Civil pecuniary penalties in New Zealand and the scope of our review
Existing civil pecuniary penalty regimes
2.3Fifteen statutes provide for civil pecuniary penalties to be imposed by the High Court. A full list can be found in appendix 1. At the time of writing, three Bills before Parliament contain civil pecuniary penalties. Civil pecuniary penalty provisions feature in:
- the regulation of commercial or corporate transactions;
- the regulation of securities and financial markets and the conduct of some financial market participants;
- the regulation of some major industries;
- environmental protection legislation;
- anti-money laundering and countering the financing of terrorism legislation; and
- legislation targeting unsolicited commercial electronic spam.
2.4In some fields, civil pecuniary penalties provide a comprehensive response to a wide range of behaviour, but in others their adoption has been less broad. For example, they feature in the regulation of securities and securities markets and, on the passing of the Financial Markets Conduct Bill, will be even more prevalent. In contrast, while they feature to an extent in environmental legislation, they are absent from a great deal of it too. And while the participants in some major industries are regulated by way of civil pecuniary penalties, others are subject to criminal offences.
2.5This is because the civil pecuniary penalty is a comparatively recent phenomenon. Their numbers have grown since the mid-1980s as new areas of activity have come to be regulated or as older Acts have been amended. For example, the Hazardous Substances and New Organisms Act 1996 (HSNO Act) was amended in 2003 in response to concern about genetically modified and other new organisms. Civil pecuniary penalties were introduced to the Act for certain breaches relating to these “new organisms”. However the older part of the Act, which regulates the assessment, importation, storage, use, etc of other “hazardous substances”, is enforced by way of criminal and infringement offences.
2.6Both individuals and corporate bodies may incur civil pecuniary penalties. The maximum penalty for the latter is generally substantially higher than the former (for example, $100,000 for an individual under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and $2m for a body corporate). In some cases they are used in closely regulated industries with limited specialised participants. For example, part 2, subpart 5 of the Dairy Industry Restructuring Act 2001 deals with Fonterra’s obligations as the dominant player in the dairy industry. Those obligations are enforced by way of civil pecuniary penalties. In other cases, civil pecuniary penalties have been enacted to deal with conduct by less narrowly defined groups or persons. For example, civil pecuniary penalties in the Unsolicited Electronic Messages Act 2007 (UEM Act) are targeted at any person sending a commercial electronic message. Similarly, under the Commerce Act 1986 civil pecuniary penalties may be imposed on any individual or body corporate for anti-competitive contraventions under parts 2 and 3 of the Act.
2.7In civil pecuniary penalty proceedings, the State enforcement agency must prove in the High Court that, on the balance of probabilities, the defendant carried out the contravention. In most regimes there is no express requirement for any element of knowledge or intent on the part of the defendant. As such, most civil pecuniary penalty provisions appear to carry strict liability and the State does not have to prove anything regarding the defendant’s state of mind. However, the Court is usually directed to take into account the defendant’s degree of intent, awareness or other subjective factors in determining penalty quantum.
2.8Civil pecuniary penalties are sought by a range of enforcement bodies, depending on the Act (see appendix 1). In respect of civil pecuniary penalties, the enforcement bodies generally have information-gathering, search and seizure powers that match their criminal investigatory powers. Civil pecuniary penalties often feature with a range of other enforcement measures which have been designed to give an enforcement body a range of responses to non-compliance.
2.9While some are directed at minor technical breaches of the regime, most are directed at the core behaviour targeted by the legislation. Civil pecuniary penalties may be the most serious enforcement mechanism within the Act (such as in the UEM Act) or the Act may also contain criminal offences (such as in the Securities Act 1978). Also, civil pecuniary penalties sometimes form a “parallel” sanction to a criminal offence. In those cases, civil pecuniary penalties and criminal offences tend to be differentiated on the basis of the degree of knowledge or intent required. So, for example, a contravention may be enforced by way of a criminal offence under the HSNO Act where it was performed with intent or recklessness.