Administrative Penalties Must deal with the “cost of doing business”

Posted by Johannes Schenk on April 1st, 2016 — Posted in Litigation, Professional Discipline

CanLII – 2015 SCC 41 (CanLII). This case concerns the constitutional validity of sections of the Income Tax Act and the principles behind administrative penalties.

The Court says this:

[77] The magnitude of the sanction on its own is not determinative. However, if the amount at issue is out of proportion to the amount required to achieve regulatory purposes, this consideration suggests that it will constitute a true penal consequence and that the provision will attract the protection of s. 11 of the Charter. This is not to say that very large penalties cannot be imposed under administrative monetary penalty regimes. Sometimes significant penalties are necessary in order to deter non-compliance with an administrative scheme: see Rowan v. Ontario Securities Commission, 2012 ONCA 208 (CanLII), 110 O.R. (3d) 492, at para. 49. The amount of the penalty should reflect the objective of deterring non-compliance with the administrative or regulatory scheme.


[80] Some statutes prescribe very high administrative monetary penalties, at times over a million dollars, and these have been upheld where it is demonstrated that the penalty serves regulatory purposes. In some cases, sizable penalties are necessary so the penalty is not simply considered a cost of doing business: see the Federal Court of Appeal’s reasons, at para. 47.

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