As a regulator, your governing statute might allow you to conduct investigations to discipline those that you regulate. You might have the powers to conduct warrantless searches, request production of documents, and/or compel admissions (collectively referred to as “administrative powers”). Your governing statue might also contain mandatory provisions, which if breached, could lead to penal liability and possibly imprisonment. If this is the case, then you should draw your attention to R v Jarvis, where the Supreme Court of Canada (SCC) held that regulators’ administrative powers should not be used to conduct investigations whose predominant purpose is the determination of penal liability.
In R v Jarvis, the SCC considered Canada Revenue Agency’s audit versus penal investigative functions. At issue was whether evidence obtained through an audit investigation (obtained through a warrantless search) could be used to prosecute a taxpayer for penal liability. The Court determined that the Canada Revenue Agency was a regulator, and that non-compliance with its mandatory provisions could, in some cases, led to the laying of criminal charges.
When regulators conduct investigations with the predominant purpose of laying provincial or quasi-criminal charges that may result in imprisonment, section 7 of the Canadian Charter of Rights and Freedoms– the right to life, liberty and security of a person and the principle against self-incrimination – is engaged.
The SCC held that there must be a differentiation between the audit and investigative functions of the CRA to protect an accused’s Charter rights. Thus, when the predominant purpose of an investigation is the determination of penal liability, investigators must relinquish the regulator’s audit powers, and must instead engage in criminal investigative techniques, such as obtaining judicial warrants. When penal liability is a potential outcome, investigators must also be more cautious about taking statements from offenders so that the Charter’s right against self-incrimination is not violated.
The SCC provided a list of factors used to determine whether the predominant purpose of an inquiry is the determination of penal liability, as follows:
- Did the authorities have reasonable grounds to lay charges? In other words, does it appear from the record that a decision to proceed with a criminal investigation could have been made?
- Was the general conduct of the authorities such that it was consistent with the pursuit of a criminal investigation?
- Had the auditor transferred his or her materials to the investigators?
- Was the conduct of the auditor such that he or she was effectively acting as an agent for the investigators?
- Does it appear that the investigators intended to use the auditor as their agent in the collection of evidence?
- Is the evidence sought relevant to taxpayer liability generally? Or, as is the case with evidence as to the taxpayer’s mens rea, is the evidence relevant only to the taxpayer’s penal liability?
- Are there any other circumstances or factors that can lead the trial judge to the conclusion that the compliance audit had in reality become a criminal investigation?
How does R v Jarvis affect regulators? As a regulator, you might have a department specialized in conducting penal investigations (“enforcement”), and other departments who conduct administrative or regulatory investigations (“regulatory”) through the use of the administrative powers outlined above. A regulatory department might become suspicious of an unlicensed registrant and may want to refer the matter to enforcement for potential prosecution. As a regulator, you might want to ensure that (a) the evidence gathered by regulatory inspectors, through the administrative powers, can be used in the criminal prosecution; (b) the information gathered by enforcement is admissible in court; and (c) regulatory staff can continue their regulating functions.
The evidence in a quasi-criminal prosecution will be subjected to greater scrutiny because the defendant’s Charter rights will be engaged. The rules of evidence and common law will dictate what can and cannot be admissible in Court. As way of example, in a criminal or quasi-criminal prosecution statements or admissions cannot be compelled from the accused while statements may be compelled in furtherance of a purely regulatory context.
To ensure that your penal investigation is not compromised and the accused’s Charter rights are respected, consider adopting guidelines, to (at a minimum):
- Address how the predominant purpose test can be adapted to your organization’s settings;
- Create an enforcement department responsible for conducting penal inquiries that is separate from regulatory inspections;
- Determine how regulatory inspectors and enforcement investigators can identify when the predominant purpose of an inquiry is or has become the determination of penal liability;
- Ensure that enforcement investigators are not using administrative powers when conducting inquiries whose predominant purpose is the determination of penal liability; and
- Reinforce that enforcement investigators should obtain evidence through criminal investigatory techniques, such as judicially obtained warrants and the use of cautions before taking statements from a potential defendant.
In summary, regulators can perform their enforcement and regulatory functions concurrently. But take measures to ensure that your enforcement department is not using administrative powers for penal liability investigations.