In Defence of the Due Diligence Defence: a Look at Strict Liability As Sault Ste

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In Defence of the Due Diligence Defence: a Look at Strict Liability As Sault Ste In Defence of the Due Diligence Defence: A Look at Strict Liability as Sault Ste. Marie Turns Forty in the Age of Administrative Monetary Penalties by Allison Meredith Sears A thesis submitted in conformity with the requirements for the degree of Master of Laws Faculty of Law University of Toronto © Copyright by Allison Meredith Sears 2018 Defence of the Due Diligence Defence: A Look at Strict Liability as Sault Ste. Marie Turns Forty in the Age of Administrative Monetary Penalties Allison Meredith Sears Master of Laws Faculty of Law University of Toronto 2018 Abstract The author looks back at the Supreme Court of Canada’s creation of a presumption that public welfare offences are strict liability offences affording defendants the opportunity to make out a due diligence defence. It is argued that the availability of this defence is receding in the face of a resurgence of absolute liability by means of administrative monetary penalties, which are increasingly being used by regulators to enforce compliance with regulatory requirements. While there is some support for the availability of the due diligence defence in the face of a potential administrative monetary penalty, the courts remain divided and numerous statutes expressly exclude it. It is argued that this ignores the important function that strict liability offences have served in encouraging corporate social responsibility through the development of compliance programs with the dual purpose of preventing harm and being able to demonstrate the taking of all reasonable care. ii Acknowledgments I would like to thank my thesis supervisor Kent Roach for his helpful guidance and light-handed regulation. I would also like to thank all of those who supported and encouraged me to express my mid-life crisis in this upright fashion. iii Table of Contents ACKNOWLEDGMENTS……………………………………………………………iii TABLE OF CONTENTS……………………………………………………………..iv I. INTRODUCTION…………………………………………………………………….1 II. THE HISTORY OF PUBLIC WELFARE OFFENCES AND THE EMERGENCE AND DEVELOPMENT OF THE DUE DILIGENCE DEFENCE…………………...3 a. Public Welfare Offences…………………………………………………………..3 b. Emergence of the Due Diligence Defence…………………………………………7 c. The Due Diligence Defence in Practice…………………………………………..16 III. ADMINISTRATIVE MONETARY PENALTIES AND THE RESURGENCE OF ABSOLUTE LIABILITY……………………………………………………………28 a. Absolute Liability Makes a Comeback…………………………………………...28 b. What are AMPs?.....................................................................................................30 c. Applicability of Sault Ste Marie to Administrative Sanctions……………………34 d. Concluding Thoughts on the Applicability of Due Diligence to AMPs…………..42 IV. CONCLUSION………………………………………………………………………44 iv In Defence of the Due Diligence Defence: A Look at Strict Liability as Sault Ste. Marie Turns Forty in the Age of Administrative Monetary Penalties Public welfare laws pervade the lives of ordinary people. Almost every aspect of our activities is regulated from parking the car to fixing the roof. When people think about “the law” they often think of crimes such as theft, sexual assault and murder. But lawyers are well aware that the laws most likely to affect ordinary people, and to be broken by them, are not criminal laws, but the myriad of public welfare laws that are necessary to regulate and reduce the risk we impose on each other through activities as diverse as driving a car, operating a school, spraying a herbicide or constructing a nuclear power plant. These regulatory laws protect consumers, children in day-care centres, the elderly in nursing homes and hospitals, pedestrians and motorists, workers in factories, and the natural environment that sustains human and other life forms.1 -John Swaigen I. INTRODUCTION The year was 1978, the number one song on the radio was “Night Fever” by the Bee Gees, and I was in utero. As kitchens all over the country were being designed in the earthly hues of avocado and harvest gold, the Supreme Court of Canada was toiling over the issue of the requisite fault element in public welfare offences (or regulatory offences – I will use these terms interchangeably throughout). Prior to its decision in R v Sault Ste Marie,2 it was an all or nothing proposition: regulatory offences either required proof of full mens rea to secure a conviction or were absolute liability offences requiring proof only of the prohibited act and no mental element at all. As for when any particular offence would be held to fall in one or the other camp, greater certainty could be achieved from consulting a Magic 8-Ball than the divergent case law. In what has been lauded as “a bold stroke of judicial law reform”3 and later criticized for 1 John Swaigen, Regulatory Offences in Canada: Liability & Defences (Scarborough, ON: Carswell, 1992) at xxxv [Swaigen]. 2 [1978] 2 SCR 1299 [Sault Ste. Marie]. 3 Bruce P. Archibald, “Liability for Provincial Offences: Fault, Penalty and the Principles of Fundamental Justice in Canada (A Review of Law Reform Proposals from Ontario, Saskatchewan and Alberta)” 14:1 Dal L J 65 (1991) at 66 [Archibald]. 1 2 flouting the presumption of innocence,4 the Court in Sault Ste. Marie established the middle ground “strict liability” offence in which the doing of the prohibited act prima facie imports the offence and, assuming the prosecution can prove the commission of that prohibited act beyond a reasonable doubt, the burden shifts to the accused to avoid liability by proving on a balance of probabilities that all reasonable care was taken to avoid the prohibited act. In the absence of specific language indicating a contrary intention on the legislature’s part to create either an offence of absolute liability or an offence requiring proof of mens rea, all public welfare offences were to be presumed to be strict liability offences. And while the reversal of the burden of proof inherent in the strict liability model only narrowly survived a constitutional challenge in R v Wholesale Travel Group Inc.,5 the defence of due diligence became a staple in regulatory offences. Like me, the judicial creation of the presumption of strict liability offences affording a defence of due diligence is turning forty. Rather than face questions of my own wisdom, place in the world and relevance today, I turn my attention instead to considering those issues as they relate to strict liability and the due diligence defence. I consider how the due diligence defence has evolved and argue that its availability appears to be receding in the face of a resurgence of absolute liability under the moniker of administrative monetary penalties (or “AMPs”), which are increasingly being used by regulators as a means to enforce compliance with regulatory requirements. While there is a body of case law developing in support of the availability of the defence of due diligence in the face of a potential administrative monetary penalty, the courts remain divided and numerous statutes expressly exclude it. I argue that this is an unprincipled end 4 Rick Libman, “Is Presuming Guilt for Regulatory Offences still Constitutional but Wrong?: R v Wholesale Travel Group Inc. and Section 1 of the Charter of Rights and Freedoms 20 Years After” 43 Ottawa L Rev 455 (2012-2013) [Libman]. 5 [1991] 3 SCR 154 [Wholesale Travel]. 3 run on the important function that strict liability offences have served in encouraging corporate social responsibility through the development of compliance programs with the dual purpose of preventing harm and being able to demonstrate the taking of all reasonable care. By looking back at the history that led to, and the rationale that underpinned, the Court’s decision in Sault Ste. Marie, I argue that legislators and regulators ought not be too quick to dismiss for perceived efficiency gains what benefits may be lost by excluding the due diligence defence; namely, transparency and insight into constantly evolving standards of care and compliance mechanisms. These public interest benefits are in addition to more basic issues of fairness and ensuring the imposition of just sanctions. In addition to avoiding punishing the faultless, by assessing and probing the steps taken by the alleged offender to prevent the harm that the regulator is guarding against, the regulator can promote knowledge and the adoption of higher standards of care throughout the regulated industry. This is the case regardless of whether an administrative monetary penalty or a regulatory prosecution is the chosen enforcement mechanism. By excluding the due diligence defence, regulators risk increased cynicism on the part of regulated parties and the treatment of administrative monetary penalties as a mere tax or cost of doing business to be passed on to consumers as opposed to a justly deserved sanction that merits attention from the press, shareholders and the broader public. II. THE HISTORY OF PUBLIC WELFARE OFFENCES AND THE EMERGENCE AND DEVELOPMENT OF THE DUE DILIGENCE DEFENCE a. Public Welfare Offences The history of “public welfare offences” is charted in Francis Sayre’s 1933 seminal work of the same name.6 As society became more industrialized, complex and crowded, greater 6 Francis Bowes Sayre, “Public Welfare Offences” 33(1) Colum L Rev 55 (1933) [Sayre]; see also Swaigen, supra note 1 at Chapter 1 [Swaigen]. 4 regulation in the interest of public health and safety emerged in England and the United States in the mid 19th Century.7 The criminal law was deployed to process these new regulatory offences, referred to by Sayre as “petty police offences”, which
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