Quigley, J.:—This is an appeal by the Crown from the acquittal of the respondent on two counts alleging offences committed by him contrary to section 242 of the Income Tax Act (Canada), R.S.C. 1952, as amended. The wording of the counts is as follows:
Count No. 1
On or about the 16th day of August, 1985, at the City of Calgary, in the Province of Alberta, did participate in and was a party to the commission of an offence wherein STAY SALES LTD. failed to remit the sum of $6,944.05 to the Receiver General, which sum was deducted and withheld from salaries, wages or other remunerations paid to employees of STAY SALES LTD. during the month of July, 1985, and did thereby commit an offence contrary to Section 242 of the Income Tax Act (Canada), R.S.C. 1952, as amended;
Count No. 2
On or about the 16th day of September, 1985, at the City of Calgary, in the Province of Alberta, did participate in and was a party to the commission of an offence wherein STAY SALES LTD. failed to remit the sum of $5,431.62 to the Receiver General, which sum was deducted and withheld from salaries, wages or other remunerations paid to employees of STAY SALES LTD. during the month of August, 1985, and did thereby commit an offence contrary to Section 242 of the Income Tax Act (Canada), R.S.C. 1952, as amended.
Counsel for the appellant submits that section 242 imposed a positive duty on the respondent which was in the public interest and created an offence either of absolute or strict liability, but not an offence requiring the Crown to prove mens rea. As the trial judge opted for the latter approach, the appellant contends that there was an error of law and the acquittal should be vacated and either a conviction entered or a new trial ordered, depending on whether the Court characterizes the offences as being absolute or strict liability offences.
An extensive and in-depth view of the issue before me was undertaken by the Supreme Court of Canada R v. Sault Ste Marie, [1978] 2 S.C.R. 1299; 85 D.L.R. (3d) 161. The judgment of the court was delivered by Dickson, J. (as he then was) and at pages 1325-26 (D.L.R. 181-82) he stated:
I conclude, for the reasons which I have sought to express, that there are compelling grounds for the recognition of three categories of offences rather than the traditional two:
1. Offences in which mens rea, consisting of some positive state of mind such as intent, knowledge, or recklessness, must be proved by the prosecution either as an inference from the nature of the act committed, or by additional evidence.
2. Offences in which there is no necessity for the prosecution to prove the existence of mens rea; the doing of the prohibited act prima facie imports the offence, leaving it open to the accused to avoid liability by proving that he took all reasonable care. This involves consideration of what a reasonable man would have done in the circumstances. The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event. These offences may properly be called offences of strict liability. Mr. Justice Estey so referred to them in Hickey's case.
3. Offences of absolute liability where it is not open to the accused to exculpate himself by showing that he was free of fault.
Section 242 of the Act provides:
242. Where a corporation is guilty of an offence under this Act, an officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in, or participated in, the commission of the offence is a party to and guilt of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.
The substantive offences which the respondent is alleged to have been guilty of by virtue of section 242 were committed by the corporation of which he is a director, when it failed to comply with paragraph 153(1)(a) of the Act. That provision provides as follows:
153. (1) Every person paying at any time in a taxation year
(a) Salary or wages or other remunertion,
shall deduct or withhold therefrom such amount as may be determined in accordance with prescribed rules and shall, at such time as may be prescribed, remit that amount to the Receiver General on account of the payee's tax for the year under this Part.
Subsection 238(2) of the Act provides as follows:
(2) Every person who has filed to comply with or contravened subsection . . . 153(1) . . . is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to
(a) a fine of not less than $200 and not exceeding $10,000, or
(b) both the fines in paragraph (a) and imprisonment for a term not exceeding 6 months.
In my view section 242 is not a charging section. The offence was a failure to comply with subsection 153(1) and the offence is created by subsection 238(2) of the Act.
Section 242 sets out the various ways by which an officer, director or agent of a corporation may become a party to an offence committed by a corporation. The section requires that such person direct, authorize, assent to, acquiesce in or participate in the commission of the offence before guilt may attach to him. These requirements prevent the fixing of automatic penal liability upon officers, directors or agents of a guilty corporation.
The substantive offences committed by the corporation are in my view properly characterized as strict liability offences. I adopt the reasoning in R. v. Rohan's Rockpile Ltd. (1981), 26 B.C.L.R. 125; 57 C.C.C. (2d) 388. It follows therefore that if the respondent is guilty of the same offences their characterization does not change. A party to an offence faces the same offence as that committed by the principal. The real question before me is whether or not the Crown discharged the onus of proving that the respondent was a party within the meaning of section 242 of the Act.
The unique aspect of a corporate entity is that it can only carry out its functions and discharge its duties through the actions of its officers, directors and agents. To a certain extent those occupying these positions enjoy exemptions from civil liability. Indeed, by section 227.1 of the Income Tax Act itself provision is made to save directors from the higher civil liability attaching to the corporation for moneys owed for failure to comply with section 153 of the Act. That they should also receive more protection than the corporation in the prosecution of certain offences is therefore not surprising nor illogical.
In the present case the actus reus of the substantive offence was the failure by the corporation to remit sums it had deducted and withheld from salaries and wages of its employees to the Receiver General. The Crown was not required to prove mens rea in order to saddle the corporation with guilt under subsection 238(2) of the Act. Where it sought to affix guilt to the respondent by virtue of section 242, it was necessary to prove not only the guilt of the corporation but in addition that the respondent "directed, authorized, assented to, acquiesced in, or participated in,” the commission of the offence. The Crown chose to particularize the charge by alleging that the respondent “participated” in the failure to remit the funds to the Receiver General.
In R. v. Posner, [1966] 1 O.R. 388; 46 C.R. 321, Lieff, J. held that mens rea was an ingredient of the offence which a director commits under a section of the Excise Tax Act, similar to section 242 of the Income Tax Act. The controlling words were “direct, authorize, participate or condone". At 393 (C.R. 326) of his judgment, Lieff, J. said:
I would think that the state of mind of Samuel Posner at the time of the conduct giving rise to the charge is vital. Do not the very words “direct, authorize, participate or condone" imply the existence of a state of mind which can be described as intending to do some act which the accused Posner knew to be illegal, namely, as president of the company participated in its failure to pay. I therefore must say that mens rea is a necessary ingredient of the offence . . .
In R. v. Tri-City Truck Sales Ltd. (1966), 59 W.W.R. 736; 63 D.L.R. (2d) 507, Gould, J. said at page 741 (D.L.R. 511-12):
I agree with and follow Lieff, J., of the Supreme Court of Ontario in R. v. Posner. . . wherein he holds that mens rea is an essential ingredient in the mind of a director of a company before he can be convicted of participating in the company's offence.
In Rohan's Rockpile, Ltd., supra, the British Columbia Court of Appeal held that the offence of failing to remit moneys contrary to subsections 153(1) and 238(2) is one of strict liability. The appeal was taken by the corporate defendant but in setting aside its conviction and ordering a new trial the court made the following gratuitous observation at 392:
There is a matter which should be mentioned. During argument we were informed that at the trial and on appeal in the County Court separate consideration was not given to the requirements of conviction of the appellant Lowther under s. 242. Accordingly, counsel for the appellants was of the view that he could not raise the matter before us. However, it ought to be considered at the new trial which I would order. Without commenting on the correctness of the decision, I refer counsel to the judgment of Gould J., R. v. Tri-City Truck Sales Ltd. et al. (1966), 63 D.L.R. (2d) 507, 57 W.W.R. 736. It was an appeal by way of stated case from the conviction of the individual appellant of failing to remit sales tax collected under the Social Services Tax Act, R.S.B.C. 1960, c. 361. Section 32 of that statute is quite comparable to s. 242. The learned Judge held that mens rea was an essential ingredient in an offence charged against a person in his capacity as a director of a company.
In R. v. Rogo Forming Ltd. (1980), 56 C.C.C. (2d) 31, Provincial Court Judge Vanek followed Posner, supra, and held at 42:
. . . l hold that the offence charged against them under s. 242 of the Act as parties to the offence committed by the company is an offence requirement proof of mens rea as expressed in the governing words "who directed, authorized, assented to, acquiesced in, or participated in” the commission of the offence; or alternatively that those words form part of the actus reus of the offence; and at all events the onus of proof is upon the Crown to prove all the ingredients of the offence beyond reasonable doubt including the elements of active or passive participation in the substantive offence within the meaning of those key words.
In my opinion, the words “directed, authorized, assented to, acquiesced in, or participated in" are essential factual conditions requiring the Crown to prove at least one of them before a person specified in section 242 can be held to be a party to and guilty of an offence committed by a corporation contrary to subsections 153(1) and 238(2) of the Act.
In the present case there was not sufficient evidence adduced before the learned trial judge to permit an inference to be drawn necessary to establish the participation of the respondent in the commission of the offences committed by the corporation.
I therefore dismiss the appeal.
Appeal dismissed.