A Helpful Guide For How to Understand the Difference Between a Regulatory Offence and a Criminal Code Conviction

Man in suit standing within room used for regulatory offence hearings It is possible that a regulatory statute that is applicable to issues of regarding professional misconduct, and upon a finding of such misconduct the statute may contain a penalty, and even a penalty of imprisonment, such is without meaning that the regulatory offence described within the statute is of a criminal nature.  Indeed, some regulatory offences may even carry penalties in the range of hundreds of thousands of dollars and significant jail sentences.  For example, an offence of submitting a false information on an application under the Real Estate and Business Brokers Act, 2002, S.O. 2002, Chapter 30, Schedule C, or an offence of failure to comply with an order or requirements related to a real estate trust account may be punishable by a period of incarceration of up to two (2) years.  A corporation that is convicted for an offence under the Act may even be liable for up to a two hundred fifty thousand ($250,000) dollar fine.

As a case on point, in R. v. Seto, [2010] O.J. No. 5438 (QL) (O.C.J.), the owner of Re/Max Executive Realty Inc. failed to deposit trust money into a real estate trust account and instead deposited the money directly into a general account. Upon conviction, in addition to monetary penalties, Mr. Seto was sentenced to a one year jail term but appealed the sentence. Upholding the sentence, the appeal judge held that “It is important to get a clear message out to real estate brokers that if they violate their trust they may go to prison”.

On an even more extreme scale, Securities Act, R.S.O. 1990, c. S.5, provides upon conviction for fines of up to five million ($5,000,000) dollars, or imprisonment for a term of up to five (5) years less a day, or even both.

Despite the seriousness of these potential penalities, these types of convictions come without a “criminal record”.  This is because the law acknowledges a distinction between acts that are truly criminal and other types of conduct, which are prohibited for reasons of public interest.  Real crimes are primarily concerned with social and moral values, while regulatory offences are concerned with protection of the societal interests by protecting public safety, environment, and regulating operations of business, commerce and industry.  The distinction therefore hinges on the question of whether the accused merely failed to follow the prescribed standards required under a statute, or whether the misconduct was tainted with morally reprehensible intent.

In R. v. Pierce Fisheries Ltd., [1971] S.C.R. 5, the Supreme Court of Canada held that unlike prosecuting crimes, in regulatory offences the government is without the requirement to prove malicious intent.  Within Pierce, the Supreme Court specifically stated:

Generally speaking, there is a presumption at common law that mens rea is an essential ingredient of all cases that are criminal in the true sense, but there is a wide category of offences created by statutes enacted for the regulation of individual conduct in the interests of health, convenience, safety and the general welfare of the public which are not subject to any such presumption. Whether the presumption arises in the latter type of cases is dependent upon the words of the statute creating the offence and the subject-matter with which it deals. 

With this said, some regulatory offences do contain the elements of knowledge or intent known as mens rea, (Latin for “guilty mind”). This is evidenced from their language containing the words “knowingly”, “wilfully”, “with intent”, or “for the purpose of” etc., however, even where there is mens rea when a regulatory offence occurs, such still fails to convert a regulatory offence into a crime.

Also per the same Pierce Fisheries case, wherein the Supreme Court was dealing with the Ontario Water Resources Commission Act, a provincial statute, it was stated that provincial legislation,“cannot possibly create an offence which is criminal in the true sense.

This latter finding reaffirmed a constitutional premise that criminal offences are within the exclusive jurisdiction of federal laws, and the offences created by provincial statutes fail to constitute as criminal conduct even if the offence is a fraudulent act, such as supplying false information on a licensing application, mishandling trust funds, or tampering with municipal elections. In common law and for constitutional reasons, only the federal Parliament, rather than a provincial Legislature, can create an offence that is a “crime” in the true sense.

Summary Comment

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