Contents

Chapter 3
The nature of civil pecuniary penalties

Is there anything wrong with a “hybrid”?

3.28There is a view that the State should not impose penalties through civil processes.105  Such a view would hold that civil procedure has not developed with the imposition of penalties in mind and, so, it is not suited to the task. Viewing it another way:106

The extraordinary procedural protections surrounding the criminal sanction are sensible only on the assumption that the criminal law is unlike other bodies of law … the criminal law is different in that it subjects persons to state punishment.

3.29An alternative view is that any rigid description of the criminal-civil divide fails to reflect reality. As Rosen-Zvi and Fisher put it:107

The civil-criminal procedural dichotomy is inappropriate for the realities of the twenty-first century. Even assuming that, in some distant past, at the time the civil-criminal divide was set—when criminal law was much “thinner” and institutional actors as well as the government were less involved in civil litigation—it corresponded to the values underlying procedure, this is no longer the case.

3.30The Commission agrees that the divide between the two is not absolute. The distinction is blurred in a host of ways neither imprisonment nor jury trial have ever been entirely alien to the civil sphere;108  As noted in chapter 1, the sentence of reparation, handed down by criminal courts, is designed to compensate the victim;109  courts have long recognised that the civil law may have a punitive function through the remedy of exemplary damages; and, civil pecuniary penalties have existed in disciplinary statutes for many years.
3.31Also, the growth in infringement offences – which do not result in a criminal conviction if the offender pays the prescribed fee – has seen the decriminalisation of a considerable amount of minor offending.110  The adoption of such infringement or administrative offence regimes, with low penalties, is used widely in some European countries as a way of dealing swiftly, effectively and fairly (or “not-unfairly”111) with non-serious wrongdoing.
3.32The growth of regulation has also seen the criminal law expand into what were previously civil violations. Increased use of strict liability offences for regulatory or administrative infractions means that there is “a mountain of new ‘crimes’ that carry no moral condemnation”.112  While strict liability offences are not a “hybrid” in that prosecution and conviction follow, they are an example of where traditional criminal precepts have been compromised for policy imperatives.
3.33So there is a strong argument that the test of punishment alone is already a “jurisprudentially unsatisfactory”113  way of determining what should be subjected to full criminal process and protections and what should not. Hybrids already exist and have for some time.
3.34Furthermore, a pragmatic view is that developments such as the growth in infringement and regulatory or “public welfare” offences are an inevitable and sensible response to the demands of an increasingly complex society. They are examples of how our justice system has been adapted to meet changing needs. Being open to such adaptations is necessary if we are to retain an effective, proportional and flexible legal system.114

3.35Our justice system needs to respond in more sophisticated ways because it regulates a broader range of conduct. For example, we have greater expectations about public safety, standards of service and professional behaviour than in the past. Breaches of those standards may be undesirable but they may not be so grave as to demand criminalisation. The characteristics of a particular form of behaviour that lead us to outlaw it today may not be the same as those that led us to criminalise conduct in the past.

3.36Society’s views of what conduct demands criminal punishment also change over time. Our understanding of what sorts of interventions are the most effective also develops. Criminal diversion, community-based sentences and initiatives such as the drug court pilot in Auckland115  are all examples of how the justice system is attempting to deal with criminal offending in a more targeted way.

3.37Proportionality also favours gradations of sanctions. Regulatory regimes deal with a range of behaviour, from minor, technical breaches to grave, intentional contraventions. If an enforcement body had only criminal sanctions at its disposal it would be prevented from taking a proportional approach to its enforcement activities and restricted to opting for the most costly sanction in terms of investigation and prosecution; with the greatest corresponding costs to business. To leave a State-funded regulator hamstrung with insufficient tools at its disposal would be to give the taxpayer poor value for money. There may also be further flow on costs: if a regulator can access only criminal sanctions it may be less likely to take prosecutions as frequently. In turn it may have a lower profile as a regulator and risks appearing weak. This is likely to make the regulated community consider its chance of getting caught and punished to be lower, reducing the deterrent effect of the regulatory system.

3.38Finally, arguments have also been made that the criminal law should remain the last resort.116  The distinction needs to be maintained to “prevent the dilution of the criminal law’s blaming function and maintain criminal punishment as an effective and powerful mechanism of social control”.117  On one hand, this argument has been used to defend the criminal law against hybrid actions, but there is also an argument that alternative ways of punishing breaches and obtaining compliance are desirable so that the criminal law can be retained for what society considers to be the most serious conduct.

The need for policy justification for hybrids

3.39In the Law Commission’s view, modern conditions mean that hybrids can be both necessary and desirable. However, they involve a compromise. Both criminal procedure and civil procedure have developed, in the particular contexts of their respective aims and consequences, with fairness in mind. Civil pecuniary penalties are punitive measures that represent a novel combination of those procedures, aims and consequences.

3.40In our view, where hybrids or compromises of the standard criminal or civil approach exist, there should be two forms of protection around their use. First, there needs to be robust analysis about and policy justifications for those compromises. It is accepted that there is a need to justify the criminalisation of conduct “by reference to democratic principles, and … sufficient reasons for invoking this coercive and censuring machinery against individual subjects.”118  Civil pecuniary penalties are also coercive and censuring machinery used by the State against its citizens, so similar justification should be required. The decision to use civil pecuniary penalties in a statute must take into account the fact that criminal procedural protections do not apply: the question is not so much about whether to punish, but whether it is justifiable to punish in this way.

3.41Secondly, the procedure for their imposition and protections around their use should be submitted to similarly rigorous analysis and justification, and fairness needs to be maintained. We discuss issues of procedure in chapters 6 and 7.

3.42Existing hybrids adhere to these two requirements. They are exceptional – that is they operate in limited fields – and there is an articulated policy reason for their use. To a greater or lesser extent, the procedure or protections accompanying them have also been worked out.

3.43For example, exemplary damages may now be imposed in very restricted circumstances in New Zealand.119  Justice Tipping described the limits of their legitimate operation in Couch v Attorney-General (No 2):120

Exemplary damages are anomalous. Civil remedies are not generally designed to punish. The reach of exemplary damages should therefore be confined rather than expanded. Outrageousness is not a satisfactory sole criterion. The concept lacks objective content and does not contain sufficient certainty or predictability. Exemplary damages should be confined to torts which are committed intentionally or with subjective recklessness, which is the close moral equivalent of intention

3.44The implication from Couch is that, since exemplary damages are a form of civil punishment, the occasions for their award are limited.121  Furthermore, the majority of the Court of Appeal in Daniels v Thompson held that exemplary damages are not available where a defendant has been convicted of a criminal offence and sentenced (including being discharged), on the basis that this would entail double punishment.122
3.45Infringement schemes provide another example. In the last 30 years they have become an essential means of ensuring effectiveness and proportionality in our justice system. In 2005 the Law Commission reported that infringement offences dealt with more than 2.5 million breaches of the law each year.123  A very large proportion of those are resolved between the defendant and prosecuting authority without the need for recourse to the court system. Because they compromise full criminal processes however, they are considered to be appropriate only in certain circumstances. The LAC Guidelines note that the infringement notice procedure is not suited for use in connection with:124

3.46The LAC Guidelines also state that the procedure is best suited for those offences that are offences of strict liability; are committed in large numbers; involve misconduct that is generally regarded as being of comparatively minor concern by the general public; and involve acts or omissions that involve straightforward issues of fact.

3.47The trade-off involved in infringement offences is also recognised in that the LAC Guidelines state that “[t]he level of infringement fee should generally be less than $500”,125  and by the process for their imposition which is set out in statute: in return for accepting the penalty and so supporting the expediency of the process, the offender escapes criminal conviction.126  Furthermore, defendants retain the right to challenge an infringement notice, and to be prosecuted through normal criminal processes.
3.48Strict liability offences are also considered only to be appropriate in certain circumstances. A strict liability offence requires that the prosecution prove, beyond reasonable doubt, only that the conduct making up the offence has been carried out. The defendant’s subjective mental state is not relevant. The defendant has the burden of proving that, notwithstanding that the criminal contravention occurred and may be attributed to him or her, s/he is not at fault for it – either through establishing a specific statutory defence or through the common law defence of total absence of fault.127
3.49In some instances, an offence is expressly drafted as a strict liability one. However, where an offence is silent as to mens rea, the courts have developed a number of factors to assist them in determining whether it might be categorised as a “public welfare regulatory” offence carrying strict liability.128  These factors are reflected in the LAC Guidelines, as follows:129

An offence may properly be categorised as a strict liability offence (where there is no need for the prosecution to prove mens rea, but there is a defence if the defendant proves total absence of fault) if:

(a) the offence involves the protection of the public from those undertaking risk-creating activities. These offences (commonly described as public welfare regulatory offences) usually involve the regulation of occupations or trades or activities in which citizens have a choice as to whether they involve themselves; and
(b) the threat of criminal liability supplies a motive for persons in those risk-generating activities to adopt precautions, which might otherwise not be taken, in order to ensure that mishaps and errors are eliminated; and
(c) the defendant is best placed to establish absence of fault because of matters peculiarly or primarily within the defendant's knowledge.
3.50Strict liability offences still operate against the background of the NZBORA protections, notwithstanding the inherent encroachment on the presumption of innocence. In light of the limited sphere within which strict liability offences are considered appropriate, they are regarded, under s 5 of NZBORA, as a justified limit on the presumption of innocence.130

Conclusion

3.51The Commission’s view is that there is a place for hybrid sanctions and procedures in the law. However, modifications to or compromises of the core legal tenets that mould our system of justice should be undertaken in the light of robust analysis and guided by principle. Civil pecuniary penalties represent a major shift in the way that the State controls and punishes illegal behaviour. Yet there has been little consideration and analysis of their nature and use. They are becoming increasingly popular, and we anticipate that they will be introduced to a growing range of legislation. There may be circumstances when they are inappropriate and undesirable. Furthermore, there may be areas of regulation that do not use civil pecuniary penalties that would benefit from their introduction.

3.52We propose, then, that guidance should be developed about the circumstances when civil pecuniary penalties may be justified or desirable, and when they should not be used. In the following chapter we consider what that guidance should say.

105See for example United States v United Mine Workers 330 US 258 (1974) at 364: “[T]he idea that a criminal prosecution and a civil suit for damages or equitable relief could be hashed together in a single criminal-civil hodgepodge would be shocking to every American lawyer and to most citizens.” As cited in Klein, above at n 76 at 681.
106D Husak “The Criminal Law as Last Resort” (2004) 24 OJLS 207 at 211. See also Ashworth, above n 68 at 5, talking broadly about new statutory civil remedies and preventative orders: “These orders may be regarded as one manifestation of a more general movement away from the paradigms of the criminal law, and the consequent side-lining [of] the protections of criminal procedure. Thus the greater use of diversion, of fixed penalties, of summary trials, of hybrid civil-criminal processes, of strict liability offences, of incentives to plead guilty, and of preventive orders–all of these challenge the paradigm of the criminal law, and challenge the way it is traditionally presented.”
107I Rosen-Zvi and T Fisher “Overcoming Procedural Boundaries” (2008) 94 VA L Rev 79 at 133. See also P Spender “Negotiating the Third Way: Developing Effective Process in Civil Penalty Litigation” (2008) 26 C&SLJ 249 at 257: “[the] bipolarity [of the civil-criminal divide] obscures the complex characteristics of a modern legal system”.
108For example, civil contempt may be punished by way of imprisonment; and s 19A of the Judicature Act 1908 provides that civil proceedings in which the only relief claimed is payment of a debt or pecuniary damages or the recovery of chattels over a value of $3000 may be tried by a judge and jury. See generally Law Commission Review of the Judicature Act 1908: Towards a Consolidated Courts Act (NZLC IP29, Wellington, 2012) ch 9.
109Section 32 of the Sentencing Act 2002 provides that “(1) A court may impose a sentence of reparation if an offender has, through or by means of an offence of which the offender is convicted, caused a person to suffer—(a) loss of or damage to property; or (b) emotional harm; or (c) loss or damage consequential on any emotional or physical harm or loss of, or damage to, property.” Reparation is specified as one of the purposes of sentencing under s 7(1)(d) of the Act. It is intended to provide “a simple and speedy means of compensating those who suffer loss from criminal activities” so that they do not need to seek a civil remedy: R v O’Rourke [1990] 1 NZLR 155 at 158 (CA).
110Summary Proceedings Act 1957, s 21.
111Ashworth, above n 68 at 4.
112P H Robinson “The Criminal–Civil Distinction and the Utility of Desert” (1996) 76 BU L Rev 201 at 210. Robinson cites Coffee as reporting that in the United States there are now more than 300,000 federal regulations that may be enforced criminally: J C Coffee “Does ‘Unlawful’ Mean ‘Criminal’?: Reflections on the Disappearing Tort/Crime Distinction in American Law” (1991) 71 BU L Rev 193 at 215–221.
113Smith and Hogan, above at n 92 at 21.
114See Campbell, above n 96 at 105, citing D Garland The Culture of Control: Crime and Social Order in Contemporary Society (Oxford University Press, Oxford, 2001).
115Simon Power, Georgina te Heuheu “Drug Court Pilot announced for Auckland” (press release, 19 October 2011) <www.beehive.govt.nz/release/drug-court-pilot-announced-auckland>.
116See for example D Husak, above n 106 and M Nehme “Birth of a New Securities Law Regulator: The Financial Markets Authority and the Powers at its Disposal” [2011] NZLR 475 at 490.
117Rosen-Zvi and Fisher, above n 107 at 108. See also Coffee “Paradigms Lost” 101 (1992) Yale LJ 1875 at 1877 and Sayre “The Present Significance of Mens Rea in the Criminal Law” in R Pound (ed) Harvard Legal Essays (Harvard University Press, Cambridge, Massachussetts, 1934) at 409.
118Ashworth, above n 68 at 22.
119See generally G Hammond “Exemplary Damages” in S Degeling, J Edelman, J Goudkamp Torts in Commercial Law (Thomson Reuters Australia, 2011) at 449.
120Couch v Attorney-General (No 2) [2010] NZSC 27; [2010] 2 NZLR 149 at [178]. Previously, the received wisdom was that for exemplary damages to be awarded, the defendant must have acted with outrageous, flagrant, high-handed or contumelious disregard for the plaintiff’s rights. See for example Dehn v Attorney-General [1988] 2 NZLR 564 (HC), McLaren Transport Ltd v Somerville [1996] 3 NZLR 424 (HC) at 434 and Ellison v L [1998] 1 NZLR 416 (CA) at 418 and 419.
121The largest awards in New Zealand to date are $85,000 and $100,000, both in situations of very serious physical and sexual abuse. Exemplary damages have otherwise not exceeded $40,000. See generally B Marten “Exemplary Damages” in Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Thomson Reuters, Wellington, 2011) at 544 and 548.
122Daniels v Thompson [1998] 3 NZLR 22 at 48 (CA). The Court also held that they are not available where a defendant has been acquitted because of the criminal law’s primacy in imposing “discretionary Court-based sanctions” for criminal offending (at 51); and that where a prosecution is likely but has not yet commenced, a claim for exemplary damages could be stayed (at 52–53). However, the Accident Compensation Act 2001, s 319(2) now provides that a court may award exemplary damages in spite of a person being charged with a criminal offence for conduct resulting in personal injury under that Act.
123Law Commission The Infringement System: A Framework for Reform (NZLC SP16, Wellington, 2005) at 1.
124Legislation Advisory Committee Guidelines on Process and Content of Legislation (Wellington, 2001) at [12.5.3]. See <www2.justice.govt.nz/lac/index.html>
125Legislation Advisory Committee, above at [12.5.3]. Although higher infringement fees exist: see for example Fisheries Act 1996, s 297(1)(c) ($3,000), Building Act 2004, s 402(1)(z) ($20,000), and Gambling Act 2003, s 360 ($10,000 for individuals and $50,000 for licencees).
126Summary Proceedings Act 1957, s 21.
127See Civil Aviation Department v MacKenzie [1983] NZLR 78 (CA).
128We discuss the categorisation of regulatory breaches further at para 4.4. The factors employed by the courts for strict liability offences can be summarised as: (a) The misconduct involved falls short of the moral disapproval that would be reserved for criminal offending: it involves behaviour that is “not criminal in any real sense, but … acts which in the public interest are prohibited under a penalty”. (b) The purpose of the legislation is: to protect the public from those undertaking risk-creating activities rather, in general, than individual interests; to encourage compliance with certain standards of behaviour and the adoption of precautions for those undertaking risk-creating activities; and to regulate occupations, trades or activities in which citizens have a choice as to whether they involve themselves. (c) The defendant is likely to be in a far better position than the prosecution to know how the breach of the law occurred. This is particularly the case where the defendant is an organisation. (d) There may be no identifiable victim. See generally, J November “Public Welfare/Regulatory Offences: Judicial Criteria for Definition and Classification (I)” (1990) NZLJ 236 and J November “Public Welfare/Regulatory Offences: Judicial Criteria for Definition and classification (II)” (1990) NZLJ 365.
129Legislation Advisory Committee, above n 124 at [12.2.3]. See <www2.justice.govt.nz/lac/index.html>
130Absolute liability offences are those where even a total absence of fault is not a defence. Given the greater compromise of NZBORA rights that they involve, the Legislation Advisory Committee Guidelines suggest that such offences should only be contemplated in legislation if: (a) there is an overwhelming national interest in using the criminal law as an incentive to prevent certain behaviour occurring, regardless of fault; and (b) there is a cogent reason in the particular circumstances for precluding a defence of total absence of fault (this will be rare): Legislation Advisory Committee, above n 124 at [12.2.3].