Contents

Appendix 2
Non-criminal penalties in other jurisdictions

Australia

Civil penalties are an established part of the Australian regulatory landscape at both state and federal level, and cover broader areas of the law than in New Zealand. They are found for example in competition law, company law, environmental law, superannuation, telecommunications and anti-spam legislation.590  As in New Zealand, they are imposed in judicial proceedings.

Their use is growing, for instance the Competition and Consumer Act 2010 (Cth) relies heavily on civil penalties. They have also (along with administrative penalties) been the subject of a comprehensive review by the Australian Law Reform Commission (ALRC), commenced in 2000 (see below). In general, they tend to have attracted a greater degree of scrutiny and interest from various quarters.

As in New Zealand their place in the regulatory regime varies. In some Acts they are the sole enforcement mechanism (along with other civil orders)591  and in others they provide a parallel enforcement mechanism (alongside criminal penalties) for less egregious, non-intentional contraventions.592  The quantum of maximum penalties varies between regimes. Notably, many Australian regimes frame their penalties as “units” defined under the Crimes Act 1914 (Cth). Section 4AA of that Act currently fixes a penalty unit at AD$110.
The procedural provisions of the civil penalty regime in the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) have been put forth as a proposed model capable of being applied to a range of civil penalty regimes by the Attorney-General's Guide to Framing Commonwealth Offences, Civil Penalties, and Enforcement Powers (2007 edition).593  The guide defines a civil penalty; gives guidance on when they are appropriate; how they should be framed; their procedural provisions; and guidance for determining quantum. However, the 2007 edition of the guide is not routinely followed. For example it recommends including a provision to the effect that the court must apply the civil rules of evidence and procedure in civil penalty proceedings; but this is not explicitly stated in the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth)).594 The guide has now been replaced and no longer deals with civil penalties.595

Report of the Australian Law Reform Commission

In 2002 the ALRC published its final report on the use of administrative and civil penalties in Commonwealth legislation.596  The report was broad in scope and covered civil, administrative and quasi-penalties (such as the removal of a licence or benefit) in a number of regulatory fields. The ALRC’s essential task was to identify areas in the many disparate federal regulatory and penalties schemes where greater clarity, transparency and consistency could be introduced.
Among other things, the ALRC report considered whether a “hybrid” approach should be created for civil penalty proceedings, but most submitters preferred to maintain the traditional criminal-civil divide.597  Ultimately the report recommended that civil penalty regimes state that the usual civil rules of procedure would apply in civil penalty proceedings.598  It did not specify when heightened procedural protections should apply – for example, when the court should recognise the common law privilege against self-exposure to a penalty – noting the role of judicial discretion in upholding procedural fairness depending on the particular facts and circumstances.599
The report’s overarching recommendation was to enact a Regulatory Contraventions Statute to govern the creation and use of all civil and administrative penalties, in the absence of express legislative provision to the contrary.600  This was intended to introduce underlying principles and greater consistency without imposing a “one size fits all” approach. Ultimately no statute was ever enacted, although many of the report’s individual recommendations were incorporated into a section of the Attorney-General’s Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers, from 2004 until 2010.601

Use by regulatory agencies

Some Australian regulatory agencies have well-developed policies and approaches towards their use and enforcement of civil penalties, such as the Australian Securities and Investment Commission (ASIC) and the Australian Competition and Consumer Commission. These agencies are tasked with overseeing significant civil penalty regimes and both publish relatively comprehensive enforcement policies on their websites.602  For example, ASIC makes enforcement decisions based on the seriousness of the conduct and to maximise the available remedies. It also discusses how it decides when to refer cases to the Commonwealth Director of Public Prosecutions and publishes its memorandum of understanding with that body.603
ASIC in particular has come under some scrutiny from academics, the media and the general public in terms of its use of civil penalties. Some academics have taken the view that ASIC has under-used civil penalties in favour of criminal prosecutions (see further below). At other times when ASIC has chosen civil over criminal proceedings, it has been obligated to defend its choice in the public arena, in face of concerns that it is soft on crime.604

Role of the courts

As a court-imposed regulatory tool, civil penalties in Australia have been subjected to robust examination by Australian courts. While the courts have not so much questioned their legitimacy, they have taken a clear stance on their punitive nature, at least where penalties against individuals under the Corporations Act are concerned.605  In taking this approach, Australian courts have determined that certain procedural protections should apply in civil penalty actions, or that certain processes may need to be followed to ensure fairness. Judges have made a number of decisions or statements favouring the imposition of certain procedural protections, including:

These protections are considered in more detail in chapter 6 of this Issues Paper.

Academic commentary

Australian academics appear to accept civil penalties as a legitimate form of regulation. This may be because theories of strategic and responsive regulation have gained particular traction in Australia, both in legal and policy development and among academics.607  Civil penalties did come under some criticism in Australia in the late 1980s and early 1990s (Tony Greenwood described them as a “noxious hybrid”).608  But more recent commentary focuses less on the question of their legitimacy and more on how they are formulated and how the courts have interpreted them. Writing in 1994, Gillooly and Wallace-Bruce concluded that their use would, and should, increase in the years to come.609 We have not identified a strong voice objecting to civil penalties in the academic literature.
Indeed, the robust judicial approach towards many civil penalties has led some academics to remark that the courts are favouring criminal process values to the detriment of the regulatory rationale of civil penalties.610  This has led to calls from some for a governing procedural statute to deal with civil penalty formation and imposition, and creation of a third or middle way departing from the traditional criminal-civil division of the law.611
ASIC’s use of civil penalties has come under particular academic scrutiny and empirical study.612  Michelle Welsh has suggested that ASIC’s default stance is to refer cases for criminal prosecution, and that this diminishes the effectiveness of civil penalties and fails to reflect the policy of “responsive regulation” that led to their insertion in the Corporations Act in 1993. She has suggested ASIC should reserve its use of criminal penalties and institute civil proceedings more frequently than it has done in the past.613
590See for example Corporations Act 2001 (Cth), s 1317G; Commonwealth Authorities and Companies Act 1997 (Cth), sch 2; Superannuation Industry (Supervision) Act 1993 (Cth), s 193; Competition and Consumer Act 2010 (Cth), s 76; Telecommunications Act 1997 (Cth), s 570; Environment Protection and Biodiversity Conservation Act 1999 (Cth), s 481; Water Act 2007 (Cth), s 147.
591See for example the Spam Act 2003 (Cth) which, like New Zealand’s Unsolicited Electronic Messages Act 2007, is enforced solely by way of injunctions, enforceable undertakings and pecuniary penalties.
592See for example the Superannuation Industry (Supervision) Act 1993 (Cth), s 202: when a person contravenes a civil penalty provision with intent they are guilty of an offence.
593Attorney-General’s Department (Criminal Justice Division) A Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers (December 2007 ed).
594Competition and Consumer Act 2010 (Cth), sch 2 (Australian Consumer Law), s 228 is titled “Civil action for recovery of pecuniary penalties” and provides only that “the regulator may institute a proceeding in a court for the recovery … of a pecuniary penalty.” 
595Now see Attorney-General’s Department (Criminal Justice Division) Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (September 2011 ed) <www.ag.gov.au>.
596Australian Law Reform Commission Principled Regulation: Federal Civil & Administrative Penalties in Australia (R95, Sydney, 2002).
597Australian Law Reform Commission Securing Compliance: Civil and Administrative Penalties in Australian Federal Regulation (DP 65, Sydney, 2002) at Q 17–3 and [17.79].
598Australian Law Reform Commission, above n 596 at R 3–1 and ch 3.
599Australian Law Reform Commission, above n 596 at [3.52].
600Australian Law Reform Commission, above n 596 at 25 (R 6–7 and R 6–8).
601Attorney-General’s Department (Criminal Justice Division) A Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers (December 2007 ed).
602Accessible at <www.asic.gov.au> and <www.accc.gov.au>.
603Australian Securities and Investment Commission and Commonwealth Director of Public Prosecutions “Memorandum of Understanding” (1 March 2006).
604There was criticism of the Australian Securities and Investment Commission’s decision to take only civil proceedings for breaches by Stephen Vizard in his role as director of Telstra Corporation (Australia Securities and Investment Commission v Vizard (2005) 145 FCR 57): see for example Jennifer Sexton “Vizard Was ‘Too Well Connected’ For Jail” The Australian (Sydney, 6 July 2005) at 1, cited in V Comino “Effective Regulation by the Australian Securities and Investments Commission: The Civil Penalty Problem” [2009] 33 MULR 802 at note 57. See also M Welsh “Civil Penalties and Responsive Regulation: The Gap Between Theory and Practice” (2009) 33 MULR 908 at 922 and note 85.
605The Australian Law Reform Commission’s Discussion Paper observed that the courts seem to display greater concern about the punitive effect and the use of civil procedure in proceedings against company officers under the Corporations Act, and in customs prosecutions, than they do about civil penalty proceedings under the Trade Practices Act: Australian Law Reform Commission, above n 597 at [17.69]–[17.70].
606Briginshaw v Briginshaw (1938) 60 CLR 336 at 361–363 per Dixon J.
607See for example Senate Standing Committee on Legal and Constitutional Affairs Report on the Social and Fiduciary Obligations of Company Directors (Canberra, November 1989) at 190–191; Treasury Review of Sanctions in Corporate Law (2007) at 7; Australian Competition and Consumer Commission Compliance and Enforcement Policy (2010) at 3; A Corbett “A Proposal for a More Responsive Approach to the Regulation of Corporate Governance” (1995) 23(2) FL Rev 277; and V L Neilsen and C Parker “Testing Responsive Regulation in Regulatory Enforcement” (2009) 3 Regulation and Governance 376.
608T Greenwood “Corporate Officers – Bounden Duty and Service … and Reasonable Lively Sacrifice” (1992) 6 Butterworths Corporate Law Bulletin 61. See also A Freiberg “Civilising Crime: Parallel Proceedings and the Civil Remedies Function of the Commonwealth Director of Public Prosecutions” (1988) 21 Aust and NZ J Criminology 129.
609M Gillooly and N Wallace-Bruce “Civil Penalties in Australian Legislation” (1994) 13 U Tas LR 269.
610Comino, above n 604 at 814, JP Knackstredt “The Evolution in Civil Penalty Proceedings” (2006) 24 C&SLJ 56 at 57 and P Spender “Negotiating the Third Way: Developing Effective Process in Civil Penalty Litigation” (2008) 26 C&SLJ 507.
611Vicky Comino has argued for a sliding scale of procedural protections, taking as its starting point a model set out by Isachaar Rosen-Zvi and Talia Fisher: Comino, above n 604 at 832 citing I Rosen-Zvi and T Fisher “Overcoming Procedural Boundaries” (2008) 94 VA L Rev 79. See also T Middleton “The Privilege against Self-Incrimination, the Penalty Privilege and Legal Professional Privilege under the Laws Governing ASIC, APRA, the ACCC and ATO – Suggested Reforms” (2008) 30 Aust Bar Rev 282 and Spender, above. See chapter 8.
612H Bird “The Problematic Nature of Civil Penalties in the Corporations Law” (1996) 14 C&SLJ 405; Comino, above n 604; G Gilligan, H Bird and I Ramsay “Civil Penalties and Enforcement of Directors’ Duties” [1999] 22(2) UNSWLJ 417; G Gilligan, H Bird and I Ramsay Regulating Directors Duties: How Effective are the Civil Penalty Sanctions in the Australian Corporations Law? (Research report, Centre for Corporate Law and Securities Regulation, University of Melbourne, 1999); and M Welsh “The Regulatory Dilemma: The Choice between Overlapping Criminal Sanctions and Civil Penalties for Contraventions of the Directors’ Duty Provisions” (2009) 27 C&SLJ 370.
613Welsh, above n 604. Civil penalties were inserted into the Act following a review by the Senate Standing Committee on Legal and Constitutional Affairs (the Cooney Committee), which found evidence of a perception that the Act’s criminal sanctions were too draconian and that courts were instead imposing weak criminal fines. The Committee recommended civil penalties be introduced to allow regulators to pursue a range of enforcement responses better adapted to the seriousness of the breach: Senate Standing Committee on Legal and Constitutional Affairs, above n 607. Now see Corporations Act 2001 (Cth), s 1317P.