Working With Your Regulator While Police Watch

Your phone rings. Your client is panicking. A regulator tells them that investigators and the police will be at their site the next day investigating an incident.

The investigator tells your client they must assist in the investigation and answer their questions. Pretty routine for a regulated business. But why are the police there?

Government authorities, including the Canada Revenue Agency, financial regulators, WorkSafeBC, natural resource regulators, and professional regulators, frequently audit, review and inspect businesses for breaches of their governing statutes. However, sometimes, police agencies involve themselves in those inspections. Regulated persons become caught in a challenging legal position. They subject themselves to administrative sanctions if they fail to cooperate in the inspection. However, their cooperation might produce evidence used by police.

R. v. Jarvis, 2002 SCC 73 defined for regulated persons, regulators, and the police how to balance a regulated person’s obligation to cooperate with regulators and the regulated person’s rights under the Charter. Under Jarvis, the court must balance whether:

  1. reasonable and probable grounds existed;
  2. the inspection proceeded like an investigation;
  3. regulators transferred the inspection to an investigative body;
  4. the inspection was conducted as a de facto investigation;
  5. the investigatory agency used the administrative agency to collect evidence; and,
  6. evidence gathered is only relevant for criminal liability.

Crown counsel screened cases citing Jarvis to produce a set of reported decisions detailed enough to understand how evidence was excluded. We coded the dataset so we could analyze it statistically.

Out of 115 reported decisions examined, the court excluded evidence in only 18% of cases. Little changed depending on the industry in which these applications arose. In Fisheries Act prosecutions, applications succeed in 25% of cases. They always failed in prosecutions involving the Competition Act, forestry legislation and other environmental statutes. They succeed in 22% of tax prosecutions.

Further analysis of the narrower grounds on which courts grant these applications reveal three, rather than six, factors that matter most in these applications. Our statistical analysis, which included regression analysis and a study of histograms, suggests the three top factors motivating courts to exclude evidence among the Jarvis factors are: (1) the nature of the conduct; (2) whether the administrative inspection was conducted more akin to a criminal investigation; and (3) whether the evidence gathered would be relevant only if it was adduced in a criminal trial.

We used these statistical findings to develop practical advice for corporate counsel. These factors suggest corporate counsel should take these steps as soon as the client is exposed to potential jeopardy from a criminal investigation masked as a regulatory investigation:

  1. Identify whether there has been a referral to an investigative branch of the regulator or to police.
  2. Assert your clients’ right to protections under the Charter in writing and orally.
  3. Review any orders to produce documents or give evidence compelled under regulatory provisions to identify whether the regulatory investigation might adduce proof that could be relevant only to a criminal proceeding.
  4. Document all steps taken during a review, including the identity of the persons conducting the review, the records taken or inspected, the inspection subjects, and the times at which such inspections took place, among other facts.

Applications to exclude evidence in criminal proceedings relying on Jarvis most often fail. But they do succeed. When they succeed, the accused person can often exclude most evidence sought to be adduced and are acquitted of charges linked to that evidence, which is most often a complete exoneration. While challenging to maintain, corporate counsel who advises regulated persons should counsel their clients to establish circumstances that maximize the chance that a Jarvis application succeeds.

This article originally appeared in CBABC BarTalk. Click here to see the article.