Corporate Environmental Governance in Quebec: Penalties and Defences

The Legislature has provided Quebec with the Environment Quality Act, a general law designed to protect the environment which prescribes many obligations and duties that shall be rigorously complied with. A regime of penal and administrative penalties is provided for in the Act to sanction offenders and deter individuals, companies or public bodies that may negligently disregard their environmental responsibilities.

Since the enactment of the Environment Quality Act (the “EQA”) in 1972, the legislator has intervened on numerous occasions to emphasize the dissuasive and punitive nature of fines and penalties applicable in the event of non-compliance with its mandatory requirements. The most recent amendments date back to 2011 and nowadays, the maximum fines for a second offence by a legal person can reach up to $18 million per day for the most serious offences, including the possibility of up to five years less a day in prison for individuals who would have contravened one of these most important provisions. An individual can be fined a minimum of $1,000 for an offence considered to be “minor”.

Penal Offences Regime

All mandatory provisions of the EQA, its regulations, orders or administrative acts, such as environmental authorizations, are subject to a penal regime with fines and imprisonment sentences, the severity of which varies according to the seriousness of the offence.

The legislator has classified and grouped potential violations of the EQA into four categories based on both the significance of the environmental obligation contravened and the consequences of these violations on the quality of the environment. These four categories of violations are spelled out in sections 115.29 to 115.32 of the EQA. Applicable fines are lower when the offender is a natural person and higher when the offender is a legal person, partnership or an association without a legal personality. The legislator has also allowed the government to enact, by regulation, special penal provisions for any violation of one of the regulations of the EQA.

When reviewing the amount of the fines set out by the legislator, it appears that these amounts increase according to the category of each offence. The amounts for each offence category are set out in a range with a minimum and a maximum within which the court must exercise its discretion and determine the appropriate amount of the fine (or imprisonment period) according to the seriousness of the offence based on the evidence presented and the relevant factors described below. The minimum fines to which a natural person is liable for each offence category are $1,000, $2,500, $5,000 and $10,000, respectively. At the other end of the spectrum, the maximum fines for a corporation for each of the offence categories are $600,000, $1,500,000, $3,000,000 and $6,000,000 respectively.

Where an offence is committed by a director or an officer of a legal person, partnership or association without a legal personality, the minimum and maximum fines are doubled. Continuing offences are considered separate offences for each day that they continue.

The legislator was careful to include in the legislation the “aggravating factors” to be used to determine a fair and reasonable sentence, considering the objectives of the law, the offender’s behaviour, the costs imposed on the community and the consequences of the offence on the quality of the environment. As a matter of fact, the legislator has provided for a total of nine such "aggravating factors" which are quite extensively described in the legislation. A judge may even impose an additional fine equal to the amount of any pecuniary benefit that may have benefited the offender from the committed offence, even if the maximum fine provided for in the legislation has been imposed by the court.

Moreover, when convicting a person of an offence, a judge may make one or more of the seven orders provided for in section 115.43, such as ordering the offender to restore the premises, implement compensatory measures, pay compensation for damages resulting from the offence and even make public the conviction and the preventive and remedial measures imposed by the judge.

Penal proceedings may be instituted within five years from the date of the offence or within two years from the date on which the inspection or investigation leading to the discovery of the offence was undertaken. Where a municipality is responsible for enforcing a by-law, it may prosecute offences committed within its jurisdiction.

Increased Liability of Director and Officer

To deter decisions made by companies that are inconsistent with the EQA, the legislator has set out a specific liability regime for directors and officers, which supplements the general penal regime.

First, from a penal standpoint, the EQA provides that a legal person, partnership or association’s director or officer is deemed to have personally committed the offence perpetrated by the legal person, corporation or association, unless it is established that he diligently took all necessary precautions to prevent it. It is therefore a presumption that can be rebutted by the defendant by submitting, first and foremost, evidence showing that he made all reasonable efforts to prevent the offence from being perpetrated. Such reversal of the burden of proof for directors and officers is likely to strongly encourage them to be more vigilant in ensuring compliance with the EQA and its regulations by the legal person, corporation or association.

The legislator has set out another mechanism to increase the accountability of the director or officer of a company. Indeed, they may also be held personally liable for any amount that a legal person may owe the Minister under a provision of the EQA or one of its regulations. All of the directors’ and officers’ movable and immovable property may be subject to a legal hypothec to secure repayment of that amount to the Minister. The only way for a director or an officer to avoid personal liability is to demonstrate that he has been careful and diligent in preventing the default or failure that gave rise to the claim.

Finally, besides the above-mentioned measures and the inherent stigma of penal prosecution for a corporate director or officer, the EQA also gives the Minister the authority to refuse to issue, amend, renew, suspend or revoke any authorization applied for or held by a legal person if one of its directors or officers has been convicted of an offence under the EQA or its regulations within the last two years or within the last five years for more serious offences or for violations of tax laws or certain provisions of the Criminal Code. A conviction against an officer or a director sitting on the board of directors of several companies is thus likely to have a negative impact on all of these companies and not only on the offending company.

Defences

When a person is prosecuted for a penal offence under the EQA, a wide range of defences are available, some of which may apply to the factual situation or the legal basis of the charge against that person.

The principal defence is due diligence, meaning that the person would have taken all reasonable steps to prevent the offence or has mistakenly believed in a factual situation that, had it been true, would have rendered his behaviour innocuous. This defence was officially recognized by the Supreme Court of Canada in 1978. It has been codified in numerous statutes since then, including two sections of the EQA. Should the accused succeed in demonstrating due diligence, the judge may acquit that person.

The accused may also raise other defences depending on the circumstances of each case, such as  :

• Raising a reasonable doubt about one or more of the essential elements of an offence;
• Arguing about the meaning or definition of terms used in the law he is accused of violating;
• Raise the unconstitutionality of the statute or regulation he is accused of violating;
• Raising the ultra vires nature of delegated legislation on which the charge is based;
• The defence of officially-induced error of law;
• The defence of impossibility;
• The defence of necessity;
• The de minimis defence (a trivial offence);
• The defence of acquired rights (a limited defence in environmental law).

Monetary Administrative Penalties Regime

When updating the penalty regime of the EQA in 2011, in order to improve compliance with the law, the legislator set out a faster and more expeditious monetary administrative penalties regime than the penal regime, the latter of which requires the involvement of the penal justice system with the usual delays and uncertainties of the judicial system and procedures.

The monetary administrative penalties regime, commonly known as the “MAP” regime, applies to all mandatory provisions of the EQA, regulations, orders and administrative instruments. As with the penal offence regime, the MAP regime is organized into four categories of violations, which are referred to as "failures to comply" in the MAP regime. These four categories are also based on the significance of the targeted obligations or duties involved and their environmental consequences. The MAP system provides penalties that differ whether the offender is an individual or a corporation, a partnership or an association without a legal personality, with a higher MAP amount for the latter.

The MAP regime does not involve the intervention of any court of law. Essentially, a public servant acts as a judge of a “failure to comply” in a given situation and issues the MAP tp the person deemed responsible for the failure to comply without even consulting or hearing that person beforehand. It should be noted that this procedure is unusual, being a rather "expedient" form of justice that does not respect the usual rules of presumption of innocence and the rule of law that a person cannot be punished by the law enforcement system of the state without the intervention of an independent tribunal and compliance with procedural guarantees. For this reason, the legislator provided that the amount of a MAP would be fairly modest, ranging from $250 to $10,000, and that the amount would be fixed for each failure to comply, thus avoiding the need for the public servant to decide the amount of the MAP to be imposed upon an offender.

Nevertheless, a minimum of procedural safeguards were provided for by the legislator to preserve the rights of individuals. For example, when a public servant finds a failure to comply with the EQA, he must send a “Notice of Non-Compliance” to the offender informing him that a “failure to comply” has occurred and that an MAP may be imposed.

When a MAP is imposed on an individual, there are two possible ways to appeal  : first, the person may request an application for review before a “Review Officer” within the same department, but in a separate administrative unit dedicated to such reviews. Such a review is a purely administrative procedure, without full hearing of the parties. Parties are nevertheless invited to make representations and submit any relevant written evidence in support of their respective positions. A decision upon review is one that must be justified.

Upon satisfactory resolution (or satisfactory explanations) at the review stage, the matter can be terminated at that stage. Depending on the circumstances of the case, the individual will be required to pay the MAP if it has been maintained by the Review Officer or be released from that obligation if the MAP is cancelled by the Review Officer.

Should the individual be dissatisfied with the Review Officer’s decision, the decision may be challenged before the Tribunal administratif du Québec. The individual then has the benefit of a full and complete hearing and the opportunity to examine witnesses and submit before the administrative judges any relevant evidence that could tend to exonerate him from the alleged failure to comply. This hearing is public. During the hearing, the parties may put forward all arguments of fact and law. Among other things, if the facts so allow, the defendant may present a defence of due care and diligence and use arguments that may resemble the aforementioned penal law defences. After hearing the parties, which are usually represented by counsel, the Tribunal administratif du Québec renders a decision that is intended to be "final" although it may be subsequently reviewed by a different panel of administrative judges or even be subject to judicial review by the Superior Court of Québec, even though this difficult and exceptional recourse has little chance of success because of the very strict rules that apply to judicial review proceedings.

Key Take Away 

Given the potentially significant consequences, including reputational impacts resulting from penal sanctions and MAPs, it is appropriate for anyone whose activities are subject to the EQA to initiate or continue to reflect on their environmental governance. Caution should be exercised in taking this legislation into account.

Indeed, several measures can be implemented to prevent non-compliance with the EQA, which may also prove useful in establishing a due diligence defence. On the other hand, proper management of non-compliance notices, MAPs and findings of violations is essential to limit the consequences, as much as possible, of penal sanctions or MAPs. To this end, our Environmental Law team is available to advise you on various environmental governance measures that could be put in place in businesses and other organizations.