Court File and Parties

Date: 2012-07-13

Ontario Court of Justice

Between:

Her Majesty the Queen

— and —

Metron Construction Corporation

Before: Justice R. Bigelow

Heard on: June 15 & 28, 2012

Reasons for Judgment released on: July 13, 2012

Counsel:

• Ms. A. Morgan for the Crown
• Mr. J. Naster, Mr. B. Gluckstein for the accused

Judgment

Bigelow J.:

Facts

[1] Metron Construction Corporation (Metron) is a corporation registered in Ontario engaged primarily in the construction business. Joel Swartz is the president and sole director of the corporation. In September 2009 Metron entered into an agreement to restore the concrete balconies on 2 high rise buildings located on Keele Street in the City of Toronto. Metron contracted with a Vadim Kazenelson to act as project manager who in turn hired a Fayzullo Fazilov to work as site supervisor.

[2] On the 24th of December, 2009 at approximately 4:30 PM 5 workers and Mr. Fazilov all of whom had been working on the 14th floor climbed onto a swing stage at the project in order to travel back to the ground to get ready to close up and leave the project site for the day. Shortly thereafter the platform collapsed and 5 of the men on it fell some 14 floors to the ground. Four of the five who fell, Alesandrs Bondarevs, Aleksey Blumberg, Vladamir Korostin and the site supervisor Mr. Fazilov died as a result of injuries suffered in the fall. The fifth person to fall, Dilshod Marupov, survived but suffered serious injuries. The sixth person on the platform was properly attached to a safety line which prevented him from falling and he was uninjured.

[3] The swing stage which collapsed had been rented from an Ottawa based supplier of swing stages and when it arrived:

although appearing new, neither of the swing stages (or their components) had any markings, serial numbers, identifiers or labels with regard to the stage's maximum capacity (as required by health and safety legislation and industry practice). The new stages also arrived without any manual, instructions or other product information such as design drawings prepared by an engineer as required by s. 139(5) of the Occupational Health and Safety Act (OHSA).

[4] Subsequent testing of the swing stage which collapsed revealed that it had not been properly constructed and as a result would not have been safe for 2 workers let alone 6 with tools and other materials.

[5] At the time of the incident, there were only two lifelines available for the swing stage and it was "the normal and usual practice on the project for only two workers to be on the swing stage at any time."

[6] In addition toxicological analysis determined that at the time of the incident, 3 of the 4 deceased including Mr. Fazilov "had marijuana in their system at a level consistent with having recently ingested the drug."

[7] Metron has entered a plea of guilty to a count of Criminal Negligence Causing Death arising out of those events. The specific facts which the parties have agreed support a finding of Criminal Negligence are:

Mr. Fazilov, who it is agreed met the definition of a "senior officer" of Metron, and therefore Metron, failed to take such reasonable steps to prevent bodily harm and death by:

a) Directing and/or permitting six workers to work on the swing stage (plus various construction materials), when he knew or should have known that it was unsafe to do so;

b) Directing and/or permitting six workers to board the swing stage knowing that only two lifelines were available; and

c) Permitting persons under the influence of drugs to work on the project.

Metron, therefore, through the acts and omissions its senior officer, Fazilov, is therefore guilty of Criminal Negligence guilty of criminal negligence pursuant to sections 22.1 (b), 217.1 and 219 of the Criminal Code of Canada.

[8] Victim impact statements were filed by Oxana Afanasenko, the widow of Aleksey Blumberg and by Irina Cherniakova, Vladamir Korostin's ex-wife and the mother of his 2 daughters, outlining the tragic effects of the deaths of Mr. Blumberg and Mr. Korostin on their families. A Discharge Summary from Sunnybrook Health Sciences Centre was filed which outlined the serious nature of the injuries suffered by Mr. Marupov.

Positions of the Parties

[9] Both parties were in agreement that there is little precedent upon which the court can rely in determining the appropriate penalty to be imposed upon the corporate accused. I was only referred to one decision where a corporation has been sentenced since the substantial amendments to the Criminal Code with respect to corporate criminal liability in 2004. The impact of those amendments will be discussed further below.

[10] The Crown emphasized the tragic consequences of this offence which resulted in the death of 4 individuals and the serious injury of another, as well as the inherent dangerous conduct of a senior officer of the corporation in allowing 6 individuals to be on a scaffold with only 2 lifelines, only one of which was used, and not only allowing the consumption of an intoxicant by workers but also consuming an intoxicant himself. The Crown submitted that a fine of $1,000,000.00 would be appropriate.

[11] The defence submitted that the real responsibility for the accident lay with the faulty construction of the swing stage for which Metron was not responsible and that taking into account the Corporations prior "good character" and current financial situation a fine of $100,000.00 would be appropriate.

The Law

[12] In 2004 Parliament enacted a number of amendments to the Criminal Code (the Code) directed towards corporate liability for criminal offences. Section 22.1 was added to the provisions dealing with Parties to Offences and provides that:

22.1 In respect of an offence that requires the prosecution to prove negligence, an organization is a party to the offence if

(a) acting within the scope of their authority one of its representatives is a party to the offence, or

(ii) two or more of its representatives engage in conduct, whether by act or omission, such that, if it had been the conduct of only one representative, that representative would have been a party to the offence; and

(b) the senior officer who is responsible for the aspect of the organization's activities that is relevant to the offence departs — or the senior officers, collectively, depart — markedly from the standard of care that, in the circumstances, could reasonably be expected to prevent a representative of the organization from being a party to the offence.

[13] "Senior Officer" was defined as "a representative who plays an important role in the establishment of an organization's policies or is responsible for managing an important aspect of the organization's activities and, in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer" and "organization" is defined as:

i. a public body, body corporate, society, company, firm, partnership, trade union or municipality, or an association of persons that is created for a common purpose,

ii. has an operational structure, and

iii. holds itself out to the public as an association of persons;

[14] The Code was also amended by the addition of section 217.1 which provides that:

Everyone who undertakes, or has the authority, to direct how another person does work or performs a task is under a legal duty to take reasonable steps to prevent bodily harm to that person, or any other person, arising from that work or task.

[15] These changes in the criminal law among other effects "eliminate[s] the prosecutor's duty to prove that a person is the directing mind of the Corporation"... and ... "clearly extends the attribution of the criminal corporate liability to the actions of mid-level managers" such as Mr. Fazilov.

[16] Although the general principles of sentencing set out in sections 718 to 718.2 of the Code such as denunciation, deterrence, rehabilitation and proportionality are equally applicable to both individuals and organizations, the amendments to the Code added a number of additional factors that the court is required to take into account when imposing sentence on an organization as set out in new section 718.21:

718.21 Additional factors — A court that imposes a sentence on an organization shall also take into consideration the following factors:

(a) any advantage realized by the organization as a result of the offence;

(b) the degree of planning involved in carrying out the offence and the duration and complexity of the offence;

(c) whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay a fine or make restitution;

(d) the impact that the sentence would have on the economic viability of the organization and the continued employment of its employees;

(e) the cost to public authorities of the investigation and prosecution of the offence;

(f) any regulatory penalty imposed on the organization or one of its representatives in respect of the conduct that formed the basis of the offence;

(g) whether the organization was — or any of its representatives who were involved in the commission of the offence were — convicted of a similar offence or sanctioned by a regulatory body for similar conduct;

(h) any penalty imposed by the organization on a representative for their role in the commission of the offence;

[17] As stated above there is little case law to provide guidance to this court with respect to imposing sentence under the new provisions of the Code. The only decision to which the court was referred where a corporation has been sentenced for criminal negligence causing death is the decision from the Cour de Quebec in R c Transpavé. In that case the corporation entered a plea of guilty to the charge and the court accepted a joint submission for a fine of $100,000. The facts of the offence were that a worker:

…meurt le 11 Octobre, 2005 écrasé par le grappin d'un palettiseur alors qu'il tente d'enlever une rangée de blocs excédentaires d'une palette, suite à un carambalage de planches chargées qui y ont été apportées.

[18] In accepting the joint submission the court took into account that the Corporation had no prior record for violations of either criminal or regulatory legislation, that although some staff were aware that a security system which could have prevented the accident could be neutralized the Corporation was unaware that it, in fact, had been neutralized at the time of the accident, that subsequent to the accident the company had spent more than $750,000 in occupational health and safety improvements and that this was a family run corporation employing up to 100 individuals. The court also stated:

Cette amende, quoique importante, permet dassurer la survie de lenterprise et le maintien dune centaine demplois.

which is a clear reference to section 718.21(d) and the impact of the fine on the economic viability of the corporation and the continued employment of its employees.

[19] However, a significant body of case law exists with respect to sentencing for breaches of occupational health and safety legislation resulting in serious injury or death to workers. The leading case in Ontario in that area is still the decision of the Court of Appeal in R v Cotton Felts Ltd where the court stated:

The Occupational Health and Safety Act is part of a large family of statutes creating what are known as public welfare offences. The Act has a proud place in this group of statutes because its progenitors, the Factory Acts, were among the first modern public welfare statutes designed to establish standards of health and safety in the work place. Examples of this type of statute are legion and cover all facets of life ranging from safety and consumer protection to ecological conservation. In our complex interdependent modern society such regulatory statutes are accepted as essential in the public interest. They ensure standards of conduct, performance and reliability by various economic groups and make life tolerable for all. To a very large extent the enforcement of such statutes is achieved by fines imposed on offending corporations. The amount of the fine will be determined by a complex of considerations, including the size of the company involved, the scope of the economic activity in issue, the extent of actual and potential harm to the public, and the maximum penalty prescribed by statute. Above all, the amount of the fine will be determined by the need to enforce regulatory standards by deterrence.

[20] The court also indicated that in referring to deterrence it was referring to both "achieving compliance by threat of punishment" but also deterrence achieved through denunciation by emphasizing community disapproval.

[21] Those principles of deterrence and denunciation are also reflected in the sentencing provisions of the Code. Therefore, decisions dealing with penalties imposed for serious breaches of occupational health and safety legislation can be instructive when considering penalties for breaches of the Code so long as one takes into account that unlike under occupational health legislation, the Code does not provide for a maximum fine, that the Code directs courts to consider additional factors including those set out in section 718.21 and that:

[T]he prosecutor must establish, by proof beyond a reasonable doubt, the existence of any aggravating fact or any previous conviction by the offender.

Application of Section 718.21 Factors

[22] Here I would like to deal with each of the factors set out in section 718.21 individually as they apply to this case:

(a) Any advantage realized by the organization as a result of the offence

Although it was agreed that Metron had been offered a bonus of $50,000.00 if the project was completed by December 29th, there is no evidence before the court that this was in any way related to the incident. Therefore, I cannot find that there was any advantage realized by Metron as a result of the offence.

(b) The degree of planning involved in carrying out the offence and the duration and complexity of the offence

Counsel for Metron argued that the offence was a momentary lapse in judgement and I agree that there is no evidence before me that the swing stage had ever been used by more than 2 person prior to the incident, that workers using the swing stage had not used safety lines or that workers had been allowed to use the swing stage after consuming intoxicants. However, the swing stage which collapsed had been in use for almost 2 months at the time of the incident and upon its arrival did not have "any markings, serial numbers, identifiers or labels with regard to the stage's maximum capacity (as required by health and safety legislation and industry practice" nor did it have "any manual, instructions or other product information such as design drawings prepared by an engineer as required by s. 139(5) of the Occupational Health and Safety Act (OHSA)". Therefore for almost 2 months Metron was in violation of a number of health and safety regulations with respect to the swing stage which collapsed. In my view this is an aggravating factor. However, there is no evidence of planning or complexity of the offence.

(c) Whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay a fine or make restitution

The Crown filed with the court documentation with respect to another corporation of which Mr. Swartz is the president and sole director. Formstructures Inc. came into existence on December 3rd, 2001 although the Articles of Incorporation were only filed in 2003. Mr. Swartz is listed as the president and sole director. The Crown also filed with the court copies of pages from websites for both Metron and Formstructures which it is fair to say are almost identical. The Crown points out that in the Metron site Metron is stated to have been in business for 23 years and in the Formstructures website it is also stated to have been in business for 23 years despite only having been incorporated in 2001. Both websites also provide a portfolio of projects as examples of completed projects undertaken by the corporations. The portfolios on each website appear to be identical.

Formstructures has a number of significant contracts outstanding although the Crown concedes that it cannot say what the actual profit from any of them may be.

The position of the Crown as I understand it is that although Metron may be in a difficult financial position, Formstructures which, in effect, is a reincarnation of Metron is a viable business and that to that extent Metron has converted assets in order to reduce its liability.

Mr. Naster agreed that the Crown was entitled to lead evidence of any attempt to convert or conceal assets by Metron and therefore did not object to the introduction of the material with respect to Formstructures. However, he took the position that the Crown had fallen well short of proving any attempt to convert or conceal assets and there was no evidence before the court that any actual assets of Metron were transferred to Formstructures or that Metron in any way is concealing assets. Mr. Naster also reminds the court that a corporation is in law a separate entity and that the fact that 2 corporations may have similar or identical ownership or management is irrelevant.

Although one could argue that Formstructures is relying on the reputation of Metron by portraying itself as the contractor responsible for projects which it appears likely were in fact Metron's projects, the goodwill and reputation of Metron has been damaged to such an extent as a result of this incident that its value has been significantly reduced.

In my view the Crown has fallen well short of establishing beyond a reasonable doubt any attempt to hide or convert assets in order to avoid or reduce any fine which might be imposed on Metron or to avoid payment of restitution.

(d) The impact that the sentence would have on the economic viability of the organization and the continued employment of its employees

Mr. Swartz is the owner and sole director of Metron. Metron has 2 permanent staff who work in the office as employees although I note that in the most recent financial statements there is no reference to salaries being paid to staff. All other staff on job sites work under contracts with Metron. The defence has filed documentation on the impact that this incident has had on the economic viability of Metron.

A report dated the 31st of May, 2012 by a Chartered Accountant states that Metron earned $112,948 for the year ending September 30, 2009. For the year ending September 30, 2010 the company lost $8099 and for the year ending September 30, 2011 the company lost a further $54,691. It further notes that the only assets Metron had as of 30 September 2011 were accounts and loans receivable and although the accounts receivable as of September 30, 2011 were some $586,233 a substantial portion of that may well be uncollectible. It should also be noted that there is outstanding litigation both against Metron and by Metron the results of which are unknown. Metron also has substantial liabilities although the court was not provided with any detailed information with respect to those liabilities other than an amount.

Counsel for Metron indicate that, although Metron's financial situation is precarious, it is the intention of the Corporation to attempt to continue and re-establish a successful business providing valuable services to the community. They further indicate that Metron can pay a fine of $100,000 in the reasonably near future but that any fine significantly larger than that may well drive the company into insolvency.

(e) The cost to public authorities of the investigation and prosecution of the offence

By entering a guilty plea Metron has reduced the cost to the public purse of prosecuting this matter substantially.

(f) Any regulatory penalty imposed on the organization or one of its representatives in respect of the conduct that formed the basis of the offence

Joel Swartz the President and sole Director of Metron has entered guilty pleas with respect to a number of violations of the Regulations under the Occupational Health and Safety Act arising from this incident and total fines of $90,000.00 plus the statutorily required 25% surcharge have been imposed.

(g) Whether the organization was — or any of its representatives who were involved in the commission of the offence were — convicted of a similar offence or sanctioned by a regulatory body for similar conduct

Neither Metron nor Mr. Swartz have been previously convicted of similar offences or been sanctioned by any regulatory body and there is no evidence before me that Mr. Fazilov had ever been convicted or sanctioned for similar conduct.

(h) Any penalty imposed by the organization on a representative for their role in the commission of the offence

There was no penalty imposed by Metron on any representative.

Sentencing Analysis

[23] A review of the case law provided by counsel with respect to sentencing of corporations for offences contrary to the Occupational Health and Safety Act where fatalities were involved reveal a range of fines from $115,000 to $425,000. The majority of cases referred to by counsel were situations where a guilty plea was entered, a joint submission placed before the court and detailed information with respect to the financial status of the corporation was not placed on the record. However, in the majority of cases where fines in the higher range were imposed, the corporations were quite large and profitable which is clearly not the case here.

[24] In one of the cases where a fine at the higher end of the range was imposed, R v Bayview Wellington Homes (Port Union) Inc., the court defined the issue before it as:

How is the court to apply established principles of sentencing for public welfare driven legislation to a defendant company (hereafter referred to as Bayview) that has been inactive since the end of 1999? Bayview exists legally but appears only to have had the purpose of creating the three-phase project referred to in this trial.

[25] The court went on to state:

Given the inactive state of Bayview and that it's only purpose for existence seems to have been achieved by the end of 1999 or the beginning of 2000, I need not worry about the impact sentencing will have on Bayview per se. I therefore direct my intention more to the harm caused by the offenses for which Bayview has been convicted; to the penalty range under the Occupational Health and Safety Act and to the principle of deterrence.

[26] Although in that case the Crown recommended a fine of $200,000 to $225,000 the court imposed a total fine of $400,000 stating that the principle of totality was not applicable and that "there is no practical hardship to an inactive corporate defendant that would give rise to consideration of the totality principle."

[27] In the case of R v Geometrica De Mexico S.A. De C.V. a worker fell some 140 feet to his death. Although he was wearing a safety harness he was not attached to a lifeline. The decision is silent with respect to whether a lifeline was available to the worker. There was evidence before the court that although Geometrica was a large multinational corporation it was operating at a substantial loss at the time of the sentencing. A joint submission was placed before the court for a fine of $150,000 taking into consideration the financial situation of the company. The court took that fact into account and imposed the fine requested.

[28] It appears that the learned Justice of the Peace in Bayview took the view that since the corporation was inactive it was unnecessary to consider the financial ability of the corporation to pay a fine. With the greatest respect, I must disagree. Section 57(3) of the Provincial Offences Act states:

(3) where a defendant is convicted of an offense, the court may make such inquiries, on oath or otherwise, of and concerning the defendant as it considers desirable, including the defendant's economic circumstances, but the defendant shall not be compelled to answer.

[29] There would be little reason for the court to be given authority to inquire into the economic circumstances of the defendant unless those circumstances were relevant considerations in the imposition of sentence. I agree with the approach taken by the court in Geometrica where the court does take into account the economic circumstances of the corporation in imposing sentence as well as the comments of the Justice Fairgrieve in Czumak v. Etobicoke (City) when he states with respect to sentencing under the Provincial Offences Act:

It is an error in principle to impose a fine without an investigation into the defendant's ability to pay it, or to impose a fine which he or she lacks the means to pay within a reasonable time.

[30] If there was any doubt with respect to whether the court is required to take into account the offender's ability to pay, under the Provincial Offences Act, there is no doubt that the Criminal Code does require the court to do so. Section 734(2) of the Code states:

Except when the punishment for an offense includes a minimum fine or a fine is imposed in lieu of a forfeiture order, a court may find an offender under this section only if the court is satisfied that the offender is able to pay the fine or discharge it under section 736.

[31] I have already referred to section 718.21(d) which directs the court to take into account the "the impact that the sentence would have on the economic viability of the organization and the continued employment of its employees".

[32] The financial future of Metron is impossible to predict with any degree of certainty given the outstanding litigation both by and against Metron which makes attempting to determine the impact of a fine on it extremely difficult. However, based on the evidence before me with respect to the economic viability of Metron I am of the view that imposing the penalty recommended by the Crown would likely result in the bankruptcy of the Corporation and would be in violation of the statutory requirements that I take into account the offender's ability to pay. However, I am also of the view that a fine well above that suggested by the defence is appropriate. Metron does have significant accounts receivable, although how much of those receivables will ever be collected is certainly in issue, and despite the negative impact that this incident has had on its reputation and goodwill, the corporation still has a long history of successful projects and may well be able to survive and grow. I also take into account that pursuant to section 734.3 of the Code the offender upon whom a fine has been imposed may make application to the court to vary the time within which a fine is to be paid providing a process where the payment of a fine can be delayed if the offender establishes an inability to pay within the time frames set out by the court.

[33] In all the circumstances including the fines and surcharges totalling $112,500 imposed upon Mr. Swartz for breaches of health and safety legislation related to this incident, the financial status of the corporation, the prior good character of the corporation and the seriousness of the breaches of the corporation's legal duties resulting in the tragic death of 4 workers and the serious injury of another I am satisfied that a fine of $200,000 plus the Victim Fine Surcharge of 15% or $30,000, which results in a total financial penalty to Mr. Swartz and the corporation arising from this incident of over 3 times the net earnings of the business in its last profitable year which ended a few months before this incident, is the appropriate disposition in this case and should send a clear message to all businesses of the overwhelming importance of ensuring the safety of workers whom they employ.

[34] I would like to thank all counsel involved in this matter for their professionalism and diligence in resolving this complex and difficult matter in such a fair and reasonable manner.

[35] I will hear from counsel with respect to time to pay.

Released: July 13, 2012

Signed: Justice R. Bigelow