Civil pecuniary penalties in New Zealand and the scope of our review
Penalties outside the scope of our review
2.14As set out in chapter 1, the civil pecuniary penalties which concern us share a number of characteristics. Notably, they are imposed by the High Court in civil proceedings and the Court has discretion as to the quantum of the penalty. However, there are a number of other non-criminal sanctions on the statute book which share some of the features of civil pecuniary penalties. Each has distinguishing characteristics that led us to place them outside the scope of our review. We describe these briefly below and explain our scoping decisions. These penalties are described in greater detail in appendix 3.
Variable civil penalties
2.15Five statutes provide for the imposition of variable civil penalties by a body other than a court. Most notably, “Rulings Panels” can impose civil penalties of up to $20,000 under the Gas Act 1992 and $200,000 under the Electricity Industry Act 2010. These penalties are almost identical in design to civil pecuniary penalties. But for the most part we have excluded them from our review because they are imposed by a quasi-judicial body and therefore raise distinct issues. We consider the desirability of such a model, however, in chapter 7.
2.16The third statute is the Overseas Investment Act 2005, which contains civil pecuniary penalties of the type that fall within our review, but also provides for other variable “administrative penalties” to be imposed by the Overseas Investment Office. Those penalties are for retrospective filing of a consent (required under the Act for overseas investment in sensitive New Zealand assets) and have a maximum of $20,000. Here, the regulator has discretion as to imposition and the size of the penalty. Administrative penalties for retrospective consent are used more frequently than civil pecuniary penalties, with 15 imposed in 2010/2011 ranging from $3,000 to $15,000.
2.17The fourth statute is the Tax Administration Act 1994, under which the Commissioner of Inland Revenue can impose “shortfall penalties”, which can be sizeable and require the exercise of discretion by the Commissioner as to the errant taxpayer’s level of intent. So, a taxpayer is liable for a penalty of 20 per cent of the shortfall where they did not take reasonable care; 40 per cent where there is gross carelessness; 100 per cent where they take an “abusive tax position”; and 150 per cent where there is tax evasion.
2.18We have excluded these two forms of penalty from our review. Again, however, we touch on the desirability of such models in chapter 7.
2.19The fifth statute is the Employment Relations Act 2000, which provides for the Employment Relations Authority to impose penalties of up to $10,000 (individuals) and $20,000 (bodies corporates) for breaches of the Act or an employment agreement. In addition, 13 occupational licensing statutes include a standard provision for a “fine” to be imposed by a disciplinary body or tribunal established under the Acts, for various breaches of the relevant Act or licensing conditions. The maximum fines range from $2,000 (private security guards and private investigators) to $30,000 (health practitioners, lawyers and conveyancers and veterinarians).
2.20We have also excluded these from our review. Both types of fine have a long history. Equivalent provisions have featured in employment law since 1908 and occupational schemes have contained such fines since at least 1949. While these penalties meet most of the criteria for “civil pecuniary penalties”, they are not among the civil penalties that have raised concern and prompted our review. They have been imposed by occupational bodies and tribunals for years without a great deal of concern or debate. They do not feature the same drafting techniques that accompany Court-imposed penalties. However, they have given rise to some case law which is relevant to the issues at hand, and where relevant, we have drawn on that.
2.21We have also excluded what are commonly referred to as “administrative penalties”. Generally the term “administrative penalty” is used to mean fixed, non-discretionary penalties which are imposed by a regulator. Their fundamental distinguishing characteristic is that they are imposed in administrative, not judicial, processes. They are usually lower in quantum and involve the exercise of less discretion.
2.22This review does not deal with infringement offences. Over the last 30 years, infringement offence regimes have become established as an integral part of the justice system. Infringement fees are set by legislation – the prosecuting authority has no power to vary the penalty. On payment of an infringement fee, no conviction results. Infringement offences raise numerous questions of consistency and design themselves and have previously been the subject of a joint Law Commission and Ministry of Justice review. Indeed, there have been recent calls for further review of infringement offences.
2.23We have also excluded the expedited penalty “notices” – referred to as “civil infringement notices” – found in two civil pecuniary penalty statutes. These enable the relevant enforcement body to require direct payment of a fixed penalty. They are closer in nature to administrative penalties than civil pecuniary penalties.
Other civil remedies
2.24We have limited our scope to pecuniary penalties, thus excluding orders such as management bans and licence revocations. These are sometimes used in combination with civil pecuniary penalties. While they can have a punitive effect, they also have a protective element that is absent from a purely pecuniary penalty. We have also excluded compensation orders given their compensatory, non-penal nature.
Criminal gain disgorgement penalties
2.25Criminal gain disgorgement penalties can be imposed where there has been criminal offending, in addition to any criminal sanction, and are designed to strip away the gains made from criminal conduct. The Criminal Proceeds (Recovery) Act 2009 contains penalties that target offending generally. A range of other Acts also provide for the disgorgement of criminal gains by way of an additional penalty, supplementary to any criminal sanction. Determining the quantum of the penalty is a discretionary exercise undertaken by the courts, so criminal gain disgorgement penalties bear some resemblance to civil pecuniary penalties. Critically, they are imposed on the balance of probabilities, rather than on the criminal standard. We have not included these penalties in our review as they are linked to criminal conduct in a way that purely civil pecuniary penalties are not.
Statutory damages under the Credit Contracts and Consumer Finance Act 2003
2.26The Credit Contracts and Consumer Finance Act 2003 contains a mechanism whereby, if a creditor, lessor, transferee or buy-back promoter breaches various contractual disclosure obligations, the other party to the contract is entitled to “statutory damages” calculated as a function of the credit that accrued during the period of the breach. The statutory damages are non-compensatory, since they are unrelated to actual loss and the Act makes separate provision for compensatory orders. They may be penal in nature. But unlike civil pecuniary penalties, they are not paid to the Crown, so we do not consider them here.