Executive Summaries Mar 15, 2023
Directors and Officers: What Is Your Environmental Liability?
In Canada, particularly in Québec and Ontario, the legislator has included provisions in environmental legislation that impose specific liability on corporate directors and officers. These provisions reflect the legislator’s desire to increase these actors’ responsibility and accountability, over and above the ordinary liability of the legal persons or other entities of which they are directors or officers.
These specific provisions make directors and officers personally liable under criminal law and, where applicable, under civil and administrative law, for the decisions and actions of the legal person or entity they administer or manage.
What Does Québec Law Say?
Québec environmental law contains the most extensive and far-reaching provisions concerning the environmental liability of directors and officers.
In fact, with the adoption of Bill 102 in 2022, the legislator extended to six environmental laws the provisions that establish penal, civil, and administrative liability for any person acting as a director or officer of an enterprise. These provisions were originally found, since 2011, only in the Environment Quality Act.
Québec law differs from federal law and the law of the other provinces in that it codifies a rule which establishes that the director or officer of a legal person, partnership or association within the meaning of the Civil Code is presumed to have committed an offence of a penal nature that would have been committed by a legal person, an agent, a mandatary or an employee of the legal person, of a partnership or of an unincorporated association. However, the legislator has codified the defence it recognizes for the director and officer, namely that he or she may present evidence of due diligence showing that all the necessary precautions were taken to prevent the commission of the offence with which he or she is charged.
In the case of an offence committed by a partnership, all the partners, except the limited partners, are presumed to be directors of the partnership in the absence of any evidence to the contrary naming the person or persons charged with managing the partnership’s affairs.
Since the adoption of this liability regime, the courts have recognized the penal liability of several directors and officers of legal persons who were, however, admittedly small corporations.
The Québec legislator has also provided for the civil liability of a director or officer of a legal person who fails to pay an amount owed to the Minister as:
- An administrative penalty; and;
- An amount expended by the Minister to perform decontamination work at the expense of a responsible person or entity.
Thus, the director and officer are jointly and severally liable, with the other directors and officers of the corporation and the corporation itself, for the payment of the due amount unless they establish that they exercised due care and diligence to prevent the breach that gave rise to the monetary debt.
The Québec legislator has shown imagination in establishing administrative liability for directors and officers of corporations. Indeed, the "wrongful" behaviour of one of these actors may allow the Minister to make an executive decision with respect to the legal person, such as:
- A refusal to issue, modify or renew an authorization;
- The imposition of an amendment; or
- The suspension or revocation of a license and an objection to transferring a license to a new entity or person.
Examples of alleged "wrongful" conduct by a director or officer include:
- Filing a false statement or false information;
- Commission of an environmental offence over the last two years;
- Commission of a criminal act over the previous five years; and
- Failure to comply with a law or regulation.
If the Minister decides to make one of the executive decisions described above, they must give a 15-day notice before allowing the concerned person to make any “observations”. There is also a recourse to the Tribunal administratif du Québec.
In Ontario Law
The Ontario legislature has taken a different approach by establishing, in section 194(1) of the Ontario Environmental Protection Act, a statutory duty for every director or officer to exercise "all reasonable care to prevent the corporation from doing any of the following:" and the legislature lists a series of possible offences under the Act.
Any director or officer who fails to discharge their statutory duty may be prosecuted in a court of criminal jurisdiction. In order to defend themself, it is incumbent upon them to prove that they have discharged their duties concerning any infringement committed by the corporation of which they are a director or officer.
What About Federal Law?
In federal law, the director or officer is governed by a criminal liability regime that could be described as "first generation" since it was established in 1991 in the Fisheries Act.
The latter provides that a director, officer or agent who ordered, authorized, assented to or participated in the commission of an offence is considered a "co-perpetrator" of the offence and is liable, on conviction, to one of the penalties provided for in the Act.
The federal legislature has codified the due diligence defence, which allows a director or officer to escape conviction if they establish that they took the necessary steps to prevent the commission of the offence or that they reasonably and honestly believed in the existence of facts that, if true, would clear them.
In 2005, the Canadian Environmental Protection Act introduced a duty of "due diligence" that places a positive duty on the director and officer of a corporation to ensure that the corporation complies with the law and regulations.
The Act provides that a person who exercised "due diligence" to prevent the commission of an offence will not be found guilty of the offence. The burden of proof is on the director or officer being prosecuted.
For 25 years, BCF’s mission has been to support local businesses. We understand the issues you face, and our environmental law team is available to help you use the resources at your disposal. Do not hesitate to contact us to advise you on your environmental obligations.
Check out our strategic file about the role played by businesses in the fight against climate changes, which includes a series of articles written by our experts.