1.1The purpose of this review has been to assess pecuniary penalties as a comparatively new legislative tool for enforcing legal rules and standards. Pecuniary penalties are monetary penalties that are imposed by a court after a trial conducted under the rules of civil procedure and evidence where:
- liability is established on the civil standard of proof;
- the monetary penalty can be very substantial;
- neither imprisonment nor criminal conviction can result; and
- the penalty is paid to the Crown, rather than any victim – that is, pecuniary penalties are not intended or designed to compensate.
1.2This review has not been concerned with other non-criminal forms of penalty. Those include penalties imposed by a body other than a court (for example by “rulings panels” under the Gas Act 1992 and Electricity Industry Act 2010); administrative penalties (those being fixed, usually low-value, non-discretionary penalties imposed directly by a regulator); tax penalties; infringement notices; criminal gain disgorgement penalties; or non-monetary civil remedies such as management bans and licence revocations.
1.3Three factors prompted the review. First, pecuniary penalties are imposed without the protections that we normally take for granted as part of the criminal law. Yet they can result in a very substantial penalty. Often the penalty can be greater in monetary terms than a criminal fine. As a result, concerns have been raised that they illegitimately challenge the traditional distinction between the criminal and civil law. Pecuniary penalties are not alone in straddling the “criminal–civil divide”. The civil remedy of exemplary damages, for instance, is punitive rather than compensatory and the sentence of reparation, handed down by criminal courts, is designed to compensate the victim. So there are instances where the line has been compromised.
1.4However, the question for this review has been whether pecuniary penalties are used in circumstances that justify this compromise, and whether the appropriate balance has been struck in terms of how they are imposed. The review has also highlighted some of the difficulties that can arise when hybrid forms of remedies and penalties are created.
1.5Secondly, pecuniary penalties are relatively novel. Although New Zealand’s first pecuniary penalty provisions appeared nearly 30 years ago, the majority have been introduced since 2000. Increasingly they are being adopted as a central feature of statutory regimes. Their adoption in legislation has appeared to be relatively ad hoc, and it is not clear that it has been consistently guided by principle. There is little guidance in place for government agencies considering whether to include pecuniary penalties in legislation, and very little debate has occurred about their benefits, drawbacks and design.
1.6As a result of the lack of guidance, the third factor that prompted the review is the inconsistencies among existing pecuniary penalty provisions. Although there are some common approaches, current statutes deal in a variety of ways with matters such as procedural rules, guidance about penalty levels and when a penalty should be imposed, privilege and double punishment. There is also a lack of consistency in when pecuniary penalties have or have not been included in a legislative scheme. For example, while they feature heavily in some environmental protection legislation, they are entirely absent from other areas of environmental law. The differences in legislative approach may reflect the novel nature of pecuniary penalties. Again, however, the inconsistencies suggest the absence of clear principles to guide their adoption.
1.7Pecuniary penalties have resulted in a number of difficult legal disputes in other jurisdictions. Most notably, Australian courts have struggled with some of their features. Controversy has arisen over their design and over how the courts have interpreted pecuniary penalty provisions. To date, little substantial judicial analysis of the nature of pecuniary penalties has occurred in New Zealand. Indeed, many of the penalties have never been used. Over time, it is likely that there will be more litigation involving pecuniary penalties, and it may be that our courts will be required to tackle the sorts of issues that have vexed courts in other countries. Consistency and principle in the design and use of pecuniary penalties should help reduce the risk of future litigation here.