Supreme Court of Canada upholds the constitutional validity of administrative monetary penalties

The Supreme Court of Canada (the “SCC”) recently upheld the constitutional validity of administrative monetary penalties (“AMPs”) imposed under the Income Tax Act (the “ITA”) by concluding that they are of an administrative nature rather than of a criminal nature. This SCC decision might have consequences in other areas of law, in particular in environmental law, where the imposition of AMPs is now common practice.

In the case of Guindon v. Canada[1], Julie Guindon was assessed penalties totalling $546,747 under section 163.2(4) of ITA, which provides for the imposition of AMPs on every person who makes a false statement that could be used by another person. Ms. Guindon argued that the penalty imposed under the ITA was criminal and that she was therefore a person “charged with an offence” who was entitled to the procedural safeguards provided for in s. 11 of the Canadian Charter of Rights and Freedoms (the “Charter”). The SCC rather concluded that section 163.2(4) of the ITA did not create a “true criminal offence” and that, therefore, Ms. Guindon was not a person “charged with an offence”. Accordingly, the SCC ruled that the protections under s. 11 of the Charter did not apply.

In its reasoning, the SCC indicates that the process under section 163.2 is of an administrative nature because it aims at maintaining compliance or regulating conduct within a limited sphere by promoting honesty and deterring gross negligence on the part of tax preparers. By contrast, criminal proceedings are aimed at promoting public order and welfare within a public sphere of activity. According to the SCC, such administrative process can be contrasted with the process which applies to criminal offences because no one is charged, no information is laid against anyone, no one is arrested, no one is summoned to appear before a court of criminal jurisdiction and no criminal record will result from the proceedings. At worst, once the administrative proceeding is complete and all appeals are exhausted, if the penalty is upheld and the person liable to pay still refuses to do so, he or she risks being forced to pay by way of a civil action.

This SCC decision does not discuss the defences available against the imposition of AMPs nor the issue of the burden of proof. Earlier in 2015, the Administrative Tribunal of Quebec recognized that a person could bring forward the “reasonable, prudent and diligent person” defence that exists in civil law against the imposition of AMPs pursuant to the Environment Quality Act[2]. It will be interesting to see how the case law continues to evolve in relation to AMPs imposed pursuant to environment laws.

[1]       Guindon v. Canada, 2015 SCC 41.

[2]       Excavation René St-Pierre inc. v. MDDELCC, 2015 QCTAQ 02386.

administrative monetary penalties Income Tax Act



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