2012 QCCA 13, 2012 QCCA 13

Unofficial English Translation Autorité des marchés financiers c. Souveraine (La), compagnie d'assurances générales 2012 QCCA 13 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-10-004501-092 (500-36-004885-086) (500-61-209059-063) DATE: January 10, 2012 CORAM: THE HONOURABLE PIERRE J. DALPHOND, J.A . NICHOLAS KASIRER, J.A. GUY COURNOYER, J.A. (AD HOC) AUTORITÉ DES MARCHÉS FINANCIERS APPELLANT – Respondent – Prosecutrix v.

LA SOUVERAINE, GENERAL INSURANCE COMPANY RESPONDENT – Appellant - Defendant JUDGMENT [ 1 ] The appellant appeals from a judgment rendered on October 6, 2009, by the Superior Court, District of Montreal (the Honourable Mr. Justice Fraser Martin), which set aside a judgment rendered on November 10, 2008, by the Court of Quebec, District of Montreal (the Honourable Judge Serge Boisvert), convicting the respondent on 56 statements of offence under the Act respecting the distribution of financial products and services , R.S.Q., c.

D-9.2. [ 2 ] For the reasons of Kasirer and Cournoyer, JJ.A.: THE COURT : [ 3 ] DISMISSES the part of the motion for leave to appeal referred to the panel; [ 4 ] ALLOWS the appeal; [ 5 ] OVERTURNS the judgment of the Superior Court; [ 6 ] RESTORES the convictions against the respondent rendered by the Court of Quebec. [ 7 ] For his part, and for other reasons, Dalphond, J.A. would have DISMISSED the motion for leave to appeal on the grounds referred to the panel and DISMISSED the appeal. PIERRE J. DALPHOND, J.A. NICHOLAS KASIRER, J.A.

GUY COURNOYER, J.A. (AD HOC) Mtre Éric Blais Girard et al., attorneys & Mtre Tristan Desjardins

Downs, Lepage, S.N.A. For the appellant Mtre Jean-Claude Hébert & Mtre Patrick Henry (absent) Robinson Sheppard Shapiro, LLP For the respondent Date of hearing: October 27, 2010 REASONS OF DALPHOND, J.A. (DISSENTING) [ 8 ] I have read the reasons of my colleague Cournoyer, J.A. Unfortunately, I cannot agree with them since I am of the view that the Superior Court judgment acquitting the respondent, La Souveraine, General Insurance Company, was well-founded. BACKGROUND [ 9 ] The evidence reveals the following. [ 10 ] La Souveraine is an Alberta insurance company.

According to its business model, it issues policies through a certain number of trusted brokers, including Flanders Insurance Management and Administrative Services Ltd. of Winnipeg (Flanders). Since 1999, it has held a licence issued by the AMF pursuant to the Insurance Act , R.S.Q., c. A-32 , which authorizes it to sell insurance in Quebec, where it has a place of business and a proxy. It can therefore directly issue policies although, to date, it has been active in Quebec only through brokers.

Its Quebec representative has confirmed that it ensures that the brokers who are authorized to issue policies on La Souveraine’s behalf in this province have the registrations and certificates required under the Act respecting the distribution of financial products and services , R.S.Q., c. 9.2 ( ADFPS ). [ 11 ] Among other products, La Souveraine offers group property insurance policies.

In September of 2004, GE Capital Commercial Distribution Finance (GE), a Toronto business that finances, inter alia , the recreational vehicle inventory of hundreds of Canadian dealers, notified the said dealers that it had opted to subscribe to a new master-policy through Flanders that covered the recreational vehicle inventories that it financed across the country. A master-policy bearing No. SOV79470563 was therefore issued to GE by Flanders on behalf of La Souveraine. [ 12 ] At GE's invitation , 56 Quebec dealers acquired this policy through Flanders.

It is noteworthy that dealers financed by GE must insure their inventory in favour of GE and that taking out the master-policy allows them to meet this obligation for what is apparently a very competitive price, which is invoiced monthly to the member-dealers by GE, who collects it and sends it on to Flanders. Quebec retailers who subscribe obtain coverage only for the inventory belonging to GE.

The certificates issued to Quebec members designate GE as the [ translation ] "assured", the retailer as the [ translation ] "certificate holder" and Flanders as the [ translation ] "plan manager". [1] Finally, the evidence shows that at no time did a Quebec retailer take out a policy through Flanders that covered any assets other than those belonging to GE. [2] [ 13 ] The creation of this new master-policy frustrated another Winnipeg broker, HED Arcand Hayhurst Associates Inc., who had previously offered the coverage in question.

The broker dismissed by GE then filed complaints against its competitor, Flanders, and GE before the regulatory authorities of a few provinces, including the AMF. The complaint filed before the AMF faulted GE for soliciting and selling insurance, receiving commissions from Flanders, and failing to claim the 9 % provincial tax on premiums collected from Quebec dealers. There is no mention of La Souveraine. The complaints were dismissed in the other provinces in early 2005. [ 14 ] Following the complaint, an investigation was undertaken in January of 2005.

In the context of this investigation, the AMF asked La Souveraine in April of that year to supply various pieces of information. At the time, La Souveraine offered its full collaboration. At no time was it told that it was also being investigated. [ 15 ] It was in this context that, on June 10, 2005, La Souveraine sent the AMF a list of Quebec dealers that had joined the group policy issued to GE.

In this letter, La Souveraine gave a detailed explanation of the nature of the policy, namely, where it was negotiated (Ontario), the parties thereto (La Souveraine, an Alberta insurance company, and GE, which is based in Ontario), the nature of the assets covered and the fact that they remained GE's property until sold by a retailer. It also pointed out that the premiums were collected by GE, who then gave them to Flanders. It added that, in the event of a loss, the indemnity would be paid by La Souveraine to GE in Ontario.

The coverage expiration date for goods in Quebec – September 1, 2005 – was clearly indicated. [ 16 ] The trial judge stated the following conclusion of fact as to the context of this letter in paragraph 59 of his judgment: [ translation [59] Despite the assertion to the contrary by Robert G. Phillips, the defendant's letter to the AMF, dated June 10, 2005, (P-65) is

clearly a response prepared in collaboration with Flanders, in light of the similarity in the wording of this letter and that used by counsel for Flanders in the letters of December of 2004 and January of 2005 (P-66) addressed to the regulatory authorities of other provinces.

These letters confirm that La Souveraine and Flanders agreed that the contracts that covered the inventories were not subject to Quebec law, even before the insurance certificates were renewed on August 25, 2005 . [Emphasis added.] [ 17 ] In other words, La Souveraine had a doubt, consulted Flanders, and benefited from the legal opinions Flanders had received before concluding that the group policy issued to GE did not require that the intermediary broker be registered with the AMF since the policy was not issued in Quebec. [ 18 ] Following receipt of this letter, the AMF remained silent until January of 2006, when it filed suit against La Souveraine.

Meanwhile, on August 25, 2005, Flanders issued certificates to the 56 Quebec dealers who had renewed their subscription to the group policy, which certificates would take effect on September 1, 2005, and be valid for twelve months. [ 19 ] In January of 2006, 56 statements of offence were filed against La Souveraine as a result of the opinion given by the AMF's legal department in December of 2005 that the certificates issued by Flanders on behalf of La Souveraine on August 25, 2005, to 56 Quebec dealers consisted in as many offences by La Souveraine under

section 482 ADFPS. The statements are thus drafted: [ translation ] At [locality] and its surrounding area, in the District of [locality], on or about August 25, 2005, did consent and/or authorize to have Flanders Insurance Management and Administrative Services Ltd., a firm that is not registered with the Autorité des marchés financiers, issue a floor-plan insurance policy bearing number ... to [name of member], the whole in contravention of

section 71 of the Act respecting the distribution of financial products and services , R.S.Q., c.9.2 (the " Act "), thereby committing the offence set out in

section 482 of the Act and making itself liable to the fine under

section 490 of the Act . [ 20 ] On November 10, 2008, the judge of the Court of Quebec found La Souveraine guilty of the 56 offences and ordered it to pay $560,000, [3] being of the view that it had been wilfully involved in the issuance of insurance policies in Quebec through a broker that was not authorized to do business here ( 2008 QCCQ 10557 , J.E. 2009-156). In his view, La Souveraine gave its [ translation ] "authorization, allowed, or consented to have Flanders issue insurance policies knowing that it did not have the required permits".

Moreover, he rejected any defence in these terms: [ translation ] [63] The defendant has not presented any measures it took to ensure or verify that its floor-plan insurance policy was subject to Quebec law, and it appears that it relied entirely on the assertions of Flanders on the matter. [ 21 ] The judge of the Superior Court, the forum of appeal pursuant to

article 270 of the Code of Penal Procedure , R.S.Q., c. C-25.1 ( C.P.P. ), set aside the convictions, being of the opinion that the evidence needed to establish the actus reus was lacking and that the prosecution had failed to establish the specific mens rea required ( 2009 QCCS 4494 , J.E. 2009-1916). Alternatively, he accepted that if it was a strict liability offence, La Souveraine had exercised due diligence or proved an excusable mistake. [ 22 ] Pursuant to

article 291 C.P.P. , a judge of this Court granted the AMF leave to appeal before us on the following question of law: Did the judge of the Superior Court err in law by applying a specific mens rea burden of liability respecting the offence set out in

section 482 ADFPS? As to the four other questions addressed in the AMF's motion, they were referred to our panel. ANALYSIS I. Some opening remarks [ 23 ] It is easy to see why leave to appeal was granted with respect to mens rea , since it is a pure question of law on which the lower courts are divided. The trial judge found, in para. 44 of his judgment, that the offence set out in

section 482 ADFPS is a strict liability offence and does not require any proof of mens rea ; alternatively, if mens rea is required, he appears to say in paragraphs 45 and 61 of his judgment that it was demonstrated. The judge of the Superior Court found that the words used in

section 482 and the nature of the offence of "helping" or "inducing" require that the AMF bring evidence of specific mens rea , a burden it did not meet (para. 172). Alternatively, he writes that if it is a strict liability offence, La Souveraine established a due diligence defence (paras. 120–122). [ 24 ] The fact remains, however, that before addressing the mens rea , the judge of the Superior Court found that the actus reus was not established beyond a reasonable doubt: [140] The operative words of "aiding" and "inducing" are however of prime importance in the resolution of this matter .

The role that they play in relation to the culpability of the appellant is pivotal. In my view, these words indicate the requirement for some sort of voluntary action on the part of the accused as an essential element of the offence and secondly they also invest the offence with a mens rea component. I will deal with these points one by one . [141] Quite independently of whether or not a regulatory offence has some mens rea component to it the fact remains that proof of each element of the actus reus must always be established beyond a reasonable doubt .

As Mewett and Manning point out in Criminal Law 2 nd edition, 1985, Butterworth, Toronto, even offences of strict liability require an actor to do something. I would add to that that liability would also be engaged if the actor omitted to do something that it has a statutory duty to do. That latter notion, however, does not concern us in the case at bar.

[142] The evidence is to the effect that the appellant played a totally passive role throughout the unfolding of the events giving rise to this prosecution . In the introductory paragraphs of this decision I reproduced the resume of the facts relied upon by the first judge.

I also cited Phillips' letter of June 10 th , 2005 to Turgeon setting out in detail the role of the appellant. [143] From a review of the evidence and particularly that relied on by the first judge I cannot but conclude that the appellant played no active role with regard either the solicitations made by Flanders to the Quebec participants nor in relation to issuance or the delivery of the certificates of participation .

Indeed its role in relation with the Canada wide "floor plan" program including Quebec was merely one, which I would qualify as "ongoing recordkeeping" reflecting information conveyed from time to time by Flanders. [144] The wording of the statute clearly requires evidence of "helping" or "inducing". There is nothing in the evidence to support the conclusion that the appellant did any such thing. True it did not decline to participate in the program in Quebec. It did not decline to do so because it did not believe that Flanders required to be licensed in Quebec with regard to the "floor plan" coverage.

The fact that the appellant did not refuse to participate is however a long way from engaging the operative words of the statute. On this basis alone an acquittal should have been entered with regard to all of the counts . [Emphasis added] [ 25 ] Since the leave to appeal does not concern the actus reus or the four other grounds listed in the AMF's motion as referred to the Court, an argument might be made that the acquittals should be upheld. Indeed, the AMF's motion raises five grounds that are worded as follows: [ translation ] (

a) Did the judge of the Superior Court err in law by finding that the group damage insurance could be lawfully distributed in Quebec despite the public order provisions set out in the Civil Code of Québec and the ADFPS ? (

b) Did the judge of the Superior Court err in law by placing a burden of specific mens rea liability for the offence set out in

section 482 of the ADFPS ? (

c) Did the judge of the Superior Court err in law by substituting his assessment of the facts in dispute for those of the judge of the Court of Quebec absent a patently unreasonable error? (

d) Did the judge of the Superior Court err in law by imposing on the appellant an obligation to give the respondent advance notice of the fact that it was in breach of the ADFPS ? (

e) Finally, did the judge of the Superior Court err in law by finding that the underlying offence charged against Flanders had not been proved beyond a reasonable doubt even though Flanders pleaded guilty to all the counts brought against it and La Souveraine admitted the constitutive elements of these offences? [ 26 ] As previously noted, the authorizing judge gave leave to appeal only from ground (b). Though ground (

c) could, in appearance, apply to proof of actus reus , it appears from the AMF's motion that it concerns only the trial judge's alternative finding that specific mens rea , if required, had been established beyond a reasonable doubt. In fact, in their factums and oral submissions, the parties did not address the actus reus . [ 27 ] In these circumstances, it may be inferred either that the demonstration of the actus reus is not at issue and that the Superior Court judge erred on this point, or that the appeal, by adding ground (c), seeks to define all the elements of the offence in

section 482 ADFPS , including the burden on the prosecutor, the AMF, and the accused, La Souveraine. Respecting the first possibility, the respondent made no such concession in either its factum or its submissions before us. Only its silence and its failure to argue that the appeal is moot could, perhaps, justify finding that such a concession was made, although implicitly. I would add that the Superior Court could not have found that the actus reus had not been demonstrated if La Souveraine admitted it.

As for the second possibility, it no doubt stems implicitly, but not clearly, from the conclusion sought by the appellant. [ 28 ] One thing is certain: a conclusion by this Court finding merely that there was no need to establish mens rea could not cause an accused to lose the benefit of an acquittal resulting from an absence of proof of actus reus . [ 29 ] In short, this is in all likelihood an appeal brought on the wrong footing and, as a precaution, I will address both the actus reus and the mens rea . II. The characteristics of the offence at issue [ 30 ] The offence is described as follows in

section 482 ADFPS :

482. Un assureur qui aide ou , par un encouragement, un conseil, un consentement, une autorisation ou un ordre, amène un cabinet , ou un représentant autonome ou une société autonome par l’entremise de qui il offre des produits d’assurance, ou un dirigeant, administrateur, associé, employé ou représentant de ce cabinet ou de cette société autonome, à enfreindre une disposition de la présente loi ou de ses règlements commet une infraction. Il en est de même de tout administrateur, dirigeant, employé ou mandataire d’un assureur. 482.

Every insurer that helps or , by encouragement, advice or consent or by an authorization or order, induces a firm or an independent representative or independent partnership through which it offers insurance products or an executive officer, director, partner, employee or representative of such a firm or independent partnership to contravene any provision of this Act or the regulations is guilty of an offence. The same applies to any director, executive officer, employee or mandatary of an insurer. [Emphasis added] [ 31 ] A close reading of

section 482 reveals that the legislator intended to prohibit and punish two behaviours by insurers that are similar but distinct, to wit: helping a firm to contravene the ADFPS , and inducing a firm to contravene the ADFPS . [4] [ 32 ] It is a serious offence since it involves a key player – an insurer – helping or inducing a second player – a firm or other independent intermediary – to contravene the regulatory framework that applies to its activities.

It is easy to understand then why the legislator appended the most significant fines provided under the ADFPS to this offence. [ 33 ] At the relevant time, the applicable punishment was: 490. Un assureur déclaré coupable de l’infraction visée à l’article 480 ou 482 est passible d’une amende d’au moins 10 000 $ et d’au plus 50 000 $ et, en cas de récidive, d’une amende d’au moins 20 000 $ et d’au plus 100 000 $. 490. An insurer convicted of an offence under

section 480 or 482 is liable to a fine of not less than $10,000 and not more than $50,000 and, for every subsequent offence, to a fine of not less than $20,000 and not more than $100,000. [Emphasis added] It was the most severe punishment provided for under the ADFPS at the time. [ 34 ] The punishment currently in effect is set out in

section 487 ADFPS . It replaced

section 490, quoted in the above paragraph, following the enactment of the Act to amend various legislative provisions principally to tighten theregulation of the financial sector , S.Q. 2009, c. 58 , and goes even further: 487. Un assureur déclaré coupable de l'infraction visée à l'art. 480 ou 482 est passible d'une amende minimale, selon le plus élevé des montants , de 10 000 $, du double du bénéficie réalisé ou du cinquième des sommes qui lui ont été confiées ou qu'il a perçues. Le montant maximal de l'amende est, selon le plus élevé des montants , de 200 000 $, du quadruple du bénéfice réalisé ou de la moitié des sommes qui lui ont été confiées ou qu'il a perçues.

En cas de récidive, les amendes minimales et maximales sont portées au double. 487 . An insurer convicted of an offence under

section 480 or 482 is liable to a minimum fine of $10,000, double the profit realized or one fifth of the sums entrusted to or collected by the person, whichever is the greatest amount. The maximum fine is $200,000, four times the profit realized or half the sums entrusted to or collected by the person, whichever is the greatest amount . In the case of a second or subsequent conviction, the minimum and maximum fines are doubled. [Emphasis added]

[35] I note in passing that the first offender, Flanders, was prosecuted under

section 462 ADFPS (acting as a firm without beingregistered with the AMF). Each of the statements indicates a minimum fine of $1000 and a maximum fine of $25,000. Flanders pleadedguilty to the 210 counts. It was condemned to pay to the AMF fines totalling $210,000 ($1000 per count, or the minimum fine). [36] I will now consider the two components of the offence set out in

section 482, the mens rea and then the actus reus. (

i) The mens rea [37] The offences created by the ADFPS and the existence of minimum fines are part of a strong regulatory framework that aims toensure the compliance of those who are subject to it, usually companies. Clearly the ADFPS as a whole aims to create a framework forthe insurance products distribution industry with a view to protecting consumers (Marston v. Autorité des marchés financiers, J.E. 2009-2104, 2009 QCCA 2178 at para. 46). [38] The statute was enacted to protect society and encourage its members to comply with standards of quality and integrity – thetype of provincial statute that, since R. v.

Sault Ste-Marie, (SCC), [1978] 2 S.C.R. 1299, the Supreme Court has oftenrecognized as creating strict liability offences unless the legislator indicates that they are absolute liability offences or mens rea offences. [39] In the words "help" and "induce" of

section 482 ADFPS, the judge of the Superior Court saw an indication of intent requiringthat the prosecution prove mens rea. Certainly, these words convey the idea of a positive and voluntary act, but they do not also involveproof by the prosecution of culpable intent. The voluntary aspect of the prohibited act and its effect (elements of the actus reus) must notbe confused with the subjective intent that characterizes the mens rea (Lavoie v.

Ordre des chiropraticiens du Québec, (QC CA), [1998] R.J.Q. 1702 at 1705 (C.A.)). [40] While counsel for La Souveraine acknowledges this, he asserts that the complicity offence charged must be treated differentlybecause it does not seek the condemnation of the main offender but of a third party, the secondary offender, who helped or induced it tocommit a strict liability offence. In its view, the common law, as understood in England, Australia or New Zealand, teaches that mens reais always required to condemn an accomplice to a strict liability offence.

It is no different in Canada and, in support of his submission,counsel cites two judgments of the Court of Appeal for Ontario: R. v. F.W. Woolworth Co. Ltd. (1974), (ON CA), 3O.R. (2d) 629 and R. v. Fell (1982), (ON CA), 34 O.R. (2d) 665. He concedes, however, that the legislator maychoose to set aside this principle. [41] This theory may hold true when interpreting

section 491 ADFPS because of this provision’s similarity with paragraphs 21(1)(b)and (

c) of the Criminal Code. 491. Celui qui, par son acte ou sonomission, aide ou amène quelqu'un àcommettre une infraction est coupable decette infraction comme s'il l'avait commiselui-même. Il est passible de la même peineque celle prévue pour l'infraction qu'il aaidé ou amené à commettre. La même règle s'applique à celui qui, pardes encouragements, des conseils ou desordres, amène quelqu'un à commettre uneinfraction. 491. A person who, by

an act or omission,helps or induces another person to commitan offence is guilty of the offence as if theperson had committed it. The person isliable to the same penalty as that prescribedfor the commission of the offence. The same applies to a person who, byencouragement or advice or by an order,induces another person to commit anoffence. [Emphasis added] [42] Whatever the case may be, it does not hold true with respect to

section 482, which, unlike

section 491, does not contemplate allforms of complicity by anyone at all, but merely the complicity that results from a positive act (since the word "omission" does notappear) by an insurer, a person who engages in a regulated activity, helping or inducing a firm or other intermediary to contravene theregulatory scheme. [43] I cannot convince myself that the legislator wanted this highly specific type of offence, to be anything other than strict.

Indeed,this offence goes to the heart of the scheme established and contemplates targets only one main offender, the insurer, who has agreed toparticipate in a highly regulated activity in the best interests of consumers (R. v. Wholesale Travel Group Inc., (SCC),[1991] 3 S.C.R. 154). [44] I therefore find that the offence set out in

section 482 ADFPS is one of strict liability. [45] I hasten to add, however, that this provision does not contain any statement of legislative intent to create an absolute liability

scheme. (ii) The A ctus Reus [ 46 ] The legislator does not define what constitutes helping. We may, however, rely on the case law respecting paragraph 21(1) (

b) of the Criminal Code , which applies, by operation of

article 60 C.P.P. , to any acts that may constitute help. [ 47 ] A positive act is required, since an omission does not constitute a form of help pursuant to

section 482. Indeed, when the legislator intends to include a failure to act, it is explicit in this respect, as it was in

section 491 ADFPS , a provision under the same title of the same statute. According to the principle of uniformity, it is thus clear the offence under

section 482 contemplates positive actions, not omissions (Pierre-André Côté, The

Interpretation of Legislation in Canada , 4th ed. (Toronto: Carswell, 2011) at 353 et seq .; Ruth Sullivan, Statutory

Interpretation , 2d ed., (Toronto: Irwin Law, 2007) at 167; see also

Interpretation Act , R.S.Q., c. I-16, s. 41.1). [ 48 ] As for actions that may constitute a sufficient actus reus to find that the insurer induced a firm or other intermediary to contravene, the legislator is very clear: there must be encouragement, advice, consent, authorization, or an order. [ 49 ] That said, the fact remains that the use of the words "help" and "induce" in

section 482 ADFPS indicates that the legislator intends to require the prosecutor to demonstrate, beyond any reasonable doubt, a positive act of help or inducement ( aider ou amener ), or in other words, a positive action by an insurer that has the effect of helping or inducing a firm to contravene the ADFPS . [ 50 ] Clearly,

section 482 does not make the insurer the guarantor of compliance with the ADFPS by the firms with whom it has business relationships. Quite the contrary, it requires the insurer’s active involvement in the contravention of the statute by a firm or other intermediary. [ 51 ] Indeed, only the active involvement aspect can explain the severity of the minimum fine imposed by the ADFPS on the insurer ($10,000 at the time) when compared to the fine that applies to the firm or other intermediary that actually performed the prohibited action, that is, the main offender ($1000 at the time).

The fact that the insurer's fine is ten times that of the broker’s for same unlawful act clearly denotes that the latter must have acted under the dictates of the former. [ 52 ] It follows that, to obtain a conviction, the prosecutor (the AMF or the Crown, as the case may be) must establish, beyond any reasonable doubt, the following three material elements: (

i) An action or behaviour by a firm that constitutes a contravention of the ADFPS ; (ii) A positive action by the insurer (in the case of an inducement charge, this act must consist in encouragement, advice, consent, authorization, or an order; in short, it must consist in an action of inducement); and (iii) The fact that this action helped or induced the firm to commit the alleged acts or adopt the alleged conduct. [ 53 ] In light of the absence of mens rea , however, it is not necessary for the prosecution to establish that the insurer knew that the actions of the firm would be constitutive of an offence within the meaning of the ADFPS .

It is enough that the insurer was actively involved in the firm's illegal actions. In other words, the legislator wants insurers, before they help or induce firms to commit certain actions, to make sure that these actions comply with the ADFPS . I reiterate, however, that the legislator does not make the insurer into a guarantor of compliance with this statute by firms or other intermediaries acting on its behalf. III.

Absence of proof of actus reus in the present case [ 54 ] As the judge of the Superior Court pointed out, in this case, there is no proof beyond any reasonable doubt (not even a slight indication) of a positive act by La Souveraine of helping Flanders solicit Quebec dealers in the summer of 2005 or issue certificates to these dealers on August 25, 2005. [ 55 ] Furthermore, there is no evidence or even a hint of any order given to Flanders respecting the certificates issued in August of 2005, or any evidence or hint of advice, encouragement, consent or authorization inciting Flanders to contact Quebec dealers or issue certificates to them. [ 56 ] The trial judge had good reason to limit himself to stating that La Souveraine passively acquiesced to Flanders' actions.

I find it significant that he wrote: [ translation ] [57] The evidence is silent on the steps that were taken by the defendant to ensure the legality of the operations performed by Flanders in Quebec, and instead confirms that La Souveraine shared Flanders's opinion that contracts P-1 to P-56 were not subject to Quebec law and that Flanders did not need to be licensed in Quebec to offer "floor-plan" insurance plans to GE's Quebec dealers. [58] The evidence reveals that the defendant , who received a list of the certificates issued by Flanders to GE dealers on a monthly basis, knew in 2005 that it insured assets that were located in Quebec and in which GE and Quebec dealers had a joint interest. [59] Despite the assertion to the contrary by Robert G.

Phillips, the defendant's letter to the AMF, dated June 10, 2005, (P-65) is clearly a response prepared in collaboration with Flanders, in light of the similarity in the wording of this letter and that used by counsel for Flanders in the letters of December of 2004, and January of 2005 (P-66) addressed to the regulatory authorities of other provinces. These letters confirm that La Souveraine and Flanders agreed that the contracts that covered the inventories were not subject to Quebec law before the insurance certificates were renewed on August 25, 2005 .

[60] The defendant therefore authorized, allowed, or consented to have Flanders issue the insurance policies knowing that Flanders did not have the required permits . The policies were not issued without the defendant's knowledge. [Emphasis added.] [ 57 ] In short, there is no proof that La Souveraine induced Flanders through a positive act to contravene the ADFPS or that it helped Flanders solicit or issue certificates. It merely shared the opinion of Flanders and its councillors and let Flanders continue its practice after explaining it to the AMF, which did not react.

It is therefore faulted for failing to withdraw its authorization to the broker to continue issuing certificates to Quebec dealers in the summer of 2005. In other words, it is being faulted for a failure to act. Such behaviour could, perhaps, justify a conviction under

section 491, but the AMF chose to prosecute under

section 482, which, in the event of a conviction, would allow it to collect much larger fines, but it also required that it prove beyond a reasonable doubt that La Souveraine had committed a positive act that helped or induced Flanders to issue renewals . [ 58 ] In these circumstances, I come to the same conclusion as the judge of the Superior Court that the judge of the Court of Quebec erred in law with respect to the actus reus by confusing "positive act of encouragement" and "failure to act".

In the present case, La Souveraine failed to restrict Flanders's authority to issue certificates and exclude the province of Quebec, when it honestly believed, in good faith, [5] that Flanders could issue certificates there to the members of the master-policy entered into with GE as it did elsewhere in Canada where the complaints of the spurned broker had been dismissed. [ 59 ] In actual fact, with respect, the trial judge made La Souveraine into a guarantor of Flanders' compliance with the ADFPS , which is not the purpose of

section 482.

It must be added that the trial judge may have been led into error by the wording of the statements of offence, which modifies the nature of the offence by vaguely and loosely using the terms "consented and/or authorized Flanders ... to issue ... a policy" rather than stating " induced Flanders by consenting or authorizing it to issue a policy", which would have highlighted the necessity of proving a positive action that led Flanders to issue certificates in August of 2005. [ 60 ] For this reason, it was necessary to enter an acquittal on the 56 counts, as Martin J. of the Superior Court decided to do. IV.

La Souveraine exercised due diligence [ 61 ] Since this is a strict liability offence, and taking for granted for the purposes of the analysis that the actus reus was established (which is not the case according to the Superior Court judgment, a finding with which I agree), this means that the degree of fault required is deemed to have been proved. It is therefore up to La Souveraine to establish, on a balance of probabilities, a valid defence, since the principle whereby punishment should in general not be inflicted on those without fault applies ( Sault Ste-Marie , supra at 1326; Lévis (City of) v.

Tétreault ; Lévis (City of) v. 2629-4470 Québec inc. , [2006] 1 S.C.R. 420, 2006 SCC 12 at para. 14 ). [ 62 ] As for the aspect of liability, the defences available to a party accused of a strict liability offence are limited to officially induced error and due diligence. According to case law, the due diligence defence is centred around two themes: (

i) demonstrating that the accused had reasonable grounds to believe in a non-existent state of facts that, had it existed, would have made the act or omission innocent, [6] or (ii) demonstrating that the accused took every reasonable step to avoid the event ( Sault Ste-Marie at 1326; Lévis (City of) at para. 15). [ 63 ] In the present case, La Souveraine alleges that it exercised due diligence in the circumstances. [7] [ 64 ] As LeBel J. pointed out on behalf of the Supreme Court in Lévis (City of) , at paragraph 30: “The concept of diligence is based on the acceptance of a citizen’s civic duty to take action to find out what his or her obligations are”.

This requires that the accused show that his or her conduct displayed the same degree of diligence as that of a reasonable person placed in similar circumstances, which is an objective standard ( Lévis (City) , at para. 15 ), and not the highest possible degree of diligence . [ 65 ] It is therefore necessary to determine whether La Souveraine demonstrated, on a balance of probabilities, that it conducted itself in keeping with this requirement. [ 66 ] With respect for the opposing position, I find that the judge of the Superior Court, after having considered all of the facts, unlike the trial judge, [8] could reasonably conclude that La Souveraine had exercised due diligence. [ 67 ] First, there is no indication that La Souveraine tried to avoid complying with the law or ignored the legal requirements.

On the contrary, the evidence indicates that La Souveraine was concerned about respecting the ADFPS and the other applicable provincial laws to which it was subject in Quebec. [ 68 ] Furthermore, it did not display carelessness with respect to Flanders issuing renewal certificates in 2005.

On the contrary, following a request for information by the AMF, it actively sought to comply with the law: - analysis of its product (coverage only of assets belonging to GE, an Ontario business; payment of premiums by GE (Ontario) to Flanders (Manitoba); indemnity payable to GE); - consideration of its treatment in the other provinces; - questions put to Flanders and receipt of an opinion stating that the certificates were not covered by the ADFPS . [ 69 ] It was only after it did all this that it concluded that the renewal certificates issued to Quebec dealers tied to GE, which confirmed that the GE products in their inventory were re-insured under the master-policy issued to GE, did not constitute the issuance of an insurance contract governed by the laws of Quebec.

[ 70 ] Furthermore, La Souveraine clearly explained its position to the AMF in its letter dated June 10, 2005, summarized at the outset of these reasons. At no time did it seek to conceal the true nature of the product it offered, its understanding of the situation, or its business model with respect to this product.

The AMF's ensuing silence only strengthened La Souveraine's conclusion that the issuance of certificates was no more problematic in Quebec than it was anywhere else. [ 71 ] In fact, had the AMF expressed any objection or if La Souveraine had been otherwise informed that the issuance of membership certificates by Flanders posed a problem in Quebec and opened it up to prosecution, La Souveraine could have easily solicited and issued the renewals directly since it was authorized to do business in that province and the product was offered to only about fifty dealers who were clearly identified by GE. [ 72 ] It should also be noted that, although group property damage insurance for is not recognized in the Civil Code of Québec (see articles 2392 and 2395 C.C.Q . and the legislative debates surrounding the adoption of the new Civil Code ), it appears to be recognized elsewhere in Canada and to have been tolerated in Quebec since 1994 with respect to financed assets awaiting sale.

One thing is certain, searching for an explicit prohibition of this type of innominate contract in the Civil Code or any other law would be futile. [ 73 ] If it had been clear to the AMF inspectors that La Souveraine's business model with respect to the specific product offered to GE's commercial clients was illegal, they would, in good faith, have acted quickly and made their doubts or position known to the insurer, who could have easily adjusted its product distribution model for Quebec and avoided the offences for which it was subsequently faulted.

In truth, the inspectors of the specialized organization also found the case to be complex, and it took the involvement of the AMF's legal department in late 2005 for the regulator to conclude that the method of distribution for this highly specific product did not comply. [9] [ 74 ] Should we criticize La Souveraine for not grasping that its distribution model for a specific product (covering about fifty dealers solicited by GE) contravened the ADFPS before the AMF, the specialized regulatory agency itself, came to this realization?

In light of the fact that neither Flanders nor its advisors had any doubts as to the legality of issuing the certificates in light of the dismissed complaints elsewhere in Canada, and considering the AMF's silence throughout June, July and August of 2005, would due diligence on the part of La Souveraine have required that it bring a motion for declaratory judgment before the Superior Court respecting the application of

article 3119 C.C.Q . to the renewal certificates to be issued prior to September 1, 2005? [ 75 ] I do not believe so. [ 76 ] In short, La Souveraine's failure to restrict Flanders's authorization to issue renewal certificates in the summer of 2005 to exclude the province of Quebec is the result not only of an erroneous

interpretation of the Quebec legislative corpus that the product offered is illegal in Quebec – like the AMF's

interpretation in fact – but also of a set of concurrent facts leading La Souveraine to believe that this information was well founded: - very particular product offered only on renewal and only to dealers with ties to GE; - coverage expiring on September 1, 2005, covering only assets belonging to GE, with premiums and indemnities paid outside of Quebec; - silence of the AMF and favourable position by the counterpart organizations in the other provinces; - reassurance given by Flanders and its lawyers [ 77 ] This case does not involve ignorance of the law or a mere error of legislative

interpretation. Rather, it springs from a set of circumstances that combined to explain La Souveraine's conduct. In short, the conduct in question stemmed from an error of mixed fact and law, rather than a mere error of law. The due diligence defence was thus available. [ 78 ] I agree with the alternative position of Martin J. of the Superior Court, who wrote: [107] The trial judge concluded from the testimony of both Roberts and Soltendieck that they were generally aware of Quebec licensing requirements insofar as they applied to Flanders.

As a consequence, in his opinion any error on the appellant's part as to whether these rules applied notwithstanding that the master policy had been issued and delivered in Ontario, would necessarily involve a pure question of law. [108] In the trial judge's view it would therefore be no answer for the appellant to invoke any such error or misunderstanding on its part as to the licensing requirements applicable to Flanders in the particular circumstances of this case.

Obviously ignorance of the law is no excuse and will not excuse one's failure to conform to it. [109] If the issue were no more complicated than that then the first judge would, I believe, be correct. There is however more to it. If Roberts and Soltendieck were indeed under the impression that the Regulator had acquiesced with regard to licensing requirements in the case of the "floor plan coverage" then that, I believe, is quite another matter.

The question would then become one of mixed fact and law with consequences potentially quite different from those taken for granted by the first judge . [110] That, in my respectful view, is precisely what the witnesses Soltendieck and Roberts were respectively alluding to in the extracts from their testimony that I reproduced above at paragraphs 105 and 106 ( supra ) and which were in turn cited by the first judge in his decision . [111] I find comfort on this issue when I consider that such an

interpretation is confirmed and corroborated by the content of the letter of June 10, 2005. It will be recalled that Roberts underlined in that letter that in the view of the appellant there was no licensing issue. That fact can be reconciled perfectly with the testimony that he gave at trial. [112] The respondent in its capacity as Regulator chose not to reply to that latter and accordingly did nothing to put in question the appellant's belief that, at least as far as the "floor plan coverage" was concerned, there was indeed no licensing issue.

[113] It may well be that the appellant's reading of the situation was wrong but it was nevertheless based up on an honest belief held in good faith. It was after all open to the Regulator to reply to that letter, disagree with the appellant's position and to put its "cards on the table". It chose not to do so. Perhaps it declined to answer in view of the ongoing investigation. I do not know. The appellant is not, however, in my view to be blamed for interpreting that silence, as an indication that it's appreciation of the licensing issue was correct. [114] I am acutely aware that it is not for me to substitute my

interpretation of the evidence for that of the first judge. It appears to me however, and I say so with the greatest of respect, that the first judge did not even consider any such

interpretation. [115] At paragraph 42 of his decision the first judge qualifies the infraction committed by Flanders as being one of strict responsibility. Curiously later at paragraph 61 he concludes however that, in so far as the appellant is concerned, it is not necessary to qualify the infraction as being either one of strict responsibility or a mens rea offense [ translation ] "because the evidence reveals the defendant’s acquiescence to Flanders's actions". [116] [ translation ] "Acquiescence" is a rather wide term, of debatable import, and at no place does it appear in the applicable

section of the statute ( L.R.Q. c. D-9.2 sec.482 ). With respect to the judge was obliged to consider and weigh the wording of the statute. [117] The first judge points out that the appellant's failure to appreciate that the issuance of the certificates by Flanders was illegal does not constitute a defence in since it is a pure error in law. He then adds that the error was not, according to the evidence, attributable in any manner to [ translation ] "the competent authority". Presumably by the use of that term he means the respondent.

For the reasons set out in the foregoing paragraphs I am unable to agree with him on either of these issues. [118] The first judge, in my respectful opinion was, as I have said, obliged to consider both the nature and the elements of the offence in the light of the wording of the statute. In as much as he considered the appellant's error to be a pure question of law he apparently believed that that distinction was immaterial. [119] If, as I have suggested, the appellant's mistake constitutes an error of mixed fact and law then different considerations come into play.

That is so quite independently of whether it is a strict liability offence having a dimension of intent or mens rea to it, as Me Hébert contends, or whether it is purely a strict liability offence in the traditional regulatory sense as Me Blais contends. [120] As Stuart, Delisle and Coughlan point out in Learning Canadian Criminal Law, Thompson Carswell, Toronto, 10th Edition, 2006 at page 677: MISTAKE OF FACT (

a) General Principles On the issue of whether a mistake of fact is a defence, Pappajohn v R. (see previous chapter) is still the leading decision. Chief Justice Dickson there decided for the majority that a mistake of fact defence constitutes a denial that the Crown has proved the fault element. It follows that, in the absence of statutory wording to the contrary: 1. Where there is a subjective mens rea requirement the mistake need merely be honestly held with reasonableness only relevant to assessment of credibility; 2.

Where the fault element requires objective negligence, the mistake must be both honest and reasonable; 3. Where there is a due diligence defence, the mistake must be both honest and reasonable, with an onus of proof on the accused in the case of regulatory offences ; and 4.

Where the offence is one of absolute liability, mistake of fact is not a defence. [121] For the reasons set out previously I would conclude that, given the manner in which events unfolded in the course of 2005 , the error attributable to the appellant is at the very least one of mixed fact and law . [122] Furthermore, if I am (not) [10] correct in my conclusion that there is a mens rea dimension to the infraction, an issue which I will discuss later, then I would, for the reasons previously articulated, be inclined to conclude that the mistaken belief on the part of the appellant was honestly held . [Emphasis added.] [ 79 ] A reasonable error of law by a proactive citizen (as opposed to ignorance of the law) may be one of the elements in a context giving rise to a due diligence defence.

I find that this approach is particularly necessary when the state of the law on a question is complex and the specialized regulatory organization is incapable of quickly concluding that the business model is contrary to the law. In this context, expecting the insurer to have a better understanding of the law than the AMF, without any margin for error, would be tantamount to saying that the ADFPS creates strict liability offences. [ 80 ] Unlike Cournoyer J.A., I share the analysis of Lévis (City) by Professors Christine Boyle and Sam de Groot in an

article titled "The Responsible Citizen in the City of Lévis: Due Diligence and Officially Induced Error" published in (2006), 36 C.R. (6th) 249 at 255 : On the other hand, the Court does not assert an absolute duty to know the law, just one of due diligence . The "civic duty" aspect of the case appears to conjure an unrealistic image of the citizen competent to navigate the complex regulatory state. However, conceptualizing knowledge of the law in terms of diligent effort may provide support for defence arguments that accused persons had exercised due diligence with respect to knowing the law and thus should be acquitted . [Emphasis added]

[ 81 ] In the present case, La Souveraine acted like a responsible corporate citizen who actively sought to understand its obligations under Quebec law; it did not display any negligence, indifference, or wilful blindness. If it failed to restrict Flanders' authorization to issue certificates to exclude the province of Quebec, it is because of a particular context that involves not only the information it had obtained and its analysis of its product, but also the silence of the AMF. As Martin J. points out, it is not a mere error of law, but one of mixed fact and law. V.

Comment (in obiter ) on the legal nature of the certificates [ 82 ] I would make the following comment in closing. It is not necessary to determine the exact nature of the contractual relationship between La Souveraine and each of the Quebec members, as the AMF asks us to do in its factum. Suffice it to say that the concept of adherence to a group property insurance contract does not appear to exist in Quebec.

Yet there is nothing to indicate that these contracts are void ab initio . [ 83 ] It follows that, from the perspective of the Quebec civil law, the contracts entered into with the Quebec dealers could be considered stand-alone, separate from the master-policy issued to GE. There would thus be 56 parallel and distinct contracts in Quebec, with identical content and each governed by Quebec law. Could this be a case where the Quebec retailer is co-insured with GE? Or could it be an insurance policy where the insured and beneficiary are GE and the policyholder is the Quebec retailer?

Could it be a stipulation for another entered into by GE for the benefit of the retailer, which may chose to claim it, thereby entering into an insurance contract between itself and La Souveraine? [ 84 ] None of these options squares well with the reality of the arrangements described above, and each is littered with obstacles that are preferably left to a case where contractual issues are at stake. For the purposes of this appeal, it is enough to accept that an insurance product was distributed in Quebec. VI. The referred motion [ 85 ] I previously discussed ground (

c) of the AMF's motion for leave to appeal. As for the other grounds raised, which were referred to our panel, they should be dismissed as they do not raise any real legal issues. CONCLUSION [ 86 ] In sum, I find that there is nothing that justifies the intervention of this Court with respect to the conclusion of the judge of the Superior Court acquitting La Souveraine in light of the particular circumstances of this case. PIERRE J. DALPHOND, J.A.

REASONS OF KASIRER, J.A. [ 87 ] I have had the advantage of reading the reasons of my colleagues Dalphond, J.A. and Cournoyer, J.A. (ad hoc) With respect for the contrary opinion, I agree with Cournoyer, J.A.'s conclusions that the appeal should be allowed, the judgment of the Superior Court be set aside and the convictions entered against the respondent be restored. [ 88 ] I agree with the reasons given by Cournoyer, J.A. in respect of the actus reus of the offence.

I agree as well with both my colleagues that the offence is not one for which a mens rea attaches, but instead a strict liability offence within the meaning of R. v. Sault Ste.

Marie . [11] [ 89 ] To avoid liability La Souveraine must show that it had taken all reasonable steps to avoid committing the offence or that it has a proper defence of mistake in the circumstances. [ 90 ] Here again, I agree with the conclusion of Cournoyer, J.A. that the respondent has failed to show due diligence. [ 91 ] I allow myself to add the following comments in respect of the availability of a defence of mistake in the circumstances. [ 92 ] The respondent did not claim to be acting under the sway of a mistake of fact – say, an honest and reasonably-held belief that Flanders had a licence when in fact it did not – as a means of excusing its conduct.

The respondent acted under the belief that Flanders did not need a licence in connection with the insurance scheme in question. The trial judge decided this was an inexcusable mistake of law. [ 93 ] Among the active steps that La Souveraine took to avoid committing the offence was sending the letter of explanation to the

AMF on June 10, 2005. As we know, that letter went unanswered. The judge of the Superior Court sitting in appeal concluded that La Souveraine mistakenly relied on the AMF’s silence as an indication that its proposed conduct was legal. In obiter , he concluded that La Souveraine’s error was a mixed error of law and fact. On that view, if the error was a reasonable one, it could be considered an excuse from liability pursuant to Sault Ste.

Marie . [ 94 ] Central, then, to La Souveraine's defence of mistake is the AMF's failure to answer the letter and the impact of that failure on the respondent's subsequent conduct. [ 95 ] As a preliminary point, it bears noting that as regulator pursuant to the Act respecting the Autorités des marches financiers , the AMF has defined statutory responsibilities. [12] It has a mandate to act as an "information and reference centre in all fields of the financial sector" [13] and "to grant the public and the business community access to reliable, accurate and complete information" in respect of players, products and services in the field. [14] The AMF does not have, as one of its ordinary duties, the obligation to inform individuals that conduct they propose to undertake is legal or illegal.

Unlike certain other administrative agencies, the AMF does not provide advance rulings on the legal effects of proposed conduct to members of the public. The fact that the letter remained unanswered must be understood with that in mind. [ 96 ] With respect, I disagree with the view expressed by the judge of the Superior Court that the AMF had "a duty to advise the appellant [La Souveraine] of its position as Regulator with regard to the proposed 'floor plan' coverage" (paragraph [9] of his reasons).

Imposing this kind of duty on the AMF would be a perilous matter in that, if broadly extended, it could potentially transform the role that the regulator plays in the marketplace.

Even in circumstances in which a member of the public might be seen as soliciting an opinion as to the legality of proposed conduct before undertaking it, I do not believe the courts should impress a duty to act on the AMF – in the absence of statutory direction – such that its silence could excuse penal conduct for reasons. [ 97 ] That said, it is of course nonetheless possible, even in the absence of a duty, that La Souveraine honestly but mistakenly took the lack of an answer to its letter as a sign that its proposed conduct was legal. [ 98 ] Two lines of argument may be invoked in support of the view that La Souveraine committed an error that relieves it from liability here.

First, it might be said, that La Souveraine acted pursuant to a mixed error of law and fact that it was doing nothing wrong. If that mistake were proved to be a reasonable one in light of all the circumstances, including the unanswered letter, La Souveraine should be excused. Alternatively, if La Souveraine did act under a mistake of law, one might argue that it did so in part as a result of the failure by the AMF to answer the letter.

Taking into account all the circumstances, reliance on the unanswered letter arguably amounts to an excuse for this mistake of law in a manner comparable with the doctrine of officially induced error as interpreted in Lévis (City) v. Tétreault . [15] [ 99 ] I propose to address briefly each of these two arguments in turn.

A) Mixed Error of Law and Fact or an Error of Law? [ 100 ] La Souveraine acted under the mistaken impression that this conduct was legal because, in its view, Flanders did not need a licence from the Quebec authorities. The trial judge in the Court of Québec held that this was a mistake in law that cannot be set up as a defence to a strict liability offence. [ 101 ] Was it instead a mixed error of fact and law that, if honestly and reasonably held, could provide La Souveraine with a defence? [ 102 ] A combination of circumstances, taken together, may well have induced La Souveraine to believe honestly that its

interpretation of the law was correct. These circumstances would include, in particular, the complex nature of the insurance scheme, the fact that GE is a non-Quebec company, the fact that the arrangement would have been legal in some other parts of Canada, the legal opinions it had in hand, and the lack of an answer to the letter from AMF. Specifically, the judge of the Superior Court observed that the representatives of La Souveraine were under the impression that the AMF had "acquiesced with regard to licensing requirements in the case of the 'floor plan coverage'" (paragraph [109]).

In the circumstances, the judge of the Superior Court was of the view that the error attributable to La Souveraine was "at the very least one of mixed fact and law" (paragraph [121]). [ 103 ] Again, central to this view is the importance one attaches to the fact of the unanswered letter.

One might argue that La Souveraine mistakenly interpreted the silence as a sign that the AMF had agreed with its position that Flanders did not need a licence. [ 104 ] Did the silence of the AMF following its receipt of the letter in which La Souveraine set out its understanding of the law give rise to a reasonable error of fact or mixed error that can be invoked as a defence to the charge? [ 105 ] The judge of the Superior Court underscored the role of the unanswered letter as follows: [112] The respondent in its capacity as Regulator chose not to reply to that letter and accordingly did nothing to put in question the appellant's [La Souveraine's] belief that, at least as far as the "floor plan coverage" was concerned, there was indeed no licensing issue. [113] It may well be that the appellant's reading of the situation was wrong but it was nevertheless based upon an honest belief held in good faith.

It was after all open to the Regulator to reply to that letter, disagree with the appellant's position and to put its "cards on the table". It chose not to do so. Perhaps it declined to answer in view of the ongoing investigation. I do not know. The appellant is not, however, in my view to be blamed for interpreting that silence, as an indication that it's appreciation of the licensing issue was correct. [Emphasis added.] [ 106 ] This would seem to suggest that the judge saw the silence as giving rise to an erroneous "appreciation of the licensing issue" for which La Souveraine should not be blamed.

In other words, the circumstances, including the AMF's silence, left La Souveraine believing that Flanders did not need a licence. In my respectful view, this was a mistake in law, not one of fact or a mixed error of law and fact, for which there is no excuse.

[ 107 ] At trial, the judge of the Court of Québec observed that the evidence demonstrated that La Souveraine [translation] "did not know that the 'floor-plan' insurance contract proposed by Flanders to Quebec dealers was governed by Quebec law and that it was necessary for Flanders to be registered in Quebec" (paragraph [45]). In paragraphs [46] and following, he cited extensive excerpts from the testimony at trial confirming that La Souveraine thought that Flanders did not need a licence.

The respondent did not identify direct evidence that La Souveraine interpreted the silence to mean that the AMF had acquiesced to its view and that it relied on that acquiescence going forward. The trial judge did record, at paragraph [50] of his reasons, that Stephen Soltendieck, a manager at La Souveraine, thought the AMF had an obligation, as a "partner" and a "regulator" to "pick up the phone" and to prevent La Souveraine from breaking the law. Mr.

Soltendieck did testify that he reacted with "astonishment" when he learned of the notice of offences months later, but he explained that was because he had never thought the company was in violation of the law. La Souveraine's Assistant Vice President Robert Phillips remarked upon the lack of follow-up correspondence from the AMF in his testimony, but he did not say that it induced him to believe that the AMF had acquiesced.

La Souveraine has not pointed to evidence that it believed the AMF's silence provided a reliable sign of the regulator's acquiescence, much less demonstrated – as is its burden – that its mistake was reasonable in the circumstances. [ 108 ] The trial judge has not been shown to have misread the facts on this point nor has it been shown that he was wrong to conclude that this was an error of law on the part of La Souveraine. The complex circumstances did not transform that into a mixed error of law and fact.

Fully aware of the complexity of the arrangement, La Souveraine persisted in its view that its conduct was legal. For the trial judge, La Souveraine was ignorant of the meaning of the law and, in the absence of a recognized excuse for the mistake in law, the company must answer for its conduct. [ 109 ] Moreover, the plain fact that the AMF had no statutory obligation to answer the letter renders it very difficult for the accused corporation to argue that its mistake was a reasonable one.

It was not reasonable for La Souveraine to expect that the AMF had a duty, as "regulator" and "partner", to provide confirmation of the legality of its proposed course of conduct given the nature and scope of the AMF's statutory mandate. [ 110 ] This leaves the question as to whether circumstances exist in which La Souveraine can be excused from its ignorance of the law. I now turn to that matter.

B) Excusable Mistake in Law? [ 111 ] While the courts have regularly invoked the principle that ignorance of the law is no excuse, they have not been unmindful of injustices caused by its inflexible application. Among the exceptions to the rule is the doctrine of officially induced error which, in a word, provides a defence for an accused who reasonably relied on erroneous legal advice from an official responsible for the administration of the law. [16] [ 112 ] That doctrine, as set forth in Lévis , does not apply here.

The AMF did not provide legal advice upon which La Souveraine relied, that advice having led to the error that Flanders did not need a licence. The advice it did receive came not from an official of the AMF but from an independent legal counsel. While some might feel that it is reasonable to rely on a lawyer's opinion to excuse a mistake in law, the courts have been firm in rejecting this as an excuse for ignorance of the law, as my colleague Cournoyer, J.A. amply explains in his reasons. [ 113 ] What about the AMF's failure to answer the letter of June 10, 2005?

Can this be said to excuse La Souveraine's mistake of law? One might argue that the doctrine of officially induced error can be extended to include an omission to act by an official, at least by analogy. On this view, the AMF's silence amounts to a "green light" of sorts – the notional equivalent of an official authorization to act – inducing La Souveraine to believe that its proposed conduct was not mistaken in law.

As such, the argument goes, it was reasonable for La Souveraine to rely on the AMF's silence in a manner not dissimilar to that in which an accused might rely on mistaken advice from an official as an inducement to make an error of law. [ 114 ] The idea that AMF's silence excuses La Souveraine's mistake in law might be said to rest on a policy justification of reliance.

This has been broadly described by some as a "criminal estoppel argument", based on "[t]he mistaken assumption upon which [an accused] acts was implanted or confirmed by another, whose authority he reasonably trusted". [17] [ 115 ] In my view, La Souveraine could not reasonably rely on the AMF’s silence as an indication that its proposed conduct was legal. As noted above, AMF had no obligation to respond to the letter.

Its silence does not constitute, according to the criteria in Lévis , "reasonable advice" from an "appropriate official", [18] nor was it reasonable for La Souveraine to rely upon it given the absence of any obligation to answer the letter. [ 116 ] The failure to answer the letter could not reasonably be construed in the circumstances as a "green light" upon which La Souveraine could rely to excuse its mistake of law.

Whatever one's views may be on how the AMF goes about its business, it cannot be said that the appellant was involved in snaring La Souveraine in this case in a manner comparable to entrapment. [ 117 ] La Souveraine chose to rely on independent legal advice and, as a consequence, it made the mistake of law of consenting to Flanders proceeding without a licence. However honest La Souveraine's belief might have been that the conduct was legal, its ignorance of the law is no excuse. [ 118 ] I would dispose of the appeal as suggested by my colleague Cournoyer, J.A. NICHOLAS KASIRER, J.A.

REASONS OF COURNOYER, J.A. [ 119 ] The respondent, La Souveraine, General Insurance Company, was sued by the Autorité des marchés financiers ("AMF") for consenting and/or authorizing to have Flanders Insurance Management and Administrative Services Ltd. ("Flanders"), an insurance firm that is not registered with the AMF, issue "floor-plan" insurance policies for financed recreational products to dealers with establishments in Quebec. [ 120 ] Here is the text of one of the statements of infraction: At Alma and its surrounding area, in the District of Alma, on or about August 25, 2005, did consent and/or authorize to have Flanders Insurance Management and Administrative Services Ltd., a firm that is not registered with the Autorité des marchés financiers, issue a floor-plan insurance policy, bearing number ..., to Atelier Fortin Sports Inc., the whole in contravention of

section 71 of the Act respecting the distribution of financial products and services , R.S.Q., c. D-9.2 (the " Act "), thereby committing the offence set out in

section 482 of the Act and making itself liable to the fine set out in

section 490 of the Act . [ 121 ] On June 10, 2005, in a complete and detailed letter, La Souveraine explained to the AMF that, in its opinion, the insurance firm it used to issue insurance policies was not required to register with the AMF since the policies in question protected mainly the interests of GE Capital Commercial Distribution Finance, Canada ("GE"), which financed the inventories of Quebec recreational vehicle dealers. GE's head office is in Ontario, where the contract was entered into. [ 122 ] A sample insurance policy signed on behalf of La Souveraine by a representative of Flanders, Gordon B.

Roberts, was also joined to this letter. [19] [ 123 ] The respondent did not receive any response from the AMF. [ 124 ] On January 16, 2006, 56 statements of offence were served on the respondent. [ 125 ] All of these statements concern offences committed on August 25, 2005, the date on which the insurance policies at issue were renewed. The offences were therefore committed about ten weeks after the letter was sent to the AMF.

The offences with which Flanders was charged occurred during a period antedating the respondent's letter. [ 126 ] The respondent was convicted of 56 counts by the trial judge, who condemned it to pay a fine of $560,000. [ 127 ] The Superior Court overturned the respondent's conviction. [ 128 ] The AMF appeals from this decision. [ 129 ] The applicability of the Act respecting the distribution of financial products and services [20] (" ADRPS ") to the present file is not under appeal.

Both the Court of Quebec and the Superior Court found that it applies An insurance product was distributed in Quebec. [21] [ 130 ] The only issue in dispute is the classification of the offence created by

section 482 of the ADFPS . [ 131 ] This offence creates a complicity rule that specifically contemplates insurers. [ 132 ] It must first be determined whether it is a mens rea offence or a strict liability offence. If the offence created in

section 482 requires proof of mens rea , then clearly, the respondent must be acquitted. If the offence is determined to be a strict liability offence, it must be decided whether the respondent exercised due diligence in the circumstances. [ 133 ] For the reasons that follow, I find that the offence set out in

section 482 ADFPS is one of strict liability. [ 134 ] La Souveraine has not shown that it exercised due diligence according to the standard recognized in case law. The appeal should be allowed. 1 – Relevant statutory provisions [ 135 ]

Section 71 of the ADFPS states that an insurance firm must be registered with the AMF: 71. Nul ne peut agir comme cabinet, ni se présenter comme tel, à moins d’être inscrit auprès de l'Autorité. 71. No person may act as or purport to be a firm without being registered with the Authority [ 136 ]

Section 482 ADFPS sets out the offence for which the respondent was convicted:

482. Un assureur qui aide ou, par un encouragement, un conseil, un consentement, une autorisation ou un ordre, amène un cabinet, ou un représentant autonome ou une société autonome par l’entremise de qui il offre des produits d’assurance, ou un dirigeant, administrateur, associé, employé ou représentant de ce cabinet ou de cette société autonome, à enfreindre une disposition de la présente loi ou de ses règlements commet une infraction. Il en est de même de tout administrateur, dirigeant, employé ou mandataire d’un assureur. 482.

Every insurer that helps or, by encouragement, advice or consent or by an authorization or order, induces a firm or an independent representative or independent partnership through which it offers insurance products or an executive officer, director, partner, employee or representative of such a firm or independent partnership to contravene any provision of this Act or the regulations is guilty of an offence.

The same applies to any director, executive officer, employee or mandatary of an insurer. 2 – The facts [ 137 ] In his judgment, the trial judge summarized the main facts as follows: [ translation ] [4] The circumstances giving rise to the 56 counts can be summarily described as follows. [5] Through the broker Flanders Insurance Management and Administrative Services Ltd. ("Flanders"), the defendant, an insurance company duly registered in Quebec, negotiated an insurance policy bearing number ... in Ontario with GE Capital Commercial Distribution Finance, Canada, ("GE"), to insure the floor-plan assets it finances, which assets were located all across Canada at various recreational product dealerships. [6] The 56 individuals or companies named in the counts are recreational product dealerships that have places of business in Quebec, are financed by GE, and are insured by the defendant. [7] In 2004, GE purchased a competitor, the Transamerica Commercial Finance Corporation, Canada ("TCFCC") and informed TCFCC clients of this acquisition.

Until that time, these clients had been insured for the most part through a broker by the name of Hayhurst Elias Dudek Inc. ("HED"). [8] GE then informed TCFCC clients that as of December 2004, the insurance scheme, until then provided by HED, would be replaced with a new product offered by Flanders and that, consequently, clients would have to opt for this product from Flanders or take out additional insurance from a supplier of their choosing. [9] Flanders, through its vice-president Gordon Roberts, wrote to each of the Quebec dealers in September of 2004, offering to maintain the insurance covering any GE-owned inventory.

A draft notice of cancellation for the policy in effect up to that point, addressed to the broker HED, was joined to his letter. Almost all of the Quebec dealers agreed to join the insurance plan offered by the defendant through Flanders. [10] Losing this large clientele made the managers of HED unhappy and they filed complaints against Flanders and its employee Gordon Roberts with various Canadian regulatory authorities and more particularly, with Quebec authorities (P-57).

The complaint dated November 1, 2004, alleges, inter alia , that Flanders was acting as an insurance broker in Quebec without holding the requisite licence. [11] After summarily analyzing the complaint, the AMF opened an investigation file on January 13, 2005 (D-1). [12] In a letter dated April 28, 2005, (P-64), the AMF asked the defendant for information regarding its business relationships with Flanders and GE as well as, inter alia , information regarding the insurance covering the inventory of Quebec dealers of recreational products financed by GE. [13] The defendant answered the AMF in a letter dated June 2, 2005 (P-65), adding that, as GE is a client of Flanders with a head office in Ontario, where the master contract was entered into, there was no licence issue in Quebec, where La Souveraine insures only the inventories of Quebec dealers that are financed by GE. [14] On or about August 25, 2005, Flanders offered to renew and then did renew the insurance certificates of the 55 Quebec dealers named in the statements, which certificates name GE and each of the dealers as the insured for the financed property found in Quebec.

Only one Quebec retailer refused the offer despite the solicitation (P-49). [15] The legal department of the AMF found that 56 offences had been committed by the defendant and decided to lay this information in January of 2006. [ 138 ] On June 10, 2005, the president of La Souveraine responded to the AMF's request for information dated April 28, 2005. He wrote:

Subject : Flanders Insurance Management and Administrative Services Ltd. GE Commercial Distribution Finance Canada GE CDF File : SE 4458 Dear Sir: I am responding to the letter of May 3rd 2005 from Richard Perron to your attention as requested. The facts regarding Flanders' relationship with GE Commercial Distribution Finance (GE-CDF) are as follows: 1. As GE-CDF is Flanders' client, and has its head office in Ontario, there is no licensing issue. 2.

Flanders' client, GE-CDF, finances the purchase of floor plan goods such as snow machines, A-TVs, recreational vehicles, mobile homes, computers, manufactured homes, consumer electronics and appliances. 3. A floor plan insurance policy is issued to GE-CDF and certificates issued for GE and dealer as per the attached certificate page. 4. Much like other, similar lending institutions, GE-CDF retains title to the goods, and requires that the floor plan goods be insured in order to protect its interests. 5. Each GE-CDF dealer has the option to participate in the floor plan insurance program.

Alternatively, dealers may supply evidence of insurance otherwise placed, which confirms that GE-CDF's goods are properly insured. A brochure is supplied to the dealers, either by the GE-CDF representative arranging the financing, or by Flanders. 6. When, and if, a dealer expresses interest in the insurance policy available, Flanders obtains all required underwriting information from GE-CDF, and from the individual dealer. Rating for the risk is then determined by Flanders, and the monthly cost is confirmed to GE-CDF, and to the dealer. 7.

Subsequently, the dealer signs a form confirming the rate, and authorized GE-CDF to include the insurance premium on the monthly billing statement. Flanders then issues a Certificate confirming insurance coverage. 8. No commissions or fee payments are made to GE-CDF by Flanders. 9. All lost payment cheques are payable to GE-CDF, not the dealer. Flanders receives 22.5% commission based on the premium billed.

GE-CDF recently (2004) acquired the business of TransAmerica Commercial Finance in respect of these type of dealers and we have attached bordereau for business written from November 2004 to April 2005 as well as copies of the type of certificate issued. This is the information that you specifically requested in your telephone conversation with Serge Byette of our Montreal office. Please note that the Floor plan program for GE-CDF (out of Ontario) is all that we currently insure as far as any Quebec locations.

We do not write any property, liability, automobile, key-man life or health and sickness covers for Flanders' in Quebec and in this regard you should address any concerns to Nick Leitch the principal owner of Flanders Insurance at 210-200 Waterfront Drive, Winnipeg, Manitoba R3B 3P1. We are aware that a previous broker that had the TransAmerica business decided to issue letters of complaint against Flanders to all provincial jurisdictions across the country. We believe that to date most if not all have responded positively to the response given by Flanders' through their lawyer.

We trust that the information provided is to your satisfaction and responds to your needs. Should you have any other questions or require further detail please do not hesitate to contact the writer. Yours truly, Robert G. Phillips AVP, Reinsurance and Special Risks Encl. [ 139 ] The respondent did not receive any other communication from the AMF prior to the filing of the statements of offence. [ 140 ] On January 12, 2006, the AMF published a press release on the subject of the charges filed against the respondent, Flanders, and its vice-president.

The appellant made two comments therein on the subject of the respondent's conduct: [ translation ] The Autorité's investigation shows that Flanders, whose head office is in Winnipeg, and Gordon B. Roberts, acted illegally since they are not registered with the Autorité as a property insurance firm or as a representative in property insurance.

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