Contents

Chapter 6
The critical issues

Procedural and evidential rules

6.1New Zealand statutes differ in their treatment of the procedural and evidential rules that should be employed for civil pecuniary penalty proceedings. Some are silent on the issue. Five, including the Securities Act 1978, s 57D contain a common provision:240

The proceedings under this subpart are civil proceedings and the usual rules of court and rules of evidence and procedure for civil proceedings apply (including the standard of proof).

6.2This provision is in similar terms to s 1317L of the Australian Corporations Act 2001 (Cth) which has been the focus of argument in Australia in favour of uniform procedural rules.241  Middleton has observed that the meaning of the words “civil evidence and procedure rules” in s 1317L is unclear.242  He also notes that the Australian Securities and Investments Commission, which enforces the Corporations Act, has expressed concern that there is uncertainty about which procedural rules will apply.
6.3As in Australia, there is a question as to the import of s 57D. What, for example, does the term “usual” imply? Is it possible to identify what the “usual rules of evidence and procedure for civil proceedings” are? Alternatively, is the term “usual” a qualification? That is to say, must it be the “usual” rules rather than the exceptional or unusual rules of civil procedure that are used? For example, might an argument be made that this wording supports establishing a case on the typical balance of probabilities standard rather than taking a flexible approach to the standard of proof depending on factors such as the seriousness of the alleged act or conduct?243
6.4The issue is further complicated by some of the differences between the civil pecuniary penalty statutes. For example, s 79A of the Commerce Act 1986 provides that:244

In any proceedings under this Part for a pecuniary penalty—… (b) the Commission may, by the order of the Court, obtain discovery and administer interrogatories.

6.5The Anti-Money Laundering and Countering Financing of Terrorism Act 2009, Dairy Industry Restructuring Act 2001 and Hazardous Substances and New Organisms Act 1996 contain identical provisions. None of these four Acts contain the Securities Act formulation. There is a question as to why it is has been thought necessary to provide specifically for discovery and interrogatories in some Acts? If the received wisdom is that civil pecuniary penalty proceedings are civil proceedings, discovery and interrogatories should occur as a matter of normal practice under the High Court Rules. What, then, is the import of s 79A(b), and what is the import of its omission from other civil pecuniary penalty statutes?

6.6There are further inconsistencies. Section 79 of the Commerce Act provides:

In the exercise of its jurisdiction under this Part of this Act, except in respect of criminal proceedings and proceedings for pecuniary penalties of this Act, the Court may receive in evidence any statement, document, or information that would not be otherwise admissible that may in its opinion assist it to deal effectively with the matter.

6.7That section provides that, in general under the Act, relaxed rules of evidence apply, but that the normal (stricter) rules of evidence apply in criminal proceedings and proceedings for pecuniary penalties. In contrast, while the Securities Markets Act 1988 also provides for enforcement by way of both criminal offences and pecuniary penalties, s 43V provides:

In the exercise of its jurisdiction under this Act, the Court may receive in evidence any statement, document, or information that would not be otherwise admissible that may in its opinion assist it to deal effectively with the matter.

In all proceedings under that Act, then, the relaxed rules apply.

6.8Two questions arise. First, should more specific direction about procedure for civil pecuniary penalties be given, rather than the broad Securities Act, s 57D formulation? Secondly, should we be striving for consistency across our civil pecuniary penalty statutes, and if so, how is it to be achieved?

6.9There is a public interest in the effective and efficient enforcement of the regulatory schemes which employ civil pecuniary penalties. The use of inconsistent and broadly framed provisions such as that in s 57D poses two risks. They could invite a number of interpretations and consequent procedural challenges which may add cost and delay to civil pecuniary penalty proceedings. Again, this concern has been raised in Australia.245  A United Kingdom commentator has also observed that:246

The means of exacting the penalty in the case of criminal offences is the law of criminal procedure. This certainly contains variations and alternatives, most obviously the differences between summary and indictable/solemn procedures. However, it remains a more or less coherent whole, and applies to all criminal offences. Thus, their means of enforcement is well-known, standardized, and predictable, involving relatively clear procedures such as arrest, charging, caution, prosecution, guilty pleas, trial and appeal.

On the evidence of the three civil penalties examined, there is no more or less coherent standardised means of civil enforcement. Indeed the civil procedures differ substantially not only from those of criminal procedure but also among themselves.

6.10Civil pecuniary penalties are thought to be a speedy and efficient means of enforcement. Any savings and benefits that do in fact accompany them may be lost if their formulation leads to extended litigation. There may therefore be an argument for a greater degree of specificity and certainty than exists in s 57D. The other risk is that a lack of certainty will give courts the room to default to “quasi-criminal” protections. Again, this has been a concern in Australia.

6.11On the other hand, there are arguments that favour retention of the broad wording. It provides the Court with maximum flexibility, which enables it to ensure that the procedure adopted in the individual case is fair so that justice can be afforded. The ability to adapt procedure may be particularly warranted in the case of civil pecuniary penalties, given the potential gravity of the outcome for defendants and the range of defendants that may be involved. Civil courts have long had the discretion to adapt procedure accordingly and are well-versed in the practice. Also, where fairness requires that greater specification about particular rules of procedure or evidence is necessary, separate provision can be made. In this regard, see for example the discussion about the privilege against self-exposure to a non-criminal penalty, below.

6.12Another matter which favours a broadly worded procedural provision is the difficulty of identifying what any more specific wording would say. Thomas Middleton suggests that an Australian “code” should deal with matters such as:

6.13In the past, the Criminal Justice Division of Australia’s Attorney-General’s Department published a Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers.247  The guide has now been updated and no longer deals with civil pecuniary penalties,248  however in its previous form it gave a useful indication of the matters that might be dealt with either by guidelines or more formal rules. In addition to the matters listed above, it dealt with:
6.14However, in terms of a broad statement of what procedural provisions should apply, the guide simply stated: “Civil evidence and procedure rules to apply: It is preferable to include a provision specifying the applicable rules of evidence in proceedings for a pecuniary penalty order …”249  The guide gave as an example a provision framed in much the same way as the Corporations Act 2001 (Cth) provision.250  We deal with the formulation of the specific rules listed in the bullet points above in the following paragraphs. For present purposes our question is whether there should be a broad provision such as the one in s 57D of the Securities Act in civil pecuniary penalty statutes.

Q4Should civil pecuniary penalty statutes contain a broad instruction to the effect that “civil pecuniary penalty proceedings are civil proceedings and the usual rules of court and rules of evidence and procedure for civil proceedings apply”?

240See also Securities Markets Act 1988, s 42ZI, Securities Trustees and Statutory Supervisors Act 2011, s 43, Takeovers Act 1993, s 43B, Unsolicited Electronic Messages Act 2007, s 49, Financial Markets Conduct Bill (342–2), cl 487.
241See further para 8.11.
242T Middleton “The Difficulties of Applying Civil Evidence and Procedure Rules in ASIC’s Civil Penalty Proceedings under the Corporations Act” (2003) 21 C&SLJ 507 at 508, citing Australian Law Reform Commission Principled Regulation: Federal Civil and Administrative Penalties in Australia (ALRC R95, Sydney, 2002) at [3.58]–[3.59].
243See further para 6.15 onwards.
244Anti-Money Laundering and Countering Financing of Terrorism Act 2009, s 72, Commerce Act 1986, 79A(b), Dairy Industry Restructuring Act 2001, s 144 and Hazardous Substances and New Organisms Act 1996, s 124E.
245See for example Middleton, above n 242 at 512. See below para 8.11.
246R M White “It’s Not a Criminal Offence–Or Is It? Thornton’s Analysis of ‘Penal Provisions’ and the Drafting of ‘Civil Penalties’” (2011) 32(1) Statutes LR 17 at 36.
247Attorney-General’s Department (Criminal Justice Division) Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers (December 2007 ed). The guide was first published in March 2004.
248Now see Attorney-General’s Department (Criminal Justice Division) Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (September 2011 ed) <www.ag.gov.au>. See further at para 8.12.
249Attorney-General’s Department, above n 247 at 69.
250The provision was the Commonwealth Authorities and Companies Act 1997, sch 3, cl 8: “The Court must apply the rules of evidence and procedure for civil matters when hearing proceedings for: (a) a declaration of contravention; or (b) a pecuniary penalty order.”