In 2011, the Law Commission was asked to review the use of pecuniary penalties as a regulatory tool. These are financial penalties that policymakers are increasingly opting to use in place of criminal sanctions, to punish and deter misconduct in a number of regulatory regimes. They were first used in 1986 in the Commerce Act and now appear in 18 Acts of Parliament, including the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and the Unsolicited Electronic Messages Act 2007.
The Commission published an Issues Paper in 2012, seeking feedback on a number of questions relating to the use and design of these penalties. It received 20 submissions from a range of different stakeholders.
The Commission has published its Report in 2014 with final recommendations to the Government on the use and design of pecuniary penalties. In its Report, the Commission makes nine recommendations to Government about the need for these penalties to be carefully designed so that they do not create a risk of unfairness or injustice to defendants.
The Report was tabled in the House of Representatives on 30 October 2014. The Government responded to the Report on 4 May 2015, largely accepting the recommendations in principle but also said that more work was required to analyse the Commission’s proposed legislative guidelines.
Terms of reference
The Government asked the Law Commission to review the law on civil penalties.*
Civil penalties have been a feature of regulatory legislation in New Zealand since the mid-1980s. In recent years they have been included in an increasing number of Acts as part of a suite of enforcement measures. During that time the Legislation Advisory Committee has raised concerns (a) about the nature of civil penalties and (b) that insufficient consideration has been given to the principles that should guide both the introduction of civil penalty provisions and the procedure for their imposition.
The Law Commission considered the law relating to civil penalties, with emphasis on:
- the nature of civil penalties;
- when it might be appropriate to include civil penalties in a legislative regime;
- the procedural provisions that should accompany them; and
- whether some form of guidance about civil penalty provisions should be in place.
*Over the course of the review, the term has been changed to "pecuniary penalties".
Civil Pecuniary Penalties (NZLC IP33, 2012)
Chapters 1 and 2 of the Issues Paper, Civil Pecuniary Penalties (NZLC IP33, 2012), set out the existing landscape. The Commission noted that a first principles review of civil pecuniary penalties is needed because of:
(a) their comparative novelty
(b) the inconsistencies in the design of the existing regimes
(c) concerns that they illegitimately blur the traditional distinction between the civil and criminal law, and
(d) experience in other jurisdictions, particularly Australia, where courts have imposed additional “quasi-criminal” protections on their imposition.
Chapter 3 of the Issues Paper focused on the nature and validity of civil pecuniary penalties. The Commission assessed where civil pecuniary penalties sit against the traditional criminal-civil divide. It concluded that they are a “hybrid” action and took the position that while such hybrids have a valuable role to play, there must be robust policy justifications for their use. Chapter 4 critiqued those policy justifications.
The third part of the Issues Paper was concerned with matters of legislative drafting and design. Chapter 5 identified three guiding principles that should underpin the design of a civil pecuniary penalty regime: fairness; the effective enforcement of regulatory regimes; and certainty. It also assessed the application of the New Zealand Bill of Rights Act 1990.
Chapter 6 dealt with the “critical” design questions of: the rules of evidence and procedure that should apply; the standard and burden of proof; the privilege against self-exposure to a non-criminal penalty; double jeopardy; and intent and defences.
Chapter 7 dealt with other issues of design including: who should be able to seek and impose penalties; how penalty maximums are set in legislation; what guidance should be given to the Court; appeal rights; and limitation periods.
The final chapter of the Issues Paper asked whether the Commission should recommend guidance – such as a new chapter for the Legislative Advisory Committee Guidelines – for policy makers contemplating the use of civil pecuniary penalties. It also asked whether there is a need for legislation concerning civil pecuniary penalties.
Submissions on Issues Paper 33
The Commission received a total of 20 submissions in response to Issues Paper 33, Civil Pecuniary Penalties. Submissions were made by a range of organisations and several individuals.