Rarely Applied Revenue Stripping Provision Results in Huge Fines
A large number of regulatory offences are subject to so called “revenue stripping” provisions. Their purpose is to authorize justices to increase fines imposed on convicted defendants by an amount equal to the monetary benefit acquired by or accrued to the defendant as a result of the commission of an offence, despite any prescribed maximum fine.
The purpose of these provisions is to ensure that the size of fines which may be imposed by the Court are not so low that they are akin to a licensing fee for the wrongful act. Deterrence, whether general or specific, requires fines that make it bad for business to break the law. However, despite this rationale, revenue stripping provisions are seldom invoked by the Crown and infrequently applied by the courts. That may be because of the difficulty regulators can encounter in attempting to calculate the acquired or accrued monetary benefit. A recent case from Nova Scotia, however, is a good demonstration of exactly how bad for business the provisions, if applied, can be.
In R. v. H&H Fisheries the defendant was charged and plead guilty to three counts of having purchased, sold or possessed halibut caught in contravention of the Fisheries Act. Over a period of several years, the company had purchased the illegally caught fish from four separate fishermen that it subsequently sold on the market. The volume of fish was staggering, over 140,000 pounds with a market price close to $900,000. So large was the volume, that the presiding justice found that it had probably rendered inaccurate the Department of Fisheries and Oceans’ data on the local halibut fishery on which it had relied to calculate the size of fishery available for commercial fishing during and after the offence periods. As a aggravating factor, the justice found that the there was no doubt that the company was fully aware of the fact that it was buying and selling halibut caught in violation of the Fisheries Act. This was a fraud perpetuated on a public resource.
The three convictions were subject to a maximum fine of $100,000 each. The justice fined the company $175,000 but then went on to consider the monetary benefit the company had obtained as a result of the offences. The company had purchased the fish for about $680,000, leaving a gross profit of about $220,000. He added this amount to the imposed fines meaning the total fines were about $375,000.
In considering the monetary benefit, the Justice specifically rejected the submission, supported by some judicial precedent, that the benefit added to the imposed fines should be net of expenses. He observed: “Since deterrence, both specific and general is the paramount sentencing consideration in cases of this nature, it hardly seems logical that Parliament would have intended that the additional direct or indirect costs of doing illegal business would then be utilized to reduce or offset the potential penalty of the offender.”
The Justice also found that there was no information before him suggesting that the total fines were financially unmanageable for the company, affecting its viability and the continued employment of its workforce. This would imply that, if there were such information, the total fines would have been less. That is certainly in accord with historical precedent requiring that fines for corporate regulatory offenders be substantial enough to be a deterrent but still affordable. But one can now question whether this principle holds the same weight in regulatory offences involving an serious breaches of the law, particularly after the recent decision of the Court of Appeal for Ontario in R. v. Metron Construction concluding that financially unviable fines can be imposed on corporations convicted of criminal offences.