R. v. Daymak Inc., 2017 ONCJ 251

CITATION: R. v. Daymak Inc., 2017 ONCJ 251 DATE: April 21, 2017 ONTARIO COURT OF JUSTICE BETWEEN: HER MAJESTY THE QUEEN — AND — DAYMAK INC., ALDO BAIOCCHI and YEG BAIOCCHI Before Justice Geraldine N. Sparrow Reasons for Judgment released on April 21, 2017 Mr. Damien Frost ...................................................................................................... for the Crown Ms. Marie Henein ................................................. for Aldo Baiocchi, Yeg Baiocchi and Daymak Inc. (And previously Mr.

Harold Albrecht) SPARROW J.: [ 1 ] Daymak Inc., Yeg Baiocchi and Aldo Baiocchi are each charged with six counts of contravening s. 154 of the Canadian Environmental Protection Act, 1999 (CEPA). These counts include three counts of failing to abide by the conditions set out in s. 153(1) (

a) of CEPA, as well as three counts for failing to abide by the conditions set out in s. 153(1)(

b) of CEPA. In essence, they are charged with importing motor scooters from China in 2010 which violated emissions standards, and were not covered by documentation which had to be submitted and be satisfactory to the Minister of the Environment. [ 2 ] The relevant sections read as follows: 154. No person shall import any vehicle, engine or equipment of a prescribed class unless the requirements of paragraphs 153(1)(a), (b), (

d) and (

e) are met in respect of the vehicle, engine or equipment. 153.

(1) No company shall apply a national emissions mark to any vehicle, engine or equipment, sell any vehicle, engine or equipment to which a national emissions mark has been applied or import any vehicle, engine or equipment unless; (

a) the vehicle, engine or equipment conforms to the standards prescribed for vehicles, engines or equipment of its class at the time its main assembly or manufacture was completed; and (

b) evidence of such conformity has been obtained and produced in the prescribed form and manner or, if the regulations so provide, in a form and manner satisfactory to the Minister . AGREED FACTS [ 3 ] Paragraphs 4-28 below are taken directly from an agreed statement of fact provided by counsel. [ 4 ] During the period in which the alleged offences took place, Yeg Baiocchi was the President and Director of Daymak Inc. [ 5 ] During the period in which the alleged offences took place, Aldo Baiocchi, her husband acted as the Vice-President of Daymak Inc. [ 6 ] Daymak Inc. was incorporated on May 14, 2002.

The business address of Daymak Inc. during the investigation was 130-134 Oakdale Road, Toronto, Ontario. During the period in which the alleged offences took place, Daymak’s business was designing, importing, wholesaling and retailing various types of motorized vehicles and accessories.

[ 7 ] On December 3, 2009, Daymak Inc. submitted an “evidence of conformity” package to Environment Canada’s (EC) Transportation Division for the model year 2010 LJ50QT-K scooter manufactured by Ningbo Longjia Motorcycle Co. Ltd. (to be sold in Canada under the name “Daymak Niagara”), as prescribed by

section 36 of the On-Road Vehicle and Engine Emission Regulations (“the ORVEER”) and required by paragraph 153(1) (

b) CEPA. [ 8 ] S. 36 of the Regulations reads as follows: On-Road Vehicle and Engine Emission Regulations 36.

(1) For the purpose of paragraph 153(1)(

b) of the Act, a company shall obtain and produce evidence of conformity for a vehicle or engine other than one referred to in

section 35 or 35.1 in a form and manner satisfactory to the Minister instead of as specified in that section.

(2) A company shall submit the evidence of conformity to the Minister before importing a vehicle or engine or applying a national emissions mark to it. [ 9 ] Sections 35 and 35.1 refer to vehicles which have received a certificate of conformity from the US Environment Protection Agency (EPA).

The Evidence of Conformity package included a signed statement by Aldo Baiocchi, identified as the vice- president of Daymak Inc., indicating that he was authorized to act on behalf of Daymak Inc. in relation to this import, that Daymak Inc. intended to sell the 2010 LJ50QT-K scooter in Canada, and that all scooters of this model complied with the applicable standards set out in the Regulations.

The Evidence of Conformity package was required by section 36(2) of ORVEER to be submitted before importation. [ 10 ] That statement also included specifications for the vehicle and results of emissions testing conducted in 2007 by China National Motorcycle Quality Supervisory & Testing Center, located in China. The statement indicated that the test results were based on testing of the 2007 model of the same scooter; however no addition or modification to the engine and emission control system that could affect the emission results had taken place since 2007.

The emissions testing was conducted on behalf of the manufacturer, Ningbo Longjia Motorcycle Co. Ltd., also located in China, and showed that the vehicle met applicable emission standards for Hydrocarbons and Carbon Monoxide. [ 11 ] On January 27, 2010, Daymak Inc. submitted a supplement to the “Evidence of Conformity” package for the model year 2010 LJ50QT-K scooter (to be sold in Canada under the name “Daymak Niagara”) to Environment Canada’s Transportation Division.

The supplementary submission corrected certain errors contained in the “Evidence of Conformity” submitted on December 3, 2009, and provided some additional information that was missing from the original submission.

These problems had been identified in a review by Environment Canada. [ 12 ] On January 29, 2010, Nick Carrey, Program engineer, Transportation Division, Environment Canada, sent a notice to Aldo Baiocchi, Vice President, Daymak Inc. informing him that Environment Canada had completed its examination of the evidence of conformity produced by Daymak Inc. (consisting of Daymak’s submission dated December 3, 2009 and supplementary information dated January 27, 2010), and that the Department was acknowledging that the information submitted in respect of the subject motorcycle was in a form and manner satisfactory to the Minister. [ 13 ] Daymak imported scooters covered by EOC – model LJ50QT-K from Longjia, into Canada, as follows: 1) 7 scooters, on January 11, 2010, to Toronto, according to the accused for the purpose of display at a January trade show; 2) 98 of the same scooters, on April 26, 2010, to Toronto and 3) 98 of the same scooters on May 30, 2010. [ 14 ] On July 29, 2010, Stephane Malette of Environment Canada’s Transportation Division purchased one unit of the 2010 LJ50QT-K Scooters, being sold as the 2010 Daymak LJ50QT-K from the Daymak Megastgore.

Since Mr. Malette was coming from Ottawa, arrangements were made for him to pick up the scooter at a retail store in Belleville, Ontario. The vehicle Identification Number (“VIN”) for this vehicle is L4HGTBBP7A6000111. [ 15 ] The testing of the scooter was contracted out to Lotus Engineering in Ann Arbour, Michigan, U.S.A. for testing to verify that it met applicable emissions standards. It was sent for testing on September 2, 2010. [ 16 ] Between September 13, 2010 and September 17, 2010, engineers at Lotus Engineering performed emissions testing on the scooter.

The results of this testing, as provided by Lotus engineering, showed that after the vehicle had been accumulated to 1500 kilometers, it emitted 11.693 grams of total Hydrocarbons per kilometre and 23.343 grams of Carbon Monoxide per kilometre. [ 17 ] These amounts exceed the maximum allowable quantities set out in the Consolidated Federal Regulations of the US (CFR), which are incorporated by reference in the Regulations passed pursuant to CEPA – 1 gram of total Hydrocarbons per kilometre and 12 grams of Carbon Monoxide per kilometre.

Therefore, the results of testing on scooter #L4HGTBBP7A6000111 as reported by Lotus Engineering showed levels of Hydrocarbon and Carbon Monoxide in excess of the maximum allowable quantity. [ 18 ] In light of these results, the Daymak LJ50QT-K scooter file was transferred to Environment Canada’s Enforcement Branch. [ 19 ] On December 10, 2010, Environment Canada Enforcement Officers (hereafter “EO”) Luke Cayley and Irina Moiseenko went to Daymak Inc. at 134 Oakdale Road in Toronto, and met with the company’s president, Yeg Baiocchi.

At that time, EO Cayley advised Yeg Baiocchi that the 2010 Daymak Niagara LJ50QT-K scooter that had been purchased by Environment Canada did not meet the applicable emissions standards.

[ 20 ] On December 10, 2010, EO Cayley also served Yeg Baiocchi with a “Notice of Intent to Issue an Environmental Protection Compliance Order”. The Notice of Intent informed Daymak Inc. and Yeg Baiocchi that they would be given a reasonable opportunity to make oral representations in relation to the proposed Environmental Protection Compliance Order (“EPCO”) in accordance with ss. 237(1) of the Act, if they so wished before the EPCO was issued. [ 21 ] On December 14, 2010, EO Cayley received a letter from Yeg Baiocchi in response to the Notice of Intent.

In the letter, she asked that her correspondence be accepted in lieu of their oral representation. Further communication between Yeg Baiocchi and EO Cayley, and Aldo Baiocchi and EO Cayley followed thereafter. [ 22 ] Ultimately, EO Cayley determined that the circumstances were not appropriate for the issuance of an EPCO.

Instead, EO Cayley commenced an investigation. [ 23 ] On February 24, 2011, Aldo Baiocchi and Yeg Baiocchi participated in a teleconference with three members of Environment Canada’s Transportation Division: Nick Carrey, Morrie Kirshenblatt, and Pierre Contant regarding the Daymak Niagara and the emission test conducted by Lotus Engineering on behalf of Environment Canada.

At the conclusion of the teleconference, it was agreed that Environment Canada would retest scooter #L4HGTBBP7A6000111 with a replacement carburetor, provided and installed by Daymak Inc. under the supervision of Nick Carrey, Program Engineer with Environment Canada’s Transportation Division. [ 24 ] On March 3, 2011, Carrey brought scooter #L4HGTBBP7A6000111 to Daymak Inc. and supervised their replacement of the carburetor.

Ultimately, Daymak’s mechanic removed one of the carburetors from another unit and installed it onto the scooter #L4HGTBBP7A6000111. [ 25 ] During that visit, Aldo Baiocchi asked Carrey whether they could also change the muffler on the unit. The company’s mechanic said that the fact that the vehicle had been run for 1500 km with the oil-injection pump at the factory setting could have damaged the catalyst (housed inside the muffler).

Carrey initially declined, because neither the owner’s manual nor the Evidence of Conformity stated that catalyst could be damaged by use of the vehicle with the oil-injection pump at the factory setting.

Also Baiocchi requested that Carrey take a new muffler and test the vehicle with both and Carrey accepted this proposal. [ 26 ] Between March 5, 2011 and March 24, 2011, members of Environment Canada’s Transportation Division performed two further emissions tests on the scooter - one using the original muffler, and one using the replacement muffler provided by Aldo Baiocchi on March 3, 2011. [ 27 ] The results of testing with the original muffler showed that it emitted 20.898 grams of total Hydrocarbons per kilometre and 9.384 grams of Carbon monoxide per kilometre.

The results of the testing with the replacement muffler showed that it emitted 26.703 grams of total Hydrocarbons per kilometre and 1.574 grams of Carbon Monoxide per kilometre. [ 28 ] In both cases, these amounts exceed the maximum allowable quantities set out in the code of Federal Regulations (CFR), which are incorporated by reference in the ORVEER - 1 gram of total Hydrocarbons per kilometre and 12 grams of Carbon Monoxide per kilometre.

Testimony and Documents [ 29 ] It is not disputed that Daymak engaged Li Liu of the Motorcycle and Moped Industry Council of Canada, an industry organization, to prepare the Evidence of Conformity package (EOC) in conjunction with a company known at MVIECS, Motor Vehicle Import and Export Consulting Service of Canada. Ms. Liu and engineer Frank Liu of MVIECS testified as to their extensive experience in the industry and as to how the information for the package was obtained – much from a document known as “Technical Specifications” for the scooter to be imported, produced by Longjia. [ 30 ] Ms.

Liu testified that the Minister generally accepted certificates of conformity provided to the U.S. Environmental Protection Agency as evidence of conformity for Canada, if it is clear that the identical engine model is being imported concurrently in both countries. Although a U.S. certificate for the model was obtained, it referred to a prior year of manufacture and importation and thus was not acceptable. [ 31 ] She explained that in the fall of 2009 Environment Canada (EC) was in the process of creating a set of guidelines for preparing the EOC.

These were followed in her preparation of the Daymak submission, along with direction from EC officials. She contributed to preparation of the guidelines. [ 32 ] A significant requirement of both the EPA and EC involves an indication as to whether there are any “adjustable parameters” on the vehicle. The Daymak submission reflected the letters N/A beside the box with the words “adjustable parameters” because, according to the testimony of Frank Liu, Longjia had provided information that there were no parts as meant by this term which could be adjusted by the purchaser.

He stated that all technical information in the EOC was verified by Longjia, and he communicated that fact to Aldo Baiocchi. [ 33 ] In the course of inspection that the motorcycle selected for testing, EC Transportation Division engineer Nick Carrey noticed it had an air fuel mixture screw which was adjustable, meaning that the purchaser could turn it with a screwdriver allowing for a change in the mixture which would allow it to go faster and produce a higher level of emissions.

He testified that it could be glued or capped so that it could not be adjusted, and that such steps are normally required in the U.S. and Canada. [ 34 ] Enforcement officer Cayley testified that the adjustable nature of the screw should have been reflected in the column entitled “adjustable parameters” in the technical information part of the EOC, rather than the letters N/A. He considered this inaccuracy

to be serious, as adjustment of the screw can effect emissions. He communicated with both the accused Yeg Baiocchi and Jenny Guo, a sales representative with Longjia, about the issue; Guo confirmed by email that Longjia ordered scooters with non-adjustable screws. [ 35 ] Carrey testified that the screw and the carburetor could not be seen from the outside of the scooter – some dismantling was required.

He also stated that metal labels on the scooters known as “VECI” labels – vehicle emission control information – wrongly reflected that the idle mixture was non-adjustable, which was also an inaccurate indication that the air fuel mixture was non-adjustable. A photo of the VECI label was included with the EOC. [ 36 ] During the summer of 2011 EC enforcement officers obtained search warrants allowing them to seize scooters: five were seized “in situ” at the Daymak superstore, 15 more at several dealerships in southern Ontario and other provinces and a few more at a Daymak store in Ajax.

Ultimately five were taken to Ottawa, and four of those were sent to Lotus for emissions testing. [ 37 ] It is clear from the vehicle identification numbers that at least two of the scooters had adjustable screws, and at least one had a non-adjustable screw.

All vehicles were accumulated to 1500 kilometres; all emitted hydrocarbons at levels of approximately one to six grams over the legal limit of one gram per kilometer; two exceeded legal carbon monoxide levels. [ 38 ] It should be noted that no specific evidence was presented indicating whether or not the adjustable screws affected the results of the test. [ 39 ] In a lengthy e-mail dated March 7, 2011 to Cayley and others, Yeg Baiocchi outlined the efforts made by Daymak to be duly diligent in complying with the regulations.

These included researching Longjia’s reliability before ordering, hiring MMICS and MVIECS to “do all the applications and check all the components”, paying for certain testing and providing a notice of defect when it was discovered that some scooters had adjustable carburetors. She also mentioned that that the engine model had been certified by the EPA. She acknowledged that parts inside the scooters were not inspected, or emissions test done by Daymak because it is “impossible”.

She also stated that all carburetors have screws that can be adjusted. [ 40 ] In an undated and unsigned response, filed EC official Mark Vanderlaan explained that the notice of defect submitted only covered the problem of the 98 adjustable carburetors, and not the 107 others which also failed emissions tests. A comprehensive notice of defect is required by

section 157 of CEPA.

He confirmed that the attempts to rectify the situation with new carburetors had been unsuccessful to date, and proposed alternative solutions. [ 41 ] On September 11, 2011, Cayley sent an email to his superiors and other colleagues, stating that he intended to lay charges regarding the EOC but not the test results as Daymak was trying to remedy the problem. [ 42 ] Defence counsel called two particularly significant witnesses: the accused Aldo Baiocchi and Jenny Guo, the Longjia sales representative who handled the Daymak Niagara file. [ 43 ] Baiocchi testified that in the fall of 2008 he saw the Niagara at a trade show in Canton, and ultimately placed an order for 200 units.

He was shown an EPA certificate for the model for the previous year. He was told in 2009 that he had to provide a new type of submission, the EOC to EC, and as he didn’t understand it he hired MMIC and MVIECS to prepare it. [ 44 ] Baiocchi testified that he made it “crystal clear” to Longjia that compliance with Canadian standards was necessary. He did not discuss the subject of adjustable carburetors.

He observed the factory and confirmed that it was certified by the International Standards Organization. [ 45 ] Baiocchi identified a “compliance statement” from Longjia, saying that the Niagara met the standards of CEPA and the ORVEER, which gave him comfort. He also said that he had seen the test report from the Chinese testing center, which verified that the model met CFR emission standards. [ 46 ] He stated that he was contacted by EC on December 3, 2009, after the EOC had been sent, as more information was needed about the carburetor. The mixture screw was not mentioned.

He understood that the information required was provided by Li Liu and Frank Liu. On January 29, 2010 he got a copy of the approval letter of EC, and said that he understood that the EOC was satisfactory. [ 47 ] He identified a letter and Notice of Defect sent to Morrie Kirshenblatt on May 21, 2011 in his name, and said it was sent after Guo told him that some units had been mistakenly sent with adjustable carburetors.

He said that he intended to ensure that the notice was sent to all customers and that all scooters were fixed. [ 48 ] Biaocchi also identified a second evidence of conformity sent January 9, 2012, which contained a technical analysis report. It was authored by Longjia, and identified parts that could have been failing of the time of the Lotus tests and causing the increased emissions – either a defective carburetor or catalyst.

Ultimately a scooter was fixed by Longjia, and passed testing at Lotus; other scooters were returned similarly fixed. [ 49 ] In cross examination the accused said that he could not find a signed copy of a contract for purchase, although he had the invoices. Before importing the scooters he checked the issue of EPA compliance; it was his understanding that the Niagara contained the same engine as that of a scooter previously imported into the US with EPA approval. However, he could not order a model that was specifically covered by an EPA certificate as it was hard to find.

He could not find an EPA certificate covering a prior import of a Longjia scooter to Canada. [ 50 ] He testified that he was not knowledgeable about parts that affect emissions, but that Li Liu would have told him if the scooter was problematic. [ 51 ] Baiocchi also testified that the first seven scooters were imported for display at a trade show in Mississauga on January 15 2010; the others were imported after the EOC was approved by EC. He understood that the seven could be brought in before approval

because they were just for display. The email containing the order for three shipments could not be located. [ 52 ] He testified that Longjia was very clear on what it was supposed to build, because of negotiations with MMIC. When he saw the scooter at the factory on a visit in 2009, it was not “broken down” or examined by a mechanic. He never specified parts to be used in his order because it was “based on the EOC”. However Longjia had advised him personally and in their brochures that the engines in his chosen model would be EPA compliant.

His order for the second and third shipments were not placed until EC approval was received. [ 53 ] In further cross examination he agreed that the fuel and exhaust systems were not examined when the scooters arrived. He agreed that MMIC was not retained to examine any of the scooters, and that they were hired just to prepare paperwork and coordinate with the manufacturer although Li Liu looked at pictures and videos provided by Longjia. He had additional confidence in her because she sat on the council drafting the new guidelines.

He again said that he expected that Longjia would meet the specifications contained in the EOC. [ 54 ] In cross examination he also acknowledged that he had imported a scooter from China in 2008, called the Saigon. No EOC was required at that time; however EC complained about many features of the vehicle including the fact that it had an adjustable screw. He had to change many components to meet the specifications covered by an existing EPA certificate. [ 55 ] He also testified that Daymak is small, with approximately 20 employees, and that it cannot afford to hire a compliance officer.

In her e-mail of March 7, 2011, Yeg Baiocchi said that testing in North America was unaffordable. An invoice from Lotus showed that the cost of testing two vehicles was more than $20,000 U.S. [ 56 ] In reexamination he repeated that he was told by Frank Liu that the EPA certificate could not be used for certain reasons, and that Longjia and MVIECS would fill in technical information on the EOC and have it verified at Longjia. He identified exhibit 48, an email to him from Frank Liu dated November 20, 2009 which outlined this process. [ 57 ] Jenny Guo testified via Skype from China.

She has been a sales representative for Longjia since 2005. She testified that in 2009 the company sold approximately 50,000 to 60,000 scooters to North America, South America and Europe. [ 58 ] Guo identified a 2008 application for EPA certification of the LJ50QT engine family – the same family used in the Daymak Niagara. She confirmed that in one space on that form the words “the motorcycles have no adjustable operative parameters” appear. She also identified the resulting 2008 EPA certificate which showed that the engine named and another one complied with emission standards.

She them identified an attestation document by Longjia dated August 7, 2009stating that the LJFOQT – K, to be imported by Daymak, is covered by the EPA certificate. [ 59 ] Guo testified that she met Aldo Baiocchi at the Canton fair in 2008, and discussed selling a scooter with EPA certification. Ultimately she spoke to the Ms. Liu and Mr. Liu to assist in preparation of the EOC; she said that the technical information, including information relevant to “adjustable parameters” was provided to MMIC by Longjia.

She said that the Chinese letters on the form in the “adjustable parameters” column mean “no”. [ 60 ] Guo also identified statements in the EOC confirming that the words “produced motorcycles are identical to those tested” refers to test result obtained in China in 2007 and 2008. She also identified

a) a Longjia compliance statement attesting that LG50QTK meets all requirements of CEPA and ORVEER for model year 2010, and b)a letter from Longjia to EC stating that there were no changes in the 2010 model from the 2007 model that had been tested. She stated that in providing the test results Longjia was confirming that the engines sold to Daymak would meet standards. [ 61 ] Guo then identified an e-mail to Longjia from Dawson Zhang, an agent of Daymak in China, dated January 25, 2010 stating that all vehicle features had to match “backup documents” provided to Canada.

She testified that Baiocchi was never asked for technical advice, that the order was for non-adjustable carburetors and that the order was never changed. [ 62 ] Guo also verified an e-mail she sent to Cayley on July 29, 2012, confirming that the Daymak order was for non- adjustable carburetors and that the adjustable carburetors had mistakenly been included.

She also identified a document called a “production order statement” dated August 13, 2016 in which she stated that the third shipment had erroneously contained adjustable carburetors. [ 63 ] She also identified a picture of a carburetor with a nail in the screw, which looks to the Court like a cap, and said that someone in the warehouse was supposed to put the cap in the screw but did not do so.

She said that “quality assurance” did not pick up the problem. [ 64 ] Guo further identified a 2012 evidence of conformity pertaining to the Niagara, which contained a technical analysis report concluding that the vehicle may not have met emission standards due to a defect in the carburetor, involving a needle which allowed too much gas to get in, or a defect in the catalyzer which was “deteriorating too fast”.

She said that new parts were provided to customers and that tests done in 2011 showed compliance. [ 65 ] In cross examination she acknowledged that neither of two types of invoices issued by Longjia addressed compliance with standards. She said that details of the order were contained in emails, which were not located. She stated that reference to “backup documents” in an email from Zhang dated June 25, 2011 meant parts tests provided by the Ms. Liu and Mr. Liu.

She also identified a 2012 email in which Longjia admitted that the carburetor problem was the result of a “mixup”. [ 66 ] Guo also confirmed that unlike bigger clients, Daymak did not inspect Longjia facilities. ISSUES

[67] With respect to the first three charges, the Crown argues that in effect no evidence of conformity was submitted, andcertainly not one as prescribed or satisfactory to the Minister, because a different vehicle from the one imported was described – onewith non-adjustable parameters. He also argues that the supplementary EOC was filed after the first shipment came in, contrary tosection 36(2) or ORVEER, and thus the EOC was not filed in the manner prescribed.

He submits that due diligence was notdemonstrated on a balance of probabilities. [68] Defence counsel argues that an evidence of conformity was filed, that in was in the proper manner and form and manner. In any event her client exercised due diligence in complying with the relevant law, regulations and guidelines with respect to all threeshipments. She also argues that the Crown did not prove that a non-adjustable screw was found in shipments one and two, such that therelated counts fail.

ANALYSIS Counts 1-3 [69] With respect to the first three counts, the Crown has in my view simply not proved that no EOC was filed. As stated inthe Facts

section above, the package was submitted on December 3, 2009, and accurately described the product to be shipped as ascooter for model year 2010 LJ50QT-K manufactured by Longjia, to be sold as Daymak Niagara. This is exactly the product that wasimported in each of those shipments.

The fact that the EOC was in a manner satisfactory to the Minister was stated clearly by NickCarrey on behalf of the Minister in the notice dated January 29. [70] It is clear that the EOC indication that the question of “adjustable parameters” was “not applicable” was clearly incorrect,given that it was subsequently proved that about half of the scooters had adjustable screws.

However the Crown has provided noauthority to the effect that an inaccurate depiction of one part of the engine family, albeit an important one, means that the vehicleimported is not covered by the entry document or that it is a different vehicle from the one described. Nor has he provided any authorityas to the meaning of the term “form and manner”. [71] I note that in the case of R. v. Steinberg Ltd. (ON SC), 17 O.R. (2d) 559 (Ont Prov.

Ct.), provided bydefence counsel to illustrate the meaning of due diligence, reference is made to the term “form and manner” in regulations to the federalConsumer Packaging and Labelling Act. The company was charged under section 7(1) of the Act with selling a product – packaged meat- with a label containing a false representation, that being the name of the cut of beef. The label referred to a better quality cut than thatin the package, and had been applied in error by an employee. [72]

Section 10 of that act requires that the label be applied in such “form and manner” as may be prescribed to show theidentity of the product. The court did not review the “voluminous’ regulations; however it is noteworthy that the company was chargedwith applying a label that was not in the correct form and manner because it did not describe the beef that was in the package.

Instead thecompany was charged with applying a false label and the argument centered on the issue of due diligence. [73] Defence counsel submitted that the accused in this case could have been charged with knowingly filing a documentcontaining false or misleading information contrary to section 272(1) of CEPA, or negligently filing such a document contrary to section272.1 (1).

It is clear from Baiocchi’s testimony that the scooters were not built when he placed his order – a fact which perhaps raisesquestions about how knowledge or negligence could be demonstrated, particularly if wrong components were clearly not incorporateduntil after the EOC was filed.

However, in my view the possibility of such arguments do not support the submission that the EOC wasnot, in the words of CEPA and other federal statutes, submitted in a satisfactory form and manner; it was filled out according toguidelines, errors were corrected in a supplementary submissions and all information was approved as satisfactory to the Minister.

In myview the one error noted does not demonstrate that the EOC was not submitted in a satisfactory form and manner. [74] I note at this point that the approval notice refers to the documents being satisfactory in form and manner, not asprescribed, presumably because it was prepared according to guidelines rather than regulations.

Submissions concerning specificrequirements of ORVEER may be considered as to whether they are in a form and manner prescribed; however it is not necessary todetermine this point. [75] It should also be noted that in a document entitled “position of the Crown”, provided early in the proceedings, it is statedthat two other factors constitute evidence that a satisfactory EOC was not submitted: 1) a photo of the VECI label showing the words“idle mixture not adjustable” and 2) the absence of reference to air/fuel mixture levels in a few places in the EOC including on thetechnical information document.

The second point was not addressed by the Crown in submissions. In my view, even if these factorsconstitute errors or omission, they do not render the EOC unsatisfactory in form and manner. [76] Finally, with respect to count one, the Crown argues that no EOC was filed before the importation because thesupplementary EOC was submitted after the first shipment. As stated previously regulation 36(2) of ORVEER clearly states that theEOC must be submitted before importation. Defence counsel argues that the first shipment was for display purposes, and was notcomposed of “on road vehicles”.

She also submits that there is no proof that the first two shipments contained any adjustablecarburetors. [77] It is not necessary to consider this argument. In my view it is clear that an EOC was filed before the first shipment, andthe fact that certain errors and omissions had to be corrected by supplementary evidence of conformity does not change that fact.

Nor dothose errors and omissions, or the fact that wrongly there were no adjustable parameters indicated retroactively turn an EOC which wasfound satisfactory to the Minister in form and manner into one that was not. [78] Ultimately, for the reasons stated the Crown has not proved the actus reus of the offences in counts one to three.

[79] With respect to due diligence, the Court notes that the accused has some knowledge of the issue of adjustable screws – ithad been brought to their attention during the Saigon matter, and Yeg Baiocchi reveals knowledge of the topic in her March 7, 2011 e-mail to Cayley and others. No formal compliance system involving checking of parts was put in place in China or Canada. [80] The accused and defence witnesses however, in testimony and emails demonstrate evidence of many efforts to ensurecompliance, including engaging the Ms. Liu and Mr.

Liu to prepare the EOC in conjunction with Longjia and receiving the EPAcertificate and assurances that the Niagara was the same as EPA certified vehicle and as described in the EOC. The adjustable screw isnot immediately visible. Longjia accepts responsibility. [81] Weighing these multiple factors to determine if due diligence was exercised is in my view a complicated and unnecessarytask, given that the actus reus has not been proved. The accused will be acquitted on counts one to three.

Counts 4 -6 [82] With respect to the emissions charges, it is in my view clear from the facts summarized above that the Crown had provedbeyond a reasonable doubt that scooters from each shipment failed the emissions tests, including at least one with a non-adjustablecarburetor. Results were particularly egregious with respect to the test for hydrocarbons.

As stated by the Crown, if it is unclear that ascooter from shipment one was tested, it can be inferred from the significant number of failures that one of those scooters would not havemet the all the tests. [83] It is therefore necessary to determine if the defence has established on a balance of probabilities that due diligence wasexercised to prevent the commission of offences, in accordance with

section 283 of CEPA. [84] The defence argument is that the accused demonstrated due diligence through inter alia the following evidence: 1) Aldo Baiocchi testified that he ordered scooters from Longjia that met EPA and EOC standards, and was assured of this byMMIC, MVIECS and Longjia; 2) He and Yeg Baiocchi stated that they researched the company and the factory and found that it had ISO certification; he attended there to observe; 3) He hired MMIC and MVIECS as they were experts and he believed that they would ensure that standards were met; 4) Yeg Baiocchi expressed concern about meeting standards in her email of March 7, 2011 to Cayley’ 5) Li Liu testified that she worked closely with Longjia in preparing the EOC, including communication about technical detailswhich she said had to be provided by the company; 6) Frank Liu testified that his company was hired as “in house compliance” by companies such as Daymak.

He obtained informationfor the EOC from Longjia technical documents and test results and had them verified. He so informed Baiocchi.

He said that hediscussed issues with Cayley, and assisted in remedying problems discovered and preparing the EOC filed in 2012. 7) Li Liu testified that she worked with Cayley after the notice of defect was issued to develop a recall plan, and [85] Defence counsel also reviewed the efforts of the Baiocchis to correct the emissions problems before issuance of thenotice of defect and after, presumably to show good faith and lack of awareness of the issue until it was brought to their attention. [86] Defence counsel also relies on the following evidence to show that flaws in the engine caused the emission problems, andthat the accused could not have reasonably prevented it: 1) Guo’s testimony about the carburetor and catalyst defects; 2) Guo’s production error attestation; 3) Vanderlaan’s acknowledgement to Yeg Baiocchi that the company had taken proper steps to address the problem. [87] She also cited Cayley’s testimony that testing a sample from a group of vehicles, rather than each vehicle is not aproblem. [88] The Crown argues that the hiring of a consultant, and an assurance that information provided by the manufacturer iscorrect does not constitute due diligence.

He cites R v Canadian Tire Ltd. (ON SC), 2004 OJ No. 3129 (Ont Sup. Ct.),for this proposition. In that case, imported bar fridges emitted freon, a prohibited substance, and the use of a compliance officer andstrategy was found inadequate to meet the due diligence test. He argues that the fact that Zhang, nor anyone, did a check of thecomponents of the engine in China or in Canada or did testing suggests that if the accused could not afford the high cost of testingsamples in North America perhaps they should not be importing.

As in Canadian Tire, blaming the supplier is inadequate. [89] In my view, the evidence cited by Ms. Henein, summarized in paragraph 84 above, constitutes evidence on a balance of probabilities that all accused exercised due diligence as defined in R v Petro Canada 63 O.R. (3rd) 9 (OCA) - “reasonable care to avoidany foreseeable cause” of the particular event. I also agree with the Board of Transportation decision in Friesen v Canada (Minister ofTransportation)

(2016) CTATD No. 26which states that the particulars of the industry and the “degree of knowledge expected of theaccused” are relevant factors in determining if due diligence was exercised at the time, rather than in hindsight.

[ 90 ] Although the Canadian Tire case is highly relevant, it can in my view be distinguished. Some of the boxes containing bar fridges clearly showed the problem on labels, which employees or compliance officers could have seen. In this case the defective parts named by Guo, the carburetor needle and catalyst could not be seen without dismantling and professional inspecting. [ 91 ] There is no authority suggesting that inspection of unexposed components, either abroad or in Canada is required to prove due diligence.

Nor was there any authority provided or testimony given suggesting that testing of engines of models from years prior to the import but formally stated to be applicable is short of what constitutes reasonable due diligence in Canada. [ 92 ] The evidence of due diligence is supported by the evidence of Guo that the emissions problems were caused by defective internal parts, suggesting that the real problem was unforeseeable. [ 93 ] This case squarely raises the question of what type of testing of scooters, particularly engine emissions should be required before import is permitted.

Is reliance on tests of engines stated to be the same as those ordered, but done in prior years, without detailed inspection of parts or testing by the importing company necessary to prevent importation of vehicles which don’t meet standards? [ 94 ] It is clearly unnecessary and inappropriate to answer this question, which might be considered one of policy. In my view, the defence has proved according to the correct standard that the accused took sufficient steps to avoid the problems addressed in counts 4 – 6 to meet the test of due diligence. They will be acquitted on these charges as well as counts 1 – 3.

Released: April 21, 2017 Signed: “Justice G. N. Sparrow