11.3We also considered what principles should apply in deciding whether a particular pecuniary penalty provision should include an element of fault or intention, or whether it should be a strict liability contravention. The primary issue is whether the criminal law presumption that an offence should include an element of fault or intent, with strict liability offences being reserved for “public welfare regulatory offences”, provides an appropriate model for pecuniary penalties, or whether a different approach is required.
11.4On one hand, it might be assumed that given the quasi-criminal nature of pecuniary penalties, the same principles relating to mens rea as those which govern criminal offences should apply. Indeed, the New Zealand Bar Association submitted that including a mens rea element in pecuniary penalties should be the default position. The similarity of drafting and construction between pecuniary penalty provisions and criminal offences suggests the same over-arching criminal law principles have been borne in mind in the drafting process, and that those principles should also govern the use of pecuniary penalties.
11.6On balance, we prefer a case-by-case approach to this question. Pecuniary penalty design should be considered in the round, with reference to all relevant principles and factors before determining the extent to which fault or intention should feature in a particular penalty provision. We set out our rationale for this conclusion below.
11.8Traditionally, the criminal law sanctions those who are morally responsible for their acts – persons whose subjective mental state, as well as their conduct, is blameworthy. Another important facet of mens rea is that the prosecution bears the burden of establishing it, so the requirement of mens rea in criminal offences can also have a protective function for criminal defendants. Besides proving that the physical element of the offence has occurred, the prosecution must also prove that the defendant had the necessary intent or mental state.
11.13In the Issues Paper, we canvassed the arguments in favour of limiting intentional or knowing breaches to the criminal law, but concluded that no reason in principle exists to avoid creating pecuniary penalties that include an element of moral culpability or fault.
11.14Six submitters agreed that there should be no general prohibition on pecuniary penalties being used for contraventions that involve some degree of moral blameworthiness. The New Zealand Law Society noted that the hybrid nature of penalties means it is inevitable that they will overlap with conduct covered by the criminal sphere; accordingly, there is no reason why a penalty could not be imposed for a contravention where some moral blameworthiness is inherent:
Ultimately, if a … pecuniary penalty is appropriately imposed in relation to a certain category of conduct, which conduct is thereby not seen to be suitable for criminal sanction, it is not solely the presence or absence of moral blameworthiness that will determine the category into which the conduct will fall. It is rather a question of degree.
11.15Meredith Connell and the New Zealand Bar Association noted that, given pecuniary penalties are used in a range of contexts, a flexible approach is required. For instance, as noted in the submission of the Parliamentary Counsel Office (Commercial Team), the liability of accessories to a pecuniary penalty contravention depends on having acted with knowledge of the penalty that they were helping to contravene. It is appropriate, then, for some pecuniary penalty provisions to examine and make relevant the defendant’s state of mind.
11.17In our view, pecuniary penalties straddle both criminal and civil law. This indicates that the civil/criminal divide is not a stark line. Rather, there is now a spectrum of statutory mechanisms that can be employed to respond to statutory breaches. Relying purely on the criminal law to sanction any breach of law involving a mens rea element would arguably cast a large burden on that area of the law.
11.19As Bell Gully noted in its submission, the monetary amounts that can be imposed by pecuniary penalty statutes can be very significant in order to ensure an effective deterrent. Therefore it is desirable that policymakers give due consideration to whether knowledge or intention should be an element of the provision.
11.20Finally, we are mindful of the overall liabilities faced by directors and managers in the business community, and the concern that the potential for over-penalising “innocent” or “no fault” contraventions is perceived to unduly deter people from engaging in commercial activities. The flexibility to incorporate a mens rea element is a useful design component to ensure that penalties are suitably calibrated, bearing in mind this wider context.
11.22Four submitters on the Issues Paper specifically commented that it would be useful to have guidance on when a pecuniary penalty provision should or should not incorporate mens rea, and how that might be done in practice. We agree that enhanced guidance in this area is desirable.
11.23In essence, any decision whether to use strict liability penalties, or those where some mental element needs to be established, involves weighing up factors similar to those relevant to the initial decision to include the pecuniary penalty provision in a regime. In particular, it involves a balance between fairness, and regulatory efficiency and effectiveness. The balance of those factors is always going to be context-specific.
11.25For these reasons, we do not go so far as to recommend a presumption in favour of a mens rea element for pecuniary penalties. However, serious consideration should be given to whether a mens rea element should be included in a pecuniary penalty breach. This is because:
11.26The final point above means that where there is no requirement to prove a form of fault or intent, a defendant has little procedural protection against the penalty’s imposition. In principle then, the greater the potential liability of the defendant, the more pressing the need for the inclusion of a mental element to ensure that the penalty provision is fair overall. This mirrors the approach to strict liability offences that are considered more justifiable, or less objectionable, where they are for comparatively minor or technical breaches of a regime, or result in a comparatively lower penalty.
11.27As set out at [11.11], the LAC Guidelines identify three factors that justify strict liability criminal offences. We consider that those factors are equally relevant to determining whether a pecuniary penalty provision should carry strict liability. Those factors form the basis for our guidance as to the use of strict liability pecuniary penalties. We suggest that strict liability pecuniary penalties may be justifiable where:
11.28Many pecuniary penalties may fit these criteria. But, as indicated above, the challenge is to weigh properly all the features of the penalty and regime, such as the nature of the conduct, potential defendants and size of the penalty involved, to ensure the particular provision achieves the right balance between fairness and regulatory effectiveness. Where a strict liability penalty is proposed, the availability of other procedural protections (such as the penalty privilege) may need to be assessed to determine whether the design of the penalty overall incorporates sufficient procedural protections. The introduction of an element of fault or intention may address any imbalance in the proposed pecuniary penalty regime.
11.30A number of pecuniary penalty regimes include defences that should be considered. For instance:
11.31A defendant to an absolute liability offence or penalty has no defence; the defendant will be liable even if they are wholly without fault. In our Issues Paper, we asked whether guidance is needed that absolute liability pecuniary penalties should be contemplated only in rare circumstances when:
11.33Accordingly, we confirm that the appropriate guidance for policymakers is that absolute liability pecuniary penalties should be used very rarely. Any penalty that imposes absolute liability should state this in express terms.
11.34If a pecuniary penalty provision requires a mens rea element to be established, it should be clearly specified as an element of the penalty provision.
The difficulties that have arisen in the absence of these express provisions are well known … Parliament ideally should make its intention clear, rather than leaving it to the courts to grapple with what are fundamental issues of fault, and what defences may or may not be available to a provision imposing the penalty. In the absence of such provisions, the courts are left to discover the intention of Parliament as best they are able which can lead not only to results unintended by the legislature but also to inconsistent decisions.
11.37Clear and precise drafting on the level of intention required for a contravention that attracts a pecuniary penalty is desirable to ensure that the objectives of the regime are not undermined by any ambiguity. To enhance clarity, strict liability penalties should expressly state that they are imposed on the basis of strict liability. Examples of criminal offences that already do this are section 13 of the Animal Welfare Act 1999, sections 154M and 154N of the Biosecurity Act 1993 and section 388 of the Building Act 2004. In addition, the statute should list expressly any defences to the strict liability penalty.
G8 Pecuniary penalty provisions should state clearly:
Consideration should be given to whether intention or fault should be an element of the contravention for which a pecuniary penalty may be imposed.
In assessing whether to include intention or fault as an element of the contravention, it is necessary to weigh up the features of the penalty and regime, such as the nature of the conduct, potential defendants and size of the penalty involved, to ensure that the particular provision achieves the right balance between fairness and regulatory effectiveness.
Strict liability pecuniary penalties may be appropriate where a case can be made that:
It is not clear that the presumptions that exist about strict liability criminal offences apply equally to pecuniary penalties. Strict liability pecuniary penalty provisions should therefore clearly set out any defences, even if it is anticipated that only the defence of absence of fault should be available.
Absolute liability pecuniary penalties should be used very rarely.
(1) In proceedings for a civil penalty order against a person for a contravention of a civil penalty provision, it is not necessary to prove:However, a pecuniary penalty provision that contains a specific mental element will override the standard provision (cl 94(4)). The Bill also provides a general “mistake of fact” defence (cl 95).
(a) the person's intention; or
(b) the person's knowledge; or
(c) the person's recklessness; or
(d) the person's negligence; or
(e) any other state of mind of the person.