LawNews - Issue 38

NEWS Oct 27, 2023 Issue 38

Inside ■ CRIMINAL

Battle looms over s 27 cultural reports, three strikes P06-07

■ TECHNOLOGY

Regulations needed for AI P10-11

Shakeout looms for retirement village

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SECTOR

Contents 03-05 DISCLOSURE CAPITAL GAIN CONTRACT

Retirement village operators fight to protect their lucrative bottom lines

LawNews is an official publication of The Law Association Inc. Editor: Jenni McManus Publisher: The Law Association Inc.

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08-09 CONSTITUTION LEVIES TAX

Australia’s highest court strikes down EV tax

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Oct 27, 2023 Issue 38

PROPERTY LAW

Retirement village operators, residents spar over proposed sector restructure There is a natural tension between retirement village operators’ capital-based models and the underlying provision of accommodation to sometimes vulnerable customers

Troy Churton

Diana Clement Retirement villages are popular with older people, but the business model is poised for a shake-up with proposed legislative change threatening to dent village operators’ bottom lines.

These operators are throwing considerable resources into reducing the impact of potential government ‘interference’. With the aim of improving protections for residents, the government has embarked on a comprehensive review of the legislative framework for retirement villages.

Governed by the Retirement Villages Act 2003, a 15-year-old code of practice and three sets of regulations, the retirement village sector looks set for a regulatory overhaul as signalled by its watchdog, Te Ara Ahunga Ora – Retirement Commission, in a 2020 white paper.

Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development (MHUD) subsequently released a 132-page review in August, The Retirement Villages Act 2003: Options for change. Key proposals include making disclosure statements shorter and less complex, forcing operators to be accountable for the actions of sales staff, standardising occupation rights agreements and a new disputes system. Submissions close on November 20.

Is this enough? Back in 2021, the Retirement Villages Residents’ Association told a parliamentary select committee that the business model was akin to a “quasi ponzi scheme” because residents are generally not entitled to share in any capital gains from the sale of their units but are usually forced to wear any losses.

Whether the review will survive the change of government is anybody’s guess.

statements with new plain-language documents with prescribed headings and maximum page and word counts; ■ occupation rights agreements (ORAs), by partially standardising them and considering whether certain terms could be declared unfair; ■ dispute resolution processes, by replacing the current complaints and disputes scheme with a new, independent, accessible scheme provided by either an appointed private dispute resolution scheme operator or a commissioner; ■ repair, replacement and maintenance responsibilities for operator-owned chattels, requiring operators to replace chattels and fixtures when they wear out, rather than charging residents; and ■ building standards, with new minimum quality standards similar to the Healthy Homes Standards for residential tenancies.

The review proposes the termination of weekly fees when units are vacated and quicker return of residents’ capital, and considers deferred maintenance fees and capital gains and losses.

Not miles apart The Retirement Villages Residents Association (RVR) has welcomed the review more warmly than the Retirement Villages Association (RVA), which represents most operators.

Troy Churton, a former lawyer who consults to the RVR, says residents have been lobbying the government for most of the last decade to highlight “unfair practices, [which create] suboptimal outcomes for residents”.

Churton spent six years at the Retirement Commission, has visited more than 200 villages, met with thousands of residents and authored the commission’s 2020 white paper, which led to the review. He says incoming residents and their families

Proposed changes The review proposes changes to: ■ disclosure requirements, by replacing existing disclosure

Continued on page 04 03

Continued from page 03

For a unit worth $600,000, an operator makes about $1 million over a seven-year tenure

often want to see only the positive side of their decision. It’s not until they’ve lived in the village for a period that the nuances or implications sink in.

There is a natural tension between retirement village operators’ capital-based models and the underlying provision of accommodation to sometimes vulnerable customers, he says.

The RVR has been conducting surveys of its 11,000 members, “which tend to paint a picture that there’s a lot of unhappiness on [certain] issues”. That data is seen by the RVA as unreliable though and its customer satisfaction surveys show that most residents are actually very happy in retirement villages.

“My own view is that yes, most of the residents are happy.

But for certain types of issues, they are very unhappy because they don’t actually have that much power in the contractual arrangement,” Churton says.

Broad agreement The “big six” operators – Ryman, Metlifecare, Summerset, Bupa, Oceania and Arvida – which between them hold almost twothirds of the country’s retirement living units, are either NZXlisted or large multinational organisations. At the other end of the scale are small church-run villages.

Churton says both the RVA and RVR have collaborated on solving most of the issues identified in his 2020 white paper. And the RVA has front-footed some of the proposals in the discussion paper, says Liz Rowe, a senior associate at MinterEllisonRuddWatts. But there are still different views on a variety of issues outlined in the paper.

On some issues, says Churton, the operators are throwing considerable resources into ensuring the least amount of change to the model. “They have a very profitable business model – and they don’t want too much government intervention impacting on that.”

Both agree that restrictive legislation could tie the hands of operators who want to offer models other than standard rightsto-occupy, together with service fees, deferred maintenance fees and loss of capital gain, Churton says. “It still remains for [agreed] issues to be formally addressed under the new framework and an updated statute because not all villages are members of the [RVA].”

Miles apart The two sides differ on key issues, “which go to the heart of the business model that provides profitability for the operators”, Churton says. The first is the repayment of capital once a resident dies or moves out. Currently, residents or their estates are not paid out until the unit is resold. Residents argue the operators are not incentivised to sell quickly. “It prolongs the fact that it’s the resident’s capital, which is helping to stump up the preferred model of the operators,” Churton says. “The [RVA] counters that and says 90% or so get relicensed within 04

nine months and having to wait for six or nine months is not disproportionate.”

The RVR argues that residents, when they buy units, provide interest-free loans to the operators in exchange for their occupancy. That’s confirmed in operators’ accounts, says Churton. A cost-benefit analysis posted on MHUD’s website with the review documents shows that, on average, for a unit worth $600,000, an operator makes about $1 million over a seven-year tenure from compounding interest, capital gain, development margin, deferred maintenance fees and the interest-free value of the capital.

The cost to operators of a 28-day mandatory buyback would be around $13,500, Churton says. “[If] you weigh that against the $1 million worth of revenue streams for the same unit, you start to get a different lens on the disparity of the pricing model and the opportunity to reset it.”

More gaps Another area in dispute is complaints. Complaints that can’t be sorted out in-house can be escalated to a statutory supervisor.

Residents have complained that supervisors aren’t sufficiently independent because they’re paid by the operators and don’t want to lose those contracts. The operators believe the system works well. Churton says most complaints get resolved between the resident and village, although he believes there is room in the framework for an independent industry advocacy service.

One of the other issues where both sides disagree, and is a continual cause of grievance, relates to the representation in disclosure documents of future developments and amenities.

Residents often choose a village because it has rest home and hospital-level services on the drawing board. These units sometimes never get built. Ditto the recreational facilities listed in marketing material. “[This may be] a key reason why they thought this village is going to be a good one to live in. Then a year later, they find that for whatever reason, usually commercial and business operational needs, [the work] is not happening or has been delayed,” Churton says. “There’s a vacuum about what pragmatic and realistically exercisable rights a resident has.”

Different views Michelle Burke, a partner at Anthony Harper Lawyers, acts for the RVA as well as several village operators, not all of which are RVA members. She says the system works well, evidenced by how many people choose to live in retirement villages.

“I think the association would say that is the proof that the system is fundamentally fit-for-purpose.” She notes her clients have a range of different views on some of the proposed reforms. “The views of a small church-operated village of, say, seven units is likely to be quite different to those of a large

Continued on page 05

Oct 27, 2023 Issue 38

Continued from page 04

Village operators have a very profitable business model and they don’t want too much government intervention impacting on that

corporate operator.”

The white paper canvasses the issues in a fair and open way although it’s fair to say operators might not agree with every statement, says Burke, who has some concerns about proposed disclosure documents that she believes mostly work well. She notes the review has picked up on the RVA’s best-practice guidelines for disclosure statements, a “very simple document, it’s only two pages long and [has] boxes where you can put in limited information”. The proposed information sheet is a more complex document, she says. “For example, it’s required quite a lot of detail about maintenance and repair, which at the moment is not a simple matter. And we don’t believe it’s suitable to have an initial comparison document which is going out to residents who are looking at different villages.”

More differences Another concern, Burke says, is suggestions that the ORAs residents sign should be standardised. Most villages operate on a loosely standard ORA model, which does not offer residents a share of the capital gain when they move out. She cites Freedom Lifestyle Villages as well as Vivid Living by Fletcher Building Group, both of which offer a different model to the big six village operators. “I am not that keen on a standardised form of occupational licence. And that is because I am concerned that it will stifle innovation.” The rights of an operator to terminate the ORA could be standardised because they’re set out in the code of practice. “But most of the other terms, you need to have some flexibility.”

Three of the 17 items in the review relate to residential care: rest homes, aged care hospitals and dementia care. Some residents are unaware that there is no guarantee of availability of this level of care should they need it, and the review proposes making this clearer. “It is to ensure that residents are aware of the reality that availability cannot be guaranteed. I’m completely supportive of that,” Burke says.

Operators are not keen on a new disputes system. “There is,

unfortunately, a perception that the system may not be easy to use and may be not fair to residents. I believe that it’s simply a perception, not a reality in my experience.” The current system works well, with disputes that villages can’t resolve being escalated to a statutory supervisor, Burke says.

“Statutory supervisors have the advantage that they understand how retirement villages work and can advocate in a neutral way for each other [party] to understand the position.

The types of systems proposed by the paper totally remove the statutory supervisor from the process. I think there’s a huge loss of IP there.”

Unintended consequences Burke warns that several of the proposals could cause unintended consequences and may affect the industry’s ability to continue to evolve the model to meet future demand and need. A one-size-fits-all rule on termination of weekly fees on exit, for example, may not work for a village where the resident has the responsibility of reselling the unit, she says. Issues around standardised ORAs and maintenance charges are also highlighted.

“Once you start saying, ‘if you don’t have an entitlement to capital gains, the operator must pay for all repairs of chattels and fixtures’, that’s fine. But potentially it might change another setting in the offering.” Burke questions whether the Retirement Villages Act should be amended to address matters when there is already other legislation in place that deals with the problems.

Unfair contract terms, which the review suggests addressing in new legislation, are already governed by the Commerce Commission, she says.

“It’s just muddling with the legislation, introducing a dual system. I do not think that’s appropriate when, [with] every other contract in New Zealand, in order to determine whether a term is unfair a complaint needs to be made to the Commerce Commission. I’m not sure why in one particular sector we would suddenly have not even a court making a decision on an unfair contract term.”

The same argument applies to the ORA and breaches of the Privacy Act, she says. ■

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CRIMINAL LAW

Incoming govt faces battle on cultural reports, three strikes and discount caps It might be time for that convention of judges speaking only through their judgments to take second place to a proper community understanding of exactly what is going on Jenni McManus If it stays true to its campaign promise, the incoming National government will sometime within the next 100 days remove taxpayer funding for “cultural” reports, put together under s 27 of the Sentencing Act 2002 to give judges detailed information about an offender’s background in a bid to reduce his or her sentence.

But if National’s likely coalition partner, Act, gets its way, these reports will be scrapped altogether.

Describing the system as “rotten”, Act leader David Seymour says cultural reports cost taxpayers $7.56 million – or $630,000 a month – in the year to 30 June 2023. That’s a 27% rise on the previous year’s $5.91m and a big jump on the year to 30 June 2018, when taxpayers stumped up only $3,333 a month for cultural reports.

Incoming Prime Minister Christopher Luxon says the practice has spawned a cottage industry that’s lowering sentences and taxpayers are footing the bill.

“National is going to unwind this growth. Offenders

will still be able to ask the court to hear from someone who knows them, but taxpayers won’t be paying for that,” he says.

Luxon also wants sentencing discounts capped at 40% and, most controversially, has pledged to reintroduce mandatory sentencing by reactivating the three-strikes law, which Labour repealed in August last year.

Unsurprisingly, those who work in criminal law predict the new government will have a massive fight on its hands, especially if Act prevails and offenders lose the ability to present cultural reports or have their backgrounds considered in some other way during sentencing.

Retired District Court Judge David Harvey, who sat in south Auckland for much of his 33 years on the bench, says he has kept a database of every case where s 27 was featured, along with an indication of what the discount level was. On average, most cases came in at 15%.

“And there are some cases where there has been a s 27 report and the judge has been able to say, ‘I can’t

find any contributing factors to the offending, any contributing link to the offending from what I’ve read in the s 27 report. Therefore, no discount’. Just because you’ve got a s 27 report doesn’t automatically mean you’re going to get a discount.”

For a mitigating factor to be taken into consideration, there must be a causal nexus between the matters raised in the report and the offending.

Because cultural reports are funded via legal aid, the simplest way of cutting taxpayer funding is to make legal aid no longer available for this purpose.

But Harvey notes s 27 makes no mention of written reports, meaning family members and others could still get up in court and have their say about the offender.

And s 27 reports could still be funded privately by offenders who could afford it.

Judges, he says, prefer written reports to oral submissions. “The reality of it is that this material is often so detailed and so dense that from a judicial point of view, you need some time to think about it and evaluate it.”

If Act gets its way and s 27 is repealed, Harvey says one should never under-estimate the creativity of lawyers and judges who will then turn to s 8 of the Sentencing Act which states the courts must take into

Continued on page 07

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Oct 27, 2023 Issue 38

Continued from page 06 account an offender’s personal, family, community and cultural background. A judge could therefore order a report to comply with s 8(i). “It’s conceivable that you could still get some kind of legal aid funding for that report under s 8(i) that you mightn’t get under s 27. I imagine they would anticipate that, so s 8(i) would then have to be repealed as well.

“This means that judges would be unable to take background into account, at least as far as the statute is concerned. But, as I say, never under-estimate the power of creativity of a judge or a lawyer because there’s another funny concept that lies in there – and it’s called ‘justice’. It would be unjust not to take into account the causes of crime so that we can address those causes by rehabilitation. And the only way we can take into account the causes of crime is to look at this guy’s background.”

Harvey is no fan of mandatory sentencing and does not support the reintroduction of the three-strikes law, nor a 40% cap on sentencing discounts.

“Even the staunchest redneck is going to recognise that every case is different.

And if they were going to do it to me, why I’d want my circumstances taken into account.”

Even the One way judges might get around the staunchest 40% cap is by lowering the starting point for redneck sentencing by 60%. “Let’s just say if you were to express a starting point as a range, you would is going to recognise that see the range for starting points as being a lot wider.” every case is On three strikes, he says judges need the different flexibility and discretion to deal with each case not only according to law but according to the circumstances of each case. “Three strikes really interferes with that. And we all know that there were occasions when judges would go through all sorts of intellectual gymnastics to avoid imposing a third strike when it would have been completely unjust to do so, when your third strike was still strikable, but it was something so trivial and minor that it didn’t warrant the maximum.

“If they try to bring these things in, they’re going to have a fight on their hands that you wouldn’t believe.” Not just with the Criminal Bar Association but the bar at large “and, I think, the wider legal profession who are still interested in justice will really get their dander up in a big way”.

A solution, he says, might be for the judiciary to take the lead and do something radical and unconventional and start explaining to the community what’s happening and why.

“If the Chief District Court Judge or the Chief Justice or the President of the Court of Appeal or the Chief High Court Judge were to say ‘there’s been a lot of talk about sentencing discounts and how long they are. This is why we do it, and this is how we do it. And we’re doing it according to law.

“We’re not making this up as we go along. It’s all there in the Sentencing Act, and we’re just applying the Sentencing Act’ and explain it that way. ‘This isn’t some left-wing pat them on the head and send them away. This isn’t like Andrew Coster’s community policing by consent or anything like that. This is making the law work in a fair and just way.’

“And it might be time for that convention of judges speaking only through their judgments to take second place to a proper community understanding of exactly what is going on.” ■ Read more here ■

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CASE NOTE

High Court of Australia strikes down Victoria’s EV tax Reweti Kohere

The ZLEV charge seemingly was a tax on consumption

Constitutional law (Cth) – Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) – duties of excise – exclusive power of Commonwealth Parliament – scope and operation of s 90 of constitution – definition of duties of excise – tax on the consumption of goods

Vanderstock & Anor v State of Victoria [2023] HCA 30 From 1 July 2021, s 7(1) of the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) required registered electric vehicle (EV) drivers to pay an annual charge to the state of Victoria for using their vehicles on effectively all public roads in Australia. The charge was based on the number of kilometres they had driven in the preceding 12 months.

Christopher Vanderstock and Kathleen Davies were registered EV drivers living in Victoria. They had been issued with invoices for, and had paid, the charge.

In September 2021, supported by the Commonwealth Attorney-General and the Australian Trucking Association, Vanderstock and Davies sued Victoria in the original jurisdiction of the High Court. The attorneys-general of the other states and territories of Australia intervened also, in support of Victoria.

Precedent and submissions The plaintiffs challenged the constitutional validity of s 7(1) of the Act, arguing it was invalid because it imposed a “duty of excise” within the meaning of s 90 of the Constitution.

Under s 90, only the Commonwealth Parliament has the authority to impose duties of customs and excise. This meaning had been accepted, by a majority in Dickenson's Arcade Pty Ltd v Tasmania (1974) 130 CLR 177, as referring to an inland tax “on production, manufacture, sale or distribution of goods”.

Dickenson’s Arcade held a tax on goods imposed at the stage of consumption did not constitute an excise duty.

In Vanderstock and Davies’ case, the ZLEV charge seemingly was a tax on consumption. The plaintiffs argued the court should reopen and overrule Dickenson’s Arcade, to read 08

The state and territory attorneysgeneral submitted that overruling Dickenson’s Arcade could leave some categories of taxation open to challenge

s 90 as including the ZLEV charge.

Victoria argued the ZLEV charge was not an excise – it was a tax on an activity, not on a good. Alternatively, a tax on consumption was not an excise and Dickenson’s Arcade should be affirmed, or that an excise under s 90 should be read as a “tax that falls selectively upon locally produced goods” in accordance with the minority judgments in Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561 and Ha v New South Wales (1997) 189 CLR 465.

The state and territory attorneys-general submitted that overruling Dickenson’s Arcade could leave some categories of taxation open to challenge.

Two issues were before the court: whether an inland tax imposed on the consumption of goods could constitute a duty of excise within s 90 and, if so, whether the ZLEV charge was a duty of excise.

Majority decision Kiefel CJ and Gageler and Gleeson JJ, with Jagot J in agreement, found in the plaintiffs’ favour: s 7(1) of the Act was invalid.

The purpose of s 90 is to give the Commonwealth Parliament exclusive control of the taxation of goods to ensure state or territory taxation of goods does not hamper or defeat uniformity in federal trade, commerce or taxation policy.

In reopening and overruling Dickenson’s Arcade, the court held an excise within the meaning of s 90 included an inland tax on goods imposed at any stage of their life cycle. Taxing consumption could depress demand for goods in the same way taxes on production, manufacture, sale or distribution could because it would increase the cost of goods to consumers; they would factor it into the price they were prepared to pay.

Because of this tendency to depress demand, a state tax on the consumption of goods could hit the flow of trade in goods into and out of the states or territories. To limit taxes on goods to just production and distribution was irreconcilable with s 90, the

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Oct 27, 2023 Issue 38

Continued from page 08

majority said.

To determine whether a tax is a tax on goods, and therefore a duty of excise, the majority held the tax must satisfy two elements. It must: ■ bear a close relation to the production or manufacture, sale, distribution or consumption of goods; and ■ affect the goods as the subjects of manufacture or production or as articles of commerce.

The ZLEV charge met the criteria. It had a close relation to the use of EVs and it affected such vehicles as articles of commerce because it tended to affect demand for EVs.

Dissents

The purpose of s 90 is to give the Commonwealth Parliament exclusive control of the taxation of goods

While the minority took largely differing approaches in their dissents, their collective criticism took aim at the majority’s inappropriate broadening of the meaning of excise.

Consequently, the court’s decision would have significant implications for any future state taxes on goods more generally.

Unlike Gordon and Edelman JJ, Justice Steward held the ZLEV charge was not a tax on goods at all. In accepting Victoria’s submission, the judge said the charge was a tax on the use of EVs in defined circumstances, rather than a tax on the vehicle itself. If it were a tax on consumption, however, Steward J said Dickenson’s Arcade should not be reopened as it still had value as a precedent: once out of the stream of production and distribution, taxes on goods were not duties of excise.

Justice Gordon, in relying on authority that said duties of excise must affect goods as the subjects of “articles of commerce”, said excise was essentially a “trading tax” as it concerned the commercial dealing in commodities (a point Steward J also made). Such taxes naturally tended to enter into the purchase price of goods, in contrast to taxes on consumption, which didn’t have that effect.

The judge criticised the majority’s view that the assessment required determining whether a tax tended to depress demand.

The effect that a tax would have on demand or the market for goods would depend on several complex factors, including its

size, consumer preferences, the regulatory environment, its relationship with any complementary goods and the purchase price of other substitutes.

Gordon J also warned the new rule would “radically” affect the ability of the states and territories to raise taxation revenue. Years of litigation would follow as the courts sought to determine how the new rule would work.

Edelman J discerned from the authorities three constraints on the meaning or application of an excise: a tax must anticipate a “real and substantial” economic effect in a market for the sale of goods; that economic effect must be on the supply-side of that market; and the supply-side economic effect must directly arise in that market for the sale of goods.

The judge viewed the majority’s decision as amounting to a removal of the second and third constraints. The majority’s conception of demand also rested on false economic assumptions. Edelman J also alluded to certain other taxes (on gifts or inheritances, payroll, land and other consumption-based goods) as being on uncertain constitutional ground because of the new rule.

Applicable principles: Constitutional law (Cth) – duties of excise – exclusive power of Commonwealth Parliament – scope and operation of s 90 of Constitution – whether s 7(1) of the ZLEV Charge Act 2021 (Vic) purported to oblige registered operator of ZLEV to pay a charge for use of vehicle on specified roads – whether specified roads included all roads in Victoria and all public roads elsewhere in Commonwealth – whether ZLEV charge properly characterised as tax on goods – whether definition of duty of excise stated in Capital Duplicators [No 2] and Ha as tax on production, manufacture, sale or distribution of goods exhaustive or descriptive – where application for leave to reopen Capital Duplicators [No 2] and Ha refused – whether inland tax on goods imposed at stage of consumption answers description of duty of excise – whether Dickenson's Arcade should be reopened and overruled.

Held: by majority, s 7(1) of the ZLEV Charge Act is invalid on the basis it imposes a duty of excise within the meaning of s 90 of the Constitution. ■ Click here to read case ■

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TECHNOLOGY/PRIVACY

Police are using AI to catch criminals but the law urgently needs to catch up The use of SearchX and other AI programs raises questions about the invasive nature of the technology, inherent biases and whether New Zealand’s current legal framework will be enough to protect the rights of everyone

The use of artificial intelligence (AI) by New Zealand police is putting the spotlight on policing tactics in the 21st century.

A recent Official Information Act request by Radio New Zealand revealed the use of SearchX, an AI tool that can draw connections between suspects and their wider networks. SearchX works by instantly finding connections between people, locations, criminal charges and other factors likely to increase the risk of harm to officers.

Police say SearchX is at the heart of a $200 million front-line safety program, primarily developed after the death of police constable Matthew Hunt in West Auckland in 2020, as well as other recent gun violence.

But the use of SearchX and other AI programs raises questions about the invasive nature of the technology, inherent biases and whether New Zealand’s current legal framework will be enough to protect the rights of everyone.

Controversial technologies At this stage, New Zealanders have only a limited view of the AI programs being used by the police. While some of the programs are public, others are being kept under wraps.

Police have acknowledged using Cellebrite, a controversial phone hacker technology. This program extracts personal data from iPhones and Android mobiles and can access more than 50 social media platforms, including Instagram and Facebook.

Read more: AI profiling: the social and moral hazards of ‘predictive’ policing The police have also acknowledged using BriefCam, which aggregates video footage, including facial recognition and vehicle 10

There is no legal framework for the use of AI in New Zealand, much less for the police use of it

licence plates. Briefcam allows police to focus on and track a person or vehicle of interest. Police claim Briefcam can reduce the time analysing CCTV footage from three months to two hours.

Other AI tools such as Clearview AI, which takes photographs from publicly accessible social media sites to identify a person, were tested by police before being abandoned.

The use of Clearview was particularly controversial as it was trialled without the clearance of the police leadership team or the Privacy Commissioner.

Eroding privacy?

The promise of AI is that it can predict and prevent crime. But there are also concerns about the use of these tools by police.

Cellebrite and Briefcam are highly intrusive programs. They enable law enforcement to access and analyse personal data without people realising, much less providing consent.

But under current legislation, the use of both programs by

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Photo: alashi / Getty Images

Alexandra Sims

Oct 27, 2023 Issue 38

Continued from page 10 police is legal. The Privacy Act 2020 allows government agencies – including police – to collect, withhold, use or disclose personal information in a way that would otherwise breach the act, where necessary for the “maintenance of the law”.

Privacy is not the only issue being raised by the use of these programs. There is a tendency to assume decisions made by AI are more accurate than humans, particularly as tasks become more difficult.

This bias in favour of AI decisions means investigations may harden towards the AI-identified perpetrator rather than other suspects. Some of the mistakes can be tied to biases in the algorithms. In the past decade, scholars have begun to document the negative impacts of AI on people with low incomes and the working class, particularly in the justice system.

Read more: Australian police are using the Clearview AI facial recognition system with no accountability Research has shown ethnic minorities are more likely to be misidentified by facial recognition software.

AI’s use in predictive policing is also an issue as AI can be fed data from over-policed neighbourhoods, which fails to record crime occurring in other neighbourhoods. The bias is compounded further as AI increasingly directs police patrols and other surveillance onto these already over-policed neighbourhoods.

This is not just a problem overseas. Analyses of the New Zealand government’s use of AI have raised a number of concerns, such as the issue of transparency and privacy, as well as how to manage “dirty data” – data with human biases already baked in before it is entered into AI programs.

Updated laws There is no legal framework for the use of AI in New Zealand, much less for the police use of it. This lack of regulation is not unique, though. Europe’s long-awaited AI law still hasn’t been

Alexandra Sims

New Zealanders are left relying on police to monitor themselves

implemented.

That said, New Zealand Police is a signatory to the Australia New Zealand Police Artificial Intelligence Principles. These establish guidelines around transparency, proportionality and justifiability, human oversight, explainability, fairness, reliability, accountability, privacy and security.

The Algorithm Charter for Aotearoa New Zealand covers the ethical and responsible use of AI by government agencies.

Read more: AI could be a force for good – but we’re currently heading for a darker future Under the principles, police are meant to continuously monitor, test and develop AI systems and ensure data are relevant and contemporary. Under the charter, police must have a point of contact for public inquiries and a channel for challenging or appealing decisions made by AI. But these are both voluntary codes, leaving significant gaps for legal accountability and police antipathy.

And it’s not looking good so far. Police have failed to implement one of the first – and most basic – steps of the charter: to establish a point of inquiry for people who are concerned by the use of AI. There is no special page on the police website dealing with the use of AI, nor is there anything on the main feedback page specifically mentioning the topic.

In the absence of a clear legal framework, with an independent body monitoring the police’s actions and enforcing the law, New Zealanders are left relying on police to monitor themselves.

AI was barely on the radar ahead of the 2023 election. But as it becomes more pervasive across government agencies, New Zealand must follow Europe’s lead and enact AI regulation to ensure police use of AI doesn’t cause more problems than it solves. ■ Alexandra Sims is an Associate Professor in Commercial Law at the University of Auckland ■ The above first appeared in The Conversation and is republished with permission

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