Design of civil pecuniary penalties – guiding principles
5.5As a matter of policy and good legislative practice, fairness must remain central to the design of civil pecuniary penalties. Exactly what this means for how they should be drafted is a matter for debate. This is because the common law rules of procedural fairness – or natural justice – are not fixed. They vary according to context. As Tucker LJ put it in Russell v Duke of Norfolk:
The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth.
5.6In the next two chapters we discuss the extent to which, given our views on the nature of civil pecuniary penalties, fairness should influence specific aspects of their design.
Impact of the New Zealand Bill of Rights Act 1990
5.7The application of the New Zealand Bill of Rights Act 1990 (NZBORA) demands examination under this heading. Procedural fairness is protected by NZBORA. Sections 23 to 26 set out specific fundamental rights and standards to be observed in the investigation and prosecution of criminal offences. Those rights are given express legislative backing because of the grave consequences of criminal trial, the power asymmetries involved and the interest in not convicting the innocent.
5.8The right to natural justice is also protected in broader terms by s 27(1) of NZBORA:
Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person's rights, obligations, or interests protected or recognised by law.
5.9The application of these rights to civil pecuniary penalties has not been the subject of judicial consideration or other commentary. The issue is relevant from two perspectives. First, what should these provisions mean for the design of civil pecuniary penalties? Secondly, might a court challenge to them be founded on these NZBORA rights?
NZBORA’s influence on the policy development of civil pecuniary penalties
5.10Drawing on the language of the White Paper on the Bill of Rights, Paul Rishworth argues that NZBORA should be the standard for policy: its set of “navigation lights”. On this ground he suggests that policy makers should always be vigilant in properly analysing and labelling proposals for laws. They need to ask whether the laws will invade personal liberty and, if so, can they be justified under the heightened standard that the broad and expansive rights in NZBORA (such as s 27(1)) ought to require? In turn, this means that possible breaches of NZBORA demand justification under s 5. That is, if rights might be impaired, the limits upon them must be no more than is “reasonable and demonstrably justified in a free and democratic society”. By their nature, civil pecuniary penalties infringe upon liberty just as any sanction does. If it is the case that NZBORA rights might be infringed by them, any such breach should be acknowledged and justified during the policy process.
The possibility of court challenges
5.11There is some New Zealand case law which may give an indication of how NZBORA might be applied to civil pecuniary penalties. Also, forms of non-criminal proceeding or penalty have been the subject of constitutional or rights-based challenges in other jurisdictions (see appendix 2). In some of those cases, additional procedural protections have been required.
5.12The first question is whether the protections afforded in criminal proceedings under NZBORA apply to civil pecuniary penalty proceedings. Section 24 set outs the rights of persons “charged with an offence” and s 25 lists the rights of a person in the determination of the charge. Section 26(2) provides: “No one who has been finally acquitted or convicted of, or pardoned for, an offence shall be tried or punished for it again.” These protections would be directly applicable to civil pecuniary penalty proceedings if the term “offence” were to be interpreted to include them.
5.13There is no definition of “offence” in NZBORA. At present, it is defined in the Crimes Act 1961, s 2 as “any act or omission for which any one can be punished under this Act or under any other enactment, whether on conviction on indictment or on summary conviction.” The meaning of the term has been considered in a handful of cases. In Daniels v Thompson, the Court of Appeal considered its scope under s 26(2). It determined that the term refers only to criminal proceedings. It did so on the grounds that s 26(1) relates only to criminal proceedings and because of the use of the terms “acquitted or convicted” in s 26(2). Also relevant was the fact that the common law principle of autrefois acquit, on which the provision was based, did not apply to civil proceedings. The Court also placed emphasis on the Crimes Act definition of “offence”. Given its reading of the provision as a whole, the Court considered that the term “punished” in s 26(2) cannot have a different connotation. It followed, the Court found, that there was no complete bar to exemplary damages after a criminal conviction under s 26(2).
5.14The meaning of “offence” was also considered in Drew v Attorney-General where the appellant was a prisoner who was subject to prison disciplinary proceedings. He sought judicial review of a decision imposing a penalty of a loss of seven days’ remission of his sentence, on the grounds that he had not been entitled to legal representation for the proceedings. John Hansen J in the High Court adopted the approach of the Supreme Court of Canada in R v Wigglesworth and R v Shubley in considering whether Drew had a right to legal representation under s 24(f) of NZBORA. He concluded that breach of prison discipline rules did not amount to an “offence” under s 24 because (a) the nature of the proceedings was not criminal and (b) the penalty did not involve the imposition of “true penal consequences”. Rather than being a penalty, loss of remission was loss of a privilege. And the nature of the rules at hand was not criminal because Drew was not being called upon to account to society for a crime which violated the public interest. Instead, the aim of the rules was to control prison discipline. Drew appealed John Hansen J’s decision, but the Court of Appeal resolved the matter on other grounds and expressly refrained from dealing with the definition of “offence” under NZBORA.
5.15In 2010 the Supreme Court had cause to consider the term in Siemer v Solicitor-General. Like John Hansen J in Drew v Attorney-General, the Court adopted R v Wigglesworth. Siemer was found to be in contempt of a court order. He was sentenced to six months’ imprisonment by the High Court and appealed on the grounds that proceedings for contempt were by nature criminal proceedings and that he should have been able to elect trial by jury, as dictated by s 24(e) of NZBORA. The Supreme Court noted that a purposive interpretation of NZBORA had to be applied. Delivering the majority judgment, Blanchard J quoted Richardson J in Ministry of Transport v Noort where it was said:
A purposive approach to the interpretation of the Bill of Rights Act requires the identification of the particular right. The Act’s guarantees are cast in broad and imprecise terms and the identification of the object of the particular right allows for the inclusion within its scope of conduct that truly comes within that purpose and the exclusion of activity that falls outside ...
5.16The Supreme Court went on to find that the effect of a finding of contempt was the equivalent to conviction for a statutory offence. McGrath J noted that “the protections are extended because of the nature of the consequences to an individual of a determination of guilt of an offence, including exposure to the punishment that will follow.”
R v Wigglesworth
5.17As noted, New Zealand courts have drawn on the jurisprudence of the Canadian Supreme Court. Most notably, in R v Wigglesworth, the majority of that Court considered the scope of s 11(h) of the Canadian Charter of Rights and Freedoms which provided for the rule against double jeopardy. The majority adopted a “narrow” interpretation of the section. It concluded that its protections were available to persons prosecuted by the State for criminal, quasi-criminal and regulatory offences. However, in determining whether a person had been charged with such an offence, two questions were to be considered. First, was the very nature of the proceeding criminal? Secondly, did the accused face “true penal consequences”? A “true penal consequence” was “imprisonment or a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.” The majority also stated that if a particular matter was of a public nature, intended to promote public order and welfare within a public sphere of activity, then the matter fell within s 11. However, if it was a private, domestic or disciplinary matter which was regulatory, protective or corrective and which was primarily intended to maintain discipline, professional integrity and professional standards or to regulate conduct within a limited private sphere of activity, the Court held that it would not. Justice Wilson, delivering the majority judgment, also stated that a factor which led her to adopt a narrow definition of the opening words of s 11 was a concern for the future coherent development of the section if it were made applicable to a wide variety of proceedings.
European Court of Human Rights
5.18The European Court of Human Rights has also developed a test for determining what falls within the ambit of the term “criminal charge” under art 6 of the European Convention on Human Rights. In Engel v Netherlands the question was whether the offences at hand, which were classified in Netherlands law as “military disciplinary offences”, were criminal in nature. The Court decided that the term “criminal charge” in art 6 has an autonomous meaning: signatory states could not unilaterally determine whether any particular contravention was a “criminal charge” and thus attracted the art 6 protections. It stated that:
If the Contracting States were able at their discretion to classify an offence as disciplinary instead of criminal … the operation of the fundamental clauses of [art] 6 … would be subordinated to their sovereign will. … The Court therefore has jurisdiction … to satisfy itself that the disciplinary does not improperly encroach upon the criminal.
5.19The Court concluded that three factors were relevant to whether a provision fell within the term “criminal charge”:
(a) domestic classification of the offence was relevant but was only a “starting point” and of “formal and relative value”;
(b) the nature of the offence, which was a “factor of greater import”; and
(c) the nature and degree of severity of the penalty.
5.20The Court found that on these criteria some of the charges, while classified as disciplinary, did indeed come within the criminal sphere. On the facts, however, the Court found only one breach of art 6. In Ozturk v Germany the Court provided further guidance about the application of the above factors. That case involved minor road traffic offences which attracted fines and were classified as “administrative offences” in Germany. The Court found a breach of art 6(3) on the basis that the offences were, in nature, criminal. It held that the offences:
… retained a punitive character, which is the customary distinguishing feature of criminal penalties. The rule of law infringed by the applicant has ... undergone no change of content. It is a rule that is directed, not towards a given group possessing a special status – in the manner, for example, of disciplinary law – but towards all citizens in their capacity as road users ... Indeed, the sanction ... seeks to punish as well as to deter.
The Court made the same observation as in Engel
, that a signatory to the convention could not avoid the protections in art 6 merely by calling a contravention “regulatory” rather than criminal. In Bendenoun v France
, the Court also found that arts 6(2) and (3) applied to certain tax penalties because they operated on the public at large, the penalties were not compensatory, but punitive and deterrent, and because the penalties were very substantial. The majority of the English Court of Appeal followed this approach in Han v Commissioners of Customs and Excise
when it found that the imposition of penalties for alleged dishonest evasion of tax under the Value Added Tax Act 1994 (UK) and Finance Act 1994 (UK) amounted to the determination of criminal charges within the meaning of art 6(1). The approach in Han
was followed in International Transport Roth GmbH v Secretary of State for the Home Department
which involved breaches of immigration legislation relating to hauliers who were responsible for “clandestine entrants” to the United Kingdom and thus liable for fixed strict liability civil penalties.
What might be the position in New Zealand?
5.22New Zealand courts may be likely to refrain from extending the interpretation of the phrase “charged with an offence” to include civil pecuniary penalties. Thus far, where the phrase has been given a broad interpretation, the penalty has involved imprisonment. Furthermore, a strained interpretation of NZBORA is not permitted. The Court of Appeal has emphasised that that rule authorises only NZBORA-consistent meanings that can be “reasonably” or “properly” given; such interpretations must be “fairly open” and “tenable”.
5.23On the other hand, the Supreme Court has been influenced by the Canadian Supreme Court in R v Wigglesworth. While Wilson J in that case stated that she was taking a “narrow” interpretation of s 11, she indicated that “true penal consequences” could result from a “fine”.
5.24New Zealand courts have not thus far been influenced by the European jurisprudence in this area. The European courts have taken a more expansive approach to determining what is, in nature, a criminal offence. As a result, non-criminal penalties have been found to fall within the term. The penalties dealt with under the European and UK cases are not directly akin to ours. They have involved fixed penalties imposed directly by enforcement agencies, rather than by the court. They mirror more closely the administrative penalties found in our tax legislation and our infringement regimes. However, the matters raised are relevant.
5.25A number of factors have been influential in the European cases. In Han it was relevant that the breach concerned fraud or dishonesty in respect of the tax payable. The level of “criminality” involved, then, did not differ significantly from parallel criminal offences under the tax regime. Also, whether the “offence” applies generally to the public at large or is restricted to a specific group is relevant. And if a punitive and deterrent penalty is attached, courts will be more likely to find a contravention to be criminal. On the other hand, if the offence is limited to a restricted group, for example as disciplinary offences are, the courts will be less likely to classify a charge as criminal unless it involves or may lead to a loss of liberty. Finally, the purpose of the regime is also relevant.
5.26If New Zealand courts were to adopt the approaches of the European and Canadian courts, some civil pecuniary penalties may be susceptible to a finding that they amount to a “criminal offence” under NZBORA. They display features that have been relevant in those courts. Critically, they are public in nature and, while some are directed at a specific group, others capture the conduct of a broad range of society. Furthermore, they are intended to be punitive and deterrent. In addition, some civil pecuniary penalties contain a mens rea element and so involve a degree of moral culpability akin to criminal offences. And while there is no threat of imprisonment, the level of potential financial penalty outstrips many criminal financial penalties.
5.27Ultimately, however, courts may not see the need to determine this issue, given the existence of s 27(1) of NZBORA.
5.28The White Paper which preceded the enactment of NZBORA notes that s 27(1) largely reflects basic principles of the common law which go back at least to the 16th century and, in keeping with Tucker LJ’s statement, that the principles will have a varying application in differing circumstances. The commentary also states that the more serious the matter, the nearer the procedures adopted will need to approximate the protections in ss 23 to 26. This point has been reiterated since. For example in Ali v Deportation Review Tribunal Elias J stated: “The more significant the decision the higher the standards of disclosure and fair treatment.”
5.29Express language must be employed to preclude the operation of s 27. Butler and Butler note that the result of s 6 of NZBORA is that it is likely that a statutory provision granting a broad discretion to a decision maker about procedure will be read as subject to the obligation under s 27(1). However, if the procedures laid down by the statute are clear and unambiguous, there will be no scope for the implication of different natural justice requirements.
5.30In Drew v Attorney-General, the Court of Appeal ultimately decided the case on the common law principles of natural justice which were “necessarily affirm[ed] and strengthen[ed]” by the guarantee in s 27. The Court indicated that, depending on the circumstances of the case, including the seriousness of penalties or consequences involved, the right to legal representation may be protected by s 27(1).
5.31Section 27 clearly applies to civil pecuniary penalty proceedings. It is clear then that breaches of natural justice by the imposition of civil pecuniary penalties need to be justified under s 5. It may also be that the applicable rights in ss 24 and 25, most notably those relating to access to legal advice and representation and arguably those relating to the right to be presumed innocent and not to be compelled to be a witness need to be given some degree of protection.
5.32Section 5 requires that:
Subject to s 4 of this Bill of Rights, the rights and freedoms contained in this Bill of Rights may be subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
5.33In his minority judgment in Siemer v Solicitor-General, McGrath J weighed the nature of contempt proceedings against their objective in assessing whether they could be justified under s 5. He noted that the aim of the summary process for contempt was to protect the ability of the courts to exercise their constitutional role of upholding the rule of law. Effective administration of justice required that they were able to ensure that court orders were adhered to and, in the event of breach, that a person was quickly brought to account. Also, in Drew v Attorney-General, John Hansen J was persuaded by the Attorney-General’s arguments that the refusal of legal representation to prisoners in prison disciplinary hearings was justified under s 5, in part because of the purpose of such hearings and the need for their speedy disposition. In relation to civil pecuniary penalties, the discussion below about the need for effectiveness in regulatory regimes is relevant to the impact of s 5.