Chapter 2
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:

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.24 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.25
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”.26  However the older part of the Act, which regulates the assessment, importation, storage, use, etc of other “hazardous substances”,27  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.28

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.29
18Commerce Act 1986, Overseas Investment Act 2005 / Overseas Investment Regulations 2005, Takeovers Act 1993.
19Securities Act 1978, Securities Markets Act 1988, Securities Trustees and Statutory Supervisors Act 2011, Financial Advisers Act 2008, Financial Service Providers (Registration and Dispute Resolution) Act 2008, Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
20Dairy Industry Restructuring Act 2001 / Dairy Industry Restructuring (Raw Milk) Regulations 2001, Telecommunications Act 2001 / Telecommunications (Civil Infringement Notice) Regulations 2007, Telecommunications (Interception Capability) Act 2004.
21Biosecurity Act 1993, Hazardous Substances and New Organisms Act 1996.
22Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
23Unsolicited Electronic Messages Act 2007.
24Financial Markets Conduct Bill (342–2), cl 600. The Bill was reported back from the Commerce Committee on 7 September 2012 and at the time of publication is awaiting its second reading.
25Compare for example the use of civil pecuniary penalties in the Dairy Industry Restructuring Act 2001 with the use of criminal offences in the Railways Act 2005.
26Including genetically modified organisms, eradicated species and species not present in New Zealand before July 1998: Hazardous Substances and New Organisms Act 1996, s 2A.
27Defined as “any substance—(a) With one or more of the following intrinsic properties: (i) Explosiveness: (ii) Flammability: (iii) A capacity to oxidise: (iv) Corrosiveness: (v) Toxicity (including chronic toxicity): (vi) Ecotoxicity, with or without bioaccumulation; or (b) Which on contact with air or water (other than air or water where the temperature or pressure has been artificially increased or decreased) generates a substance with any one or more of the properties specified in paragraph (a) of this definition:”: s 2(1).
28Part 2 prohibits restrictive trade practices: practices (including contracts, joint buying and promotion activities) that substantially lessen competition; take advantage of market power; or amount to resale price maintenance (for example inducements by suppliers or others to artificially set prices and withholding or preventing the supply of goods). Part 3 prohibits business acquisitions likely to, or having the effect of, substantially lessening competition.
29Hazardous Substances and New Organisms Act 1996, ss 109, 124B.