Chapter 7
Other elements of legislative design

Guidance as to whether to impose a penalty

7.42Most civil pecuniary penalty statutes provide that the High Court may impose a civil pecuniary penalty on a person in breach. That is, where a relevant breach of the statute has been proven, the Court has discretion as to whether to make an order for a civil pecuniary penalty. This is also the case for those regimes where a declaration of contravention must be made if the contravention has been established.476
7.43Most civil pecuniary penalty statutes leave the position at that – they give no further guidance as to how this discretion is to be exercised.477   Others set out factors which the Court must consider before a penalty should be imposed. Where guidance to this effect is provided, it varies from statute to statute. So, for example, the Securities Trustees and Statutory Supervisors Act 2011 specifies that the following factors should be considered when determining whether to impose a penalty:478
(a) the nature and extent of the contravention:
(b) (in the case of a contravention relating to a security) the likelihood, nature, and extent of any damage to the integrity or reputation of New Zealand's securities markets as a result of the contravention:
(c) the nature and extent of any loss or damage suffered by security holders or residents because of the contravention:
(d) the circumstances in which the contravention occurred:
(e) whether or not the licensee has previously contravened a licensee obligation:
(f) the public benefit in encouraging prompt and honest self-reporting of breaches or possible breaches of licensee obligations:
(g) any other circumstances that the court considers relevant.
7.44Under the Unsolicited Electronic Messages Act 2007, the Court is directed to take into account whether another penalty or order has been imposed in respect of the same act or omission and if so, its amount and effect.479 The result is that the Court will take into account whether multiple penalties are appropriate in the circumstances. Courts have also considered this issue under the Commerce Act 1986,480  although it is not explicitly mentioned in that Act, nor in other civil pecuniary penalty regimes.
7.45Section 80(2) of the Commerce Act is unique in that it directs the Court to impose a penalty on an individual in breach of part 2 of the Act unless it considers there is good reason not to.481  The provision was introduced to address the Court’s historical tendency not to impose individual penalties for a breach of part 2 of that Act, especially where they have already been imposed on the body corporate.482
7.46Finally, s 33M of the Takeovers Act 1993 takes a different approach. It provides: 483
If the Panel applies for a pecuniary penalty order against a person under this Act in accordance with s 35, the court— …
(c) may order the person to pay a pecuniary penalty that the court considers appropriate to the Crown if satisfied that the person has contravened the takeovers code, that the person knew or ought to have known of the conduct that constituted the contravention, and that the contravention—
(i) materially prejudices the interests of offerees, the code company, the offeror or acquirer, competing offerors, or any other person involved in or affected by a transaction or event that is or will be regulated by the takeovers code, or that is incidental or preliminary to a transaction or event of that kind; or
(ii) is likely to materially damage the integrity or reputation of any of New Zealand's securities markets; or
(iii) is otherwise serious.

7.47The effect of s 33M(c) is to set a threshold which the conduct must reach before a penalty may be imposed. That is, where a contravention is established, the Court’s discretion to impose a penalty is limited by these factors and pecuniary penalties should only be imposed for sufficiently serious breaches.

7.48Two matters arise. First, in what circumstances should Acts contain guidance as to when to impose a civil pecuniary penalty, and what should that guidance be? To what extent should civil pecuniary penalty statutes strive for consistency on this front and is there a list of standard factors which go to whether a civil pecuniary penalty should be imposed? Or do those factors need to be influenced by the particular regime involved?

7.49Secondly, are there difficulties in providing for a “threshold” of seriousness as in the Takeovers Act, above? Is it better that matters such as “material prejudice” form part of the element of the contravention? Or that the degree of prejudice should be relevant instead to the level of penalty imposed? One of the reasons for having s 33M(c) appears to be to enable the Court to find a breach on a strict liability basis. A pecuniary penalty, then, differs from the granting of a declaration of contravention.

Q35 In what circumstances should Acts contain guidance as to when to impose a civil pecuniary penalty, and what should that guidance be?

Q36 Are there difficulties in providing for a “threshold” of seriousness as in the Takeovers Act 1993?

476See for example Takeovers Act 1993, s 33M.   
477The following are silent: Anti-Money Laundering and Countering Financing of Terrorism Act 2009, Biosecurity Act 1993, Commerce Act 1986, Dairy Industry Restructuring Act 2001, Financial Advisers Act 2008, Financial Service Providers (Registration and Dispute Resolution) Act 2008, Hazardous Substances and New Organisms Act 1996, Overseas Investment Act 2005, Telecommunications (Interception Capability) Act 2004, Telecommunications Act 2001. See also Therapeutic Products and Medicines Bill, cl 37(1).
478Section 41(2). The same factors are to be taken into account when determining the amount of any penalty.
479Section 48(2).
480See for example Commerce Commission v NZ Bus HC Wellington BC200662042, 29 September 2006, Commerce Commission v Ophthalmological Society of New Zealand Inc [2004] 3 NZLR 689 (HC), Commerce Commission v Wrightson NMA Ltd (1994) 6 TCLR 279 (HC), and Commerce Commission v Accent Footwear Ltd (1993) 5 TCLR 448 (HC).
481This was one of a number of provisions enacted by the Commerce Amendment Act 2001 to provide a greater focus on penalising individuals within a firm who are responsible for making the decisions which led to the proscribed conduct.
482J Mallon and J Stevens “Commerce Act Penalties for Individuals” [2001] NZLJ 339. See for example Commerce Commission v NZ Bus Ltd, above n 480, in which Miller J declined to impose a penalty on individuals party to the body corporate’s contravention.
483See also Securities Markets Act 1988, s 42T(1)(c), Securities Act 1978, s 55C(c).