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I. INTRODUCTION

On June 12, 2003, the Minister of Justice of Canada, the Honourable Martin Cauchon, tabled two bills in the House of Commons aimed at extending the application of the Criminal Code to Canadian businesses and organizations. Bill C-45 seeks to ensure the safety of employees in the workplace and modernize the law on corporate criminal liability, while Bill C-46 is designed to re-establish investor confidence in the Canadian financial market system by giving more teeth to the criminal provisions pertaining to fraud in connection with the purchase or sale of securities. The following is a brief analysis of the changes which the proposed legislation would make, if passed.

II. Bill C-45 (criminal negligence)

This draft legislation came about in response to the death of twenty-six miners in the Westray mine disaster in Nova Scotia in 1992, where in spite of strong pressure from the victims' families and their union, the province's attorneys were unable to prosecute those in charge of the organization that owned and operated the mine for negligent acts found to have been the cause of the explosion.

A. The current law

Under the current law, an offence under the Criminal Code can be committed by a body corporate, a society or a company, but not an association of persons, which is not included in the definition of "every one". The "identification" theory is used to prove criminal intent on the part of a body corporate charged with criminal negligence, defined as the commission of an act or the failure to fulfil a duty imposed by law that shows wanton or reckless disregard for the lives or safety of other persons. This theory holds that the intent of the body corporate at the time of commission of the negligent act can be deduced from the conduct of the "directing minds" of the body corporate, which may be its board of directors, its chief executive officer, its general manager, its manager or any other delegate of its board of directors. The latter's conduct is then measured against the standard of conduct that would be expected of the "directing minds" of a body corporate considered to be acting reasonably in similar circumstances. It should be noted that the current Criminal Code does not allude to any specific duty being incumbent on persons who supervise work performed by others. The fact that no such specific duty is spelled out, combined with the requirements of the identification theory, makes it difficult to obtain a conviction in a case like the Westray mine disaster.

B. The contemplated changes

First, Bill C-45 extends the application of the Criminal Code to include any association that is created for a common purpose, has an operational structure and holds itself out to the public as an association of persons. If the amendments are adopted, partnerships and trade unions could now be prosecuted for criminal offences.

Secondly, Bill C-45 proposes to add to the Criminal Code a specific legal duty, applicable to anyone who directs how another person does work or performs a task, to take reasonable steps to prevent bodily harm to that person, or any other person, arising from that work or task. In the event of failure to fulfil such duty, the corporation or association for which the work was being done could be charged with criminal negligence if bodily injury or death were to result from the omission.

Lastly, the proposed legislation provides that the examination of conduct for purposes of attributing criminal liability to an organization would not be confined to the organization's "directing minds", but would extend as well to any employee, agent or contractor of the organization who was called upon to supervise the performance of work for the organization. If it is shown that any such person, acting within the scope of their authority, was a party to the offence, and that the senior officer responsible for the aspect of the organization's activities that is relevant to the offence departed from the standard of care that could reasonably be expected to prevent the person from being a party to the offence, the organization will be deemed to have been a party to the offence.

In Canada, a body corporate cannot be made to serve a prison sentence. However, Bill C-45 adds a list of factors that are to be taken into consideration in the determination of the punishment that is suitable for an organization convicted of a criminal offence, which include any advantage realized by the organization as a result of the offence, prior convictions, and any measures taken to reduce the likelihood of subsequent offences being committed.

III. Bill C-46 (insider trading)

This draft legislation, aimed at restoring investor confidence in Canadian capital markets, was tabled in the wake of the succession of scandals involving corporate giants like Enron and WorldCom in the United States. The bill contains amendments to the Criminal Code pertaining to financial and commercial fraud, which would be made in conjunction with the creation of six integrated teams composed of RCMP officers, federal lawyers and other investigative experts who would oversee the enforcement of the new provisions.

A. The current law

Bill C-46 was tabled by the federal government in response to the recent legislative changes made in the United States in an effort to combat corporate fraud and market illegalities. However, contrary to U.S. law as it existed prior to the scandals that rocked the financial world in recent years, Canadian law already has a range of legal provisions which suffice to allow perpetrators of financial fraud to be prosecuted. Indeed, the Criminal Code provides that any person who defrauds the public or any person of any property by deceit, falsehood or other fraudulent means, including in connection with the purchase or sale of securities, is liable to imprisonment.

However, insider trading, while found in provincial securities legislation, is currently not an offence under the Criminal Code. Moreover, despite broad similarities in its characterization as defined in the various provincial laws, the specific statutory provisions dealing with the offence of insider trading and the attribution of liability to the insider vary from one jurisdiction to another. For example, in Quebec, the test for determining what constitutes privileged information is based on the potential of the information to affect the decision of a reasonable investor in regard to the securities of the issuer, whereas in Ontario it is based on the potential to affect the market price or value of the securities. The penalties that may be imposed for insider trading offences also differ from province to province and may range from the obligation to repay the profit realized from the prohibited trades to liability for direct losses sustained by any person as a result of those trades.

B. The contemplated changes

Bill C-46 would create a new criminal offence of insider trading that would apply in all provinces and territories of Canada. Any person who buys or sells a security, knowingly using inside information that they possess by virtue of being a shareholder of the issuer, or by virtue of their business or professional relationship with the issuer, would be liable to imprisonment for a term of up to ten years. The characterization that the bill proposes to give to the kind of information that would be covered by the offence is similar to the definition of a "material fact" or "material change" found in the Ontario Securities Act, but differs from the definition of "privileged information" contained in the Quebec Securities Act, since the information covered is defined as any information that could significantly affect the market price or value of a security of the issuer, rather than information that could affect the decision of a reasonable investor.

Bill C-46 would also increase the maximum punishment that may be imposed for existing financial or commercial fraud offences. For example, a person convicted of fraudulently manipulating stock trading would be liable to imprisonment for a maximum of ten years rather than the current five-year maximum sentence.

Another new criminal offence would also be created with the aim of protecting employees against retaliatory disciplinary measures for disclosing unlawful conduct by their employer to persons entrusted with the enforcement of federal or provincial law. The offence would carry a maximum sentence of five years in prison.

Lastly, the Bill introduces a major change in the domain of evidence-gathering, by adding a series of provisions to the Criminal Code that would allow a judge or justice to order a person to produce or prepare documents or data, or a financial institution to produce information concerning the bank account of a person named in the order, where the judge or justice is satisfied that there are reasonable grounds to believe that an offence under the Criminal Code has been or will be committed, that the documents, data or information will afford evidence of the commission of the offence, and that the person or financial institution is in possession of the documents, data or information. Where the documents, data or information is privileged or otherwise protected from disclosure by law or is not in the possession of the recipient of the order, or where the production requirements are found to be unreasonable, an exemption could be obtained. Failure to comply with a production order would be punishable by a fine of up to $250,000 and/or imprisonment for up to six months.

IV. CONCLUSION

Legislative amendments proposed by the federal government, if enacted before the federal election expected to be held as early as the spring of 2004, would attribute criminal liability to employers who fail to provide a safe work environment for their employees (Bill C-45) and would make insider trading a criminal offence in Canada (Bill C-46).

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