1.8However, the penalties that concern us have a number of unique features which suggest they warrant particular examination. They are relatively novel. The majority of them have been introduced since 2000. Increasingly they are being adopted as a central feature of regulatory regimes. All indications are that they will become a key tool in the way that we regulate and punish breaches of the law.
1.10The fact that such growth in the use of a potentially severe form of penalty has occurred in the absence of any general consideration of their design is undesirable. Examination of civil pecuniary penalties is both warranted and overdue.
1.11The lack of analysis may carry some blame for the inconsistencies that exist across the field of civil pecuniary penalty provisions. While there are some common approaches, current statutes deal with matters such as procedural rules, guidance about penalty levels and when a penalty should be imposed, privilege and double punishment in a variety of ways. This range of approaches can create confusion. It does not assist in promoting the integrity of the law and suggests that insufficient consideration has been given to taking an approach that reflects good legal principle.
1.12There is also a lack of consistency in when civil pecuniary penalties have or have not been included in a legislative scheme. For example, while they feature heavily in some aspects of environmental legislation they are entirely absent in other areas of environmental law. Another example arises in the regulation of certain financial services. Civil pecuniary penalties are a feature of the Securities Trustees and Statutory Supervisors Act 2011, which has as its purpose to protect the interests of security holders and of residents of retirement villages, and to enhance investor confidence in financial markets and retirement villages. In part, it does this by setting standards for trustees and statutory supervisors and providing for them to be held accountable for failures to perform their functions effectively. In contrast, the obligations under the, also recent, Insurance (Prudential Supervision) Act 2010 are all enforced by way of criminal offences. Yet the aims of the two pieces of legislation appear to be similar: the purpose of the 2010 Act is to promote the maintenance of a sound and efficient insurance sector and to promote public confidence. Again, the Act sets standards for insurers and provides for them to be held accountable for failing to comply.
1.13The differences in legislative approach may be a reflection more of the novel nature of civil pecuniary penalties than anything else. But, they indicate that a first principles review is needed.
1.15Civil pecuniary penalties, then, are a relatively new form of enforcement tool which challenges the traditional distinction between the criminal and civil law. Historically, the criminal-civil divide has been central to how we think about the law. The criminal law is concerned with how the State punishes people who act in a way that Parliament has decided is worthy of condemnation as a criminal offence. Criminal offences are prosecuted through the criminal courts using the rules of criminal procedure. Prosecution can result in imprisonment and a criminal conviction – an enduring form of sanction which can have life-long implications for employment prospects, freedom to travel and other opportunities. Because criminal conviction results in our legal system’s gravest implications for the defendant, criminal procedural rules provide the greatest protections available.
1.16In contrast, the civil law is concerned with disputes between, or the vindication of rights of, private individuals or bodies. Civil litigation is pursued according to civil procedural rules which allow the defendant fewer protections.
1.18Civil pecuniary penalties are not alone in straddling the criminal-civil divide. For example, the civil remedy of exemplary damages is punitive rather than compensatory and the sentence of reparation, handed down by criminal courts, is designed to compensate the victim. So, there are instances where the line has been breached. However, in this Issues Paper we suggest that where such a breach is to occur, it should be done with a robust rationale and in a manner which is fair.
[N]egotiating an effective civil penalty procedure on a case-by-case basis is problematic and carries the danger of “lead[ing] to indeterminacy or default to criminal procedure”.
1.23It must be acknowledged that, thus far, these concerns have not arisen in civil pecuniary penalty cases in New Zealand. Civil pecuniary penalties have been imposed in around 60 cases. Most have arisen under the Commerce Act 1986. In the majority of those cases, the Commerce Commission and defendant have reached an agreed penalty which has been approved by the Court. There has therefore been little substantial judicial analysis of the nature of civil pecuniary penalties. It is possible that defendants will continue to accept their imposition and that our courts will continue to approach them in this manner. However, as the numbers of civil pecuniary penalty provisions grow, in a wider range of statutory settings, it is likely that there will be more litigation. As they are imposed on a wider range of persons they may be more robustly defended. It is notable that, to date, very few cases have been taken against individuals as opposed to bodies corporate. It may be that our courts will be required to tackle the sorts of issues that have vexed courts in other jurisdictions. Moving forward, consistency and principle in the design and use of civil pecuniary penalties may assist in reducing the risk of litigation.