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

Allison Meredith Sears

A thesis submitted in conformity with the requirements for the degree of Master of Laws Faculty of Law University of Toronto

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.

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

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 tended to be offences that were not crimes at common law (and not thought of as morally wrong), but created as part of a regulatory regime to protect the well-being of the community by targeting certain mischiefs.8 As regulations became more pervasive, the courts quickly became overburdened with prosecutions of these new offences and efficiency demanded that the mens rea element be disposed of.9 This occurred first in the domains of food safety and liquor control, and then in traffic regulation, criminal nuisances, labour laws, and building laws, among others.10 Sayre coined the term “public welfare offences” to refer to this distinct group of offences distinguishable from true crimes in that they were punishable without regard to any mental element. In short, he equated the term public welfare offences with the emergence of absolute liability offences and sought to distinguish such offences from true crimes in order to resist the notion that criminality in general was moving away from the requirement of mens rea.

After summarizing the early case law, Sayre concluded that convictions based merely on forbidden conduct irrespective of intent may be had if “the statute violated is of a purely regulatory nature, and if the injury is of a widespread and public character, – particularly in cases where the ascertainment and proof of [mens rea] would be so difficult that to require it would practically prevent convictions.”11 In explaining the movement away from requiring proof of a guilty mind,

7 Sayre, ibid at 56. 8 Ibid at 59. 9 Ibid at 67-70. 10 Ibid at 67; Swaigen, supra note 1 at 2-3. 11 Sayre, supra note 6 at 62.

Sayre states:

The development is the not unnatural result of two pronounced movements which mark twentieth century criminal administration, i.e., (1) the shift of emphasis from the protection of individual interests which marked nineteenth century criminal administration to the protection of public and social interests, and (2) the growing utilization of the criminal law machinery to enforce, not only the true crimes of the classic law, but also a new type of twentieth century regulatory measure involving no moral delinquency.12

Sayre cautioned, however, that the group of offences punishable without proof of any criminal intent must be sharply limited and he foresaw the problem later addressed in Sault Ste

Marie of how to draw the line between those offences which do and those which do not require proof of mens rea. As for the factors to be considered in drawing the line, Sayre proposed that the character of the offence and the severity of the penalty should govern. Where the character of the offence is the singling out of wrongdoers for punishment as opposed to regulating the social order, or where the punishment is something more than a “light monetary fine”, mens rea should be required.13 Sayre was concerned that some public welfare offences involved heavy fines or the possibility of imprisonment and he suggested that in such cases the defendant should have the right to bring forward affirmative evidence to prove that the violation was not the result of any fault on his part.14 It seems that even in these early days of the emergence of absolute liability regulatory offences, red flags were being raised concerning the proper scope of the doctrine and its potential for harsh consequences.

Notwithstanding the foregoing developments in England and the US, prior to the Supreme

12 Ibid at 67. 13 Ibid at 72. 14 Ibid at 79.

Court of Canada’s decision in R v Pierce Fisheries Ltd.,15 confusion remained in Canada as to whether there was any basis for penal liability other than mens rea regardless of the class of offence.16 In Pierce Fisheries, the Court distinguished between true crimes and regulatory offences finding that, where the latter are concerned, there is no presumption of mens rea and the issue of whether mens rea is a requisite element is to be determined based on the words of the statute creating the offence.17 Ultimately, the Court held that mens rea was not a requisite element in the regulatory offence of possessing undersized lobsters contrary to the regulations under the federal

Fisheries Act.18 Thereafter, courts began applying Pierce Fisheries in interpreting other regulatory offences under both provincial and federal legislation other than the Criminal Code,19 but uncertainty and dissatisfaction remained as courts struggled with the stark polarity of liability founded either on absolute liability, on the one hand, or full mens rea, on the other.20 Courts wrestled with the seeming unfairness of absolute liability, which resulted in the punishment of the morally innocent, and began to interpret certain absolute liability offences as affording a defence

15 R v Pierce Fisheries Ltd., [1971] SCR 5 [Pierce Fisheries]. 16 Swaigen, supra note 1 at 5. 17 Pierce Fisheries, supra note 15 at 13. The distinction between true crimes and regulatory offences has remained relevant, particularly after the advent of the Charter as regards the scope of constitutional protections available to individuals and corporations charged with regulatory offences. See, for example, Wholesale Travel, supra note 5 at paras 24-25, where Cory J. for the majority stated: It has always been thought that there is a rational basis for distinguishing between crimes and regulatory offences. Acts or actions are criminal when they constitute conduct that is, in itself, so abhorrent to the basic values of human society that it ought to be prohibited completely. Murder, sexual assault, fraud, robbery and theft are all so repugnant to society that they are universally recognized as crimes. At the same time, some conduct is prohibited, not because it is inherently wrongful, but because unregulated activity would result in dangerous conditions being imposed upon members of society, especially those who are particularly vulnerable.

The objective of regulatory legislation is to protect the public or broad segments of the public (such as employees, consumers and motorists, to name but a few) from the potentially adverse effects of otherwise lawful activity. Regulatory legislation involves a shift of emphasis from the protection of individual interests and the deterrence and punishment of acts involving moral fault to the protection of public and societal interests. While criminal offences are usually designed to condemn and punish past, inherently wrongful conduct, regulatory measures are generally directed to the prevention of future harm through the enforcement of minimum standards of conduct and care. 18 RSC 1952, c 119. 19 RSC 1985, c C-46 [Criminal Code]. 20 Swaigen, supra note 1 at 5.

7 of reasonable care or of a reasonable mistake of fact; in short, lack of fault.21

It was in this context that the Supreme Court of Canada was called upon in Sault Ste. Marie to determine what five lower courts had not yet been able to resolve22 – whether the City could be held liable for discharging or causing or permitting the discharge or deposit of any material of any kind into any water course that may impair the quality of water in contravention of s. 32(1) of the

Ontario Water Resources Act23 in circumstances where it had contracted with a third party to dispose of all refuse originating in the City. The third party had already been found guilty of contravening s. 32 of the OWRA when waste it had disposed of leached into a creek adjacent to its chosen landfill site, but the lower courts could not agree on whether (and on what basis) the City could be held liable for this public welfare offence. The lower courts had differing views on whether the offence required specific mens rea on the part of the City to cause or permit the discharge, or whether the offence was one of absolute liability such that the City’s permitting the third party to undertake the work that resulted in the discharge was dispositive.

b. Emergence of the Due Diligence Defence

Notably, in the few years prior to the Court’s decision in Sault Ste. Marie, the Law Reform

Commission of Canada (“LRCC”) undertook a series of studies on strict liability (which term was used interchangeably with absolute liability at that time and by which the LRCC was referring to what we know as absolute liability since Sault Ste. Marie) in which it considered, among other things, the doctrine of mens rea and whether it had a place in regulatory offences as opposed to

21 These cases are summarized in Sault Ste. Marie, supra note 2 at paras 38-47 and 49. 22 The City had initially been acquitted in Provincial Court (Criminal Division) but was convicted following a trial de novo on a Crown appeal. The City’s further appeal to the Divisional Court was then allowed and the conviction was quashed, but the Ontario Court of Appeal later overturned that decision and ordered a new trial: Sault Ste Marie, supra note 2 at para 5. 23 RSO 1970, c 332 [OWRA].

8 true crimes.24 In its main Working Paper, The Meaning of Guilt, the LRCC concluded that absolute liability in the law of regulatory offences was unjust and that regulatory offences should require some kind of fault.25 It recommended that negligence should be the minimum standard of liability in regulatory offences and that an accused should not be liable if it can be established that the accused acted with due diligence. In supporting the propriety of a negligence standard, the LRCC noted that regulatory offences are typically committed as much through carelessness as by design and the objective of the law of regulatory offences is not so much prohibiting morally objectionable acts as it is “to promote higher standards of care in business, trade and industry, higher standards of honesty in commerce and advertising, higher standards of respect for the need to preserve our environment and husband its resources.”26

In rejecting absolute liability for regulatory offences and advocating for a negligence standard, the LRCC outlined a rationale for the due diligence defence that has ultimately become its great societal contribution (beyond the obvious and foremost desirability of affording the faultless an opportunity to avoid liability):

Another undesirable consequence which [absolute liability]27 may have is that of making life too easy, not only for the law enforcer, but for the offender too. The law enforcer gets a conviction without really having to inquire whether the defendant’s business practices fell below acceptable standards of care and honesty. The offender pleads guilty, saves face on the ground that he wasn’t really at fault,

24 Law Reform Commission of Canada, Studies on Strict Liability (Ottawa: Law Reform Commission of Canada, 1974) [Studies on Strict Liability]. 25 Ibid at 25. 26 Ibid at 32. While this characterization is apt for some regulatory offences, there are some regulatory offences that prohibit acts that are arguably morally objectionable (i.e. mala in se as opposed to merely mala prohibitum) and are actually also offences under the Criminal Code such as insider trading, tax evasion, and misleading advertising/fraud. These dual track offences give rise to a number of other considerations, including whether the significant fines and stigma associated with contraventions make the reversed onus in regulatory offences unconstitutional: See Libman, supra note 4. Additionally, shifting concepts of morality have arguably changed our views of what morally objectionable conduct may be, such that it is less clear in 2018 than it was in 1974 that regulatory offences are predominantly concerned with the promotion of higher standards of care in regulated industries. The upshot of these issues, however, would be an argument for even more procedural protections than are afforded for strict liability offences (i.e. the availability of the due diligence defence), whereas I am more concerned in this paper with the erosion of existing protections and the movement toward absolute liability. 27 I have replaced references to strict liability with “absolute liability” to avoid confusion given that the LRCC’s references to strict liability refer to what we now consider to be “absolute liability”.

and yet avoids having the spotlight of the court investigation focused on his practices. For all that the conviction rate looks good, how far are care and safety being in fact promoted? By contrast, a system of prosecuting regulatory offences without relying on [absolute liability] would force the attention of the court on the very matter with which the law is concerned – the extent to which the defendant’s practice fell below required standards. Instead of allowing this to be swept under the rug, a system without [absolute liability] would allow the trial to bring it out where it belongs – into the open. For standards of care are public property; they are a matter of public concern – not least because improved technology and the wisdom of hindsight raise them constantly. As such, they need to be probed, assessed and explored, not in the backrooms of the administrators, but in open court. This is precisely what [absolute liability] prevents. …

[Regulatory offences] are offences which the law creates in order to promote standards of care – standards liable to rise as knowledge, skill, experience and technology advance. Such standards need to be explored, examined and assessed in open court. For this, we have to know exactly what the defendant did and how and why he did it. We argue therefore that in regulatory law, to make the defendant disprove negligence – prove due diligence – would be both justifiable and desirable. Justifiable since penalties are lighter and stigma less. Desirable, since it best achieves the aims of regulatory law.28 [Emphasis added]

The foregoing analysis appears to have been accepted and relied upon by the Court in Sault

Ste. Marie.29 In particular, Dickson J. (as he then was) speaking for a unanimous court, rejected the arguments that high standards of care are best maintained if people know that ignorance or mistake will not excuse them for regulatory contraventions and that absolute liability is the most efficient or effective way of ensuring compliance with regulatory legislation.30 He noted that such arguments rest:

28 Studies on Strict Liability, supra note 24 at 30 & 33. 29 Sault St. Marie, supra note 2 at para 48. 30 Ibid at para 26. It was chiefly administrative efficiency arguments that had historically been relied upon to justify absolute liability. The argument was that the difficulty of proving mental culpability and the number of petty cases coming before the courts was such that proving fault

…upon assumptions which have not been, and cannot be, empirically established. There is no evidence that a higher standard of care results from absolute liability. If a person is already taking every reasonable precautionary measure, is he likely to take additional measures, knowing that however much care he takes it will not serve as a defence in the event of breach? If he has exercised care and skill, will conviction have a deterrent effect upon him or others? Will the injustice of conviction lead to cynicism and disrespect for the law, on his part and on the part of others? These are among the questions asked.31

Dickson J. also rejected the notion that no stigma attaches to convictions for regulatory offences. In particular, he noted that the accused suffers loss of time, legal costs, exposure to the processes of the criminal law and the opprobrium of conviction. He noted that whereas penalties for breach of statutes enacted for the regulation of individual conduct in the interest of public health and safety were minor (i.e. $25), in 1978 they could amount to thousands of dollars and entail the possibility of imprisonment for a second conviction.32 Such concerns carry even greater force today in the age of corporate social responsibility, social media campaigns against perceived corporate malfeasors, and potential multi-million-dollar penalties. In finding the administrative efficiency argument of little force, Dickson J. also noted that evidence of due diligence is admitted in sentencing and might just as well be heard when considering guilt.33 As outlined in further detail below, this is equally the case with respect many administrative monetary penalties, where regulators will consider evidence of due diligence in respect of the quantum of the penalty to be levied, but not liability therefor.

was too great a burden in time and money on the prosecution and would impede adequate enforcement to the point of nullifying the regulatory statutes. The social ends of regulatory legislation were argued to be of such importance as to override the by-product of punishing the blameless, which was diminished as public welfare offences were said not to carry the stigma associated with criminal offences. 31 Ibid. at para 27. 32 Under s. 32(1) of the OWRA, the City was facing a penalty on first conviction of a fine of not more than $5,000 and on each subsequent conviction to a fine of $10,000 or imprisonment of not more than one year (or to both a fine and imprisonment). 33 Sault Ste. Marie, supra note 2 at para 27.

Based on the foregoing and his review of cases from other jurisdictions including Australia,

New Zealand and England, Dickson J. held that there were compelling grounds for the recognition of three categories of offences instead of the traditional two:

1. Offences in which mens rea, consisting of some positive state of mind such as intent, knowledge, or recklessness, must be proved by the prosecution either as an inference from the nature of the act committed or by additional evidence.

2. Offences in which there is no necessity for the prosecution to prove the existence of mens rea; the doing of the prohibited act prima facie imports the offence, leaving it open to the accused to avoid liability by proving that he took all reasonable care. This involves consideration of what a reasonable man would have done in the circumstances. The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event. These offences may properly be called offences of strict liability…

3. Offences of absolute liability where it is not open to the accused to exculpate himself by showing that he was free of fault.34

[Emphasis added]

True crimes would fall in the first category, whereas regulatory offences would presumptively fall in the second category unless words such as "wilfully", "with intent", "knowingly" or

"intentionally" are contained in the statutory provision creating the offence. Finally, offences of absolute liability would only be those in respect of which the legislature had made it expressly clear that guilt would follow proof merely of the prohibited act. As such, Sault Ste Marie can be understood not only as creating a presumption of strict liability, but also a strong presumption against absolute liability.35 In determining whether the legislature had made it clear that an

34 Ibid at para 60. 35 At para 27, Dickson J. states that the most telling argument against absolute liability is that it “violates fundamental principles of penal liability.”

12 absolute liability offence was intended, Dickson J. noted that the primary considerations would be

“the overall regulatory pattern adopted by the legislature, the subject matter of the legislation, the importance of the penalty and the precision of the language used.”36

In addition to creating a new third class of offence – strict liability offences, which all regulatory offences would be in absence of clear statutory language conveying that either full mens rea or absolute liability was intended – Dickson J. outlined the new defence of due diligence at the heart of the strict liability offence. It would be made out if the accused could demonstrate on a balance of probabilities that it either (i) reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent; or (ii) that it took all reasonable steps to avoid the particular event.37 The two branches of the due diligence test are alternatives and an accused need only satisfy one.38 As for the “particular event”, it is the event that resulted in the prohibited act occurring (i.e. the commission of the actus reus of the offence).39

Significantly, where it is a corporation charged with the regulatory offence arising from an act of one of its employees, Dickson J. provided the following guidance respecting the due diligence required of the corporation to avoid liability:

One comment on the defence of reasonable care in this context should be added. Since the issue is whether the defendant is guilty of an offence, the doctrine of respondeat superior has no application.40 The due diligence which must be established is that of

36 Sault Ste Marie, supra note 2 at para 61. 37 Ibid at para 60. 38 See R v MacMillan Bloedel Ltd., 2002 BCCA 510 at paras 46-48. 39 This was subsequently clarified in numerous cases including: R v Imperial Oil Ltd., 2000 BCCA 553; R v Petro-Canada (2003), 171 CCC (3d) 354, 2003 CanLII 52128 (ONCA); R v Emil K. Fishing, 2008 BCCA 490; and R v British Columbia (Ministry of Forests, Lands and Natural Resource Operations), 2018 BCPC 45. 40 In other words, regulatory offences are not generally offences of vicarious liability. Rather, as was historically the case for criminal liability in Canada, it is the conduct of the corporation itself as evidenced by the acts or omissions of its directing mind (i.e. the identification theory of criminal liability) upon which liability may be imposed: see Canadian Dredge & Dock Co. v The Queen, [1985] 1 SCR 662 (SCC) at 691); and R v Emil K. Fishing, 2008 BCCA 490 at paras 28-34. It is interesting to note, however, that Canadian corporate criminal liability changed dramatically with the enactment of Bill C-45, An Act to amend the Criminal Code (Criminal Liability of Organizations), SC 2003, c 21, which broadened the basis for organizational liability under the Criminal Code. It replaced the liability based on the fault of the corporation’s directing minds (i.e. the board of directors and those with the power to set corporate policy) with liability tied to the fault of the corporation’s “senior

the accused alone. Where an employer is charged in respect of an act committed by an employee acting in the course of employment, the question will be whether the act took place without the accused's direction or approval, thus negating wilful involvement of the accused, and whether the accused exercised all reasonable care by establishing a proper system to prevent commission of the offence and by taking reasonable steps to ensure the effective operation of the system. The availability of the defence to a corporation will depend on whether such due diligence was taken by those who are the directing mind and will of the corporation, whose acts are therefore in law the acts of the corporation itself.41

[Emphasis added]

Based on the foregoing, it was understood that corporations would have to establish and implement formal harm prevention systems as well as monitor their employees’ compliance with those systems. As for the fate of the City of Sault Ste. Marie, Dickson J. held that s. 32(1) of the OWRA created a public welfare offence not a true crime, and without providing a clear indication that liability was absolute or without using words such as “knowingly” or “wilfully” to require proof of mens rea, the offence was one of strict liability. He noted that the words “cause” and “permit” fit better into an offence of strict liability than either full mens rea or absolute liability and ordered a new trial in which the defence of due diligence could be considered on new evidence directed to that end.42

officers”, which is now defined under the Criminal Code to include employees, agents or contractors who “play an important role in the establishment of an organization’s policies” or who have responsibility “for managing an important aspect of the organization’s activities”: see Criminal Code, ss 2 (“senior officer”), 22.1 (negligence offences), 22.2 (subjective intent offences), and 217.1 (duty to protect workers); see also Todd Archibald, Kenneth Jull and Kent Roach, “The Changed Face of Corporate Criminal Liability” 48 CLQ 367 (2004). Canada’s new corporate criminal model has been described as a composite model based on the concept of “senior officers”, which lies somewhere between the doctrines of vicarious liability and directing mind: see Todd Archibald, Kenneth Jull and Kent Roach “Corporate Criminal Liability: Myriad Complexity in the Scope of Senior Officer” 60 CLQ 387 (2014). Accordingly, there are now different theories of corporate criminal liability at work in Canada depending on whether a corporation is prosecuted for an offence under the Criminal Code or a regulatory statute. Of course, corporate responsibility for regulatory offences can also arise on the direct imposition of a primary duty on the corporation (employer) and reference must always be had to the specific language in the statute creating the regulatory offence. The statute may also expressly incorporate vicarious liability of the corporation for the actions of its employees, such as when language like the following is used: “In any proceedings under this Act against a person in relation to a violation, it is sufficient proof of the violation to establish that it was committed by an employee or agent or mandatary of the person, whether or not the agent or mandatary has been proceeded against in accordance with this Act”: Environmental Violations Administrative Monetary Penalties Act, SC 2009, c 14, s 126, s 9(1). 41 Sault Ste Marie, supra note 2 at para 72. 42 Ibid at paras 66-74. For a critique of these and other broad pronouncements made with little articulation of the underlying doctrinal premise see Allan C. Hutchinson, “Sault Ste. Marie, Mens Rea and the Halfway House: Public Welfare Offences Get a Home of their Own” 17(2) Osgoode Hall L. J. 415 (1979). Professor Hutchinson’s chief complaint seems to be that the decision was results-oriented. Arguments supporting the

In sum, Sault Ste Marie radically changed the face of regulatory prosecutions. In addition to affording parties the opportunity to demonstrate that their conduct was faultless, thereby ensuring that sanctions are justly imposed, it prompted corporations (and other organizations) to develop, implement and monitor the effectiveness of various harm prevention systems tailored to meet standards imposed under public welfare legislation and to demonstrate the taking of all reasonable care. In the wake of Sault Ste Marie, prosecutions centered on the due diligence defence and accused parties marshalled expert evidence on, among others, industry standards, standards of care, and the foreseeability of various events. For this reason, as outlined further below, strict liability and the due diligence defence have been described as “part of the driving force encouraging corporate responsibility towards, and the regulatory protection of, public interests.”43

Before exploring how the due diligence defence has evolved and played out in practice, it bears noting that Sault Ste Marie was decided in the pre-Charter 44 era and that the reversal of the burden of proof to make out the defence barely survived a Charter challenge.

Prior to the Supreme Court of Canada’s decision in Wholesale Travel,45 the Ontario Court of Appeal had, in two separate decisions,46 ruled that the reverse onus inherent in the due diligence defence violated sections 7 and 11(d) of the Charter.47 The Supreme Court of Canada reversed

desired result were favoured and not enough theoretical and doctrinal analysis was brought to bear on the issues with the result that there is an insufficiently clear statement of principles to be applied in resolving interpretive issues when determining which category a particular offence will fall into. While Professor Hutchinson would have liked to see clearer and more robust statement of principles, he ultimately viewed the development of the middle-ground of strict liability with a due diligence defence for public welfare offences as a welcome step forward. 43 N. J. Strantz, “Beyond R. v. Sault Ste. Marie: The Creation and Expansion of Strict Liability and the Due Diligence Defence” 30 Alta L Rev 1233 (1992) at 1234 [Strantz]. 44 Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11 [Charter]. 45 Supra note 5; see also R v Ellis-Don, [1992] 1 SCR 840. 46 R v Wholesale Travel (1989), 52 CCC (3d) 9, 63 DLR (4th) 325 (ONCA) and R v Ellis-Don (1990), 61 CCC (3d) 423, 1 OR (3d) 193 (ONCA). 47 Sections 7 and 11(d) of the Charter provide as follows: 7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice. … 11. Any person charged with an offence has the right … (d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal.

15 both of these rulings. Though the Court split on numerous issues,48 the majority result in Wholesale

Travel was that the reversal of the burden of proof imposed on those charged with strict liability offences49 (to establish due diligence on a balance of probabilities) was found to violate the

Charter's presumption of innocence under section 11(d), but this infringement was found to be justified under section 1.

In finding that the infringement was justified, the majority distinguished between true criminal offences and regulatory offences50 and how they embody different degrees of fault.51 As a conviction for a regulatory offence suggested nothing more than that the defendant had failed to meet a prescribed standard of care, this imported a lesser degree of culpability and stigma than a conviction for a criminal offence. Accordingly, it was found to be important to consider the regulatory nature of the offence and its place within the larger scheme of public welfare legislation with the result that constitutional standards developed in the criminal context should not be applied automatically to regulatory offences.52 This distinction was justified on two bases: (i) the

“distinctive nature of regulatory activity” (i.e. the licencing justification – that regulated defendants had made the choice to engage in the regulated activity, and having placed themselves in a responsible relationship to the public generally, must be taken to accept the consequences of that responsibility)53 and (ii) the “fundamental need to protect the vulnerable through regulatory legislation” (i.e. the vulnerability justification – that extensive regulatory legislation was essential

48 The result was a five-four split decision, in which five separate opinions were delivered. 49 In this case, the corporate defendant had been charged with five counts of false or misleading advertising, contrary to the Competition Act, RSC 1985, c C-34, and faced in the case of conviction upon indictment, a fine in the discretion of the court or imprisonment for five years, or both; or in the case of summary conviction, a fine of $25,000 or imprisonment for a one-year period, or both. 50 See commentary supra note 17. 51 Wholesale Travel, supra note 5 at para 26. 52 Ibid at paras 46-50. 53 Ibid at paras 52-65.

16 for the protection of society as a whole, and especially those who were vulnerable and least able to protect themselves).54

The decision in Wholesale Travel has been the subject of wide criticism over the years.55

Moreover, as I discuss further below with respect to administrative monetary penalties, the distinction between regulatory offences and true crimes, and what constitutes a true penal consequence triggering the applicability of section 11 Charter rights has remained a hotly contested issue.56 While much commentary has been focused on whether strict liability offences offend the Charter, and on issues related to how the reasonable care standard should be applied, who should bear the onus and on what standard in order to best reflect Charter values, I am more concerned with how the due diligence defence has evolved at common law and with arguing for its continued availability.

c. The Due Diligence Defence in Practice

Demonstrating due diligence is the close cousin of establishing that one has not been negligent at common law and imports concepts from the tort of negligence. In R v Chapin,57 the

Supreme Court of Canada said of the due diligence defence that an accused “may absolve himself on proof that he took all the care which a reasonable man might have been expected to take in all the circumstances or, in other words, that he was in no way negligent.”58 The main distinction, of course, being that in a regulatory offence the reasonable care that must be demonstrated is in

54 Ibid at paras 66-71. 55 See Libman, supra note 4; see also Don Stuart, “Wholesale Travel: Presuming Guilt for Regulatory Offences is Constitutional but Wrong” 8 CR (4th) 225 (1992) and Clayton Ruby and Kenneth Jull, “The Charter and Regulatory Offences: A Wholesale Revision” 14 CR (4th) 226 (1992). 56 See, for e.g., R v Wigglesworth, [1987] 2 SCR 541; Martineau v M.N.R., 2004 SCC 81; and Guindon v Canada, 2015 SCC 41. 57 [1979] 2 SCR 121 (SCC). 58 Ibid at 134. See also Lévis (City) v Tétreault, 2006 SCC 12 at para 15.

17 respect of the prevention of the statutory breach, whereas, in negligence, it is in respect of the prevention of the damage caused.

It is difficult to provide a simple or concise summary of what makes for a successful due diligence defence as it is case specific and the standard of care that will be applied varies depending on the nature of the offence as well as the industry or activity involved.59 Furthermore, it is not static and what may have met the standard historically may no longer be adequate as technologies evolve.60 As a general proposition, however, it can be said that the greater the likelihood of harm and the greater the awareness of danger is, the more due diligence an accused must have exercised in order to avoid liability.61 The accused is not required to show that it took all possible or imaginable steps to avoid liability and is not required to achieve a standard of perfection or show superhuman efforts.62

Given that the due diligence defence applies broadly to innumerable regulated activities and industries that differ greatly, many cases return to the broad statement of the test in Sault Ste

Marie with reference to a number of generic factual considerations that have emerged in the jurisprudence. These factors were initially outlined in R v Commander Business Furniture Inc.,63 a prosecution under Ontario’s Environmental Protection Act,64 as follows:

1. the nature and gravity of the adverse effect; 2. the foreseeability of the effect, including abnormal sensitivities; 3. the alternative solutions available; 4. legislative or regulatory compliance; 5. industry standards;

59 R v Gondor (1981), 62 CCC (2d) 326; [1981] YJ No 16 (QL) (YTC) at para 22 [Gondor cited to QL]. The standard of care must reflect the diligence of a reasonable person having the expertise suitable to the activity in issue: R v Placer Developments Ltd. (1983), 13 CELR 42 (YTC). 60 Strantz, supra note 43 at 1242. 61Ibid. See also Gondor, supra note 59 at paras 23 and 39; R v Placer Developments Ltd. (1983), 13 CELR 42 (YTC); and R v Inco Ltd., [2001] OJ No 4938 (QL) (ONSCJ) at para 49. 62 R v Syncrude Canada Ltd., 2010 ABPC 229 at para 99 [Syncrude]. 63 R v Commander Business Furniture Inc. (1992) 9 C.E.L.R. (NS) 185; [1992] OJ No 2904 (QL) (ON PCJ) [Commander cited to QL]. 64 RSO 1980, c 141.

6. the character of the neighbourhood; 7. what efforts have been made to address the problem; 8. over what period of time, and promptness of response; 9. matters beyond the control of the accused, including technological limitations; 10. skill level expected of the accused; 11. the complexities involved; 12. preventative systems; 13. economic considerations; and 14. actions of officials.65

Archibald and Jull argue that these 14 factors amount roughly to a type of risk management analysis, though they are poorly arranged, sometimes work at cross-purposes, and are without guidance as to priorities.66 They propose the merger of the 14 factors under two broad categories:

(i) precautions taken to avoid the event; versus (ii) systems to measure potential gravity and likelihood of impact, and they suggest that these form a practical risk management matrix to be employed by the courts in assessing due diligence.67

Helpful early guidance as to what is expected of corporations as well as their directors and officers to establish due diligence in the face of environmental offences (but it is insightful more generally too) came in R v Bata Industries Ltd.,68 where the shoe manufacturing company and two of its directors were convicted respectively of causing or permitting the discharge of industrial waste contrary to then s. 16(1) of the Ontario Water Resources Act69 and failing to take all reasonable care to prevent the company from causing or permitting an unlawful discharge contrary to then s. 75(1). The convictions arose from the company’s storage of chemical waste in drums

65 Commander, supra note 63 at para. 95. 66 Todd L. Archibald & Kenneth E. Jull, Risk Management, Financial Crimes, and Corporate Compliance (Toronto, ON: Canada Law Book, 2017 Student Ed.) at 4:70 [Archibald and Jull]. 67 Ibid at 4:70:150; 4:80; and 4:90. 68 (1992) 9 OR (3d) 329; [1992] OJ No 236 (QL) (ON Ct Prov D) [Bata Industries cited to QL]; varied as to sentence in (1993) 14 OR (3d) 354, [1993] OJ No 1679 (QL) (ON Ct Gen D) and (1995) 25 OR (3d) 321; [1995] OJ No 2691 (QL) (ONCA). 69 RSO 1980, c 361 (at the time of the offence); RSO 1990, c O.40 (at the time of the conviction).

19 proximate to its manufacturing facility. The drums deteriorated over time resulting in waste escaping into the ground. The company was found liable because it had not established a proper system to prevent the commission of the offence (i.e. to prevent the disintegration and leaking of the waste barrels) or take reasonable steps to ensure the effective operation of the inadequate system it had. The company had ignored the environmental directions given to it by its parent company70 and was not informed about steps being taken by its industrial neighbour, whose system was considered in assessing the standard to which Bata Industries should be held.

As for the three corporate directors charged, Justice Ormston outlined the following

“minimum profile” against which the liability (or a successful due diligence defence) of directors and officers could be assessed:

I ask myself the following questions in assessing the defence of due diligence:

(a) Did the board of directors establish a pollution prevention "system" as indicated in R. v. Sault Ste. Marie. i.e., was there supervision or inspection? was there improvement in business methods? did he exhort those he controlled or influenced?

(b) Did each director ensure that the corporate officers have been instructed to set up a system sufficient within the terms and practices of its industry of ensuring compliance with environmental laws, to ensure that the officers report back periodically to the board on the operation of the system, and to ensure that the officers are instructed to report any substantial non-compliance to the board in a timely manner?

I reminded myself that:

70 The Court considered evidence that the parent company, the Bata Shoe Organization, had issued “Technical Advisory Circular (TAC) 298” to its interests around the world, which updated previous industrial safety measures with particular attention to environmental concerns and exhorted all companies to work in co-operation with local authorities to identify problems and carry out precautionary measures. The first area that it recommended addressing was an assessment of environmental exposure and reduction of potential risks.

(c) The directors are responsible for reviewing the environmental compliance reports provided by the officers of the corporation, but are justified in placing reasonable reliance on reports provided to them by corporate officers, consultants, counsel or other informed parties.

(d) The directors should substantiate that the officers are promptly addressing environmental concerns brought to their attention by government agencies or other concerned parties including shareholders.

(e) The directors should be aware of the standards of their industry and other industries which deal with similar environmental pollutants or risks.

(f) The directors should immediately and personally react when they have notice the system has failed.

Within this general profile and dependent upon the nature and structure of the corporate activity, one would hope to find remedial and contingency plans for spills, a system of ongoing environmental audit, training programs, sufficient authority to act and other indices of a pro-active environmental policy.71

After setting out the foregoing questions, Ormston J. outlined the different roles of the three directors within the corporate structure before finding two of the three directors guilty. In acquitting the CEO of the parent company and chairman of Bata Industries on the basis that he had established due diligence, Ormston J. found:

In short, he was aware of his environmental responsibilities and had written directions to that effect in TAC 298. He did personally review the operation when he was on site and did not allow himself to be wilfully blind or orchestrated in his movements. He responded to the matters that were brought to his attention promptly and appropriately. He had placed an experienced director on site and was entitled in the circumstances to assume that Mr. Weston was addressing the environmental concerns. He was entitled to assume that his on-site manager/director would bring to his attention any problem as Mr. Riden had done. He was entitled to rely upon his

71 Bata Industries, supra note 68 at paras 134-135.

system as evidenced by TAC 298 unless he became aware the system was defective.72

A great benefit of the analysis in, and result of, Bata Industries is that it was surely discussed in board rooms across Canada as companies undertook reviews of their internal compliance policies to assess (i) whether they had adequate systems in place to detect and prevent environmental contamination (including through the engagement of consultants with required expertise); (ii) whether their systems were being adequately monitored, inspected and audited; (iii) whether employees were adequately trained; and (iv) whether adequate reporting mechanisms were in place.

Though not at issue in Bata Industries (where the existence of the disintegrating chemical storage barrels was well known), the foreseeability of the particular event resulting in the charge and its place in mounting a due diligence defence has often been a contentious issue. In R v Rio

Algom Ltd.,73 the Ontario Court of Appeal overturned the acquittal of the company in relation to an occupational health and safety offence arising from a fatal accident at its mine site. A gate that had been installed at the front of a dump site to prevent mining cars from inadvertently going into the dump area was damaged over time such that it could overswing. The gate overswung into the path of mining cars on a parallel set of tracks crushing one of the accused's employees. Though the company was aware of the damaged gate it argued that it could not have foreseen this particular type of accident occurring. The Court found that the trial judge had erred by applying the wrong test in acquitting Rio Algom on the basis that the exact type of accident that occurred was not reasonably foreseeable.

72 Ibid at 143. 73 (1988), 66 OR (2d) 674; [1988] OJ No 1810 (QL) (ONCA) [Rio Algom cited to QL].

As regards the proper role of foreseeability in the due diligence assessment, the Court stated:

The trial judge, however, appears to have focused his attention on the fact that none of the witnesses foresaw "this type of accident happening" and that "no one had foreseen the happening of what happened on September 3rd". In my view, in purporting to determine whether the respondent had taken the care which a reasonable man might have been expected to have taken in the circumstances, he applied the wrong test. The test which should have been applied was not whether a reasonable man in the circumstances would have foreseen the accident happening in the way that it did happen, but rather whether a reasonable man in the circumstances would have foreseen that an "overswing" of the gate could be dangerous in the circumstances and if so whether the respondent in this case had proven it was not negligent in failing to check the extent of overswing in order to consider and determine whether it created in any way a potential source of danger to employees and in failing to take corrective action to remove the source of danger.74

[Emphasis added]

In short, the reasonable foreseeability of danger resulting from the prohibited act or omission that constitutes the offence (in this case, the failure to keep the gate in a proper state of repair) is one of the factors to be considered in deciding whether an accused took all the care which a reasonable man might have been expected to take in the circumstances. It does not, howver, require asking whether a reasonable person in the circumstances would have foreseen the accident happening in the way that it did, but whether any potential danger could have been reasonably foreseen.75

The manner in which the foreseeability issue played out in Rio Algom is actually the converse problem from what can be seen in many other decisions and which some critics have characterized as the problem of hindsight bias leading companies to be held to standards of care

74 Ibid at para 25. 75 See also R v XI Technologies Inc., 2013 ABCA 282.

23 that are arguably too exacting.76 Whereas the trial judge in Rio Algom erred in accepting as evidence of due diligence that the company had not foreseen the exact type of accident that occurred, in cases such as R v Sunshine Village Corp.77 and R v Lonkar Well Testing Limited,78 convictions have been overturned on the basis that trial judges have erred in imposing requirements based on hindsight in determining what preventative steps companies ought reasonably to have taken to prevent workplace fatalities.79 The British Columbia Court of Appeal has also toiled over the issue of foreseeability in respect of contaminant releases in R. v Imperial Oil Ltd.80 and R v

MacMillan Bloedel Ltd.81 Both decisions included strong dissenting reasons on the issue of foreseeability,82 with critics noting that “whether an event will be found to have been foreseeable may depend solely upon the peculiar and unpredictable inclinations of the trial judge.”83

Separate from the issue of the foreseeability of the event, it should be noted that the accused does not need to prove the exact cause of the event resulting in the charge (i.e. the precise mechanism by which the prohibited act occurred) in order to avail itself of the due diligence defence. However, where the exact cause can be demonstrated, this can limit what preventative steps must be proven to establish a successful due diligence defence. This was illustrated in R v

Petro-Canada,84 where the Ontario Court of Appeal rejected the trial judge’s finding that in order

76 Archibald and Jull, supra note 66 at 4:30. 77 2010 ABQB 493 [Sunshine]. 78 2009 ABQB 345 [Lonkar]. 79 Sunshine, supra note 77 at paras 89-95; Lonkar, supra note 78 at paras 79-80. 80 2000 BCCA 553 [Imperial]. 81 2002 BCCA 510 [MacMillan]. 82 See, for example, Madam Justice Newbury’s finding in dissent at para 34 of Imperial that the Majority was imposing a standard of perfection on Imperial. 83 Bruce Pardy, “MacMillan Bloedel: Progress on Due Diligence” (2003) 5 CR (6th) 146 (WL) [Pardy cited to WL] at 3. 84 (2003) 63 OR (3d) 219; [2003] OJ No 216 (QL) (ONCA) [Petro-Canada cited to QL].

24 to establish due diligence Petro-Canada had the onus of showing the precise cause of a pipeline failure that resulted in a gasoline spill, stating:

[T]he offence charged is that the accused discharged ... gasoline into the natural environment...Once the Crown proves this, the accused can successfully defend itself by showing on a balance of probabilities that it took all reasonable steps to avoid or prevent the discharge. The "particular event" is discharging or causing the discharge of gasoline as described in the charge.

For these reasons I do not think that the law requires the accused to prove precisely how the discharge came about – in this case precisely why the pipe failed – in order to avail itself of the due diligence defence. On the other hand, in a case where the accused can do this, it may be able to narrow the range of preventative steps that it must show to establish that it took all reasonable care. However where, as here, the accused cannot prove the precise cause of the pipe failure the due diligence defence is not rendered unavailable as a result. That being said, it must be emphasized that to invoke the defence successfully in such circumstances, the accused must show that it took all reasonable care to avoid any foreseeable cause.85 [Emphasis added]

Reflecting upon the foregoing jurisprudence, a fair criticism would be that there has been a lack of clarity in the due diligence doctrine. It is equally apparent that the availability of the due diligence defence has led to lengthy and expensive legal battles. It seems to me, however, that as the stigma associated with being a bad corporate citizen increases (such as would follow a serious event giving rise to a regulatory prosecution), the arguments in favour of the availability of the due diligence defence only grow. Moreover, looking back at the rationales underlying the adoption of the presumption of strict liability in Sault Ste Marie, they appear to have been borne out in the subsequent due diligence cases. In particular, due diligence cases have brought standards of care out into the open. By publicly probing the adequacy of various complex harm prevention systems,

85 Ibid at paras 19-20.

25 in addition to providing regulated parties an opportunity to exculpate themselves, the due diligence defence has increased the state of knowledge and expectations of regulators, industry, and the public at large. The educative value of these trial processes can also reasonably be expected to have had a positive effect on corporate social responsibility.86

These benefits are manifest in a decision such as R v Syncrude Canada Ltd,87 in which

Syncrude was convicted of offences under Alberta’s Environmental Protection and Enhancement

Act88 and the federal Migratory Birds Convention Act89 when 1600 birds died after landing in a tailing ponds at its Aurora oil sands mining operation. Though other defences were raised, the 8- week trial largely focussed on whether Syncrude had made out the defence of due diligence based on the steps it had taken to deter the birds from landing in its tailings pond (which, as it turns out, is apparently not an easy thing to do).90 The decision includes a detailed overview of the evidence considered, which included testimony from an expert in conservation behaviour and specialized research dealing with avian deterrence in the Alberta oil sands. She described what she considered to be attributes of a “minimum reasonable deterrent system”, as well as what steps she would add for a “best practices” approach.91 In addition to this expert evidence and Syncrude’s evidence in respect of all the steps it had taken, the Court also heard evidence from Syncrude’s competitors,

Shell and Suncor, in respect of their bird deterrent programs.92

86 For a discussion of the movement toward, and evolving concept of, corporate social responsibility see Norman Keith, Corporate Crime and Accountability in Canada: From Prosecutions to Corporate Social Responsibility, 2nd Ed. (Markham, ON: LexisNexis, 2016) at Chapter 11. 87 Syncrude, supra note 62. 88 RSA 2000, c E-12 [EPEA]. Syncrude was convicted of failing to store a hazardous substance in a manner that ensured that it did not come into contact with any animals, contrary to s 155. 89 SC 1994, c 22. Syncrude was convicted of depositing a substance harmful to migratory birds in an area frequented by migratory birds, contrary to s 5.1(1). 90 The many challenges presented to oil sands operators by deterring birds from tailings ponds are set out at para 15 and include the fact that birds become habituated to visual and auditory stimuli including that provided by deterrent equipment. 91 Ibid at paras 20-21. 92 Ibid at paras 35-36.

In detailed reasons, Tjosvold P.C.J. found that Syncrude had not made out the defence of due diligence. Regarding its preventative system, he held:

Syncrude's bird deterrent system in 2008 was based on the use of sound cannons and human effigies. The evidence indicates that these devices can be effective. While Syncrude had documents that set out procedures for bird deterrence, the documents are not in any way comprehensive and do not reflect the complexity of effective bird deterrence. One document, apparently a job description for a Bird Deterrent Tech, indicated that deterrents were to be activated in all contaminated waters beginning on April 1, depending on the weather and arrival of birds. Dave Matthews said there was no formal schedule however. Another document concerning cannon set-up called for the cannons to be placed no further than 240 metres apart on land or water. The evidence indicates that Syncrude did not have enough cannons to achieve this density. It does not appear that these documents played any significant part in Syncrude's bird deterrent program.

Most significantly, Mr. Matthews and his supervisor Gary Bourque made the decision to bring the BET team to work on April 14, 2008…

As a result of the late start, Syncrude did not have sound cannons deployed on the perimeter of Aurora Settling Basin before the bird landings discovered on April 28, 2008.

Regarding the reasonable alternatives that were available to Syncrude, Tjosvold P.C.J. stated:

The evidence here, while disclosing no real industry standard for bird deterrence, offered a number of reasonable alternatives. The most obvious alternative was to have sufficient equipment and staff ready for deployment of adequate deterrents no later than early April. Shell Albian Sands Muskeg River Mine and Suncor were both able to commence deployment in early April in 2008. These operators also had more comprehensive written procedures, oversight by individuals with appropriate training and advance planning and preparation of equipment. I am not suggesting that Syncrude was required to adopt either of these systems, simply that there were reasonable alternatives available.

I was impressed with the evidence of Dr. St. Clair who offered an opinion respecting a minimum reasonable deterrent system. Oil sands operators would be well advised to accept Dr. St. Clair's advice but I do not find that oil sands operators must meet these requirements to establish reasonable care. Dr. St. Clair's opinion

does, however, provide evidence of reasonable alternatives available to Syncrude. Of particular note is the advice that the system should be operational in early spring, i.e.: March, not late April. Dr. St. Clair also suggested appropriate training for those involved in the deterrent program, including training in bird behaviour and identification, experimental design and monitoring protocols.

In my view, there existed several reasonable and feasible alternatives of which Syncrude did or should have known. I have heard no evidence to suggest that these alternatives would not be economically feasible.93 [Emphasis added]

Finally, in respect of the issue of foreseeability, Tjosvold followed the test set out in Rio

Algom in finding that while Syncrude may not have foreseen the severity of the weather conditions or the total number of birds that would be killed, a reasonable person in Syncrude’s place would have foreseen that its acts and omissions leading up to the event would cause an unacceptable hazard for waterfowl. It had not established a proper system to avoid the harm nor had it taken reasonable steps to ensure the effective operation of its system.

In reading Syncrude, it is difficult to reach any conclusion other than – by probing in open court the steps taken by Syncrude to avoid the event, the oil sands industry and its regulators gained incremental insight into the state of bird deterrence systems. Syncrude was afforded an opportunity to resuscitate its corporate image by attempting to demonstrate that it had taken all reasonable steps to avoid the unfortunate event, but was ultimately shown to be underperforming in comparison to its arguably more socially responsible industry peers. Additionally, for any interested members of the public, the lengths to which oil sands producers actually go to avoid certain harms to the environment was on display. While it could be argued that this may not have been the most economically efficient manner in which to gain this insight, or that clearer and more

93 Ibid at paras 117-119.

28 stringent express regulatory standards ought to have been in place to avoid the harm, it is not necessarily reasonable to expect that the government (and regulatory agencies) will always be able to be on the forefront of harm prevention mechanisms. Nor is it necessarily optimal to legislate prescriptive standards, particularly in areas where technology is rapidly evolving. A process in which the due diligence defence is considered facilitates ongoing dialogue on harm prevention where broad standards are in place. Indeed, even where prescriptive standards are in place, the due diligence defence can unearth unanticipated problems with existing prescriptive standards and facilitate dialogue on reasonable alternatives.

Having extolled the virtues of the due diligence defence, it would be fair to ask at this point: so what? Is strict liability and the due diligence defence actually under attack? Hasn’t absolute liability gone by the wayside? In a word: no.

III. ADMINISTRATIVE MONETARY PENALTIES AND THE RESURGENCE OF ABSOLUTE LIABILITY

a. Absolute Liability Makes a Comeback

When he wrote the first Canadian textbook on regulatory offences in 1992, Swaigen noted that absolute liability offences “appeared to be a vanishing species”.94 This may have seemed a fair prediction in light of the Supreme Court of Canada’s repeated post-Charter findings that absolute liability infringes the principles of fundamental justice and breaches section 7 of the

Charter when the rights to life, liberty and security of the person are engaged (such as when an absolute liability offence is combined with potential imprisonment).95 Just over a decade later,

94 Swaigen, supra note 1 at 52. 95 See Reference re s. 94(2) of the B.C. Motor Vehicle Act, [1985] 2 SCR 486 at 514 [Re B.C. Motor Vehicle Act]; and R v Vaillancourt, [1987] 2 SCR 636 at 652, where Lamer J. summarized: “This Court's decision in Re B.C. Motor Vehicle Act stands for the proposition that absolute liability infringes the principles of fundamental justice, such that the combination of absolute liability and a deprivation of life, liberty or security of the person is a restriction on one's rights under s. 7 and is prima facie a violation thereof. In effect, Re B.C. Motor Vehicle Act acknowledges that, whenever the state resorts to the restriction of liberty, such as imprisonment, to assist in the enforcement of a law, even, as in Re B.C. Motor Vehicle Act, a mere provincial

29 however, Justice Libman noted that, with the benefit of hindsight, Swaigen’s prediction was premature.96 He pointed to a resurgence in absolute liability arising under Ontario’s Highway

Traffic Act enactments in respect of flying tires from commercial vehicles,97 administrative driver’s licence suspension regimes,98 and “environmental penalties” under Ontario’s

Environmental Statue Law Amendment Act, 2005 (Bill 133).99 It is this last development – the environmental penalty – that is of most interest to me as it is an example of part of a larger trend of arming regulators with the ability to levy significant administrative monetary penalties instead of proceeding with regulatory or criminal prosecutions, and sometimes with few if any procedural protections.

regulatory offence, there is, as a principle of fundamental justice, a minimum mental state which is an essential element of the offence. It thus elevated mens rea from a presumed element in Sault Ste. Marie, supra, to a constitutionally required element. Re B.C. Motor Vehicle Act did not decide what level of mens rea was constitutionally required for each type of offence, but inferentially decided that even for a mere provincial regulatory offence at least negligence was required, in that at least a defence of due diligence must always be open to an accused who risks imprisonment upon conviction” (emphasis in original). But see also R v Pontes, [1995] 3 SCR 44 [Pontes], where the Supreme Court of Canada held that if the offence is one of absolute liability, but there is no risk of imprisonment, then the provision will not offend s. 7 of the Charter. 96 Rick Libman, “Bill 133 and "Environmental Penalties": Absolute Liability and the Environment. Absolute Liability when Necessary but Necessarily Absolute Liability?” 16 CELR-ART 155 (2005) (WL) [Libman Absolute Liability cited to WL]. 97 Reference is made here to the flying truck wheel regime set out in s 84.1 of Ontario’s Highway Traffic Act, RSO 1990, c H.8, which creates an absolute liability offence for the owner and operator of a commercial motor vehicle where a wheel becomes detached from the vehicle while it is on a highway, and results in a penalty of up to $50,000, but not to imprisonment or probation. The constitutionality of this absolute liability offence was upheld by the Ontario Court of Appeal in R v 1260448 Ontario Inc. (2003), 68 OR (3d) 51; [2003] OJ No 4306 (QL) (ONCA) [1260448 cited to QL]; leave to appeal to SCC dismissed [2004] SCCA No 8. The Court rejected the argument that notwithstanding the only possible penalty for the offence was monetary, the creation of this absolute liability offence violates the guarantee to security of the person in s. 7 of Charter and the presumption of innocence in section 11(d) of the Charter. As regards, section 11(d), the Court held that there is no violation where the legislature defines an offence so as to eliminate an element (or a common law defence) as opposed to reversing the burden of proof of a fact that is an element of the defence: para 12. As for section 7, the Court was not convinced that a prosecution for the s 84.1 offence engages the kind of exceptional state-induced psychological stress, even for an individual, that would trigger the security of the person guarantee in s. 7. In particular, the Court noted that the offence did not create a true crime, and like most regulatory offences, it was focused on the harmful consequences of otherwise lawful conduct rather than any moral turpitude. Further, the Court noted that the right to security of the person does not protect the individual operating in the highly regulated context of commercial trucking for profit from the ordinary stress and anxieties that a reasonable person would suffer as a result of government regulation of that industry: paras 27-29. 98 Reference is made here to provincial regimes providing for the automatic administrative suspension of a driver's licence where a person is charged with a drinking and driving offence (even if that charge is later withdrawn) such as that under s 48.3 of the Ontario’s Highway Traffic Act, RSO 1990 c H.8. Section 48.3 provides for a 90-day licence suspension effective immediately upon the Registrar receiving notice that a peace officer is satisfied that a person driving or having the care, charge or control of a motor vehicle had a blood alcohol concentration exceeding 80 milligrams of alcohol in 100 millilitres of blood as revealed by a breathalyzer or blood sample or has refused to provide a breath or blood sample. The constitutionality of such schemes was upheld in Horsefield v Registrar of Motor Vehicles (1999), 44 OR (3d) 73; [1999] OJ No 967 (ONCA); and Buhlers v British Columbia (Superintendent of Motor Vehicles), 1999 BCCA 0114. 99 SO 2005, c 12.

b. What are AMPs?

Unlike fines, which are imposed by courts only upon conviction and after a sentencing hearing, AMPs are sanctions that are imposed directly by regulators without any intervention by a court and sometimes immediately upon detection of a violation without any prior process.100

Though expressly branded as “penalties”, they are described as financial disincentives to non- compliance101 and are often accompanied with self-serving statutory language to the effect that the purpose of the AMP is not to penalize or punish but to promote compliance with the applicable act and regulations.102 Such language is employed in hopes of avoiding the finding that the AMP, though designed as an administrative sanction, is in substance a true penal consequence and therefore an “offence” subject to the procedural protections of section 11 of the Charter. In upholding the constitutionality of the imposition of a significant AMP on an individual in Guindon v Canada,103 the Supreme Court of Canada held that a true penal consequence is “imprisonment or a fine which, having regard to its magnitude and other relevant factors, is imposed to redress the wrong done to society at large rather than simply to secure compliance.”104 The Court went on to set out the following factors in assessing whether a particular monetary penalty will be a true penal consequence:

A monetary penalty may or may not be a true penal consequence. It will be so when it is, in purpose or effect, punitive. Whether this is the case is assessed by looking at considerations such as the magnitude of the fine, to whom it is paid, whether its magnitude is

100 Libman Absolute Liability, supra note 96 at 1; see also Stephen Aylward and Luisa Ritacca, “In Defence of Administrative Law: Procedural Fairness for Administrative Monetary Penalties” 28 Can J Admin L & Prac 35 (2015) (WL) [Aylward Cited to WL] at 1. 101 Environment and Climate Change Canada, Policy Framework of the Administrative Monetary Penalty Regime at Environment and Climate Change Canada to Implement the Environmental Violation Administrative Monetary Penalties Act (Gatineau: Environment and Climate Change Canada, 2017) at 5. 102 See, for e.g., s. 112.5(1.1) of the Ontario Energy Board Act, 1998, SO 1998, c 15, Sched B. See also s 1(2) of the Administrative Penalties, OR 51/16, regulations thereunder, which provides that an AMP determined thereunder “shall not, by its magnitude, be punitive in the circumstances.” 103 2015 SCC 41 [Guindon]. 104 Ibid at para 75 citing R v Wigglesworth, [1987] 2 SCR 541.

determined by regulatory considerations rather than principles of criminal sentencing, and whether stigma is associated with the penalty: see, e.g., Canada (Attorney General) v. United States Steel Corp., 2011 FCA 176, 333 D.L.R. (4th) 1, at paras. 76-77.

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, 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.105

Reliance upon AMPs to enforce regulatory laws has become increasingly prevalent.106

Whereas contraventions of regulatory regimes were historically addressed through the prosecution of regulatory offences by Crown prosecutors (such as in Sault Ste Marie), there are now numerous provincial and federal statutes that provide for AMPs to be imposed directly by the regulator, including in such areas as securities regulation,107 consumer protection,108 taxation,109 environmental protection,110 energy regulation,111 telecommunications,112 agriculture and food

105 Ibid at paras 76-77. 106 See, for e.g., Law Commission of Ontario, Modernizing the Provincial Offences Act: A New Framework and Other Reforms (Final Report, August 2011) (Toronto: Law Commission of Ontario, 2011) [LCO Report] at p 51, where it is noted that the use of AMPs appears to be steadily increasing in Ontario and elsewhere in Canada with 21 statutes in Ontario establishing various different AMPs. Online at: http://www.lco- cdo.org/wp-content/uploads/2011/10/POA-Final-Report.pdf. See also Amanda Tait, The Use of Administrative Monetary Penalties in Consumer Protection (Ottawa: Public Interest Advocacy Centre, 2007) at 7 [Tait]. 107 See, for e.g., the Securities Act, RSA 2000, c S-4, s 199; Securities Act, RSO 1990, c S.5, s 127(1)9. 108 See, for e.g., the Competition Act, RSC 1985, c C-34, s 74.1; Fair Trading Act, RSA 2000, c F-2, ss 158.1-160, and the Administrative Penalties (Fair Trading Act) Regulation, AR 135/2013, thereunder; Business Practices and Consumer Protection Act, SBC 2004, c 2, s 164-167. 109 See, for e.g., the Income Tax Act, RSC 1985, c 1 (5th Supp), s 163. 110 See, for e.g., Environmental Violations Administrative Monetary Penalties Act, SC 2009, c 14, s 126; the Environmental Protection and Enhancement Act, RSA 2000, c E-12, s 237, and the Administrative Penalty Regulation, AR 23/2003, thereunder; and the Environmental Protection Act, RSO 1990, c E 19, ss 182.1-182.5. 111 See, for e.g., the National Energy Board Act, RSC 1985, c N-7, Part IX, and the Administrative Monetary Penalties Regulations (National Energy Board), SOR/2013-138, thereunder; Alberta Utilities Commission Act, SA 2007, c A-37.2, s 63; Ontario Energy Board Act, 1998, SO 1998, c 15, Sched B, s 112.5. 112 See, for e.g., Telecommunications Act, SC 1993, c 38, ss 72.001-72.2.

32 safety,113 and occupational health and safety.114 AMPs have become a favorite tool among regulators and have been increasingly used to engender compliance and cooperation from the regulated community.115 One need only look so far as the recent annual reports of various regulators to spot the trend.116

AMPs are levied by regulators in accordance with various different procedures either expressly set out in their governing legislation or established through their own rules of procedures.

Though subject to the principles of procedural fairness,117 AMP schemes generally provide fewer protections than formal regulatory prosecutions.118 For example, in some instances an AMP will be imposed immediately upon detection of a non-compliance, subject only to the party’s ability to have the assessment reviewed.119 AMP schemes of this nature bring the concept of absolute liability to a new level as there is not even a formal process pursuant to which the actus reus of the contravention can be challenged prior to the penalty being levied. Moreover, the educative value of a trial or hearing process is entirely lost in such schemes. Other AMPs are levied only after a hearing process (whether written or oral), but where the rules of evidence are relaxed and the

113 See, for e.g., Agriculture and Agri-Food Administrative Monetary Penalties Act, SC 1995, c 40. 114 See, for e.g., the Occupational Health and Safety Act, RSA 2000, c O-2, s 40.3; and Administrative Penalty (Occupational Health and Safety Act) Regulation, AR 165/2013, thereunder. 115 Tait, supra note 106 at 5. 116 See, for e.g., the 2017 Annual Report of the Alberta Securities Commission, which shows zero prosecutions commenced between 2015 and 2017, but over $6.4 Million in AMPs levied: Alberta Securities Commission, 2017 Annual Report (Calgary: Alberta Securities Commission, 2017) at 18, online at: http://www.albertasecurities.com/Publications/17-00056-2017_Annual_Report_Digital_v9a.pdf. Similarly, in the 2015- 2016 fiscal year, the Ontario Securities Commission completed 26 proceedings before the Commission resulting in AMPs, disgorgement orders and settlement amounts totaling over $59 million, and only 9 prosecutions in court: Ontario Securities Commission, 2017 Annual Report (Toronto: Ontario Securities Commission, 2017) at 15, online at: http://www.osc.gov.on.ca/documents/en/Publications/Publications_rpt_2017_osc-annual-rpt_en.pdf. 117 In Cardinal v Kent Institution, [1985] 2 SCR 643 at para 14, the Supreme Court of Canada held that there is a duty of procedural fairness lying on every public authority making an administrative decision that is not of a legislative nature and which affects the rights, privileges or interests of an individual. In its Final Report regarding AMPs, the Law Reform Commission of Saskatchewan recommended the following minimum procedural rules be included in all statutes creating AMPs to meet the duty of procedural fairness: (i) Reasonable notice of intention to impose an administrative penalty; (ii) an opportunity for the subject of the complaint to be heard and make a written submission before an administrative penalty is imposed; and (iii) reasons for decision should be given when an administrative penalty is imposed: Law Reform Commission of Saskatchewan, Administrative Penalties: Final Report (Saskatoon: Law Reform Commission of Saskatchewan, 2012). 118 LCO Report, supra note 106 at 52. 119 Ibid at 50; See also Tait, supra note 106 at 10.

33 evidence is considered on a lesser standard of proof than would otherwise be required in a regulatory or criminal prosecution (i.e. on the balance of probabilities as opposed to the criminal standard of beyond a reasonable doubt).120

In many AMP schemes, the due diligence defence has either been expressly excluded or has not been made available in practice.121 Blanket exclusions of the due diligence defence to any

AMPs levied are common under federal regimes and can be found in statutes including the

Environmental Violations Administrative Monetary Penalties Act,122 the Agriculture and Agri-

Food Administrative Monetary Penalties Act,123 and the National Energy Board Act.124 Provincial statutes, on the other hand, are more commonly silent on the issue of whether the due diligence defence is available, and there are divergent administrative and judicial precedents addressing whether the defence should be available under such circumstances.

Before proceeding to consider the precedents considering whether the due diligence defence is available in certain administrative enforcement matters, it should be noted that my critique is in no way intended to criticize the value or usefulness of AMPs in enforcing regulatory requirements. Notably, AMPs are commonly viewed as a more efficient alternative to the court process in appropriate cases in that they are generally processed more expeditiously, at a lesser cost, and allow for determinations to be made by parties with expertise in the regulated area.125 In his final report on regulatory penalties to the UK Ministry of Justice, Professor Macrory recommended that regulators have access to a flexible set of modern fit for purpose sanctioning

120 Ibid at 52. See, for e.g., s. 127(4) of the Securities Act, RSO 1990, c S.5. 121 Ibid at 52-54. See also Archibald and Jull, supra note 66 at 15-20. 122 Supra note 110 at s 11. 123 Supra note 113 at s 18. 124 Supra note 111 at s 140. 125 LCO, supra note 106 at 52; Tait, supra note 106 at 12. See also R.M. Brown, “Administrative and Criminal Penalties in the Enforcement of Occupational Health and Safety Legislation” 30 Osgoode Hall L J 691 (1992) at 727-731 [Brown].

34 tools, noting that although criminal prosecutions can be an effective tool in some circumstances, too heavy reliance on criminal sanctions can be ineffective given that the cost of bringing criminal proceedings deters regulators from using their limited resources to take action. McCrory referred to this as a “compliance deficit”.126 Accordingly, AMPs should be understood as a valuable tool in the regulator’s toolkit. My concern, rather, is that as AMP schemes increasingly displace regulatory prosecutions as the preferred mechanism to enforce regulatory compliance, legislators and regulators not lose sight of the benefits of the due diligence defence, fully realized through a trial or equivalent process, that are outlined in the first part of this paper. Such benefits accrue not just to the party facing the enforcement proceeding, but also to the regulator, other regulated parties and the community at large.

c. Applicability of Sault Ste Marie to Administrative Sanctions

Some decision-makers have taken a narrow view that the classification system set out in

Sault Ste Marie applies only to offences prosecuted in court. Others have taken a broader view, extending the analysis in Sault Ste Marie to statutory non-compliances that are redressed administratively. The broader view posits that, like regulatory offences, regulatory violations leading to AMPs should be presumed to be strict liability violations unless the statute expressly states otherwise. For the reasons outlined below, I favour the extension of the Sault Ste Marie classification system to AMPs such that AMPs are presumptively strict liability violations and the due diligence defence is available in the absence of express statutory language to the contrary.

Given the quantum of AMPs and the consequences associated with administrative sanctions, which

126 Richard B. Macrory, Regulatory Justice: Making Sanctions Effective, Final Report (UK Government, November 2006) at 15-16, online at: http://webarchive.nationalarchives.gov.uk/20121205164501/http://www.bis.gov.uk/files/file44593.pdf; see also Brown, supra note 125 at 732- 733.

35 often mirror those of fines and other consequences arising from regulatory prosecutions, there does not seem to be much of a principled basis upon which to make the due diligence defence available in one context and not the other.127 I am not here making an argument for the extension of section

11 Charter protections to AMPs or arguing that AMPs imposed on an absolute liability basis are necessarily unconstitutional. The Supreme Court of Canada has left little room for such arguments after Guindon, Re B.C. Motor Vehicle Act and Pontes.128 Rather, my argument is that the rationale underpinning the decision in Sault Ste Marie is also applicable to the enforcement of public welfare legislation through AMPs and should be applied as a principled evolution of the common law.129

Decision-makers taking the narrow view (that the Sault Ste Marie categorization scheme and interpretive principles should not be extended to AMPs) often cite the early decision of the

Ontario Divisional Court, in Gordon Capital Corp. v. Ontario (Securities Commission).130 In

Gordon, the Court refused to recognize the availability of the defence of due diligence in the context of disciplinary proceedings for breaches of take-over bid provisions under Ontario’s

Securities Act despite the fact that the Court acknowledged that the defence would be available if charges had been laid and prosecution taken place under the Act for the very same conduct. In this regard, the Court stated:

Of course if Gordon had been charged with breaches of the Act under s. 118, the defence of due diligence would have been available to it. Such charges result in criminal or quasi-criminal proceedings

127 It can be argued that there is more stigma attached to a conviction for a regulatory offence than for an AMP, but stigma has always been a nebulous touchstone. Furthermore, increased stigma (such as, for example, that derived from media coverage) for AMPs should be encouraged to increase their effectiveness in deterring regulatory non-compliance and increasing corporate social responsibility. 128 Supra notes 95 and 103. 129 In this regard, it is worth noting that in supporting the creation of the middle-ground strict liability offence, which based liability on a negligence standard, Dickson stated: “Although enforced as penal laws through the utilization of the machinery of the criminal law, the offences are in substance of a civil nature and might well be regarded as a branch of administrative law to which traditional principles of criminal law have but limited application. They relate to such everyday matters as traffic infractions, sales of impure food, violations of liquor laws, and the like. In this appeal we are concerned with pollution” (emphasis added): Sault Ste Marie, supra note 2 at para 1. 130 (1991), 1 Admin. L.R. (2d) 199; [1991] OJ No 934 (QL)(ONCJ) [Gordon cited QL]. See also MacMillan Bloedel Ltd. v British Columbia Ministry of Forests, (1997) 23 CELR (NS) 47; 1997 CarswellBC 718, where the BC Forest Appeals Commission held that the due diligence defence was not available in respect of an AMP levied under BC’s Forest Practices Code for harvesting timber without authorization.

with penal consequences; a conviction under s. 118 can lead to a fine or imprisonment or to both.

The decisions in the last mentioned cases support the proposition that the classification of criminal and quasi-criminal offences into categories of "absolute liability", "strict liability" and full "mens rea" as defined in R. v. Sault Ste. Marie is irrelevant to proceedings under ss. 26(1). The fact that Gordon may have acted without malevolent motive and inadvertently is not determinative of the right of the OSC to exercise its regulatory and discretionary powers to impose a sanction upon Gordon.

For the above reasons, Gordon has failed to demonstrate that the OSC has committed any error in law in rejecting the defence of due diligence.131

Absent from the decision in Gordon is any critical analysis as to why the analysis in Sault

Ste Marie is irrelevant in the context of administrative sanctions, which did not exist at the time

Sault Ste Marie was decided. It is telling that in Sault Ste Marie, the City was charged with causing or permitting a discharge of pollutants under the Ontario Water Resources Act – a matter that could now be redressed through the administrative imposition of an environmental penalty (and one significantly larger than the fine that was at issue.132

The findings in Gordon can be contrasted against those of the Federal Court of Appeal in

Canada (Attorney General) v Consolidated Canadian Contractors Inc.,133 endorsing the approach taken by Bowman T.C.J. in the lower court decision in Pillar Oilfield Projects Ltd. v R.134 In

Consolidated, the Court was asked to determine whether the due diligence defence is available to persons otherwise subject to an automatic penalty for failing to remit the correct amount of GST,

131 Ibid. at 7. 132 Ontario Water Resources Act, RSO 1990, c O.40, s 106.1. 133 [1999] 1 FC 209; [1998] FCJ No 1394 (QL) (FCA) [Consolidated cited to QL]. 134 (1993), 2 GTC 1005; [1993] TCJ No 764 (QL) (TCC) [Pillar cited to QL].

37 as required under the Excise Tax Act.135 As the Act did not expressly provide for such a defence, the issue turned on whether it could be validly implied. In response to the Crown’s argument that the due diligence defence could not be extended to administrative penalties because Sault Ste

Marie was authority for the proposition that the defence was only available for regulatory offences, the Federal Court of Appeal undertook a considered analysis of Sault Ste Marie and the underlying rationale for strict liability and the defence of due diligence. The Court correctly noted:

In my opinion, the true precedential significance of Sault Ste. Marie lies in the fact that it recognizes strict liability offences for which the defence of due diligence is available. It does not stand for the proposition that the defence of due diligence can be invoked only if a public welfare or regulatory offence is involved. That issue was not before the Supreme Court. Hence, in my view, it is open to this Court to determine whether the defence of due diligence may, as a matter of principle, be raised in the context of administrative penalties.136

[Emphasis added]

In considering whether the concept of strict liability should be extended to administrative penalties, and ultimately concluding that the same exercise of statutory interpretation endorsed in

Sault Ste Marie to distinguish between absolute and strict liability offences should apply to administrative penalties, the Court stated:

135 RSC 1985, c E-13, s 280. In Pillar, supra note 134, Bowman J. found that the s 280(1) of the Excise Tax Act was a strict liability violation that was susceptible to being challenged where the taxpayer was able to demonstrate due diligence. He concluded that no policy reasons suggested themselves for treating offences and administratively imposed penalties differently, noting that AMPs can be substantial and in some cases crippling. Absolute liability for such penalties could not be justified as a deterrent where the omissions or errors which the penalties sought to deter could not have been avoided even by the exercise of the very due diligence that the imposition of the penalties is purportedly designed to encourage. He also held that the fact that permitting a defence of due diligence may be administratively burdensome to the Department of National Revenue was no justification for interpreting s. 280 as not permitting a due diligence defence. At para 17, he stated: “That a person should be susceptible of being penalized administratively by a public servant without any possibility of exculpating himself by demonstrating due diligence is not only extraordinary. It is abhorrent. It is no less abhorrent because it is mechanically and routinely imposed by anonymous revenue officials and therefore qualifies for the essentially meaningless rubric ‘administrative’ rather than ‘criminal’. A punishment is a punishment. Neither its nature nor its effect is tempered by the use of palliative modifiers” (emphasis added). While I tend to agree with this blunt sentiment, the Supreme Court of Canada’s decision in Guindon, supra note 103, suggests that AMPs generally will not be considered punitive (i.e. a punishment) but rather will be viewed as an amount to promote compliance with the relevant regulatory scheme. Whether an AMP is a true penal consequence will be assessed with reference to a number of factors. In short, it seems that a punishment is not a punishment in some circumstances. 136 Consolidated, supra note 133 at para 20.

…[Sault Ste Marie] does not address whether administrative penalties entail absolute or strict liability. I know of no common law rule that would disallow a due diligence defence with respect to administrative penalties. For greater certainty, I take the position that there is no valid basis for maintaining absolute liability for all administrative penalties. I would adopt the reasons of Justice Dickson in Sault Ste. Marie, in which he rejected the argument that strict liability was inapplicable to regulatory offences, and apply those reasons to administrative penalties.

To reiterate those reasons, there is no evidence that absolute liability has the effect of causing adherence to a higher standard of care. I am similarly unpersuaded that recognition of a due diligence defence would lead to inefficiency in the enforcement of legislation. With respect to penalties of an inconsequential nature, and cases where there is no convenient forum to determine whether due diligence has been established, absolute liability attaches according to the criteria set out in Sault Ste. Marie. [No one is going to accept, for example, that a due diligence is available for penalties imposed on over-due accounts payable, any more than one would expect to be able to plead due diligence with respect to parking meter violations.]

I admit that there is a significant difference between regulatory offences which give rise to the possibility of incarceration, and administrative penalties which are necessarily restricted to fines. I also accept that there is much less "stigma" attached to the payment of a penalty than to a conviction. Both of these factors were relevant in Sault Ste. Marie in deciding to recognize strict liability offences. However, I also realize that not every regulatory offence entails imprisonment.137 Indeed, the absence of incarceration as a penalty has not dissuaded the Supreme Court from adjudicating on whether an offence entailed strict as opposed to absolute liability: see for example R. v. Pontes, [1995] 3 S.C.R. 44, where the penalty for the absolute liability offence of driving without a licence was limited to a fine of not less than $300 and not more than $2,000…

In conclusion, I am of the opinion that administrative penalties may give rise to either strict or absolute liability. I am also of the view that, in deciding whether a due diligence defence is available in any one case, the application of conventional interpretative principles cannot be avoided. Thus, and as will be discussed below, the analytical framework outlined by Justice Dickson in Sault Ste. Marie is consistent with the "modern approach" to statutory interpretation,

137 Indeed, where the party charged with the regulatory offence is a corporation, imprisonment is never at issue and, in this sense, the imposition of a fine or an AMP can have similar impacts on a corporation.

which involves a contextual and purposive analysis of the legislation in question.138 [Emphasis added]

Having regard to the analytical framework outlined in Sault Ste Marie, the Court determined that the Crown had not rebutted the presumption in favour of strict liability as the due diligence defence was neither incompatible with the legislative scheme nor frustrated or undermined the purpose of the underlying scheme.

The approach taken in Consolidated was preferred over that in Gordon by the New

Brunswick Court of Appeal in 504174 N.B. Ltd. (c.o.b. Choo Choo's) v. New Brunswick (Minister of Public Safety).139 The Court held that the due diligence defence was available in the case of a violation under New Brunswick’s Liquor Control Act140 resulting in an AMP in the amount $1,000 and a 2-day licence suspension. Contrary to the finding in Gordon that it was irrelevant that the due diligence defence would have been available had the regulator decided to address the non- compliance by way of prosecution instead of AMP, this was a relevant factor in Choo Choo’s, where the Court held:

In particular, I see no reason why the defence is not available to a person responding to an allegation that he or she violated section 126(3) of the Act by permitting an underage patron to remain in licensed premises. In my view, to paraphrase Robertson J.A. in Consolidated Canadian Contractors, such a recognition is not incompatible with the legislative scheme under the Liquor Control Act, nor does it frustrate or undermine the purposes underlying that scheme. It also seems to me to be incongruous at best not to recognize the availability of the defence, considering the grave consequences that may flow for violation of this particular provision of the Act along with the fact that the defence would be available if

138 Ibid at paras 21-24. 139 2005 NBCA 18 [Choo Choo’s]. 140 RSNB 1973, c L-10.

the alleged violator, charged with an offence under the Act, responds to a charge of a quasi-criminal nature for the same conduct.141

[Emphasis added]

A similar conclusion was reached by the BC Court of Appeal in respect of BC’s liquor control legislation142 in Whistler Mountain Ski Corp. v British Columbia (General Manager

Liquor Control and Licensing Branch.143 In Whistler, the Court dealt with legislation in which two regimes for enforcement are established, one being quasi-criminal in nature where the prohibited act is an offence and can be prosecuted and the other being regulatory or disciplinary in nature where a violation is subject to administrative sanctions. The Court acknowledged the decision in Gordon, but preferred instead to follow the decision of the Northwest Territories Court of Appeal in Papa's Holdings Ltd v. Northwest Territories (Liquor Licensing Board),144 extending the due diligence defence to administrative sanctions under similar legislation in the Northwest

Territories. The Court noted that under BC’s regime, when proceeding administratively, the

General Manager had the power to fine, suspend and even cancel licenses. There were no limits on these powers, and the Court noted that such sanctions can have very serious consequences for a licensee. Given that the importance of the penalty (which the Court took to mean its significance) was a key consideration in Sault Ste Marie in determining whether the offence was one of absolute liability, the Court extended this analysis to the violations under consideration. Finding them to be strict liability violations, the Court ordered a new hearing to consider evidence in relation to the due diligence defence.145

141 Choo Choo’s, supra note 139 at para 27. 142 Liquor Control and Licensing Act, RSBC 1996, c 267. 143 2002 BCCA 46 [Whistler]. 144 [1987] NWTR 82 (NWTCA); [1986] NWTJ No 122 (QL) (NWTCA) [Papa’s cited to QL]. 145 Whistler, supra note 143 at paras 34-41.

Notwithstanding the foregoing decisions moving away from the dismissive approach taken in Gordon, the Ontario courts continue to endorse the view that the analysis in Sault Ste Marie is not applicable to regulatory violations that are redressed administratively rather than by prosecution. In Summitt Energy Management Inc. v. Ontario Energy Board,146 the Ontario

Superior Court held that the Ontario Energy Board erred in interpreting its governing legislation as allowing the defence of due diligence to be raised where parties are facing AMPs for regulatory non-compliances.147 The Court focused not on whether the analysis supporting the presumption of strict liability and the availability of the due diligence defence in Sault Ste Marie should be extended to administrative sanctions, but rather on the narrow question of whether the Appellant had actually been charged with a regulatory offence (as had been the City in Sault Ste Marie).

Finding that the Appellant had not been charged with a regulatory offence, the Court relied on

Gordon in determining that Sault Ste Marie (and the due diligence defence) was simply irrelevant.148

Notably, in reaching its decision in Summitt, the Court appears to have conflated the issue of the applicable standard of proof with the availability of the due diligence defence. The finding that the regulatory contravention (i.e. the actus reus of the violation) need only be proven on the civil standard of the balance of probabilities is an altogether separate issue from whether the regulated party should be afforded an opportunity to exculpate itself by proving that it took all reasonable steps to prevent the contravention.

146 2013 ONSC 318 [Summitt]. 147 Summitt Energy Management Inc. had been ordered, among other relief, to pay AMPs totalling 234,000: Summitt, ibid at para 35. 148 Ibid at paras 70-72.

Finally, it is worth noting that like the Ontario Energy Board prior to the decision in

Summitt, regulators appear to be favouring the availability of the due diligence defence in administrative enforcement proceedings where the defence has not been expressly excluded in the applicable legislation. This can be seen in the recent decision of the Alberta Securities Commission in Re Aikens,149 and of the administrative tribunal responsible for adjudicating the enforcement of

Quebec’s environmental legislation in Miron (Succession de) c Québec (Ministère du

Développement durable de l'Environnement et de la Lutte contre les changements climatiques),150 and in Excavation René St-Pierre inc. c Québec (Ministère du Développement durable de l'Environnement et de la Lutte contre les changements climatiques).151

d. Concluding Thoughts on the Applicability of Due Diligence to AMPs

As outlined above, AMPs are a valuable tool for regulators in seeking to enforce the regulatory standards that they oversee. They are, however, displacing some of the enforcement work that used to be accomplished through the prosecution of strict liability regulatory offences.152

Accordingly, it is incumbent upon legislators and regulators responsible for drafting and administering AMP regimes in public welfare legislation to give consideration to the underlying rationale for strict liability and whether it holds for the administrative sanctions they are designing and implementing today. While administrative efficiency is touted as the great benefit of AMPs, it should be recalled that this was equally the early argument in favour of absolute liability offences

– an argument which was ultimately rejected by the Supreme Court of Canada in Sault Ste Marie.

149 2018 ABASC 27 at paras 89-90. 150 2016 QCTAQ 454 (Tribunal administratif du Québec Section du territoire et de l'environnement) at paras 167-189. 151 2015 QCTAQ 2386 (Tribunal administratif du Québec Section du territoire et de l'environnement) at paras 55-65. 152 A commonly expressed concern, the full consideration of which is beyond the scope of this paper, is that regulators may rely excessively on AMPs and entirely forgo more cumbersome, costly and complex prosecutions. See Brown, supra note 125 at 735, who found that the two regulators he studied who had the ability to use AMPs and prosecute relied almost exclusively on AMPs.

I am prepared to admit that efficiency is a much more persuasive argument today than it was back in 1978 in light of the current overburdening of the provincial courts.153 The real efficiency gains inherent in AMP schemes, however, accrue by virtue of taking the prosecution of regulatory contraventions out of the court system, not by imposing penalties on the basis of absolute liability as opposed to any other type of liability for the contravention. These are discrete issues and should be treated as such by those responsible for designing and administering these schemes.

That is not to say that all AMPs should afford a due diligence defence. Just as some regulatory offences are absolute liability offences (traffic violations being a classic example), there are undoubtedly AMPs for relatively trivial regulatory violations for which the penalties are very small and for which the benefits of making the due diligence available as a defence will be outweighed by the costs. These assessments are for legislators to make. As for when it may be appropriate to legislate the imposition of an AMP on the basis of absolute liability, the following insights of Swaigen are helpful:

Where courts or legislatures treat an offence as one of absolute liability, there is usually an unstated premise: that the offence is one that is simple to avoid. Although it is very difficult to discern any “golden thread” among the cases that have decided an offence is one of absolute liability, these offences are frequently ones where the conduct is easy to control and manipulate, and the appropriate standard of care is well-known and simple to meet, so that the prohibited conduct is unlikely to occur if reasonable care is taken. Thus although the courts rarely articulate this, what they appear to be thinking in such cases is that a defence of reasonable care is not needed because it would rarely succeed. … Conversely, if an offence involves conduct that is difficult to control, or the standard of care is difficult to meet or not clearly articulated, it is obviously unfair to convict someone without giving him/her an opportunity to demonstrate a lack of fault. Nor will this serve the

153 See R v Jordan, 2016 SCC 27.

purpose of exposing in a public forum what the standard of conduct should be and the difficulties of meeting it.154 [Emphasis added]

In addition to circumstances where the penalty is very small, the foregoing suggests that AMPs should only be imposed on the basis of absolute liability where the contravention relates to conduct that is easy to control and in respect of which the appropriate standard of care is well known and simple to meet. In all other circumstances, the party should be afforded the opportunity to demonstrate that all reasonable care was taken. As in the case of regulatory offences, this ensures transparency and increased knowledge respecting applicable standards of care and available harm protection mechanisms.

Finally, for the reasons set out in Consolidated, the classification system outlined in respect of regulatory offences in Sault Ste Marie, should apply equally to AMPs for regulatory violations.

That is, in the absence of clear language in the applicable statute or regulations indicating that the

AMP will be imposed on the basis of absolute liability, the due diligence defence should presumptively be available.

IV. CONCLUSION

Perhaps I am being overly self-deprecating, but as I sit slumped over my keyboard tired, creased brow and with greys overwhelming my previously brown curls, I cannot help but think that Sault Ste Marie has weathered these last forty years better than I have. It continues to accomplish what it set out to where regulatory offences are concerned by avoiding penalizing those who are free of fault and by exposing regulators, industry and the public at large to better knowledge and expectations regarding ever-changing standards of care that make us all safer. The

154 Swaigen, supra note 1 at 53.

45 rationale underpinning the decision in Sault Ste Marie and the classification system that emerged from it remains relevant today, but it must be adapted to our new enforcement darling – the AMP, and the resurgence of absolute liability she brought with her.