R. v. Wholesale Travel Group Inc. [1991] 3 S.C.R. 154: -- Corporations -- Standing -- Corporation charged with misleading advertising under Competition Act -- Whether corporation has standing to challenge validly of federal legislation-- Presumption of innocence -- Reverse onus -- Regulatory provisions -- Strict liability

Present: Lamer C.J. and La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO

Constitutional law -- Charter of Rights -- Fundamental justice -- Regulatory provisions -- Strict liability -- Corporation charged with misleading advertising under Competition Act -- Conviction possible without fault on part of regulated party -- Imprisonment possible penalty on breach of provisions -- Whether ss. 36(1)(a) and 37.3(2) of Competition Act infringe s. 7 of Charter -- If so, whether infringement justifiable under s. 1 of Charter -- Canadian Charter of Rights and Freedoms, ss. 1, 7, 11(d) -- Competition Act, R.S.C. 1970, c. C-23, ss. 36(1)(a), 37.3(2).

Constitutional law -- Charter of Rights -- Presumption of innocence -- Reverse onus provisions -- Corporation charged with misleading advertising under Competition Act -- Statutory defences comprising defence of due diligence coupled with timely retraction -- Statutory defences to be established by accused on balance of probabilities -- Whether reverse onus infringes s. 11(d) of Charter -- If so, whether infringement justifiable under s. 1 of Charter -- Canadian Charter of Rights and Freedoms, ss. 1, 7, 11(d) -- Competition Act, R.S.C. 1970, c. C-23, ss. 36(1)(a), 37.3(2).

Constitutional law -- Charter of Rights -- Corporations -- Standing -- Corporation charged with misleading advertising under Competition Act -- Whether corporation has standing to challenge validly of federal legislation under ss. 7 and 11(d) of Charter -- If so, whether a corporation entitled to benefit from a finding that federal legislation unconstitutional -- Canadian Charter of Rights and Freedoms, ss. 1, 7, 11(d) -- Competition Act, R.S.C. 1970, c. C-23, ss. 36(1)(a), 37.3(2).

Wholesale Travel Group Inc. (a travel agency) was charged with false or misleading advertising, contrary to s. 36(1)(a) of the Competition Act. The advertisements referred to vacations at "wholesale prices" but the advertised "wholesale price" was not the price at which Wholesale Travel acquired its vacation packages. The Crown elected to proceed by way of summary conviction and the accused pleaded not guilty. At the outset of the trial, the accused brought a motion for a declaration that ss. 36(1)(a) and 37.3(2) of the Competition Act were inconsistent with ss. 7 and 11(d) of the Canadian Charter of Rights and Freedoms and were, therefore, of no force or effect. Section 36(1)(a) created the offence and s. 37.3(2) set forth a statutory defence. This defence, which was to be established by the accused (s. 37.3(2)), included essentially the common law defence of due diligence (s. 37.3(2)(a) and (b)) coupled with the requirement of a timely retraction (s. 37.3(2)(c) and (d)).

The trial judge held that ss. 36(1)(a) and 37.3(2) were inconsistent with ss. 7 and 11(d) and could not be upheld under s. 1 of the Charter and dismissed the charges. The Supreme Court of Ontario, on appeal, found impugned provisions constitutional and remitted the case to the Provincial Court. The Ontario Court of Appeal allowed the appeal in part. The majority held that s. 37.3(2)(c) and (d) of the Competition Act were severable from the rest of s. 37.3(2) and declared them to be of no force or effect. The majority further held that the words "he establishes that" in s. 37.3(2) were severable and declared them to be of no force or effect. Both Wholesale Travel and the Crown appealed.

The constitutional questions stated here queried: (1) whether s. 37.3(2) of the Competition Act in whole or in part violated ss. 7 or 11(d) of the Charter; (2) whether s. 36(1)(a), in and of itself or when read in combination with s. 37.3(2), violated ss. 7 or 11(d) of the Charter; and (3) if either were answered in the affirmative, whether the impugned provision was saved by s. 1 of the Charter? An issue not encompassed by the constitutional questions was whether a corporation had "standing" to challenge the constitutionality of these statutory provisions under the Charter and, if so, was a corporation entitled to benefit from a finding that the provisions violated a human being's constitutional rights.

Held: The appeal by Wholesale should be dismissed.

Held (Lamer C.J., La Forest, Sopinka and McLachlin JJ. dissenting in the result): The Crown's appeal should be allowed.

The issues are decided as follows:

1. It is not an infringement of s. 7 of the Charter to create an offence for which the mens rea component is negligence, so that a due diligence defence (s. 37.3(2)(a) and (b)) is available. Unanimous.

2. The timely retraction provisions (s. 37.3(2)(c) and (d)) infringe s. 7, are not justified under s. 1, and are accordingly unconstitutional. Unanimous.

3.

  1. On a majority reasoning by Lamer C.J. (and La Forest, Sopinka, Gonthier, McLachlin, Stevenson and Iacobucci JJ.), the reverse onus provision ("he establishes that" in s. 37.3(2)) infringes s. 11(d) of the Charter; L'Heureux-Dubé and Cory JJ. (dissenting on this issue) would find no infringement, and would in any event, have found an infringement justified under s. 1.
  2. Per Gonthier, Stevenson and Iacobucci JJ.: The provision is justified under s. 1 of the Charter.
  3. Per Lamer C.J. and La Forest, Sopinka and McLachlin JJ. (dissenting on this issue): The provision is not justified under s. 1 of the Charter.
  4. Per L'Heureux-Dubé, Gonthier, Cory, Stevenson and Iacobucci JJ. (Lamer C.J. and La Forest, Sopinka and McLachlin JJ. dissenting in the result): The reverse onus provision is constitutional.

4. The matter is therefore remitted to trial on the bases that:

  1. a negligence mens rea regulatory offence is constitutional;
  2. the timely retraction provisions are unconstitutional; and
  3. the reverse onus provision is constitutional.

I. Standing

Per Lamer C.J. and La Forest and Sopinka JJ.: Wholesale Travel has standing to challenge the constitutionality of the false/misleading advertising provisions under ss. 7 and 11(d) of the Charter and may benefit the finding that these provisions are unconstitutional. However, this is not to say that if the same provisions were enacted so as to apply exclusively to corporations, a corporation would be entitled to raise the Charter arguments which have been raised in the case at bar. Sections 36(1) and 37.3(2) of the Competition Act encompass both individual and corporate accused. If the provisions violate an individual's Charter rights they must be struck down (to the extent of the inconsistency) and cannot apply to any accused, whether corporate or individual. If the provisions in question applied only to corporations, the Charter analysis would be very different.

Per Gonthier, Stevenson and Iacobucci JJ.: The conclusions of Lamer C.J. on standing were agreed with.

Per McLachlin J.: It was not necessary to consider the application of the Charter to a provision dealing with corporations only.

II. Sections 7 and 11(d) of the Charter

Per Lamer C.J. and Sopinka J.: Section 37.3(2)(c) and (d) infringes s. 7 of the Charter and the words "he establishes that" in s. 37.3(2) infringe the presumption of innocence in s. 11(d) of the Charter.

The offence of false/misleading advertising is punishable by imprisonment. The offence therefore must not be one of absolute liability and must command at least a fault requirement of negligence, in that at least a defence of due diligence must always be open to an accused.

While there are some offences for which the special stigma attaching to conviction is such that subjective mens rea is necessary in order to establish the moral blameworthiness which justifies the stigma and sentence, the offence of false/misleading advertising is not such an offence.

The issue here centred on the fault requirement constitutionally required where an accused faces possible imprisonment. An element of subjective mens rea is not always required by s. 7 of the Charter. Whether a fault requirement higher than this constitutional minimum of negligence ought to be adopted where an accused faces possible imprisonment or conviction of any offence under the Criminal Code is a question of public policy which must be determined by Parliament.

The inclusion of the word "and" after s. 37.3(2)(c) clearly indicates that all four components of s. 37.3(2) must be established for the accused to be acquitted. If a situation could arise where an accused would be unable to establish all four components of s. 37.3(2) but had nonetheless been duly diligent (i.e., not negligent), the constitutionally required element of negligence is not fulfilled by the statutory defence contained in s. 37.3(2).

The additional requirement of "timely retraction" in paras. (c) and (d) means that the statutory defence is considerably more narrow than the common law defence of due diligence and could result in the conviction of an accused who was not negligent. The consequence of paras. (c) and (d) is to remove the constitutionally required fault level in the false/misleading advertising provisions and s. 7 of the Charter is therefore offended.

Whether this offence (or the Act generally) is better characterized as "criminal" or "regulatory" is not the issue. A person whose liberty has been restricted by way of imprisonment has lost no less liberty because he or she is being punished for the commission of a regulatory offence as opposed to a criminal offence. It is the fact that the state has resorted to the restriction of liberty through imprisonment for enforcement purposes which is determinative of the principles of fundamental justice. These principles do not take on a different meaning simply because the offence can be labelled as "regulatory". A regulatory context may well influence the Charter analysis in particular cases but negligence nevertheless is the minimum level of fault which will accord with s. 7 of the Charter whenever a conviction gives rise to imprisonment.

The presumption of innocence is protected expressly by s. 11(d) and inferentially by s. 7 because this presumption is a principle of fundamental justice. Section 11(d) requires, where a person faces penal consequences, that the individual be proven guilty beyond a reasonable doubt, the state bear the burden of proof, and that the prosecution be carried out lawfully. Section 11(d) is offended if an accused may be convicted notwithstanding a reasonable doubt on an essential element of the offence. The real concern, therefore, is not that the accused must disprove an element or prove an excuse, but that an accused may be convicted while a reasonable doubt exists.

The words "he establishes that" in s. 37.3(2) require the accused to prove the two elements set out on a balance of probabilities and failure to so prove either element will result in conviction. The absence of due diligence is necessary for conviction and yet an accused could be convicted under s. 37.3(2) notwithstanding a reasonable doubt as to whether or not the accused was duly diligent. The impugned words therefore infringe s. 11(d).

Since constitutional difficulties arise only from the operation of s. 37.3(2)(c) and (d) and from the words "he establishes that" in s. 37.3(2), s. 36(1)(a) raises no constitutional problem either by itself or in combination with the remainder of s. 37.3(2).

Per La Forest J.: Substantial agreement was expressed for the reasons of Lamer C.J. Nevertheless, there is a broad divide between true criminal law and regulatory offences. The possible imposition of a term of imprisonment necessitates much stricter requirements to conform with the principles of fundamental justice than mere monetary penalties. In the regulatory context here, a requirement that a reasonable doubt be raised by the accused that he or she exercised due diligence meets the requirements of fundamental justice under s. 7 of the Charter. A requirement that the accused prove such diligence on the balance of probabilities goes too far. The same holds true under s. 1 if the issue is approached in terms of s. 11(d).

The requirement of due diligence is sufficient for Charter purposes for regulatory offences and some criminal offences having a significant regulatory base. However, a lower level of mens rea than criminal negligence should not be accepted for most criminal cases.

Per McLachlin J.: The modified due diligence defence embodied in s. 37.3(2)(c) and (d) permits conviction in the absence of even the minimum fault of negligence and so infringes s. 7 of the Charter. The requirement of s. 37.3(2) that the accused establish due diligence on a balance of probabilities, through the inclusion of the phrase "he establishes that", permits conviction despite a reasonable doubt as to an essential element of the offence. Combined with the sanction of imprisonment, the application of this onus violates s. 11 (d) of the Charter. When the offending provision in s. 37.3(2)(c) and (d) is removed, along with the phrase "he establishes that" in s. 37.3(2), the remaining provision at issue, s. 36(1)(a), does not infringe the Charter.

Per L'Heureux-Dubé and Cory JJ.: Strict liability offences, as exemplified in this case by the combination of s. 36(1)(a) and s. 37.3(2)(a) and (b) of the Competition Act, do not infringe either s. 7 or s. 11(d) of the Charter. Neither the absence of a mens rea requirement nor the imposition of an onus on the accused to establish due diligence on a balance of probabilities offends the Charter rights of those accused of regulatory offences.

The common law has long acknowledged a distinction between truly criminal conduct and conduct, otherwise lawful, which is prohibited in the public interest. Regulatory offences and crimes embody different concepts of fault. The mens rea requirement is not required in regulatory offences. Since regulatory offences are directed primarily not to conduct itself but to the consequences of conduct, conviction of a regulatory offence imports a significantly lesser degree of culpability than conviction of a true crime. The concept of fault in regulatory offences is based upon a reasonable care standard and, as such, does not imply moral blameworthiness in the same manner as criminal fault. Conviction for breach of a regulatory offence suggests nothing more than failure to meet a prescribed standard of care.

The Competition Act is regulatory in character. Here, the offence did not focus on dishonesty but rather on the harmful consequences of otherwise lawful conduct. Conviction would only suggest that the defendant has made a representation to the public which was in fact misleading and that the defendant was unable to establish the exercise of due diligence in preventing the error. This connotes a fault element of negligence rather than one involving moral turpitude.

The Charter is to be interpreted in light of the context in which the claim arises. The rights asserted by the appellant must be considered in light of the regulatory context, acknowledging that a Charter right may have different scope and implications in a regulatory context than in a truly criminal one. Under this contextual approach, constitutional standards developed in the criminal context cannot be applied automatically to regulatory offences. Rather, the content of the Charter right must be determined only after an examination of all relevant factors and in light of the essential differences between the two classes of prohibited activity. The appellant's claim must also be considered and weighed in light of the realities of a modern industrial society, where the regulation of innumerable activities is essential for the benefit of all. It is vital that the fundamentally important role of regulatory legislation in the protection of individuals and groups in Canadian society today be recognized and accepted.

The distinction between criminal and regulatory offences and their differential treatment for Charter purposes is in some ways explained by a "licensing argument" and by the vulnerability of those being protected by the regulatory measures. The regulated person chose to enter the regulated field and accordingly can be taken to have known of, in most cases, and to have accepted certain terms and conditions of entry. The nature of the conduct will largely determine if the licensing argument should apply. The procedural and substantive protections a person can reasonably expect may vary depending upon the activity that brings that person into contact with the state. The extent of Charter protection may differ depending upon whether the activity in question is regulatory or criminal in nature. Vulnerability is also a component in the contextual approach to Charter interpretation and should be considered whenever regulatory legislation is subject to Charter challenge.

The principles of fundamental justice referred to in s. 7 of the Charter prohibit the imposition of penal liability and punishment without proof of fault. The level of fault constitutionally required for every type of offence, however, has not been determined and will vary with the nature of the offence and the penalties available upon conviction. It has only been established that where imprisonment is available as a penalty, absolute liability cannot be imposed since it removes the fault element entirely and, in so doing, permits the punishment of the morally innocent.

Section 7 requires proof of mens rea in connection with true crimes. With respect to regulatory offences, however, proof of negligence satisfies the s. 7 fault requirement. Although the element of fault may not be removed completely, the demands of s. 7 will be met in the regulatory context where liability is imposed for conduct which breaches the standard of reasonable care required of those operating in the regulated field.

Mens rea and negligence are both fault elements which provide a basis for the imposition of liability. Mens rea focuses on the mental state of the accused and requires proof of a positive state of mind such as intent, recklessness or wilful blindness. Negligence, on the other hand, measures the conduct of the accused on the basis of an objective standard, irrespective of the accused's subjective mental state. Where negligence is the basis of liability, the question is not what the accused intended but rather whether the accused exercised reasonable care. The application of the contextual approach suggests that negligence is an acceptable basis of liability in the regulatory context which fully meets the fault requirement in s. 7 of the Charter. To place regulatory offences in a separate category from criminal offences, with a lower fault standard, does not violate the principles of fundamental justice under s. 7 by allowing the defendant to go to jail without having had the protection of proof of mens rea by the Crown which is available in criminal prosecutions.

Governments must have the ability to enforce a standard of reasonable care in activities affecting public welfare. The laudable objectives served by regulatory legislation should not be thwarted by the application of principles developed in another context. The tremendous importance of regulatory legislation in modern Canadian industrial society requires that courts be wary of interfering unduly with the regulatory role of government through the application of inflexible standards.

The government cannot adequately monitor every industry so as to be able to prove actual intent or mens rea in each case. It can, as a practical matter, do no more than to demonstrate that it has set reasonable standards to be met by persons in the regulated sphere, and to prove beyond a reasonable doubt that there has been a breach of those standards by the regulated defendant. The regulated person is taken to be aware of and to have accepted the imposition of a certain objective standard of conduct as a pre-condition engaging the regulated activity. It misses the mark to speak in terms of the "unfairness" of an attenuated fault requirement because the standard of reasonable care has been accepted by the regulated actor upon entering the regulated sphere.

Strict liability offences accordingly do not violate s. 7 of the Charter. The requirements of s. 7 are met in the regulatory context by the imposition of liability based on a negligence standard.

The imposition of a reverse persuasive onus on the accused to establish due diligence on a balance of probabilities does not run counter to the presumption of innocence, notwithstanding the fact that the same reversal of onus would violate s. 11(d) in the criminal context. The section 11(d) standard which has been developed and applied in the criminal context should not be applied to regulatory offences. The importance of regulatory legislation and its enforcement strongly supports the use of a contextual approach in the interpretation of the s. 11(d) right as applied to regulatory offences. Quite simply, the enforcement of regulatory offences would be rendered virtually impossible if the Crown were required to prove negligence beyond a reasonable doubt. The means of proof of reasonable care will be peculiarly within the knowledge and ability of the regulated accused. Only the accused will be in a position to bring forward evidence relevant to the question of due diligence. There is a practical difference between requiring the accused to prove due diligence on a balance of probabilities and requiring only that the accused raise a reasonable doubt as to the exercise of due diligence. The presumption of innocence for a regulated accused is not meaningless because the Crown must still prove the actus reus. Fault is presumed from the bringing about of the proscribed result and the onus shifts to the defendant to establish reasonable care on a balance of probabilities.

The availability of imprisonment does not alter the conclusion that strict liability does not violate either ss. 7 or 11(d) of the Charter. The Charter does not guarantee an absolute right to liberty; rather, it guarantees the right not to be deprived of liberty except in accordance with the principles of fundamental justice. It is whether the principles of fundamental justice have been violated, not the availability of imprisonment, which is the determinative consideration. There is a difference or variation between what the principles of fundamental justice require in regard to true crimes and what they require in the regulatory context. Imprisonment is not unreasonable, given the danger that can accrue to the public from breaches of regulatory statutes, and can be challenged under s. 12 of the Charter if grossly disproportionate to the offence committed.

Section 37.3(2)(c) and (d) imposes an obligation on the accused to make a timely retraction as a precondition to relying on the defence of due diligence. Conviction therefore may be required in some circumstances where there is no fault on the part of the accused. Even where an accused can establish the absence of negligence in the making of misleading representations, paras. (c) and (d) nonetheless require conviction if the accused has failed to make a timely prompt correction or retraction. In these circumstances, the accused would be deprived of the defence of due diligence and the offence would be tantamount to absolute liability, and thereby violate s. 7.

Section 37.3(2)(a) and (b) put forward the common law defence of due diligence. They do not violate s. 7 of the Charter because of the removal of the mens rea requirement in strict liability offences. Where imprisonment is available as a penalty for breach of a statute, s. 7 of the Charter requires a proof of fault before liability can be imposed. Fault in the regulatory context should be imposed on the basis of negligence.

The imposition in strict liability offences of a reverse persuasive onus on the accused to establish due diligence is proper and permissible and does not constitute a violation of the s. 11(d) presumption of innocence. Section 37.3(2)(a) and (b) do not violate s. 11(d) of the Charter.

Per Gonthier, Stevenson and Iacobucci JJ.: Section 37.3(2)(c) and (d) infringe s. 7 of the Charter. The section 11(d) presumption of innocence has a different scope and meaning in relation to public welfare or regulatory offences as opposed to criminal offences.

The reverse onus on the accused to establish due diligence on a balance of probabilities (via the words "he establishes that" in s. 37.3(2)) infringes s. 11(d) (but is justified under s. 1 of the Charter).

III. Section 1 of the Charter

Per Gonthier, Stevenson and Iacobucci JJ.: Section 37.3(2)(c) and (d) is not justified under s. 1.

The reverse onus provision is justified under s. 1 of the Charter. The objective of convicting those guilty of false or misleading advertising and of avoiding loss of convictions because of evidentiary problems because the facts are in the hands of the accused warrants overriding the right guaranteed by s. 11(d) of the Charter.

There is a rational connection between the desired objective and the means chosen to attain it. The alternative means by use of a mandatory presumption of negligence would not achieve the objective as effectively nor would it go a long way in achieving the objective. In practice it would be virtually impossible for the Crown to prove public welfare offences and would effectively prevent governments from seeking to implement public policy through prosecution.

Given that those regulated choose to participate in these regulated activities, and accordingly have accepted the attendant responsibilities, and taking into account the fundamental importance of the legislative objective and the fact that the means chosen impair the right guaranteed by s. 11(d) as little as is reasonably possible, the effects of the reverse onus on the presumption of innocence are proportional to the objective.

Per L'Heureux-Dubé and Cory JJ.: Sections 36(1)(a) and 37.3(2)(a) and (b) do not infringe either s. 7 or s. 11(d) of the Charter and would have been justified under s. 1 had there been a Charter infringement.

Section 37.3(2)(c) and (d) violate s. 7 of the Charter and cannot be justified under s. 1 of the Charter. Assuming that there is a rational connection between the requirement of corrective advertising and the legislative objective of seeking to prevent the harm resulting from misleading representations, there is no proportionality between means and ends. The impugned provisions do not constitute a minimal impairment of the rights of the accused. Further, the availability of imprisonment as a sanction far outweighs the importance of the regulatory objective in correcting false advertising after the fact.

Per Lamer C.J. and Sopinka J. (dissenting in the result): Section 37.3(2)(c) and (d) are not justified under s. 1. Section 37.3(2)(c) and (d) were enacted to prevent false/misleading advertisers from benefiting from advertising and to protect consumers from the detrimental effects of advertising. This is sufficiently important to warrant overriding constitutionally protected rights. The means chosen were rationally connected to this objective. The modified due diligence defence embodied in paras. (c) and (d), however, does not fall within the constitutionally acceptable range. These paragraphs may "catch" even those who have been duly diligent in preventing false advertising. Alternative means could achieve the objective of encouraging advertisers to undertake corrective advertising without convicting the innocent.

An absolute liability component to the offence of false advertising would perhaps be more effective in facilitating convictions than would the alternatives proposed. Parliament, however, could have retained the absolute liability component and, at the same time, infringed Charter rights to a much lesser extent, had it not combined this with the possibility of imprisonment.

The reverse onus provision is not justified under s. 1. The reverse onus provision was intended to facilitate the convictions of false/misleading advertisers. This is a "pressing and substantial objective". The means chosen are rationally connected to this objective. The provision, however, does not infringe constitutionally protected rights as little as is reasonably possible. Parliament could have employed alternative means which would have resulted in a lesser impairment.

Per McLachlin J.: The infringements caused by s. 37.3(2)(c) and (d) and the reverse onus provision cannot be justified under s. 1.

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