Contents

Chapter 11
Intention and strict liability

The place of mens rea in pecuniary penalties

11.2In the Issues Paper, we considered whether contraventions involving an element of intention should be reserved for the criminal law.224 Our preliminary conclusion was that there should not be a fixed rule of this sort, and that pecuniary penalties should not be barred from including a mental element.

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.

11.5However, the distinct regulatory functions and deterrence purposes of pecuniary penalties may suggest that the orthodox criminal law approach to mens rea is not always applicable. We note that the Regulatory Powers (Standard Provisions) Bill, introduced in Australia, makes strict liability the legislative default for pecuniary penalties in that jurisdiction.225

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.

The presumption of mens rea in the criminal law

11.7The use of different classes of criminal offences, both those that involve a mens rea element and those that do not (such as strict and absolute liability offences), is dealt with in the Legislation Advisory Committee Guidelines (LAC Guidelines).226

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.

11.9In most offence provisions, the mens rea element is denoted through the use of terms of advertence like “intentionally”, “wilfully”, “knowingly” or “recklessly”, or terms of inadvertence like “carelessly” or “negligently”. Inadvertence can also be phrased in the negative, such as where a person fails to “take all reasonable steps”. Where the statute is silent on the question of mental intent, the courts will apply a presumption that Parliament intended the offence in question to require mens rea. In deciding whether to override this presumption, the court will determine, as a matter of statutory interpretation, whether the provision is “truly criminal” – in which case the presumption of mens rea remains – or a “public welfare regulatory offence”227 – which will allow the court to displace the presumption and apply strict liability. In making this assessment, the court will consider the wording of the statute, the nature of the offending in terms of the degree of moral condemnation elicited by the offence, the basis on which it has been outlawed (for example, whether it arises in the regulation of a specialist regime), the purpose and scheme of the legislation, and the severity of the punishment.228
11.10Therefore, the requirement for a criminal offence to have a mens rea component is the general rule. If an offence is to be characterised as a strict liability offence, the prosecution need only establish that the person performed the conduct in question. It does not need to prove he or she acted with mens rea; but the defendant may exonerate him or herself either through any specified statutory defence or through the common law defence of total absence of fault.229

Strict liability

11.11The LAC Guidelines set out when an offence may properly be characterised as one of strict liability:230
(a) The offence involves the protection of the public from those undertaking risk-creating activities. These offences (commonly described as public welfare regulatory offences) usually involve the regulation of occupations or trades or activities in which citizens have a choice as to whether they involve themselves; and
(b) The threat of criminal liability supplies a motive for persons in those risk-generating activities to adopt precautions, which might otherwise not be taken, in order to ensure that mishaps and errors are eliminated; and
(c) The defendant is best placed to establish absence of fault because of matters peculiarly or primarily within the defendant’s knowledge.

Absolute liability

11.12In the case of absolute liability offences, legal responsibility is imposed in the absence of any fault or moral blameworthiness. The prosecution is only required to prove the physical elements of the offence and, even if the defendant is completely free of fault, that will not constitute a defence. As a result, courts will only find absolute liability where the statute imposes it in clear terms or by necessary implication. The LAC Guidelines state that there is very limited scope for the creation of new absolute liability offences in New Zealand, and that:231
The use of an absolute liability offence should be contemplated only if–
(a) there is an overwhelming national interest in using the criminal law as an incentive to prevent certain behaviour occurring, regardless of fault; and
(b) there is a cogent reason in the particular circumstances for precluding a defence of total absence of fault (this will be rare).

Mens rea in pecuniary penaltiesTop

Should statutory breaches involving mens rea be confined to the criminal law?

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.

11.16Conversely, two submitters said that morally blameworthy conduct should be reserved for the criminal law.232 This approach would preserve strictly the civil/criminal divide. Applying penalties to contraventions that entail some degree of moral blameworthiness could lead to a further erosion of that divide.

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.

11.18Also, on a practical level some contraventions innately involve an intentional element; sometimes fault elements are the key to whether there has been a contravention, such as where intention is an essential element.233 Where various policy factors suggest these breaches should be penalised by a pecuniary penalty rather than a criminal penalty, we do not think that the mens rea component should be the sole determinant of categorisation. That would be too inflexible. We prefer a more flexible approach. Our view is that mens rea should be one factor to be weighed with others in determining the appropriate legislative sanction.

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.

11.21In accordance with the weight of submissions, we are of the view that pecuniary penalties should not be precluded from being used where mens rea is a relevant element of the contravention and there may be an aspect of moral blameworthiness.234 We agree with those submitters who thought that restricting the use of pecuniary penalties to contraventions that do not include a mens rea element could unduly limit their scope. While commonly used for purposes of deterrence, pecuniary penalties can also have a punitive function and may be used to target morally blameworthy conduct. This may need to be reflected in the design of the contravention provision by including an element of intention.

When should pecuniary penalties have an element of intention?

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.

11.24On this basis, our view is that the approach to these questions in the criminal law context provides a useful model that can be adapted to pecuniary penalties. However, it is not entirely apt because of the field within which pecuniary penalties are usually employed: they are very commonly used for “public welfare regulatory” breaches, where strict liability offences are also common. And, while they are punitive, they do not bring with them the potential penalties of conviction and imprisonment.235

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:

(a) Strict liability provides persons with an incentive to adopt compliance processes and procedures to protect against contraventions, and these precautions may not otherwise be taken; and
(b) The standards imposed are clear and well-known to the regulated persons, who participate voluntarily in the activity; and
(c) The defendant is in the best position to establish a defence. This might include 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.

Defences

11.29As noted in the Issues Paper, it is not clear whether the MacKenzie defence of total absence of fault, which applies to strict liability criminal offences, would also apply to pecuniary penalties.236 Given that uncertainty, policymakers should explicitly identify the applicable statutory defences to make clear the standard of conduct required.237

11.30A number of pecuniary penalty regimes include defences that should be considered. For instance:

(a) mistake, lack of knowledge, or other absence of fault;
(b) the contravention was necessary (for example, to save or protect life or health, or prevent serious damage to property);238
(c) the contravention was beyond the person’s control, could not reasonably have been foreseen, and the person could not reasonably have taken steps to prevent it occurring;239
(d) the person did not know, and could not reasonably have known, of the contravention;240
(e) the contravention was a mistake or occurred without the person’s knowledge;241
(f) the contravention was due to reasonable reliance on information supplied by another person;242 or
(g) Person A’s contravention was due to the default of another person, which was beyond Person A’s control, and Person A took precautions to avoid the contravention.243

Absolute liability

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:

(a) there is an overwhelming national interest in using them as an incentive to prevent certain behaviour occurring, regardless of fault; and
(b) there is a cogent reason in the particular circumstances for precluding a defence of total absence of fault.
11.32There was widespread agreement among submitters to the Issues Paper that absolute liability should only be imposed in rare circumstances.244 The Parliamentary Counsel Office (Commercial Team) and Federated Farmers set out their view that absolute liability should only be used for compelling reasons. The New Zealand Law Society noted that absolute liability should be used rarely because it may inhibit the penalty’s deterrent value.

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.

Legislative drafting

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.

11.35Our review of existing pecuniary penalty statutes in the Issues Paper revealed a range of approaches to the mental element for liability. Some make specific reference to what the defendant knew or ought to have known.245 Some provisions make conduct a contravention where it is done for a prohibited purpose.246 The great majority do not refer to the defendant’s state of mind within the penalty provision itself, although some provide specific defences,247 or only prohibit conduct “without reasonable excuse”.248
11.36Unlike the criminal law, no settled principles determine the approach to the mental element of a pecuniary penalty provision that is silent as to fault. Therefore, the mental element of a pecuniary penalty will, if not clearly stated in legislation, be a matter for statutory interpretation. It seems unsatisfactory to leave it to the courts to try to determine what form of liability was intended by Parliament in the relevant provision:249

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.

GUIDELINE

G8 Pecuniary penalty provisions should state clearly:

(i) whether mens rea is an element of the penalty provision; or
(ii) whether the penalty is to be imposed on the basis of strict liability
 

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:

  • Strict liability provides persons with an incentive to adopt compliance processes and procedures to protect against contraventions, and these precautions may not otherwise be taken; and
  • The standards imposed are clear and well-known to the regulated persons, who participate voluntarily in the activity; and
  • The defendant is in the best position to establish a defence. This might include where:
  • the person bringing proceedings would face serious difficulty in proving the matter, and the defendant has peculiar knowledge of the relevant facts; or
  • it would be extremely difficult or expensive to require the person bringing proceedings to provide proof, and that proof could be provided readily by the defendant.

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.

224Law Commission Civil Pecuniary Penalties (NZLC IP33, 2012) [Issues Paper] at ch 6.
225Regulatory Powers (Standard Provisions) Bill 2014 (Cth), cl 94:
(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:
(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.
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).
226LAC Guidelines, above n 223, at ch 12, pt 2.
227In Millar v Ministry of Transport [1986] 1 NZLR 660 (CA) Cooke P described the “public welfare regulatory offence” as “a convenient label rather than an exact definition” (at 666).
228See generally AP Simester and WJ Brookbanks Principles of Criminal Law (2nd ed, Brookers, Wellington, 2002) at 162.
229Civil Aviation Department v MacKenzie [1983] NZLR 78 (CA) at 81; and Millar v Ministry of Transport [1986] 1 NZLR 660 (CA) at 668.
230LAC Guidelines, above n 223, at [12.2.3].
231LAC Guidelines, above n 223, at [12.2.3].
232Dr Marina Nehme and Air New Zealand.
233Australian Law Reform Commission Principled Regulation: Federal Civil and Administrative Penalties in Australia (ALRC R95, 2002) at [4.66]–[4.67].
234We note that the Australian Law Reform Commission, in its Report, came to the same conclusion: Australian Law Reform Commission, above n 233, at [4.66]–[4.67].
235Although, see the discussion in ch 4.
236Civil Aviation Department v MacKenzie, above n 229. In Colonial Mutual Life Assurance Society Ltd v Wilson Neill Ltd [1994] 2 NZLR 152 (CA), the Court of Appeal set out its provisional view that a defence of total absence of fault was not available because the statute already contained exceptions for liability. However, it did so on the basis of its interpretation of the statute rather than any express debate about there being a potential difference between criminal and civil strict liability. The courts may conclude in the future that the total absence of fault defence applies to pecuniary penalties where the statute does not rule it out, but the position is unclear.
237The LAC Guidelines also recommend this for strict liability criminal offences (at [12.3.3]): “Subject to the limitations referred to in guidelines 3 and 4, it is helpful to the public and the courts for legislators to identify and spell out specific defences in the case of public welfare regulatory offences, if it is possible to identify such defences as part of the policy development process”.
238Biosecurity Act 1993, s 154H(3)(a).
239Biosecurity Act 1993, s 154H(3)(b).
240Hazardous Substances and New Organisms Act 1996, s 124B(3).
241Unsolicited Electronic Messages Act 2007, s 12.
242Financial Markets Conduct Act 2013, s 499(1)(a).
243Financial Markets Conduct Act 2013, s 499(1)(b).
244See the submissions of the New Zealand Bar Association, the New Zealand Law Society, Ministry for Primary Industries, Parliamentary Counsel Office (Commercial Team), Federated Famers and Air New Zealand.
245See for example the Takeovers Act 1993, s 33M(c): the court can impose a penalty if the defendant “knew or ought to have known of the conduct that constituted the contravention”. Section 41 also refers to the defendant’s intent and level of control over the contravention as factors that may excuse a contravention.
246Commerce Act 1986, ss 27–30, 36 and 80.
247Unsolicited Electronic Messages Act 2007, s 12; Hazardous Substances and New Organisms Act 1996, s 124B.
248Financial Service Providers (Registration and Dispute Resolution) Act 2008, s 79A.
249Submission of New Zealand Law Society.