Current approaches to limitation periods
18.9We have identified five distinct approaches in pecuniary penalty statutes currently in force:
- no express limitation period, thereby invoking the default limitation periods in the Limitation Act 2010;
- express application of the finite six-year primary period in the Limitation Act 2010;
- adoption of a shorter finite primary period;
- adoption of a primary period based on “reasonable discoverability”; and
- a variety of primary periods for different contraventions within a pecuniary penalty statute.
No express limitation period
18.10Some pecuniary penalty statutes are silent on the question of limitation periods and are therefore subject to the Limitation Acts 2010 and 1950. “Civil penalties” are included as “money claims” under the 2010 Act, with the result that the structure of the limitation period includes:
- a six-year primary period (after the date of the act or omission on which the claim is based);
- a three-year late knowledge period; and
- a 15-year longstop period. The longstop period does not apply in the case of fraud.
18.11The interaction of these various periods means that a limitation period can be between three and six years from the acquisition of knowledge of the contravention or reasonable discoverability of that knowledge. This is because the six-year primary period applies regardless of the point at which the contravention is discovered. This means that the acquisition of knowledge or reasonable discoverability occurring within the first half of the primary period is subject to the full length of the remaining primary period, whereas a contravention discovered near the end of the primary period is subject to a three-year late knowledge period.
18.12By contrast, the Limitation Act 1950 provided a two-year limitation period (from the date on which the cause of action accrued) for actions to recover a penalty that could be extended where the cause of action has been concealed by fraud. The 1950 Act also has a longstop period of 15 years, introduced by the Limitation Act 2010.
18.13The decision to include pecuniary penalties as “money claims” for purposes of the Limitation Act 2010, and therefore make penalties subject to a six-year primary period, was a simplification decision by the Commission reference group convened in 2007–2008, in response to submissions that the draft Limitation Bill was overly complex in categorising different claims.
Limitation periods based on the Limitation Act 2010Top
18.14Section 72 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 expressly adopts the six-year limitation period (from the date the conduct occurs) but does not specify any additional late notice period. It would be a matter of statutory interpretation whether section 72 provides a finite limitation period, or whether it is extendable through the Limitation Act’s late knowledge provision. Another interpretation issue is whether the Limitation Act’s fraud exception applies to potentially lengthen the limitation period.
18.15In contrast, section 508 of the Financial Markets Conduct Act 2013 generically applies all aspects of the money claim defence from the Limitation Act:
(1) The Limitation Act 2010 prescribes a defence to a money claim that is a claim for monetary relief under this subpart (for example, a pecuniary penalty order or a compensatory order).
18.16The provision also expressly applies the Limitation Act periods to non-monetary orders as if they were “money claims” within the Limitation Act definition:
(2) Subsections (3) to (5) apply to a claim for relief (other than any form of monetary relief or declaratory relief) under this subpart.
(3) It is a defence to the claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based.
(4) The claim has both a late knowledge period and a longstop period, and sections 11(3)(a) and (b) and 14 of the Limitation Act 2010 apply to it—
(a) as if it were a money claim; and
(b) as if the period in subsection (3) were its primary period.
Shorter finite primary limitation periodTop
18.17Some pecuniary penalty statutes use shorter finite primary limitation periods. For example:
- three years after the matter giving rise to the contravention arose: section 144(4) of the Dairy Industry Restructuring Act 2001;
- three years after the contravention occurred: section 137K(5) of the Financial Advisers Act 2008; and section 79A(5) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
18.18This formulation does not indicate whether the late knowledge period, longstop period and fraud exceptions from the Limitation Act are intended to apply, in addition to the primary limitation period expressed in the pecuniary penalty statute.
Primary limitation period based on reasonable discoverabilityTop
18.19Other pecuniary penalty statutes use a primary limitation period based on reasonable discoverability of the contravention. For example:
- three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered; or
- two years after the date on which the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.
18.20On its face, it may appear shorter than the six-year primary period in the Limitation Act, but because it may start at a later point in time (from reasonable discoverability of the contravention, rather than from the date of the contravention itself), the period may not in fact be shorter than a standard limitation period. If the contravention is immediately or fairly quickly discoverable, however, the limitation period will be shorter than under the Limitation Act.
18.21The model used in these statutes raises similar interpretation issues as to whether the Limitation Act would fill any gaps, as there is no indication whether any longstop period or fraud exception applies. Use of the reasonable discoverability model also gives rise to consideration of the state of knowledge required for discoverability to be achieved.
18.22We note the formulation used in section 52 of the Electricity Industry Act 2010, in particular subsection (2), which negates the operation of the limitation provision:
(1) The [Electricity] Authority may not exercise its powers in relation to a breach or possible breach of the Code if the breach—
(a) was discovered, or ought reasonably to have been discovered, more than 3 years before the exercise of the power; or
(b) occurred more than 10 years before the exercise of the power.
(2) However, once the [Electricity] Authority has exercised a power in relation to the breach or possible breach, the limitations in subsection (1) do not apply.
18.23The intent, presumably, is that once the Electricity Authority has exercised any power in relation to a breach, it is not precluded from then exercising a different power with respect to same breach, in cases where an escalated regulatory response may be required. The Commission’s view, however, is that any pecuniary penalty proceedings should be initiated within the specified limitation period, and we are not persuaded that the exception in subsection (2) is desirable. We do not recommend its wider adoption.
18.24The Commerce Act 1986 has adopted two different limitation models depending on the type of contravention. First, a primary period of three years from the date of contravention is used for proceedings for contraventions relating to business acquisitions, information disclosure requirements and price quality requirements. This matches the limitation period applying to damages actions for breach of business acquisition restrictions. It is not specified whether the three-year primary period is potentially extendable by virtue of the Limitation Act late knowledge period.
18.25Secondly, a primary period of three years from the date of reasonable discoverability applies to proceedings for contraventions relating to cease and desist orders, restrictive trade practices and the indemnification prohibition, with a 10-year longstop from the date of contravention. This matches the limitation period applying to damages actions for restrictive trade practices. However, there is no express provision for a fraud exception to the longstop period, as would apply under the Limitation Act.