Individual and corporate liability
14.4As separate legal persons, it is possible for a corporate entity and an individual each to be concurrently and separately liable for a pecuniary penalty, based on the same conduct. In the Issues Paper, we noted that determining penalty quantum is a matter of court discretion and asked whether pecuniary penalty statutes should give more direction about penalty quantum in these circumstances, given that issues of double punishment and double jeopardy may arise.
14.5Pecuniary penalty provisions generally do not provide much guidance to the courts on this matter, other than the provision of different maxima for individuals and corporates. The one exception is the Commerce Act 1986. The 2001 amendments to that Act, aimed at “promoting general deterrence”, created a presumption that pecuniary penalties be awarded against individuals unless a court considers there is “good reason” for not doing so.
14.6Submitters were divided on the need for further guidance for the courts on this matter. Some thought guidance would be useful. Others questioned whether it was practical to provide such guidance, given the wide range of situations giving rise to pecuniary penalties. Both the Parliamentary Counsel Office (Commercial Team) (PCO) and Donald Mathieson QC noted that the justice of the case would differ depending on the nature of the company and the role of the individual concerned.
14.7The New Zealand Bar Association also noted that courts are “experienced in determining penalties in many fact situations including cases where both a company and an individual are principally liable for the same contravention”.
14.8We agree that it would be very difficult to provide practical guidance for the apportionment of penalties between corporations and individuals, given the wide range of circumstances in which pecuniary penalties may be imposed. The courts are conscious of the need to ensure that the penalties imposed reflect the relative culpability and involvement of different (corporate and individual) parties, and it does not seem that apportionment is an area causing difficulty.
14.9For example, greater penalties have been imposed on those regarded as a “prime mover” in the contravention, than those imposed on “willing followers” in a breach of section 29 of the Commerce Act. Similarly, a greater penalty was imposed on the “driving force”, than on a defendant who assisted in the arrangements contravening section 27 of the Commerce Act. Any guidance (such as the need to consider the individual’s level of involvement, their role and seniority in the corporation, and any personal benefit) is likely to be so general in nature that it is redundant.
14.10A secondary issue raised in our Issues Paper was the appropriateness of courts sharing out a single penalty between the individual and the corporate to avoid double punishment, rather than imposing separate penalties on each. As McGechan J in Commerce Commission v Wrightson NMA Ltd said:
The infliction of separate penalties would be to penalise twice … I resolve the problem for this case by penalising the one course of conduct, and dividing the penalty for this course of conduct between the company and the individual concerned.
14.11Likewise, in Commerce Commission v Opthalmological Society of NZ Inc, Gendall J said:
I am conscious that there be no element of double punishment arising out of penalties being imposed upon the society and either of the two individual defendants. In fixing a penalty I take that into account, bearing in mind that I am clear that individual penalties are required but of a significantly lesser degree than that on the society.
14.12The New Zealand Bar Association submission questioned the appropriateness of splitting a penalty in this manner. It drew analogies to the criminal law where perpetrators of the same crime each receive an independent penalty as a principal, rather than “sharing” an overall punishment. The Association felt that the punitive and deterrent function of pecuniary penalties may mean that the criminal approach is more appropriate than the approach taken in civil proceedings where the defendants who have caused the same loss or damage are held responsible for a share of the total damage.
14.13We think the situation is more nuanced. We agree that where a corporate and an individual are concurrently liable, or where two different corporations are concurrently liable, it may be appropriate that the penalty is imposed on each defendant, rather than split between them. However, it seems to us that the situation could be different where the individual is associated with the corporation, for instance, by being an employee. There, concurrent liability arises in relation to the same course of conduct, namely the conduct of the individual. The individual’s contravening conduct is carried out on behalf of the corporation. In such a situation, we consider that it may be appropriate for the penalty to be split between the corporation and the individual, at the court’s discretion.
Regulatory enforcement policy
14.14The PCO submission suggested that the matter of whether enforcement agencies pursue individuals or corporations could be usefully incorporated in enforcement agency guidance. Where an individual and a corporation are each potentially liable to a pecuniary penalty, whether enforcement action is taken against either or both will depend on the context and discretion of the enforcement agency. We agree that it would be useful and desirable for enforcement agency policy to include the factors to be taken into account in the exercise of that discretion. In Chapter 20, we discuss the need for enforcement bodies to provide guidance on how they will enforce their regimes.