United States Steel Corporation v. Canada (Attorney General)

United States Steel Corporation v. Canada (Attorney General)
Court (s) Database
Federal Court of Appeal Decisions
Date
2011-05-25
Neutral citation
2011 FCA 176
File numbers
A-342-10
Notes
Digest
Decision Content
Date: 20110525
Docket: A-242-10
Citation: 2011 FCA 176
CORAM: NADON J.A.
DAWSON J.A.
TRUDEL J.A.
BETWEEN:
UNITED STATES STEEL CORPORATION
and U.S. STEEL CANADA INC.
Appellants
and
THE ATTORNEY GENERAL OF CANADA
Respondents
Heard at Ottawa, Ontario, on December 7, 2010.
Judgment delivered at Ottawa, Ontario, on May 25, 2011.
REASONS FOR JUDGMENT BY: NADON J.A.
CONCURRED IN BY: DAWSON J.A.
TRUDEL J.A.
Date: 20110525
Docket: A-242-10
Citation: 2011 FCA 176
CORAM: NADON J.A.
DAWSON J.A.
TRUDEL J.A.
BETWEEN:
UNITED STATES ST EEL CORPORATION
and U.S. STEEL CANADA INC.
Appellants
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT
NADON J.A.
[1] The Investment Canada Act, R.S. 1985, c. 28 (1st Suppl.) (the “Act”) allows the Minister of Industry (the “Minister”) to review and approve applications from foreign investors who wish to obtain control of major Canadian corporations. Section 39 of the Act allows the Minister to demand that a foreign investor in control of a Canadian corporation comply with the Act and with any undertaking made during the application stage. If the Minister is not satisfied with the investor’s actions or response, he can apply under section 40 to a superior court which can grant several forms of relief.
[2] On July 17, 2009, the Minister commenced an application in the Federal Court pursuant to section 40 of the Act with respect to two written undertakings, namely, the production and employment undertakings given by the respondents United States Steel Corporation and U.S. Steel Canada Inc. (collectively “U.S. Steel”) in connection with the acquisition of Stelco Inc. (“Stelco”).
[3] On October 8, 2009, U.S. Steel filed a Notice of Motion challenging the constitutional validity of sections 39 and 40 of the Act. More particularly, U.S. Steel says that the impugned provisions violate their right to a fair hearing in accordance with principles of fundamental justice, contrary to subsection 2(e) of the Canadian Bill of Rights, S.C. 1960, c.44 (the “Bill of Rights”) and that they violate the principle of presumption of innocence and the right to a fair hearing, contrary to subsection 11(d) of the Canadian Charter of Rights and Freedoms, the Constitution Act being Schedule B to the Canada Act 1982 (U.K.), 1982, c.11 (the “Charter”).
[4] In a judgment dated June 14, 2010, 2010 FC 642, Hansen J. (the “Judge”) of the Federal Court dismissed U.S. Steel’s challenge in its entirety. This is an appeal from that decision.
Facts and Procedural History
[5] In September 2007, U.S. Steel intended to invest in and acquire control of Stelco’s Hamilton-based business. To this end, it submitted an application for ministerial approval and provided 31 undertakings to the Minister, two of which related to employment and production levels. On October 29, 2007, the Minister approved the acquisition.
[6] On May 5, 2009, the Minister advised U.S. Steel that it was in contravention of the employment and production undertakings. As a result, the Minister demanded, under section 39 of the Act, that U.S. Steel cease the contraventions, remedy the default and either demonstrate there were no contraventions or justify the contraventions.
[7] U.S. Steel responded by sending a lengthy letter to the Minister which explained the difficulties it was facing due to the unexpected economic downturn.
[8] The Minister, being dissatisfied with U.S. Steel’s response, informed it on July 15, 2009, that he would be bringing proceedings under section 40 of the Act, seeking an order directing compliance with the undertakings and imposing a penalty of $10,000 per day per breach, running from November 1, 2008, until such time as U.S. Steel had complied with the undertakings.
[9] As I indicated earlier, the Minister filed his Notice of Application on July 17, 2009. Paragraphs 3 and 4 of the application read as follows:
3. Directing the Respondents to forthwith comply with the relevant undertakings:
a. by increasing steel production at the Canadian Business, as defined in this Application, such that:
i. in the period from November 1, 2007 to October 31, 2009, steel production at the Canadian Business is greater than or equal to a total of 8,690,000 tons (2 x 4,345,000); and
ii. in the period from November 1, 2009 to October 31, 2010, steel production at the Canadian Business is greater than or equal to 4,345,000 net tons; and
b. by taking all such steps as are necessary to ensure that over the Term of the undertakings, as defined in this Application, the Respondents maintain an average level of employment at the Canadian Business of 3,105 employees on a full time equivalent.
4. Imposing on US Steel and US Steel Canada, jointly and severally, a penalty of $10,000 per day, per breach of the relevant undertakings, calculated from November 1, 2008 or from such other dates as this Court may determine, until the Respondents have complied with the relevant undertakings and such order as this Court may issue;
[10] In response to the Minister’s Notice of Application, U.S. Steel filed an application with the Federal Court seeking to have sections 39 and 40 of the Act declared of no force or effect.
Legislation
[11] Before turning to the Judge’s decision, I will set out the relevant legislation. Section 39 of the Act allows the Minister to send a demand to a non-Canadian investor requiring compliance with the Act or the investor’s undertakings, or else a justification for non-compliance:
39. (1) Where the Minister believes that a non-Canadian, contrary to this Act,
(a) has failed to give a notice under section 12 or file an application under section 17,
(a.1) has failed to provide any prescribed information or any information that has been requested by the Minister or Director,
(b) has implemented an investment the implementation of which is prohibited by section 16, 24, 25.2 or 25.3,
(c) has implemented an investment on terms and conditions that vary materially from those contained in an application filed under section 17 or from any information or evidence provided under this Act in relation to the investment,
(d) has failed to divest himself of control of a Canadian business as required by section 24,
(d.1) has failed to comply with an undertaking given to Her Majesty in right of Canada
in accordance with an order made under section 25.4,
(d.2) has failed to comply with an order made under section 25.4,
(e) has failed to comply with a written undertaking given to Her Majesty in right of Canada relating to an investment that the Minister is satisfied or is deemed to be satisfied is likely to be of net benefit to Canada,
(f) has failed to comply with any other provision of this Act or with the regulations, or
(g) has entered into any transaction or arrangement primarily for a purpose related to this Act, the Minister may send a demand to the non- Canadian, requiring the non-Canadian, forthwith or within such period as is specified in the demand, to cease the contravention, to remedy the default, to show cause why there is no contravention of the Act or regulations or, in the case of undertakings, to justify any non-compliance therewith.
(2) If the Minister believes that a person or an entity has, contrary to this Act, failed to comply with a requirement to provide information under subsection 25.2(3) or 25.3(5) or failed to comply with subsection 25.4(3), the Minister may send a demand to the person or entity requiring that they immediately, or within any period that may be specified in the demand, cease the contravention, remedy the default or show cause why there is no contravention of the Act.
(3) A demand under subsection (1) or (2) shall indicate the nature of the proceedings that may be taken under this Act against the non-Canadian or other person or entity to which it is sent in the event that the non-Canadian, person or entity fails to comply with the demand.
[Emphasis added]
39. (1) Le ministre peut faire émettre une mise en demeure à l’intention d’un non Canadien qui, selon lui, a, contrairement à la présente loi, selon le cas :
a) fait défaut de déposer l’avis mentionné à l’article 12 ou la demande d’examen mentionnée à l’article 17;
a.1) omis de fournir les renseignements prévus par règlement ou ceux exigés par le ministre ou le directeur;
b) effectué un investissement en contravention avec les articles 16, 24, 25.2 ou 25.3;
c) effectué un investissement selon des modalités qui sont substantiellement différentes de celles que contenait la demande d’examen déposée en conformité avec l’article 17 ou des autres renseignements ou éléments de preuve fournis en conformité avec la présente loi à l’égard de l’investissement;
d) fait défaut de se départir du contrôle d’une entreprise canadienne comme l’exige l’article 24;
d.1) omis de se conformer à tout engagement pris envers Sa Majesté du chef du Canada conformément au décret pris en vertu de l’article 25.4;
d.2) omis de se conformer au décret pris en vertu de l’article 25.4;
e) fait défaut de se conformer à l’engagement écrit envers Sa Majesté du chef du Canada qu’il a pris à l’égard de l’investissement au sujet duquel le ministre est d’avis ou est réputé être d’avis qu’il sera vraisemblablement à l’avantage net du Canada;
f) fait défaut de se conformer à une autre disposition de la présente loi ou des règlements;
g) procédé à une opération ou à un arrangement dans un but lié à la présente loi. La mise en demeure exige du non-Canadien, de mettre fin, immédiatement ou à l’intérieur du délai qu’elle précise, à la contravention, de se conformer à la loi ou aux règlements, ou de démontrer qu’ils n’ont pas été violés ou, dans le cas d’un engagement, de justifier le défaut.
(2) S’il estime qu’une personne ou une unité a, contrairement à la présente loi, omis de se conformer soit à une demande de renseignements faite en vertu des paragraphes 25.2(3) ou 25.3(5), soit au paragraphe 25.4(3), le ministre peut envoyer une mise en demeure exigeant de la personne ou de l’unité que, sans délai ou dans le délai imparti, elle mette fin à la contravention, elle se conforme à la présente loi ou elle démontre que celle-ci n’a pas été violée.
(3) La mise en demeure fait état de la nature des poursuites judiciaires qui peuvent être instituées en vertu de la présente loi contre le non-Canadien, la personne ou l’unité à qui elle est adressée s’il omet de s’y conformer.
[Non souligné dans l’original]
[12] Section 40 of the Act allows the Minister to bring an application to a superior court if a section 39 demand is not complied with:
40. (1) If a non-Canadian or any other person or entity fails to comply with a demand under section 39, an application on behalf of the Minister may be made to a superior court for an order under subsection (2) or (2.1).
(2) If, at the conclusion of the hearing on an application referred to in subsection (1), the superior court decides that the Minister was justified in sending a demand to the non-Canadian or other person or entity under section 39 and that the non-Canadian or other person or entity has failed to comply with the demand, the court may make any order or orders as, in its opinion, the circumstances require, including, without
limiting the generality of the foregoing, an order
(a) directing the non-Canadian to divest
themselves of control of the Canadian business, or to divest themselves of their investment in the entity, on any terms and conditions that the court considers just and reasonable;
(b) enjoining the non-Canadian from taking any action specified in the order in relation to the investment that might prejudice the ability of a superior court, on a subsequent application for an order under paragraph (a), to effectively accomplish the end of such an order;
(c) directing the non-Canadian to comply with a written undertaking given to Her Majesty in right of Canada in relation to an investment that the Minister is satisfied or is deemed to be satisfied is likely to be of net benefit to Canada;
(c.1) directing the non-Canadian to comply with a written undertaking given to Her Majesty in right of Canada in accordance with an order made under section 25.4;
(d) against the non-Canadian imposing a penalty not exceeding ten thousand dollars for each day the non-Canadian is in contravention of this Act or any provision thereof;
(e) directing the revocation, or suspension for any period specified in the order, of any rights attached to any voting interests acquired by the non-Canadian or of any right to control any such rights;
(f) directing the disposition by any non-
Canadian of any voting interests acquired by the non-Canadian or of any assets acquired by the non-Canadian that are or were used in carrying on a Canadian business; or
(g) directing the non-Canadian or other person or entity to provide information requested by the Minister or Director.
(2.1) If, at the conclusion of the hearing on an application referred to in subsection (1), the superior court decides that the Minister was justified in sending a demand to a person or an entity under section 39 and that the person or entity has failed to comply with it, the court may make any order or orders that, in its opinion, the circumstances require, including, without limiting the generality of the foregoing, an order against the person or entity imposing a penalty not exceeding $10,000 for each day on which the person or entity is in contravention of this Act or any of its provisions.
(3) A penalty imposed by an order made under paragraph (2)(d) or subsection (2.1) is a debt due to Her Majesty in right of Canada and is recoverable as such in a superior court.
(4) Everyone who fails or refuses to comply with an order made by a superior court under subsection (2) or (2.1) that is directed to them may be cited and punished by the court that made the order, as for other contempts of that court.
(5) For greater certainty, all rights of appeal provided by law apply in the case of any decision or order made by a superior court under this section, as in the case of other decisions or orders made by that court.
(6) In this section, “superior court” has the same meaning as in subsection 35(1) of the Interpretation Act but does not include the Supreme Court of Canada, the Federal Court of Appeal or the Tax Court of Canada.
[Emphasis added]
40. (1) Une demande d’ordonnance judiciaire peut être présentée au nom du ministre à une cour supérieure si le non-Canadien, la personne ou l’unité ne se conforme pas à la mise en demeure reçue en application de l’article 39.
(2) Après audition de la demande visée au paragraphe (1), la cour supérieure qui décide que le ministre a agi à bon droit et constate le défaut du non-Canadien, de la personne ou de l’unité peut rendre l’ordonnance que justifient les circonstances; elle peut notamment rendre une ou plusieurs des ordonnances suivantes :
a) ordonnance enjoignant au non-Canadien de se départir soit du contrôle de l’entreprise canadienne, soit de son investissement dans l’unité, selon les modalités que la cour estime justes et raisonnables;
b) ordonnance enjoignant au non-Canadien de ne pas prendre les mesures mentionnées dans l’ordonnance à l’égard de l’investissement qui pourraient empêcher une cour supérieure, dans le cadre d’une autre demande pour une ordonnance visée à l’alinéa a), de rendre une ordonnance efficace;
c) ordonnance enjoignant au non-Canadien de se conformer à l’engagement écrit envers Sa Majesté du chef du Canada pris à l’égard d’un investissement au sujet duquel le ministre est d’avis ou est réputé être d’avis qu’il sera vraisemblablement à l’avantage net du Canada;
c.1) ordonnance enjoignant au non-Canadien de se conformer à l’engagement écrit pris envers Sa Majesté du chef du Canada conformément au décret pris en vertu de l’article 25.4;
d) ordonnance infligeant au non-Canadien une pénalité maximale de dix mille dollars pour chacun des jours au cours desquels se commet ou se continue la contravention;
e) ordonnance de révocation ou de suspension, pour une période qu’elle précise, des droits afférents aux intérêts avec droit de vote qu’a acquis le non-Canadien ou du droit de contrôle de ces droits;
f) ordonnance enjoignant au non-Canadien de se départir des intérêts avec droit de vote qu’il a acquis ou des actifs qu’il a acquis et qui sont ou ont été utilisés dans l’exploitation de l’entreprise canadienne;
g) ordonnance enjoignant au non-Canadien, à la personne ou à l’unité de fournir les renseignements exigés par le ministre ou le directeur.
(2.1) Après audition de la demande visée au paragraphe (1), la cour supérieure qui décide que le ministre a agi à bon droit et constate le défaut de conformité peut rendre l’ordonnance que justifient, à son avis, les circonstances, et notamment infliger à la personne ou à l’unité en défaut une pénalité maximale de 10 000 $
pour chacun des jours au cours desquels se commet ou se continue la contravention.
(3) Les pénalités infligées en vertu de l’alinéa (2)d) ou du paragraphe (2.1) sont des créances de Sa Majesté du chef du Canada dont le recouvrement peut être poursuivi à ce titre devant une cour supérieure.
(4) Quiconque refuse ou omet de se conformer aux ordonnances visées aux paragraphes (2) ou (2.1) peut être puni pour outrage au tribunal par la cour qui a rendu l’ordonnance.
(5) Il demeure entendu que tous les droits d’appel que prévoit la loi s’appliquent aux ordonnances visées au présent article comme s’il s’agissait d’une ordonnance ordinaire rendue par la cour.
(6) Au présent article, « cour supérieure » a le sens que lui donne le paragraphe 35(1) de la Loi d’interprétation mais ne vise pas la Cour suprême du Canada, la Cour d’appel fédérale et la Cour canadienne de l’impôt.
[Non souligné dans l’original]
[13] Subsection 11(d) of the Charter reads as follows:
11. Any person charged with an offence has the right:
…
(e) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal;
11. Tout inculpé a le droit:
…
e) d’être présumé innocent tant qu’il n’est pas déclaré coupable, conformément à la loi, par un tribunal indépendant et impartial à l’issue d’un
[14] Subsection 2(e) of the Bill of Rights reads as follows:
2. Every law of Canada shall, unless it is expressly declared by an Act of the Parliament of Canada that it shall operate notwithstanding the Canadian Bill of Rights, be so construed and applied as not to abrogate, abridge or infringe or to authorize the abrogation, abridgment or infringement of any of the rights or freedoms herein recognized and declared, and in particular, no law of Canada shall be construed or applied so as to
…
(e) deprive a person of the right to a fair
hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations;
2. Toute loi du Canada, à moins qu’une loi du Parlement du Canada ne déclare expressément qu’elle s’appliquera nonobstant la Déclaration canadienne des droits, doit s’interpréter et s’appliquer de manière à ne pas supprimer, restreindre ou enfreindre l’un quelconque des droits ou des libertés reconnus et déclarés aux présentes, ni à en autoriser la suppression, la diminution ou la transgression, et en particulier, nulle loi du Canada ne doit s’interpréter ni s’appliquer comme
…
e) privant une personne du droit à une audition impartiale de sa cause, selon les principes de justice fondamentale, pour la définition de ses droits et obligations;
Decision of the Federal Court
[15] After an overview of the facts, the relevant statutory provisions and the appellants’ submissions, the Judge turned to the question of whether subsection 11(d) of the Charter applied to section 40 of the Act.
[16] The Judge proceeded to apply the two-category test set out by the Supreme Court of Canada in R. v. Wigglesworth, [1987] 2 S.C.R. 541 [Wigglesworth], to the effect that if a matter falls within one of two categories, subsection 11(d) applies. The first category asks whether a matter is by its very nature a criminal proceeding, whereas the second asks whether the provision in question allows the imposition of true penal consequences.
[17] Turning to the first category, the Judge looked at the purpose of section 40, the purpose of the sanction and the process leading to the sanction, which led her to write at paragraph 40 of her Reasons:
[40] The central feature of the legislation is the determination that the proposed investment “is likely to be of net benefit to Canada”. This determination is based on the strength of the investor’s information, representations and undertakings in relation to the broad economic factors found in section 20. If the investment is not carried out in accordance with the basis upon which it was approved, in particular, if the undertakings are not honoured, there is a risk that the ultimate objective of the legislation will be undermined… ,
adding at paragraph 41:
[41] Read in the context of sections 39 and 39.1 and having regard to the legislative objectives and the types of orders available under section 40, the objective of a section 40 proceeding is to enforce compliance with the provisions of the Act and any undertakings that may have been given in support of the application for approval.
[18] With regard to the purpose of the sanction found in section 40, the Judge was of the view that its purpose was “… to encourage and promote timely compliance and to enforce compliance with any undertakings and provisions of the legislation” (Judge’s Reasons, para. 42).
[19] The Judge went on to say that despite the public aspect of section 40, its subject matter was largely private since it related to private business transactions in that the provision allowed the government to call to account private entities that had breached their commitments. In her view, legislative history reinforced the idea that section 40 was not criminal in nature.
[20] Consequently, on the first Wigglesworth category, the Judge concluded that a section 40 proceeding was not a criminal proceeding.
[21] The Judge then turned to the question of whether section 40 could be fitted into the second Wigglesworth category, that is, whether it imposed true penal consequences.
[22] In the Judge’s view, that enquiry had “…to proceed beyond the magnitude of the fine to determine whether it is being imposed for the purpose of redressing the harm done to society or for a particular private purpose” (Judge’s Reasons, para. 54). For this view, the Judge relied on the Supreme Court’s decision in Martineau v. M.N.R., [2004] 3 S.C.R. 737, 192 C.C.C. (3d) 129 [Martineau] and that of the Queen’s Bench of Alberta in Lavallee v. Alberta (Securities Commission), 2009 ABQB 17, affirmed 2010 ABCA 48 [Lavallée].
[23] The Judge found no merit in U.S. Steel’s argument that magnitude of the fine alone could indicate true penal consequences. In her view, magnitude of the fine could not be assessed in isolation. At paragraph 58 of her Reasons, she stated that “[w]ithout context, it cannot be said that a dollar value alone, can lead to no other inference but that the penalty is being imposed to punish”, adding that it was important to bear in mind that the provision gave the court discretion to determine the magnitude of the penalty (Judge’s Reasons, para. 59).
[24] In the Judge’s view, it was crucial that a legislated monetary penalty be of sufficient scope and magnitude so as to address the full range of reviewable instruments and to deter non-compliance, adding that the penalty should not simply constitute a cost of doing business (Judge’s Reasons, para. 58).
[25] The Judge then indicated that she was satisfied that the purpose of the fine imposed by section 40 was not to redress harm caused to society. The mere fact that the fine was payable to Her Majesty in Right of Canada did not point to a public purpose, nor did the fact that the penalty did not aim to compensate for any particular harm. On the second Wigglesworth category, the Judge concluded as follows at paragraph 67:
[67] In the absence of any of the usual indicia, on what basis can it be determined whether the monetary penalty by its magnitude is being imposed for the purpose of redressing the harm done to society. In the context of ICA, the court should have regard to the objectives of the legislation, the legislative scheme including the nature of the monitoring process and the availability of the opportunity to voluntary comply or remedy a default, the critical role the investor’s undertakings play in the attainment of the legislative objectives, the nature of the transaction subject to review, the relationship between the investor and the government, the conduct being sanctioned is not morally blameworthy conduct and the structuring of the monetary penalty. Having regard to these factors, I conclude that the monetary penalty is not a true penal consequence. Instead, the purpose of the monetary penalty is to promote and ensure the attainment of the legislative objectives.
[26] The Judge then turned to U.S. Steel’s arguments directed at subsection 2(e) of the Bill of Rights. In her view, the key question was “… whether section 40 violates the right to a fair hearing in accordance with the principles of fundamental justice” (Judge’s Reasons, para. 69).
[27] U.S. Steel’s argument was that the Act improperly allowed for the divesture of property without affording the right to know the case one had to meet and that it did not properly set out either the requested elements of a failure to comply or the available defences. In making this argument, U.S. Steel relied on its submission that the words “principles of fundamental justice” found in subsection 2(e) of the Bill of Rights covered more than the common law principles of natural justice.
[28] After a careful review of the relevant case law, the Judge rejected U.S. Steel’s argument. At paragraph 79, she wrote as follows:
[79] Accordingly, it can be seen that a fair hearing in accordance with the principles of fundamental justice in the context of subsection 2(e) of the Bill of Rights is synonymous with the concept of natural justice and procedural fairness. It remains to be determined what the requirements of natural justice are in these circumstances.
[29] The Judge then turned to the identification of the relevant principles of natural justice. She was of the opinion that U.S. Steel’s expansive view of subsection 2(e) rights focused unduly on the magnitude of the financial penalty, adding that the requirements of natural justice were not as stringent as argued by U.S. Steel. At paragraph 84 of her Reasons, she wrote as follows:
[84] There is no doubt that the importance of the decision to the affected party is a significant factor. However, a distinction must be drawn between those decisions that implicate the life, liberty, and security of the person involved and those, as in the present case, having only an economic impact. As well, the magnitude of the penalty and the forced divestiture have to be viewed in the context of the legislative scheme. Although when viewed in isolation the monetary penalty may appear to be very large, as stated earlier, having regard to the financial thresholds that trigger ministerial review and approval, the penalties under the ICA have to be sufficiently significant to be effective given the size of the investments under the Act. Further, although the possibility of forced divestiture appears to be ominous and a serious intrusion on the right to the enjoyment of property, having regard to the objectives of the legislation and the broad discretion a court has in structuring a divestiture, it does not rise to the level of those decisions in which the life, liberty and security of the person are at stake. It is purely an economic outcome. It is also important to note that a section 40 proceeding arises in a regulatory context. As well, the parties seeking ministerial approval are sophisticated, well represented, economic actors who are given an opportunity of voluntary compliance before the application at issue is undertaken.
[30] With regard to U.S. Steel’s main argument that it did not and could not adequately determine the case that it had to meet, the Judge was of the view that that concern was not justified in that the Federal Court Rules, SOR/98-106, which dealt with the conduct of applications, clearly allowed U.S. Steel to know the case it had to meet. At paragraphs 87 to 90 of her Reasons, she explained in clear terms why she was of that view.
[31] Finally, the Judge declined to deal with U.S. Steel’s argument that section 40 was void for vagueness because of her view that that concept did not apply where only procedural rights were at issue, adding that U.S. Steel had abandoned its argument that subsection 2(e) provided protection of substantive rights.
[32] For those reasons, the Judge concluded that section 40 of the Act did not infringe subsection 11(d) of the Charter or subsection 2(e) of the Bill of Rights and, as a result, she dismissed U.S. Steel’s motion.
U.S. Steel’s Position
[33] U.S. Steel submits that the Minister has not given it any explanation for the rejection of its May 20, 2009 response in which it sought to justify its failure to fulfill the two undertakings at issue on the grounds of the prevailing severe economic situation. U.S. Steel argues that sections 39 and 40 of the Act create a punitive regime to which subsection 11(d) of the Charter applies because the statutory regime “fails to accord an Investor disclosure of the case to meet, fails to provide fair notice of the prescribed conduct and allows guilt to be found on a mere balance of probability” (U.S. Steel Memorandum of Fact and Law, para. 19).
[34] U.S. Steel further argues that the availability of contempt proceedings to enforce section 40 sanctions demonstrates that those sanctions have a penal character: the monetary penalty is a fine. The fact that a contempt power is rarely included in other administrative regimes indicates that the statutory regime is of a different character. Moreover, the regime is directed to public ends and is enforced in superior courts which can impose retributive penalties, rather than in regulatory tribunals which can only impose penalties aimed at inducing compliance. Furthermore, U.S. Steel argues that the fines imposed under section 40 do not relate to any loss or extent of the breach involved. Thus, the fines do not aim to promote compliance, but rather to punish. Consequently, in U.S. Steel’s submission, subsection 11(d) of the Charter is engaged.
[35] Moreover, U.S. Steel submits that, in the circumstances of this case, subsection 11(d) is infringed. The Act imposes no duty on the Minister to disclose relevant information and is also impermissibly vague on what can constitute a “justification” for violations. Furthermore, proceedings that can impose punitive fines of the size provided for in the Act should be subject to proof beyond a reasonable doubt, but they are not.
[36] U.S. Steel further argues that these subsection 11(d) violations fail the test enunciated by the Supreme Court of Canada in R. v. Oakes, [1986] 1 S.C.R. 103, because the removal of procedural rights is not rationally connected to the objectives of the Act and does not minimally impair the infringements of the subsection 11(d) interests at issue.
[37] U.S. Steel also submits that sections 39 and 40 of the Act violate subsection 2(e) of the Bill of Rights. It argues that the principles of fundamental justice under subsection 2(e) are not coterminous with the rules of natural justice and procedural fairness because these rules are not freestanding. Their aim is to reflect legislative intent and they can be circumscribed by statute, whereas the Bill of Rights principles of fundamental justice are not subject to Parliamentary will and so they should be interpreted more expansively than the rules of natural justice and procedural fairness. Moreover, they should apply robustly to property rights.
[38] U.S. Steel further argues that in the present matter, the principles of fundamental justice are infringed because section 40 does not adequately afford an investor a right to disclosure. Moreover, “the legislature’s failure to clearly delineate the boundaries of the offence, or of any offence that an Investor may have, result in a provision that is so vague as to effectively deprive an Investor of the right to fair notice of the case it has to meet” (U.S. Steel’s Memorandum of Fact and Law, para. 97).
Issues
[39] The issues for determination in this appeal are the following:
1. What is the applicable standard of review?
2. Do sections 39 and 40 of the Act violate subsection 11(d) of the Charter?
3. Do sections 39 and 40 of the Act violate subsection 2(e) of the Bill of Rights?
Analysis
1. Standard of review:
[40] In my view, there can be no doubt that the standard of review applicable to the issues raised by the appeal is that of correctness (see: Housen v. Nikolaisen, [2002] 2 S.C.R. 235, para. 8).
2. Are sections 39 and 40 of the Act in violation of subsection 11(d) of the Charter?
[41] Section 11(d) of the Charter guarantees that an accused natural or legal person will benefit from a panoply of protections. However, for an accused natural or legal person to enjoy these protections, that person must be “charged with an offence”. In Wigglesworth, Wilson J. explained the meaning of that expression, stating that a matter might fall within section 11 in two ways. At page 559 of her Reasons, she wrote:
… a matter could fall within s. 11 either because by its very nature it is a criminal proceeding or because a conviction in respect of the offence may lead to a true penal consequence. I believe that a matter could fall within s. 11 under either branch.
[42] Thus, proceedings that can result in imprisonment can fall within section 11, as can proceedings that lead to lesser penalties such as monetary penalties (Wigglesworth, page 559).
[43] As I have already indicated, the Judge found that sections 39 and 40 of the Act did not fit within either of the two categories. In my view, the Judge made no error in concluding as she did. My reasons for this view are as follows.
a. Are proceedings under sections 39 and 40 by their very nature criminal?
[44] In Wigglesworth, Wilson J. explained at page 560 what she meant by the words “by its very nature a criminal proceeding”:
In my view, if a particular matter is of a public nature, intended to promote
public order and welfare within a public sphere of activity, then that matter is the kind of matter which falls within s. 11. It falls within the section because of the kind of matter it is. This is to be distinguished from private, domestic or disciplinary matters which are regulatory, protective or corrective and which are primarily intended to maintain discipline, professional integrity and professional standards or to regulate conduct within a limited private sphere of activity:…
[45] Pursuing her explanation, Wilson J. added at page 560 that “[p]roceedings of an administrative nature instituted for the protection of the public in accordance with the policy of a statute are also not the sort of ‘offence’ proceedings to which s. 11 is applicable” (see also Lavallée at para. 21 for a recent expression of the same idea).
[46] In writing for the Supreme Court in Martineau, Fish J. enunciated at paragraph 24 of his Reasons three factors which ought to be considered when determining whether a proceeding is criminal by its very nature:
[24] To determine the nature of the proceeding, the case law must be reviewed in light of the following criteria: (1) the objectives of the [statute and relevant provisions]… thereof; (2) the purpose of the sanction; and (3) the process leading to imposition of the sanction.
[47] With respect to the first Martineau factor, U.S. Steel argues that the Act “… is manifestly concerned with promoting the public good in the realm of foreign investment and punishing contraventions accordingly” (U.S. Steel Memorandum of Fact and Law, para. 40). While it is true that both Wilson J. in Wigglesworth (page 560) and Fish J. in Martineau (para. 21) made the point that proceedings which are criminal by their very nature will have public purposes, it cannot be automatically concluded that a public purpose necessarily leads to a criminal proceeding. This is made clear by Fish J., at paragraph 22 of his Reasons in Martineau, where he states that administrative proceedings “… instituted for the protection of the public in accordance with the policy of a statute are not penal in nature”.
[48] Consequently, proceedings having a public purpose can be penal or not. Hence, certain proceedings with publicly beneficial purposes will automatically fall within section 11, such as proceedings brought under the Criminal Code (Wigglesworth, page 560) Other proceedings, however, with publicly beneficial purposes will almost always fall outside the realm of section 11, such as proceedings brought under provincial securities acts (Lavallée, para.21).
[49] Thus, it seems clear that the mere existence of a public purpose cannot per se be determinant. Courts must go further and ask what sort of public purpose is the legislation addressing? There will not be much doubt that a public purpose pertaining to dishonesty, fraud or immorality will usually lead to a penal characterization by the court. However, a public purpose that pertains to financial regulations will generally fall on the administrative/non-penal side of the spectrum.
[50] The purpose of the Act at issue in this appeal is found at section 2 thereof which reads:
2. Recognizing that increased capital and technology benefits Canada, and recognizing the importance of protecting national security, the purposes of this Act are to provide for the review of significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada and to provide for the review of investments in Canada by non-Canadians that could be injurious to national security.
2. Étant donné les avantages que retire le Canada d’une augmentation du capital et de l’essor de la technologie et compte tenu de l’importance de préserver la sécurité nationale, la présente loi vise à instituer un mécanisme d’examen des investissements importants effectués au Canada par des non-Canadiens de manière à encourager les investissements au Canada et à contribuer à la croissance de l’économie et à la création d’emplois, de même qu’un mécanisme d’examen des investissements effectués au Canada par des non-Canadiens et susceptibles de porter atteinte à la sécurité nationale.
[51] There is no suggestion that national security is an issue in this case, thus leaving as the relevant purpose that of encouraging economic growth and employment opportunities in Canada. This purpose drives the Act’s application process for foreign investors, and informs the factors which the Minister must consider when approving or rejecting an application (the Act, s. 20).
[52] As the Judge correctly points out at paragraph 41 of her Reasons, sections 39 and 40 aim to maintain compliance with the Act and with undertakings made under it. It therefore follows that the proceedings by the Minister under the provisions at issue have the ultimate aim of stimulating economic development and employment opportunities, much like the Act as a whole. Thus, in my view, the first Martineau factor points away from the proceedings being of a penal nature.
[53] Moreover, as the respondent points out, section 40 proceedings are never entirely public in their aim or purpose. When they relate to undertakings that a foreign investor has mad