost of compensation to be paid by the successful bidder to the accommodation bidders, and sometimes to other conspirators who did not participate in the bidding then in question. The score sheet" was the inter‑conspirator accounting document on which was recorded the entitlement in these moneys to be wrongfully recovered from the contracting party, usually a public authority. In short, the moneys fraudulently recovered from the property owner were divided up amongst the conspirators as their share of the ill‑gotten gains. Whatever property there is in a thief in the product of his theft, or whatever his ability to maintain his title against the world, a corporation cannot be said to have been defrauded in the sense herein employed when the only thing of which it is deprived in part, or indeed all, of the product of the crime of which it is charged. In the transactions now before the Court, one conspirator could not successfully recover from another conspirator the claimant's share in the proceeds of the fraud. Remarkably this was attempted indirectly by two of the conspirators, as the evidence revealed, but the matter was settled out of court and the only real result of that litigation was the use of the pleadings by the Crown as evidence of guilt here. The appellant Porter, for example, could not sue CD for funds diverted from the score sheet credit of Porter to CD. Consequently, the directing mind Rindress could not act in fraud of Porter by depriving Porter of its share of the overpricing in a dredging contract. The same applies as between Rindress and Richelieu and as between any of the directing minds and the other appellants, their respective employers.
71. Accordingly, I answer both questions in this way: all four appellants were the victims of specific instances of fraud practised by the respective directing minds who, in the course of their criminal activities, derived personal benefits therefrom. There is no evidence, however, that the directing minds in these affairs acted wholly for their own benefit, nor did any of them act wholly in fraud of their employer in the sense of designing and executing a scheme to deprive their respective employer corporations of any and all dredging business or benefit therefrom. Here the voluminous evidence paints a clear picture of a design conceived by a group of conspiratorial directing minds which was not aimed at the destruction of the respective corporate employers but rather was calculated to ensure their existence at a level of profits sustained by fraudulently enhanced prices for the work and services of the corporations. The bid‑rigging scheme was indeed essentially a plan to ensure the survival of the weakest, and probably to ensure their continuance in business in much the same relative size. There is no evidence in these records of any plan amongst the directing minds or of a plan held by a single directing mind which involved the destruction of the undertaking of the appellants, or indeed which involves the undermining of the fiscal health of the appellants. That is not to say that the record does not reveal any plan amongst the conspiring directing minds to enhance their own financial and economic positions. The facts are quite to the contrary. However, the twin goals were accommodated in the plan because the bid‑riggers rewarded both the appellant corporations and themselves at the expense of the contracting public agencies.
72. I therefore would answer both questions as they relate to the defences of acting wholly or partly in fraud of the corporation", and in whole or in part for the benefit of the directing mind", as follows:
1. On the evidence in these records, the respective directing minds of the appellants did not act wholly in fraud of their respective corporate employers;
2. Neither did the four directing minds act wholly for their own benefit in the sense that no benefit from their actions would accrue to the appellants; and in any event the record clearly reveals an intention on their part to benefit their respective corporations;
3. Express or implied instructions prohibiting the unlawful acts specifically, or unlawful conduct generally, is not a defence whether the corporate liability springs from authorization of the acts of an agent or the unlawful acts of a directing mind. In any case, only in the record relating to CD is there any evidence of any such prohibition.
73. There can be no complete rationalization of corporate criminal liability in the criminal law whether the attempt be made under the banner of vicarious liability or the identification theory or otherwise. The corporation does not have, in the human sense of the term, a mind capable of reaching the state identified in criminal law as mens rea. The criminal law does not recognize in mens rea offences criminal liability in the proprietor employer for the unlawful actions of the proprietor's employees save in the case of authorization, express or implied. A corporation, however, is found liable in some countries, as we have seen, on vicarious liability, and in other jurisdictions on the basis of the identification theory. Both doctrines are the product of judicial necessity brought on by the realities of the modern community. Our law, which in this field commenced, as we have seen, in Fane Robinson Ltd., supra, and evolved through St. Lawrence, supra, has not yet been required to settle the outer limit of the identification theory. The identification theory, however, loses its basis in rationality when it is applied to condemn a corporation under the criminal law for the conduct of its manager when that manager is acting not in any real sense as its directing mind but rather as its arch enemy. On the facts before the jury in this case in these proceedings, as the Court of Appeal has pointed out, the directing minds were acting partly for their own benefit and partly for the benefit of the corporation, and not wholly in fraud of the employer corporation. Consequently, it is unnecessary, technically, for this Court to define the limits in our law of the so‑called Moore v. Bresler rule. The case was, however, argued extensively at all levels on the basis that this rule either did not apply, or if it did it had no application where the employee in question was acting wholly in fraud of the company and wholly for his own benefit. This problem, as we have seen, has of course reared its head in the United States where the vicarious liability doctrine has been limited on occasion when the employee has acted in this extreme way. That is but another illustration of the courts adapting the common law rules of law to the changing realities of the community. In my view, the very pragmatic origins of the identification rule militate against its extension to the situation which would have existed here had one or more of the directing minds acted entirely for his own benefit and directed his principal efforts to defrauding the company. Where the corporation benefited or was intended to be benefited from the fraudulent and criminal activities of the directing mind, the rationale of the identification rule holds. Where the delegate of the corporation has turned against his principal, the rationale fades away.
74. I would therefore dismiss all four appeals.
Appeals dismissed.
Solicitors for the appellant Canadian Dredge & Dock Company, Limited: McCarthy and McCarthy, Toronto.
Solicitors for the appellant Marine Industries Limited: Clark, Woods & Partners, Montréal.
Solicitors for the appellants The J.P. Porter Company Limited and Richelieu Dredging Corporation Inc.: Blain, Piché, Emery & Associates, Montréal.
Solicitor for the respondent: Ministry of the Attorney General for Ontario, Toronto.
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