Simon's Megalomaniacal Legal Resources

Provincial Offences Act - Due Diligence

. Ontario (Labour) v. Bondfield Construction Company Limited

In Ontario (Labour) v. Bondfield Construction Company Limited (Ont CA, 2023) the Court of Appeal considered a s.131 POA leave to appeal motion. Here the court comments on due diligence:

[16] First, the Crown argues that the appeal judged erred in finding that it was a legal error for the trial judge not to have considered the due diligence defence separately as it applied to each charge. In making this argument, the Crown relies on the following statement in the appeal judge’s reasons:

The trial Justice of the Peace was required to consider the defence of due diligence regarding each Appellant relating to each of them taking all reasonable steps to avoid committing a particular offence. Instead, she reviewed all three offences for which she made findings of guilt for Toromont and both offences for which she made findings of guilt for J.M.R., and then applied the due diligence defence to the entirety of the offences. This amounts to an error of law. [Emphasis in original.]

[17] I agree that this may have been an overstatement of the law. There is no requirement that the defence of due diligence be considered in a separate section in relation to each offence. But, as a general proposition, and as conceded by the Crown, the appeal judge is correct in suggesting that a due diligence defence must be related to each separate charge. As held by this court in Ontario v. Brampton Brick Ltd., 2004 CanLII 2900 (ON CA), 189 O.A.C. 44 (C.A.), para. 28, citing R. v. Kurtzman, (1991) 1991 CanLII 7059 (ON CA), 4 O.R. (3d) 417 (C.A.), “[t]he employer must show that it acted reasonably with regard to the prohibited act alleged in the particulars and not some broader notion of acting reasonably”: see also R. v. Raham, 2010 ONCA 206, 99 O.R. (3d) 241, at para. 48. This is consistent with the broader principle, as explained in Rankin, at para. 34, that “[g]uilt or innocence [has] to be decided on a count-by-count basis”. While there may be common facts and considerations relevant to a defence of due diligence on multiple counts, a finding that a due diligence defence is made out in relation to one charge is not sufficient to find that a due diligence defence is made out on related charges. In this case, the trial justice considered the due diligence defences for all charges against each defendant without distinguishing what findings related to what charges, and it was open to the appeal judge to find that this was an error.

. R. v. Greater Sudbury (City)

In R. v. Greater Sudbury (City) (SCC, 2023) the Supreme Court of Canada, in an unusual case where the court issued a split decision (leaving the Court of Appeal ruling governing), regarding occupational health and safety. These quotes are from the four-judge ruling (Martin JA) that would have dismissed the appeal.

In these quotes the court reviews 'due diligence' as the central aspect of strict liability, here in the OSHA context:

[7] ... Third, I comment on the role of control in relation to the due diligence defence under s. 66(3)(b).

....

C. The Defence’s Burden: Proving Due Diligence

[48] Once the Ministry establishes a breach of the employer’s duty under s. 25(1)(c), the burden shifts to the accused to prove, on a balance of probabilities, that “every precaution reasonable in the circumstances” was taken pursuant to s. 66(3)(b) (see Timminco, at paras. 22-26; see also Sault Ste. Marie, at pp. 1324-25). I note that the common law defence of due diligence also remains available for strict liability offences under the Act that are not listed in s. 66(3) (see R. v. Bradsil 1967 Ltd., [1994] O.J. No. 837 (QL), 1994 CarswellOnt 4450 (WL) (C.J. (Prov. Div.)), at para. 16, citing R. v. Cancoil Thermal Corp. and Parkinson (1986), 1986 CanLII 154 (ON CA), 27 C.C.C. (3d) 295 (Ont. C.A.)). It is therefore open to the City to escape liability by proving that it exercised due diligence. I begin by explaining why control should only be considered at this stage of the analysis, before turning to how control ought to be considered.

(1) An Employer’s Control Should Be Considered Only as Part of the Due Diligence Defence

[49] Considering control at the due diligence stage respects the text, context and purpose of the Act and best upholds its purpose of promoting workplace safety. Though a person convicted under s. 25(1)(c) of the Act may be liable to fines and/or imprisonment (s. 66(1) and (2)), a breach of s. 25(1)(c) is not a criminal offence, but rather a strict liability regulatory offence. Its goal is not to “condemn and punish past, inherently wrongful conduct”, but to “preven[t] . . . future harm through the enforcement of minimum standards of conduct and care” (R. v. Wholesale Travel Group Inc., 1991 CanLII 39 (SCC), [1991] 3 S.C.R. 154, at p. 219; see also Wilson v. British Columbia (Superintendent of Motor Vehicles), 2015 SCC 47, [2015] 3 S.C.R. 300, at para. 33; La Souveraine, Compagnie d’assurance générale v. Autorité des marchés financiers, 2013 SCC 63, [2013] 3 S.C.R. 756, at para. 90). The legislature’s choice to impose liability upon an employer, even absent a connection to or control over an activity, was driven not by a desire to express opprobrium of inherently blameworthy conduct but by a desire to modify behaviour and reduce the risk of workplace injury. The nature and purpose of strict liability offences means that stigma will not attach to employers who are found to have breached s. 25(1)(c) of the Act. Rather, shifting the burden to the employer to establish a due diligence defence incentivizes employers to take all steps within their control to achieve workplace safety and prevent future harm so that they may avail themselves of the defence should harm occur.

[50] That an employer’s degree of control over other parties in the workplace is relevant to its due diligence defence also answers fairness concerns about imposing liability on an employer for a breach caused by another party. Considering control under due diligence means employers lacking control may escape liability. Placing the burden of establishing a lack of control on the employer is logical and preferable, as the employer is best positioned to adduce evidence of its levels of control, expertise, knowledge, and skill. It is not unfair or absurd to shift the burden of proof and costs of proving lack of control to an accused. In Wyssen, Finlayson J.A., concurring in the result only, raised fairness concerns that were reprised by the City in this appeal. These concerns were rightly rejected as unpersuasive by the majority in Wyssen and the unanimous Court of Appeal in the case at bar. They simply do not support reading a control requirement into provisions without one, especially when control plays a role at the due diligence stage.

[51] In this appeal, no one argues that ss. 1(1) or 25(1)(c) are unconstitutional. While in Wyssen Finlayson J.A. also suggested that the definition of “employer” was overbroad (at pp. 202-3), the matter was later argued and rejected in R. v. Grant Forest Products Inc. (2002), 98 C.R.R. (2d) 149 (Ont. C.J.), at para. 55, rev’d on other grounds 2003 CarswellOnt 6071 (WL) (S.C.J.). The court found that overbreadth concerns are of limited concern given that the Act is public welfare legislation that enacts strict liability regulatory offences, not criminal offences, and given that the employer duties are subject to a due diligence defence (paras. 53 and 55). As Bélanger J. observed:

Without doubt, the breadth of the legislation is onerous and may have negative consequences relating to cost and economic feasibility of any particular endeavour or enterprise, but it does not unfairly deprive owner/contractors of the means to advance successful defences when they have attended diligently to their responsibilities. [para. 57]

This observation answers the City’s submissions in this appeal. Existing jurisprudence on the interpretation of the Act and the nature of strict liability offences contain all that is needed to affirm the conclusion of the Court of Appeal below. It is unnecessary to revisit or reverse that jurisprudence here.

[52] Additionally, though my colleagues Rowe and O’Bonsawin JJ. point to hypotheticals that they say demonstrate the absurdity of leaving control to due diligence (at paras. 137-39), a close examination of the statutory scheme dispels any such absurdity. First, the hypothetical concerning the caterer fails to appreciate that an employer’s duties under s. 25(1)(c) are limited to the workplace. A “workplace” is a distinct definition from a construction “project” (s. 1(1)) and refers to a place where a worker is or can reasonably be expected to be carrying out their employment duties at the time an incident occurs (Blue Mountain Resorts Ltd. v. Ontario (Ministry of Labour), 2013 ONCA 75, 114 O.R. (3d) 321, at para. 57). It seems unlikely that the caterer’s workplace would span the entirety of the construction project, such that the caterer would necessarily be charged and found liable in the event of a breach.

[53] Second, the remaining hypotheticals fail to appreciate that the employer is an employer by virtue of contracting for the services of the constructor who is present at the project. When this layer of the “employer” definition is kept in mind, the absurdity of the hypotheticals falls away. The employer’s potential liability is not tied to the simple act of sending an inspector to a project. Rather, they are already possibly liable because they are the employer who has deployed a constructor on the project. Indeed, the employer is likely well served by sending an inspector to the project, since, as discussed below, this may well demonstrate that they were duly diligent in hiring and supervising the constructor. As a result, the concern that the risk of liability would dissuade the hypothetical employer from sending inspectors is unwarranted.

(2) How an Employer’s Control Informs the Due Diligence Defence

[54] Though I am remitting the issue of the City’s due diligence to the provincial offences appeal court, I turn now to how courts may assess this defence and how an employer’s level of control informs the analysis.

[55] That the employer’s level of control over workers or the workplace is relevant to the due diligence defence is well recognized in existing authorities. As set out in R. v. Gonder (1981), 1981 CanLII 3207 (YK TC), 62 C.C.C. (2d) 326 (Y. Terr. Ct.), at pp. 332-33:

Reasonable care implies a scale of caring. The reasonableness of the care is inextricably related to the special circumstances of each case. A variable standard of care is necessary to ensure the requisite flexibility to raise or lower the requirements of care in accord with the special circumstances of each factual setting. The degree of care warranted in each case is principally governed by the following circumstances:

(a) Gravity of potential harm.

(b) Alternatives available to the accused.

(c) Likelihood of harm.

(d) Degree of knowledge or skill expected of the accused.

(e) Extent [to which] underlying causes of the offence are beyond the control of the accused.

Gonder has been followed by courts across Canada when applying the due diligence defence under occupational health and safety legislation (see, e.g., London Excavators, at p. 37; R. v. Inco Ltd., [2001] O.J. No. 4938 (QL), 2001 CarswellOnt 10933 (WL) (C.J.), at para. 39 (QL); Ontario (Ministry of Labour) v. Linamar Holdings Inc., 2012 ONCJ 295, at para. 112 (CanLII); Ontario (Ministry of Labour) v. Wal-Mart Canada Corp., 2016 ONCJ 267, 32 C.C.E.L. (4th) 313, at para. 123; R. v. Imperial Electric Ltd., 1998 CarswellBC 4085 (WL) (Prov. Ct.), at para. 37; R. v. Amherst Fabricators Ltd., [2003] N.S.J. No. 280 (QL) (Prov. Ct.), at para. 9; R. v. XI Technologies Inc., 2011 ABPC 313, at para. 201 (CanLII)).

[56] I agree that the “[e]xtent [to which] underlying causes of the offence are beyond the control of the accused” is a relevant factor. The fact-finder should assess, either in absolute or comparative terms, whether an employer had control over the worker and the workplace. Control is also an implicit consideration in assessing what alternatives were available to the accused (J. Stoller, at paras. 22-24; Campbell, at para. 68; J. Swaigen and S. McRory, Regulatory Offences In Canada: Liability and Defences (2nd ed. 2018), at pp. 123‑28). Indeed, “[r]easonableness of care is often best measured by comparing what was done against what could have been done” (Gonder, at p. 333 (emphasis added)). “What could have been done” is necessarily limited to steps or measures that are within the workplace actor’s control and thus capable of being carried out.

[57] In the construction context, it may be open to a judge to find that the owner took every reasonable precaution because the owner decided to delegate control of the project and responsibility for workplace safety to a more experienced constructor. Relevant considerations might include whether the owner pre-screened the constructor before hiring the constructor to ascertain, for example, whether the constructor has superior expertise, a track record free of prior convictions for breach of the Act, and the capacity to ensure compliance with the Act and the Regulation (Grant Forest Products, at para. 54; D. McKechnie, “Occupational Health and Safety in Construction Law”, in L. Ricchetti and T. J. Murphy, Construction Law in Canada (2010), 209, at pp. 219‑20). An owner may argue that its relative inexperience with workplace safety was why it chose to delegate control over a project to a more sophisticated constructor.

[58] Another consideration might be whether after executing the contract the owner informed the constructor of any hazards at the workplace and monitored the quality of the constructor’s work (indeed, the trial judge placed weight on the fact that the City supervised Interpaving’s work) (McKechnie, at pp. 219-20). As well, a court could find that a municipality, such as the City, has the ability to require its contractors to uphold health and safety requirements on a project, since it “is in a position to control those whom it hires . . . and to supervise the activity, either through the provisions of the contract or by municipal by‑laws” (Sault Ste. Marie, at p. 1331).

[59] Once again, this guidance is not novel. Supervision and inspection have long been seen as sensible steps to take when considering whether that person can avail themselves of the due diligence defence. Put simply, the Act does not “capture within its ambit owners and employers who have exercised due diligence in their choice and supervision of contractors” (Grant Forest Products, at para. 57). Hence, categorizing the City as an employer in breach of s. 25(1)(c) of the Act because it sent inspectors to the worksite to monitor Interpaving’s work does not condemn the City for supervising Interpaving or otherwise discourage it from doing so. Those efforts may well assist the City in establishing due diligence and escaping liability.

[60] In addition to control, the accused’s degree of knowledge, skill or experience and the gravity and likelihood of harm (i.e., the “foreseeability of the accident”) are all relevant to whether the accused took every precaution reasonable in the circumstances (R. v. Rio Algom Ltd. (1988), 1988 CanLII 4702 (ON CA), 66 O.R. (2d) 674 (C.A.), at p. 682; R. v. Brampton Brick Ltd. (2004), 2004 CanLII 2900 (ON CA), 189 O.A.C. 44, at para. 29). An accused’s relative inexperience might support a finding that the accident was unforeseeable, at least from its standpoint.

. Kadonoff v. OSC

In Kadonoff v. OSC (Div Court, 2023) the Divisional Court considered a s.9 Securities Act appeal of "a finding of the Ontario Securities Commission (“OSC”) that he engaged in fraudulent conduct pursuant to s. 126.1 of the Securities Act, and the penalty imposed by the [SS: now named] Capital Markets Tribunal (CMT) in that proceeding".

Although this was an administrative (CMT) ruling, the appellant sought to advance a common law 'due diligence defence' [which is more commonly advanced strict liability (eg. POA) prosecutions], and in the course of that attempt the court considered a related 'defence of reasonable reliance on legal advice':

Did the Panel err in law by finding that Mr. Kadonoff had not established a due diligence defence under s. 126.1 of the Securities Act?

[35] Mr. Kadonoff argues that the Panel erred in stating that due diligence is not an available a defence to an allegation of breach of s. 126.1 of the Securities Act. The Panel made this comment in the context of its consideration of the defence of reasonable reliance on legal advice. At paragraph 239 of the reasons the Panel wrote:

[239] We will now review the defence of reasonable reliance on legal advice and consider whether it is available to the respondents on the facts of this case.

[240] The defence is available in a Commission proceeding in respect of an allegation that requires Staff to establish an intentional or wilful act. An allegation of fraud contrary to the Act falls into that category. The defence is therefore available, subject to a respondent satisfying the criteria for its use.

[241] Subsection 126.1(1) of the Act does not provide for a due diligence defence, and under these circumstances none is available. Instead, a respondent who asserts the defence must establish that:

a. the lawyer had sufficient knowledge of the facts on which to base the advice;

b. the lawyer was qualified to give the advice;

c. the advice was credible given the circumstances under which it was given; and

d. the respondent made sufficient enquiries and relied on the advice.

[242] The last of these four components has a due diligence aspect to it, and even though the defence in this context is not a true due diligence defence, diligence on the part of the respondent asserting the defence may play a role both in the assessment of the mental element at the merits stage and as a potential mitigating factor at the sanctions stage (if any) of a proceeding. (Citations omitted).

[36] The defence of due diligence is a defence available at common law or by statute for strict liability offences. It involves an individual proving on a balance of probabilities that they took all reasonable care or took all reasonable steps to avoid committing the offence: R. v. Sault Ste Marie (City), [1978] 2 S.C.R. 1299, 1978 CanLII 11 (SCC), at p. 14.

[37] This defence is also incorporated in some statutes, including in s. 122 of the Securities Act in the case of a prosecution for the offence of making misleading statements:

Defence – Without limiting the availability of other defences, no person or company is guilty of an offence under clause (1)(a) or (b) if the person or company did not know and in the exercise of reasonable diligence could not have known that the statement was misleading or untrue or that it omitted to state a fact that was required to be stated or that was necessary to make the statement not misleading in the light of circumstances in which it was made.

[38] In contrast to s. 122 which uses the language of “reasonable diligence,” s. 126.1 of the Securities Act provides:

Fraud and market manipulation

126.1(1) A person or company shall not, directly or indirectly, engage or participate in any act, practice or course of conduct relating to securities, derivatives or the underlying interest of a derivative that the person or company knows or reasonably ought to know,

a. results in or contributes to a misleading appearance of trading activity in, or an artificial price for, a security, derivative or underlying interest of a derivative; or

b. perpetrates a fraud on any person or company.

[39] Due diligence can take several forms. As counsel for the OSC concedes, a mistake of fact is an aspect of due diligence which can be a legitimate defence in a prosecution under s. 126.1 of the Securities Act. Mr. Kadonoff raised that defence, testifying that he did not know that SIF#1’s funds were being used to fund the distributions by SIF#2 in June, July and August of 2015.

[40] Had the Panel accepted this evidence, then this would have been a defence, at common law, akin to due diligence. Mr. Kadonoff’s mistake would have countered the allegation that he knew or reasonably ought to have known that the acts done perpetrated a fraud. But the Panel did not accept his evidence on this point, finding that although Mr. Kadonoff raised concerns about the transfers, he signed the cheque to SIF#2 distributions in his capacity as an officer of SIF Inc. The Panel went on to say that “a reasonable inquiry would have revealed exactly what Mr. Kadonoff feared was indeed happening, we cannot accept his wishful assertion that he relied on others to justify his signing the cheque.” Thus, although the Panel did not describe his defence as one of due diligence, it nevertheless considered Mr. Kadonoff’s defence of mistake of fact, and his lack of knowledge and rejected his evidence on that point. I find that in considering the defence of mistake of fact, and in observing that there was no statutory defence of due diligence in s. 126.1, the Panel did not fall into legal error.

[41] In reading the detailed reasons for each of the defences raised by Mr. Kadonoff and considering the discussion of due diligence in the context of the section, I conclude that it is likely that the Panel meant that s. 126.1 does not include an explicit statutory defence of due diligence. The Panel understood the defences raised by Mr. Kadonoff at common law and addressed them. This raises a question of mixed fact and law. I see no error in law or any palpable and overriding error in the Panel’s application of the law to Mr. Kadonoff’s defence of mistake of fact or purported exercise of due diligence. Thus, I would not give effect to this ground of appeal.