Contents

Chapter 6
The critical issues

Privilege against self-exposure to a non-criminal penalty

6.54The privilege against self-incrimination enables individuals to refuse to answer questions or provide information on the grounds that to do so might expose them to criminal prosecution. It is provided for in the Evidence Act 2006, s 60 and aspects of it are protected by the New Zealand Bill of Rights Act 1990, ss 23(4), 25(d).310  Before the introduction of the Evidence Act, New Zealand courts also recognised the common law “penalty privilege” which gave protection against answering questions or providing information in a way that might expose oneself to a non-criminal penalty. The penalty privilege had been recognised as giving potential protection to defendants in civil pecuniary penalty cases.311
6.55The position has changed under the Evidence Act. The Act provides for the privilege against self-incrimination but omits reference to the penalty privilege. In doing so, it implements the Law Commission’s recommendation in its 1999 Evidence report that the penalty privilege should not be retained. It appears, then, that defendants in civil pecuniary penalty cases can no longer rely on the privilege, unless the particular civil pecuniary penalty statute provides for it specifically. In fact, most civil pecuniary penalty statutes are silent on the privilege. However, a handful do provide some protection against the subsequent use in criminal and civil pecuniary penalty proceedings of statements made by a person in answer to questions.312  Those statutes treat protection against self-exposure to a civil pecuniary penalty in the same way as self-incrimination.

6.56In the light of the growth in civil pecuniary penalty regimes and their punitive nature, we suggest that there is a need to revisit whether the penalty privilege should apply both during the investigation of civil pecuniary penalty proceedings and the proceedings themselves. The inconsistent approach adopted by existing civil pecuniary penalty statutes also suggests that the issue demands consideration. We also query whether judicial interpretation of the provisions of the Evidence Act that concern the relationship between the Act and pre-existing common law rules could lead to the judicial reintroduction of the penalty privilege in New Zealand in some areas.

The impact of the Evidence Act 2006

6.57In 1999 the Law Commission completed its review of the law of evidence and proposed a new Evidence Code.313  That review led to the enactment of the Evidence Act. In its discussion paper on the privilege against self-incrimination, the Commission proposed retaining the privilege against self-exposure to a non-criminal penalty.314  In reaching this position, the Commission focussed on the same rationales that exist for the privilege against self-incrimination, those being the potential for abuses of power, the power imbalance in civil pecuniary penalty proceedings and a person’s interest in maintaining their privacy.
6.58However, the weight of submissions persuaded the Commission to change its view. Submitters advocated against retention of the privilege on the grounds that it is difficult to determine whether some existing legislative sanctions amount to a penalty in law; and that the existence of the privilege is difficult to justify when no protection exists for other serious forms of civil liability, such as loss of custody of a child, injunctive orders or substantial damages.315  As a result the Commission’s code was silent on the privilege, and s 60 of the Act provides only for the privilege against self-exposure to a criminal penalty.316  The authors of The Evidence Act 2006: Act and Analysis state that the “restriction of s 60 to criminal acts and punishments eliminates the common law protection in New Zealand against self-incriminating exposures to a civil penalty”.317  This reflects the position taken by the Commission and there is no evidence that the government or Parliament of the time took express exception to this view.

6.59Notwithstanding this background, we have considered whether, because of changes made to the Commission’s draft code before the enactment of the Evidence Act, there is a possibility that courts may still recognise the existence of the common law penalty privilege. This is relevant because Australian experience tells us that challenges to civil pecuniary penalties might well be made on this basis.

6.60The Commission had proposed that s 10 of the new code should provide:318

This Code is to be liberally construed in such a way as to promote its purpose and principles and is not subject to any rule that statutes in derogation of the common law should be strictly construed.

The commentary to the code stated that the section was designed to be a “reminder that it is to the purpose and principles of the Code, rather than to the common law, that judges and lawyers should look for answers to evidential issues”.

6.61However, changes made to the Bill before its introduction to Parliament included the amendment of proposed s 10. As enacted, the provision now reads:

Interpretation of Act
(1) This Act—(a) must be interpreted in a way that promotes its purpose and principles; and (b) is not subject to any rule that statutes in derogation of the common law should be strictly construed; but (c) may be interpreted having regard to the common law, but only to the extent that the common law is consistent with—(i) its provisions; and (ii) the promotion of its purpose and its principles; and (iii) the application of the rule in s 12 ...

6.62Section 10 should be read with ss 11 and 12 which state:

11 Inherent and implied powers not affected
(1) The inherent and implied powers of a court are not affected by this Act, except to the extent that this Act provides otherwise. (2) Despite subsection (1), a court must have regard to the purpose and the principles set out in sections 6, 7, and 8 when exercising its inherent or implied powers.
12 Evidential matters not provided for
If there is no provision in this Act or any other enactment regulating the admission of any particular evidence or the relevant provisions deal with that question only in part, decisions about the admission of that evidence—(a) must be made having regard to the purpose and the principles set out in sections 6, 7, and 8; and (b) to the extent that the common law is consistent with the promotion of that purpose and those principles and is relevant to the decisions to be taken, must be made having regard to the common law.

6.63The authors of The Evidence Act 2006: Act and Analysis note that the amendment to s 10 was made as a “helpful addition to aid interpretation” however they also note that the effect of these provisions is that, as enacted, the Act is no longer a code.319  Recent judicial statements suggest that these provisions may give rise to some difficult questions of interpretation about the application of the common law under the Act. In New Zealand Institute of Chartered Accountants v Clarke Keane J described the prevailing situation as follows:320

Section 10(1), which governs interpretation, sets the balance. The Act is the starting point and may well be the end point. It speaks for itself and is not to be read subject to the common law. If it speaks explicitly and completely there can be no resort to the common law. If it speaks less than definitively and completely there can and may need to be, but only in so far as the common law marches with the purposes, principles and letter of the Act.

6.64On this basis, he concluded that the common law has “a continuing place in setting the boundaries” of s 57 (which relates to the privilege for settlement negotiations or mediation). On the question of the penalty privilege itself, the Chief Employment Court judge stated, in NZ Air Line Pilots Assn v Jetconnect Ltd:321

Although acknowledging that the Act is a code, it is arguable that “privilege” dealt with under the Evidence Act 2006 relates to exposure to criminal liability and the common law of privilege affecting claims to civil penalties may have been left untouched by Parliament.

6.65Recently, the Court of Appeal considered the impact of ss 10 to 12 of the Evidence Act. It noted that:322
(a) Under s 10(1)(c) of the Evidence Act, the Act may be interpreted having regard to the common law to the extent that the common law is consistent with its provisions, the promotion of its purpose and its principles and the application of the rule in s 12.
(b) Under s 11 the inherent and implied powers of a court are not affected by the Act except to the extent that the Act provides otherwise, although a court must have regard to the purpose and the principles set out in ss 6, 7 and 8 when exercising those powers.
(c) Under s 12 if there is no provision in the Act or any other enactment regulating the admission of any particular evidence or the relevant provisions deal “with that question only in part”, decisions about the admission of that evidence must be made having regard to the purpose and principles set out in ss 6, 7 and 8. To the extent that the common law is consistent with the promotion of that purpose and those principles and is relevant to the decisions to be taken, regard must be had to the common law. In particular s 6(c) provides that a purpose of the Act is to help secure the just determination of proceedings by “promoting fairness to parties and witnesses”.
6.66The Court concluded that there remains a general common law discretion to exclude evidence where its admission would be unfair, notwithstanding silence as to that discretion in the Evidence Act, and specifically in s 30 (which relates to improperly obtained evidence).323  It reached this conclusion on the basis that to refuse to do so would be inconsistent with the common law and the purpose of the Evidence Act. The purpose of the Act is set out in s 6:
The purpose of this Act is to help secure the just determination of proceedings by—
(a) providing for facts to be established by the application of logical rules; and
(b) providing rules of evidence that recognise the importance of the rights affirmed by the New Zealand Bill of Rights Act 1990; and
(c) promoting fairness to parties and witnesses; and
(d) protecting rights of confidentiality and other important public interests; and
(e) avoiding unjustifiable expense and delay; and
(f) enhancing access to the law of evidence.
6.67Section 7 contains the “fundamental principle” that relevant evidence is admissible. Evidence is “relevant” if it has a tendency to prove or disprove anything that is of consequence to the determination of the proceeding.324  We have considered whether there is scope for a court to determine that the combined effect of the provisions set out above makes room for the continuation of the common law penalty privilege in New Zealand. We think that this would be unlikely: any court doing so would be acting in the face of the Law Commission’s express view that the privilege should not be retained. However, judges have shown some willingness to place greater emphasis on a broad reading of the interpretation aids in the Act than on the Commission’s recommendation that the Act should be a code. Where civil pecuniary penalty statutes are silent on the matter, then, there may presently be some uncertainty as to the position for those resisting civil pecuniary penalty investigations and proceedings.

Should civil pecuniary penalty statutes protection against self-exposure to a non-criminal penalty?

6.68The roots of the penalty privilege were considered by the High Court of Australia (HCA) in Rich v Australian Securities Investment Commission.325  The privilege bears some similarity to the privilege against self-incrimination and is one element of the rule that “a party cannot be compelled to discover that which, if answered, would tend to subject him to any punishment, penalty, forfeiture, or ecclesiastical censure.”326  It had its origins in the rules of equity relating to discovery, when discovery and interrogatories were provided for under rules made under the Judicature Act. Equity’s principle was that an order for discovery or for the administration of interrogatories in favour of the prosecutor, whether the prosecutor was the Crown or a common informer or some other person, should not be made where the proceeding was of such nature that it might result in a penalty or forfeiture.327  The rule has long been recognised by the common law as being of general application.328
6.69The privilege applied to exposure to penalties – that is those designed to punish or discipline. It did not apply to compensatory awards. However, historically wide scope was placed on the term “penalty”. The majority of the HCA listed exposure to loss of office, petitions for bankruptcy, cases of forfeiture of estate, and breaches of covenants in leases, among other things as examples when the privilege has been relied upon.329  In determining whether the common law privilege applied in Rich, the majority held, what is important is not the classification of the orders sought – for example, whether they are “punitive” or “protective”, rather attention must be focused upon the nature of the orders.330  
6.70Drawing on the discussion in chapter 5, above, it is not clear whether the privilege might be protected in the context of civil pecuniary penalties by s 25(d) or 27(1) of NZBORA.331
6.71Arguments in favour of and against the penalty privilege were made in the Commission’s 1996 discussion paper on the privilege against self-incrimination.332  In favour of retention the Commission made the point that civil pecuniary penalties can be as severe as criminal offences and can be feared by the witness and investigated by officials in much the same way. These similarities suggest that the rationales for the privilege of self-incrimination may be applicable, at least in some situations, to liability to a civil pecuniary penalty. In its 2002 report, the Australian Law Reform Commission recommended statutory expression of the penalty privilege on these grounds:333

It is apparent that some civil and administrative penalties carry consequences that are just as serious as traditional criminal punishments. … the conventional common law readiness to remove the privilege more easily in relation to non-criminal penalties may require reassessment in light of the convergence of the severity of criminal punishments and non-criminal penalties.

6.72The rationales for the privilege against self-incrimination are said to be those summarised by Justice Goldberg in the United States Supreme Court case Murphy v Waterfront Commission:334

The privilege against self-incrimination “registers an important advance in the development of our liberty – one of the great landmarks in man’s struggle to make himself civilized.” It reflects many of our fundamental values and most noble aspirations: our unwillingness to subject those suspected of crime to the cruel trilemma of self-accusation, perjury or contempt; our preference for an accusatorial rather than an inquisitorial system of criminal justice; our fear that self incriminating statements will be elicited by inhumane treatment and abuses; our sense of fair play which dictates “a fair state-individual balance by requiring the government to leave the individual alone until good cause is shown for disturbing him and by requiring the government in its contest with the individual to shoulder the entire load”; our respect for the inviolability of the human personality and of the right of each individual “to a private enclave where he may lead a private life”; our distrust of self-deprecatory statements; and our realization that the privilege, while sometimes “a shelter to the guilty”, is often “a protection to the innocent”.

6.73The privilege recognises the severity of criminal penalty, the imbalance between state and individual in criminal proceedings and our desire not to penalise the innocent. These same arguments can easily apply to civil pecuniary penalty proceedings. In our view, the question is whether the lack of criminal conviction distinguishes civil pecuniary penalties enough from criminal offences to warrant treating them differently when it comes to the privilege. As we observe in chapter 3, although the lack of conviction is not an insignificant distinction, the stigma and punitive effect of civil pecuniary penalties may differ little from a criminal penalty.

6.74Practice abroad may also favour recognition of such a privilege. As noted above, Australian case law recognises a common law privilege against the self-exposure to a forfeiture or penalty. The penalty can be abrogated, but only by express words in the legislation. The United Kingdom Civil Evidence Act 1968 provides for the penalty privilege as follows:

14 Privilege against incrimination of self or spouse or civil partner
(1) The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty
(a) shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law; …
6.75In favour of abolition of the privilege, in our 1996 discussion paper we quoted Murphy J’s minority opinion in Pyneboard:335

[i]t is an absurd state of the law if a witness, in a civil or criminal trial, can lawfully refuse to answer because the answer may tend to expose him or her to … a civil action for penalties, but may not refuse if the exposure is to some other civil loss, such as an action for damages, even punitive damages. In so far as such absurdity has been introduced or maintained by judicial decision … it can and should be erased by judicial decision. Whatever their standing in judicial proceedings, I see no reason for recognizing such privileges outside judicial proceedings.

6.76This view echoes the one that led the Law Commission to change its view and recommend abrogation of the penalty privilege. That is, if there is justification for the privilege existing for pure “penalties” imposed under civil law, then there should be equal justification for it applying to other civil orders which may have a punitive effect. Existence of such a privilege would seriously impede the ability of plaintiffs to make out their case in a wide range of civil proceedings.

6.77This argument is significant in the regulatory context of civil pecuniary penalties. To enable persons to avoid providing information or answering questions on the basis of the penalty privilege would hinder enforcement bodies in obtaining compliance and punishing breaches. We return to this point below.

“Penalty”

6.78First, however, we query the suggestion that a distinction cannot be made on the basis of the nature of the order involved. While it may be true that, historically, the privilege has not been confined to pure monetary penalties,336  it does not follow that this must be the approach of a new statutory iteration of the privilege.
6.79The majority of the HCA in Rich raised three objections to reliance on a distinction based on whether an order is “punitive” or “protective”:337

6.80Although the High Court was of this view, we consider that it is possible to distinguish validly between the types of orders contained in many of the regulatory schemes dealt with in this review. With limited exceptions, the monetary civil pecuniary penalties under review have a primarily and almost solely punitive function. They seek to deter breaches and promote compliance by the threat of punishment. Management bans, licence revocation and other similar orders have a punitive impact on the recipient but they serve an additional purpose. They are also aimed at protecting others from harm arising from future breaches. A policy argument can be made that this additional aim of protection justifies the greater compromise of the defendant’s rights.

6.81This distinction is now made in the Corporations Act 2001 (Cth). Section 1349 provides that the privilege against exposure to penalty does not apply in proceedings relating to a disqualification order.338  This approach was taken because of concerns that application of the privilege to investigation of and proceedings for banning orders would severely limit the effectiveness of Australian Securities and Investments Commission’s power to conduct a hearing to determine whether a banning order should be made.339  However, the Act does not abrogate the privilege in relation to pecuniary penalty orders.

Conclusion

6.82Notwithstanding the Commission’s previous position in its 1999 Evidence report, the civil pecuniary penalties falling under this review are growing in number and they carry very significant maximum penalties. There was no direct consideration of the nature of these penalties in the preliminary paper or reports on the Evidence project. Given their growing popularity, we think there is a strong argument for reconsideration of the penalty privilege in this context.

6.83This is not to say that the privilege should be given full effect in civil pecuniary penalty regimes. Instead, the question is whether the privilege should be treated in the same manner as the privilege against self-incrimination. A number of existing regimes remove the protection offered by the privilege against self-incrimination. Removal in those regimes will have been considered a justified and proportionate breach of NZBORA. It may have been warranted in recognition of the policy imperatives of the particular regulatory schemes.

6.84However, removal of the privilege is usually accompanied by restrictions on the subsequent use of the information. Usually this is in the form of a “use immunity” which prevents answers to questions and/or information supplied from being admitted into evidence against that person in subsequent proceedings.340  Less commonly there is provision for a “derivative use immunity” which extends also to preventing admission of evidence obtained as a result of further inquiries made on the basis of the answers given/information supplied. These immunities give recognition to NZBORA.
6.85We anticipate that enforcement bodies would hold considerable concerns that the protection afforded by the penalty privilege would significantly diminish their ability to obtain compliance and punish breaches of their legislation. This point has been argued forcefully in Australia. It has been claimed that the application of the privilege to civil pecuniary penalty proceedings will have a “profound effect on civil penalty proceedings” and that, along with other procedural decisions made by Australian courts in those proceedings, it will “rapidly [diminish]” their utility as a remedy.341

6.86As noted, it is not clear that the letter of NZBORA requires: (a) the protection of the penalty privilege, or (b) equivalent immunities in the case of civil pecuniary penalties. But there is certainly an argument that recognition of the privilege in the context of civil pecuniary penalties would better reflect the balance between fairness and regulatory effectiveness. Should, then, the penalty privilege be dealt with in the same way as the privilege against self-incrimination?

Q7 Should civil pecuniary penalty statutes recognise a privilege against self-exposure to a non-criminal penalty?

310New Zealand Bill of Rights Act 1990, s 23(4): everyone who is (a) arrested; or (b) detained under any enactment for any offence or suspected offence shall have the right to refrain from making any statement and to be informed of that right; and s 25(d): the right not to be compelled to be a witness or to confess guilt.
311Port Nelson Ltd v Commerce Commission [1994] 3 NZLR 435 (CA). The case involved a civil penalty proceeding under s 80 of the Commerce Act 1986. However, the Court of Appeal found that the privilege was not a ground for limiting its power to order the advance exchange of briefs of evidence. See also Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328.
312Commerce Act 1986, s 106, Dairy Industry Restructuring Act 2001, s 145, Telecommunications Act 2001, s 15, Takeovers Act 1993, s 33C. See also Electricity Industry Act 2010, s 48, Gas Act 1992, s 43V.
313See Law Commission Evidence: Evidence Code and Commentary (NZLC R55, Wellington, 1999) vol II and Law Commission Evidence: Reform of the Law (NZLC R55, Wellington, 1999) vol I.
314Law Commission The Privilege Against Self-Incrimination (NZLC PP25, Wellington, 1996) at 59.
315Law Commission Evidence: Reform of the Law, above n 313 at [278].
316The definitions of “incriminate” and “self-incriminate” in s 4 of the Evidence Act 2006 refer solely to criminal prosecutions.
317R Mahoney and others The Evidence Act 2006: Act and Analysis (2nd ed, Brookers, Wellington, 2007) at [EV60.06(6)], citing the Law Commission Evidence: Evidence Code and Commentary, above n 313 at [C253].
318See Law Commission Evidence: Evidence Code and Commentary, above n 313 at 36–37. See also Law Commission Evidence: Reform of the Law, above n 313 at 9.
319R Mahoney and others, above n 317 at [EV10.01].
320New Zealand Institute of Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC) at [38].
321NZ Air Line Pilots Assn v Jetconnect Ltd AC 23A/09, ARC 33/09, 19 June 2009 (EmpC) at [23].
322An order is in force prohibiting publication of the judgment and any part of the proceedings of the relevant case until final disposition of the trial.
323Section 30 of the Evidence Act 2006 applies only to criminal proceedings. The Act does not specifically control the re-use of improperly obtained evidence in civil proceedings other than to the limited extent provided for by ss 53(4) and 90.
324Section 8 of the Evidence Act 2006 is also relevant: “General exclusion (1) In any proceeding, the Judge must exclude evidence if its probative value is outweighed by the risk that the evidence will (a) have an unfairly prejudicial effect on the proceeding; or (b) needlessly prolong the proceeding. (2) In determining whether the probative value of evidence is outweighed by the risk that the evidence will have an unfairly prejudicial effect on a criminal proceeding, the Judge must take into account the right of the defendant to offer an effective defence.”
325[2004] HCA 42, (2004) 209 ALR 271.
326Redfern v Redfern [1891] P 139 at 147 per Bowen LJ. See also Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 336, 355.
327A common informer was a person who took proceedings for breaches of certain statutes solely for the penalty which, according to the statute, was paid to the one who gave information of the breach. When a common informer sued for a penalty, the courts refused to assist in any way and allowed the person sued to avoid giving any evidence at all. See Law Commission The Privilege Against Self-Incrimination, above n 314 at [177].
328Rich v Australian Securities Investment Commission, above n 325 at [23]–[24]. Compare the statement of the majority of the same court in Pyneboard Pty Ltd v Trade Practices Commission, above n 326 at 337 that “the better view is that equity looked to the existing model of the common law and applied the rule which it had established”.
329Rich v Australian Securities Investment Commission, above n 325 at [26]–[28].
330Rich v Australian Securities Investment Commission, above n 325 at [34].
331It may be that s 27(1) captures the privilege against self-incrimination. Before NZBORA was enacted, the Court of Appeal held in Busby v Thorn EMI Video Programmes Ltd [1984] 1 NZLR 461 that answers given under the compulsion of Anton Piller orders may not be used to prosecute the person answering. It would be possible for a court to hold that such a result was now dictated by s 27(1). See also Natural Gas Corporation Holdings Ltd v Grant [1994] 2 NZLR 252 (HC).
332Law Commission The Privilege Against Self-Incrimination, above n 314.
333Australian Law Reform Commission Principled Regulation: Federal Civil and Administrative Penalties in Australia (ALRC R95, Sydney, 2002) at [18.20].
334378 US 52 at 55 (1964). See also the Australian Law Reform Commission, above at [18.5]–[18.8] which concluded that the prevailing view in Australia is that the privilege is based on the protection of individual human rights and protects “personal freedom, privacy and dignity” from the power of the state.
335Pyneboard Pty Ltd v Trade Practices Commission, above n 326 at 346.
336Rich v Australian Securities Investment Commission, above n 328 at [26].
337Rich v Australian Securities Investment Commission, above n 328 at [31]–[33]. In doing so, the Court overruled the decision the Federal Court in Australian Securities Commission v Kippe (1996) 67 FCR 499, 137 ALR 423: at [38].
338It is also abrogated in relation to various proceedings for declarations, banning, suspension or cancellation orders, requirement to give an undertakings, etc under the Act. Section 1349(2) of the Corporations Act 2001 (Cth) provides that subsection (1) applies whether or not the person is a defendant in, or a party to, the proceeding or any other proceeding.
339T Middleton “The Privilege against Self-Incrimination, the Penalty Privilege and Legal Professional Privilege under the Laws Governing ASIC, APRA, the ACCC and ATO–Suggested Reforms” (2008) 30 Aust Bar Rev 282 at 314.
340Except (usually) in proceedings for perjury.
341See P Spender “Negotiating the Third way: Developing Effective Process in Civil Penalty Litigation” (2008) 26 C&SLJ 249 at 249, 253; V Comino “Effective Regulation by the Australian Securities and Investment Commission: The Civil Penalty Problem” (2009) 33 MULR 802 at 819, and T Middleton “The Privilege against Self-Incrimination, the Penalty Privilege and Legal Professional Privilege under the Laws Governing ASIC, APRA, the ACCC and ATO–Suggested Reforms” (2008) 30 Aust Bar Rev 282.